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Annual Corporate Governance & Directors’ Remuneration Reports 2016

Police Mutual Annual Governance & Directors’ Remuneration Reports 2016

ContentsCorporate Governance Report 1

Committee of Management members, Executive Directors & Life Vice Presidents 1

Corporate Governance Framework 2

Committee membership & attendance 5

Committee of Management 6

Principal sub-committees 6

Relations with members 10

Risk Management & Internal Control 11

Statement of Compliance 12

Directors’ Remuneration Report 13

Purpose of the report 13

The Remuneration Committee 14

Remuneration Committee Chairman’s 2016 Annual Statement 15

Annual Report on Remuneration for the year ended 31 December 2016 16

Directors’ Remuneration Policy for 2016-2019 18

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Corporate Governance ReportCommittee of Management members, Executive Directors & Life Vice Presidents

Committee of ManagementPresidentSir Hugh Orde OBE QPM, formerly President, Association of Chief Police Officers

Vice PresidentsSimon Cole QPM BA(Hons) MA, DipCrim, Chief Constable, Leicestershire PoliceMike Cunningham QPM, Her Majesty’s Inspectorate of ConstabularyJustine Curran QPM, Chief Constable, Humberside PoliceSir Jon Murphy QPM LLB (Hons), Formerly Chief Constable, Merseyside PoliceNeil Richardson OBE QPM BA MBA FCMI, Formerly Deputy Chief Constable, Police Scotland

ChairmanJulie Spence OBE QPM BEd LLB MA MBA, formerly Chief Constable, Cambridgeshire Constabulary

Chief Inspector Deirdre Allen, Hertfordshire Constabulary Claire Beck, Cambridgeshire ConstabularyDavid Campbell MSc, West Yorkshire PoliceRichard Coates BSc (Econ) FCAInspector Carwyn Evans, South Wales PoliceDetective Constable Martin Guest, Humberside PoliceJulie Hopes MBA ACIBConstable Robin Hardiman, Lancashire ConstabularyKirsty Norman, Derbyshire ConstabularyBarry Sanjana MAGraham Smillie, Police ScotlandMike Urmston BA FIADetective Sergeant Ieuan Watkins, Gwent Police

Chief ExecutiveStephen Mann LLB APMI FIoD

Executive DirectorsIan Cordwell BA FCA, Product and Chief Investment OfficerDave Wright BA MBA, Marketing & Sales Director

Company SecretaryRachel Kirwan BSc ACIS

Life Vice PresidentsMick Foster QPM, formerly ChairmanPeter Sharpe MBE FCII, formerly Chief Executive

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Corporate Governance ReportPolice Mutual is committed to maintaining high standards of corporate governance and has opted to use the UK Corporate Governance Code for companies quoted on the London Stock Exchange as the basis for reporting on its Corporate Governance arrangements. In applying the Code we consider its requirements and put them into practice in a way that reflects our business, culture and values and which helps to support the following:

• Transparency; giving our members the information they need to judge whether the Executive team, Board and Committee of Management are doing a good job on their behalf

• Effective decision-making, risk management and control• A proper balance between executive and non-executive directors• Keeping the interests of Police Mutual’s members aligned with, and at the front of the mind of, the people responsible for running the business

Corporate Governance FrameworkPolice Mutual operates within a clear governance framework which is outlined in the diagram below and set out in the report that follows:

Police Mutual is governed by two committees – the Committee of Management and the Managing Board (the Board). Both are chaired by Police Mutual’s Chairman, Julie Spence.

Role of the ChairmanThe Chairman’s role is agreed by the Committee of Management. The main responsibility of the role is to lead and manage the work of the Committee of Management and Board and ensure they operate effectively and discharge their duties. The Chairman is responsible for ensuring all directors are properly briefed and receive accurate, timely and clear information to enable effective challenge to management.

Role of the Chief ExecutiveThe roles of the Chairman and Chief Executive are clearly defined and separate. The Committee of Management has delegated responsibility for the day-to-day management of the Police Mutual Group to the Chief Executive. The role of the Chief Executive is to lead the development and delivery of strategy for the Group and its implementation and leading and managing the Group, supported by the Executive team.

Role of the Company SecretaryThe Company Secretary provides dedicated support to the Committee of Management and its sub-committees. Her services are available to all directors, particularly the non-executive directors, in order to ensure they receive timely accurate information to fulfil their duties. The Company Secretary advises the Board through the Chairman on governance matters and assists with inductions and development. The appointment and removal of the Company Secretary are matters for the Committee of Management.

Directors may also take independent professional advice on request at Police Mutual’s expense where they judge it necessary to discharge their responsibilities.

Non-executive directorsPolice Mutual makes two types of non-executive appointment. The Committee of Management is made up of mainly unremunerated non-executives who are members of the Police Service and carry out their role on a voluntary basis. They are not financial services professionals but are there to ensure the Committee of Management fulfils its role, which is key to Police Mutual’s mutual and affinity group status. However, in recognition of their “lay” status, additional remunerated non-executive directors are appointed for their financial services and management experience to serve on both the Committee of Management and the Board.

Based on their breadth of knowledge and experience, non-executive directors challenge, monitor and approve the strategy and policies recommended by the executive directors.

Committee of Management

Investment Committee

Audit Committee

Remuneration Committee

With-Profits Committee

Managing Board

Nomination Committee

Foundation Advisory Board

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Corporate Governance ReportAppointment of directorsThe process for appointing new members of the Committee of Management is determined by the Nomination Committee. All names submitted to delegates for election to the Committee of Management are accompanied by biographies to enable delegates to make informed decisions.

Committee of Management appointments operate in several ways. The President and Vice Presidents are senior figures within the Police Service appointed for their knowledge and influence and are approached and selected on an individual basis. For the appointment of Committee members representing members of Police Mutual, an invitation to apply is made to all Force Authorised Officers. Those interested are then subject to a selection process involving interviews with and presentations to the Chairman and Chief Executive. As far as possible, consideration is given to geographic and Force representation, although these are secondary considerations to the qualities and merits of the individual. Due to their lay status a formal evaluation of the balance of skills, knowledge and experience is not applicable to unremunerated non-executive Committee members on appointment. Unremunerated non-executive directors are appointed for three year terms which may be renewed or extended by mutual agreement.

The Nomination Committee does not believe that the use of external search consultants is appropriate in the selection of unremunerated Committee members.

Where remunerated non-executive director appointments are made, the criteria for the desired background and competencies a new non-executive director should have are agreed by the Nomination Committee. The Chairman and Chief Executive and members of the Nomination Committee interview each potential new non-executive director, who may include individuals identified with the assistance of external search consultants, before the appointment is recommended to the Committee of Management.

Remunerated non-executive directors are appointed for three year terms, which may be renewed or extended by mutual agreement. Subject to the Committee of Management being satisfied with the director’s performance, independence and commitment, there is no specified time limit regarding the number of terms a remunerated non-executive director may serve, but their continued appointment is subject to review by the Nomination Committee.

The standard terms and conditions and letters of appointment for remunerated and unremunerated non-executive directors can be obtained by writing to the Company Secretary.In 2016 there were no new appointments of remunerated non-executive directors to the Board.Board diversity and in particular the lack of women on boards has been subject to some scrutiny in recent years. Police Mutual recognises that Board diversity is a key factor in encouraging constructive debate and continues to view diversity in its broadest sense, seeking to ensure that it is an integral part of Committee of Management and Board succession planning. This means that in addition to gender, consideration is also given to differences of approach and experience, with all appointments continuing to be based on merit, measured against objective criteria and the skills and expertise that a person can bring to the business.

Under Police Mutual’s Rules, all members of the Committee of Management stand for re-election in a general meeting each year. The Chief Executive is the only executive director elected to the Committee of Management. The executive directors on the Board are not subject to yearly election in a general meeting as this is not required under the constitution. However, their appointment to the Board is considered by the Committee as part of its yearly review of sub-committees.

Police Mutual is also allowed under its Rules to grant an indemnity to its directors, to the extent permitted by law, in respect of liabilities incurred as a result of their office. Police Mutual purchases a yearly directors’ and officers’ liability insurance policy in respect of these liabilities.

Senior independent directorPolice Mutual has decided not to appoint a senior independent director as required by the Code. A senior independent director is required to provide a sounding board for the Chairman and to serve as an intermediary for the other directors when necessary. A senior independent director also acts as an alternative point of contact to the Chairman, Chief Executive and other executive directors for members who have concerns that cannot be addressed through normal channels and to lead the performance evaluation of the Chairman. The Committee believes that members are able to contact any member of the Committee of Management and raise issues through Police Mutual’s delegate system and that to introduce another role for this purpose would bring unnecessary complexity and the potential for division. For the Chairman’s appraisal, one of the non-executive directors on the Board is given responsibility for leading this process. Members who would like to communicate with a Committee of Management member can do so by writing to him or her at Police Mutual’s registered office or by contacting the Company Secretary.

External appointments and non-executive director time commitmentsPolice Mutual recognises that there are significant advantages to individuals and to the business as a whole of our directors serving on the Boards of other companies. Police Mutual allows its executive directors to hold non-executive directorships with other companies, with all external appointments being approved by the Chairman.

Non-executive directors are not restricted on the number of external boards on which they may serve, provided that they continue to demonstrate the ability to discharge effectively their duties to Police Mutual and keep the Chairman informed of changes to those commitments. Appointments to the boards of other financial services companies require the prior approval of the Chairman and Chief Executive.

The letters of appointment set out the time commitment expected of non-executive directors in performing their duties.

Non-executive director independenceThe Code sets out the circumstances that should be relevant to Police Mutual in determining whether each non-executive director is independent. Non-executive director independence is considered by the Nomination Committee and in 2016 all the non-executive directors who had served during the year were considered to be independent in character and judgement based on the nature of their contributions with particular consideration having been given to Julie Spence, Richard Coates, Mike Urmston, and Ieuan Watkins who had each served for 9 years or more during 2016.

