REG - Phoenix Grp Hldgs - Phoenix Group Holdings - 2015 Annual Results <Origin Href="QuoteRef">PHNX.L</Origin> - Part 5
23/03/2016 08:18
- Part 5: For the preceding part double click ID:nRSW9668Sd
of its capital strength after meeting obligations to policyholders and elsewhere) and of the
Company's ability to pay dividends to its own shareholders. Although less cash was actually paid in the year, to ensure
that risks are effectively managed and that the position on distributions is considered in light of the post-year end final
accounts, the Committee's practice has been to look at both the distributions made in the year, and also to credit
potential distributions that were deferred to the following year where the cash generated related to the AIP year. Such
potential distributions are then added to any target for the subsequent year to avoid double-counting.
In prior years, the Committee has defaulted to making as few adjustments as possible and has not excluded the negative
impact on some elements of the AIP of a number of management actions which, while in the interests of shareholders overall,
reduced some element of the AIP as such actions have more typically been reflected in the budget process. While the
exercise of any judgment is inherently subjective and should be used sparingly, the Committee believes that the three
adjustments above were both sufficiently significant as to warrant adjustment and that, without those adjustments, the AIP
out-turn would not have reflected the true level of corporate and management performance.
Following the application of such steps the Corporate measure factor for 2015 (i.e. the AIP before assessment of the
personal performance element) was determined on a formulaic basis at 85% of maximum.
This produced an AIP out-turn for the Chief Executive Officer, after reflecting personal performance, of approximately 82%
of maximum.
While, in principle, the Committee felt that a similar adjustment could have been made to the Long Term Incentive Plan
('LTIP'), no such adjustment was made. The LTIP vesting level of 57% was approved.
Remuneration Policy for 2016
Looking ahead to 2016, the Committee concluded that:
· Neither Executive Director will receive a salary increase (this means that the Group Chief Executive Officer has not had
any increase in salary since his date of joining approximately five years ago)
· No changes will be made to the target or maximum levels under our AIP or to the award levels under our LTIP.
The Committee has therefore not made any changes to the overall remuneration levels detailed in our Directors' remuneration
policy which was approved by our shareholders at the 2014 Annual General Meeting ('AGM').
The Phoenix business strategy involves corporate actions that can be considered price-sensitive activity. Indeed, much of
2013, 2014 and 2015 was spent in either a 'closed' or 'prohibited' period due to such potential activity (not all of which
led to publicly announced actions but which included the sale of Ignis and the refinancing of the Group to secure
investment grade status) which results in the Company not being able to transact or make decisions relating to shares.
This can impact the Group's ability to manage its incentive plans effectively as, during such periods, we have been unable
to allocate shares under the Deferred Bonus Share Scheme ('DBSS'), and impacted employees were unable to exercise any
vested DBSS share award. The same restrictions apply to our LTIP arrangements with grants under both plans (DBSS and LTIP)
not being made until the Group emerged from the restrictions in September 2015.
Accordingly, the Company has made a number of minor technical changes to the rules of the DBSS to make it more formulaic.
Commencing with the 2015 awards, DBSS awards will automatically vest on the dealing day following the third anniversary of
the announcement of the Company's results. The share price at the actual time of grant continues to be used to determine
the number of shares awarded. This means that DBSS awards will vest on a consistent cycle, even if regulatory constraints
delay the making of DBSS awards in any year. These changes can be made to the DBSS as it is a formulaic arrangement under
which one-third of the AIP out-turn per individual is deferred. Equivalent changes to the LTIP have not been made.
The Committee has commissioned a broader review of incentives during 2016 to consider whether alternative approaches will
be more suitable for Phoenix Group given the constraints outlined above. As part of that review, the Committee will also
look at the developing approach of financial services regulators towards the design of executive remuneration. Specifically
within the insurance industry, this includes the remuneration aspects of Solvency II and, in the wider regulated financial
sector, the continuing development of regulators' views towards the implementation of the remuneration aspects of CRD IV
(the EU's Capital Requirements Directive for regulated financial businesses).
The review will look at the structure of executive pay within Phoenix Group in the light of these ongoing regulatory
developments and, whilst it is not proposed to increase the overall quantum of pay, will consider whether current
structures remain appropriate in the new regulatory environment. Any outcomes from this review will be discussed with key
shareholders and then disclosed in full in the 2016 Directors' remuneration report.
As detailed on pages 60 and 61, important changes are also being made to the performance measures for 2016 AIP and for the
2016 LTIP award. In light of Solvency II, embedded value is expected to be a less relevant measure within the insurance
industry and Phoenix will no longer be reporting MCEV; accordingly measures based on MCEV have been removed for 2016's
incentive plans and the other measures re-balanced.
The Board has noted that in the period since the Group's Premium Listing on the London Stock Exchange in July 2010, the fee
levels for Non-Executive Directors across the sector have increased significantly in recognition of the increased time
commitment of Directors in regulated businesses. There has been no increase in the base fee levels for Non-Executive
Directors since July 2010 and the Board has decided to increase the base fee for all Non-Executive Directors to £105,000 in
2016 to reflect these factors. This is against a background of significant time commitment and increasingly complex and
onerous financial services requirements and related responsibilities. All other fees remain unchanged (i.e. Board Committee
Chairmanship fees of £10,000 and no separate Board Committee membership fees).
