FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
The LTIP awards made in 2019 are due to vest in May 2022 with reference to performance to 31 December 2021. The threshold TSR performance target was not achieved and the adjusted EPS measure was achieved at 63.5%. Therefore 31.8% of the 2019 LTIP awards will vest in May 2022. Further detail can be found on page 98. The Committee felt that outturns under the STIP and LTIP in respect of 2021 were appropriate and did not exercise discretion. Summary of remuneration for David Richardson in respect of 2021
Performance will continue to be measured over a three year period.
The Policy allows the Committee some discretion to make adjustments to the performance conditions and weightings from year-to-year. For the LTIP awards to be made in 2022, there have been some minor changes to the measures and their weightings. There will be four performance measures and the associated targets are disclosed on page 105. The Committee has approved the following changes: • the use of Underlying Organic Capital Generation (excluding management actions), which is a similar measure to that used in the 2021 LTIP; • replacing the current EPS measure with Return on Equity (“ROE”) to align with the strategic KPIs being used in 2022 and beyond; and • the inclusion of an Environmental, Social and Governance (“ESG”) measure with a 10% weighting of ‘Investment into ‘sustainable assets’ over the 3-year period’ to reflect the strategic importance of this measure. As a result, the following performance conditions will apply to the 2022 LTIP award: • Underlying Organic Capital Generation (25%) • ROE (35%) • Relative TSR (30%) vs FTSE 250 (excl. investment trusts) • ESG (10%) This combination of measures is felt to reflect the business strategy and objectives over the next three year period. I hope that you will be able to support the resolution to approve the Annual Report on Remuneration at the forthcoming AGM.
(£’000)
Deferred variablE 30%
Salary
597
fixed casH 43%
Benefits Pension
23 60
STIP – cash
191 286 430
STIP – deferred
variable casH 27%
LTIP
Summary of remuneration for Andy Parsons in respect of 2021
Deferred variablE 20%
(£’000)
Salary
415
fixed casH 49%
Benefits Pension
23 42
STIP – cash
199 299
variable casH 31%
STIP – deferred
LTIP
0
IMPLEMENTATION OF THE REMUNERATION POLICY FOR 2022 For the reasons set out as part of the policy review, the Committee considers that the arrangements remain clear, simple, predictable, proportionate, aligned to culture and mitigate risk (particularly through the emphasis on surplus capital), as required by paragraph 40 of the Corporate Governance Code. This will be kept under periodic review. The Committee agreed that David Richardson and Andy Parsons would receive a salary increase with effect from 1 April 2022 of 2% and 1.9% respectively. The salary increase budget available for senior management and the general employee population eligible to be considered for an increase was 3.2%, with individual increases varying within a range, depending on a number of factors. The maximum STIP opportunity continues to be 150% of base salary for Executive Directors, subject to stretching corporate financial and personal non-financial measures. The core bonus opportunity is determined through a basket of financial and strategic performance measures and is then distributed to Executive Directors against their achievement of their personal objectives. While recent LTIP awards have been made at a reduced basis of 150% of salary reflecting the fall in share price over recent years, given that in the past two years the Company has achieved capital self-sufficiency, providing the foundation to deliver sustainable growth and the share price has increased by some 20% over the year, as permitted under the policy, the Committee considers it appropriate to revert to its long term approach of making grants at around the median level. The Committee therefore anticipates making awards under the LTIP over shares worth 200% of salary to David Richardson and 175% of salary to Andy Parsons in 2022.
95
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