Under the Code it is generally accepted that it is not appropriate to include a board chairman in the definition of independent non-executive directors. During 2016 the Board comprised (excluding the chairman) four independent non-executive directors and three executive directors. This means that Police Mutual continued to meet the requirement that at least half of the board, excluding the chairman should comprise independent non-executive directors.

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Corporate Governance ReportDirector induction and trainingThe Chairman ensures that on appointment to the Committee of Management all individuals receive a comprehensive induction tailored to their needs. Directors are given background information describing the Police Mutual Group and its activities. The induction covers the role of the Committee of Management and its sub-committees and includes meetings with senior management and, for Board members, it also includes meetings with key functional areas across the Police Mutual Group and key external advisers to help build a detailed understanding of how the Police Mutual Group works and current issues.

Updates given at Committee and Board meetings are used where possible as an opportunity to ensure members gain and develop the knowledge relevant to their role.

Performance evaluationDuring 2016 a formal, external review of our overall Corporate Governance arrangements was conducted to consider their effectiveness. The overall conclusion was that our current governance structure is broadly appropriate for our current size and scope and there is a positive culture which promotes openness, transparency and customer-centricity and a high level of engagement. The level of challenge and debate is good, and overall Board members have a sufficiently good understanding to enable appropriate decisions to be made. In light of the growth of our business and the product and customer diversification that has taken place, there were several areas where enhancements could be made including the establishment of a Risk Committee, increasing Board training, adding further clarity to the roles of certain committees and individuals in the enlarged Police Mutual group and reducing the amount of information provided to the Board.

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Corporate Governance ReportCommittee Membership and attendance at meetingsDetails of the attendance of directors at committee meetings during 2016 are as follows:

Director Committee of Management

Managing Board

Audit Committee

Nomination Committee

Remuneration Committee

Investment Committee

With-Profits Committee

Number of meetings 4 11 5 2 4 4 6

Sir Hugh Orde 3/4

Simon Cole1 1/1

Mike Cunningham 2/4

Justine Curran 1/4

Sir Peter Fahy2 0/3

Sir Jon Murphy 3/4

Neil Richardson 0/4

Chris Sims2 0/3

Julie Spence 4/4 10/11 2/2 4/4 6/6

Deirdre Allen 4/4

Claire Beck 4/4 3/4

David Campbell 4/4

Richard Coates 4/4 11/11 5/5 4/4

Carwyn Evans1 1/1

Martin Guest1 1/1

Robin Hardiman 4/4

Julie Hopes 4/4 11/11 4/4 6/6

Steve Jackson2 2/3

Kirsty Norman 3/4

Barry Sanjana 4/4 11/11 5/5 4/4

Graham Smillie 4/4

Mike Urmston 2/4 11/11 5/5 1/2 2/4 6/6

Ieuan Watkins 3/4 2/2

Stephen Mann 4/4 11/11 2/2 4/4

Ian Cordwell 11/11 3/4 6/6

Dave Wright 10/11 2/2

Notes(1) Appointed to the Committee of Management April 2016(2) Stepped down from the Committee of Management April 2016

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Corporate Governance Report

Committee of ManagementThe Committee of Management has clear terms of reference and as Police Mutual’s ultimate governing body, is responsible for:

• Expressing members’ requirements of Police Mutual in terms of products and services• Setting the overall values and principles of the business to ensure the strategic vision and decisions taken by the Board are in line with the

Police Service• Upholding Police Mutual’s reputation• Ensuring the strong link with the Police Service continues through the building and maintaining of relationships

The Committee of Management currently comprises a President, four Vice Presidents, a Chairman, the Chief Executive and 13 other members. In accordance with the Code, at least half of the Committee of Management, excluding the Chairman, comprised independent non-executive directors.

During 2016 the Committee of Management met four times and members were given appropriate documentation in advance of each meeting. These papers included an update report from the Chief Executive and minutes of sub-committees, including the Board.

Principal sub-committeesThe Committee of Management has delegated certain responsibilities to the Board and other sub-committees. The principal sub-committees are set out below. All of these committees operate within clearly defined terms of reference and attendance at meetings is only by members or those invited by the chairman of the sub-committee. The terms of reference of the Committee of Management and its principal sub-committees are available on request from the Company Secretary and from our website at policemutual.co.uk. A summary of the terms of reference for each committee, together with their membership is included in the committee summaries below. A Risk Committee will also be established in 2017 to provide oversight and detailed consideration of all risk matters including strategic, operational, financial, compliance and conduct risks.

Managing Board (the Board)During the year the Board comprised:Julie Spence (Chairman)Richard CoatesIan CordwellJulie Hopes Stephen MannBarry SanjanaMike UrmstonDave Wright

SecretaryRachel Kirwan

During 2016 the Board met eleven times and at least half of its members, excluding the Chairman, comprised independent non-executive directors. Board members were given appropriate documentation in advance of each meeting. These papers included key performance indicators for the period and strategy implementation updates. In addition to formal Board meetings the Chairman and Chief Executive maintained contact with Committee members and held informal meetings with the non-executive directors on the Board to discuss issues affecting Police Mutual.

Managing Board terms of reference – summary

• Developing an overall group strategy and corporate vision, setting standards and driving performance towards long• term objectives• Developing an annual business plan and associated budget compatible with Police Mutual’s strategic aims• Overseeing and ratifying proposals for business development that may include the formation of additional subsidiary• companies and associations with third parties• Overseeing the development and approval of an investment policy that is in line with the aims and objectives of Police Mutual and monitoring

investment performance• Developing and approving the distribution of surpluses and bonuses• Setting the basis for actuarial valuations and capital measurements• Setting Police Mutual’s risk appetite and approving and monitoring its risk management system• Reporting to with-profits policyholders and the FCA on its exercise of discretion for with-profits business and compliance with the PPFM and

considering the interests and fair treatment of with-profits policyholders

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Corporate Governance ReportAudit CommitteeDuring the year the Audit Committee comprised: Richard Coates (Chairman) Barry Sanjana Mike Urmston


In 2016 the Audit Committee met five times and met the Annotated Corporate Governance Code requirement to have at least three independent non-executive directors. The Managing Board is satisfied that Richard Coates brings recent and relevant financial expertise, augmented by the financial expertise and experience of the other members of the Audit Committee.

The Audit Committee annually schedules time, without any executive directors or senior management present, to discuss issues with the Head of Internal Audit and External Auditors. The Chairman of the Audit Committee meets the Head of Internal Audit to review current issues before each Audit Committee meeting.

Audit Committee terms of reference – summary

• Reviewing the adequacy and effectiveness of internal systems of governance, financial and other controls, and risk management• Reviewing procedures for detecting fraud• Monitoring the integrity of financial statements• Reviewing significant financial reporting issues and judgements• Overseeing the relationship with and appointment of the external and internal auditors, including their remuneration and terms of

engagement• Reviewing and monitoring the external auditor’s independence and objectivity and the effectiveness of the external audit process• Developing and implementing the policy on the engagement of the external auditor to supply non-audit services• Considering the adequacy and scope of external and internal audits and compliance plans• Reporting to the Managing Board on how it has discharged its responsibilities• Identifying matters & making recommendations where it considers action or improvement is needed• Reviewing the arrangements by which employees may, in confidence, raise concerns about possible wrongdoing in financial reporting or

other matters and ensuring arrangements are in place for investigation

As part of the Audit Committee’s reporting to the Managing Board, it considers whether the annual report and financial statements taken as a whole are fair, balanced and understandable and provide the information necessary for members to assess Police Mutual’s position and performance, business model and strategy.

The independence and objectivity of the external auditor are considered on a regular basis. The external auditor’s appointment is subject to regular review and the lead partner is rotated every seven years. A tender process for the external audit was last conducted in 2009. Consequently, a full tender process will be carried out in 2017.

The level of non-audit fees paid to the external auditor is subject to a formal policy to safeguard their independence and objectivity.

In 2016 the external auditor was engaged to provide due diligence in respect of acquisition activity and to carry out a review of the transition to Solvency II. Before agreeing to the engagement the Audit Committee followed its formal policy and considered the external auditor’s independence and safeguards in place to protect it based on written assurances from the external auditor. The Audit Committee concluded that to the extent that safeguards were required, these were adequate and therefore external auditor independence had not been impaired.

Total fees paid to PricewaterhouseCoopers LLP in 2016 were £1,501,000 (2015: £433,000) excluding VAT of which £797,000 (2015: £182,000) related to non-audit services.

In 2016 a review of the external auditor’s effectiveness was conducted by means of a desk-based review undertaken by key stakeholders within Police Mutual as part of the year end planning process. Having considered the results of the review the Audit Committee concluded that the external auditor provided a satisfactory service and that they should continue in the role. The Managing Board supported this conclusion.

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Corporate Governance ReportFoundation Advisory BoardIn 2016 the Foundation Advisory Board comprised: Julie Spence (Chairman) Stephen Mann Ieuan Watkins Gavin Thomas, President Superintendents’ Association of England & Wales Matt Johnston, College of Policing, Police Health, Safety & Welfare Steve Edwards, Chief Executive Officer National Association of Retired Police Officers Steve White, Chairman, Police Federation of England & Wales


The Foundation Advisory Board was established in 2011 with responsibility for allocating and overseeing funds allocated to the Police Mutual Foundation and related activity in line with the Committee of Management’s requirements. In 2016 the Foundation Advisory Board met three times.

