Accountability
Directors’ remuneration report
Total shareholder return performance
The graphs below illustrate the total shareholder return performance of the Company’s ordinary shares relative to the FTSE 350 and the FTSE All Share Insurance indices respectively over the five years to 31 December 2007. Comparisons are shown with both these indices as the performance of Amlin’s shares, which are a constituent of both indicies, is affected both by the general UK stock market in companies of its size and by its insurance sector. The graphs show the values, at each year end from 2003 to 2007 inclusive, of £100 invested in the Company’s shares on 31 December 2002 compared with the values of £100 invested in the relevant index on the same date. To produce a fair value, each point on the graphs is the average of the relevant return index over the 30 days preceding the relevant year end.
Total shareholder return compared with FTSE 350 at 31 December
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Total shareholder return compared with FTSE All Share Non-Life Insurance Index at 31 December
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Valuation of Performance Share Plan and Long Term Incentive Plan awards granted in 2007
In terms of the make-up of each director’s long term remuneration decided upon by the Committee during the year, the relevant measure relating to share related incentives is the estimated value, at the date of grant, of the awards granted during the year (rather than the profits on exercise shown in the table earlier in this report). Accordingly the theoretical values are disclosed in the table below of the PSP and LTIP awards made to directors in 2007. These valuations apply the same method as used in the Group’s financial statements (as summarised in note 23 to the Accounts), which uses the share price on the date of all the grants on 7 March 2007 (316.25p) and assumes (in respect of the PSP) that a 15% average return on net tangible assets is achieved over its five year performance period and (in respect of the LTIP) that its secondary performance condition is met. The valuations below further assume the director’s continuing employment.
Theoretical values of awards granted in 2007
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NED current terms of office
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Non-executive directors’ fees, appointment and removal
The fees paid to non-executive directors of the Company, other than the Chairman, are determined by the full Board. The Board receives recommendations in this respect from a committee chaired by the Chairman, with the Chief Executive and two other directors (one executive and one nonexecutive member of the Committee, each of which usually changes each year) as the other members. Recommendations and decisions are made taking account of professional advice and other information on the level of such fees paid by comparable companies for comparable services.
The Chairman’s remuneration is determined by similar criteria, but by the Remuneration Committee. The minimum time commitments given by each director, as detailed in the Board Corporate Governance statement, are also taken into account. The Board’s policy is that non-executive fees should be set by reference to the upper quartile of such fees paid by companies of similar size, on account of the above average complexity and regulatory responsibilities involved (including membership of the Amlin Underwriting Limited board). Each non-executive director is paid a basic fee and may be paid further for additional services, such as additional committee or subsidiary Board responsibilities.
Non-executive directors have contracts for services rather than employment contracts. They are not eligible for any of the Group’s pension, share or incentive schemes. Their terms of appointment are formalised in letters of appointment, copies of which are available for inspection at the Company’s registered office and which are updated from time to time. They are appointed on the recommendation of the Nomination Committee, usually for a three year term, and may be removed, or not nominated for reelection at the end of their term, in each case in accordance with the Articles of Association of the Company. The commencement and expected year of expiry of each of the non-executive directors’ current terms are set out in the table above.
If a non-executive director is not nominated or re-elected at the end of a term of office, the director is not entitled to any extra payment on termination. In other circumstances three months notice of termination may be given by either side.
By Order of the Board, on the recommendation of the Remuneration Committee
C C T Pender Secretary
27 February 2008
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