Directors’ remuneration report

This report has been prepared by the remuneration committee (the committee) of Beazley plc and approved by the board of Beazley plc. The report complies with The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.

Section headings marked ▪ indicates the information in that section has been audited.

Dear shareholder

In the following pages the Committee’s report on directors’ remuneration for 2010 is presented.

Beazley produced an exceptional performance for the year ended 31 December 2010 delivering a pre-tax profit of $250.8m (2009: $158.1m), against a background of increased competition, softening insurance markets and macro-economic uncertainty. Market conditions placed increased emphasis on the skill of our underwriters in identifying profitable underwriting opportunities, as well as optimising the portfolio mix to achieve healthy returns across the cycle. Our combined ratio of 88% and 21.4% return on equity in 2010 reflects the success of our underwriters, both individually and collectively, in achieving this, and we maintained our track record of 25 years of unbroken profitability. 

This success has been achieved by virtue of our greatest asset; our people. Talent management is one of the cornerstones of our business success, as we seek to recruit and retain people who rank among the best insurance professionals in the world. Against that background, ensuring Beazley has a competitive remuneration mix that rewards sustainable performance remains important to our future success.

Our executive remuneration policy is governed by two guiding principles – alignment to shareholder interests and performance of the group. The committee considers the overall package to be appropriate, responsible and balanced.

We have made no significant changes to our executive remuneration policies during this year. The salary increase for executive directors was 2% which was in line with the standard increase throughout the organisation.

Best practice remuneration structures in financial services continue to be a developing area. During the year the Committee reviewed Beazley’s policies against the revised UK Corporate Governance Code and other relevant shareholder guidance. Ensuring that Beazley’s reward policy is sensitive to risk considerations continues to be a key priority for the Committee. Our executive director pay packages include a number of best practice features, which are consistent with, and take account of, the risk profile of the company. These include bonus deferral into shares; provisions for clawback in certain periods; performance periods extending to five years; and shareholding guidelines. The committee will continue to monitor developments in the external environment over the next year.

We are keen to encourage an on-going dialogue on our policies and continue to welcome our shareholders’ views.

Andy Pomfret

Remuneration Committee Chairman

8 February 2011

Summary of remuneration elements

The main elements of the remuneration package payable to each executive director comprise basic salary, short-term incentive payments, pension contributions, long-term share-based incentives and other benefits. A summary of the key elements of remuneration for executive directors across the company is as follows:

Executive directors

Element

Objective

Summary

Base salary

To recognise responsibilities

Reviewed annually.

For 2011, executive director standard salary increases are 2%.

Enterprise bonus

To link reward to group profit and return on equity

Incentive pool calculated as a percentage of profit subject to a minimum return on equity target.

Portion deferred into shares for 3 years (between 0% and 35% of bonus) dependent on level of bonus. 

LTIP

To align the senior management team to the out-performance of the group by setting stretching performance targets over the longer term

Awards of 200% of salary for CEO and 150% of salary for other executive directors.

50% of an award is subject to performance over 3 years and 50% over 5 years.

Vesting dependent on Net Asset Value per share (NAVps) performance against the risk-free rate:

  • No vesting if NAVps growth is less than the risk free rate plus 10% p.a.

  • 25% vests if NAVps growth exceeds the risk-free rate by 10% p.a.

  • 100% vests if NAVps growth exceeds the risk-free rate by 15% p.a.

  • Pro-rating between points.

Shareholding guidelines

To align with shareholders’ interests

Shareholding guidelines of 200% of salary for CEO and 150% of salary for other executive directors.

To be built up over 3 years.

Investment in underwriting

To align personal capital with underwriting performance

Executive directors and selected staff may voluntarily defer part of their bonuses into an underwriting syndicate. Capital commitments can be lost if underwriting performance is poor.

Benefits

To provide market levels of benefits

Benefits include a company car or car allowance, private medical insurance and permanent health insurance.

Pension

To provide market levels of pension provision

  • Defined contribution of 15% of salary for executive directors

  • Some directors received a salary supplement in lieu of legacy pension arrangements.

Service contracts

Company policy is that notice periods do not exceed 12 months.

No specific provision for compensation amounts. Policy includes consideration of mitigation and phasing

In addition to the above, the Committee also has oversight of remuneration arrangements elsewhere in the group. The following tables set out the additional incentive arrangements for other staff in the organisation.

Other incentive arrangements at Beazley (not applicable to executive directors)

Element

Objective

Summary

Profit related pay plan

To align underwriters’ reward with the profitability of their account

Profit on the relevant underwriting account as measured at three years and later.

Support bonus plan

To align staff bonus with individual performance and achievement of objectives

Participation is limited to staff members not on the executive or in receipt of profit related pay bonus.

Retention shares

To retain key staff

Used in exceptional circumstances. Full vesting dependent on continued employment over 6 years.

Policy going forward is that existing executive directors do not participate in these plans. However, some executive directors have subsisting legacy retention shares.

All-employee arrangements (including executive directors)

Element

Objective

Summary

SAYE

To create staff alignment with the company and promote a sense of ownership.

HMRC approved monthly savings scheme facilitating the purchase of shares at a discount.

US SAYE

As above but for US participants

 

Remuneration committee

The committee consists of five non-executive directors and during the year the members included Andy Pomfret as Chairman, Gordon Hamilton, George Blunden, Padraic O’Connor and Ken Sroka. The board views each of these directors as independent. The committee met seven times during the year. In addition to the five regular meetings there were another two ad-hoc meetings.

The committee considers the individual remuneration packages of the deputy chairman, chief executive, executive directors and executive committee members. It also has oversight of the salary and bonus awards of individuals outside the executive committee who are either direct reports of executive committee members or who have basic salaries over £200,000, as well as the overall bonus pool and total incentives paid by the company. The terms of reference of the committee are available on the company’s website.