Foundation Advisory Board terms of reference – summary• Considering annual funding themes and making a recommendation to the Committee of Management specifying conditions that will apply to

awards made under each annual funding theme• Periodically reviewing the Vision, Objectives and Funding Allocation policy• Identifying and presenting proposals for Foundation Advisory Board initiated awards• Considering and evaluating proposals for funding• Considering quarterly reports from award recipients to ensure appropriate use of funds in line with award conditions

Investment CommitteeIn 2016 the Investment Committee comprised:

Barry Sanjana (Chairman) Ian Cordwell Stephen Mann Mike Urmston

SecretaryPaul Freer

In 2016 the Investment Committee met four times. The Chair of the Investment Committee is an investment management expert and a non-executive director.

Investment Committee terms of reference – summary

• Making recommendations to the Managing Board on investment strategy• Monitoring and implementing investment strategy• Investment manager selection and monitoring• Tactical asset allocation• Custody arrangements• Asset pricing basis

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Corporate Governance ReportNomination CommitteeThe composition of the Nomination Committee during the year was:

Julie Spence (Chairman) Stephen Mann Mike Urmston Ieuan Watkins Dave Wright


The Nomination Committee met twice during 2016. In line with the Code the majority of members were independent non-executive directors. The Committee of Management Chairman is Chairman of the Nomination Committee except where the Committee is considering their succession, in which case one of the remaining members is selected to chair the Committee.

Nomination Committee terms of reference – summary

• Reviewing the Committee of Management and Managing Board structure, size, composition, skills, knowledge, experience and diversity• Recommending the appointment of new directors• Evaluating the balance of skills, knowledge, experience and diversity on the Committee of Management and Managing Board• Putting in place plans for succession, in particular for the Chairman of the Committee of Management and Managing Board and the Chief

Executive• Reviewing the time required from non-executive directors and their other commitments

Remuneration CommitteeDuring the year the Remuneration Committee comprised:

Julie Hopes (Chairman) Claire Beck Richard Coates Julie Spence


In 2016 the Remuneration Committee met four times and satisfied the Code’s requirement to have at least three independent non-executive directors. The Chief Executive only attended meetings to provide advice and support at the invitation of the Committee and to recommend proposals for the remuneration of the Executive team. The Chairman of the Committee ensures care is taken to recognise and avoid any conflicts of interest and no individual is present for discussions relating to their own remuneration.

Full details of directors’ remuneration and a statement of our remuneration policy are included in the Remuneration Report. The remuneration of non-executive directors is determined by the Chief Executive together with the other executive directors and, where possible, is subject to final sign-off by the President.

Remuneration Committee terms of reference – summary

• Determining a policy and framework for the remuneration of the Chief Executive and Executive team• Approving the design, targets and payments for any performance related pay schemes• Determining the policy and scope of terms of service or employment contracts generally• Approving any compensation packages or arrangements following the severance of any of the Executive team’s contracts• Determining the total individual remuneration package of each Executive team member• Reviewing and noting the remuneration trends across the Police Mutual Group• Overseeing any major changes in employee benefit structures• Ensuring that all relevant legal requirements and provisions regarding disclosure or remuneration, including pensions, are fulfilled• Being exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any

remuneration consultants who advise the Committee

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Corporate Governance ReportThe Committee of Management has considered whether the Remuneration Committee should also look at the level and structure of remuneration for senior management. As the Police Mutual Group has a small number of management layers the Committee of Management has agreed that this provision is not appropriate for an organisation of this size.

With-Profits CommitteeIn 2016 the With-Profits Committee comprised:

Jim Gallagher (Chairman) Ian Cordwell Julie Hopes Julie Spence Mike Urmston


The With-Profits Committee met five times during 2016. It was established in response to regulatory requirements and as such is not subject to any Code provisions.

With-Profits Committee terms of reference – summary

• Considering the rights, interests and expectations of different classes and generations of with-profits policyholders• Considering the way in which Police Mutual has exercised its discretion in the conduct of its with-profits business• Considering the way in which Police Mutual has addressed any competing or conflicting rights, interests of expectations of its with-profits

policyholders or groups of policyholders• Considering Police Mutual’s compliance with its Principles and Practices of Financial Management (PPFM)• Considering the way in which any proposed changes to the PPFM might affect the rights, interests and expectations of with-profits

policyholders

Relations with membersPolice Mutual is committed to ongoing communication across its entire member base whether Police Officer, Police Staff or family member.

The Annual General Meeting and conference held in April 2016 was well attended by representatives of Police Mutual’s delegate system who received a business presentation and the opportunity to ask questions of the Committee of Management and Board. A summary of the meeting is made available on the website. The Chairman arranges for the chairmen of all sub-committees to be available to answer questions at the Annual General Meeting and for all directors to attend where possible.

Police Mutual’s Committee of Management and Authorised Officer network are key to ensuring all directors develop an understanding of members’ views. The Chairman maintains good contact with the Police Family to ensure that she understands the issues and concerns of members and communicates these to the Board.

It is the Committee of Management’s policy to propose separate resolutions at the Annual General Meeting on each substantially separate issue and in particular a resolution regarding the report and accounts. The Notice for the Annual General Meeting and related papers are normally sent 20 working days in advance of the meeting in accordance with the Code. The date of the Annual General Meeting is announced 12 months in advance and all delegates are contacted individually approximately four months before. In 2016 the Notice for the Annual General Meeting and related papers were sent 19 working days in advance of the meeting.

The delegate system is a feature of Police Mutual’s friendly society status and operates such that, for each Force in which there are members, Forces nominate delegates to represent the members from their Force, rather than all members being invited to attend. Police Mutual’s delegate system Rules do not allow for proxy voting. If a Force Authorised Officer is unable to attend a general meeting the Rules allow the Force Authorised Officer to appoint a deputy to attend in his or her place.

Police Mutual’s Annual Report and Accounts are designed to present a balanced and understandable view of the Police Mutual Group’s activities and prospects and are supported by presentations to delegates at the Annual General Meeting.

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Corporate Governance ReportRisk Management and Internal ControlThe Police Mutual Group is committed to high standards of risk management and internal control aimed at supporting the long term goals and success of the Group. The Board, under delegated authority from the Committee of Management, is responsible for ensuring that the Group’s management maintains an effective system of risk management and internal control and for reviewing its effectiveness.

The Group’s system of risk management and internal control covers the full spectrum of business activity that includes managing the Group’s reputation, strategic, financial, operational and regulatory compliance and follows prevailing best practice guidance available in a heavily regulated industry and relevant professional standards. Due to the limitations that are inherent in any risk management and control framework, this system is designed to manage, rather than eliminate the risk of failure to achieve our corporate objectives and as such, can only provide reasonable and not absolute assurance against material misstatement or loss.

The Group’s governance and internal control system includes an independent internal audit function that reports to management and the Audit Committee on the Group’s operations and compliance with the Group’s policies and standards. During the year, the Board has considered the effectiveness of the Police Mutual Group’s system of internal control and risk management and engaged management in proactive and appropriate mitigation plans in managing the principal risks facing the Group.

The processes in place for identifying, evaluating and managing on an ongoing basis the significant risks facing the Group include:

• Board discussion and approval of the Group’s strategic direction, risk appetite and policies, goals and the risks to achieving them• Board review and approval of business plans, budgets and forecasts• Board periodic consideration of the key risks facing the Group, stress tests and their management• Regular reviews of performance against budgets, strategic risk mitigation plans and forecasts by management and the Board• Regular reviews by management of the risks to achieving objectives and progress of mitigation action plans• Audit Committee review of any incidents of fraud or suspected fraud and the controls in place to protect the Police Mutual Group against this risk• Regular reviews by management and the Audit Committee of the effectiveness of the Group’s risk management system, scope and results

of internal audit and compliance work across the Group and of the implementation of recommendations. The scope of internal audit and compliance work is risk-based to focus attention in appropriate activities across the Group

• Audit Committee reviews of the scope of work undertaken by the external auditors and any significant issues arising• Audit Committee reviews of accounting policies

During 2016 the information received and considered by the Audit Committee and Board provided assurance that the major risks are being managed.

The principal features of the Police Mutual Group system of risk management and internal control that operated in the year is described in the next section of this report.

Management and organisationThe executive management is responsible for ensuring that risks and controls are evaluated across the Group and for determining those of most significance for closer monitoring. It has put in place an organisational structure with formally defined roles of responsibility and delegation of authority. Operational responsibility rests with the Chief Executive and devolves through an executive structure with delegated and appropriate levels of authority. Members of executive management are therefore accountable for the establishment of appropriate policies, procedures and operation of the systems of internal controls within the Police Mutual Group. The executive management also encourages a culture of continuous improvement to ensure systems of internal control are maintained.

The key established procedures include strategic planning, financial resources and expenditure management, risk management, information and reporting systems for monitoring the Group’s businesses and their performances.

Strategic and business planningThe Board reviews the strategic plans prepared by the Chief Executive and executive management and considers the operating environment of the Group, financial and operational outlook, impact of macro and micro economics on its customers, contagion risks and stress scenarios of the business model. The review provides the basis for framing the business plan for the immediate year as well as a 3-5 year time horizon. Progress against the business plan is monitored via an agreed set of performance indicators included in the Board information pack.

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Corporate Governance ReportFinancial resources and expenditure managementEach year the Board approves an operating budget and monitors expenditure on a regular basis in line with the Group’s objectives for controlling and maintaining its competitive expense advantage. Management monitors key performance indicators against plans for the year on a monthly basis, and reports the results to the Board.

The Board is also kept informed of management strategy for assessing the Group’s financial resources including capital requirements as required by regulation as well as for delivering the strategic goals of the Group. The Board discusses and challenges the underlying assumptions and stress tests applied to the Group’s financial resources requirements and any material change to these assessments.

Risk ManagementThe Board has expressed its risk appetite and tolerances, which underpin the Group’s strategy for managing its risks. These tolerances are reviewed by the Board at least annually. An enterprise-wide risk management framework has been defined by management which builds on the foundations laid down in the prior years for identifying, assessing, monitoring and reporting of risks to the goals and objectives of the Group.

