REG - Phoenix Grp Hldgs - Phoenix Group Holdings - 2015 Annual Results <Origin Href="QuoteRef">PHNX.L</Origin> - Part 8
23/03/2016 08:18
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· N/A
Chairman and Non-Executive Director fees · The fees paid to the Chairman and the fees of the other Non-Executive Directors are set to be competitive with other listed companies of equivalent size and complexity (both relevant insurance companies and the FTSE 31-100 as a whole)· Fee levels are periodically reviewed. The Company does not adopt a quantitative approach to pay positioning and exercises judgement as to what it considers to be reasonable in all the circumstances as regards quantum· Additional fees are paid to Non-Executive Directors who chair or sit on a board committee, or on boards of subsidiary entities or on the Solvency II Model Governance Committee and to the Senior Independent Director ('SID')· Fees are paid monthly in cash· Fee levels for Non-Executive Directors are reviewed annually with any changes normally taking effect from 1 January · The aggregate fees of the Chairman and Non-Executive Directors will not exceed the limit from time to time prescribed within the Company's Articles of Association for such fees (currently £2 million per annum in aggregate)· The Company reserves the right to vary the structure of fees within this limit including, for example, introducing time-based fees or reflecting the establishment of new board committees · N/A
Footnotes to the above Remuneration Policy table
1. Benefits in 2015
For details of benefits in 2015, please see note 1 to the 'Single Figure of Remuneration Table' on page 64.
2. Holding Period for LTIP awards from 2015
For LTIP awards from 2015 a two-year holding period has been introduced as explained in the 'Implementation of
Remuneration Policy in 2015' table on page 61.
3. Shareholding Guidelines from 2015
These have been extended to 200% of base salary for all Executive Directors.
RECRUITMENT REMUNERATION POLICY
The Company's recruitment remuneration policy aims to give the Remuneration Committee sufficient flexibility to secure the
appointment and promotion of high-calibre executives to strengthen the management team and secure the skill sets to deliver
our strategic aims.
· In terms of the principles for setting a package for a new Executive Director, the starting point for the Remuneration
Committee will be to apply the general policy for Executive Directors as set out above and structure a package in
accordance with that policy. Consistent with the new UK regulations, the caps contained within the policy for fixed pay do
not apply to new recruits, although the Remuneration Committee would not envisage exceeding these caps in practice.
· The AIP and LTIPs will operate (including the maximum award levels) as detailed in the general policy in relation to any
newly appointed Executive Director.
· For an internal appointment, any variable pay element awarded in respect of the prior role may either continue on its
original terms or be adjusted to reflect the new appointment as appropriate.
· For external and internal appointments, the Remuneration Committee may agree that the Company will meet certain
relocation expenses as it considers appropriate.
· For external candidates, it may be necessary to make additional awards in connection with the recruitment to replace
awards forfeited by the individual on leaving a previous employer. For such replacement awards, Phoenix Group will not pay
more than is, in the view of the Remuneration Committee, necessary and will in all cases seek, in the first instance, to
deliver any such awards under the terms of the existing incentive pay structure. It may, however, be necessary in some
cases to make such awards on terms that are more bespoke than the existing annual and equity-based pay structures in
Phoenix in order to secure a candidate. Details of any recruitment-related awards will be appropriately disclosed.
· All such replacement awards, whether under the AIP, LTIP or otherwise, will take account of the service obligations and
performance requirements for any remuneration relinquished by the individual when leaving a previous employer. The
Remuneration Committee will seek to make replacement awards subject to what are, in its opinion, comparable requirements in
respect of, service and performance. However, the Committee may choose to relax this requirement in certain cases (such as
where the service and/or performance requirements are materially completed), and where the Remuneration Committee considers
it to be in the interest of shareholders or where such factors are, in the view of the Remuneration Committee, reflected in
some other way, such as a significant discount to the face value of the awards forfeited. Exceptionally, where necessary,
this may include a guaranteed or non pro-rated annual incentive in the year of joining.
· For the avoidance of doubt, such replacement awards are not subject to a formal cap. The Remuneration Committee has not
placed a maximum limit on any such awards which it may be necessary to make as it is not considered to be in shareholders'
interests to set any expectations for prospective candidates regarding such awards. Any recruitment-related awards which do
not replace awards with a previous employer will be subject to the limits for incentive pay as stated in the general
policy.
