ANNUAL REPORT AND ACCOUNTS 2012 - RSA, Annual Report ...

CORPORATE GOVERNANCE
Director
Adrian Brown
George Culmer
Pension arrangement
• member of the Stakeholder Pension Plan
until January 2012 and received an employer
contribution of 11% of base salary and a taxable
cash supplement of 6.5% of base salary;
• a taxable cash supplement of 17.5% of base
salary was paid from February 2012 onwards.
• member of Stakeholder Pension Plan and,
until he left RSA on 14 May 2012, received
an employer contribution of 8% of base
salary and a taxable cash supplement of
22% of base salary.
The bonuses awarded to Simon Lee and Richard Houghton reflect the
financial performance delivered across the Group, as well as their own
leadership and operational goals. Adrian Brown’s bonus award was
weighted towards the performance of the UK & Western Europe
division for which he is accountable, along with a proportion for the
Group’s financial performance and his operational goals. In summary,
the Group reported good growth and financial performance despite
a tough trading environment. It is successfully executing its strategy to
grow premiums, improve underwriting profitability and focus its capital
to generate shareholder value. The UK & Western Europe division
made good progress in the year, targeting profitable growth and taking
action to remediate key portfolios, but sustained significant losses higher
than forecast reflecting weather and other exceptional events.
Other employment benefits
The Executive Directors received a range of employment benefits
during the year and the value of these is noted in the table on page 67.
In addition, they can participate in RSA’s all-employee share plans –
Sharesave and Sharebuild – and details of their share interests in these
plans to 31 December 2012 are noted in the tables on pages 69 and 71.
2. Variable remuneration
Annual bonus plan
During 2012, the Executive Directors’ bonus plan consisted of stretching
targets aligned to Combined Operating Ratio (COR), Net Written
Premium (NWP) and operational objectives personal to their roles
which were assessed against a performance scorecard. Seventy per
cent of the bonus award is subject to COR and NWP targets.
The Executive Directors’ award opportunity is set out in the
table below.
Cash bonus
(% of salary)
Compulsory
deferred shares
(% of salary)
On-target performance 60% 20%
Outstanding performance 120% 40%
Executive Directors were also invited to defer a further 33% of their
net cash bonus into shares on a voluntary basis. All three Executive
Directors elected to make the maximum voluntary deferral. All
deferred shares are held in trust for three years. Further matching
shares may be awarded against these through the LTIP, which is
described in more detail in this report.
To ensure that Richard Houghton was covered by a bonus
arrangement for 2012, his bonus award has not been pro-rated
for time based on his appointment date of 12 June 2012; it reflects
the Group’s performance across the full financial year. No other
exceptional remuneration has been paid or awarded to him. The
inclusion of Mr Houghton in the 2012 LTIP cycle is noted below.
George Culmer did not receive a bonus award for 2012 following
his resignation from the Group.
The cash bonuses awarded to Executive Directors for 2012 are noted
below, out of a maximum of 120% of salary. For comparison, the value
of the bonuses awarded to the Executive Directors in 2011 is noted
in brackets as a percentage of salary; this highlights that bonuses have
decreased year-on-year in relative percentage of salary terms by around
one third. In accordance with RSA’s LTIP, compulsory deferred shares
will be granted in April 2013 valued at 33% of the executives’ cash
bonus awards. The cash awards are included in the emoluments table
on page 67 and both the cash and compulsory deferred share awards
are noted in the ‘single figure’ table on page 64.
Cash bonus award 2012
% of salary
Director
Value (2011 in brackets)
Simon Lee 1 £481,440 60% (91%)
Richard Houghton 2 £255,264 53% (–)
Adrian Brown 3 £247,000 52% (88%)
Note:
The bonus awards were determined by the Committee relative to the following annual
gross basic salaries, and in the case of Mr Lee for 2011, his actual earnings for the year.
1. 2012: £800,000; 2011: £538,000.
2. 2012: £480,000. Mr Houghton did not receive a bonus award for 2011.
3. 2012: £475,000; 2011: £430,000.
Long-term incentive plan (LTIP)
Under the 2009-2011 plan cycle, Executive Directors could be awarded
performance shares up to 150% of salary and receive up to 2.5
matching shares for each share deferred through the 2008 annual
bonus plan. The 2010 and 2011 cycles operate in the same way as
described for the 2009 cycle.
The Group’s performance against LTIP targets was tested by the
Committee and independently verified. The results of this are set
out in the table below.
Group
Target range performance
Relative TSR
Median to
upper quintile
(5.9%-20.2%) -4.8%
ROE (3-year average) 10%-16% 11.5%
Annual Report and Accounts 2012 | RSA | 63