In 2016, the risk function has continued to work together with the business to embed the risk policies and procedures, which now include an integrated assurance approach that provides the Board with the necessary information and reports for appropriate discussion and oversight. The Board reviews the strategic and significant risks to the Group as well as related stress tests at least once a year and monitors the agreed mitigation plans periodically.

In particular, operating as management first line of defence, Actuarial and Finance are proactive in monitoring the effects of market movements and other financial risks on the assets of the business and obligations to policyholders, ensuring appropriate actions are taken.

Investment strategy and managementThe Board, supported by its Investment Committee, reviews and approves the Group’s investment strategy at least annually and as required by predetermined parameters. Management maintains a close watch on near-term market uncertainties and informs the Investment Committee of appropriate actions to control the risks in line with the Board’s defined tolerances.

Performance Appraisal and MonitoringThe Board’s Remuneration Committee reviews and approves the Group’s remuneration policy that affects all employees of the Group. The remuneration of the Chairman and non-executive directors as well as senior management is determined by the executive directors.

Whistle-blowingThe Group has established a formal policy and procedure for reporting and handling concerns raised in a confidential and appropriate manner. The procedures and reporting of any incidents are reviewed by the Audit Committee annually.

Anti-Financial CrimeThe Group has established a formal policy and procedure for detecting, reporting and handling financial crime which includes money laundering.

Internal AuditInternal audit, operating as a third line of defence plays an important role in the Group’s internal control environment by providing independent assurance to its management and the Board via the Audit Committee. Until October 2016 the Group’s internal audit function was outsourced to KPMG at which point a Chief Internal Auditor was appointed moving the arrangement to a co-sourced basis. The Internal Audit function has a mandate and set of plans which are reviewed and approved formally each year by the Audit Committee. The internal audit plans are determined after appropriate risk assessments carried out in conjunction with management to ensure that assurance is sought in the most appropriate areas of the Group. Progress of management actions arising from internal audit findings as well as internal audit’s progress against plans is followed up and monitored by management and the Audit Committee.

Statement of Compliance with the Corporate Governance Code for Mutual InsurersPolice Mutual is committed to a high standard of corporate governance. The directors consider that throughout the year ended 31 December 2016 Police Mutual has applied the relevant principles and complied with the relevant provisions of the Corporate

Governance Code. The following are exceptions:

• The non-appointment of a Senior Independent Director• The remuneration of the Chairman and remunerated non-executive directors is determined by the executive directors rather than the

Remuneration Committee• The remuneration of senior management is determined by executive directors rather than the Remuneration Committee• Changes to the Chairman’s other significant commitments are included in the biographical details in the Delegate AGM pack rather than the

annual governance report• The Notice for the Annual General Meeting and related papers was sent less than 20 working days in advance of the meeting

The directors do not regard these exceptions as material at this time and reasons for departure from the Code are explained in the full report.

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Directors’ Remuneration ReportThis Remuneration Report is split into the following sections:

Purpose of the report To explain why we prepare this report, who it is for and who determines its content so that you can understand the governance process for directors’ remuneration.

The Remuneration Committee To explain who is involved and what it does.

Chairman’s Statement To give a summary for the financial year of the major decisions on and any major substantial changes to directors’ remuneration and the context in which that occurred.

Annual Report on Remuneration A summary of the remuneration awarded to all directors for the last financial year. This part of the report will be put to an advisory vote at the Annual General Meeting each year.

Remuneration Policy A statement on remuneration policy for all directors for the period 2016-2019. This part of the report was put to a binding vote at the Annual General Meeting on 29 April 2016. Unless a change to policy is sought by the Remuneration Committee before then, it will be put to a binding vote again in May 2019.

Purpose of the ReportWho determines what information is in this report?This remuneration report has been prepared using Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2013 (the 2013 Regulations) as a guide. The 2013 Regulations only apply to companies quoted on the London Stock Exchange but Police Mutual has opted to use the Regulations as a basis for reporting on Directors’ Remuneration on a voluntary basis.

Who prepares the report and who is it for?The remuneration report is prepared by the Remuneration Committee. It summarises remuneration policy and payments for all directors serving on the Managing Board. The final report is presented to the Committee of Management for approval at the same time as the Annual Report & Accounts. The Annual Report & Accounts and the Annual Governance & Remuneration Reports are part of the corporate governance process that involves the provision of information about how Police Mutual is managed to delegates at the Annual General Meeting and members of Police Mutual more widely, to enable them to ask questions and express views about that information as part of holding those who run the organisation for the benefit of members to account. Delegates at the Annual General Meeting are then required to vote on the report in two ways.

How does the voting work?There are two potential votes at the Annual General Meeting. Every year delegates will be asked to give an advisory vote on the Annual Report on Remuneration. Every 3 years delegates will be asked to give a binding vote on the Remuneration Policy statement for the following 3 years.

An advisory vote does not have practical effect in that a vote against the report will not require directors’ remuneration to be amended retrospectively but the result of an advisory vote sends a strong message to directors about the level of support for remuneration policy which in practice they will wish to take into account.

A binding vote means that the Remuneration Committee must operate within the terms of the policy set out in the report and must seek approval in general meeting to change remuneration policy. In exceptional circumstances between general meetings where it is necessary to deviate from the policy, the Remuneration Committee will provide an explanation in the annual remuneration report in line with the principle of ‘comply or explain’.

What happened last time the Annual Report and Policy Statement were voted on?The Annual Report on Remuneration put to delegates at the 2016 Annual General Meeting and subject to an advisory vote received a unanimous vote in its support.

The 2016-2019 Policy Statement put to delegates at the 2016 Annual General Meeting and subject to a binding vote received a unanimous vote in its support.

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Directors’ Remuneration ReportThe Remuneration CommitteeWho sits on the Remuneration Committee?During 2016 the Remuneration Committee was chaired by Julie Hopes. The other Committee members were Richard Coates, Julie Spence and Claire Beck. Claire Beck was appointed to increase accountability to members of Police Mutual as Claire is a member of the Committee of Management and a retired Police Officer, now a member of Support Staff. The Chief Executive may, by invitation, attend Remuneration Committee meetings except where his own remuneration is discussed.

What does the Remuneration Committee do?The Remuneration Committee’s principal responsibilities are:

• Determining a policy and framework for the remuneration of the Chief Executive and Executive team• Approving the design, targets and payments for any performance related pay schemes• Determining the policy and scope of terms of service or employment contracts• Determining contractual terms and payments in relation to termination of employment of executive directors and executive team members• Determining the total individual remuneration package of each Executive team member• Reviewing and noting the remuneration trends across the Police Mutual Group• Overseeing any major changes in employee benefit structures• Overseeing performance related pay schemes for employees across the Police Mutual Group• Ensuring that all remuneration reporting requirements are fulfilled• Being exclusively responsible for the selection, appointment and terms of reference for any remuneration consultants who advise the Committee

Full terms of reference for the Remuneration Committee are available at policemutual.co.uk and on request from the Company Secretary. Non-executive director remuneration is determined separately as described later in this report.

Who advises the Remuneration Committee?The Remuneration Committee keeps itself informed of market developments and best practice through the purchase of independent market data for jobs carrying similar responsibilities in comparable organisations in the private sector. The data is from specialist providers Hay Group and McLagan which have no other dealings with Police Mutual. The principal comparator group consists of financial services companies providing similar services to Police Mutual. This data is not updated annually but from time to time at the Remuneration Committee’s request and may be supplemented by comparable survey data from other specialist providers such as Willis Towers Watson. The selection of market data providers is entirely a matter for the Remuneration Committee.

Hay Group and McLagan do not provide any advice to the Remuneration Committee on the application of the remuneration data. Advice and views on best practice and market practice and the application of market data is provided by the Head of Human Resources. The Head of Human Resources also reports to the Remuneration Committee on remuneration policy and practice across the rest of the Police Mutual Group. The Chief Executive, Stephen Mann, provides advice and input on the measures and objectives to be used in setting performance related pay and makes recommendations relating to the performance and remuneration of his direct reports. From time to time the Remuneration Committee may also use specialist remuneration advisers.

The Remuneration Committee did not receive advice from external advisers during 2016.

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Directors’ Remuneration ReportRemuneration Committee Chairman’s 2016 Annual Statement I am pleased to present the latest Directors’ Remuneration Report. I hope you find it clear and transparent providing the information you need to see the link between Police Mutual strategy, the delivery of benefits and services to members, the Police service and our Military affinity and the performance and remuneration outcomes of the executive directors. We want remuneration arrangements that are transparent and straightforward to explain and understand. Ultimately we want all our stakeholders to support what we do because they can see clear evidence of our objectives to drive the best outcomes for Police Mutual and its members.

To this purpose, membership of the Remuneration Committee includes two Police members from the Committee of Management, Claire Beck and the Chairman, Julie Spence. Claire and Julie’s membership is an important part of ensuring that the desired balance and transparency is achieved and that we do not lose sight of the perspective of the Police service and our members. The involvement of our members in decisions relating to pay remains unusual but is intended to demonstrate the highest levels of accountability. We value the opportunity to listen to the views of members and are committed to an open and transparent dialogue. This report is intended to assist this process.

The context to the Remuneration Committee’s decisions in 2016The Managing Board believes that achievement against Police Mutual’s strategic objectives will deliver valuable benefits and services to members, the Police service and the Military and the Remuneration Committee seeks to ensure performance is assessed against progress in these areas. The Remuneration Committee seeks to have pay tied to performance and achievement of agreed outcomes, whilst at the same time ensuring that executives receive fair reward for their achievements. In linking pay to performance we need to ensure that performance measures do not drive inappropriate risk taking.