Our Directors' remuneration report for 2016 will include a re-statement of the Directors' remuneration policy which, in
line with the normal requirement for Directors' remuneration policies to be renewed every three years, will be put to the
Company's shareholders for approval at the 2017 AGM.
Shareholder approval
At the AGM on 11 May 2016, shareholders will be invited to approve the 2015 Directors' remuneration report as set out in
the following pages. For ease of reference, and consistent with our approach last year, the main summary policy tables from
the Directors' remuneration policy approved at the 2014 AGM are also set out as an Appendix to the Directors' remuneration
report, although we are not seeking further approval from shareholders for our policy at the 2016 AGM.
I hope that we can continue to rely on the support of our shareholders for the resolution on the 2015 Directors'
remuneration report which will be proposed at the 2016 AGM.
Yours sincerely,
Ian Cormack
Remuneration Committee Chairman
22 March 2016
INTRODUCTION
We have presented this Directors' remuneration report in accordance with the UK's Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 (the 'UK regulations'). The Company complies with the reporting obligations
within the UK regulations as a matter of good practice although it is not strictly required to do so as a non-UK
incorporated quoted company. The Directors' remuneration report also describes how the Board has complied with the
provisions set out in the UK Corporate Governance Code relating to remuneration matters.
At our 2016 Annual General Meeting ('AGM') we will be holding an advisory vote on the Directors' remuneration report.
The auditors have reported on certain parts of the Directors' remuneration report and stated whether, in their opinion,
those parts of the Directors' remuneration report have been properly prepared in accordance with the Companies Act 2006.
Those sections of the Directors' remuneration report which have been subject to audit are clearly indicated.
DIRECTORS' REMUNERATION POLICY
The Directors' remuneration policy ('Remuneration Policy') was approved by the Company's shareholders at the Company's AGM
on 30 April 2014 and has effect for all payments made to Directors from that date.
The Company's full Remuneration Policy is available within the Remuneration Committee ('Committee') section under Board
Committees on the Company's website. For information and ease of reference, the main summary policy tables from the
Remuneration Policy are included in the Appendix to this Directors' remuneration report. The information in the Appendix is
not subject to the advisory vote on the Directors' remuneration report at the 2016 AGM.
ANNUAL IMPLEMENTATION REPORT - UNAUDITED INFORMATION
IMPLEMENTATION OF REMUNERATION POLICY IN 2016
Element of Remuneration Policy Detail of Implementation of Policy for 2016
Overall positioning The Company's overall positioning on remuneration for Executive Directors remains unchanged from 2015:· An appropriate balance is maintained between fixed and variable components of remuneration.· Our Remuneration Policy benchmarks the total target
remuneration for the Executive Directors between FTSE 31-100 and FTSE 250 data sets, and remuneration for both Executive Directors are positioned appropriately between these data sets.
Base Salary Salaries in 2016 will remain unchanged from the 2014 and 2015 levels of £700,000 for the Group Chief Executive Officer and £440,000 for the Group Finance Director.
Benefits There are no proposed changes to the benefits offered to Executive Directors in 2016.
Pension There are no proposed changes to the pension benefits offered to Executive Directors in 2016.
Annual Incentive Plan ('AIP')¹ The AIP for 2016 will operate on a basis that is consistent with how the AIP operated in 2015, although there have been changes to the precise measures and weightings of the Corporate (financial and strategic) performance measures for 2016's AIP to reflect
our evolving business focus.The AIP maximum potential and on-target levels remain unchanged at 150% of base salary and at 50% of maximum levels (75% of base salary) respectively. As in previous years, one-third of AIP outcomes for 2016 will be delivered as
an award of deferred shares under the Deferred Bonus Share Scheme.The overall weightings between Corporate and Personal performance measures for AIP in 2016 are unchanged from 2015:· Corporate (financial and strategic) performance measures - 70%.·
Personal (individual objectives) - 30%.The weightings of the AIP performance measures for 2016 are summarised below: Performance Measure Weighting of Corporate Measure % of
incentive potential Corporate measure Operating companies' cash generation 50% 35% IFRS operating earnings 25% 17.5% Customer experience 25% 17.5% Personal Individual objectives 30% TOTAL 100% The changes made from 2015's Corporate performance measures for
AIP can be summarised as follows:· In 2016, the highest weighting will be given to operating companies' cash generation which remains core to our business and is linked directly to Phoenix Life free surplus under Solvency II. The overall weighting for
cash generation has increased from 2015.· 2015's Corporate performance measures included both a Group Market Consistent Embedded Value (Group 'MCEV') and a Group MCEV operating earnings after tax measure. Due to Solvency II, embedded value metrics are
expected to be less relevant measures within the insurance industry and Phoenix will no longer be reporting MCEV; accordingly MCEV will be removed as a measure under AIP 2016, and IFRS operating earnings will replace MCEV operating earnings.· Greater
weighting has been given to customer experience, reflecting the focus of the Board as well as of our regulators.· Specific targets of employee engagement and expense management have been removed as Corporate performance measures, but are included as part
of the objectives for the Personal performance element. Assessment of these items under the Personal element permits a more rounded assessment.In addition, and as previously stated in the Remuneration Policy, there are three potential levels at which the
performance measures and targets and related outcomes from AIP in 2016 may be moderated (downwards or upwards) by the Committee - more details are provided in the summary Remuneration Policy table set out in the Appendix to the Directors' remuneration
report.
