GLOBAL SPECIALISTS
Annual Report 2016
CORPORATE
SPONSORSHIP
As specialists in what we do, we partner with specialists who deliver winning results. This is why we are proud to partner
with professional British cycling team JLT Condor, triple Olympic gold-medal winning cyclist Ed Clancy OBE, the British
Bobsleigh and Skeleton Association, some of Britain’s leading racecourses and the Australia Football League (AFL).
JLT CONDOR
JLT Condor is the UK’s longest-standing UCI Continental cycling team and they rounded
off a very successful 2016 race season by adding the Revolutions Series indoor track
title in December to the UK national Tour Series, Motorpoint Grand Prix Series, London
Nocturne and National Circuit Race Championships. The team also raced across Asia,
Australia and northern Europe and will look to continue to dominate in races around the
globe in 2017.
ED CLANCY OBE
2016 was an outstanding year for JLT-sponsored cyclist Ed Clancy who was crowned
Olympic track cycling champion for the third time in a row, claiming gold in Rio in August.
Ed brought his gold medals to the London offices upon his return to the UK to meet
JLT clients and staff. Ed was also recognised for his sporting achievements in the 2016
Queen’s New Year Honours List, being awarded an OBE.
OFFICIAL PARTNER OF GREAT BRITAIN SKELETON
Reigning Olympic Champion and JLT ambassador Lizzy Yarnold, who had taken a
season away from competing, returned to racing in the 2016-17 World Cup season with
an immediate return to form. Laura Deas was named 2016 British Skeleton Athlete of the
Year having won her first World Cup gold medal at the opening World Cup race of 201516 season. This specialised sport is now looking ahead for more Winter Olympic success
in Pyeonchang in early 2018.
JLT AND HORSE RACING
JLT is proud to be a partner of Cheltenham, Aintree, Ascot and Newbury racecourses
and sponsor premium Grade 1 jump races including The JLT Novices Chase and the
JLT Melling Chase. The JLT Novices Chase takes place on the third day of the famous
Cheltenham Festival. In 2016 the race saw joint favourite, Black Hercules, ridden by Ruby
Walsh, take the win over the line. The JLT Melling Chase takes place on Ladies’ Day at
Aintree and in 2016 was won by God’s Own after the favourite fell, and was unhurt, leaving
the race wide open.
JLT COMMUNITY SERIES
JLT Australia’s community driven partnership with the Australia Football League (AFL)
brings the excitement of the game to regional and suburban communities across Australia.
Supporting the AFL’s pre-season, reflects our shared focus of connecting the elite level
with community football. From the boardroom to the changing rooms, we have been
creating safer sporting communities as the AFL’s risk and insurance partner for more than
a decade. Together, we are growing the game – no matter how good you are or where
you’re from.
CONTENTS
This section includes an
introduction to JLT with
a brief review of 2016,
including performance
highlights, information
on our people, our culture
and our Mission, Strategy
and Values.
54
CORPORATE
GOVERNANCE
Global Specialists
Financial Highlights
Where we Operate
Our Mission, Strategy & Values
Our People, Clients and Culture
Our Businesses at a Glance
JLT International Network
STRATEGIC REPORT
11
STRATEGIC
REPORT
2
4
5
6
7
8
10
OVERVIEW
2
OVERVIEW
This section includes a
review of our corporate
governance and summaries
of the work of our Board
and its Committees.
Corporate Governance Report
Audit & Risk Committee Report
Nominations Committee Report
Directors’ Remuneration Report
Directors’ Report
101 108 109 110 111 112 113 119 172 Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Significant Accounting Policies
Notes to the Financial Statements
Company Financial Statements
SHAREHOLDER INFORMATION
180
ADVISORS &
SHAREHOLDER
INFORMATION
This section includes
the Group and Company
financial statements
and related notes.
55 63
71 73
92 181 Group Five Year Review
182 Advisors & Shareholder Information
183 Principal JLT Offices
This section includes
the Group five year review and
information about advisors,
shareholders and the Group’s
principal offices.
Jardine Lloyd Thompson Group plc Annual Report 2016
FINANCIAL STATEMENTS
100
FINANCIAL
STATEMENTS
CORPORATE GOVERNANCE
12 Chairman’s Statement
15 Chief Executive’s Review
18 Our Market Context
22 Our Business Model
This section includes the
23 Delivering on our Strategy
Chairman’s Statement,
26 Key Performance Indicators
Chief Executive’s and Finance
27 Group Executive Committee
Director’s Reviews as well as
28 Review of Operations
details of our markets, business
37 Finance Director’s Review
model, strategic progress,
42 Risk Management Report
operations and key risks.
46 Corporate Responsibility
1
OVERVIEW
GLOBAL
SPECIALISTS
Focusing and growing in specialist areas where we offer distinctive products, services and independent
choice, such as:
AEROSPACE
ENERGY
more than
39% 30%
JLT represents 39% of the
world's large airline operators,
with individual fleet values
in excess of USD50m
2
JLT handles in excess
of 30% of the world's
mobile drilling rig fleet
Jardine Lloyd Thompson Group plc Annual Report 2016
CONSTRUCTION
100bn
£
JLT's London construction
team arranged coverage for
projects globally with a total
value of £100bn
OVERVIEW
STRATEGIC REPORT
CORPORATE GOVERNANCE
EMPLOYEE
BENEFITS
LIFE SCIENCE
14bn 6 10
£
Our Specialty, Property
& Casualty team provides
services to 6 of the top
10 global pharmaceutical
companies
UK's
No.1
JLT is the UK's largest
administrator of private
sector pensions
Jardine Lloyd Thompson Group plc Annual Report 2016
SHAREHOLDER INFORMATION
Our Financial Lines Group
placed M&A insurance on
transactions with a total
value of £14.4bn in 2016
of
the
top
FINANCIAL STATEMENTS
FINANCIAL LINES
3
OVERVIEW
FINANCIAL
HIGHLIGHTS
We are pleased to be able to present a good set of results that reflect the Group’s sustained
overall momentum.
£m
Total revenue
Underlying trading profit*
Excl. US investment**
Underlying profit before tax*
Excl. US investment**
Reported profit before tax
2016
1,261.3
193.7
220.7
172.6
199.6
134.9
2015
1,155.1
187.5
208.0
170.1
190.6
155.0
Change
9%
3%
6%
1%
5%
(13%)
Pence per share
Underlying diluted EPS*
Reported diluted EPS
Total dividend per share
2016
51.4p
37.8p
32.2p
2015
52.2p
48.0p
30.6p
Change
(2%)
(21%)
5%
* Underlying results exclude exceptional items
** Excludes the US investment of £27.0m in 2016 (2015: £20.5m)
On a restated basis: see Note 9 of the Financial Statements on page 129
SEGMENTAL BREAKDOWN
2016 Turnover by Division
2016 Turnover by Location of Client
Employee Benefits
£300.3m
24%
Risk & Insurance
£956.3m
£1,256.6m
Rest of the World 4%
United Kingdom 29%
Europe 8%
Australia &
New Zealand 13%
Asia 16%
£1,256.6m
76%
Americas 30%
Total Revenue
(£m)
9
+ %
Underlying Trading Profit*
(£m)
1,104.1
1,155.1
1,261.3
196.8
187.5
193.7
2014
2015
2016
52.2
51.4
2015
2016
3
+ %
2016 Growth Rate
2016 Growth Rate
2014
2015
2016
Underlying Profit Before Tax*
(£m)
Underlying Diluted EPS*
(pence)
183.0
1
170.1
172.6
+ %
2016 Growth Rate
57.1
(2)%
2016 Growth Rate
2014
2015
2016
2014
Turnover = Revenue excluding investment income
4
Jardine Lloyd Thompson Group plc Annual Report 2016
OVERVIEW
WHERE
WE OPERATE
STRATEGIC REPORT
JLT is one of the world’s leading providers of insurance, reinsurance and employee benefits related
advice, brokerage and associated services. We are specialists. Our deep expertise and entrepreneurial
culture give us the insights, creative freedom and tenacity to go beyond the routine and deliver better
results for our clients. Because at JLT, clients come first.
JLT owns offices in 40 territories and has more than 10,000 colleagues. Supported by the
JLT International Network, we service clients in over 135 countries.
40
TERRITORIES
10,000+
EMPLOYEES
CORPORATE GOVERNANCE
135+
COUNTRIES*
FINANCIAL STATEMENTS
Owned locations
Argentina
Macau
Australia
Malaysia
Bahrain
Myanmar
Barbados
Netherlands
Bermuda
New Zealand
Brazil
Norway
Canada
Peru
Chile
Philippines
China
Singapore
Colombia
South Africa
Denmark
South Korea
Finland
Sweden
France
Switzerland
Germany
Taiwan
Guernsey
Thailand
Hong Kong
Turkey
India
UAE (Dubai)
Indonesia
UK
Ireland
USA
Japan
Vietnam
SHAREHOLDER INFORMATION
Associates
Austria/
Central & Eastern Europe
India
Italy
Malta
Mexico
Spain
* See page 10 for more detail on
the JLT International Network
Jardine Lloyd Thompson Group plc Annual Report 2016
5
OVERVIEW
OUR MISSION,
STRATEGY & VALUES
OUR MISSION
INDEPENDENT
CLIENT FIRST
RESULTS BASED
We advise our clients without
influence or bias and value
innovation and creativity.
We act in our clients’ best
interests and bring the best
of JLT to all of our clients.
We expect to be judged
and rewarded based
on our performance.
OUR STRATEGY
The five pillars of our strategy balance the interests of our four key stakeholders - our clients, our people,
our trading partners and our shareholders.
Focusing and
growing in
specialist areas
Building our
international reach
and relevance
Improving our
efficiency and
effectiveness
Providing a
distinctive working
environment
Operating
collaboratively
as ‘One JLT’
Focusing and growing
in specialist areas
within our operations
where we can offer
distinctive products,
services and
independent choice.