The Remuneration Committee is very aware of its responsibility to balance sometimes conflicting perspectives in making judgements on executive pay. We all serve and are accountable to our members and the Police service and we also respect the need to consider the economic environment in which they operate. At the same time we need to recruit a high calibre of talent in a very competitive financial services market that will ensure Police Mutual is highly successful at delivering benefits and services to its members and is a valued asset of the Police service, but without paying more than is appropriate.

Financial services remains a difficult environment for firms and the success of Police Mutual in recent years in many ways bucks the wider trend. The financial services market place is seeing upward pressure on remuneration as firms continue to compete for skilled resource. We also have to recognise that a consequence of our success to date is a much larger and diverse business which is more complex to oversee. Our pay approach remains cautious but we have to be mindful that these other factors have led to drift in remuneration in executive director roles against wider market comparisons.

The Remuneration Committee’s major decisions in 2016The Remuneration Committee reviewed the outcome of the 2016 bonus for the executive directors, the results of which are set out in note (f) of the Directors’ Total Remuneration table. Overall, the Remuneration Committee agreed that annual bonus awards for 2016 team objectives were just below on target at 47% (50% being on target) recognising that 2016 had been a mixed year with good progress being made with both the Police and Military affinities in terms of value created, quantitative evidence of improving lives, strong Member Satisfaction scores and record member numbers tempered by some control issues requiring remedial action, a material change programme, an acquisition and a heavy regulatory agenda which had in turn impacted overall delivery resulting in delays in certain areas of a demanding change programme and a slight decrease in overall levels of colleague engagement activity.

As reported in previous years, the Chief Executive has waived a substantial proportion of the annual bonuses awarded to him during his time as Chief Executive and has made the same decision again for 2016 waiving half (£42k) of the payment which would otherwise be due in 2017. The total amount retained for investment in Police Mutual in this way is now over £440k. This money has been used for business benefit and to help the Police service, funding customer research, investment in culture and leadership, supporting the Police Bravery awards and in funding the development of project plans to build a Police memorial at the National Memorial Arboretum where he has become a founding trustee of the Police Arboretum Memorial Trust.

The Remuneration Committee also reviewed the overall remuneration of the executive directors and in particular sought to continue to address the material gap in the Chief Executive’s remuneration that has continued to widen against our external pay benchmarks, in part due to market trends and the increased scale and complexity of the business, and in part as a cumulative result of Stephen having had no increase in the majority of reviews between 2009 and 2013. Stephen’s pay was increased by the Remuneration Committee in 2012 however as a material gap was emerging with our policy of paying market median amounts. The Remuneration Committee gave salary increases each year for 2013-2015 and again in 2016 as this material gap has continued to widen. It should be noted that since his appointment in 2009 Stephen Mann has asked the Remuneration Committee each year not to review his salary.

The Remuneration Committee will continue to monitor trends and external perspectives in reviewing remuneration during 2017. As good practice the Remuneration Committee went through a selection process to appoint a new market data provider for 2017 and appointed McLagan as a result of that process. The Remuneration Committee will also continue to operate with independence and rigour in making its judgements, guided ultimately by our commitment to both member and Police service interests and executive engagement.

Substantial Changes to Directors’ Remuneration during 2016There were no substantial changes made to directors’ remuneration during 2016 although in response to market survey data the Remuneration Committee revised the on target bonus opportunity for team objectives from 19.5% to 25% of base salary for directors and from 25% to 30% of base salary for the Chief Executive. Maximum bonus opportunity however remained the same at 60% of base salary for directors and 75% of base salary for the Chief Executive. The Remuneration Committee has operated within the Directors’ Remuneration Policy agreed for 2016-2019.

A resolution on the annual remuneration report will be put to our Force Authorised Officers for an advisory vote at the AGM. On behalf of the Remuneration Committee I would like to thank Force Authorised Officers for their support on this subject at the 2016 AGM. Should any member of Police Mutual or the Police service wish to contact me in connection with director remuneration, please email me at [email protected].

Julie Hopes

Non-executive director & Chairman of the Remuneration Committee

23 March 2017

mailto:[email protected]

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Directors’ Remuneration ReportAnnual Report on remuneration for the year ended 31 December 2016This part of the report tells you about directors’ remuneration in 2016. It outlines the various elements of their remuneration and the amounts received or payable in relation to Police Mutual’s performance in 2016.

Delegates attending the Annual General Meeting on 28 April 2017 will be invited to take an advisory vote to approve this part of the report. This means they will be asked to vote on how remuneration policy was implemented in the past year, including actual sums paid.

An advisory vote does not have practical effect in that a vote against the report will not require directors’ remuneration to be amended retrospectively but the result of an advisory vote sends a strong message to directors about the level of support for remuneration policy which in practice they will wish to take into account.

Directors’ Total Remuneration

Year Salary & fees £000s

Taxable benefits(c)

£000sBonus(d)(e)(f)

£000sPension related benefits(g)

£000sTotal

£000sExecutive directorsStephen Mann(a)(b) 2016 356 24 126 78 584

2015 313 23 185 62 583Ian Cordwell 2016 230 11 66 51 357

2015 226 7 97 50 380Dave Wright 2016 146 13 48 34 241

2015 138 13 62 37 250Chairman & Non-executive directorsJulie Spence 2016 58 - - - 58

2015 54 - - - 54Richard Coates 2016 48 - - - 48

2015 43 - - - 43Julie Hopes 2016 43 - - - 43

2015 38 - - - 38Barry Sanjana 2016 45 - - - 45

2015 41 - - - 41Mike Urmston 2016 43 - - - 43

2015 40 - - - 40

Notes(a) Stephen Mann is a member of the Audit & Risk Committee for the College of Policing. Stephen has requested that the College of Policing retain the daily fee of £460 for this role for donation to a

Police related charity.(b) Of the annual bonus award made for 2016 Stephen Mann requested that £42k of that amount was waived and retained in the business to support the delivery of Police Mutual’s strategic objectives.

The following were also waived and retained in the business for the same reason: 2015 £60k of the annual bonus award* (*excluding the deferred element) of £123K; 2014 £25k of the annual bonus award* of £117k; 2013 half of annual bonus award* of £104k; 2011 full annual bonus award* of £90k; 2010 half of annual bonus award* of £91k; 2009 full annual bonus award* of £80k.

(c) For 2015 and 2016 benefits for each of the executive directors included the provision of a company car allowance or a company vehicle, private medical cover, life assurance and permanent health insurance and a private fuel allowance for Ian Cordwell.

(d) One third of the bonus award made in any one year is deferred for 12 months from date of payment of the corresponding two thirds. Release of deferred annual bonus payments is subject to there being no event that constitutes:

1. A material regulatory censure of Police Mutual or of its operations, management or any individual executives2. A capital adequacy failure or other failure within Police Mutual which incurs material or disproportionate losses for members3. A material breach of Police Mutual’s risk appetite4. Gross negligence by the executive or any other material error by the executive resulting in material loss for Police Mutual and/or its members5. Misconduct or inappropriate behaviour by the executive which resulted or could result in material loss for Police Mutual and/or its members6. Any breach by the executive of the provisions of their service agreement entitling Police Mutual to terminate their employment without notice7. Any other serious breach or other serious failing by the executive in the performance of their obligations to Police Mutual.8. Overstatement of business results for the Financial Year to which the bonus relates.

(e) All bonus figures are provisional and subject to final review in April 2017.(f) For the 2016 performance year the Remuneration Committee reviewed performance against the key target areas as follows:

• Value created for affinities (weighting 15%, on target 7.5%). Judged to have made very good progress with the Police across a wide range of activities with emerging evidence of growing advocacy in the Military as a result of integrated and sustained engagement through initiatives. Overall performance is above target. (Judged to have achieved 11% out of 15%).

• Deliver major change and development initiatives (weighting 10%, on target 5%). Delivery was judged across a wide ranging and significant change agenda aimed at delivering and improving products and services for the Police service and the Military. Overall judged as beneath target due to delays in some areas of the change programme. (Judged to have achieved 3% out of 10%).

• Achieve colleague engagement targets (weighting 10%, on target 5%) It was judged that there had been some underperformance across a range of objectives due to a reprioritisation exercise to create capacity for the first stages of our Simplification change programme which deferred a planned colleague engagement programme of work. There was also a slight decline in the overall level of engagement. Overall performance was slightly beneath target. (Judged to have achieved 4% out of 10%).

• Manage risk & regulatory agenda with further evidence of risk embedding and appetite met (weighting 5%, on target 2.5%). It was judged that across a wide range of risk and regulatory items there had been very good evidence of risk embedding and appetite being met offset by strains emerging in functions, some slippage in audit actions and a greater number of internal audit reviews requiring remedial action reflecting the much larger and more complex group Police Mutual has become with its recent organic growth and acquisitions. Similarly, the increased size and complexity gave rise to a heavier regulatory agenda than previously. (Judged to have achieved 1% out of 5%).

• Simplify and optimise our operation (weighting 10%, on target 5%). Operating model developed leading to Executive team restructure. Office locations closed or announced. Overall performance above target. (Judged to have achieved 7% out of 10%)

• Achieve the financial business plan (weighting 50%, on target 25%) Judged to have underperformed against the business plan, as the Executive team had anticipated a larger underrun to reflect the additional contribution expected from the Abacus acquisition. (Judged to have achieved 21% out of 50% of the objectives set).

The above weightings were set to reflect the relative impact of the key target areas on members. Overall, the Remuneration Committee agreed that annual bonus awards for 2016 are overall below target at 47% (50% being on target), with 4 objectives not meeting target and 2 exceeding target, therefore overall no stretch performance has been achieved.

(g) Pension related benefits are either contributions to a personal pension plan of the director’s choosing or a cash alternative.

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Directors’ Remuneration ReportPayments to past directorsDuring 2016 a deferred annual bonus payment of £22k was made to James Henderson who stood down from the Managing Board with effect from 30 September 2014.

