Gareth Rhys Williams, Chief Executive, aged 43, is employed
under a service contract dated 23 November 2001. The notice
period by the Company under his contract is 12 months; notice
by the employee is six months. The Company may, in the event
of termination of employment, pay a sum in lieu of notice equal
to 12 months’ gross basic salary together with the gross value of
the other benefits that he is entitled to receive under his service
contract, but excluding pension contributions and any bonus.
The bonus arrangements for 2005 will be calculated on the
basis that 75% relates to the achievement of operating profit
targets and 25% relates to specific personal objectives. The
unexpired term of Gareth Rhys Williams’ service contract, to his
normal retirement date, is 17 years.
Alastair Hewgill, Finance Director, aged 50, is employed under a
service contract dated 17 April 2002. The notice period by the
Company under his contract is 12 months; notice by the
employee is six months. The Company may, in the event of
termination of employment, pay a sum in lieu of notice equal to
12 months’ gross basic salary together with the gross value of
the other benefits that he is entitled to receive under his service
contract, but excluding pension contributions and any bonus.
The bonus arrangements for 2005 will also be calculated on the
basis that 75% relates to the achievement of operating profit
targets and 25% relates to specific personal objectives. The
unexpired term of Alastair Hewgill’s contract, to his normal
retirement date, is 10 years.
Incentive arrangements
The policy of the Remuneration Committee over the last few
years has been to make annual awards under the Long Term
Incentive Plan to the executive directors and the other members
of the Executive Board. Such awards were based on a
proportion of salary. Grants of conventional share options were
also made annually to the Group’s senior management
immediately below the level of the Executive Board. Participation
in the Deferred Bonus Plan was open to those employees who
were members of the Group’s Executive Bonus Scheme and
who received a bonus.
An in-depth review of the Group’s incentive arrangements for
executive directors, other members of the Executive Board and
all other participants in the Group’s incentive arrangements has
been carried out by Deloitte and Touche. That review has
resulted in the overall package of incentives, including salary,
bonus scheme and share incentive arrangements being
restructured. The new arrangements, agreed by the
Remuneration Committee, have resulted in a new Deferred
Bonus Plan and a new Long Term Incentive Plan. Approval by
shareholders of these new plans will be sought at the 2005
Annual General Meeting.
The new Deferred Bonus Plan will replace the current Deferred
Bonus Plan and will be used in conjunction with bonuses arising
from the Executive Bonus Scheme for 2005 and future years.
The new Long Term Incentive Plan will replace the current Long
Term Incentive Plan and will be used to make annual awards to
the executive directors and the other members of the Executive
Board, as at present, but also to the Group’s senior
management immediately below the level of the Executive
Board.
It is planned to make a grant of share options to the executive
directors and the other members of the Executive Board every
three years, starting in 2005.
Executive directors and the other members of the Executive
Board will now be required to build up, over a period, a
meaningful holding of shares in the Company.
There are currently no plans to make any further grants under
the Premium Option Plan. This policy is reviewed at least
annually and may be revised from time to time. Invitations under
the Group’s Sharesave arrangements are usually made annually
and these are planned to continue. Such awards and grants
take into account the overall and flow limits advised by the
Association of British Insurers.
The performance conditions applicable to the Group’s new Long
Term Incentive Plan and to the matching element of the
Deferred Bonus Plan will relate to total shareholder return
against a comparator group (awards under the previous
Deferred Bonus Plan were not subject to any performance
targets). The performance conditions under the Group’s share
option schemes will continue to relate to increases in earnings
per share. The performance condition applicable to the
Premium Option Plan relates to a significant increase in the
Company’s share price.
The combination of awards with performance conditions using
total shareholder return and grants using increases in earnings
per share is considered the most appropriate way of aligning the
interests of senior management with those of shareholders.
There is no re-testing of performance in respect of grants or
awards. Monitoring and measuring of the performance
conditions take place following the end of each year when the
Company’s results have been audited and again at the time of
exercise of options and awards.