Building our
international reach and
relevance, especially in
the world’s high growth
economies, to better
meet the needs of
local and multi-national
clients and trading
partners.
Improving the way
we work and serve
clients through
innovation and
by investing in
the efficiency and
effectiveness of
our people, systems
and processes.
Providing a distinctive,
entrepreneurial and
results-based work
environment that
attracts, develops and retains the best
individuals.
Operating
collaboratively as
‘One JLT’ to bring
the best of JLT to
our clients and trading
partners anywhere
in the world.
OUR VALUES
COLLABORATION
AGILITY
RIGOUR
We recognise that our people drive
our success.
We think fast, move swiftly
and act decisively.
We work with integrity and discipline
and stand up for what we believe in.
Our people work together as ‘One JLT’
to share knowledge, solve problems and
deliver the best solutions for our clients.
Our entrepreneurial drive gives
us the freedom to take on new
challenges, think creatively and capture
opportunities that others cannot.
Our work is thorough and our solutions
are robust, because it matters to
us to do what is right for our clients,
our people, our trading partners
and our investors.
6
Jardine Lloyd Thompson Group plc Annual Report 2016
OVERVIEW
OUR PEOPLE,
CLIENTS AND CULTURE
CLIENT FIRST
INDEPENDENT
ANALYTICAL
OUR
OUR
CULTURE
S
ENTREPRENEURIAL
NER
INNOVATIVE
LD
RT
PA
EH
O
G
AR
EXPERT
ER
S
TR
OUR
AD
IN
OUR CLIENTS
OUR CULTURE
Our culture is about having the best people who specialise and
work to serve clients. Our culture helps us attract and retain the
very best talent by valuing and recognising their expertise. Our
clients, colleagues and trading partners work with us because
our culture delivers consistent outcomes.
We have two flagship training programmes, the International
Senior Management Programme and the Emerging Leaders
Programme. Both provide intensive and immersive multi-day
training to better prepare our leaders across the business.
INTERNATIONAL SENIOR MANAGEMENT PROGRAMME
Each year JLT runs the International Senior Management
Programme (ISMP), for some of our most promising leaders
drawn from across the Group. Its purpose is to build worldclass leadership capabilities, deepen people’s understanding
of the JLT Group, promote greater collaboration, strengthen
relationships and preserve the Group’s culture.
Employees attending the 2016 ISMP included: Stuart Beatty,
Rick Burridge, Catherine Christiansen, David Gordon, Andres
Guiulfo, Keith Harrison, Ed Hochberg, Guy Holland-Bosworth,
David Payne, Dave Richards, Damian Schinck, Doug Turk,
Hans Van Heukelum, Conor Whelan and Nick Williams-Walker.
SHAREHOLDER INFORMATION
We are fiercely protective of our culture and, as we grow, we
take care to preserve it. We ensure that it always supports the
very best talent and creates successful and compelling client
results. Collaboration is one of JLT's core values. Our employees
work together to share their strengths globally for their clients,
pooling experience and developing each other’s expertise.
We continue to listen to our people. Using this insight, action
plans were created and implemented locally to address issues
raised by the survey.
FINANCIAL STATEMENTS
Our culture allows our specialists to solve complex risk with
creativity and collaboration. We are 'client-first' and put our
clients at the centre of everything we do. We are not all things
to all people. We understand that success requires focus and
trade-offs, and when specialty and expertise are aligned
we achieve unparalleled results for our clients.
We also ran our employee survey, which showed strong
completion rates and high overall engagement.
CORPORATE GOVERNANCE
SH
COLLABORATIVE
OUR PEOPLE
We believe that our people are the best in the industry.
We attract and retain the very best people and invest in
them by offering a comprehensive range of learning and
development opportunities that stretch far beyond mandatory
training courses.
STRATEGIC REPORT
R
In 2016 we embedded our new mentoring framework and made
it available to a broader range of colleagues at multiple levels
across the business. Our London office alone hosted more than
149 work experience placements, created 18 apprenticeships
and hired 10 graduates.
OUR
CL
IE
LE
OP
PE
S
NT
OU
Our people are the reason for JLT's success. Our people collaborate, take personal accountability
and are recognised and rewarded for their efforts.
Jardine Lloyd Thompson Group plc Annual Report 2016
7
OVERVIEW
OUR BUSINESSES
AT A GLANCE
RISK & INSURANCE
Our Risk & Insurance business comprises our global specialty insurance and reinsurance broking
operations and our wholesale insurance broking business.
Our specialist teams focus on those sectors where we have a distinctive level of knowledge and expertise.
Working in partnership with clients to manage the key risks they face, we act as their intermediary with
insurers and reinsurers and provide related risk management, analytical, advisory and other services.
OUR GLOBAL RISK & INSURANCE BUSINESSES PROVIDE SERVICES INCLUDING:
Advice and consultancy
Brokerage and placement
Advice to our clients on their
insurance and reinsurance
requirements, ensuring that
they understand the likelihood
and potential severity of the
risks they face, the options
available to mitigate those
risks and the potential cost
of doing so.
Acting on our clients’ behalf,
using our specialist knowledge
to negotiate and place
insurance cover with insurers
and reinsurers all over
the world.
RISK & INSURANCE
2016
Revenue
Specialist insurance
products
Providing our clients with
access to certain exclusive
insurance facilities, binders
and other products, without
taking any balance sheet
underwriting risk.
CONTRIBUTION TO
GROUP REVENUE 2016
Underlying Trading Profit
£960.9m £166.6m
11%
+
2015: £866.6m
4
+ %
2015: £160.9m
Trading Margin
Employees
17%
5,460*
2015: 19%
2015: 5,602
* Excludes employees in shared service operations
8
Jardine Lloyd Thompson Group plc Annual Report 2016
76%
Other services
Providing a range of related
services to our clients
and insurance market
counterparties in areas
such as captive management,
claims management and
administration, and capital
raising and corporate
insurance advice.
OUR BUSINESSES
JLT Specialty
p29
JLT Re
p29
JLT Australia & NZ
p30
JLT Asia
p30
JLT Latin America
p30
JLT US Specialty
p31
JLT Canada p31
JLT Europe,
Middle East and Africa
p32
JLT Insurance
Management p32
OVERVIEW
EMPLOYEE BENEFITS
STRATEGIC REPORT
Our Employee Benefits business offers a comprehensive range of employee benefits advice and services
to companies, pension trustees and individuals.
Our specialist teams act as advisers, intermediaries and service providers in the areas of pensions
consultancy and administration, employee benefits and healthcare, life insurance and wealth management.
OUR GLOBAL EMPLOYEE BENEFITS BUSINESSES PROVIDE SERVICES INCLUDING:
Trustee & Corporate
Benefits Consulting
Wealth and Investment
Management
Integrated risk management
services to UK pensions
trustees and corporate
sponsors, including actuarial,
investment and risk transfer
consultancy, scheme design,
governance and independent
trustee services.
Advice and support to high net
worth individuals on financial
planning, at-retirement support
and life protection requirements.
Discretionary management
of assets for both high net
worth individuals and company
pension schemes, in addition
to asset-hosting services.
Employee health and benefit
programmes, medical claims
administration, occupational
health services and
placement of health and risk
protection policies.
EMPLOYEE BENEFITS
2016
Revenue
CONTRIBUTION TO
GROUP REVENUE 2016
Underlying Trading Profit
4
+ %
14%
+
2015: £288.5m
2015: £43.6m
Trading Margin
Employees
16%
2,656*
2015: 15%
2015: 3,121
24%
Provider of one of the most
widely-used UK pensions
administration and fund
accounting software platforms
to private sector pension
schemes.
Providing integrated web
solutions for access to
information and services
and benefits management. OUR BUSINESSES
UK & Ireland
p34
Asia
p34
Australia & NZ
p34
Latin America
p35
Canada
p35
Europe, Middle East
and Africa
p35
* Excludes employees in shared service operations
Jardine Lloyd Thompson Group plc Annual Report 2016
9
SHAREHOLDER INFORMATION
£300.4m £49.5m
Technology Solutions
FINANCIAL STATEMENTS
Providing a range of
administration services
designed to meet the
requirements of pension
trustees, corporate sponsors
and scheme members, from
back-office support to fully
outsourced administration.
Supplemented with payroll,
communication, documentation
and technical services.
CORPORATE GOVERNANCE
Pension Administration
OVERVIEW
JLT INTERNATIONAL
NETWORK
The JLT International Network offers our multi-national clients insurance risk management and
employee benefit solutions in over 135 countries, making it one of the largest insurance broking
networks in the world.
The Network is comprised of majority-owned, associate and non-owned partner operations and provides
wa distribution channel for JLT’s specialty, wholesale, reinsurance and employee benefits activities.
All brokers in the Network are carefully selected for their
specialist knowledge, local market reputation and quality
of service. We expect them to have the capability not only
to service JLT’s multinational clients to the highest standards,
but to compete for and win the largest accounts in their own
territories in collaboration with JLT’s specialty, wholesale and
reinsurance teams.
Service standards are underpinned by a set of clear operating
procedures to ensure that each client, regardless of their size,
consistently receives the highest level of care and attention
in the delivery of risk management, insurance broking, and
advisory services. Each member of the network is also required
to adhere to JLT’s Code of Ethical Conduct.
10 Jardine Lloyd Thompson Group plc Annual Report 2016
A further area of differentiation is JLT’s Global Service Team,
a multilingual group that provides clients with a single point
of contact who can manage their global programme and help
resolve any issues on a daily basis. This central function acts
as the focal point for JLT’s international account co-ordination
and is used as a centre of excellence, delivering insights to
clients and colleagues globally on market practices, regulation
and the compliance of global insurance programmes.