Payments for loss of officeNo payments were made for loss of office to any person who served as a director during the year or any previous year.

Remuneration of the Chief ExecutiveThe table below shows the total remuneration figure for the highest paid executive director, the Chief Executive, during each of the last six years. The total remuneration figure includes annual bonus and is calculated on the same basis as the Directors’ Total Remuneration table. The annual bonus percentages show the amount awarded for each year as a percentage of the maximum that could have been achieved.

2011 2012 2013 2014 2015 2016Total remuneration (£000s) (a) 442 477 502 548 583 584

Annual bonus(b) 60% 70% 76% 79% 79% 47%

Notes(a) The total remuneration figures include amounts waived by the Chief Executive details of which are set out in note (b) to the Directors’ Total Remuneration table.(b) The annual bonus percentage reflects what proportion of the maximum amount (75% of salary) that could have been achieved was actually awarded.

Percentage change in the remuneration of the Chief ExecutiveThe table below shows the movement in the salary, benefits and annual bonus of the Chief Executive between the current and previous financial year compared to that for the average employee at Police Mutual. The Remuneration Committee has chosen the average employee as the comparator rather than the total remuneration costs in the financial year of all employees in the Police Mutual Group as it believes it provides a more appropriate reflection of the earnings of the average worker. Total remuneration costs are distorted by movements in the type and number of employees.

Base salary Taxable Benefits(a) Annual Bonus

Chief Executive 13.8% 10.4% -31.6%

Average Police Mutual Employee(b)(c) 2.2% 15.5% -44.6%

Notes(a) Taxable Benefits include Permanent Health Insurance, Private Medical Insurance and Company Vehicles and are based on all employees in post in either the financial year 2016 or 2015. (b) The average employee is calculated based on all employees (except for Executive team) employed during the financial years 2016 or 2015. (c) Bonus per employee is calculated based on those employees eligible to participate in non-sales performance related bonus schemes.

Relative importance of spend on payThe table below illustrates Police Mutual’s expenditure on pay in comparison to earned premiums.

2016 £’000

2015 £’000

% change

Earned premiums (a) 177,861 154,600 15%

Total employee pay(b) 21,398 16,988 26.0%

Total number of employees(c) 720 585 23.1%

Notes(a) Earned premiums (and other technical income) has been chosen as a comparison because it is a good measure of the income activities of the Police Mutual Group. It reflects the premiums that

have been paid by members and income from general insurance and other financial services activities across the group.(b) Total employee pay is the total pay plus the value of taxable benefits for all Police Mutual Group employees including pension but excluding National Insurance costs.(c) Total number of employees reflects the total number of employees paid during the year.

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Directors’ Remuneration ReportDirectors’ Remuneration Policy for 2016-2019This part of the report sets out the remuneration policy for the Police Mutual’s remunerated directors for 2016-2019.

This section sets out the remuneration policy for the Police Mutual’s remunerated directors for 2013-2016 as approved by Delegates attending the Annual General Meeting on 29 April 2016. The policy is subject to a binding vote every 3 years, or less if the Remuneration Committee wishes to change the policy within the 3 year period. Whilst the policy will be binding on the Remuneration Committee there may be exceptional circumstances between Annual General Meetings in which it is necessary to deviate from the policy. In these circumstances the Remuneration Committee will provide an explanation in its annual report adopting the principle of ‘comply or explain’.

Executive DirectorsThe principles underpinning executive director remuneration policy• remuneration should reflect performance and support the delivery of benefits and services to members and the Police service by being demonstrably

linked to the delivery of the 3 year strategy• remuneration should be fair and competitive to enable Police Mutual to attract, retain and motivate executives of the quality required to run the

organisation successfully whilst avoiding paying more than is necessary for the purpose• the total of basic salary and performance related elements (total compensation) to be benchmarked within the lower quartile range for on target

performance, and median for exceptional performance

Approach to recruitment remunerationThe Remuneration Committee believes it is vital to be able to attract, retain and motivate good quality executive directors who are aligned to the purpose and values of Police Mutual and the delivery of its strategic plans to meet its strategic vision and act in the best interests of Police Mutual’s members. Integral to that alignment is a strong commitment to appropriate risk management. Aligning performance rewards to the delivery of strategic plans in the context of sound risk management is critical to building a strong performance culture and strong business.

The Remuneration Committee’s approach when considering the overall remuneration arrangements in the recruitment of a new executive director is to take account of their remuneration package in their prior role, the market data from the comparator group set out in the remuneration policy for the new role and not to pay more than is necessary to facilitate their recruitment. The remuneration package for a new executive director will be set in accordance with Police Mutual’s approved remuneration policy in force at the time of appointment made up of the following components:

Salary

The salary level shall be determined as set out in the policy using the relevant market data. The Remuneration Committee has the flexibility to set the salary of a new executive director at a discount to the market level initially, with a view to bringing the salary to the desired positioning over an appropriate period. Similarly, in exceptional circumstances, the Remuneration Committee has the ability to set the salary of a new executive director at a rate higher that the market level to reflect the criticality of the role and the experience and performance of the individual.

Benefits The Remuneration Committee may award additional benefits and allowances to assist with relocation support.

Pension benefits Pension benefits will be provided in line with current policy.

Annual bonus The maximum bonus opportunity shall be in line with current policy i.e. 75% of base salary for the Chief Executive and 60% of base salary for executive directors.

Replacement awards

The Remuneration Committee shall consider what cash or replacement awards, if any, are reasonably necessary to facilitate the recruitment of a new executive director in all circumstances. This includes an assessment of the awards and any other compensation or benefits item that would be forfeited on leaving their current employer. These payments would not be made as a matter of course

The payments would not exceed what the Remuneration Committee considers to be a fair estimate of remuneration lost when leaving the former employer and would reflect, as far as possible, the nature of time horizons attaching to that remuneration and the impact of any performance conditions.

If the executive director’s former employer pays a portion of the remuneration that was deemed foregone, any replacement payments considered would be reduced by an equivalent amount.

Notice periods The Remuneration Committee will set notice periods in line with current policy i.e. 6 months for executive directors and 12 months for the Chief Executive with fixed term contracts subject to 3 months’ notice.

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Directors’ Remuneration ReportService agreementsThe executive directors’ service agreements, including arrangements for early termination, are carefully considered by the Remuneration Committee and are designed to recruit, retain and motivate good quality executive directors whilst protecting the interests of Police Mutual both in and post employment. Directors’ service agreements are available for inspection by members at Police Mutual’s registered office. The obligations on Police Mutual arising from the service agreements which impact termination payments are summarised below. There are no further obligations giving rise to or impacting a form of remuneration that is not set out in the Future Policy Table in this report.

Payments for loss of officeThe Remuneration Committee’s policy is to provide executive directors with service agreements that are normally terminable by either party giving 6 months’ notice (12 months’ notice in the case of the Chief Executive).

Executive director Date of appointment Date of current service agreement

Notice period

Stephen Mann 14 April 2009 10 February 2015 12 months

Ian Cordwell 1 January 2012 28 October 2015 6 months

Dave Wright 29 August 2013 2 November 2015 6 months

The service agreements are continuous and Police Mutual operates a flexible retirement policy. Where an executive director is employed on a fixed term contract, the contract will ordinarily terminate automatically at the end of the fixed term unless it is terminated by either party giving not less than 3 months’ notice.

Executive directors’ service agreements contain provisions for payment in lieu of notice. The Remuneration Committee’s approach when considering payments in the event of termination is to take account of the individual circumstances including the reason for termination, individual performance, employment law, contractual obligations and the director’s duty to mitigate loss. Service agreements may be terminated without notice and without payment in lieu of notice in certain circumstances, such as gross misconduct.

Police Mutual may require the executive director to work during their notice period or may choose to place the individual on garden leave, for example to ensure the protection of Police Mutual’s interests where the executive director has access to commercially sensitive information or poses a particular risk to the business by leaving.

The table below summarises each component of termination payment and how it would be calculated:

Notice period and compensation for loss of office

• Up to 12 months’ base salary (for the Chief Executive) or 6 months’ base salary (for executive directors) in line with the notice period. Notice period payments will either be made as normal (if the executive continues to work during the notice period or is on garden leave) or they will be made as monthly payments in lieu of notice (subject to mitigation if alternative employment is obtained).

Annual Bonus

• There is no entitlement to any unpaid annual bonus on termination. The Remuneration Committee has the discretion to pay an annual bonus where an individual is considered to be a good leaver (for reason of redundancy, retirement, ill-health, disability, injury or death). The annual bonus would be calculated by reference to the bonus performance metrics in place for the period in question and performance against them, complete months’ service up to the date of termination and the circumstances and timing of the executive’s departure, at the discretion of the Remuneration Committee.

• The Remuneration Committee may at its discretion serve a claw back notice in certain circumstances set out in note (d) of the Directors’ Total Remuneration table to recover any annual Bonus payment made for 3 years from the date of payment.

Deferred Annual Bonus

• There is no entitlement to any unpaid deferred annual bonus on termination. The Remuneration Committee has the discretion to pay deferred annual bonus where an individual is considered to be a good leaver (for reason of redundancy, retirement, ill-health, disability, injury or death). The deferred bonus would be calculated by reference to the bonus performance metrics in place for the period in question and performance against them, complete months’ service up to the date of termination and the circumstances and timing of the executive’s departure, at the discretion of the Remuneration Committee.

• The Remuneration Committee may at its discretion change the amount held in deferral post-termination in certain circumstances set out in note (d) of the Directors’ Total Remuneration table.

• Any amount held in deferral post-termination is potentially subject to forfeit at the discretion of the Remuneration Committee if certain breaches of the service agreement occur between deferral and payment.

