REG - Phoenix Grp Hldgs - Phoenix Group Holdings - 2015 Annual Results <Origin Href="QuoteRef">PHNX.L</Origin> - Part 6
23/03/2016 08:18
- Part 6: For the preceding part double click ID:nRSW9668Se
the LTIP in 2015 were £3,037,992 (Clive
Bannister's gains were £47,599 exercised on 7 January 2015 at a share price of £7.92 and £1,528,424 exercised on 25
September 2015 at a share price of £8.257558; James McConville's gain was £1,461,969 exercised on 29 September 2015 at a
share price of £8.13) (2014: £1,295,305).
5 The face value of awards granted in 2015 represents the maximum vesting of awards (but before any credit for dividends
over the period to vesting) and is calculated using a share price of 827.667p being the average of the closing middle
market prices of Phoenix shares for the 3 dealing days preceding the award date, being £1,399,999 for Clive Bannister and
£879,992 for James McConville. The vesting % at threshold performance (2015 awards) for Clive Bannister and James
McConville is 25%. As detailed on page 61 for LTIP awards made in 2015 a holding period applies so that any LTIP awards for
which the performance vesting requirements are satisfied will not be released for a further 2 years from the third
anniversary of the original award date.
The performance conditions for the 2013, 2014 and 2015 awards are set out below:
Performance measure 2013 award(40% MCEV growth, 40% Cumulative cash generation and 20% TSR) 2014 award(40% MCEV growth, 40% Cumulative cash generation and 20% TSR) 2015 award(40% MCEV growth, 40% Cumulative cash generation and 20% TSR)
MCEV growth25% of this part vests at threshold performance rising on a pro rata basis until 100% vests.Measured over three 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.As the 2013 rights issue was known before the date of award, the base MCEV for 2013's award increased by £211 million. Target range as for 2013.For this award, an additional Target range between MCEV growth in excess of the risk-free rate by 3% per annum and MCEV growth in excess of the risk-free rate by 5% per annum.
financial years commencing with the year of award. £50 million was added to the
base MCEV figure to increase the level of challenge.
Cumulative cash generation25% of this part vests at threshold performance rising on a pro rata basis until 100% vests.Measured Target range of £1.277 billion to £1.477 billion. Target range of £1.348 billion to £1.548 billion. Target range of £841 million to £991 million.
over three financial years commencing with the year of award.
TSR25% of this part vests at threshold performance rising on a pro rata basis until 100% vests. In addition, the Committee must 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. Target range as for 2013. Target range as for 2013.
consider whether the TSR performance is reflective of the underlying financial performance of the Company.Measured over three
financial
years commencing with the
year of award.
Underpin:Notwithstanding the MCEV growth, Cumulative cash generation and TSR performance targets, if the Committee determines
that the Group's debt levels and associated interest costs have not remained within parameters acceptable to the Committee over
the performance period, and that the Group has not made progress considered to be reasonable by it in executing any strategy
agreed by the Board on debt management, capital structuring and risk management, the level of awards vesting will either be
reduced or lapse in full.
As noted in the section describing the Implementation of Remuneration Policy in 2016, LTIP awards to be made in 2016 will
be subject to Cumulative cash generation and Relative TSR performance measures similar to those described in the table
above. The exact performance targets for Cumulative cash generation will be determined by the Committee shortly before the
awards are made. Such targets will be disclosed in the 2016 Directors' remuneration report.
The Committee remains committed to applying the performance conditions on the LTIP awards detailed above without adjustment
to the extent this is practicable. In light of Solvency II, embedded value metrics are expected to be less relevant
measures within the insurance industry and Phoenix will no longer be reporting MCEV. The Committee will ensure that any
necessary amendments to this part of the relevant LTIP awards are, consistent with the shareholder approved Remuneration
Policy, made on the basis of the Committee ensuring that any substitute performance measure for MCEV growth does not make
the performance condition easier to satisfy than the original was intended to be. Any alterations to the performance
measures for outstanding LTIP awards will be reported in the relevant Directors' remuneration report and be subject to due
engagement with key shareholders.