The committee receives advice from a variety of sources. During the year the committee were advised by Hewitt New Bridge Street and Deloitte LLP. The committee also calls on specialist advice from a variety of additional sources including Bluefin Advisory Services Limited for benefits and pensions advice, Towers Watson publications for salary data and Equiniti for employee share incentives matters. None of the advisors provides other services to the company.

Input was also received by the committee during the year from the chief executive, head of talent management and the company secretary. However, no individual plays a part in the determination of their own remuneration.

Remuneration policy

The committee has oversight of the remuneration policy. The general philosophy underlying the reward strategy for executive directors is the same as that applied to all other employees. Pay and employment conditions elsewhere in the company and data on comparable positions in other similar organisations are taken into consideration when determining executive directors’ remuneration.

The main aim of the policy is to ensure that management and staff are remunerated fairly and in such a manner as to facilitate the recruitment, retention and motivation of suitably qualified personnel.

The key elements of the company’s remuneration policies are:

  • To remunerate management and staff fairly and in such a manner as to facilitate the recruitment, retention and motivation of suitably qualified personnel;

  • That performance-related remuneration is an essential motivation to management and staff and should be structured to ensure that executives' interests are aligned with shareholders;

  • That individual rewards should reflect the group objectives but be dependent on the profitability of the group as well as take account of the operational risks;

  • The structures of packages should support meritocracy, an important part of Beazley’s culture;

  • That reward potentials should be market competitive; and

  • That executives' pay should include an element of downside risk.

Remuneration and the Lloyd’s market

The company’s market for talent is primarily underwriters at Lloyd’s. In line with our peer group within the Lloyd’s market, there are no upper limits on the amounts payable to individuals under short-term incentives. The committee has considered whether it is appropriate to set an upper limit and has agreed that such a limit would adversely affect the company’s competitive position and would not be in the interests of shareholders.

Fixed and variable remuneration

The balance between fixed and variable elements of executive directors’ remuneration changes with performance. The anticipated normal mix between fixed and variable remuneration is c.40% fixed and c.60% variable. This mix is illustrated in the following chart.

A significant proportion of variable pay is delivered in shares as illustrated below:

Risk and reward at Beazley

Although the company is not subject to the FSA’s Remuneration Code, the committee takes the Code into account when considering remuneration, along with other corporate governance developments and institutional shareholders’ guidance. During the year the committee undertook a review of remuneration against various guidelines and continues to monitor developments.

The committee believes the company is adopting an approach which is consistent with and takes account of the risk profile of the company. We believe reward at Beazley is appropriately balanced against risk considerations, particularly in the following areas:

Features aligned with risk considerations

Share deferral

A portion of bonus is deferred into shares for three years. These deferred shares together with shares awarded under the long term incentive plan mean that a significant portion of total remuneration is delivered in the form of shares deferred for a period of three years.

Extended performance periods

A portion of the long term incentive plan has performance measured over an extended five year period, in line with the Walker recommendations and FSA guidelines.

Shareholding requirements

Executive directors are expected to build up and maintain a shareholding of 150% of salary (200% for the CEO).

Investment in Underwriting

Management and underwriters defer part of their bonuses into the Beazley staff underwriting plan providing alignment with capital providers. Capital commitments can be lost if underwriting performance is poor.

Underwriters’ remuneration aligned with profit achieved

Under the profit related plan payments are aligned with the timing of profits achieved on the account. For long-tail accounts this may be in excess of six years. If the account deteriorates then payouts are “clawed back” through adjustments to future payments.

“Clawback” of deferred shares

For deferred share awards from 2011 onwards, a ‘clawback’ provision is being introduced, so that shares may be forfeited in certain circumstances, including material misstatement of accounts or significant adverse company performance developments.

Salary ▪

The committee reviews salaries annually taking into account levels in comparable positions in other similar financial service companies. It also considers the performance of the group and individual as well as the average salary increase for employees across the whole group. The annual salary reviews take place in December of each year, with new salaries effective from 1 January.

For 2011, the salary increase is 2%. This is in line with standard salary increases across the group.

The annualised salaries and fees for 2010 and 2011 are as set out below:

£

2010 Executive Directors’ fee

2010 Executive salary

2010 Total base salary

2011 Executive Directors’ fee

2011 Executive salary

2011 Total base salary

M L Bride

50,000

200,000

250,000

51,000

204,000

255,000

A P Cox

50,000

200,000

250,000

51,000

204,000

255,000

N H Furlonge

50,000

205,000

255,000

51,000

209,000

260,000

J G Gray

50,000

250,000

300,000

51,000

255,000

306,000

D A Horton

50,000

350,000

400,000

51,000

357,000

408,000

N P Maidment

50,000

250,000

300,000

51,000

255,000

306,000

C A Washbourn

50,000

250,000

300,000

51,000

255,000

306,000

Bonus plans ▪

Enterprise bonus plan

The enterprise bonus plan is a discretionary plan in which all employees are eligible to participate.

The pool is calculated as a percentage of profit subject to a minimum group return on equity target. The proportion of profit allocated to the pool increases as higher returns on equity are achieved.

The proportion of the pool awarded to executive directors takes into account the individual’s contribution and the performance of their division (if appropriate).

Year

Pre tax underlying profit*

Post tax underlying ROE*

Enterprise pool

2010

$220m

17.9%

$21.1m

2009

$210m

21%

$22.5m

2008

$93m

10.7%

$7.2m

 

*Note that ROE is calculated based on estimated profit taking into account the adjustments described below and is therefore on a different basis to underlying ROE as shown in the financial review section of the Annual Report. Profit and enterprise pool for years prior to 2010 were converted from sterling based on the average prevailing exchange rate for the year.