Deferred Bonus Share Scheme ('DBSS')1 One-third of AIP outcomes for 2016 will be delivered as an award of deferred shares under the DBSS which will vest after a three-year period of deferral. For DBSS awards made in 2015 (in respect of 2014's AIP outcome) and for DBSS awards to be made in
subsequent years:· The 3-year deferral period will run to the dealing day following the three-year anniversary of the announcement of the annual results by reference to which the relevant AIP outcome was determined.· Dividend entitlements for the DBSS
shares will accrue over the three-year deferral period.· When DBSS awards are made, the number of shares will be calculated using the average share price for the 3 dealing days before the actual grant of awards.· The DBSS awards will be made as soon as
practicable following the announcement of the annual results by reference to which the relevant AIP outcome was determined, and whilst the granting of awards may be delayed due to 'closed' or 'prohibited' period constraints, the deferral period will begin
as described above (i.e. three years from March).
Long-Term Incentive ('LTIP')¹ Award levels for Executive Directors for 2016 are unchanged at 200% of base salary. When awards are made, the number of shares within awards is calculated using the average share price for the three dealing days before the grant of awards.For all LTIP
awards made from 2015 onwards, a holding period applies so that any LTIP awards for which the performance vesting requirements are satisfied will not be released for a further two years from the third anniversary of the original award date. Dividend
accrual for LTIP awards will continue until the end of the holding period.The weightings of the LTIP performance measures for 2016 are summarised below: Performance Measure Weighting of Performance Measure Cumulative cash generation 50% TSR 50% TOTAL 100%
These weightings represent a change from the weightings for 2015 LTIP awards, where MCEV growth had a 40% weighting, Cumulative cash generation 40% and TSR 20%. As explained above for AIP, under Solvency II, embedded value metrics are expected to be less
relevant measures within the insurance industry and Phoenix will no longer be reporting MCEV; therefore MCEV growth has been removed for 2016's LTIP awards and the other measures re-balanced accordingly.Additionally, all 2016 LTIP awards are subject to a
further underpin measure relating to debt and risk management within the Group, as detailed on page 68. This 'underpin' will be extended for 2016 LTIP awards to include consideration of customer satisfaction and, to meet Solvency II requirements, in
exceptional cases, personal performance. These measures and the relative weightings are considered to be appropriate for 2016's LTIP awards. The application of a three-year performance period for each measure, is unchanged from 2015's LTIP awards.The
relative TSR measure is calculated against the constituents of the FTSE 250 (excluding Investment Trusts), with vesting commencing at median (25% of this part of the award) and full vesting at upper quintile levels, subject to an underpin regarding
underlying financial performance.As in past years, the performance targets for Cumulative cash generation will be set by the Committee shortly before the LTIP awards are made. The Company will disclose the performance targets for the Cumulative cash
generation measure for 2016's LTIP awards in next year's Directors' remuneration report.
All-Employee Share Plans Executive Directors have the opportunity to participate in HMRC tax advantaged Sharesave and Share Incentive Plans ('SIP') on the same basis as all other UK employees. To align with market practice, the 2016 Sharesave grant will be offered at a 20%
discount to market value rather than the previous 15%.
Shareholding requirements Requirement levels are 200% of base salary level for the Group Chief Executive Officer and the Group Finance Director.Where any vested LTIP awards are subject to a holding period requirement, the vested LTIP award shares (discounted for anticipated tax
liabilities) will count towards the shareholding requirements.
Chairman and Non-Executive Directors' fees Fee levels for the Chairman will be at the same levels as for 2015. The new Chairman who was appointed in 2015 was appointed at the same level of fees as the outgoing Chairman. This level of Chairman's fee is accordingly unchanged from October 2012.Base
fees for Non-Executive Directors have previously been set at £90,000 or £100,000 based on a range of factors. The Board decided to increase the base fee to a common £105,000. While the headline fee is relatively high, overall fee levels are appropriate as
Board Committee chairmanship fees at Phoenix remain amongst the lowest in the insurance sector and, unusually, no separate Board Committee membership fees are paid.The fee levels for 2016 are £325,000 for the Chairman, £105,000 for the role of Non
-Executive Director with additional fees of: (i) £5,000 payable for the role of Senior Independent Director; and/or (ii) £10,000 payable where an individual also chairs the Audit, Remuneration or Risk Committee; and/or (iii) £20,000 payable where a Non
-Executive Director also serves on the board of a subsidiary company and/or (iv) £10,000 payable for service on the Solvency II Model Governance Committee.
