REG - Phoenix Grp Hldgs - Phoenix Group Holdings - 2016 Annual Results <Origin Href="QuoteRef">PHNX.L</Origin> - Part 8
20/03/2017 07:07
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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 Embedded value 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. For 2016's awards, the underpin has been extended to include consideration of customer
satisfaction and, to meet Solvency II requirements, in exceptional cases, personal performance.
1 Please see footnote 1 on page 77 regarding the discontinuation of reporting on MCEV Growth.
As noted in the section describing the Implementation of Remuneration Policy in 2017 on page 72, LTIP awards made in 2017
will be subject to Cumulative cash generation and Relative TSR performance measures similar to those described in the table
above.
DBSS
Date of grant Share price on grant No. of shares No. of shares granted Increase in shares following rights No. of dividend shares acquired No. of sharesexercised2 No. of shares lapsed/ No. of shares Vesting date
as at in 2016 issue1 at vesting waived as at
1 Jan 31 Dec
2016 2016
Clive Bannister
DBSS 27 Mar 2013 658.5p 36,748 - - 9,096 (45,844) - - 27 Mar 2016
DBSS 28 Mar 2014 652.0p 34,029 - 5,991 - - - 40,020 28 Mar 2017
DBSS 28 Sept 2015 827.7p 28,840 - 5,077 - - - 33,917 19 Mar 2018
DBSS3 2 Jun 2016 877.5p - 32,706 5,758 - - - 38,464 23 Mar 2019
99,617 32,706 16,826 9,096 (45,844) - 112,401
James McConville
DBSS 27 Mar 2013 658.5p 11,999 - - 2,968 (14,967) - - 27 Mar 2016
DBSS 28 Mar 2014 652.0p 20,417 - 3,594 - - - 24,011 28 Mar 2017
DBSS 28 Sept 2015 827.7p 19,124 - 3,367 - - - 22,491 19 Mar 2018
DBSS3 2 Jun 2016 877.5p - 21,498 3,785 - - - 25,283 23 Mar 2019
51,540 21,498 10,746 2,968 (14,967) - 71,785
1 The number of shares for all outstanding DBSS awards have been increased to take into account the impact of the
rights issue. This adjustment has been based on the Theoretical Ex-Rights Price ('TERP') and approved by the Remuneration
Committee. The share price on grant shown is the actual price used at the date of the grant and has not been adjusted
following the Rights Issue.
2 Gains of Directors from share options exercised and vesting shares under the DBSS in 2016 were £530,014 (Clive
Bannister's gain was £399,875 arising from an award exercised on 3 June 2016 at a share price of £8.722509; James
McConville's gain was £130,139 arising from an award exercised on 2 June 2016 at a share price of £8.695086.
3 The face value of awards granted in 2016 is equivalent to 50% of the cash element of the 2015 AIP and is calculated
using a share price of 877.50p, being the average closing market price on the three days preceding the award date giving
£286,995 for Clive Bannister and £188,645 for James McConville.
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 exercised lapsed 31 Dec price from expiry
2016 in 2016 2016
Clive Bannister - - - - - - - -
James McConville 1,607 - 1,607 - 0 £5.60 - -
Gains of Directors from share options exercised under Sharesave during 2016 were £4,998 (2015: nil). 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 from 2016 this discount will be 20%. Sharesave options are not
subject to performance conditions. The Sharesave options exercised by James McConville represented 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 2016 were £1,656,694
(2015: £3,476,618).
During the year ended 31 December 2016, the highest mid-market price of the Company's shares was 809.654p and the lowest
mid-market price was 610.217p. At 31 December 2016, the Company's share price was 735.00p.
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 2016 31 December 2016 interests as at interests as at interests as at
or date of appointment or retirement 31 December 2016 31 December 2016 31 December 2016