The pool is calculated based on the latest post tax return at the end of the year for the financial year having been adjusted for the enterprise pool payments. The calculation uses the underlying profit which excludes the charges or credits that arise from the IFRS foreign exchange adjustments on non-monetary items and a one off currency conversion adjustment relating to change of reporting currency during the year. 

The pool approach to the calculation of bonuses is aligned to shareholders and ensures that bonuses are affordable, while the ROE return targets increase the performance gearing.

The following table and graph illustrates the way in which bonuses reflect profit and ROE performance.

 

Forecast Pre tax underlying profit*

Forecast Post tax underlying ROE*

Average executive director bonus as a percentage of salary

2010

$220m

17.9%

c.230%

2009

$210m

21%

c.230%

2008

$93m

10.7%

c.75%

*See previous note

A portion of the bonus will generally be deferred into shares for 3 years. The deferral will range from 0% to 35% dependent on the level of bonus. For deferred share awards from 2011 onwards, a ‘clawback’ provision is being introduced.  The committee may determine that unvested shares will be forfeited in certain circumstances, such as a material mis-statement of accounts or a significant adverse company development.

Underwriter bonus plan – profit related pay plan

Underwriters participate in a profit related pay plan based upon the profitability of their underwriting account. Executive directors do not participate in this plan.

The objective of the plan is to align the interests of the group and the individual through aligning an underwriter’s reward to the long-term profitability of their portfolio.

Underwriters that have significant influence over a portfolio may be offered awards under the plan. There is no automatic eligibility. Profit related pay is awarded irrespective of the results of the group and is capped at a maximum of 150% of salary.

This bonus is awarded as cash and is based upon a fixed proportion of profit achieved on the relevant underwriting account as measured at the three years and later. Any movements in prior years are reflected in future year payments as the accounts develop after the three years. For long-tail accounts the class is still relatively immature at the three year stage and therefore payments will be modest. They will receive further payouts in years 4, 5 and 6 (and even later) as the account matures. Therefore each year they could be receiving payouts from multiple underwriting years.

If the account deteriorates as it develops any payouts are “clawed back” through reductions in future profit related pay bonuses.

The fixed proportion is calculated based upon profit targets which are set through the business planning process and reviewed by a committee formed of executive committee members and functional specialists including the group actuary and the head of talent management. Underwriting risk is taken into account when setting profit targets.

In addition to profit related pay, underwriters are also eligible to receive a discretionary bonus, based upon performance, from the enterprise bonus pool. A proportion of this bonus may be paid in deferred shares, which vest after three years subject to continued employment.

Support bonus plan

Employees who are not members of the executive and who do not participate in the underwriters’ profit related pay plan participate in a discretionary bonus pool. This pool provides the employees with a discretionary award of an annual performance bonus that reflects overall individual performance including meeting annual objectives.

A proportion of this award may also be dependent on the group’s return on equity and therefore allocated from the enterprise bonus pool. A proportion of this bonus may be paid in deferred shares, which vest after three years subject to continued employment.

Share plans

Long-term incentive plan (LTIP)

Under the LTIP, executive directors, senior management and underwriters receive awards of free shares subject to the achievement of stretching performance conditions measured over five years.

The key features of the plan are as follows:

  • 50% of the award is measured after three years and 50% after five years.

  • Awards are in the form of nil-cost options with a ten year term. Dividends do not accrue on shares prior to vesting.

Participants are expected to build a shareholding in Beazley equal to their annual award level. For example the CEO has a shareholding guideline of 200% of salary. Participants have three years to build this shareholding from March 2010, when this feature was introduced.

In good leaver circumstances and on change of control, awards are pro-rated for time and performance.

The award level policy for 2011 is set out in the table below:

Chief Executive Other executive directors
Maximum annual award (as a percentage of base salary) 200% 150%

Vesting of awards is based on growth in net asset value per share (NAVps), one of Beazley’s key performance indicators. The Committee considers the LTIP NAVps growth targets to be very stretching, particularly taking into account that growth must be over a sustained three and five year period.

The performance condition for awards for 2011 is as follows:

NAVps performance

% of award vesting

NAVps growth < risk-free rate +10% p.a.

0%

NAVps growth = risk-free rate +10% p.a.

25%

NAVps growth = risk-free rate +15% p.a.

100%

NAVps growth between risk-free rate +10% and 15% p.a.

Straight line between 25% and 100%

The LTIP awards that were granted on 13 March 2007 were based on NAVps growth and TSR performance. These awards met the performance criteria in part and 50% of the awards vested in March 2010. The results were independently calculated by Hewitt New Bridge Street.

SAYE

The company operates a HMRC approved SAYE scheme for the benefit of UK-based employees. The scheme offers a three-year savings contract period with options being offered at a 20% discount to the share price on grant. Monthly contributions are made through payroll deduction on behalf of participating employees.

US SAYE

The Beazley plc savings-related share option plan for US employees permits all eligible US-based employees to purchase shares of Beazley plc at a discount of up to 15% to the shares’ fair market value. Participants may exercise options after a two-year period, although the shares are non-transferable for a further 12 months following exercise. The plan is compliant with the terms of Section 423 of the US Internal Revenue Code and is similar to the SAYE scheme operated for UK-based Beazley employees.

Retention shares

The retention plan is now only used in exceptional circumstances for recruitment or retention purposes. Any awards vest at 25% per annum over years three to six. Policy going forward is that existing executive directors do not participate in this plan. However, some executive directors have subsisting legacy awards.

Option plan

The option plan does not form part of Beazley’s current remuneration policy. The plan comprises an HMRC approved plan and an unapproved plan. All options granted under this plan have vested or lapsed. It is the committee’s intention to only grant options under this plan in exceptional circumstances. No options have been granted since 2005.