Overall responsibility for the Network sits with the JLT
International Network Management team, whose role is to
ensure common service standards by sharing expertise and
best practices across the Network, whilst offering a clear
channel through which to escalate and resolve issues with
speed and efficiency.
OVERVIEW
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
STRATEGIC
REPORT
This section includes the Chairman’s Statement, Chief Executive’s
and Finance Director’s Reviews as well as details of our markets,
business model, strategic progress, operations and key risks.
12
15
18
22
23
26
Chairman’s Statement
Chief Executive’s Review
Our Market Context
Our Business Model
Delivering on our Strategy
Key Performance Indicators
27
28
37
42
46
SHAREHOLDER INFORMATION
Group Executive Committee
Review of Operations
Finance Director’s Review
Risk Management Report
Corporate Responsibility
Jardine Lloyd Thompson Group plc Annual Report 2016
11
STRATEGIC REPORT
CHAIRMAN’S
STATEMENT
“
On behalf of the Board I would like
to thank everyone at JLT for their
continued hard work and contribution
to the Group's results in 2016.
Geoffrey Howe
“
I am pleased to present the Group’s
Annual Report for the financial year
ended 31 December 2016.
before tax increased by 1% to £172.6
million. The Group's trading profit margin
reduced from 16.2% to 15.4%.
JLT has delivered a good set of financial
results in 2016, when set against
the continued challenging trading
environment. In 2016 we have continued
to face severe external headwinds in
the economies in which we operate,
in the industries in which we specialise
and in the insurance market. We are
also addressing the challenges that
have been specific to JLT, including the
build-out of our organic start-up in US
Specialty and the challenges posed by
legal and regulatory changes in our UK
Employee Benefits business. We now
have a clear line of sight to the benefits
that will flow from all our efforts to
address those challenges.
The reduction in the Group’s underlying
trading profit reflects JLT's continued
investment in building out its US
Specialty operation and the challenging
business environment. More detail on
both of these are set out in the Chief
Executive’s Review on pages 15 to 17.
PERFORMANCE
Total revenues increased by 9%,
or 3% at constant rates of exchange,
to £1.26 billion with overall organic
revenue growth of 2%.
The Group’s underlying trading profit
increased by 3% to £193.7 million;
however at constant rates of exchange
it decreased by 9%. Underlying profit
Excluding the US Specialty net
investment of £27.0 million, the Group’s
underlying profit before tax would have
increased by 5%, and the Group’s
trading profit margin would have been
broadly maintained at 18.1%, compared
with 18.4% for 2015.
Our reported profit before tax reduced
by 13% to £134.9 million, which includes
the impact of exceptional costs of
£37.7 million and, as a consequence,
reported diluted EPS decreased to
37.8p and underlying diluted EPS
decreased to 51.4p.
INCREASED DIVIDEND
The Directors have recommended a final
dividend of 20.6 pence per share (2015:
19.5 pence) for the year to 31 December
2016. The dividend will be paid on 4 May
12 Jardine Lloyd Thompson Group plc Annual Report 2016
2017 to shareholders who are on
the register as at 31 March 2017.
This will bring the total dividend for
the year to 32.2 pence per share, an
overall increase of 5.2% and the eighth
consecutive year that JLT has paid an
increased dividend.
The business has delivered a Total
Shareholder Return (TSR) of 195%
over the past 8 years, as illustrated
in the chart on page 88.
£1,261.3m
TOTAL
REVENUE
9%
INCREASE
ON 2015
20.6p
FINAL
DIVIDEND
CORPORATE ACTIVITY HIGHLIGHTS
JLT Re achieved market leading organic revenue growth of 4%,
double 2015’s rate of growth, with an improved trading profit
margin of 21%, as that business gained further momentum
as a global reinsurance broker and advisor.
The build-out of our US Specialty platform continues, with
revenues increasing by 57% in the year to US$56 million.
With the peak of the investment programme being reached in
2016, we are now fully focused on narrowing our investment
losses this year and next, to achieve profits as planned in 2019.
In the year the Group completed 7 new acquisitions, for a total
consideration of £25.3 million, as it continued to build further
scale in its existing businesses and geographies.
CORPORATE GOVERNANCE
SENIOR MANAGEMENT DEVELOPMENTS
There were a number of Board and senior management
changes during the year.
James Twining stepped down from the Board with effect from
26 April 2016. Bruce Carnegie-Brown joined the Board as a
Non-Executive Director on 1 May 2016 and succeeded Richard
Harvey as Chairman of the Remuneration Committee on 1
November 2016. Bruce will unfortunately be stepping down
from the Board at the end of June, following his appointment
as Chairman of Lloyd's of London. Sadly Lord Leach, our
Deputy Chairman, died in June 2016 (see next page). Adam
Keswick joined the Board as Deputy Chairman with effect from
1 September 2016. Richard Harvey retired from the Board
with effect from 31 December 2016 and Jonathan Dawson
succeeded him as Senior Independent Director with effect from
the same date. I would like to thank Richard and James for their
contribution to the Board and wish them both well for the future.
Mike Rice, CEO of JLT's US Specialty business, and
William Nabarro, Special Adviser to the Group Chief Executive,
both joined the Group Executive Committee with effect from
1 May 2016. Lucy Clarke, Deputy CEO of JLT Specialty,
joined the Group Executive Committee with effect from
26 September 2016.
With effect from 28 February 2017, the following senior
management changes are being made: Mike Methley is being
appointed as Group Chief Operating Officer. Mark Drummond
Brady becomes CEO of JLT Latin America and Chairman of JLT
Jardine Lloyd Thompson Group plc Annual Report 2016
13
SHAREHOLDER INFORMATION
During the year, the Board and each of its Committees
undertook reviews of their effectiveness. The conclusions from
these reviews provided useful feedback to each body on its
performance. Further details are provided in the Corporate
Governance Report on pages 55 to 62.
More detail on the relationship with Jardine Matheson
is set out on page 60.
FINANCIAL STATEMENTS
The Board recognises the need for a strong corporate
governance framework and supporting processes across
the Group and believes that good governance, with tone set
from the top, is a key factor in delivering sustainable business
performance and creating value for the Group's stakeholders.
The Board and I feel that the Board has a good balance of
experience, skills and knowledge to support and challenge
the management team, and that it is supported by effective
governance and controls systems. More information on these
systems can be found in the Corporate Governance Report on
pages 55 to 62. In addition, the Directors’ Report on pages 92
to 99 reports on JLT’s compliance with the 2014 UK Corporate
Governance Code (the Code) during 2016.
In March 2016 an amended Relationship Agreement was
signed, formalising the processes the Company has in place
to control the provision of information to Jardine Matheson
and clarifying when and how information may be requested
by Jardine Matheson from JLT.
CORPORATE GOVERNANCE
The recently announced investment in, and partnership
with, Construction Risk Partners (CRP), a highly respected
Construction specialist broker, will establish a market-leading
Construction practice as part of the US Specialty business.
The acquisition also completes our global Construction
capability and enables us to serve international contractors
wherever they operate around the world.
STRATEGIC REPORT
We successfully implemented the restructure of our UK
Employee Benefits business. This included delivering the
anticipated savings of £9 million in the year, and a further
saving of £5 million will be secured in 2017. The business is
now positioned once again to grow its revenues and profits.
The strength and support of Jardine Matheson has been, and
will continue to be, an important factor in the success of JLT.
Since 2014 a Relationship Agreement has been in place with
Jardine Matheson, in accordance with the Listing Rules of the
Financial Conduct Authority (FCA), which require shareholders
with a 30% or more shareholding to comply with certain
independence provisions set out in a written and legally
binding agreement.
OVERVIEW
Our Risk & Insurance businesses delivered organic revenue
growth of 3% in the year, with particularly strong performances
in Construction and Aviation in all markets around the world.
JLT’s share incentive schemes are designed to ensure that
decisions are made by management to support long-term
growth, that the right behaviours are rewarded and that
management’s interests are aligned with those of shareholders.
Further details of the operation of these schemes can be found
in the Remuneration Committee Report set out on pages 73
to 91.
STRATEGIC REPORT
Canada, in addition to his current role as Deputy Group CEO.
Mike Reynolds, Global CEO of JLT Re, assumes responsibility
for JLT Insurance Management. Bala Viswanathan, CEO of JLT
UK & Ireland Employee Benefits, also becomes International
Chairman of Employee Benefits.
We are also keen to ensure that we minimise our
environmental impact and we take a number of steps to
reduce our carbon footprint, such as encouraging the use of
teleconferencing facilities where possible, instead of travelling
to face-to-face meetings.
OUR PEOPLE
SHARE BUY-BACK AUTHORITY
On behalf of the Board I would like to thank everyone in JLT
for their continued hard work and contribution to the Group’s
results in 2016. I would also like to welcome all our new
colleagues who have joined JLT during the year. We have a
distinctive culture at JLT that values agility and entrepreneurial
drive, rigour and depth of thought and a collaborative approach
that puts customers first. We invest in our people and provide
exciting opportunities to develop their careers as well as a first
class working environment. There is further information about
our people and culture on page 7.
We will be seeking renewal of our standing share buy-back
authority at the forthcoming Annual General Meeting (AGM),
up to a maximum of 10% of the Company’s issued share
capital. As in previous years, we will not be seeking shareholder
approval for a dispensation under Rule 9 of the Takeover
Code in relation to this authority.
OUR ROLE IN SOCIETY
JLT takes its role in society very seriously and has an active
Corporate Responsibility programme. JLT’s approach is
coordinated by a Corporate Responsibility Steering Committee,
chaired by the Deputy CEO and whose members also include
the Group Finance Director, the Group Head of Investor
Relations and the Group Company Secretary, as well as
representatives from each of the Group's principal businesses.