17.5%
Customer experience
25%
17.5%
Personal
Individual objectives
30%
TOTAL
100%
The changes made from 2015's Corporate performance measures for AIP can be summarised as follows:· In 2016, the highest
weighting will be given to operating companies' cash generation which remains core to our business and is linked directly
to Phoenix Life free surplus under Solvency II. The overall weighting for cash generation has increased from 2015.· 2015's
Corporate performance measures included both a Group Market Consistent Embedded Value (Group 'MCEV') and a Group MCEV
operating earnings after tax measure. Due to Solvency II, embedded value metrics are expected to be less relevant measures
within the insurance industry and Phoenix will no longer be reporting MCEV; accordingly MCEV will be removed as a measure
under AIP 2016, and IFRS operating earnings will replace MCEV operating earnings.· Greater weighting has been given to
customer experience, reflecting the focus of the Board as well as of our regulators.· Specific targets of employee
engagement and expense management have been removed as Corporate performance measures, but are included as part of the
objectives for the Personal performance element. Assessment of these items under the Personal element permits a more
rounded assessment.In addition, and as previously stated in the Remuneration Policy, there are three potential levels at
which the performance measures and targets and related outcomes from AIP in 2016 may be moderated (downwards or upwards) by
the Committee - more details are provided in the summary Remuneration Policy table set out in the Appendix to the
Directors' remuneration report.
Deferred Bonus Share Scheme ('DBSS')1
One-third of AIP outcomes for 2016 will be delivered as an award of deferred shares under the DBSS which will vest after a
three-year period of deferral. For DBSS awards made in 2015 (in respect of 2014's AIP outcome) and for DBSS awards to be
made in subsequent years:· The 3-year deferral period will run to the dealing day following the three-year anniversary of
the announcement of the annual results by reference to which the relevant AIP outcome was determined.· Dividend
entitlements for the DBSS shares will accrue over the three-year deferral period.· When DBSS awards are made, the number
of shares will be calculated using the average share price for the 3 dealing days before the actual grant of awards.· The
DBSS awards will be made as soon as practicable following the announcement of the annual results by reference to which the
relevant AIP outcome was determined, and whilst the granting of awards may be delayed due to 'closed' or 'prohibited'
period constraints, the deferral period will begin as described above (i.e. three years from March).
Long-Term Incentive ('LTIP')¹
Award levels for Executive Directors for 2016 are unchanged at 200% of base salary. When awards are made, the number of
shares within awards is calculated using the average share price for the three dealing days before the grant of awards.For
all LTIP awards made from 2015 onwards, a holding period applies so that any LTIP awards for which the performance vesting
requirements are satisfied will not be released for a further two years from the third anniversary of the original award
date. Dividend accrual for LTIP awards will continue until the end of the holding period.The weightings of the LTIP
performance measures for 2016 are summarised below:
Performance Measure Weighting of Performance Measure
Cumulative cash generation 50%
TSR 50%
TOTAL 100%
These weightings represent a change from the weightings for 2015 LTIP awards, where MCEV growth had a 40% weighting,
Cumulative cash generation 40% and TSR 20%. As explained above for AIP, under Solvency II, embedded value metrics are
expected to be less relevant measures within the insurance industry and Phoenix will no longer be reporting MCEV; therefore
MCEV growth has been removed for 2016's LTIP awards and the other measures re-balanced accordingly.Additionally, all 2016
LTIP awards are subject to a further underpin measure relating to debt and risk management within the Group, as detailed on
page 68. This 'underpin' will be extended for 2016 LTIP awards to include consideration of customer satisfaction and, to
meet Solvency II requirements, in exceptional cases, personal performance. These measures and the relative weightings are
considered to be appropriate for 2016's LTIP awards. The application of a three-year performance period for each measure,
is unchanged from 2015's LTIP awards.The relative TSR measure is calculated against the constituents of the FTSE 250
(excluding Investment Trusts), with vesting commencing at median (25% of this part of the award) and full vesting at upper
quintile levels, subject to an underpin regarding underlying financial performance.As in past years, the performance
targets for Cumulative cash generation will be set by the Committee shortly before the LTIP awards are made. The Company
will disclose the performance targets for the Cumulative cash generation measure for 2016's LTIP awards in next year's
Directors' remuneration report.
All-Employee Share Plans
Executive Directors have the opportunity to participate in HMRC tax advantaged Sharesave and Share Incentive Plans ('SIP')
on the same basis as all other UK employees. To align with market practice, the 2016 Sharesave grant will be offered at a
20% discount to market value rather than the previous 15%.
Shareholding requirements
Requirement levels are 200% of base salary level for the Group Chief Executive Officer and the Group Finance Director.Where
any vested LTIP awards are subject to a holding period requirement, the vested LTIP award shares (discounted for
anticipated tax liabilities) will count towards the shareholding requirements.
