Aviva 2006 Annual Report Download - page 93

Overview Business review Governance Financial statements Other information
Aviva plc
Annual Report and Accounts 2006 89
Policy How delivered Details
Long-Term Incentive Plan
This plan exists to motivate recipients to achieve
the Company’s longer term objectives, to aid the
retention of key personnel and to align their
interests to those of shareholders.
–Awards are made annually in the form of
restricted shares that vest, subject to
performance conditions, at the end of a three
year performance period.
–Awards that do not vest, lapse.
–The Group Chief Executive is eligible to receive
an annual award of shares to the value of
175% of his basic salary. The other executive
directors are eligible to be awarded shares to
the value of 150% of their basic salary.
–Under the scheme rules no awards may exceed
200% of a participant’s basic salary.
–Awards made to other senior employees vary
based on an individual’s skills and longer term
potential. Normally awards are made between
0% and 150% of basic salary.
Vesting of the shares is dependent upon two
equally weighted performance measures;
Return on Capital Employed (ROCE) and relative
Total Shareholder Return (TSR), reflecting
shareholders’ long-term interests in both
absolute (ROCE) and relative (TSR) performance.
ROCE vesting – ROCE targets are set annually
within the context of the Company’s three-year
business plan. Vesting depends upon the
Company’s performance over the three-year
performance period against a target return.
The Group’s external auditor provides a formal
opinion on the ROCE calculation.
For awards granted for the three-year
performance period commencing 1 January
2006, the Company’s cumulative ROCE over
the period must exceed 31.5% for 15% of the
shares to vest, with the maximum 50% of shares
vesting if the cumulative ROCE exceeds 37.5%
over the period.
TSR vesting – 15% of the awardvests for
median performance rising to 50% vesting for
upper quintile performance.
The group of companies against which the
Company’s TSR is measured comprises: AEGON,
Allianz, AXA, Fortis, Friends Provident, Generali,
HBOS, ING, Legal & General, Lloyds TSB,
Prudential, The Royal Bank of Scotland, Royal &
Sun Alliance and Zurich.These companies were
chosen for their product and geographic match
to Aviva. An independent consultant determines
Aviva’s performance within this group.
In December 2006, the Committee reviewed the
appropriateness of relative TSR as a performance
measure and agreed to include Standard Life
in the above comparator group in respect of
futuregrants.
Long-term savings
Aviva has taken the opportunity presented by
changes to pension legislation to introduce
anew long-term saving arrangement, the
Aviva Capital Accumulation Plan (ACAP).
Contributions for the executive directors are
shown in the Directors’ remuneration table
below.
–Discretionary payments into an employee
benefit trust operated by independent trustees.
Currently those executive directors who are
participating arenot accruing benefits in the
Aviva Staff Pension Scheme.
–The level of contribution varies but will not
normally exceed 50% of basic salary.
–Payments are held in trust for a minimum of
five years.
– A resignation or departure for breach of
contract generally results in the forfeiture
of contribution for the year in which
resignation occurred.
Pension
The Aviva Staff Pension Scheme (Pension
Scheme) provides a competitive post
retirement package.
–Deferred cash payable on retirement in the
form of a lump sum/monthly payment.
See details below (“Pension”).
All employee share plans
To provide employees with the opportunity to
acquire Aviva shares, where applicable.
–Eligible to participate in the Company’s UK all
employee share plans.
See details below (“UK All Employee
Share Plans”).