Our Diversity Committee has defined our Diversity agenda
on the basis of three pillars: Networking, Sponsorship and
Involvement. In 2016 JLT supported a number of initiatives,
both internally and in public events in the London and other
markets, to help drive a more diverse and inclusive business
and to play our part in addressing diversity challenges in
our industry.
JLT supports the charitable efforts of colleagues around the
Group. We currently focus on three strategic partners aligned
to our own areas of business: sharing the social benefits of
knowledge, wellbeing and resilience. Our current partners
on these strategic themes are Udaan Foundation (knowledge),
Alzheimer's Society (wellbeing) and RedR (resilience). We
manage the majority of our charitable giving business-bybusiness, with a central fund to provide greater support to
our strategic partners.
We regularly engage clients in joint fundraising activities and
see this as an important part of client relationship building.
We match pound-for-pound money raised by UK staff in
fundraising activities and all UK staff are entitled to take
one Charity Day per year, when they can spend company
time helping a charity. The Group Charities Committee
considers the many requests we receive from charities
and takes a particular interest in those charities connected
to communities local to our offices.
14 Jardine Lloyd Thompson Group plc Annual Report 2016
This means that if the directors were to initiate a buy-back,
then in order to avoid triggering a mandatory offer obligation
on Jardine Matheson Holdings (JMH) under Rule 37 of the
Takeover Code, JMH would need to be able to participate in
those buy-backs so that its overall percentage holding (which
as at 10 February 2017 was 40.16%) did not increase following
the buy-back.
Although the Company has not utilised the authority to buy
back shares since 2008, the Board believes it would be in the
interests of all shareholders for the Company to have the right
to purchase its own shares in the market in the appropriate
circumstances. We would only exercise this authority if we
believe it is in the best interests of the shareholders and
would result in an improvement of earnings per share.
Geoffrey Howe
Chairman
28 February 2017
Lord Leach
Deputy Chairman
February 1997 - June 2016
Sadly Lord Leach, our Deputy Chairman and a Non-Executive
Director since 1997, and a representative of Jardine Matheson
on our Board, died in June 2016. Rodney had been a hugely
respected source of great wisdom and invaluable advice to
the Board as well as to Dominic, myself and our predecessors
over many years. He will be sorely missed.
JLT has delivered a good set of financial
results in 2016, particularly when set
against the continued challenging trading
environment, which persisted all year.
This included the sustained softness in
both the insurance and reinsurance rating
environment, depressed commodity
prices and lacklustre global GDP growth.
The Group entered 2017 with momentum
intact and confident that JLT is well
positioned to deliver organic revenue
growth across the Group’s businesses.
The reduction in the Group’s underlying
trading profit at CRE largely reflects
our continued investment in building
out our US Specialty operation and the
challenging business environment.
Excluding the US net investment of £27
million, the Group’s underlying profit
before tax would have increased by 5%
to £199.6 million and the Group’s trading
profit margin would have been broadly
maintained at 18.1%, compared
to 18.4% for 2015.
RISK & INSURANCE
Our global Risk & Insurance businesses,
which represent 76% of the Group’s
revenue, grew revenues to £960.9 million,
an increase of 11%, with organic revenue
growth of 3%.
JLT Specialty generated a 5% increase
in headline revenues to £327.5 million
in the year, or a 3% increase both at
CRE and on an organic revenue basis,
a strong performance in challenging
trading conditions which saw insurance
rates continue their downward trend
across all Specialty lines. The business
had to contend in particular with the
reduced economic activity in the energy
and marine sectors. Trading profit in
JLT Specialty increased by 7% to £73.1
million, with the trading margin of 22%
maintained at the same level as 2015.
We also delivered strong growth in our
international Specialty businesses, which
together accounted for £437.8 million
of revenues, an increase of 15% (or 4%
at CRE), with organic growth of 3%.
JLT Australia & New Zealand delivered
trading profit of £34.1 million, compared
with £32.7 million in 2015, but saw a
decrease at constant rates of exchange
to £30.6 million. The trading environment
has been particularly competitive in the
region and this, coupled with continued
significant pressure on rates in the
region, has masked a good underlying
performance by the business.
Our Latin American operations achieved
good revenue growth of 13%, with
organic revenue growth of 4%. Trading
profit, however, reduced slightly year-onyear, from £21.3 million to £21.1 million,
reflecting the planned investment in
building specialty capabilities across
the region, the benefits of which we
expect to start to see in 2017.
Jardine Lloyd Thompson Group plc Annual Report 2016
15
SHAREHOLDER INFORMATION
JLT achieved total revenues of £1,261.3
million in 2016, an increase of 9%
over 2015, or 3% at constant rates of
exchange (CRE). This included organic
revenue growth of 2%, consistent with
that of 2015, once again impacted
by the decline in revenues in the
UK and Ireland Employee Benefits
(UK Employee Benefits) business.
Our underlying trading profit increased
by 3% to £193.7 million; however at CRE
it decreased by 9%. Underlying profit
before tax increased by 1% to £172.6
million. The trading profit margin reduced
from 16.2% to 15.4%.
FINANCIAL STATEMENTS
The weakness of sterling from June
2016 was a positive factor in the Group’s
results; the estimated impact of £22.2
million, at the underlying profit before
tax level, provided a helpful offset to the
challenging trading environment.
Dominic Burke
CORPORATE GOVERNANCE
KEY FINANCIAL
HIGHLIGHTS
“
JLT had a number of successes
in the year, demonstrating
the fundamental strength and
resilience of our global franchise.
STRATEGIC REPORT
“
OVERVIEW
CHIEF EXECUTIVE’S
REVIEW
STRATEGIC REPORT
This business is successfully collaborating with our other offices
around the world to win market share. The Group’s operations
in Brazil performed strongly despite the difficult economic
backdrop in that country.
Our US Specialty business has continued to make progress
in its second full year of operation, achieving organic revenue
growth in excess of 50%, higher than the rate in 2015. We
continued with our programme of recruitment, with headcount
reaching 223 employees at the year end. Revenues for the year
were $56 million, up from $36 million in 2015, while continued
investment in the business resulted in losses of $37 million. Our
net investment spend in 2016 in this business was £27 million.
The recently announced investment in, and partnership with,
Construction Risk Partners, will establish a market-leading
Construction practice as part of the US Specialty business.
The acquisition also completes our global Construction
capability and enables us to serve international contractors
wherever they operate around the world.
JLT Re, our global reinsurance broking business, delivered
a strong performance in 2016, with reported revenues
increasing by 13% to £195.6 million, representing marketleading organic revenue growth of 4%, twice the rate of 2015.
This performance was delivered despite the well documented,
multi-year decline in pricing across most lines of reinsurance
and in most geographies and the continued consolidation in
capital providers.
JLT Re’s trading profits increased to £40.5 million and this is
reflected in an improved trading margin of 21%, delivering upon
management's guidance that profitability would be improved
in this business. This margin improvement was achieved while
the business continues to invest significantly for future growth,
not only in recruiting leading talent to further strengthen its
General Property, Casualty and Specialty lines and its analytics
capabilities, but also in its infrastructure and systems.
EMPLOYEE BENEFITS
Within our global Employee Benefits operations, which
represent 24% of the Group’s revenue, revenues increased
by 4% overall, but declined by 3% on an organic basis. These
results were impacted by the decline in first half revenues in
the UK and Ireland business.
Reported revenues for the year for JLT’s UK and Ireland
Employee Benefits business (UK Employee Benefits) were
£160 million, compared to £167.4 million in 2015, a decline of
4%, or 8% on an organic basis. This reflects the final impact
of the cessation of commission revenue from life assurers
- which amounted to £5 million earned in 2015. Putting the
performance of UK Employee Benefits into context is best done
by looking at second half performance, given the restructure
programme in 2016. Second half revenues of £85.1 million
16 Jardine Lloyd Thompson Group plc Annual Report 2016
exceeded those of the same period in 2015 of £82.4 million,
which was an encouraging indication of the stabilisation in
the revenue run rate.
At the time of our interim results we indicated that the business
would deliver the majority of its profits in the second half and
this has been the case. Trading profit for the year was £12.3
million, compared to breakeven at the half year.
The business has successfully completed its restructuring
programme, which has resulted in a flatter, more client-centric
structure and a headcount reduction of over 300 employees.
The programme will deliver £14 million of annualised savings
in 2017, £9 million of which was delivered in 2016 (£7 million
of that in the second half).
The focus in 2016 was, and will continue to be into 2017,
very much on transitioning and rebalancing the business so that
trading profit margins can grow. The emphasis of the business
continues to be on investing to strengthen and enhance
platforms and to build out the sales function.
While the profitability of the business in 2016 was weighted
towards the second half of the year, UK Employee Benefits
is anticipating organic revenue growth for 2017 and this,
taken with the £5 million residual benefit of the restructuring
programme, means we are confident that this business is
making steady progress towards delivering a 15% trading
profit margin for 2018.
Our Employee Benefits businesses in other parts of the world
performed well.
In Asia, PCS, our high net worth life insurance broking business,
saw some slowdown in first half revenues due to regional
economic uncertainty in South Asia; however, steps were taken
in the second half to broaden the range of products offered by
the business. This succeeded in pulling revenues back up from
the half year position, which had been negative year-on-year.
Our Australian Employee Benefits business achieved 36%
revenue growth, following the acquisitions made in 2015 and
2016 in rehabilitation services provided in relation to Workers
Compensation insurance. Organic growth was 4%. With a
series of major client wins as a result of the expanded capability
of the business, accelerated revenue growth and improved
margins are projected in 2017. The trading margin of the
business improved from 16% in 2015 to 20% in 2016.
JLT’s Latin American Employee Benefits operations
delivered organic revenue growth of 10%. Performance was
particularly notable in Colombia - on the back of the Workers
Compensation offering - and in Brazil, despite the challenging
local economic backdrop. Investment has continued to be
made in building out capabilities and expanding the offering
in the region; this is the underlying reason for a smaller increase
in trading profit and a 200 bps reduction in trading margin.