Chairman and Non-Executive Directors' fees
Fee levels for the Chairman will be at the same levels as for 2015. The new Chairman who was appointed in 2015 was
appointed at the same level of fees as the outgoing Chairman. This level of Chairman's fee is accordingly unchanged from
October 2012.Base fees for Non-Executive Directors have previously been set at £90,000 or £100,000 based on a range of
factors. The Board decided to increase the base fee to a common £105,000. While the headline fee is relatively high,
overall fee levels are appropriate as Board Committee chairmanship fees at Phoenix remain amongst the lowest in the
insurance sector and, unusually, no separate Board Committee membership fees are paid.The fee levels for 2016 are £325,000
for the Chairman, £105,000 for the role of Non-Executive Director with additional fees of: (i) £5,000 payable for the role
of Senior Independent Director; and/or (ii) £10,000 payable where an individual also chairs the Audit, Remuneration or Risk
Committee; and/or (iii) £20,000 payable where a Non-Executive Director also serves on the board of a subsidiary company
and/or (iv) £10,000 payable for service on the Solvency II Model Governance Committee.
1 All incentive plans are subject to malus and/or clawback provisions. These provisions may be applied where the Committee
considers it appropriate to do so following:
· A review of the conduct, capability or performance of an individual
· A review of the performance of the Company or a Group member
· Any material misstatement of the Company's or a Group member's financial results for any period
· Any material failure of risk management by an individual, a Group member or the Company
· Any other circumstances that have a sufficiently significant impact on the reputation of the Company.
BALANCE OF FIXED TO VARIABLE REMUNERATION FOR EXECUTIVE DIRECTORS
The balance of fixed to variable remuneration for the Executive Directors is illustrated in the Appendix to the Directors'
remuneration report where the disclosure for 'Potential Rewards under Various Scenarios' from the Remuneration Policy is
included for information. The scenarios shown remain the same as for 2014 due to the underlying remuneration arrangements
and participation levels remaining substantially unchanged.
DISTRIBUTION STATEMENT
The UK regulations require each quoted company to provide a comparison between profits distributed by way of dividend and
overall expenditure on pay.
RELATIVE IMPORTANCE
GRAPH
Profit distributed by way of dividend has been taken as the dividend paid and proposed in respect of the relevant financial
year. For 2015 this is the interim dividend paid (£60 million) and the recommended final dividend of 26.7p multiplied by
the total share capital issued at the date of the Annual Report as set out in note D1 'Share capital' in the notes to the
consolidated financial statements. No share buy-backs were made in either year.
Overall expenditure on pay has been taken as the employee costs for continuing operations as set out in note C2
'Administrative expenses' in the notes to the consolidated financial statements. The 2014 figure also includes £31 million
from discontinued operations which relate to Ignis, which was disposed of on 1 July 2014. Expenditure on pay from
continuing operations has decreased by 6% year on year.
PERFORMANCE GRAPH AND TABLE
The graph below shows the value to 31 December 2015, on a TSR basis, of £100 invested in Phoenix Group Holdings on 5 July
2010 (the date of the Company's Premium Listing) compared with the value of £100 invested in the FTSE 250 Index (excluding
Investment Trusts).
TOTAL SHAREHOLDER RETURN
GRAPH
The FTSE 250 Index (excluding Investment Trusts) is considered to be an appropriate comparator for this purpose as it is a
broad equity index of which the Company is a constituent.
The UK regulations also require that a performance graph is supported by a table summarising aspects of the Group Chief
Executive Officer's remuneration for the period covered by the above graph (which will in due course be for a period of ten
years).
Group Chief Executive Officer Remuneration
Single figure of total remuneration(£000) Annual variable element award rates against maximum opportunity(AIP) Long-term incentive vesting rates against maximum opportunity(LTIP)
2015 Clive Bannister 2,889 82% 57%
2014 Clive Bannister 3,104 1,3 68% 57%2
2013 Clive Bannister 2,737 69% 67%2
2012 Clive Bannister 1,583 69% n/a4
2011 Clive Bannister5 1,333 73% n/a4
Jonathan Moss5,6 704 n/a n/a
2010 Jonathan Moss 2,307 88% 100%
1 Figures restated for 2014. See footnote 3 for detail.
2 The long-term incentive vesting rate for 2013 is shown at 67% and for 2014 is shown as 57%. In both years the Group Chief
Executive Officer decided to waive voluntarily any entitlement in excess of two-thirds of the shares which would otherwise
have vested.
3 The single figure of total remuneration for 2014 has been restated and now reflects the actual price of shares on the day
the 2012 LTIP vested (23 September 2015: 836p per share) rather than the three-month average share price to 31 December
2014 (769.93p per share) which was required to be used last year for the single figure of total remuneration, and also
reflects the actual dividends accrued on the award until the date of vesting.
4 Long-term incentive vesting rates against maximum opportunity values are not applicable for 2011 and 2012 due to no
awards vesting in those financial years.
5 Jonathan Moss left the role of Group Chief Executive Officer on 7 February 2011 and left the Group on 29 March 2011.
Clive Bannister joined Phoenix Group on 7 February 2011 and was appointed to the Board as a Director on 28 March 2011.