Dilution

The share plans permit 10% of the company’s issued share capital to be issued pursuant to awards under the LTIP, SAYE and option plan in a 10-year period.

Investment in underwriting

Traditionally, Lloyd’s underwriters contributed their personal capital to syndicates in which they worked. With the move to corporate provision of capital, individual membership of Lloyd’s has declined significantly. The committee feels that having personal capital at risk in the syndicate is an important part of the remuneration policy and provides a healthy counterbalance to incentivisation through bonuses and long-term incentive awards. The company has operated the Beazley Staff Underwriting Plan for this purpose since 2004 and executive directors and other selected staff are invited to participate through bonus deferral with an element of their cash incentives "at risk" as capital commitments. These capital commitments can be lost in full if underwriting performance is poor.

The group funds the initial capital for the participants in the scheme. The initial capital outlay is then reimbursed by individual bonus deferral. The aim is for individuals to fund their capital within three years.

To date over 100 employees of the group have committed to put at risk £6.7m of bonuses to the underwriting results of syndicate 623. Of the total at risk, £5.6m has already been deferred from the bonuses awarded.

The following directors participated in syndicate 623 through Beazley Staff Underwriting Limited:

£

Total bonuses deferred and at risk

2009 year of account underwriting capacity

2010 year of account underwriting capacity

2011 year of account underwriting capacity

M L Bride

112,500

-

400,000

350,000

A P Cox

216,000

283,661

400,000

350,000

N H Furlonge

216,000

283,661

400,000

350,000

J G Gray

216,000

283,661

400,000

350,000

D A Horton

216,000

283,661

400,000

350,000

N P Maidment

216,000

283,661

400,000

350,000

C A Washbourn

216,000

283,661

400,000

350,000

Pensions ▪

The pension benefits for directors and staff are now provided by way of a defined contribution scheme arranged through Fidelity, which is non-contributory. The company contributes 15% of salary for directors. Andrew Beazley and Nick Furlonge did not participate in this plan but, instead, received a salary supplement in lieu of pension. These supplements ceased for Nick Furlonge on 18 October 2010 and for Andrew Beazley on 31 October 2010.

Prior to 31 March 2006 the company provided pension entitlements to directors that are defined benefit in nature, based on its legacy policy under the Beazley Furlonge Limited Final Salary Pension Scheme. Future service accruals ceased on 31 March 2006. Only base salary is pensionable.

No other pension provisions are made. The normal retirement age for pension calculation purposes is 60 years. A spouse’s pension is the equivalent of two-thirds of the member’s pension (before any commutation) payable on the member’s death after retirement.

Details of the defined benefit entitlements of those who served as directors during the year are as follows.

Accrued benefit at 31 Dec 2010

Increase in accrued benefits excluding inflation (A)

Increase in accrued benefits including inflation

Transfer value of (A) less directors’ contributions

Transfer value of accrued benefits at 31 Dec 2010

Increase in transfer value less directors’ contributions

  £ £ £ £ £ £
A P Cox 10,440 - 483 - 121,375 12,684
J G Gray 29,340 - 1,358 - 652,176 44,050
N P Maidment 35,640 1,717* 3,367 26,448 548,983 76,953
C A Washbourn 15,840 - 733 - 258,091 21,128
N H Furlonge 150,594 - - - 3,529,915 138,059

 *Benefits changed due to a data clarification

Benefits ▪

Benefits include private medical insurance for the director and his immediate family, permanent health insurance, death in service benefit at four times annual salary, travel insurance, health-club membership, season ticket, car parking and the provision of either a company car or a monthly car allowance.

Service contracts ▪

Executive directors have service contracts with Beazley Management Limited. In June 2009, following the redomiciliation to Ireland, the directors were issued with new service contracts from Beazley Management Limited and appointment letters as directors of Beazley plc. 

It is company policy that such service contracts with executive directors. It is company policy that such contracts contain notice periods, from the company or employee, of not more than 12 months. The current contracts in place for executive directors are as follows:

Date of contract

M L Bride

9 Jun 2009

A P Cox

6 Dec 2010

N H Furlonge

9 Jun 2009

J G Gray

9 Jun 2009

D A Horton

9 Jun 2009

N P Maidment

9 Jun 2009

C A Washbourn

9 Jun 2009

The notice period for each of the above contracts is 12 months.There is no unexpired term as each of the executive directors’ contracts is on a rolling basis.

Subject to the notice requirements described above, there is no provision in the service agreements for compensation to be payable on early termination of the contract.  Any payments of compensation will be subject to negotiation and the company policy includes consideration of appropriate mitigation, including phasing of payments.

Executive directors’ other interests

Nick Furlonge holds a non-executive appointment with the Lloyd’s franchise board. He was appointed to this role on 4 February 2008. He receives and retains a fee of £55,000 per annum in respect of this appointment.

Non-executive directors’ fees ▪

The fees of non-executive directors, other than the chairman, are determined by the board. The fees for the chairman are determined by the board, following a recommendation from the remuneration committee. When setting fee levels consideration is given to levels in comparable companies for comparable services in addition to the time commitment and responsibilities of the individual director.

No non-executive director participates in the company’s incentive arrangements or pension plan.

Non-executive directors are appointed for fixed terms, normally for three years, and may be reappointed for future terms. Non-executive directors are typically appointed through a selection process that assesses if the candidate brings the desired competence and skills to the group.

The board has identified several key competencies for non-executive directors to complement the existing skill-set of the executive directors. These competencies are as follows:

  • Insurance sector expertise;

  • Asset management skills;

  • Public company and corporate governance experience;

  • Risk management skills; and

  • Finance skills.

A review of the fees and other income payable was carried out by the board in December 2010. The review took into account market data for other financial services companies in the FTSE 250 and the changes to Beazley’s operating and regulatory environment.