A new Non-Executive Director would be recruited on the terms explained above in respect of the main policy for such
Directors.
TERMINATION POLICY SUMMARY
In practice, the facts surrounding any termination do not always fit neatly into defined categories for good or bad
leavers. Therefore, it is appropriate for the Remuneration Committee to consider the suitable treatment on a termination
having regard to all of the relevant facts and circumstances available at that time. This policy applies both to any
negotiations linked to notice periods on a termination and any treatment which the Remuneration Committee may choose to
apply under the discretions available to it under the terms of the AIP, DBSS and LTIP plans. The potential treatments on
termination under these plans are summarised below.
Incentives Good leaver Bad leaver Exceptional events
If a leaver is deemed to be a 'good leaver'; i.e. leaving through redundancy, serious ill health or death or otherwise at the If a leaver is deemed to be a 'bad leaver'; typically voluntary resignation or leaving for disciplinary reasons For example change in control or winding-up of the Company.
discretion of the Remuneration Committee
AIP Pro-rated annual incentive. Pro-rating to reflect only the period worked. Performance metrics determined by the Remuneration No awards made Either the AIP will continue for the year or there will be a pro-rated annual incentive. Performance metrics determined by the Remuneration Committee
Committee
DBSS Deferred awards vest Deferred awards normally lapse Deferred awards vest
LTIP Will receive a pro-rated award subject to the application of the performance conditions at the normal measurement All awards will normally lapse Will receive a pro-rated award subject to the application of the performance conditions at the date of the event. Remuneration Committee discretion to disapply pro-rating
dateRemuneration Committee discretion to disapply pro-rating or to accelerate vesting to the date of leaving (subject to pro
-rating and performance conditions)
The Company has power to enter into settlement agreements with executives and to pay compensation to settle potential legal
claims. In addition, and consistent with market practice, in the event of termination of an Executive Director, the Company
may pay a contribution towards the individual's legal fees and fees for outplacement services as part of a negotiated
settlement. Any such fees would be disclosed as part of the detail of termination arrangements. For the avoidance of doubt,
the policy does not include an explicit cap on the cost of termination payments.
POTENTIAL REWARDS UNDER VARIOUS SCENARIOS
The potential total rewards available to the Executive Directors, ignoring any change in share price and roll-up of
dividends are:
TOTAL REMUNERATION OPPORTUNITY (£000) - GRAPH
Name Base salary£000 Benefits£000 Pension£000 Total fixed£000
Clive Bannister £700 £17 £140 £857
James McConville £440 £16 £88 £544
The above chart aims to show how the Remuneration Policy set out above for Executive Directors is applied using the
following assumptions.
Minimum Consists of base salary, benefits and pensionBase salary is the salary to be paid in 2014Benefits measured as benefits paid in 2013 as set out in the single figure table but excluding relocation payments for James McConville.Pension measured as the 20% of base salary receivable either as a pension contribution or as cash, and ignoring the reduction to payments made in cash for employer's national insurance contributions
On-target Based on what the Director would receive if performance was on-targetAIP: consists of the on-target annual incentive (75% of base salary)LTIP: consists of the threshold level of vesting (50% of base salary). The benefit of a single year's participation in the Sharesave scheme is recognised using an expected value for the Sharesave options of 30%. The benefit of a single year's participation in the SIP is recognised using one matching share for every six shares invested on the maximum value which can
be invested.
Maximum Based on the maximum remuneration receivable:AIP: consists of the maximum annual incentive (150% of base salary)LTIP: assumes maximum vesting of awards and valued as on the date of grant (200% of base salary). Sharesave and SIP valued on the same basis as in the on-target column.
Directors' report
The Directors of the Group present their report for the year ended 31 December 2015.
Phoenix Group Holdings is incorporated in the Cayman Islands (registered no. 202172) and has a Premium Listing on the
London Stock Exchange. The Company is therefore not required to comply with the requirements of section 415 of the UK
Companies Act 2006. However, the Directors support these enhanced standards for disclosure and have sought to comply
voluntarily with these requirements.
Shareholders
Dividends
Dividends for the year are as follows:
Ordinary shares
Paid interim dividend 26.7p per share (2014: 26.7p per share)
Recommended final dividend 26.7p per share (2014: 26.7p per share)
Total ordinary dividend 53.4p per share (2014: 53.4p per share)
Share capital
The issued share capital of the Company was increased by 329,162 ordinary shares during 2015 which related to the Company's
Sharesave Scheme. At 31 December 2015, the issued ordinary share capital totalled 225,419,446. Subsequently, 786 ordinary
shares have been issued in 2016 in connection with the Company's Sharesave Scheme to bring the total in issue to
225,420,232 at the date of this report.