6 Jonathan Moss' 2011 single figure of total remuneration does not include compensation for loss of office.
PERCENTAGE CHANGE IN PAY OF THE GROUP CHIEF EXECUTIVE OFFICER 2014 TO 2015
In accordance with UK regulations, the table below provides a comparison of the percentage change in the prescribed pay
elements of the Group Chief Executive Officer (salary, taxable benefits and annual incentive outcomes) between financial
years 2014 and 2015 and the equivalent percentage changes in the average of all staff (representing all permanent staff
during 2014 and 2015 on a matched basis). This group was selected as being representative of the wider workforce using the
same process as was used for this comparison in last year's accounts.
Year-on-year % change Salary Taxable Benefits Annual incentive Total
Group Chief Executive Officer 0.00 (0.61) 20.23 10.11
Staff 3.96 2.50 11.60 5.63
Overall, the data shows virtually unchanged levels of salary and benefits for the Group Chief Executive Officer; the
increase in annual incentive is primarily due to him being awarded a higher rating on the Personal performance measures for
AIP than in previous years, which has resulted in a higher AIP out-turn. Staff more generally have received higher overall
remuneration due mainly to higher AIP outcomes than in 2014. The median level of salary increase for staff was 2.5% and is
lower than the figure shown above which is based on averages.
VOTING OUTCOMES FROM THE 2015 AGM
The table below shows the votes cast to approve the Directors' remuneration report for the year ended 31 December 2014 at
the 2015 AGM held on 23 April 2015.
For Against Abstain
Number % of votes cast Number % of votes cast Number
To approve the Directors' remuneration report for the year ended 31 December 2014 138,914,473 98.12 2,645,386 1.87 352,328
A vote to approve the Remuneration Policy was passed at the 2014 AGM held on 30 April 2014. Details of the votes cast in
relation to this resolution were disclosed in the Company's Directors' remuneration report for 2014 which is available as
part of the Phoenix Group Holdings Annual Report and Accounts 2014.
IMPLEMENTATION REPORT - AUDITED INFORMATION
SINGLE FIGURE TABLE
Salary/fees¹ Benefits² Annual Incentive³ Long-termincentives Pension6 Total
£000 2015 2014 2015 2014 2015 2014 20154 20145(restated) 2015 2014 2015 20145(restated)
Clive Bannister4 700 700 16 16 861 716 1,189 1,5475 123 125 2,889 3,104
James McConville 440 440 16 35 566 475 679 1,5035 77 77 1,778 2,530
1 The Executive Directors are entitled to adjust their salary/benefit combination under flexible benefits arrangements and
the figures shown are before individual elections.
2 Benefits for Clive Bannister comprise car allowance and private medical insurance totalling £16,175. Benefits for James
McConville comprise car allowance and private medical insurance totalling £15,940.
3 Annual incentive amounts are presented inclusive of any amounts which must be deferred into shares for three years (i.e.
one-third of the AIP award). In 2015 and 2014, £287,000 and £238,700 respectively of Clive Bannister's incentive payment is
subject to 3-year deferral delivered in shares, and £188,650 and £158,290 of James McConville's incentive payment is
subject to similar deferral. Details of the performance measures and targets applicable to the AIP for 2015 are set out
below.
4 In accordance with the requirements of the UK regulations, the 2015 value for long-term incentives is an estimate of the
vesting outcomes for LTIP awards granted in 2013 and which are due to vest on 15 November 2016 for Clive Bannister and
James McConville. These estimated vesting levels are at 57% reflecting outcomes against the MCEV growth, Cumulative cash
generation and TSR performance measures to 31 December 2015 and assumptions regarding dividends for the period until
vesting. This vesting outcome is then applied to the average share price between 1 October 2015 and 31 December 2015
(873.4924p) to produce the estimated long-term incentives figures shown for 2015 in the above table. These assumptions will
be trued up for actual share prices and dividends on vesting in the report for 2016. Details of the performance measures
and targets applicable to the 2013 LTIP are set out on page 66.
5 For 2012's LTIP grants which are reflected in the 2014 long-term incentives columns above, the performance conditions
were met as to 84.24% of maximum. The Group Chief Executive Officer decided to waive voluntarily any entitlement in excess
of two-thirds of the shares which would otherwise have vested. The 2014 long-term incentives values in the above table
reflect the value of the Company's shares on the date of vesting which, due to extended closed and prohibited periods, was
23 September 2015 (836p per share) multiplied by the number of shares vesting, whereas the equivalent figure within the
published 2014 single figure table was an estimate which reflected the average share price between 1 October 2014 and 31
December 2014 (769.93p per share) and certain assumptions regarding the cumulative value of dividends on the number of
shares vesting.
6 Clive Bannister and James McConville are entitled to each receive a Company pension contribution of 20% of base salary,
which may at their own choice, be paid to their Group Personal Pension ('GPP') or received in cash. Pension contributions
paid as cash supplements are reduced for the effect of employers' National Insurance contributions. No Director
participated in a defined benefit pension arrangement in the year.
The aggregate remuneration of all Executive and Non-Executive Directors under salary, fees, benefits, cash supplements in
lieu of pensions and annual incentive was £3.937 million (2014: £3.771 million).