Details of the performance of each individual business are
set out in the Review of Operations on pages 28 to 36.
2016 saw some of the most challenging trading and economic
conditions that I’ve experienced in my 11 years as Chief
Executive. Despite the headwinds, JLT had a number of
successes in the year, demonstrating the fundamental strength
and resilience of our global franchise.
In light of the priority given in the recent UK Government
White Paper to protecting the UK’s strength in financial services
and to agreeing appropriate transitional arrangements, we
are confident that, after the UK leaves the EU, Continental
European insureds will still be able to secure continuing access
to the London Market insurance expertise that is essential
for them to meet their business requirements.
Examples of the changes the Group is going through include:
• The recently announced investment in and partnership with
CRP followed 7 new acquisitions made during 2016 to add
further specialty capabilities to our business; as a result,
today we have global construction capabilities totalling
some 400 colleagues across the Group;
• The improving performance of UK Employee Benefits and
the re-establishment of its revenue momentum and profit
growth; and
JLT has entered 2017 with good momentum across all of its
businesses. We are therefore confident that we will deliver
organic revenue growth more in line with historical rates,
generating sustained year-on-year financial progress.
SHAREHOLDER INFORMATION
JLT’s entrance into the US market as a reinsurance broker in
2013 and then as a specialty player in 2014 marked a pivotal
change in the development of the Group. Our capability to serve
clients in the industries in which we specialise wherever they
operate around the world now defines us as a global broker.
We are, however, a global broker with our own distinctive
model, able to operate flexibly and collaboratively in the
interests of our clients, which positions us to outperform our
larger competitors. This standing is beginning to generate
substantial benefits throughout the Group’s operations, and
particularly in our powerhouse Specialty operations in both
reinsurance and specialty broking – as their performance in
2016 demonstrates.
At many times in recent years the word ‘resilient’ has perfectly
described JLT’s performance. We have grown, evolved and
flourished despite setbacks and headwinds. And that is exactly
what we have done once again in 2016. Not only have we
continued to address external headwinds in the economies in
which we operate, in the industries in which we specialise and
in the insurance market; we are also addressing the challenges
that have been specific to JLT – the challenge of an organic
start-up from scratch in our US Specialty business; and the
challenges posed by legal and regulatory change in our UK
Employee Benefits business. We now have clear sight of the
benefits that will flow from all the effort we have put in
to address those challenges and opportunities.
Dominic Burke
Group Chief Executive
28 February 2017
Jardine Lloyd Thompson Group plc Annual Report 2016
FINANCIAL STATEMENTS
• The success of JLT Re, now firmly established as a
principal component of the Group following the substantial
acquisition made 3 years ago. JLT Re’s success has been
achieved despite reinsurance premium rate reductions
of 30% and more since the acquisition was made. The
combination of its strong market position with regional
insurers in the US, and the strength of JLT Group’s
relationships with global insurers has provided a powerful
platform from which to grow.
LOOKING FORWARD
CORPORATE GOVERNANCE
• The disposal of two businesses during the year. One of
these was Thistle, in the UK, a business which no longer
fitted the Group’s strategy;
STRATEGIC REPORT
2016 was also a year of significant change for JLT. The Group
continued to evolve and grow, building momentum in ways
not always apparent in revenues or profits. There were steady
improvements in barometers such as client advocacy scores,
new business win rates, staff retention and client renewal rates,
which underpin my strong belief that we are well equipped for
accelerating progress.
OVERVIEW
A YEAR OF FURTHER PROGRESS
JLT’s operations in Europe, outside of the UK, primarily
comprise our subsidiary companies in Ireland and Northern
Europe and our associate companies in Southern, Central
and Eastern Europe. JLT provides advice in relation to complex
risks and access to the London Market for clients across the
Continent – but we do not have JLT-owned operations of a
significant size in France or Germany. The services we provide
to Continental European clients cover only the most specialist
portion of their risk management requirements. The Group's
aggregate revenues received from EU countries into the UK
in 2016 was modest – no more than 4%.
17
STRATEGIC REPORT
OUR MARKET
CONTEXT
JLT is one of the world’s leading providers of insurance, reinsurance and employee benefits related
advice, brokerage and services. Our business is influenced by seven major factors:
1
MACRO-ECONOMIC GROWTH TRENDS
JLT’s long-term growth prospects are shaped more by
underlying macro-economic and demographic factors
than short-term insurance and reinsurance rating trends.
Higher levels of economic growth are both the cause
and effect of greater levels of corporate activity,
investment and increasing personal wealth. This activity
stimulates demand for our services, whether that is
placing the insurance for a major infrastructure project,
or helping a company arrange and manage its employee
benefits programme.
CURRENT TRENDS
2016 was a year of surprises and contrasts. The year started
with the spectre of China’s hard landing, falling bond yields,
low commodity prices and crumbling global trade. This was
compounded by widespread volatility in the stock markets
which forced central bankers to adopt unconventional policies
such as negative interest rates to combat deflation. However,
much of this reversed towards the end of the year. Inflation
expectations and growth prospects made a notable
comeback with the US presidential election and the
anticipation of promised pro-growth policies of a Trump
administration. The prospect of a reflationary trend in major
economies resulted in higher bond yields and triggered a 'riskon' sentiment. Commodity prices began to recover against the
backdrop of easing supply glut. Global trade recovered and
the stock markets rose to new highs. Productivity growth and
structural reforms, however, continued to remain elusive.
2016 witnessed the outcomes of the Brexit vote and the US
elections in particular posing material risks to global trade and
migration, which are likely to shape the policy decisions and
the major macro-economic trends of 2017.
FUTURE OUTLOOK
2017 is likely to see strong growth in the US and Japan, backed
by fiscal measures. Populist and protectionist political agendas
could, however, adversely affect trade relations, impacting
emerging markets the most. Stabilising commodity prices and
low unemployment rates in the developed world could assist
in reducing deflationary pressures and in normalising monetary
18 Jardine Lloyd Thompson Group plc Annual Report 2016
policies. At the same time, a strong US dollar could adversely
affect growth prospects in the US and weakening currencies
could exacerbate capital outflows from emerging economies,
especially China. A plethora of political uncertainties exists as
a number of countries go to vote in early 2017 in Europe, the
UK invokes Article 50 to trigger the process of leaving the EU
and the new administration takes charge of the White House.
If political uncertainties are safely negotiated and various fiscal
and structural reforms are implemented, the global economy
is likely to grow at a sound rate.
IMPACT ON JLT
A great deal of preparatory work is currently underway
within the UK Government to formulate negotiating positions
as regards both the UK’s exit from, and the subsequent
trading relationships with, the EU and the rest of the world.
JLT is watching these developments closely, and has been
contributing to the inputs being made to Government by
various insurance industry groups and the financial services
industry more generally, to ensure that we are well equipped
for the range of possible Brexit outcomes. Our commitment
is to ensure that our clients can depend on continuing quality
service from their broker and uninterrupted access to markets.
Macro-economic headwinds and a volatile geo-political
environment inevitably impact demand for insurance-related
services as new projects and investments are delayed, scaled
back or cancelled and companies look to drive more value
out of their broker relationships. Industries or countries with
particular exposure to commodity prices (such as mining
and energy) or foreign exchange are particularly exposed.
JLT is a global business with a Specialty-led strategy
that attracts and retains high quality talent and provides
differentiated offerings to clients. The business is well placed
to collaborate with clients across geographies and capitalise
on evolving opportunities.
Over the longer term, we also believe that our strategy aligns
us well with faster-growing sectors and geographies where
demand is driven by long-term and fundamental demographic
factors and market trends such as population growth, ageing,
medical inflation (in the case of international Employee Benefits),
urbanisation and accelerating middle-class wealth.
2
THE (RE)INSURANCE RATING ENVIRONMENT
3
INTEREST RATES
CURRENT TRENDS
Base rates in the UK and the Eurozone today stand at 0.25%
and 0%, respectively. In December 2016, the US again
increased its short-term interest rate to 0.75%.
Moderating capital inflows, the prospect of higher insured
catastrophe losses, reserving volatility and inflationary and
interest rate concerns are coalescing to counteract price
declines. As a result, downward reinsurance pricing pressure
eased in 2016. This was due to:
• Limited scope for further price reductions for some classes
of business as rates neared technical minimums;
• Growing demand for reinsurance as cedents recognised
that current pricing levels presented opportunities; and
• Increased underwriting discipline amidst elevated loss
experiences, growing reserving volatility (with some notable
instances of reserve strengthening) and a changing
macroeconomic environment (including rising inflation
expectations).
FUTURE OUTLOOK
IMPACT ON JLT
FUTURE OUTLOOK
Market expectations are that the US will continue to increase
interest rates in modest increments during 2017. While
there can be no certainty as to future movements in interest
rates, those in the UK and Eurozone are expected to remain
unchanged during 2017, particularly whilst uncertainty relating
to the outcome of Brexit negotiations continues.
IMPACT ON JLT
Historically, investment income has provided JLT with a
significant flow of revenue – 17% of underlying trading profit in
2008. However, for the reasons stated above, by 2016 this had
reduced to £4.7 million, 2% of underlying trading profit, despite
average balances increasing over the same period by 113%
to £797 million. Rising interest rates tend to lead to higher levels
of economic activity, which in turn provide more opportunities
for JLT to grow its business. The level of interest rates also has
an impact on the Group's pension liabilities.
We estimate that, for every 1% improvement in our average
achieved deposit rate, JLT generates approximately £8 million
of additional investment income, assuming broadly consistent
average invested balances. Taking into account the overall
interest rate outlook for 2017, JLT’s investment income
is not expected to increase significantly from that of 2016.
