Average total remuneration falls by almost a third, but basic pay still on the up as pre-tax profits grow by 5%
Bosses at six of the leading insurers in UKGI took home more than £11m in remuneration last year, but that is much lower than the £15.5m earned during 2017.
RSA’s Stephen Hester continues his reign at the top of the insurer CEO pay scales after taking home almost £4.1m in total remuneration over the course of 2018.
But even this mammoth pay cheque is less than what he took home for the previous 12 months, when he pocketed a cool £5.1m, and is symptomatic of a downward trend in CEO pay, despite continued growth in pre-tax profits at all but one of the insurers analysed.
| Insurer | Chief Executive | Base Salary | |
|---|---|---|---|
| 2018 | 2017 | ||
| RSA | Stephen Hester | £1,008,000 | £987,000 |
| Direct Line Group | Paul Geddes | £826,000 | £807,000 |
| Aviva | Mark Wilson* | £816,000 | £1,028,000 |
| Hastings Insurance | Toby van der Meer** | £407,292 | n/a |
| Admiral | David Stevens | £399,301 | £390,824 |
Of the six insurer bosses included in this analysis, none reported an increase in their annual bonuses or long-term incentive plan (LTIP) awards, with only Admiral’s David Stevens seeing an uptick in total remuneration. This is largely, however, down to the Admiral CEO not receiving any form of annual bonus or LTIP award because of his significant shareholding in the company.
Aviva
Aviva’s former group chief executive, Mark Wilson, experienced the biggest drop in his incentive-related pay, bringing home an annual bonus of £692,000 for 2018, compared to £1.945m for 2017, while he also forwent his 2018 LTIP award after leaving the business in October 2018.
But even allowing for Wilson spending the whole year at Aviva would still lead to him experiencing a drop in his annual bonus, which works out at an equivalent of approximately £896,000 for the full 12 months of 2018.
This lower annual bonus payment was equal to 84% of salary and 42% of the maximum allowed under the programme as the insurer fell short of its earnings per share target following the assumed change in the Ogden discount rate to 0% but still exceeded other financial targets.
The insurer’s Remuneration Committee decided to knock 17.5% off of Aviva’s executive directors’ annual bonuses as a result of a number of events that negatively affected “our customers, our shareholders, and our broader shareholder community”, including its u-turn on cancelling preference shares in March 2018 that resulted in the insurer paying out £14m to investors.
Aviva also suffered from disruption in its UK savings arm as it migrated its independent adviser arm platform to a new supplier, and the Canadian business suffered financial performance issues stemming from poor oversight in “some areas”.
Performance bonuses
RSA’s Stephen Hester, meanwhile, saw his annual bonus drop by almost half and his LTIP by more than a fifth as the insurer failed to hit any of its financial targets for the year, and even failed to get past the threshold level to receive any financial performance-related bonus payment.
Hester took home an annual bonus of £519,000 for 2018, compared to just over £1m for the previous year. His LTIP award fell to £2.175m from £2.726m in 2017.
LV=’s Richard Rowney took home an annual bonus of £345,000 as the insurer exceeded one financial target, hit another and failed to hit the threshold for a payout on the third, while bonuses were also paid out for four non-financial measures over the course of the year. Pre-tax profit, meanwhile, took a hit as the insurer continues with its merger with Allianz.
But it was Direct Line Group’s Paul Geddes who took home the biggest annual bonus payment, pocketing £983,000 for his performance over the course of the year. This was still lower than the £1.242m received for 2017 however, despite Geddes and his team exceeding their financial targets and performing particularly strongly on people measures where they achieved the maximum possible bonus payout.
Geddes also took home an additional £1.204m as part of his LTIP package, the last one he received before leaving the business in the hands of his successor, Penny James.
Salaries
While total remuneration may have been down pretty much across the board for insurer bosses, base salaries continued to tick upwards, although one of the insurer’s analysed in this report, LV=, saw CEO basic pay increase quicker than that paid to its wider staff base.
And it was LV=’s Rowney who benefitted from the biggest increase in basic pay after he received a 4% pay increase as the insurer continues to work through the merger with Allianz that will see LV= swap its commercial business for the German giant’s personal lines book.
This means that Rowney’s basic pay now accounts for more than half (53%) of his overall remuneration, up from just 29% in 2017.
This is the highest proportion of all the insurer CEO’s analysed, with the exception of Hasting’s Toby van der Meer who has yet to receive an LTIP payment after taking on the role at the beginning of March 2018, and Admiral’s Stevens, who does not receive any incentive payments as usual.
This change in the structure of Rowney’s pay, however, is largely down to him not receiving an LTIP payment in 2018 as a result of his previous arrangement vesting.
Meanwhile, Wilson’s large drop in incentive related pay saw his base salary of £816,000 (£1.056m 12 month equivalent) climb to 44% of total remuneration, up from 24% in 2017, largely due to no LTIP payment, while Geddes and Hester both received basic salaries worth around a quarter of their total remuneration package.
Data
| Insurer | Chief Executive | Base Salary | Annual Bonus | Benefits | LTIP | Pension | Total Renumeration | Average Increase in Base Pay | Profit Before Tax (m) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | Staff | CEO | 2018 | 2017 | Increase | ||||
| Admiral | David Stevens | £399,301 | £390,824 | N/a | N/a | £488 | £404 | N/a | N/a | £3,873 | £3,791 | £403,662 | £395,019 | 5% | 2% | £479 | £413 | 16% |
| Aviva | Mark Wilson* | £816,000 | £1,028,000 | £692,000 | £1,945,000 | £99,000 | £107,000 | N/a | £950,000 | £229,000 | £288,000 | £1,836,000 | £4,318,000 | 6% | 3%** | £2,129 | £2,003 | 6% |
| Direct Line Group | Paul Geddes | £826,000 | £807,000 | £983,000 | £1,242,000 | £19,000 | £18,000 | £1,204,000 | £1,770,000 | £206,000 | £202,000 | £3,238,000 | £4,039,000 | 4% | 2% | £583 | £539 | 8% |
| Hastings Insurance | Toby van der Meer*** | £407,292 | N/a | £83,333 | N/a | £9,685 | N/a | N/a | N/a | N/a | N/a | £500,310 | N/a | 6% | N/a | £168 | £162 | 4% |
| LV= | Richard Rowney | £525,000 | £505,000 | £345,000 | £606,000 | £17,000 | £17,000 | N/a | £480,000 | £116,000 | £111,000 | £1,003,000 | £1,719,000 | 2% | 4% | £20 | £122 | -84% |
| RSA | Stephen Hester | £1,008,000 | £987,000 | £519,000 | £1,001,000 | £64,000 | £67,000 | £2,175,000 | £2,726,000 | £302,000 | £296,000 | £4,068,000 | £5,077,000 | 3% | 2% | £480 | £448 | 7% |
| *Part year as Wilson left the role on 9 October 2018 | ||||||||||||||||||
| **Calculated pro-rata for the full 12 months | ||||||||||||||||||
| ***Part year as van der Meer only started in the role on 1 March 2018 | ||||||||||||||||||
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