Beazley operates across Lloyd’s and the US markets through a variety of legal entities and structures.  Non-executive directors, in addition to the plc board, typically sit on either one of our key subsidiary boards (Beazley Furlonge Ltd (BFL), our managing agency at Lloyd’s, and Beazley Re Ltd, our re-insurance company).  As a result of developments in regulation, the way in which these subsidiary boards operate has changed significantly since 2008, when fees were last reviewed.  The degree of autonomy in the operation of each board has increased, with a consequent increase in time commitment and scope of the role. 

As a result of the review:

  • basic fees were increased by 2%;
  • the fees for chairing the Audit and Remuneration Committees were increased to £15,000 and £10,000 respectively (from £10,000 and £8,000 respectively).  There was no increase in the fee for Senior Independent Director which remains at £6,000; and
  • Fees were introduced for board membership in respect of the two key subsidiary boards, BFL and Beazley Re. of £15,000 and 8,000 respectively.

Chairman fees were also considered as part of the review. This was in the context of both the changes in the regulatory and operational environment, as described above, as well as a review of the market data. Following the review we considered it was appropriate to:

  • Increase chairman fees from £105,000 to £120,000; and
  • Introduce a fee for chairmanship of the BFL board of £30,000, consistent with the approach for subsidiary boards described above.

The Committee considered that this increase was appropriate given the size and scope of the company, and hence the role, and the significant changes to the complexity of the environment in which it operates.

Details of the non-executive directors’ terms of appointment and their fees for 2011 are set out below:

            Other fees    
  Current annual fee Commencement date of current appointment letter Expires Senior independent director Audit Committee Chair Remuneration Committee Chair Beazley Furlonge Beazley Re
J G W Agnew (£) 120,000 20 Mar 2009 31 Dec 2011 - - - 30,000 -
A D Pomfret (£) 51,000 20 Mar 2009 30 Jun 2012 6,000 - 10,000 15,000 -
A G K Hamilton (£) 51,000 20 Mar 2009 31 Dec 2011 - 15,000 - 15,000 -
V J Sheridan (€) 61,200 9 Jun 2009 31 Dec 2011 - - - - 8,000
P J O’Connor (€) 61,200 20 Mar 2009 31 Dec 2011 - - - - 8,000
G P Blunden (£) 51,000 1 Jan 2010 31 Dec 2012 - - - 15,000 -
K P Sroka (£) 51,000 12 Nov 2010 11 Nov 2013 - - - - -
R A W Tolle (£) 51,000 6 Dec 2010 5 Dec 2013 - - - 15,000 -

Compensation for past directors ▪

Andrew Beazley died on 13 October 2010. His emoluments to the end of October are set out in the emolument tables. In accordance with the relevant plan rules, shares under the Deferred Share Plan and the Retention Plan vested in full while shares under the Long Term Incentive Plan were pro-rated for time and performance. Calculations were performed independently by Deloitte LLP. Treatment of outstanding amounts for the staff underwriting plan will follow normal rules applicable to leavers of the scheme.

Dan Jones, a non-executive director of Beazley plc, stood down from the Board on 2 June 2010. He was subsequently appointed in an executive capacity to serve on the executive committee. During the past financial year his compensation in respect of this executive role was as follows: $620,522  comprising his annual salary, bonus, benefits and pension (US 401K scheme).

 

Directors’ emoluments ▪

The emoluments in respect of qualifying services and compensation of each person who served as a director during the year were as follows:

£

Salary & fees 1

Enterprise cash bonus

Enterprise deferred shares

Staff underwriting distribution 2

Staff underwriting deferred bonus 3

Notional dividend on shares 4

Benefits

Salary supplements in lieu of pension contribution

Total for 12 months to 31 December 2010

Company pension contribution

Total for 12 months to 31 December 2009

J G W Agnew

105,000

-

-

-

-

-

-

-

105,000

-

105,000

A F Beazley

250,000

250,000

-

82,748

-

50,216

83,4375

149,601

866,002

-

1,135,300

G P Blunden

50,000

-

-

-

-

-

-

-

50,000

-

-

M L Bride

250,000

262,500

125,000

-

112,500

-

8,026

-

758,026

37,500

574,309

A P Cox6

17,808

36,024

12,466

5,158

1,373

777

 -

68448

2,671

-

N H Furlonge

255,000

228,460

100,000

41,534

71,540

22,980

13,292

98,994

831,800

-

841,348

J G Gray

300,000

297,672

125,000

22,241

77,328

40,279

15,596

-

878,116

45,384

839,484

A G K Hamilton

60,000

-

-

-

-

-

-

-

60,000

-

50,000

D A Horton

400,000

678,460

250,000

41,534

71,540

113,881

16,224

-

1,571,639

60,000

1,483,728

D L Jones7

20,959

-

-

-

-

-

-

-

20,959

-

50,000 

N P Maidment

300,000

522,672

200,000

22,241

77,328

38,471

16,060

-

1,176,772

45,000

1,112,857

P J O’Connor10

51,282 

-

-

-

-

-

-

-

51,282

-

42,035

A D Pomfret

64,000

-

-

-

-

-

-

-

64,000

-

66,000

V J Sheridan10

51,282

-

-

-

-

-

-

-

51,282

-

30,973

K P Sroka8

6,849

-

-

-

-

-

-

-

6,849

-

-

R A W Tolle9

3,562

-

-

-

-

-

-

-

3,562

-

-

C A Washbourn

300,000

672,557

250,000

21,856

77,443

91,519

11,464

-

1,424,839

45,271

1,370,567

Total

2,485,742 

 2,948,345

 1,062,466

 232,154

 489,052

 357,346

 164,876

 248,595

 7,988,576

 235,826

7,701,601

  1. 1. Other than for the chairman, fees include fees paid for chairmanship of the audit and remuneration committees and for the role of senior independent director.
  1. 2. This is return on a voluntary investment which is at risk
  2. 3. The directors defer bonus entitlements to support their underwriting through Beazley Staff Underwriting Limited
  3. 4. The notional dividend is a cash bonus equal to dividends the directors would have received during the vesting period of the deferred and retention shares.
  4. 5. This includes medical expenses which were paid to Mr Beazley him during the year ended 31 December 2010.
  5. 6. Mr Cox was appointed to the board on 6 December 2010 and his salary, bonus and benefits relate to his earnings from this date
  6. 7. Mr Jones stood down as a Non-Executive Director on 2 June 2010 in order to take up an executive position.  His fees relate to his earnings as a plc Non-Executive Director.  See details under compensation for past directors for his executive earnings in 2010.
  7. 8. Mr Sroka was appointed to the board on 12 November 2010 and his fees relate to his earnings from this date.
  8. 9. Mr Tolle was appointed to the board on 6 December 2010 and his fees relate to his earnings from this date.
  9. 10. For Mr O'Connor and Mr Sheridan, their non executive director fee was based on 60,000 and has been converted into sterling for this table at the average exchange rate of 1.17.  

Directors’ share plan interests ▪

Details of share plan interests of those directors who served during the period are as follows:

 

At 31 Dec 2009

Awarded

Exercised

Lapsed

At 31 Dec 20106

Exercise Price

Closing

 Share Price

 on Date of Exercise

Earliest date of exercise

Expiry Date

A F Beazley

 

 

 

 

 

 

 

 

 

Deferred Bonus:

 

13 MAR 07

146,368

-

146,368

-

-

1.07897

1.067

13/03/2010

13/04/2010

03 MAR 08

94,345

-

-

-

94,345

- 

 -

03/03/2011

03/04/2011

LTIP (see notes):

 

13 MAR 07

146,368

-

73,184

73,184

-

1.06000

1.072

13/03/2010

13/03/2017

03 MAR 08

125,794

-

-

-

125,794

 -

03/03/2011

03/03/2018

16 FEB 09

204,725

-

-

-

204,725

 -

16/02/2012

16/02/2019

18 FEB 10 - 3 year

-

209,888

-

-

209,888

 -

18/02/2013

18/02/2020

18 FEB 10 - 5 year

-

209,888

-

-

209,888

-

18/02/2015

18/02/2020

Retention Shares:

 

21 MAR 05

39,107

-

39,107

-

-

1.08309

1.080

21/03/2008

21/04/2010

21 MAR 06

155,105

-

77,552

-

77,553

1.08309

1.080

21/03/2009

21/04/2011

M L Bride

 

 

 

 

 

 

 

 

 

Deferred Bonus (see note 5):

 

27 APR 09

200,000

-

-

-

200,000

 -

27/04/2012

27/05/2012

23 FEB 10

-

93,284

-

-

93,284

 -

23/02/2013

23/03/2013

LTIP (see notes):

 

27 APR 09

100,000

-

-

-

100,000

 -

 -

27/04/2012

27/04/2019

18 FEB 10 - 3 year

-

174,907

-

-

174,907

18/02/2013

18/02/2020

18 FEB 10 - 5 year

-

174,907

-

-

174,907

 -

18/02/2015

18/02/2020

Retention Shares (see note 5):

 

27 APR 09

150,000

-

-

-

150,000

 -

27/04/2012

27/04/2015

SAYE:

 

2010

-

10,591

-

-

10,591

-

 -

01/07/2013

31/12/2013

A P Cox

 

 

Deferred Bonus:

 

13 MAR 07

27,444

-

27,444

-

-

1.07897

1.067

13/03/2010

13/04/2010

03 Mar 08

74,108

-

-

-

74,108

 -

03/03/2011

03/04/2011

23 FEB 10

-

139,925

-

-

139,925

 -

23/02/2013

23/03/2013

LTIP (see notes):

 

 

 

 

 

 

 

 

 

21 MAR 05

23,402

-

23,402

-

-

1.08000

1.088

21/03/2008

21/03/2015

21 MAR 06

13,501

-

13,501

-

-

1.08000

1.088

21/03/2009

21/03/2016

16 FEB 09

204,725

-

-

-

204,725

 -

16/02/2012

16/02/2019

18 FEB 10 - 3 year

-

174,907

-

-

174,907

 -

18/02/2013

18/02/2020

18 FEB 10 - 5 year

-

174,907

-

-

174,907

 -

18/02/2015

18/02/2020

Share Options:

 

 

 

 

 

 

 

 

 

ESOS UNAPP 29MAR04

11,457

-

11,457

-

-

1.08000

1.088

29/03/2007

29/03/2014

Retention Shares:

 

 

 

 

 

 

 

 

 

21 MAR 05

15,643

-

15,643

-

-

1.08309

1.080

21/03/2008

21/04/2010

21 MAR 06

36,004

-

18,002

-

18,002

1.08309

1.080

21/03/2009

21/04/2011

13 MAR 07

182,960

-

45,740

-

137,220

1.07897

1.083

13/03/2010

13/04/2013

SAYE:

 

 

 

 

 

 

 

 

 

2009

13,071

-

-

-

13,071

 -

01/07/2012

31/12/2012

N H Furlonge

 

 

 

 

 

 

 

 

 

Deferred Bonus:

 

13 MAR 07

73,184

-

73,184

-

-

1.07897

1.067

13/03/2010

13/04/2010

03 MAR 08

62,896

-

-

-

62,896

 -

-

03/03/2011

03/04/2011

23 FEB 10

-

93,284

-

-

93,284

 -

 -

23/02/2013

23/03/2013

LTIP (see notes):

 