Full details of the authorised, issued and fully paid share capital as at 31 December 2015 and movements in share capital
during the period are presented in note D1 to the IFRS consolidated financial statements.
The rights and obligations attaching to the Company's ordinary shares are set out in the Company's Articles of Association
(the 'Company's Articles') which are available on the Company's website at
www.thephoenixgroup.com/about-us/corporate-governance/articles-of-association.aspx.
Where the Employee Benefit Trust ('EBT') holds shares for unvested awards, the voting rights for these shares are
exercisable by the trustees of the EBT at their discretion, taking into account the recommendations of the Group. For
shares that have vested into respective sub funds underneath the EBT, the voting rights are exercisable by the trustees of
the respective sub funds at their discretion, taking into account the recommendations of the relevant participant of the
respective sub funds.
Restrictions on transfer of shares
Under the Company's Articles, the Directors may in certain circumstances refuse to register transfers of shares. In
particular, the Board of Directors may refuse to register the transfer of shares to a person who is a Non-Qualified Person
(as defined in the Company's Articles).
Certain restrictions on the transfer of shares may be imposed from time to time by applicable laws and regulations (for
example, insider trading laws), and pursuant to the Listing Rules of the Financial Conduct Authority ('FCA') and the
Group's own share dealing rules whereby Directors and certain employees of the Group require the approval of the Company to
deal in the Company's ordinary shares.
Substantial shareholdings
Information provided to the Company pursuant to the FCA's Disclosure and Transparency Rules is published on a Regulatory
Information Service and on the Company's website. As at 22 March 2016, the Company had been notified of the following
significant holdings of voting rights in its shares.
Number of voting rights Percentage
in shares of shares
in issue
Artemis Investment Management LLP 22,477,390 9.97
Black Rock, Inc. 11,984,110 5.31
Ameriprise Financial Inc. 11,277,894 5.00
FIL Limited 11,280,767 5.00
Annual General Meeting ('AGM')
The AGM of the Company will be held at 32 Commercial Street, St Helier, Jersey JE2 3RU on Wednesday, 11 May 2016 at
12.30pm.
A separate notice convening this meeting will be distributed to shareholders in due course and will include an explanation
of the items of business to be considered at the meeting.
Board
Board of Directors
The membership of the Board of Directors during 2015 is given within the Corporate Governance Report on page 47 which is
incorporated by reference into this report. Details of Directors and their connected persons' beneficial and non-beneficial
interests in the shares of the Company are shown in the Directors' remuneration report.
During 2015 and up to the date of this report, the following changes to the Board took place:
· Howard Davies resigned from the Board on 31 August 2015
· Henry Staunton was appointed to the Board as Chairman with effect from 1 September 2015.
Details of related party transactions which took place during the year with Directors of the Company and consolidated
entities where directors are deemed to have significant influence, are provided in the Directors' remuneration report and
in note I5 to the IFRS consolidated financial statements.
The rules about the appointment and replacement of Directors are contained in the Company's Articles. These state that a
Director may be appointed by an ordinary resolution of the shareholders or by a resolution of the Directors. If appointed
by a resolution of the Directors, the Director concerned holds office only until the conclusion of the next AGM following
the appointment.
44 Read more about our Board of Directors
In accordance with the UK Corporate Governance Code, Directors must stand for re-election annually. The Board of Directors
will be unanimously recommending that all of the Directors, except Tom Cross Brown who is standing down from the Board,
should be put forward for election/re-election at the forthcoming AGM to be held on 11 May 2016.
The Articles give details of the circumstances in which Directors will be treated as having automatically vacated their
office and also state that the Company's shareholders may remove a Director from office by passing an ordinary resolution.
The powers of the Directors are determined by Cayman Islands Company Law, Cayman Islands common law, the provisions of the
Company's Memorandum and Articles and by any valid directions given by shareholders by way of special resolution.
The Directors have been authorised to allot and issue securities and grant options over or otherwise dispose of shares
under Article 14.