if later if earlier - LTIP - DBSS - Sharesave
Clive Bannister 305,964 614,521 608,613 112,401 -
James McConville1 95,094 123,465 473,089 71,785 -
René-Pierre Azria 34,491 54,610 - - -
Alastair Barbour 3,000 6,625 - - -
Ian Cormack 3,650 5,779 - - -
Tom Cross Brown 1,988 1,988 - - -
Isabel Hudson 3,880 6,142 - - -
Wendy Mayall2 - - - - -
John Pollock - - - - -
Nicholas Shott - - - - -
Kory Sorenson 1,380 2,185 - - -
Henry Staunton 20,000 70,000 - - -
David Woods 3,500 5,541 - - -
1 James McConville exercised an LTIP award of 90,535 shares on 5 January 2017.
2 Wendy Mayall purchased 10,000 shares on 14 February 2017.
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 2016 (using the share price on 31
December 2016) can be summarised as follows:
Position Shareholding Guideline Value of
(minimum shares held at
% of salary) 31 December 2016
(% of salary)
Clive Bannister 200% 645%
James McConville 200% 206%
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 from
either 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. The Executive Directors are entitled to retain any
external fees. During 2016, Clive Bannister received £45,000 from Punter Southall Group and CHF 50,000 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 of appointment Date of Joining the Board Appointment end date Unexpired term (months)
Alastair Barbour 30 September 2016 1 October 2013 11 May 2017 2
Ian Cormack 25 May 2016 2 September 2009 11 May 2017 2
Isabel Hudson 25 May 2016 18 February 2010 11 May 2017 2
Wendy Mayall 24 August 2016 1 September 2016 1 September 2019 30
John Pollock 24 August 2016 1 September 2016 1 September 2019 30
Nicholas Shott 24 August 2016 1 September 2016 1 September 2019 30
Kory Sorenson 9 May 2014 1 July 2014 1 July 2017 4
Henry Staunton 19 August 2015 1 September 2015 1 September 2018 18
David Woods 25 May 2016 18 February 2010 11 May 2017 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 2016 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 2016 and their date of
appointment:
Member From To
Ian Cormack (Committee Chairman) 18 February 2010 To date
Isabel Hudson 18 February 2010 To date
Nicholas Shott 20 October 2016 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
2016, six Committee meetings were held and details of attendance at meetings are set out in the Corporate Governance Report
on page 49.
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 2016 were £239,665, all of which were attributed to
work relating to the Committee. 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
17 March 2017
Directors' report
The Directors of the Group present their report for the year ended 31 December 2016.
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 (2015: 26.7p per share)
Recommended final dividend 23.9p per share (2015: 26.7p per share)
Total ordinary dividend 50.6p per share (2015: 53.4p per share)
As explained in the Chairman's statement on page 5, the proposed dividend of 23.9p per share is an equivalent 5% increase
to the 2015 level (rebased to take into account the bonus element of the rights issue completed in November 2016).
As a result of regulatory changes applicable to the Group under Solvency II, dividends declared in respect of the Company's
Ordinary Shares must be capable of being cancelled and withheld or deferred at any time prior to payment. This is in order
that the Company's Ordinary Shares be counted towards Group capital. Accordingly, the final dividend will be declared on a
conditional basis and the Directors reserve the right to cancel or defer the recommended dividend. The Directors do not
expect to exercise this right other than where they believe that it may be necessary to do so as a result of legal or
regulatory requirements. The Company is also proposing to amend its Articles of Association so as to make clear that any
dividend declared in respect of the Company's Ordinary Shares may be cancelled or deferred by the Directors before payment
in circumstances where this is required.
Share capital
The issued share capital of the Company was increased by 167,430,371 ordinary shares during 2016 which related to:
- the placement of shares in relation to the acquisition of the AXA business;
- shares issued in relation to the Abbey Life acquisition; and
- shares issued under the Company's Sharesave Scheme.
At 31 December 2016, the issued ordinary share capital totalled 392,849,817. Subsequently, 2,258 ordinary shares have been
issued in 2017 in connection with the Company's Sharesave Scheme to bring the total in issue to 392,852,375 at the date of
this report.
Full details of the authorised, issued and fully paid share capital as at 31 December 2016 and movements in share capital
during the period are presented in note D1 to the IFRS consolidated financial statements.
At the Company's AGM held on 11 May 2016, 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.
Subject to obtaining shareholder approval for the renewal of this authority at the forthcoming AGM on 11 May 2017, 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), 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.
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.
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 individual authorisation 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 17 March 2017, the Company had been notified of the following
significant holdings of voting rights in its shares.
Number of voting rights in shares Percentage of shares in issue
Artemis Investment Management LLP 30,921,652 7.87%
Aviva plc & its subsidiaries 21,217,596 5.40%
Prudential plc group of companies1 12,649,238 5.10%
1 Number of voting rights and percentage notified are pre-rights issue. Prudential plc have not provided an update
post rights issue.
