Aviva 2007 Annual Report Download - page 104
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Please find page 104 of the 2007 Aviva annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Aviva plc
Annual Report and
Accounts 2007
100
Governance
Directors’ remuneration report continued
Long Term Incentive Plan – target setting
The Aviva LTIP vests subject to the achievement of two equally weighted performance measures chosen to reflect
shareholders’ long-term interest in absolute (ROCE) and relative (TSR) performance.
ROCE targets are set annually within the context of Aviva’s three year business plan. Vesting depends upon performance
over the three year period against a target return. Aviva’s external auditor provides a formal opinion on the ROCE vesting
calculation. The 2007 LTIP award has the following three year ROCE targets:
ROCE over the three year performance period Percentage of shares in overall LTIP award that vests based on achievement of ROCE targets
Less than 31.5% 0%
31.5% 15%
Between 31.5% and 37.5% Prorata between 15% and 50% on a straight-line basis
37.5% and above 50%
Relative TSR determines the vesting of the other 50% of any Aviva LTIP award. The comparator group for the assessment
of relative TSR performance under the 2007 grant comprises Aegon, Allianz, Axa, Fortis, Friends Provident, Generali,
HBOS, ING, Legal and General, Lloyds TSB, Prudential, Royal Bank of Scotland, Royal and Sun Alliance, Standard Life and
Zurich. The 2005 and 2006 LTIP grants are based on the same comparator group but without Standard Life.
TSR vesting operates as follows:
TSR position over the three year performance period Percentage of shares in overall LTIP award that vests based on achievement of TSR targets
Below median 0%
Median 15%
Between median and upper quintile Prorata between 15% and 50% on a straight-line basis
Upper quintile and above 50%
Details of unvested LTIP awards are provided on page 175.
As at 31 December 2007, vesting projections (non-audited) of subsisting LTIP awards were as follows:
LTIP award 31 December 2007 vesting projection (% of award)
Aviva LTIP 2007 43%
Aviva LTIP 2006 46.5%
Aviva LTIP 2005 50%
Details of the assumptions used in valuing the LTIP for accounting purposes can be found on page 176 of this report.
The vesting assumption made in respect of the 2007 grant for accounting purposes is 50%.
The following table has been drawn up to assist in understanding the potential value of the LTIP grants made to
executive directors in 2007:
LTIP Andrew Moss Philip Scott
Face value of grant £1,050,000 £825,000
Minimum vesting £315,000 £247,500
Expected value £607,750 £477,500
Maximum vesting £1,397,500 £1,098,000
Assumptions are as follows:
– Minimum vesting assumes TSR and ROCE elements vest at the minimum level, producing a 30% vesting of the total
award. No share price growth is assumed;
– Expected value, based on the vesting assumption made for accounting purposes, assumes TSR and ROCE elements
vest at a combined rate of 50% of the total award. Share price growth of 5% per annum is assumed over the three
year performance period;
– Maximum vesting assumes both TSR and ROCE elements vest in full, producing a 100% vesting;
– Share price growth of 10% per annum is assumed over the three year performance period.
The current LTIP succeeds a previous long term incentive plan, the last awards under which were made in 2004 and
vested in 2007. For the 2007 LTIP release, at the end of the performance period, on TSR the Company was ranked
eighth out of the 20 companies in the comparator group (34.9% vesting) and ROCE was 32.4% (30% vesting).
The total vesting was therefore 64.9%. The 35.1% of the award which did not vest lapsed.