Variable pay.

Bonus for 2012

Targets

For 2012, the bonus for executive directors was based on a number of targets which were weighted as follows:

(XLS:) Bonus for 2012 – targets

Name

Group KPIs

Other financial targets

Other strategic targets

1.

Tim Breedon stood down from the Board in June 2012. His bonus for 2012 was awarded based on the above weighting for the period January to June. From July to December he was assessed on Group KPIs and post-Board objectives primarily relating to issues surrounding Solvency ll and a smooth handover of his Group Chief Executive responsibilities.

2.

Nigel Wilson was appointed Group Chief Executive on 30 June 2012. While the weighting of his objectives did not change, his bonus was assessed on his objectives as Chief Financial Officer for the period January to June and his objectives as Group Chief Executive from July to December.

3.

John Pollock and Mark Gregory were given increased responsibilities in November relating to the International divisions. Their objectives were adjusted to take this into consideration.

4.

Mark Zinkula was appointed to the Board on 18 September 2012. For the period 1 January to 17 September his bonus was based on his responsibilities as CEO LGIM and calculated in accordance with the base salary and bonus potential for this role. For the period 18 September to 31 December his bonus was based on his base salary and bonus potential as a Board member.

Tim Breedon1

50%

20%

30%

Nigel Wilson2

50%

20%

30%

John Pollock3

40%

30%

30%

Mark Gregory3

40%

30%

30%

Mark Zinkula4

20%

40%

40%

Broad explanation of targets

Common to all executive directors.

Key divisional metrics.

Building a diversified business.

 

The TSR KPI is addressed through the PSP.

Managing capital requirements.

Delivering a positive customer experience.

 

 

 

Building a high expectation culture.

 

 

 

Improving products and services.

Bonus awarded for 2012

The Committee carefully assessed the performance against the Group KPIs, other financial and strategic targets to determine the associated bonus. The total bonus that resulted from the delivery of these objectives was reviewed by the Committee based on its view of the executive’s overall performance and regulatory compliance. In reviewing results, approach to risk (including environmental, social or governance (ESG) risks) is monitored.

The Committee reviewed a comprehensive report from the Chief Risk Officer to ascertain that the executive directors’ objectives had been fulfilled within the risk appetite of the Company. In addition, the Committee received feedback from the Group Regulatory Risk and Compliance Director and Group Legal Counsel that there were no material issues to consider around regulatory breaches, customer outcomes or litigation that would prevent payment of bonuses or trigger any clawback. The Committee was satisfied that the bonuses should be paid.

In recognition of base salary adjustments made during 2012, bonuses were calculated using pro-rated salaries as follows:

Name

Base salary pro-rating used

Tim Breedon

Pro-rated base salary for the six-month period 1 January to 30 June 2012.

Nigel Wilson

Pro-rated base salary for period 1 January to 30 June as CFO and pro-rated base salary for period 1 July to 31 December as Group Chief Executive.

John Pollock

Pro-rated base salary from 1 January to 30 October pre international responsibilities and pro-rated base salary from 1 November to 31 December using adjustment made for assuming international business responsibilities.

Mark Gregory

Pro-rated base salary from 1 January to 30 October pre international responsibilities and pro-rated base salary from 1 November to 31 December using adjustment made for assuming international business responsibilities.

Mark Zinkula

Pro-rated base salary for period he was a Board member i.e. 18 September to 31 December.

The Committee has applied discretion in the assessment of the bonuses. This is to acknowledge the successful management of the business during the changes to the Executive and Leadership Group, the review of the international businesses and successfully maintaining employee engagement and motivation throughout the organisation.

Bonus awarded for 2012 performance:

(XLS:) Bonus awarded for 2012 performance

Name

Performance in relation to 2012 Total bonus £000s

 

Maximum bonus potential is 125% of base salary other than for Mark Zinkula where it is 175% of base salary.

1.

The bonus awarded to Tim Breedon reflects his time on the Board from 1 January to 30 June 2012.

2.

The bonus awarded to Mark Zinkula reflects his time as a Board member from 18 September to 31 December 2012.

Tim Breedon1

435

Nigel Wilson

779

John Pollock

520

Mark Gregory

472

Mark Zinkula2

205

Deferral

Of the bonus awarded in relation to 2012, 37.5% was deferred for three years into shares under the SBP, and is subject to clawback.

In accordance with our current policy, there was no bonus deferral for Tim Breedon due to his retirement.

PERFORMANCE SHARE PLAN (PSP)

Details of how the 2009 award vested

The 2009 PSP award vested in full in May 2012. As stated in the 2011 Remuneration Report, in line with policy, the Committee had already carefully reviewed the Company’s underlying performance over the performance period to March 2012. It reassessed the position in May prior to agreeing the vesting. The review included considerations of partnerships entered into and maintained, cost management, capital management and risk. The Committee felt the Company performance had been strong over the period and saw no reason not to allow the PSP to vest in accordance with the TSR out-turn.

Final 2009 PSP results

(XLS:) Final 2009 PSP results

Grant date

Performance period

Legal & General’s
TSR

% of award vesting against FTSE 100

% of award vesting against Bespoke Comparator Group

Percentage of total award vesting

1.

Nigel Wilson’s recruitment award followed the same performance period as the main 6 May 2009 grant. However, the award was not released until three years from the date of grant i.e. 16 October 2012. See 2009 Directors’ Remuneration Report for full details.

6 May 2009

6 May 2009 – 6 May 2012

172.50%

50.00%

50.00%

100.00%

16 October 2009 (Nigel Wilson recruitment award)

6 May 2009 – 6 May 20121

172.50%

50.00%

50.00%

100.00%

The table below shows the numbers of nil cost options that vested and the value at the date of vest.

