Accountability

Shorter term performance rewards: annual bonus scheme for non-underwriting directors and employees (Group Bonus Scheme)

For those executive directors and other employees who are not directly involved in underwriting or claims settlement, the Group’s shorter term performance incentive is a cash Group Bonus Scheme. The senior sections of the scheme reward and incentivise participants against a mixture of business performance, measured by reference to the Group’s return on equity (ROE) compared with target returns set by the Committee each year, and the individual’s performance against agreed stretching personal objectives. The mix of business and individual bonus elements varies by seniority, with 70% of the potential target reward at the most senior level, including participating executive directors, being rewarded on Group business performance and 30% on personal performance. The total 'on-target' and maximum bonus levels also increase with seniority. In respect of 2007 (as for earlier years), 50% of base salary is payable to executive directors for 'on-target' performance rising to a potential maximum payment of 100% of base salary. As part of a general review of bonuses by the Committee during the year, the maximum payment for executive directors for 2008 has been increased to 120% of base salary but the 50% payment for 'on-target' performance is unaltered. This change has been made with the independent advice of NBSC in order to ensure that the Group remains competitive in attracting and retaining key staff by providing the potential for top quartile remuneration for top quartile performance.

Shorter term performance rewards: profit share for underwriting directors and employees (Profit Commission (PC) Scheme)

Shorter term incentives for underwriters and certain other underwriting division staff (whether or not they are executive directors of Amlin plc) consist principally of a cash profit share relating to underwriting profits in respect of each underwriting year (known as profit commission or PC). PC is paid on an underwriting year basis, partly related to the relevant participant’s division and partly to wider Syndicate 2001 underwriting performance. Rewards are also divided between those which are purely calculated as a percentage of underwriting profit and those which are also related to underwriting performance relative to external peers and/or other objectives. The maximum percentage of each division’s underwriting profit which may be paid out under the scheme in respect of each underwriting year is 4.5% unless the division has achieved a superior result for its Lloyd’s sector of business in which case the highest maximum applying to any division is 4.83%. Around 3% of each underwriting year’s profit of Amlin Bermuda Ltd is also made available to a parallel scheme for those contributing to that subsidiary’s results, with further discretionary payments intended to be managed so that up to around 4.5% of its underwriting profit over the long term is paid out under the scheme.

Rewards crystallise at the end of 36 months from the start of an underwriting year but, at the Committee’s discretion, payments on account of up to 30% of the forecast reward has in recent years been paid a year earlier.

The longer term development of PC is regularly reviewed but no material changes were made for the 2007 or 2008 underwriting years.

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