13 MAR 07

73,184

-

36,592

36,592

-

1.06000

1.072

13/03/2010

13/03/2017

03 MAR 08

62,896

-

-

-

62,896

 -

-

03/03/2011

03/03/2018

16 FEB 09

204,725

-

-

-

204,725

 -

 -

16/02/2012

16/02/2019

18 FEB 10 - 3 year

-

178,405

-

-

178,405

 -

 -

18/02/2013

18/02/2020

18 FEB 10 - 5 year

-

178,405

-

-

178,405

 -

 -

18/02/2015

18/02/2020

Retention Shares:

 

21 MAR 05

9,776

-

9,776

-

-

1.08309

1.080

21/03/2008

21/04/2010

21 MAR 06

49,269

-

24,634

-

24,635

1.08309

1.080

21/03/2009

21/04/2011

SAYE:

 

2009

13,071

-

-

-

13,071

01/07/2012

31/12/2012

J G Gray

 

 

 

 

 

 

 

 

 

Deferred Bonus:

 

13 MAR 07

124,412

-

124,412

-

-

1.07897

1.067

13/03/2010

13/04/2010

03 MAR 08

107,554

-

-

-

107,554

 -

03/03/2011

03/04/2011

23 FEB 10

-

116,604

-

-

116,604

 -

23/02/2013

23/03/2013

LTIP (see notes):

 

13 MAR 07

109,776

-

54,888

54,888

-

1.07000

1.054

13/03/2010

13/03/2017

03 MAR 08

113,214

-

-

-

113,214

-

-

03/03/2011

03/03/2018

16 FEB 09

204,725

-

-

-

204,725

 -

-

16/02/2012

16/02/2019

18 FEB 10 - 3 year

-

209,888

-

-

209,888

 -

-

18/02/2013

18/02/2020

18 FEB 10 - 5 year

-

209,888

-

-

209,888

-

-

18/02/2015

18/02/2020

Retention Shares:

 

21 MAR 05

29,330

-

29,330

-

-

1.08309

1.080

21/03/2008

21/04/2010

21 MAR 06

94,207

-

47,103

-

47,104

1.08309

1.080

21/03/2009

21/04/2011

SAYE:

 

2009

13,071

-

-

-

13,071

01/07/2012

31/12/2012

D A Horton

 

 

 

 

 

 

 

 

 

Deferred Bonus:

 

13 MAR 07

124,412

-

124,412

-

-

1.07897

1.067

13/03/2010

13/04/2010

03 MAR 08

105,038

-

-

-

105,038

 -

 -

03/03/2011

03/04/2011

23 FEB 10

-

233,209

-

-

233,209

 -

 -

23/02/2013

23/03/2013

LTIP (see notes):

 

13 MAR 07

73,184

-

36,592

36,592

-

1.09400

1.088

13/03/2010

13/03/2017

03 MAR 08

78,621

-

-

-

78,621

 -

03/03/2011

03/03/2018

16 FEB 09

204,725

-

-

-

204,725

 -

16/02/2012

16/02/2019

18 FEB 10 - 3 year

-

363,207

-

-

363,207

-

18/02/2013

18/02/2020

18 FEB 10 - 5 year

-

363,207

-

-

363,207

 -

18/02/2015

18/02/2020

Retention Shares:

 

21 MAR 05

33,241

-

33,241

-

-

1.08309

1.080

21/03/2008

21/04/2010

21 MAR 06

82,114

-

41,057

-

41,057

1.08309

1.080

21/03/2009

21/04/2011

09 OCT 07

1,044,100

-

261,025

-

783,075

1.11500

1.127

09/10/2010

09/11/2013

SAYE:

 

2009

13,071

-

-

-

13,071

 -

01/07/2012

31/12/2012

N P Maidment

 

 

 

 

 

 

 

 

 

Deferred Bonus:

 

13 MAR 07

124,412

-

124,412

-

-

1.07897

1.067

13/03/2010

13/04/2010

03 MAR 08

106,925

-

-

-

106,925

-

03/03/2011

03/04/2011

23 FEB 10

-

186,567

-

-

186,567

-

23/02/2013

23/02/2013

LTIP (see notes):

 

03 MAR 08

62,896

-

-

-

62,896

-

03/03/2011

03/03/2018

13 MAR 07

73,184

-

36,592

36,592

-

1.05500

1.072

13/03/2010

13/03/2017

16 FEB 09

204,725

-

-

-

204,725

-

-

16/02/2012

16/02/2019

18 FEB 10 - 3 year

-

209,888

-

-

209,888

-

-

18/02/2013

18/02/2020

18 FEB 10 - 5 year

-

209,888

-

-

209,888

-

18/02/2015

18/02/2020

Retention Shares:

 

21 MAR 05

29,330

-

29,330

- -

1.08309

1.080

21/03/2008

21/04/2010

21 MAR 06

63,563

-

31,781

-

31,782

1.08309

1.080

21/03/2009

21/04/2011

SAYE:

 

2010

-

10,591

-

-

10,591

01/07/2013

31/12/2013

C A Washbourn

 

 

 

 

 

 

 

 

 

Deferred Bonus:

 

13 MAR 07

109,776

-

109,776

-

-

1.07897

1.067

13/03/2010

13/04/2010

03 MAR 08

125,794

-

-

-

125,794

 -

03/03/2011

03/04/2011

23 FEB 10

-

233,209

-

-

233,209

 -

23/02/2013

23/03/2013

LTIP (see notes):

 

21 MAR 05

151,019

-

151,019

-

-

1.07800

1.085

21/03/2008

21/03/2015

21 MAR 06

47,078

-

47,078

-

-

1.07800

1.085

21/03/2009

21/03/2016

13 MAR 07

153,687

-

76,844

76,843

-

1.07800

1.085

13/03/2010

13/03/2017

03 MAR 08

132,084

-

- -

132,084

 -

03/03/2011

03/03/2018

16 FEB 09

204,725

-

-

-

204,725

 -

16/02/2012

16/02/2019

18 FEB 10 - 3 year

-

209,888

-

-

209,888

 -

18/02/2013

18/02/2020

18 FEB 10 - 5 year

-

209,888

-

-

209,888

 -

18/02/2015

18/02/2020

Share Options:

 

29MAR04

24,348

-

24,348

-

-

1.07800

108.5

29/03/2007

29/03/2014

Retention Shares:

 

04 DEC 06

783,075

-

261,025

-

522,050

1.11000

1.127

04/12/2009

04/01/2013

21 MAR 05

33,241

-

33,241

-

-

1.08309

1.080

21/03/2008

21/04/2010

21 MAR 06

83,696

-

41,848

-

41,848

1.08309

1.080

21/03/2009

21/04/2011

SAYE:

 

 

 

 

 

 

 

 

 

2009

13,071

-

-

-

13,071

 -

 -

01/07/2012

31/12/2012

Notes to share plan interests table

  1. 2007 LTIP award details. Awards were made on 13 March 2007 at a mid-market share price of 142p. 50% of the award is based on NAVps performance in excess of the risk-free rate (RFR) and 50% is based on TSR performance versus a comparator group (Alea, Amlin, Atrium, Brit, Catlin, Chaucer, Hardy, Highway, Hiscox, Kiln and Novae) over three years. Different vesting schedules apply for shares worth up to 50% of salary (‘basic shares’) and shares worth more than 50% of salary (‘additional shares’). For basic shares, for the NAV portion, NAVps < RFR+5%p.a. results in 0% vesting and NAVps >= RFR+5%p.a. results in 100% vesting. For the TSR portion, below median TSR results in 0% vesting, median TSR performance results in 25% vesting and upper quartile TSR performance results in 100% vesting. For additional shares, for the NAV portion, NAVps < RFR+5%p.a. results in 0% vesting and NAVps >= RFR+10%p.a. results in 100% vesting. For the TSR portion, below upper quartile TSR performance results in 0% vesting and upper decile TSR results in 100% vesting. Straight-line pro-rating applies between all points. Final vesting for 2007 LTIP awards was 50% of the maximum.

  1. 2008 LTIP award details. Awards were made on 3 March 2008 at a mid-market share price of 166p. Performance conditions are as for the 2007 LTIP awards except that the TSR comparator group is as follows: Amlin, Brit, Catlin, Chaucer, Hardy, Highway, Hiscox, Lancashire and Novae.

  1. 2009 LTIP award details. Awards were made on 16 February 2009 and 27 April 2009 at a mid-market share price of 102p and 101p respectively. Performance conditions are as for the 2007 LTIP awards except that the TSR comparator group is as follows: Amlin, Brit, Catlin, Chaucer, Hardy, Hiscox, Lancashire and Novae.

  1. 2010 LTIP award details. Awards were made on 18 February 2010 at a mid-market share price of 110.13p (110.13p for D A Horton ).  Performance conditions: all of the award is subject to NAVps performance, with 50% measured over a 3-year period and 50% measured over a 5-year period.  NAVps < RFR+10%p.a. equates to 0% vesting, NAVps = RFR+10%p.a. equates to 25% vesting, NAVps = or > RFR+15%p.a. equates to 100% vesting, with straight-line pro-rated vesting between these points. 

  1. Retention Plan and Deferral Plan. Awards were made on 27 April 2009 at the time of M L Bride’s recruitment. The 150,000 shares will vest in four equal tranches on each of the third, fourth, fifth and sixth anniversaries of the date of grant and the 200,000 shares will normally vest in full on the third anniversary of the date of grant.

  2. Share prices.  The market price of Beazley ordinary shares at 31 December 2010 was 115.0p and the range during the year was 98.5p and 125.0p

Directors' interests in shares

     Number of  ordinary shares held as at 1 Jan 2010 Options exercised Options sold Shares purchased Shares sold Number of ordinary shares held as at 31 Dec 2010 Shareholding as a percentage of the total issued ordinary share capital as at 31 Dec 2010
J G W Agnew 213,947 - - 12,200 - 226,147 0.04
G P Blunden 107,156 - - - - 107,156 0.02
M L Bride 65,000 - - 154,616 - 219,616 0.04
A P Cox 98,900 155,189 - - - 254,089 0.05
N H Furlonge 1,689,651 144,186 144,186 - - 1,689,651 0.33
J G Gray 2,487,026 255,733 255,733 - - 2,487,026 0.48
A G K Hamilton 37,991 - - - - 37,991 0.01
D A Horton 710,392 496,327 233,228 - - 973,491 0.19
N P Maidment 3,334,621 222,115 94,210 - - 3,462,526 0.67
P J O’Connor 30,000 - - - - 30,000 0.01
A D Pomfret 24,315 - - - - 24,315 0.00
V J Sheridan 20,000 - - - - 20,000 0.00
K P Sroka - - - - - - 0.00
R A W Tolle - - - - - - 0.00
C A Washbourn 172,395 745,179 366,327 - 172,395 378,852 0.07
Total 8,991,394 2,018,729 1,093,684 166,816 172,395 9,910,860 1.91

No changes in the interests of directors have occurred between 31 December 2010 and 8 February 2011.

Annual general meeting

A resolution will be proposed at the forthcoming annual general meeting to be held on 23 March 2011 to approve this directors' remuneration report.

I am keen to encourage an on-going dialogue with shareholders. Accordingly, please feel free to contact me, if you would like to discuss any matter arising from this report or on remuneration issues generally, either by writing to me at the company's head office or by email through Sian Coope at sian.coope@beazley.com

By order of the board

Andy Pomfret

Chairman of the remuneration committee

8 February 2011