• The Remuneration Committee may at its discretion serve a claw back notice in certain circumstances set out in note (d) of the Directors’ Total Remuneration table to recover any deferred annual bonus payments made for 3 years from the date of payment.

Pension and benefits

• Pension and benefit provisions continue to apply until the termination date. Any payments for loss of pension and benefit on early termination are calculated by reference to what the executive director would have received had they remained in office for the duration of their notice period (subject to mitigation if alternative employment is obtained).

• At the discretion of the Remuneration Committee other benefits may be receivable, such as (but not limited to) payments in lieu of accrued holiday, reimbursement of legal fees relating to the termination and outplacement support.

Other termination payments

• Executive directors’ service agreements do not provide for any termination payments (such as liquidated damages or golden parachutes) other than in relation to their notice periods. The Remuneration Committee will take into account an executive director’s entitlement to payments in respect of statutory employment rights and will exercise discretion in determining the value of these based on the likely litigation risk.

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Directors’ Remuneration ReportIllustrations of application of remuneration policy – reward scenariosThe graphs below provide an indication of the reward opportunity for each of the executive directors based on their roles as at 1 March 2016.

The basis of calculation for the charts above is:

Minimum Only fixed pay is payable i.e. base salary, benefits and pension or cash in lieu of pension. No bonus is payable i.e. performance is below threshold levels. Base salary levels (on which other elements of the remuneration package are calculated) are based on those applying for 2016/17 and benefits are based on the cash cost to Police Mutual or the taxable value to the executive director.

On-Target Fixed pay plus 50% of maximum bonus

Maximum Fixed pay plus 100% of maximum bonus

The difference between executive director remuneration policy and the policy on remuneration of employees generallyThe key difference between the executive director remuneration policy and the policy on remuneration for employees generally is that, overall, the remuneration policy for executive directors is more heavily weighted towards variable pay linked to business performance than for other employees, so that remuneration will increase or decrease in line with business performance and align the interest of executive directors and members.

Consideration of employment conditions elsewhere in Police MutualWhen determining directors’ remuneration for the year the Remuneration Committee takes into account the pay and conditions of employees in the wider Police Mutual Group by considering the details of the annual remuneration review including average, minimum and maximum pay increases across the group together with the objectives and performance of group wide performance related pay schemes. All employees, including executive directors, are paid by reference to market data and base salaries are reviewed regularly. The Remuneration Committee would generally expect directors’ increases to be in line with other employees’ increases unless there are promotions, significant changes in scope or responsibilities or misalignment to the benchmark market data in which case the Remuneration Committee has the discretion to recognise these appropriately.

The Remuneration Committee does not formally consult with employees on drawing up the executive director remuneration policy.

Statement of Consideration of Member viewsThe Remuneration Committee values any feedback from or dialogue with members and delegates. Any feedback received in relation to the Annual General Meeting, as well as any feedback received during the year, would be considered by the Remuneration Committee as it continues to develop its remuneration framework and practices. To date whilst there has been interest shown in terms of questions at the Annual General Meeting, the nature of those questions has not been such that it could be taken into account in formulating policy.

1000 400300200 500 600 800700

Chief ExecutiveTotal remuneration (£’000s)

maximum BonusOn-Target BonusFixed pay

63% 18% 18%Maximum £741

Minimum100%

£468

On-Target77% 23%

£604

500 200150100 250 300

Marketing & Sales DirectorTotal remuneration (£’000s)


68% 16% 16%Maximum £285

Minimum100%

On-Target81% 19%

£241

100 150500 400 450300 350200 250 500

Finance DirectorTotal remuneration (£’000s)


68% 16% 16%Maximum £431

Minimum100%

£292

£196

On-Target81% 19%

£361

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reta

in

exec

utiv

e di

rect

ors

with

the

attr

ibut

es,

skill

s an

d ex

perie

nce

requ

ired

to s

hape

an

d de

liver

th

e P

olic

e M

utua

l G

roup

’s s

trate

gy.

Rev

iew

ed

annu

ally

& fix

ed

for

12

mon

ths

com

men

cing

1 M

arch

. In

crea

ses

may

be

awar

ded

outs

ide

the

norm

al r

evie

w c

ycle

at

the

disc

retio

n of

th

e R

emun

erat

ion

Com

mitt

ee

if in

divi

dual

ci

rcum

stan

ces

mer

it it

such

as

a ch

ange

in r

espo

nsib

ilitie

s.

Disc

retio

n in

se

tting

ba

se

sala

ries

influ

ence

d by

:• R

ole,

exp

erie

nce

and

perfo

rman

ce• C

ompa

rato

r sa

larie

s w

ithin

Pol

ice

Mut

ual

• Ave

rage

ch

ange

in

br

oade

r em

ploy

ee s

alar

ies

• Tot

al s

alar

y bu

dget

s• M

arke

t sur

vey

data

• Ext

erna

l indi

cato

rs s

uch

as in

flatio

n an

d m

arke

t con

ditio

ns• A

fford

abili

ty

taki

ng

into

ac

coun

t ov

eral

l fin

anci

al

perfo

rman

ce

of

Pol

ice

Mut

ual

Rec

over

y or

with

hold

ing

No

reco

very

or w

ithho

ldin

g ap

plie

s

Whi

lst t

here

is n

o m

axim

um a

nnua

l in

crea

se,

sala

ry

incr

ease

s w

ill

be

dete

rmin

ed

by

the

polic

y of

be

nchm

arki

ng b

ase

sala

ry fo

r a ro

le

agai

nst t

he m

arke

t med

ian

info

rmed

by

indi

vidu

al v

alue

and

per

form

ance

.Th

e R

emun

erat

ion

Com

mitt

ee h

as

the

flexi

bilit

y to

se

t sa

lary

w

ithin

a

reas

onab

le

rang

e ar

ound

th

e m

edia

n fo

r exa

mpl

e to

take

acc

ount

of

affo

rdab

ility

, to

refle

ct th

e le

vel o

f ex

perie

nce

in a

new

role

or t

o at

tract

a

cand

idat

e in

to a

spe

cific

rol

e w

ith

sign

ifica

nt e

xper

ienc

e.

Non

eN

one

FUTU

RE

POLI

CY

TAB

LE

Key

Ele

men

ts o

f Exe

cutiv

e D

irect

ors’

Rem

uner

atio

n

22


Purp

ose

& li

nk to

str

ateg

yO

pera

tion

Opp

ortu

nity

Perf

orm

ance

met

rics

Cha

nges

in p

erio

d sh

own

in it

alic

s in

tabl

e

Annual bonus

Rew

ards

ac

hiev

emen

t of

an

nual

fin

anci

al

and

stra

tegi

c bu

sine

ss

targ

ets

and

deliv

ery

of

exec

utiv

e te

am a

nd p

erso

nal o

bjec

tives

whi

ch,

whi

lst

set

on a

n an

nual

bas

is,

are

aim

ed

at

deliv

erin

g be

nefit

s an

d se

rvic

es fo

r mem

bers

and

the

polic

e se

rvic

e in

the

sho

rt an

d lo

ng t

erm

as

ann

ual t

arge

ts a

re s

et b

ased

on

the

over

all d

eliv

ery

of a

thr

ee y

ear

stra

tegy

.

Def

erre

d el

emen

t di

scou

rage

s ex

cess

ive

risk

taki

ng a

s am

ount

s ar

e su

bjec

t to

fo

rfeit

if pa

rticu

lar

even

ts o

ccur

bet

wee

n aw

ard

and

paym

ent.

Ret

entio

n m

echa

nism

as

bo

nus

can

be

redu

ced

or

forfe

ited

at

the

Rem

uner

atio

n C

omm

ittee

’s

disc

retio

n if

an in

divi

dual

resi

gns.

Obj

ectiv

es

are

set

and

revi

ewed

an

nual

ly

for

both

th

e ex

ecut

ive

team

and

ind

ivid

uals

and

rel

ate

to

initi

ativ

es w

hich

the

exec

utiv

e te

am

as a

who

le n

eed

to d

eliv

er a

nd t

o ar

eas

of t

he b

usin

ess

over

whi

ch

the

indi

vidu

al h

as p

artic

ular

con

trol.

One

th

ird

of

each

an

nual

bo

nus

awar

d is

def

erre

d fo

r a

perio

d of

12

mon

ths

from

the

date

on

whi

ch th

e co

rres

pond

ing

two

third

s is

pai

d.

Pol

icy

on b

onus

is to

set

opp

ortu

nity

w

ithin

the

low

er q

uarti

le o

f the

mar

ket

surv

ey

data

an

d fo

r ex

cept

iona

l pe

rform

ance

th

e m

id-q

uarti

le.

The

oppo

rtuni

ty

may

be

va

ried

up o

r do

wn

durin

g th

e th

ree

year

pe

riod

that

the

rem

uner

atio

n po

licy

oper

ates

to

ensu

re i

t co

ntin

ues

to

rem

ain

in li

ne w

ith p

olic

y.A

ll bo

nus

arra

ngem

ents

are

sub

ject

to

con

tinue

d em

ploy

men

t and

goo

d le

aver

pro

visi

ons.

Rec

over

y or

with

hold

ing

The

sche

me

rule

s co

ntai

n m

alus

an

d cl

aw b

ack

prov

isio

ns t

o ta

ke

acco

unt o

f exc

eptio

nal a

nd a

dver

se

circ

umst

ance

s as

set

out

in n

ote

(f)

to th

e D

irect

ors’

Tot

al R

emun

erat

ion

tabl

e oc

curr

ing

betw

een

defe

rral

an

d pa

ymen

t or w

ithin

3 y

ears

of t

he

date

of p

aym

ent..

Pers

onal

obj

ectiv

es

100%

of t

he p

erso

nal b

onus

rela

tes

to a

reas

of t

he b

usin

ess

over

whi

ch

the

indi

vidu

al h

as p

artic

ular

con

trol

and

acco

unta

bilit

y in

tha

t ye

ar a

nd

are

alig

ned

to d

eliv

ery

of th

e 3

year

st

rate

gy.

