Aviva 2009 Annual Report Download - page 109

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Performance review
Aviva plc Directors’ remuneration report continued
Corporate responsibility
Annual Report and Accounts 2009
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
ABP – target setting
The financial targets which underpinned the ABP (accounting for 50% of annual bonus) in 2009 were derived from Aviva’s return,
growth and capital efficiency/capital generation goals. Three of the financial targets (operating profit, volume and new business
contribution) were “stretched” (as set out in Table 6) due to their importance in achieving these aspirations.
Employee and customer targets (each accounting for up to 10% of annual bonus) are set taking into account performance to
date and aspirations for the future. The employee targets on leadership and engagement are derived from the Group’s employee
promise survey in which all business units participate and which over 37,500 staff completed in 2009. This survey is delivered
through an independent third party who is able to provide extensive external benchmark data. The Company’s aspiration is to
reach the upper quartile positions compared to the relevant global and national norms on leadership and engagement over time.
In 2009, the number of businesses measuring customer advocacy using a consistent robust methodology doubled, and this was
measured by an independent global research agency. All business units now have customer advocacy targets in place for 2010.
The Company’s aspiration is to reach the upper quartile in the relevant local market benchmark. Internal assurance that the
outcomes on employee and customer targets were accurately calculated and reported was provided to the Committee by
Group Audit.
Personal objectives based on delivery of key strategic priorities, personal leadership and operating performance of the
relevant portion of the business account for up to 30% of annual bonus. Carbon emissions targets are also included as part of
the EDs’ personal objectives.
The Group’s performance against its financial, employee and customer KPIs in 2009, as they affected the bonus of the Group
Chief Executive, is shown in Table 6.
Table 6: Group performance in 2009 against its KPIs
Weighting (% of total bonus
opportunity)
Actual
On target Stretch payment
Key Performance Indicators (%) (%) (%)
Business measures (70%) Volume – Total long-term savings 5.0 5.0 5.0
Volume – Net written premium 2.5 2.5 —
IFRS operating profit 1.5 10.0 9.3
MCEV operating profit 1.5 10.0 10.0
New business margin 1.0 5.0 2.2
Combined Operating Ratio (COR) 1.0 5.0 —
Net capital returns 7.5 7.5 7.5
Cost savings (expense base) 5.0 5.0 5.0
Customer 5.0 10.0 7.0
Employee 5.0 10.0 5.0
Personal measures (30%) Personal – individual strategic 15.0 30.0 23.3
Total * 50.0 100.0 74.2
* Totals in columns do not add up due to rounding.
The Committee is sensitive to the current environment in relation to executive pay, and particularly relating to the payment of
bonuses in circumstances where financial targets have not been met and share prices have fallen. However, the combination of
financial and non-financial measures is central to the structure of the ABP. The Committee wants to ensure a balanced focus on
both short-term financial performance and on the objective non-financial measures that are leading indicators of future financial
success. This balance is, in the Committee’s view, reflective of good practice in incentive design and is consistent with the FSA’s
guidance on creating incentive schemes that have a focus on long-term sustainable performance.
As described above, the Committee took the view that it was important to maintain the integrity of the financial targets for
the EDs, and so these were not adjusted during the year. In the same way, the Committee believes that it is appropriate to pay
bonuses based on pre-agreed rigorous targets when these have been met.
To align with the business priorities for 2010, the financial measures at Group level for 2010 are operating profit, volume,
new business margin, the Combined Operating Ratio (COR) of our general insurance businesses and cost savings.
Governance