SHAREHOLDER INFORMATION
JLT is affected by lower insurance and reinsurance pricing as
a significant proportion of our income is based on commissions.
Lower pricing also often leads to rivals discounting heavily to
retain and win business, increasing competition on our feebased business.
The rating environment creates challenges for the business
delivering organic growth. Our Specialty-led strategy aims
to counter these headwinds by creating our own growth by
focusing on our Specialty sectors and on economies where
there is demand for our distinctive value proposition, and by
winning market share from our competitors.
FINANCIAL STATEMENTS
Nevertheless, excess capital and historically low cession rates
continue to prevent any meaningful pricing upturn at present,
and unless 2017 sees the market hit by one or more major
catastrophic events, and/or there is a sharp increase in the
global interest rate environment (which may drive capital to
other asset classes), it is hard to see insurance or reinsurance
rates firming in the immediate future.
Since the global financial crisis, the world economy has been
characterised by a sustained period of very low interest rates,
most notably in ‘developed’ economies, as policy makers have
sought to stimulate growth by reducing the cost of borrowing
and boosting exports, as well as injecting unprecedented levels
of liquidity into the market in the form of quantitative easing
stimulus programmes.
CORPORATE GOVERNANCE
• Static levels of reinsurance supply due to a marked
slowdown in the rate of third-party capital entry in particular;
CURRENT TRENDS
STRATEGIC REPORT
Insurance brokers earn interest income on the fiduciary
funds that they hold on behalf of clients. This essentially
comprises premiums passing through to underwriters
and paid claims being passed back to clients.
OVERVIEW
he insurance and reinsurance industry is inherently
T
cyclical, with the price of insurance and reinsurance
fluctuating depending on demand for cover and the
supply of capital into the market. A lack of capital,
typically caused by one or more large losses or by
investors choosing to invest in alternative asset classes,
can lead to a ‘hard market’, when the cost of insurance
and reinsurance increases. An over-supply of capital
can lead to a ‘soft market’, which results in premiums
reducing. Today, near record levels of capital remain the
dominant force in maintaining soft pricing environments,
as excess supply chases relatively muted demand.
Jardine Lloyd Thompson Group plc Annual Report 2016
19
STRATEGIC REPORT
4
EXCHANGE RATES
As a global business, JLT has both ‘translational’
(ie reporting of foreign financial statements in sterling)
and ‘transactional’ foreign exchange exposures.
Our largest transactional exposure arises in our London
Market businesses, which have sterling cost bases,
but generate a large amount of US dollar revenue.
In 2016, this amounted to some USD 357 million.
2016 Foreign exchange rates
0.85
USD: GBP
AUD: GBP
0.8
0.75
0.7
0.65
0.6
0.55
0.5
CURRENT TRENDS
Sterling depreciated significantly against other major currencies
during 2017, following the outcome of the EU referendum in
June 2016. Of particular relevance to JLT are the US dollar
and Australian dollar. During 2016, the US dollar versus sterling
traded at an annual average rate of c1.36 (£0.74), compared
to a 2015 average rate of c1.53 (£0.65). Sterling also weakened
against the Australian dollar (which is important to us given
the relative size of the contribution of our Australian business
to our profits), which traded at an average of 1.83 during 2016
compared to 2.04 in 2015.
FUTURE OUTLOOK
Market consensus continues to suggest that the US dollar is
expected to outperform sterling and other currencies during
2017. This is primarily a reflection of expected relative interest
rate yields, with further moderate increases in US interest rates
anticipated during 2017 compared to UK and Eurozone GDP
growth forecasts, and the continued support from a lower
oil price and uncertainty over Brexit negotiations continuing
to weigh on both sterling and euro during 2017.
0.45
0.4
1 Jan
5
31 Dec
COMPETITION
With owned insurance broking and employee benefits
operations spanning 40 territories, JLT faces a large
number and range of local, regional and international
competitors. Given this, it is impossible to comment
on the relative individual strengths and weaknesses
of all of our competitors.
CURRENT TRENDS
Macro-economic headwinds and the continued weakening
in the insurance and reinsurance rating environment have
combined, over recent years, to create a very challenging and
competitive environment, with some rivals willing to discount
heavily, particularly on fee-based accounts, to retain and win
new business, as well as offer very significant remuneration
packages to attract new staff.
IMPACT ON JLT
A depreciation in the value of sterling (in particular versus
the US dollar) increases JLT’s revenue relative to its sterling
cost base (transactional) and affects the sterling equivalent
value of the income statements and balance sheets of our
international operations when consolidated at the Group level
(translational). Overall, we experienced a favourable foreign
exchange impact of £23.5 million on underlying trading profit
in 2016 versus 2015.
JLT does not hedge its accounting translational foreign
exchange exposure. However, to mitigate the transactional
impact of foreign currency movements arising from actual
cash flows, we operate a rolling currency hedging programme,
covering our US dollar exposures in particular, as well as other
transactional currency exposures, to reduce the impact of weak
sterling on our overall business. While this hedging programme
helps smooth the effects of foreign exchange movements, it
cannot eliminate these completely. Further detail on our hedging
programme and the impact of currency movements is provided
on page 39 in the Finance Director’s Review.
20 Jardine Lloyd Thompson Group plc Annual Report 2016
FUTURE OUTLOOK
The competitive environment is unlikely to ease significantly
in the near future. The nature of our competition is changing,
however, as we continue to grow.
IMPACT ON JLT
JLT has historically been able to attract people and clients due
to its differentiated Specialty-led offering and distinctive culture.
This can be seen, for example, in how we have been able to
consistently attract market-leading talent around the world.
We remain confident that our client and people proposition
and growth momentum will allow us to continue to attract
and retain industry talent and win clients.
6
REGULATION
CURRENT TRENDS
IMPACT ON JLT
As advances in technology take place, both JLT and its
clients face rapid changes in how their businesses are run
and the risks they face. Technological developments create
opportunities for JLT to find ways of carrying out its operations
more efficiently and cost-effectively. They also allow us to
enhance the service we provide to clients, for example through
the collection and use of data to drive better insights for our
clients, or through the adoption of new channels for engaging
and communicating with them. Technological change also gives
rise to new areas, such as cyber risk, in which JLT's expertise in
risk management can be applied to support and service clients.
On the other hand, the level of risk to our own business from
cyber risk continues to increase and requires substantial
investment in systems and procedures to counter the threats
it poses. Technological advances also potentially enable a
new generation of competitors to disrupt existing industries
and players.
FUTURE OUTLOOK
The rapid pace of technological change is likely to lead to
further operational efficiencies and a significant increase in
the volume of data that can be collected and analysed, which
could have a significant impact on the industry’s actuarial
understanding of underlying risk trends and how they should
be priced.
Cyber risk will continue to pose a significant risk for many
organisations, including ours, but also an opportunity for risk
management organisations.
IMPACT ON JLT
Jardine Lloyd Thompson Group plc Annual Report 2016
21
SHAREHOLDER INFORMATION
JLT is committed to using technology to improve its own
operational efficiency and develop its data analytics capabilities,
to deliver further insights for clients, and enhance its sales and
marketing capability. While the threat of digital disruption exists
at the lower end of some of our smaller businesses, our core
Specialty-led offering is less prone to disruption due its advice
and advocacy-based model. Cyber risk will continue to offer
both a threat to our operations and an opportunity to provide
risk management advisory services to clients.
FINANCIAL STATEMENTS
As JLT grows, we can expect a greater level of regulatory
scrutiny in line with our increased scale, particularly for those
of our businesses that carry consumer ‘conduct risk’. We
continue to invest in our risk and compliance frameworks to
ensure that we have the right skills to enable us to advise our
businesses on the implications of the changing regulatory
environment, as discussed in the Risk Management Report on
pages 42 to 45. We are committed to working constructively
with all of our regulators to ensure that we meet our regulatory
commitments and protect our clients’ interests.
CURRENT TRENDS
CORPORATE GOVERNANCE
We also observe that there is more consistency in the type
of regulation being introduced across many countries, in
areas such as data protection. These trends place additional
strain and cost on the business and increase the chances
of some form of regulatory action being taken in those
jurisdictions. However, we recognise that good regulation also
creates a more level playing field and helps stimulate greater
client demand. Proportionate and fair regulation is therefore
something we welcome as being positive for our clients,
our people and the industry as a whole.
Technology influences every aspect of life, with
implications for the risks our clients face, how we operate
as a company and how we adapt to the rapidly-changing
external and competitive environment.
STRATEGIC REPORT
The level of oversight exercised by the various financial services
regulators around the world varies from country to country and
often by business activity. In previous years, we have stated
that the regulatory environments in some of the jurisdictions
in which we operate are likely to strengthen, which is proving
to be the case in countries such as Hong Kong, South Africa,
Malaysia and Japan. Moreover, several are in the process of
implementing ‘conduct’ orientated regimes similar to the
UK’s FCA.
TECHNOLOGY
OVERVIEW
JLT operates under the jurisdiction of a number of
different regulators around the world. Its principal
regulator is the UK Financial Conduct Authority (FCA).
7
STRATEGIC REPORT
OUR BUSINESS
MODEL
CLIENTS AND SERVICES
Risk & Insurance
Employee Benefits
Acting as an intermediary for our clients with insurers and reinsurers
and providing related risk management, analytical, advisory and
other administrative services.
Acting as an advisor, intermediary and service provider in the
pensions consultancy and administration, employee benefits
and healthcare, life insurance and wealth management sectors.
Clients include multinational corporations and other public and
private sector organisations, retail insurance brokers and individuals.
Clients include multinational corporations, public and private
sector organisations, pension trustees and individuals.
FEES AND COMMISSIONS
Fees are typically charged either on a time-cost
or a fixed-fee basis and are earned in both the
Employee Benefits and Risk & Insurance business
groups. These fees are paid by the client rather
than the insurer or reinsurer.