DBSS
Date of grant Share price No. of shares as at No. of shares granted in 2015 No. of dividend shares No. of shares No. of shares No of shares as at Vesting
on grant 1 Jan2015 acquired at vesting exercised³ lapsed/waived 31 Dec date
2015
Clive Bannister
DBSS 2 April 2012 562.5p 41,452 - 12,439 (53,891) - - 23 September 2015
DBSS 27 March 2013 658.5p 36,748 - - - - 36,748 27 March 2016
DBSS 28 March 2014 652.0p 34,029 - - - - 34,029 28 March 2017
DBSS1,2 28 September 2015 827.7p - 28,840 - - - 28,840 19 March 2018
112,229 28,840 12,439 (53,891) - 99,617
James McConville
DBSS 27 March 2013 658.5p 11,999 - - - - 11,999 27 March 2016
DBSS 28 March 2014 652.0p 20,417 - - - - 20,417 28 March 2017
DBSS1,2 28 September 2015 827.7p - 19,124 - - - 19,124 19 March 2018
32,416 19,124 - - - 51,540
1 The face value of awards granted in 2015 is equivalent to 50% of the cash element of the 2014 AIP and is calculated using
a share price of 827.667p, being the average closing market price on the 3 days preceding the award date giving £238,699
for Clive Bannister and £158,283 for James McConville.
2 As explained in the Implementation of Remuneration Policy in 2016 table on page 60, the DBSS award made in 2015 will vest
on 19 March 2018, being the day following the third anniversary of the announcement of 2015's annual results.
3 Gains of Directors from share options exercised and vesting shares under the DBSS in 2015 were £438,626, exercised on 29
September 2015 at a share price of £8.139129. This was the first vesting of the DBSS for Clive Bannister since its
inception.
The DBSS is the share scheme used for the deferral of AIP. No performance conditions apply therefore other than being
subject to continued employment. In addition to the shares awarded under the DBSS presented above, participants receive an
additional number of shares to reflect the dividends paid during the vesting period (or until transfer of shares for DBSS
awards made before 2014).
Sharesave
As at Shares Shares Shares As at Exercise Exercisable Date of
1 Jan granted in vested lapsed 31 Dec price from expiry
2015 2015 2015
Clive Bannister - - - - - - - -
James McConville 1,607 - - - 1,607 £5.60 01 Jun 2016 30 Nov 2016
Gains of Directors from share options exercised under Sharesave 2015 were £nil (2014: £3,878). Sharesave options are
granted with an option price that is a 15% discount to the three-day average share price when invitations are made. This is
permitted by HMRC regulations for such options. For options in 2016 this discount will be 20%. Sharesave options are not
subject to performance conditions. The Sharesave options granted to James McConville represent options granted for the then
maximum monthly savings of £250 per calendar month for three years.
Aggregate gains of Directors from share options exercised and vesting shares under all share plans in 2015 were £3,476,618
(2014: £1,299,183).
During the year ended 31 December 2015, the highest mid-market price of the Company's shares was 922p and the lowest
mid-market price was 783.5p. At 31 December 2015, the Company's share price was 917p.
DIRECTORS' INTERESTS
The number of shares held by each Director is shown below:
Name As at As at Total share plan Total share plan Total share plan
1 January 2015 31 December 2015 interests as at interests as at interests as at
or date of appointment or retirement 31 December 2015 31 December 2015 31 December 2015
if later if earlier - LTIP - DBSS - Sharesave
Clive Bannister 176,422 305,964 554,585 99,617 -
James McConville - 95,094 337,359 51,540 1,607
René-Pierre Azria 34,491 34,491 - - -
Alastair Barbour 3,000 3,000 - - -
Ian Cormack 3,650 3,650 - - -
Tom Cross Brown 1,988 1,988 - - -
Howard Davies 3,623 3,623 - - -
Isabel Hudson 3,880 3,880 - - -
Kory Sorenson 1,380 1,380 - - -
Henry Staunton - 20,000 - - -
David Woods 3,500 3,500 - - -
SHAREHOLDING REQUIREMENTS
As explained in the Remuneration Policy under the Shareholding Guidelines section, the Executive Directors are subject to
shareholding requirements.
The extent to which Executive Directors have achieved the requirements by 31 December 2015 (using the share price on
acquisition/vesting) can be summarised as follows:
Position Shareholding Guideline(% of salary) Value of shares held at31 December 2015(% of salary)
Clive Bannister 200% 339%
James McConville 200% 175%
The Executive Directors are required to sign a declaration that they have not and will not at any time during their
employment with Phoenix Group, enter into any hedging contract in respect of their participation in the AIP, LTIP,
Sharesave, SIP or any other incentive plan of the Company, or pledge awards in such plans as collateral, and additionally
that they will neither enter into a hedging contract in respect of, nor pledge as collateral, any shares which are required
to be held for the purposes of the Company's Shareholding requirements or any vested LTIP award shares subject to a LTIP
holding period.