(XLS:) Numbers of nil cost options that vested and the value at the date of vest

 

No. of shares that vested

Vesting date

Share price at vest

Value at date of vest

1.

Nigel Wilson, John Pollock and Mark Gregory chose not to exercise their options at the time of vesting. They have the ability to exercise up to 5 May 2014.

Tim Breedon

1,984,536

8 May 2012

1.11325

£2,209,285

Nigel Wilson1

1,194,539

16 Oct 2012

1.354

£1,617,406

John Pollock1

953,608

8 May 2012

1.11325

£1,061,604

Mark Gregory1

798,969

8 May 2012

1.11325

£889,452

Mark Zinkula

0

n/a

n/a

n/a

Position of awards outstanding as at 31 December 2012

The tables below show the vesting position of the outstanding PSP cycles as of 31 December 2012.

(XLS:) Vesting position of the outstanding PSP cycles as of 31 December 2012

 

% of base salary

Max no. of shares

L&G TSR
as at 31.12.12

% of award vesting against FTSE 100
as at 31.12.12

% of award vesting against Bespoke Group
as at 31.12.12

Percentage of total award vesting
as at 31.12.12

1.

Mark Zinkula’s award, prior to his board appointment, was 200% of base salary split between the PSP and LGIM LTIP – see table below for LGIM LTIP details.

Grant date 4 May 2010

 

 

 

 

 

 

Nigel Wilson

200%

1,256,004

85.30%

50.00%

50.00%

100.00%

John Pollock

200%

937,316

85.30%

50.00%

50.00%

100.00%

Mark Gregory

200%

843,585

85.30%

50.00%

50.00%

100.00%

Mark Zinkula

0

N/A

N/A

N/A

N/A

N/A

Grant date 27 April 2011

 

 

 

 

 

 

Nigel Wilson

200%

943,396

36.30%

50.00%

50.00%

100.00%

John Pollock

200%

706,003

36.30%

50.00%

50.00%

100.00%

Mark Gregory

200%

686,106

36.30%

50.00%

50.00%

100.00%

Mark Zinkula1

80%

274,442

36.30%

50.00%

50.00%

100.00%

Grant date 24 April 2012

 

 

 

 

 

 

Nigel Wilson

200%

947,949

21.70%

50.00%

28.10%

78.10%

John Pollock

200%

712,871

21.70%

50.00%

28.10%

78.10%

Mark Gregory

200%

709,476

21.70%

50.00%

28.10%

78.10%

Mark Zinkula1

80%

278,359

21.70%

50.00%

28.10%

78.10%

In line with established policies, an additional grant was made to Nigel Wilson on appointment as Group Chief Executive – it follows the 24 April 2012 performance period but vests on 14 August 2015. This top up grant was made on the increase in base salary he received upon his appointment to Group Chief Executive.

(XLS:) Additional grant to Nigel Wilson on appointment as Group Chief Executive

 

Max no. of shares

L&G TSR
as at 31.12.12

% of award vesting against FTSE 100
as at 31.12.12

% of award vesting against Bespoke Comparator Group
as at 31.12.12

Percentage of total award vesting
as at 31.12.12

Nigel Wilson

291,765

21.70%

50.00%

28.10%

78.10%

LGIM LONG TERM INCENTIVE PLAN (LGIM LTIP) AWARDS

Between March 2010 and March 2012 Mark Zinkula was granted LGIM LTIP awards as part of his remuneration as CEO LGIMA and CEO LGIM. Following his appointment as an executive director, Mark will receive no further awards under this plan. Under the LGIM LTIP annual awards of notional shares in LGIM are granted to participants. The vesting of these notional shares is subject to the satisfaction of the cumulative growth in PBT over the three-year performance period. The value of the notional LGIM shares is delivered in cash after the end of the three-year performance period.

(XLS:) LGIM LTIP Awards

Grant date

% of base salary

No. of notional shares

Face value at grant
£

Maximum value of award on vesting
£

Value
at 31.12.12
£

1.

Mark Zinkula’s award was 200% of base salary split between the LGIM LTIP and PSP. See above for PSP award.

15 March 2010

140%

135,798

338,000

676,000

577,982

28 March 20111

120%

126,850

480,000

960,000

348,528

1 March 20121

120%

92,877

492,000

984,000

162,448

2013 AWARDS

For 2013, ‘annual bonus’ will be referred to as Annual Variable Pay (AVP).

AVP weighting

For 2013, executive director AVP will continue to be based on a number of key financial targets linked to Group and individual business performance, customer outcomes, teamwork, Company values, risk appetite and employee engagement. Weightings and targets will be reviewed annually and changed as appropriate.

The weighting will be as follows for 2013:

(XLS:) AVP Weighting

Name

Group KPIs

Other/
Divisional financial targets

Strategic and Consumer outcomes, values and behaviours

Nigel Wilson

50%

30%

20%

John Pollock

50%

30%

20%

Mark Gregory

50%

30%

20%

Mark Zinkula

50%

30%

20%

Broad explanation of targets for 2013

Group Key Performance Indicators (KPIs)

  • Common to all executive directors
  • The TSR KPI is addressed through the PSP

Other financial targets

  • Key divisional metrics
  • Capital requirements

Other strategic and consumer outcomes

  • Growth of the business
  • Delivering a positive customer experience
  • Capital management
  • Organisational capability
  • Diversification
  • Risk management

2013 PSP award

After due consideration of business performance and share price, the Remuneration Committee decided that for 2013, executive directors should be granted awards of performance shares equivalent to 200% of 2013 base salaries. The maximum award value is shown below:

Nigel Wilson £1,500,000
John Pollock £922,500
Mark Gregory £922,500
Mark Zinkula £922,500