ACQUISITIONS
Commissions are typically based on a percentage of the
insurance or reinsurance premium being paid by the client.
Frequently, the level of this commission payment is also
subject to negotiation with the client. This commission is
paid by the insurer or reinsurer rather than the client and is
largely earned in the Group’s Risk & Insurance businesses.
INVESTMENT INCOME
The Group’s Strategy (see page 23) includes
a commitment to grow its Specialty-led
capabilities and build out its international
reach and relevance. Acquisitions have
been, and will continue to be, an important
element of delivering on this strategy.
Investment income arises from the holding of cash
and investments on behalf of clients. The holding of
client monies largely relates to premium and claims
payments which the business holds for a short period
of time in its role as the intermediary.
In 2016, the Group made 7 new acquisitions
for a total consideration of £25.3 million.
In the last 5 years, the Group has made
a total of 39 acquisitions for a total
consideration of £360 million.
COSTS
PEOPLE
The Group continues to retain and recruit
market-leading individuals across all of its
global operations.
JLT now has 10,232 employees working
for the Group. Key to the success of our
recruitment approach has been retaining
and attracting individuals who not only add
further capabilities, but also fit JLT’s distinctive
culture.
The Group is committed to investing in the
training and development of all its employees.
Two of the largest underlying costs to the business
relate to staff and premises. In 2016, these
represented 62.3% and 5.1% respectively of total
revenues. There is a clear focus on cost discipline
with the trading margin being a Key Performance
Indicator of the Group. In addition, the Group has
a rolling programme of investment in areas such as
information technology, process improvement and
other enhancements to client service.
PROFIT
REINVESTED IN BUSINESS
22 Jardine Lloyd Thompson Group plc Annual Report 2016
REMITTED TO SHAREHOLDERS
OVERVIEW
DELIVERING ON
OUR STRATEGY
DRIVING GROWTH
We seek to drive growth through two main pillars:
Our proposition is based primarily on client advocacy, deep
knowledge, tailored advice and service excellence. Our aim
is to drive strong revenue and profit growth in a way that is
sustainable and that balances the interests of our four key
stakeholders: our clients, our people, our trading partners
and our shareholders. We believe our strategy is distinctive
and will allow us to grow and win market share, despite
today’s difficult trading environment. To deliver our strategy,
we have identified five core pillars:
ENABLING GROWTH
2. Building our international reach and relevance
3. Improving our efficiency and effectiveness
These two pillars are rooted in our view of long term economic
trends relating both to the improving prospects of ‘developed’
world economies, such as the United States, where we are
focused on building a significant presence, and the continued
opportunity represented by the ‘developing’ world, where
factors such as population growth, ageing and increasing
personal prosperity are driving long term demand, as detailed
in the Our Market Context section (pages 18 to 21). Our
specialist focus positions us well to continue to capitalise
on those trends, as long term investment in areas such as
infrastructure, construction, telecommunications, aviation
and healthcare continues.
4. Providing a distinctive working environment
We have significantly enhanced the efficiency and effectiveness
of our processes, systems and operating models over the last
few years to improve the way we serve clients. In 2016 we
commenced a global initiative to introduce a consistent
Operating Model in all our businesses, supported by improved
IT platforms.
We continue to invest in our people proposition to ensure
that we are able to attract and retain the very best talent in
the market. We continue to see significant financial benefit
from collaboration between our Specialty operations
around the world.
SHAREHOLDER INFORMATION
We are already amongst the world’s leading construction,
offshore energy, aerospace, commodity and brokers of high
value life assurance policies, with improving positions in
a range of further specialty areas which are set to benefit
from global economic activity.
5. Operating collaboratively as ‘One JLT’
On the following pages, we describe in more detail each
element of our strategy, selected highlights of our progress
in 2016 and priorities for 2017.
Geographically, we are very well positioned in fast growing
markets. In Asia we also benefit from our relationship with
Jardine Matheson and its strong reputation across the region.
Jardine Lloyd Thompson Group plc Annual Report 2016
FINANCIAL STATEMENTS
1. Focusing and growing in Specialist areas
To enable this growth, we are focused on delivering
against three further pillars:
CORPORATE GOVERNANCE
Our strategy is founded on the concept of specialisation.
We choose to only operate in those areas where we have
deep-seated expertise and knowledge that adds value
to clients and provides us with a competitive edge. We
carefully prioritise our specialisms based on where we
see the best opportunity to establish a leadership position,
supported by long-term growth trends.
STRATEGIC REPORT
Our mission is to be a Client First business that always acts in our clients’ best interests, to be
Independent by advising our clients without bias or influence and valuing innovation and creativity,
and to be Results Based in our focus on delivering for clients within JLT’s performance-based culture.
23
STRATEGIC REPORT
STRATEGY ELEMENT
FOCUSING AND GROWING
IN SPECIALIST AREAS
1
2
SELECTED ACHIEVEMENTS IN 2016
• Invested further in building our capabilities in key Specialty areas
including Representations & Warranties and Fine Art, Jewellery
and Specie
• Enhanced analytics and modelling capabilities across
the Group to improve our client advisory proposition
• Completed a number of new acquisitions to deepen our
Specialty capabilities in developing markets and economies,
including in Peru and in our India associate business
BUILDING OUR
INTERNATIONAL REACH
AND RELEVANCE
• Continued the build-out of our US retail operations through
organic development
• Strengthened our Healthcare capability in Australia by acquiring
a further leading occupational health business
• Recently acquired a majority interest in Construction Risk Partners,
a leading US-based construction risk and surety specialty insurance
broker, accelerating JLT’s presence as a focused Specialty broker
in the world’s largest insurance market
IMPROVING OUR
EFFICIENCY AND
EFFECTIVENESS
3
• Established a global Operations Forum to deliver
more effective working practices across the Group
• Commenced a global initiative to improve the Group’s
digital capabilities
• Rolled out a single common reinsurance platform across
the Group’s international operations
• Delivered a restructuring programme in our UK Employee
Benefits business, which resulted in a structural rationalisation
and cost reductions through improvements to processes
and more effective use of technology
PROVIDING A DISTINCTIVE
WORKING ENVIRONMENT
4
• Completed the 2016 Global Employee Engagement Survey,
with high levels of participation, identifying opportunities to drive
even stronger employee engagement and further improve the
working environment
• Organised the second Emerging Leaders Programme,
helping to develop the next generation of JLT leadership
• Progressed a range of programmes to encourage the development
of greater diversity in our workforce, led by a global advisory group
OPERATING
COLLABORATIVELY
AS ‘ONE JLT’
5
24 Jardine Lloyd Thompson Group plc Annual Report 2016
• Continued to win major global accounts through improved
collaboration across the Group, including the Group’s largest
international Employee Benefits client win to date
• Embedded global initiatives in Mining, Construction,
Communication, Technology & Media and Credit and Political
& Security, to ensure an aligned global approach to identifying,
prospecting and servicing key accounts
PRIORITIES FOR 2017
OBJECTIVE
• Grow our Mining business around the world,
leveraging the global practice group and leadership
OVERVIEW
• Continue to develop our Healthcare offering
around the world to take advantage of
changing client demands
Focusing and growing in specialist
areas within our existing operations
where we can offer distinctive
products, services and
independent choice
• Continue to invest in strengthening our Specialty
offering around the world, both organically and
through selective bolt-on acquisitions
• Reinforce our retail, Employee Benefits and
Reinsurance activities in developing markets,
through selected investments, bolt-on acquisitions
and partnerships
• Rationalise our applications landscape and
develop digital-ready IT platforms in our businesses
Building our international reach and
relevance, especially in the world’s
high growth economies, to better
meet the needs of local and multinational clients and trading partners
CORPORATE GOVERNANCE
• Continue to roll out robotic process automation
across the Group where relevant to provide faster,
more consistent and higher quality processes
STRATEGIC REPORT
• Invest in the continued build-out of our
US Specialty business, through recruitment
and selected bolt-on acquisitions
Improving the way we work and
serve clients through innovation
and by investing in the efficiency
and effectiveness of our people,
systems and processes
• Enhance our risk mitigation and control activities
across our UK and international businesses
FINANCIAL STATEMENTS
• Develop global talent pools which will ensure
JLT’s talent is being deployed in the right place,
at the right time
Providing a distinctive, entrepreneurial
and results based work environment
that attracts, develops and retains
the best individuals
• Continue development of diversity programmes
to ensure that we recruit the best and foster
career development without limitation
• Build our technical training capability
on a global scale
• Develop our portfolio management activities
across all our operating entities and geographies,
supported by an appropriate operating platform
SHAREHOLDER INFORMATION
• Optimise use of our Customer Relationship
Management Tool to improve insight and alignment
around key accounts and the opportunity pipeline
Operating collaboratively as ‘One JLT’
to bring the best of JLT to our clients
and trading partners anywhere in
the world
Jardine Lloyd Thompson Group plc Annual Report 2016
25
STRATEGIC REPORT
KEY PERFORMANCE INDICATORS
GROUP
Total revenue per employee*
Trading Margin**
For the Group, revenue per employee increased, reflecting
a combination of the reduction in headcount in UK Employee
Benefits and the impact of foreign exchange. Across the
Group we continued to invest in our Specialty capabilities
through the ongoing recruitment of leading industry
professionals and targeted acquisitions.
The underlying trading margin decreased from 16.2% to
15.4%, reflecting the continued investment in our US Specialty
business and the reduction in the revenues of our Energy and
Marine businesses. Excluding the cost of the net US Specialty
investment, the Group’s trading profit margin would have been
broadly maintained at 18.1%, compared to 18.4% for 2015.