ADDITIONAL UNAUDITED INFORMATION
DIRECTORS' SERVICE CONTRACTS
The dates of contracts and letters of appointment and the respective notice periods for Directors are as follows:
Executive Directors' contracts
Name Date of appointment Date of contract Notice period fromeither party (months)
Clive Bannister 28 March 2011 7 February 2011 12
James McConville 28 June 2012 28 May 2012 12
Subject to Board approval, Executive Directors are permitted to accept outside appointments on external boards as long as
these are not deemed to interfere with the business of the Group. During 2015, Clive Bannister received £37,500 from Punter
Southall Group and CHF60,000 from UniGestion in respect of two external directorships. James McConville received £112,000
from Tesco Personal Finance plc.
Non-Executive Directors' contracts
Name Date of letter Date of Appointment Unexpired term(months)
of appointment Joining the Board end date
René-Pierre Azria 2 September 2009 2 September 2009 11 May 2016 2
Alastair Barbour 11 September 2013 1 October 2013 1 October 2016 7
Ian Cormack 2 September 2009 2 September 2009 11 May 2016 2
Tom Cross Brown 24 September 2009 24 September 2009 11 May 2016 2
Isabel Hudson 11 December 2009 18 February 2010 11 May 2016 2
Kory Sorenson 9 May 2014 1 July 2014 1 July 2017 14
Henry Staunton 19 August 2015 1 September 2015 1 September 2018 30
David Woods 21 December 2009 18 February 2010 11 May 2016 2
The above tables have been included to comply with UKLA Listing Rule 9.8.8. In the event of cessation of a Non-Executive
Director's appointment (excluding the Chairman) they would be entitled to a one month notice period. The Chairman, as
detailed in his letter of appointment, would be entitled to a six months' notice period.
REMUNERATION COMMITTEE GOVERNANCE
The Group established the Committee in 2010. The terms of reference of the Committee are available at
www.thephoenixgroup.com. The main determinations of the Committee in 2015 in respect of the application of the Remuneration
Policy are summarised in the Committee Chairman's letter to shareholders at the start of the Directors' remuneration
report.
The table below shows the independent Non-Executive Directors who served on the Committee during 2015 and their date of
appointment:
Member From To
Ian Cormack (Committee Chairman) 18 February 2010 To date
Isabel Hudson 18 February 2010 To date
Kory Sorenson 3 July 2014 To date
Under the Committee's Terms of Reference, the Committee meets at least twice a year but more frequently if required. During
2015, six Committee meetings were held and details of attendance at meetings are set out in the Corporate Governance Report
on page 47.
Consistent with the requirements of Solvency II, the Committee is responsible for establishing, implementing, overseeing
and reviewing the firm-wide remuneration policy in the context of business strategy and changing risk conditions. The
firm-wide remuneration policy focuses on ensuring sound and effective risk management so as not to encourage risk-taking
outside of the Company's risk appetite. None of the Committee members has any personal financial interest (other than as
shareholders), conflicts of interests arising from cross-directorships or day-to-day involvement in running the business.
The Committee makes recommendations to the Board. No Director plays a part in any discussion about his or her own
remuneration.
Advice
The Committee received independent remuneration advice during the year from its appointed adviser, FIT Remuneration
Consultants LLP ('FIT'). FIT is a member of the Remuneration Consultants Group (the professional body for consultants) and
adheres to its code of conduct. This appointment was made by the Committee following consideration of FIT's experience in
this sector. FIT provided no other services to the Group and accordingly the Committee was satisfied that the advice
provided by FIT was objective and independent. FIT's fees in respect of 2015 were £246,582. FIT's fees were charged on the
basis of the firm's standard terms of business for advice provided.
The Committee also consulted with the Group Chief Executive Officer, Group HR Director and General Counsel who attended, by
invitation, various Committee meetings during the year although no executive is ever permitted to participate in
discussions or decisions regarding his or her own remuneration. Input is also sought from the Chief Risk Officer (without
management present) and from representatives from finance, as appropriate.