There were no payments made to former Directors and no payments for loss of office in the year.
AIP OUTCOMES FOR 2015
The Committee seeks to set suitable ranges for each measure in the context both of the Company's own internal budgets and
of external projections (whether through management guidance or consensus forecasts). As an entirely closed life business,
targets are significantly impacted by management actions and year on year growth is not an inherent objective. The ranges
are considered appropriate in that context.
As explained in the Committee Chairman's letter, and as permitted under the AIP rules, in relation to the MCEV-based
measures the Committee excluded the additional direct MCEV implications of securing an investment grade credit rating
together with related Solvency II steps, the full negative impacts of which on MCEV were not reflected in the original AIP
target setting process for 2015. The achievement of an investment grade rating was a significant step for the Company and
had been a long-standing aspiration and the increase in liabilities for MCEV from the Company being required to value its
listed bonds on a market value basis would have operated counter-intuitively if not excluded.
Group MCEV is a measure of the consolidated value of shareholders' interests in an insurance group and the key components
are net worth plus the value of in-force covered business, based on a market-consistent methodology where assets and
liabilities are valued in line with market prices. Accordingly, listed debt is valued at the market value quoted on the
reporting date. One consequence of achieving an investment grade rating was that the market value of the Group's listed
bonds increased even though there was no additional liability for the Group (as the market perceived our strength and,
therefore, the likelihood of repayment to be higher). Consequently, as this increase in market value of debt reduced MCEV,
the Committee concluded that it would be appropriate to exclude such impact from the AIP out-turn by adjusting the targets,
otherwise the impact of such a significant step for the Group would have inadvertently penalised management.
Similarly, following clarity on the regulations under Solvency II and the actions necessary to ensure approvals in relation
to full internal model approval and matching adjustment be obtained, management took the decision to change the credit
portfolio by selling assets which attracted a high capital charge under the new regime, which were outside of the Group's
risk appetite or which were ineligible or inefficient for matching adjustment (such as callable bonds). Furthermore,
management also reduced the longevity and credit exposure by reinsuring c.£1.3 billion of liabilities to an external
reinsurer, both of which attract the highest level of risk capital under Solvency II for the Group. Accordingly, the
Committee concluded again that it would operate contrary to the principles of the AIP if management was penalised for such
actions which were clearly in the interests of the Group.
It was felt appropriate to ensure that management was not disincentivised from bringing such opportunities to the Board.
This could have been the case had appropriate adjustments to the 2015 AIP targets not been made for the additional costs
required to deliver these important developments. The impact of the adjustments on the AIP Corporate measures is shown
below.
Against the specific Corporate measures, out-turns were as follows:
Performance measure Threshold performance Maximum performance Performance % of 70% % achieved
level for level for level attained of incentive
2015 AIP 2015 AIP for 2015 potential based on Performance Measure
AIP
Operating companies' cash generation¹ £200m £300m £275m 25% 19%
Group MCEV2 £2,463m £2,574m £2,633m 25% 25%
Expense management £253m £237m £239m 15% 13%
Group MCEV operating earnings after tax £123m £246m £223m 15% 12%
Customer satisfaction3 3.5 rating 5 rating 4.7 rating 10% 8%
Employee engagement 72% 80% 78% 10% 8%
Total 85%
1 Consistent with past practice, the performance level for operating companies' cash generation has been credited with
£50million which was generated within Phoenix Life. This ensures that, at all times, management maintains sufficient
capital in Phoenix Life given the implementation of Solvency II.
2 Represents reported Group MCEV after adding back ordinary dividends.
3 The rating is a score based on questions answered by customers in a satisfaction survey managed by Ipsos MORI. Customers
surveyed were asked to give a satisfaction rating of between 1 and 5 to a number of questions (with a rating of 3 or above
regarded as satisfied). The 4.7 rating (out of 5) in 2015 is the average score of all questions answered.
The table below shows the actual out-turn against the annual incentive maximum. For 2015 AIP, Corporate (financial and
strategic) measures applied to 70% of incentive opportunity and Personal (individual objectives) measures applied to 30% of
incentive opportunity.
Corporate Personal Total Maximum
Name As a % ofmaximum corporate element As a % ofsalary As a % ofmaximum personal element As a %of salary As a %of salary As a %of salary
Clive Bannister 85.00 89.25 75.00 33.75 123.00 150.00
James McConville 85.00 89.25 87.50 39.38 128.63 150.00
In line with market best practice, the Company has disclosed both the actual performance targets for the specific Corporate
(financial and strategic) performance measures used for the 2015 AIP and the relevant levels of attainment for those
targets. Specific performance measures and targets for the Personal (individual objectives) performance elements of the
2015 AIP are not disclosed as these performance measures and targets are regarded as commercially sensitive by the
Committee and are likely to remain so, although key achievements included the approval of the Group's Internal Model under
Solvency II and managing the introduction of the new Pension Freedoms, together with meeting the MCEV management actions
target one year ahead of schedule.