At the Company's AGM held on 23 April 2015, shareholders granted the Company authority to purchase up to 10% of its issued
ordinary shares. Any ordinary shares purchased under the authority would, subject to the Cayman Islands Companies Law (as
amended), either be cancelled by operation of law or held in treasury. These authorities were not used during the year or
up to the date of this report.
Subject to obtaining shareholder approval for the renewal of this authority at the forthcoming AGM, the Company is
authorised to make purchases of its own shares under Article 20 and make payment for the redemption or purchase of its own
shares in any manner permitted by the Cayman Islands Companies Law (as amended), applicable law or regulation, including
without limitation, out of capital, profits, share premium or the proceeds of a new issue of shares. The Company held no
treasury shares during the year or up to the date of this report.
Directors' remuneration and interests
A report on Directors' remuneration is presented within the Directors' remuneration report including details of their
interests in shares and share options or any rights to subscribe for shares in the Company.
57 Read more about Directors' remuneration
Directors' indemnities
Following shareholder approval on 15 March 2010, the Company entered into a deed of indemnity by way of deed poll with its
Directors whereby the Company has agreed to indemnify each Director against all losses incurred by them in the exercise,
execution or discharge of their powers or duties as a Director of the Company, provided that the indemnity shall not apply
to the extent prohibited by any applicable law.
The deed of indemnity remains in force as at the date of signature of this Directors' Report.
Directors' conflicts of interest
The Board has established procedures for handling conflicts of interest in accordance with Cayman Islands law and the
Company's Articles.
On an ongoing basis, Directors are responsible for informing the Company Secretary of any new, actual or potential
conflicts that may arise.
All Directors and employees of the Company and its subsidiaries are subject to the Group conflicts of interest policy which
has been established to provide a clear framework for an effective system of internal control to manage conflicts of
interest throughout the Group.
Directors' and Officers' liability insurance
The Company maintains Directors' and Officers' liability insurance cover which is renewed annually.
Governance
Going concern
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. The Strategic Report also provides details of any key events affecting the
Company (and its consolidated subsidiaries) since the end of the financial year. The Strategic Report includes details of
the Group's cash flow and solvency position, including sensitivities for both. Principal risks and their mitigation are
detailed on pages 37 to 38 and the viability statement is included on pages 39. In addition, the financial statements
include, amongst other things, notes on the Group's borrowings (note E5), management of its financial and insurance risk
including market, credit and liquidity risk (note E6), its commitments and contingent liabilities (notes I7 and I8) and its
capital position and management (note I4). The Strategic Report (on pages 4 to 40) sets out the business model and how we
create value for shareholders and policyholders.
The Board has followed the new requirements of the UK Financial Reporting Council's 'Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting (September 2014) when performing its going concern assessment. As part
of its comprehensive assessment of whether the Group and the Company are a going concern, the Board has undertaken a review
of the liquidity and solvency of the Group under both normal and stressed conditions as at the date of preparation of the
statement of consolidated financial position.
Having thoroughly considered the going concern assessment, including a detailed review of the regulatory capital and cash
flow positions of each principal subsidiary company and the availability across the Group of a range of management actions,
the Board has concluded that there are no material uncertainties that may cast significant doubt about the Group and the
Company's ability to continue as a going concern. The Directors have a reasonable expectation that the Group and the
Company have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to
adopt the going concern basis of accounting in preparing the annual financial statements.
Corporate governance statement
The disclosures required by section 7.2 of the FCA's Disclosure and Transparency Rules can be found in the Corporate
Governance Report on page 82 which is incorporated by reference into this Directors' Report and comprises the Company's
Corporate Governance Statement. The UK Corporate Governance Code (the 'Code') applies to the Company and full details on
the Company's compliance with the Code are included in the Corporate Governance Report. The Code is available on the
website of the Financial Reporting Council - www.frc.org.uk.
Greenhouse gas emissions
All disclosures concerning the Group's greenhouse emissions are contained in the Environmental Report forming part of the
Strategic Report on page 40.
Financial risk management
The Group operates a Risk Management Framework ('RMF') consisting of several components, as detailed in the Risk management
section of the Strategic Report. The RMF provides a consistent approach to highlighting and controlling key risks
throughout the organisation. This is achieved primarily through review and compliance, at a functional level, with the risk
universe and related policies (and the risk appetites therein). At its highest level the RMF considers the following risks:
strategic, market, credit, insurance, financial soundness , customer and operational. As a result, in preparing the
consolidated financial statements, assessment is given to a broad range of risk categories.