Team

obj

ectiv

esTh

e bo

nus

is b

ased

on

a ba

lanc

e of

ob

ject

ives

re

latin

g to

th

e de

liver

y of

fin

anci

al,

oper

atio

nal,

cust

omer

, af

finity

, pe

ople

& c

ultu

re,

trans

form

atio

n an

d re

gula

tory

& ri

sk

obje

ctiv

es.

The

prec

ise

wei

ghtin

gs

will

dep

end

on t

he s

trate

gic

focu

s fro

m y

ear t

o ye

ar.

The

mea

sure

s an

d w

eigh

tings

use

d ar

e se

lect

ed a

nnua

lly t

o re

flect

the

P

olic

e M

utua

l G

roup

’s

stra

tegi

c in

itiat

ives

an

d fin

anci

al

and

non-

finan

cial

mea

sure

s.

Bon

us a

war

ds a

re d

eter

min

ed b

y th

e R

emun

erat

ion

Com

mitt

ee a

fter

the

year

end

bas

ed o

n pe

rform

ance

ag

ains

t the

obj

ectiv

es.

The

Rem

uner

atio

n C

omm

ittee

re

vise

d th

e on

ta

rget

bo

nus

oppo

rtuni

ty b

ased

on

mar

ket

data

fo

r te

am o

bjec

tives

fro

m 1

9.5%

to

25%

for

dire

ctor

s an

d fro

m 2

5% t

o 30

% f

or t

he C

hief

Exe

cutiv

e. T

he

stre

tch

bonu

s op

portu

nity

rem

ains

th

e sa

me.

As

sim

plifi

catio

n of

th

e bu

sine

ss

is

the

mai

n fo

cus

of

2017

th

e R

emun

erat

ion

Com

mitt

ee

has

exer

cise

d its

dis

cret

ion

for o

ne y

ear

in t

hat

bonu

s aw

ards

for

Exe

cutiv

e D

irect

ors

for

2017

ar

e en

tirel

y ba

sed

on t

he a

chie

vem

ent

of t

eam

ob

ject

ives

, no

t pe

rson

al o

bjec

tives

. Fo

r 201

7 th

e op

portu

nity

is:

Pers

onal

Obj

ectiv

es

%O

n ta

rget

Stre

tch

CE

O7.

512

.5

Dire

ctor

510

Ther

e is

als

o an

opp

ortu

nity

to e

arn

an a

dditi

onal

5%

bon

us fo

r tru

ly

exce

ptio

nal p

erso

nal p

erfo

rman

ce

in a

ny o

ne y

ear a

s ju

dged

by

the

Rem

uner

atio

n C

omm

ittee

.

Team

Obj

ectiv

es

%O

n ta

rget

Stre

tch

CE

O25

57.5

Dire

ctor

2545

Max

imum

bon

us o

ppor

tuni

ty

%P

erso

nal

Tea

mM

ax

CE

O17

.557

.575

Dire

ctor

1555

60

Pers

onal

Obj

ectiv

es

%O

n ta

rget

Stre

tch

CE

O37

.570

Dire

ctor

3055

Max

imum

bon

us o

ppor

tuni

ty

%P

erso

nal

Tea

mM

ax

CE

O5

7075

Dire

ctor

555

60

FUTU

RE

POLI

CY

TAB

LE (co

ntin

ued)

Key

Ele

men

ts o

f Exe

cutiv

e D

irect

ors’

Rem

uner

atio

n

23

Purp

ose

& li

nk to

str

ateg

yO

pera

tion

Opp

ortu

nity

Perf

orm

ance

met

rics

Cha

nges

in p

erio

d sh

own

in it

alic

s in

tabl

e

Benefits

To

prov

ide

mar

ket

com

petit

ive

bene

fits

to a

ssis

t in

attr

actin

g an

d re

tain

ing

exec

utiv

e di

rect

ors

A ra

nge

of b

enefi

ts m

ay b

e pr

ovid

ed

incl

udin

g, b

ut n

ot li

mite

d to

, pr

ivat

e he

alth

care

, a

car

or c

ar a

llow

ance

, pr

ivat

e fu

el p

aym

ent

or a

llow

ance

, pe

rman

ent

heal

th

insu

ranc

e,

life

cove

r an

d re

loca

tion

assi

stan

ce o

n ap

poin

tmen

t.R

ecov

ery

or w

ithho

ldin

gN

o re

cove

ry o

r with

hold

ing

appl

ies

The

cost

of

be

nefit

s is

no

t pr

e-de

term

ined

re

flect

ing

the

need

to

al

low

fo

r no

rmal

in

crea

ses

asso

ciat

ed

with

th

e pr

ovis

ion

of

bene

fits.

Non

eN

one

Pension

Rew

ards

sus

tain

ed c

ontri

butio

n an

d pr

ovid

es c

ompe

titiv

e po

st-r

etire

men

t be

nefit

s or

cas

h al

tern

ativ

e en

surin

g th

e to

tal

rem

uner

atio

n pa

ckag

e is

co

mpe

titiv

e an

d ai

ds re

tent

ion.

Pay

men

ts m

ay b

e m

ade

pens

ion

sche

me

of th

eir c

hoos

ing

or p

aid

as

a ca

sh a

llow

ance

.B

onus

an

d ot

her

bene

fits

are

excl

uded

from

the

calc

ulat

ion.

R

ecov

ery

or w

ithho

ldin

gN

o re

cove

ry o

r with

hold

ing

appl

ies

Em

ploy

er

cont

ribut

ion

leve

ls

are

set

in b

ands

and

dep

end

on a

ge

with

em

ploy

er c

ontri

butio

ns u

p to

a

max

imum

of

20%

for

dire

ctor

s em

ploy

ed a

fter

1 Ju

ly 2

012

prio

r to

whi

ch t

he m

axim

um c

ontri

butio

n w

as 2

5%.

In

the

even

t of

ch

ange

s to

th

e pe

nsio

n ta

x re

gim

e ad

vers

ely

affe

ctin

g pe

nsio

n ar

rang

emen

ts

the

Rem

uner

atio

n C

omm

ittee

m

ay a

men

d th

e pe

nsio

n be

nefit

s av

aila

ble

on

a ba

sis

that

w

ould

no

t co

st m

ater

ially

mor

e th

an t

he

exis

ting

arra

ngem

ents

..

Non

eN

one

FUTU

RE

POLI

CY

TAB

LE (co

ntin

ued)

Key

Ele

men

ts o

f Exe

cutiv

e D

irect

ors’

Rem

uner

atio

n

24


Directors’ Remuneration ReportChairman & Non-Executive Directors The policy on non-executive directors’ fees is:

Purpose and link to strategyFees are designed to recognise the responsibilities and time commitment of non-executive directors and to attract individuals with necessary skills and experience to contribute to the future growth of the Police Mutual Group and to a high performing board.

OperationFees for non-executives are determined annually by the executive directors with any changes normally effective from 1 July. They are benchmarked against comparable organisations in the private and mutual sectors. The principal comparator group consists of financial services companies and data is obtained from surveys and publicly available information. Specific independent reports may be obtained from time to time. Fees are benchmarked to the median with some discretion around that point to allow for the need to attract different skills, experience and knowledge in non-executive directors

Fees are neither performance related nor pensionable and non-executive directors do not participate in any incentive plans.

Reasonable expenses relating to travel, accommodation and meals for business purposes are reimbursed.

Fees are made up of a basic annual fee together with additional fees for the chairmanship or membership of any committees or subsidiary companies. Fees are paid monthly in cash and are calculated on an annual rather than daily basis. The following table sets out the fees effective from 1 July 2016:

Base fees

Chairman £57,000

Non-executive director £39,000

Additional fees

Audit Chair £10,000 Audit member £2,000

Remuneration Chair £4,000 Remuneration member £1,000

Investment Chair £6,000 Investment member £1,000

With Profits Chair* £22,000 With Profits member £2,000

Notes* The independent Chair of the With Profits Committee is not a non-executive director.

Approach to recruitment remunerationFor the appointment of a new Chairman or non-executive director, the fee arrangement and notice period shall be set in accordance with the approved remuneration policy in force at that time.

Chairman and other non-executive directors’ letters of appointmentNon-executive directors, including the Chairman, do not have service agreements, but each has a letter of appointment which sets out their duties and responsibilities. The appointment of remunerated non-executive directors is generally for an initial period of three years, subject to annual re-election, and may be renewed by mutual consent. These appointments can be terminated at any time by either party, without the payment of compensation, upon giving three months’ written notice. The current chairman and non-executive director appointments commenced on:

Julie Spence 4 May 2011

Richard Coates 10 May 2007

Julie Hopes 6 May 2014

Barry Sanjana 20 October 2010

Mike Urmston 4 May 2006

NotesJulie Spence was appointed as a non-executive director on 5 May 2010 and Chairman on 4 May 2011.

The above fee levels may be varied (up or down) during the three year period that the remuneration policy operates to ensure that they continue to appropriately recognise the time commitment and responsibilities of the role, increases or decreases to the fee levels for non-executive directors in general and fee levels in comparable organisations.

Non-executive directors’ letters of appointment are available for inspection by members at Police Mutual’s registered office.

Police Mutual Assurance Society Limited (PMAS) is an incorporated friendly society authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FCA register number 110050). The registered office of PMAS is: Alexandra House, Queen Street, Lichfield, Staffordshire WS13 6QS.

AG2016

Police Mutual Assurance Society LimitedAlexandra House, Queen Street, Lichfield, Staffordshire WS13 6QS

policemutual.co.uk

Annual Corporate Governance & Directors’ Remuneration ... · Annual Corporate Governance &...

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