APPROVAL
This report in its entirety has been approved by the Remuneration Committee and the Board of Directors and signed on its
behalf by
IAN CORMACK
Remuneration Committee Chairman
22 March 2016
APPENDIX TO DIRECTORS' REMUNERATION REPORT:
FOR INFORMATION ONLY: THE SUMMARY REMUNERATION POLICY TABLE FROM THE DIRECTORS' REMUNERATION POLICY APPROVED AT THE 2014
AGM
Remuneration Policy table
Element and purpose Policy and operation Maximum Performance measures
Base salaryThis is the core element of pay and reflects the individual's role and position within the Group with some adjustment to reflect their capability and contribution · Base salaries are reviewed each year against companies of similar size and complexity and set by reference to the median data of comparators which the Remuneration Committee considers to be suitable, with consideration given to both relevant insurance companies and the FTSE 31-100 as a whole· The Remuneration Committee does not strictly follow data but uses it as a reference point in considering, in its judgement, the appropriate level of salary having regard to other relevant factors including corporate and individual performance and any changes in an individual's role and responsibilities, and the level of salary increase awarded to other employees of the Group· Base salary is paid monthly in cash· Changes to base salaries normally take effect from 1 January · The Remuneration Committee will apply the factors set out in the previous column in considering any salary adjustments during the duration of this policy and, in any event, no increase will be made if it would take an Executive Director's salary above the median level of salaries for the Remuneration Committee's assessment of that role in the FTSE 31-100 at or shortly prior to when any increase is considered · N/A
Benefits1To provide other benefits valued by recipient · The Group provides market competitive benefits in kind. Details of the benefits provided in 2013 and 2014 are set out in the section below1. The Remuneration Committee reserves discretion to introduce new benefits where it concludes that it is in the interests of Phoenix Group to do so, having regard to the particular circumstances and to market practice· Where appropriate, the Company will meet certain costs relating to Executive Director relocations · It is not possible to prescribe the likely change in the cost of insured benefits or the cost of some of the other reported benefits year-to-year, but the provision of benefits will normally operate within an annual limit of 10% of an Executive Director's base salary· The Remuneration Committee will monitor the costs in practice and ensure that the overall costs do not increase by more than the Remuneration Committee considers to be appropriate in all the circumstances· Relocation expenses are subject to a maximum limit of £150,000 · N/A
PensionTo provide retirement benefits and remain competitive within the market place · The Group provides a competitive employer sponsored pension plan· All Executive Directors are eligible to participate in the Group Personal Pension ('GPP'). Executive Directors receive a contribution to GPP or they may opt to receive the contribution in cash if they are impacted by the relevant lifetime or annual limits· Phoenix will honour the pensions obligations entered into under all previous policies in accordance with the terms of such obligations · A contribution limit of 20% of base salary per annum per Executive Director has been set for the duration of this policy · N/A
Annual Incentive Plan ('AIP')To motivate employees and incentivise delivery of annual performance targets · AIP levels and the appropriateness of measures are reviewed annually to ensure they continue to support the Group's strategy· AIP outcomes are paid in cash in one tranche (less the deferred share award)· One third of any annual AIP award is to be deferred into shares for a period of three years although the Remuneration Committee reserves discretion to alter the current practice of deferral (whether by altering the portion deferred, the period of deferral or whether amounts are deferred into cash or shares). Such alterations may be required to ensure compliance with regulatory guidelines for pay within the insurance sector, but will not otherwise reduce the current portion deferred or the period of deferral· Deferral of AIP outcomes into shares is currently made under the Phoenix Group Holdings' Deferred Bonus Share Scheme ('DBSS') and DBSS awards are made following the announcement of annual results in accordance with the DBSS rules· Awards under DBSS will be in the standard form of awards to receive shares for nil-cost (with the shares either being delivered automatically at vesting or being delivered at a time following vesting at the individual's choice)· During the period until vesting of DBSS awards, the number of shares within such awards are cumulatively increased by the value of dividends notionally payable in respect of the vesting shares· Malus/clawback provisions apply to the AIP and to amounts deferred and may be operated in a broad range of circumstances, including those prescribed by the FCA's Remuneration Code · The maximum annual incentive level for an Executive Director is 150% of base salary per annum· The performance measures applied to AIP will be set by the Remuneration Committee and may be financial or non-financial and
corporate, divisional or individual and in such proportions as it considers appropriateIn respect of the financial performance
measures, attaining the threshold performance level produces a £nil annual incentive payment and for non-financial performance
measures the threshold level of performance produces an annual incentive outcome that is 10% of the weighting given to these
measuresOn-target performance on all measures produces an outcome of 50% of maximum annual incentive opportunity. However, the
Remuneration Committee reserves the right to adjust the threshold and target levels for future financial years in light of
competitive practiceThe AIP operates subject to three levels of moderation:i. The Remuneration Committee sets targets for
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