Memorandum and Articles
Changes to the Company's Memorandum and Articles require prior shareholder approval.
The Memorandum and Articles are available on the Company's website at
www.thephoenixgroup.com/about-us/corporate-governance/articles-of-association.aspx.
Re-appointment of the Auditors
Ernst & Young LLP ('EY') has indicated its willingness to continue in office and a resolution that it is re-appointed will
be proposed at the AGM on 11 May 2016.
There is no cap on auditor liability in place in relation to audit work carried out on the consolidated IFRS financial
statements, MCEV supplementary information and the Group's UK subsidiaries' individual financial statements.
Details of fees paid to EY during 2015 for audit and non-audit work are disclosed in note C3 to the IFRS consolidated
financial statements.
Disclosure of information to Auditors
The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are aware,
there is no relevant audit information of which the Company's auditor is unaware and that each Director has taken all the
steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to
establish that the Company's auditor is aware of that information.
Group Company Secretary
The Group Company Secretary throughout the 2015 financial period was Gerald Watson.
34 Read more about Risk management
Contractual/other
SIGNIFICANT AGREEMENTS IMPACTED BY A CHANGE OF CONTROL OF THE COMPANY
There are change of control clauses contained in certain of the Group's financing agreements. The PGH Capital revolving
credit facility has a provision which would enable the lending banks to require repayment of all amounts borrowed following
a change of control. In addition, certain provisions of the Articles relating to the City Code on Takeovers and Mergers
apply in connection with a takeover bid.
All of the Company's employee share and incentive plans contain provisions relating to a change of control. Outstanding
awards and options would normally vest and become exercisable on a change of control, subject to the satisfaction of any
performance conditions and pro rata reduction as may be applicable under the rules of the employee share incentive plans.
Apart from the aforementioned, there are a number of agreements that take effect, alter or terminate upon a change of
control of the Company, such as commercial contracts. None is considered to be significant in terms of their potential
impact on the business of the Group.
Essential contracts or arrangements
There are a number of relationships with third parties which are of significant value to the Group. Apart from the PGH
capital revolving credit facility, £300 million unsecured bonds, the £200 million Phoenix Life Limited Tier 2 bonds and the
£428 million subordinated notes, no single relationship is considered to be essential to the Group.
Group employees
The Group is committed to achieving equality of opportunity and the equal treatment of all our people and those applying to
join us. To this end, all our people share an obligation to their colleagues, customers and business partners to provide a
safe, fair and equitable working environment in which every individual can seek, obtain and continue employment without
experiencing any unfair or unreasonable discrimination.
The Group recognises the need to treat people with disabilities fairly and equally including where an employee becomes
disabled during their employment. Full and fair consideration is given to internal and external applications from disabled
people for employment and further career opportunities, including training and development. Internal and external
applicants are asked if they have any special requirements when invited to attend an interview and reasonable provisions
are made to meet the applicant's request. Applicants are considered on the basis of the job requirements and their ability
and competencies, also taking into consideration any appropriate reasonable workplace adjustments.
The Group provides the opportunity for employees to participate in the Company's all-employee share schemes, Sharesave and
Share Incentive Plan, to facilitate share ownership in the Company.
Employee practice
Phoenix Group continues to communicate with staff across a wide variety of channels, including regular news bulletins via
the intranet, Executive Committee presentations and other face-to-face briefings. The staff briefings and Executive
Committee presentations typically include updates on the Company's strategy and plans, progress against key financial and
operational targets, regulatory and risk management updates and review of economic or other factors which could affect the
Company's strategy and performance. Regular feedback mechanisms are also in place, ensuring communication at Phoenix is a
continuous two-way dialogue.
The views and opinions of staff are sought through Phoenix's annual Engagement Survey and more regular interim surveys and
employee communication and engagement forums. Phoenix undertakes meaningful consultation with staff representatives on all
major organisational changes and other matters affecting employees.