In addition, whilst the performance measures for the AIP for 2016 have been disclosed (see Implementation of Remuneration
Policy for 2016), the performance targets for these measures are regarded as commercially sensitive at the current time and
accordingly are not disclosed. However, the Company intends to disclose the performance targets for the Corporate
(financial and strategic) performance measures for 2016's AIP retrospectively in next year's Directors' remuneration report
on a similar basis to the disclosures made above in respect of 2015's AIP Corporate (financial and strategic) performance
measures.
LTIP OUTCOMES FOR 2013 AWARDS
Performance measure and weighting Target range Performance achieved Vesting %
outcome achieved
MCEV growth (40%) Target range between MCEV growth in excess of the risk-free rate by 4% per annum and MCEV growth in excess of the risk-free rate by 6% per annum. 6.14% 100% 40%
Cumulative cash generation (40%) Target range between cumulative cash generation of £1.277 billion and cumulative cash generation of £1.477 billion. £1.258bn 0% 0%
TSR (20%) Target range between median performance against the constituents of the FTSE 250 (excluding Investment Trusts) rising on a pro rata basis until full vesting for upper quintile performance. In addition, the Committee must consider whether the TSR performance is reflective of the underlying financial performance of the Company. 74th percentile 87% 17%
Total 57%
The above targets were all measured over the period of three financial years 1 January 2013 to 31 December 2015.
In addition to the above targets, the Committee confirmed that the underpin performance condition relating to management of
debt, capital restructuring and risk management within the Group (as described more fully on page 68) had been achieved in
the performance period.
NON-EXECUTIVE FEES
The emoluments of the Non-Executive Directors for 2015 based on the current disclosure requirements were as follows:
Name Directors' Directors' Benefits¹ Benefits¹ Total Total
salaries/fees 2015 salaries/fees 2015 2014 2015 2014
£000 2014 £000 £000 £000 £000
£000
Non-Executive Chairman
Howard Davies² 217 325 - - 217 325
Henry Staunton³ 108 - - - 108 -
Non-Executive Directors
René-Pierre Azria 100 100 - - 100 100
Alastair Barbour 130 122 7 8 137 130
David Barnes4 - 89 - - - 89
Ian Cormack 125 125 - - 125 125
Tom Cross Brown 120 120 - - 120 120
Manjit Dale5 - 33 - - - 33
Isabel Hudson 100 100 - - 100 100
Kory Sorenson6 90 45 - - 90 45
David Woods 130 130 11 8 141 138
Total 1,120 1,189 18 16 1,138 1,205
1 The amounts within the benefits columns reflect the fact that the reimbursement of expenses to Non-Executive Directors
for travel and accommodation costs incurred in attending Phoenix Life Holdings Limited Board and associated meetings
represent a taxable benefit. This position has been clarified with HMRC and the amounts shown are for reimbursed travel and
accommodation expenses (and the related tax liability which is settled by the Group).
2 Howard Davies retired from the Board 31 August 2015.
3 Henry Staunton joined the Board 1 September 2015.
4 David Barnes retired from the Board 22 October 2014.
5 Manjit Dale retired from the Board 30 April 2014.
6 Kory Sorenson joined the Board 1 July 2014.
SHARE-BASED AWARDS
As at 31 December 2015, Directors' interests under long-term share-based arrangements were as follows:
LTIP
Date of grant Share price No. of shares as at No. of shares granted in 2015 No. of dividend shares acquired No. of shares No. of shares No of shares as at Vesting date
on grant 1 Jan as exercised4 not vested 31 Dec
2015 at vesting¹ 2015
Clive Bannister
LTIP2,4 12 April 2011 657.5p 6,010 - - (6,010) - - 12 April 2014
LTIP3,4 2 April 2012 566.5p 253,493 - 42,733 (185,094) (111,132) - 23 September 2015
LTIP 15 November 2013 712.0p 196,629 - - - - 196,629 15 November 2016
LTIP 26 March 2014 741.5p 188,806 - - - - 188,806 26 March 2017
LTIP5 28 September 2015 827.7p - 169,150 - - - 169,150 28 September 2018
644,938 169,150 42,733 (191,104) (111,132) 554,585
James McConville
LTIP3,4 23 August 2012 485.0p 169,194 - 37,295 (179,824) (26,665) - 23 September 2015
LTIP 15 November 2013 712.0p 112,359 - - - - 112,359 15 November 2016
LTIP 26 March 2014 741.5p 118,678 - - - - 118,678 26 March 2017
LTIP5 28 September 2015 827.7p - 106,322 - - - 106,322 28 September 2018
400,231 106,322 37,295 (179,824) (26,665) 337,359
1 In addition to the shares awarded under the LTIP presented above, participants receive an additional number of shares
(based on the number of LTIP awards which actually vest) to reflect the dividends paid during the vesting period (and which
,for awards made from 2015, will include dividends paid during any applicable holding period).
2 The shares outstanding at the start of the year related to dividend roll-up and were exercised on 7 January 2015.
3 The 2012 LTIP award vested at 84.24%, although the Group Chief Executive Officer decided to waive voluntarily any
entitlement in excess of two-thirds of the shares which would otherwise have vested.
4 Gains of Directors from share options exercised and vesting shares under
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