Annual General Meeting ('AGM')
The AGM of the Company will be held at 1st Floor, 32 Commercial Street, St Helier, Jersey JE2 3RU on Thursday, 11 May 2017
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 2016 is given within the Corporate Governance Report on pages 44 and 45,
which is incorporated by reference into this report. Details of Directors' (and persons closely associated with them)
interests in the shares of the Company are shown in the Directors' remuneration report.
During 2016 and up to the date of this report, the following changes to the Board took place:
- Tom Cross-Brown resigned from the Board on 11 May 2016.
- Rene-Pierre Azria resigned from the Board on 30 November 2016
- Wendy Mayall, John Pollock and Nicholas Shott were appointed to the Board with effect from 1 September 2016.
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.
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 Isabel Hudson and David Woods who are standing down from
the Board, should be put forward for election/re-election at the forthcoming AGM to be held on 11 May 2017.
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.
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.
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.
Directors' and Officers' liability insurance
The Company maintains Directors' and Officers' liability insurance cover which is renewed annually.
Employees
equal opportunities
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 engagement
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 engagement.
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 page 39. In addition, the IFRS consolidated financial
statements include, amongst other things, notes on the Group's borrowings (note E5), management of its financial risks
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 2 to 40) sets out the business model and how the
Group creates value for shareholders and policyholders.
The Board has followed the 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 Guidance and Transparency Rules can be found in the
Corporate Governance Report on pages 47 to 57 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. Changes proposed at the 11 May 2017
AGM will be set out in the notice for that meeting.
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 2017.
The Audit tender exercise undertaken in 2016 is described in the Corporate Governance Report on page 52.
There is no cap on auditor liability in place in relation to audit work carried out on the IFRS consolidated financial
statements and the Group's UK subsidiaries' individual financial statements.
Details of fees paid to EY during 2016 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 2016 financial period was Gerald Watson.
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 £900million 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.
Disclosures under Listing Rule 9.8.4R
For the purposes of Listing Rule 9.8.4C, the information required to be disclosed under Listing Rule 9.8.4R 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 by a Director Not applicable
6 Waiver of any future emoluments by a Director Not applicable
7 Non pre-emptive issue of equity for cash page 8 - Group Chief Executive Report
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 2016, 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 17 March 2017.
Clive Bannister James McConville
Group Chief Executive Officer Group Finance Director
St Helier, Jersey
17 March 2017
Financials
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND ACCOUNTS
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
17 MARCH 2017
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
2016 and of the Group's loss 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 2016, 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 - The statement of financial position as at 31 December 2016
for the year then ended
- 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 - The statement of changes in equity for the year then ended
31 December 2016
- The statement of consolidated cash flows for the year then ended - Related notes 1 to 16 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 £67 million (2015: £46 million) which represents 2.0% (2015: 1.9%) 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, Phoenix Life Division and Abbey Life Assurance Company Limited and audit procedures on specific balances for Other Companies. These are explained further on page 95 to 96.
- 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.
- Acquisition of AXA Wealth Limited and Abbey Life Assurance Company Limited.
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 (£46.7 billion; 2015: £40.9 billion)Refer to the Audit Committee Report (page 53); Critical accounting estimates (page 107); Accounting policies and notes F1, F2 and F4 of the consolidated financial statements (pages 145 to 153) We considered the valuation of insurance contract liabilities to be a significant risk for the Group. Specifically we considered the actuarial assumptions and modelling that 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 resultant valuation. Additionally, the valuation process is conditional upon the accuracy and completeness of the data. We have split the risks relating to the valuation of insurance contract liabilities into the following component parts:- actuarial assumptions; - actuarial modelling; and- data.We consider changes in the valuation basis, following discontinuation of Solvency I,
not to increase the significant risk in actuarial assumptions and modelling from the prior year as the approach has streamlined financial reporting and reduced the reliance on legacy Solvency I processes and requirements.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 area Our response to the risk Key observations communicated
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 life expectancy of policyholders (including improvement rates), the lapse rates of polices and expenses. These assumptions are used as inputs into a valuation model which uses standard actuarial methodologies. To obtain sufficient audit evidence to conclude on the appropriateness of actuarial assumptions, we:- tested the design and operating effectiveness of key controls over 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.
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
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