Disclosures under Listing Rule 9.8.4R
For the purposes of Listing Rule 9.8.4C R, the information required to be disclosed under Listing Rule 9.8.4 R can be found
within the following sections of the Report and Accounts:
Section Requirement Location
1 Statement of interest capitalised Note E5 to the Consolidated Financial Statements
2 Publication of unaudited financial information Not applicable
3 Deleted Not applicable
4 Details of long-term incentive schemes Directors' remuneration report
5 Waiver of emoluments Directors' remuneration report
by a Director
6 Waiver of any future emoluments by a Director Directors' remuneration report
7 Non pre-emptive issue of equity for cash Not applicable
8 As per 7, but for major subsidiary undertakings Not applicable
9 Parent participation in any placing of a subsidiary Not applicable
10 Contracts of significance Not applicable
11 Controlling shareholder provision of services Not applicable
12 Shareholder dividend waiver Not applicable
13 Shareholder dividend waiver - future periods Not applicable
14 Controlling shareholder agreements Not applicable
Strategic and Directors' Report approval
The Board has prepared a Strategic Report which provides an overview of the development and performance of the Group's
business for the year ended 31 December 2015, covers the future developments in the business of Phoenix Group Holdings and
its consolidated subsidiaries, and provides details of any important events affecting the Company and its subsidiaries
after the year-end. For the purposes of compliance with DTR 4.1.5R(2) and DTR 4.1.8R, the required content of the
'Management Report' can be found in the Strategic Report and this Directors' Report, including the sections of the Annual
Report and Accounts incorporated by reference.
In addition, the Directors at the date of this report consider that the Annual Report and Accounts, taken as a whole,
provides users (who have a reasonable knowledge of business and economic activities) the information necessary to assess
the Group's performance, business model and strategy and is fair, balanced and understandable.
The Strategic Report and the Directors' Report were approved by the Board of Directors on 22 March 2016.
Clive Bannister James McConville
Group Chief Executive Officer Group Finance Director
St Helier, Jersey
22 March 2016
FINANCIALS
In this section
Statement of Directors' responsibilities 86
Independent Auditor's report 87
IFRS consolidated financial statements 95
Notes to the IFRS consolidated financial statements 102
Parent company accounts 188
Asset disclosures 198
MCEV supplementary information 206
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND ACCOUNTS
Statement of Directors' Responsibilities in respect of the Annual Report and Accounts of Phoenix Group Holdings
The Directors of Phoenix Group Holdings are responsible for the preparation of the Annual Report and Accounts, the
Strategic Report, the Directors' Report, the Directors' remuneration report, the Group consolidated financial statements
and the Company financial statements in accordance with applicable law and regulations.
The Directors have prepared the Group consolidated financial statements and the Company financial statements in accordance
with International Financial Reporting Standards ('IFRSs') as issued by the International Accounting Standards Board
('IASB'). The Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that
period.
In preparing these financial statements the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether IFRS, as adopted by the IASB, have been followed, subject to any material departures disclosed and
explained in the Group and the Company financial statements; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for:
· keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions
and disclose, with reasonable accuracy at any time, the financial position of the Group and the Company;
· safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities; and
· preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement in
compliance with applicable laws and regulations.
The Directors as at the date of this report, whose names and functions are listed in the Board of Directors section on
pages 44 and 45, confirm that, to the best of their knowledge:
· the Group's consolidated financial statements and the Company financial statements, which have been prepared in
accordance with IFRS as issued by the IASB, give a true and fair view of the assets, liabilities, financial position and
profit of the Group and the Company; and
· the Directors' Report and the Strategic Report include a fair review of the development and the performance of the
business and the position of the Company and its consolidated subsidiaries taken as a whole, together with a description of
the principal risks and uncertainties that they face.
In addition, the Directors as at the date of this report consider that the Annual Report and Accounts, taken as a whole,
provides users (who have a reasonable knowledge of business and economic activities) with the information necessary for
shareholders to assess the Group's performance, business model and strategy, and is fair, balanced and understandable.
The Directors have elected to comply with certain Companies Act and Listing Rules ('LR') which would otherwise only apply
to companies incorporated in the UK - namely:
· the Directors' statement under LR 9.8.6R(3) (statement by the Directors that the business is a going concern);
· the Directors remuneration disclosures made under LR 9.8.4R(5) and (6); and
· the requirements of Schedule 8 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008 of the United Kingdom pertaining to Directors' remuneration that UK quoted companies are required to comply with.
CLIVE BANNISTER JAMES MCCONVILLE
Group Chief Executive Officer Group Finance Director
St Helier, Jersey
22 March 2016
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF PHOENIX GROUP HOLDINGS
Our opinion on the financial statements
In our opinion:
· Phoenix Group Holdings' consolidated financial statements and parent company financial statements (the 'financial
statements') give a true and fair view of the state of the Group's and of the parent company's affairs as at 31 December
2015 and of the Group's and of the parent company's profit for the year then ended; and
· the financial statements have been properly prepared in accordance with International Financial Reporting Standards
('IFRSs') as issued by the International Accounting Standards Board ('IASB').
What we have audited
We have audited the consolidated financial statements of Phoenix Group Holdings and its subsidiaries (collectively 'the
Group') and the parent company for the year ended 31 December 2015, included within the Annual Report and Accounts, which
comprise:
Group Parent company
· The consolidated income statement for the year then ended · The statement of comprehensive income for the year then ended
· The consolidated statement of comprehensive income for the year then ended · The statement of financial position as at 31 December 2015
· The pro forma reconciliation of Group operating profit to results attributable to owners for the year then ended · The statement of cash flows for the year then ended
· The statement of consolidated financial position as at 31 December 2015 · The statement of changes in equity for the year then ended
· The statement of consolidated cash flows for the year then ended · Related notes 1 to 17 to the financial statements
· The statement of consolidated changes in equity for the year then ended
· Related notes A1 to I9 to the consolidated financial statements
Certain required disclosures have been presented elsewhere in the Annual Report and Accounts, rather than in the notes to the financial statements. These have been cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as issued
by the IASB.
Overview of our audit approach
Materiality · Overall Group materiality of £46m (2014: £41m) which represents 1.9% (2014: 1.7%) of total equity attributable to owners of the parent ('Group equity').
Audit scope · We performed an audit of the complete financial information of the Group Function and Insurance Companies and audit procedures on specific balances for Other Companies. These are explained further on page 91.
· The reporting units where we performed full or specific audit procedures accounted for more than 99% of the equity and operating profit of the Group.
Risks of material misstatement · Valuation of insurance contract liabilities, comprising of the following risk areas:· actuarial assumptions;· actuarial modelling; and· data.
· Valuation of complex and illiquid financial investments.
Our assessment of risk of material misstatement
We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit
strategy, the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these
risks, we have performed the procedures below which were designed in the context of the financial statements as a whole
and, consequently, we do not express any opinion on these individual areas.
Risk
Valuation of insurance contract liabilities (£40.9bn value of the risk; 2014: £43.9bn)Refer to the Audit Committee Report (page 50 to 52); Critical accounting estimates (page 103); Accounting policies and notes F1 and F2 of the consolidated financial statements (pages 140 to 142)We considered the valuation of insurance contract liabilities to be a significant risk for the Group. Specifically we considered the actuarial assumptions which are applied, as these involve complex and significant judgements about future events, both internal and external to the business, for which small changes can result in a material impact to the valuation. We considered the actuarial modelling used in the valuation process which should model the results appropriately based on the methodology and in accordance with the regulations. Additionally, the valuation process is conditional upon the accuracy and completeness of the data used.We have therefore split the risks relating to the valuation of insurance contract liabilities into the following risk areas:· actuarial assumptions;· actuarial modelling; and· data.We assessed management's analysis of movements in insurance contract liabilities and obtained evidence to support large or unexpected movements. This provided important audit evidence over the valuation of insurance contract liabilities. Further additional audit procedures performed to respond to the specific risk areas are
set out below:
Risk Our response to the risk What we concluded to the Audit Committee
Actuarial assumptionsThere has been no change in our assessment of this risk from the prior year.Economic assumptions are set by management taking into account market conditions as at the valuation date. Non-economic assumptions such as future expenses, longevity and mortality are set based on past experience, market experience, market practice, regulations and expectations about future trends.The assumptions that we consider to have the most significant impact are the rate of interest used for discounting liabilities, the allowance for expected credit default within the investment portfolio, life expectancy of policyholders and the lapse rates of policies.These assumptions are used as inputs into a valuation model which uses standard actuarial methodologies. In obtaining sufficient audit evidence to conclude on the appropriateness of actuarial assumptions, we:· tested the design and operating effectiveness of key controls We determined that the actuarial assumptions used by management are reasonable based on the analysis of the experience to date, industry practice and the financial and regulatory requirements.
over management's process for setting and updating actuarial assumptions;· compared the methodology and assumptions used with those we would expect based on our
knowledge of the Group, industry standards and regulatory and financial reporting requirements;· assessed the results of management's experience analysis, which supports
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