114.4
£120.1
108.9
120.1
17.8
15.4
£'000
2014
2015
16.2
15.4
2015
2016
%
2016
2014
Underlying PBT***
Underlying Diluted EPS***
Underlying PBT increased by 1% reflecting the reduction in
the revenues of our Energy and Marine businesses, together
with the impact of the cost of the investment in building out
the US Specialty operation. Excluding the net US investment,
the underlying PBT would have increased by 5%.
Underlying diluted EPS decreased by 2% in the year. The
performance related remuneration of the executive directors
and other senior executives within the Group is closely aligned
to PBT and EPS performance. This is discussed in more detail
in the Remuneration Report on pages 73 to 91.
183.0
£172.6
170.1
51.4
£'m
2014
2015
RISK & INSURANCE
Total Revenue Per Employee*
£’000
57.1
172.6
51.4
2015
2016
Pence
2016
2014
EMPLOYEE BENEFITS
Trading Margin**
%
144.7
155.6
19
2015
2016
2015
Total Revenue Per Employee*
£’000
17
76.3
2016
2015
15
16
2016
2015
2016
* Total revenue (fees, commissions and investment income) per employee is calculated using the average number of employees for the year
** Trading margin represents trading profit, being total revenue less operating expenses, divided by total revenue
*** Underlying results exclude exceptional items
On a restated basis: see Note 9 to the Financial Statements on page 129
26 Jardine Lloyd Thompson Group plc Annual Report 2016
Trading Margin**
%
86.5
HOW WE CALCULATE OUR KEY PERFORMANCE INDICATORS
52.2
*Executive Director of Jardine Lloyd Thompson Group plc
GROUP EXECUTIVE COMMITTEE
PAUL KNOWLES
CEO, JLT Specialty
Dominic joined the Group in 2000 when his business
Burke Ford was acquired by JLT and became CEO
of JLT’s UK Retail and Employee Benefits business.
He was appointed Group COO in January 2005 and
became Group Chief Executive in December 2005.
Paul was appointed CEO of JLT Specialty and joined the
GEC in January 2016. He has been with JLT for more than
20 years and has held a number of senior roles, including
leading the Construction and Real Estate business and
JLT Specialty’s Major Corporate business.
MARK DRUMMOND BRADY*
Deputy Group CEO, CEO JLT Latin America
and Chairman, JLT Canada
MIKE METHLEY
Group Chief Operating Officer
CHARLES ROZES*
Group Finance Director
Charles joined JLT in September 2015 as Group
Finance Director. He is also a director of JLT India.
Charles has also held senior roles over a period of
25 years at Barclays, Bank of America, IBM and
PricewaterhouseCoopers.
WILLIAM NABARRO
Special Adviser to the Group Chief Executive
William rejoined JLT in early 2016 and became a member of the
GEC in May 2016. He previously worked for JLT between 2003
and 2010 in a range of senior roles, including as a plc Director
and Executive Chairman of Employee Benefits. Prior to this he
worked as a merchant banker with Hambros Bank and Lazards
and he was also, for many years, a non-executive director of
ICAP Plc, the wholesale money and securities group.
MIKE REYNOLDS
Global CEO, JLT Re
Leo joined JLT Australia in 1985 and was appointed
Managing Director of the Risk Services Division in 2000.
He became Managing Director of JLT’s Australian and
New Zealand businesses in January 2008 and was then
appointed CEO and joined the GEC in January 2010.
Mike joined JLT in November 2012 as Group Finance
Director, before his appointment as Global CEO, JLT Re
on 1 September 2014. Mike had worked in a number of
senior finance roles in the insurance industry, including as
CFO of ACE European Group Limited and Aon Benfield.
From 28 February 2017 Mike has assumed responsibility
for JLT Insurance Management.
ADRIAN GIRLING
Chairman, JLT Specialty
MIKE RICE JR
CEO, JLT Specialty USA
Adrian has been with JLT for over 30 years.
He was CEO of Jardine Lloyd Thompson UK Limited
before being appointed Chairman of JLT Specialty in
February 2012. Following the merger of JLT Specialty
and Lloyd & Partners Adrian became Chairman of the
enlarged business.
Mike joined the Group in August 2014 as the CEO
of US Specialty, responsible for overseeing JLT's US
operations and expansion. He joined the GEC in
May 2016. Prior to joining JLT, Mike held several
senior positions within Aon over a 25 year career.
ROSS HOWARD
Executive Chairman, JLT Re
DOMINIC SAMENGO-TURNER
CEO, JLT Asia
Ross joined JLT in November 2013 on completion of the
acquisition of Towers Watson Re and joined the GEC in
January 2014. Ross was formerly the global leader of
Towers Watson’s reinsurance business.
Dominic joined JLT and the GEC on 9 February 2015
and was appointed CEO of JLT Asia in May 2015.
Dominic joined the Group from Willis, where he
spent 20 years, most recently as Co-Chief Executive
of Global Specialties and a director of Willis Limited.
KEITH JOHNSON
Group General Counsel
Keith was appointed as General Counsel for the JLT
Group in August 2014 and joined the GEC at the same
time. He was formerly a partner of Linklaters, with more
than 20 years’ corporate and management experience
in the UK, Sweden and Asia.
He currently serves as Chairman of the LIIBA Aviation
Executive, a post he has held for over 20 years.
BALA VISWANATHAN
CEO, JLT UK & Ireland Employee Benefits,
International Chairman of Employee Benefits
Bala joined the JLT Group in 2006 as CEO of its
operations in India. In April 2014 he was appointed Group
COO based in London and joined the GEC at the same time.
In October 2015 Bala became CEO of the UK & Ireland
Employee Benefits business and from 28 February 2017
he became International Chairman of Employee Benefits.
Jardine Lloyd Thompson Group plc Annual Report 2016
27
SHAREHOLDER INFORMATION
LEO DEMER
CEO, JLT Australia and New Zealand
Jonathan joined JLT and became a member of the
GEC in 2010. He is a former Chairman of the London
and International Insurance Brokers’ Association
and sat on the London Market Group.
FINANCIAL STATEMENTS
JONATHAN PALMER-BROWN
Adviser to the Group Chief Executive
CORPORATE GOVERNANCE
LUCY CLARKE
Deputy CEO, JLT Specialty
Lucy has worked within the insurance industry in the
London market for over 25 years. She joined JLT in 2002
and leads JLT Specialty's Energy and Marine teams.
She was appointed as Deputy CEO of JLT Specialty in
September 2015 and joined the GEC in September 2016.
He has over 35 years’ experience in the industry.
Mike joined JLT in 1994. He is a member of the GEC.
He was CEO of JLT Latin America from 2013 to 2017 and
Chairman of JLT Canada and JLT Insurance Management
from 2014 to 2017. Mike was previously Managing Director
of JLT Asia. Mike has been appointed as Group Chief
Operating Officer with effect from 28 February 2017.
STRATEGIC REPORT
Mark has been with the JLT Group since 1987. He joined
the GEC in 2006 and was appointed Deputy Group CEO in
September 2014. He is also a director of JLT’s US Specialty
business. From 28 February 2017, Mark assumes the roles
of CEO JLT Latin America and Chairman of JLT Canada,
in addition to his current role as Deputy Group CEO.
OVERVIEW
DOMINIC BURKE*
Group Chief Executive
STRATEGIC REPORT
REVIEW OF
OPERATIONS
RISK & INSURANCE
Our Risk & Insurance business comprises our global Specialty insurance and reinsurance broking
operations and our wholesale insurance broking business. Our specialist teams focus on those sectors
where we have a distinctive level of knowledge and expertise. Working in partnership with clients to
manage the key risks they face, we act as their intermediary with insurers and reinsurers, as well as
providing related risk management, analytical, advisory and other services.
ADVICE AND CONSULTANCY
SPECIALIST INSURANCE PRODUCTS
Advising our clients on their insurance and reinsurance
requirements, ensuring that they understand the likelihood and
potential severity of the risks they face, the options available to
mitigate these risks and the potential cost of doing so.
BROKERAGE AND PLACEMENT
OTHER SERVICES
Acting on our clients’ behalf, using our specialist knowledge
to negotiate and place insurance cover with insurers and
reinsurers all over the world.
RISK & INSURANCE
2016
Underlying Trading Profit
£960.9m
£166.6m
2015: £866.6m
Providing a range of related services to our clients and
insurance market counterparties in areas such as captive
management, claims management and administration,
and capital raising and corporate finance advice.
CONTRIBUTION TO
GROUP REVENUE 2016
Revenue
+11%
Providing our clients with access to certain exclusive insurance
facilities, binders and other products, without taking any
balance sheet underwriting risk.
+4%
2015: £160.9m
Trading Margin
Employees
17%
5,460*
2015: 19%
2015: 5,602
* Excludes employees in shared service operations
28 Jardine Lloyd Thompson Group plc Annual Report 2016
76
%
OUR BUSINESSES
JLT Specialty
p29
JLT Re
p29
JLT Australia & NZ
p30
JLT Asia
p30
JLT Latin America
p30
JLT US Specialty
p31
JLT Canada p31
JLT Europe,
Middle East and Africa
p32
JLT Insurance
Management p32
JLT SPECIALTY
Underlying trading profit
Trading margin
2016
£327.5m
2015
£311.2m
% Change
5%
£73.1m
£68.3m
7%
22%
22%
Review of Operations
JLT Specialty generated a 5% increase in headline revenues to
£327.5 million, or a 3% increase at constant rates of exchange
(CRE), all of which was organic. Trading profit increased by 7%
to £73.1 million, with the trading margin maintained at 22%.
Principal lines of business
Accident & Health, Aerospace, Construction, Communications,
Technology & Media, Cargo, Credit, Political & Security, Cyber,
Energy, Financial & Professional, Fine Art, Jewellery & Specie,
Food & Agribusiness, Life Science, Marine, Mining, Power,
Renewables, Real Estate and Specialty Property & Casualty.
£40.5m
£32.4m
25%
21%
19%
JLT Re is one of the world’s largest reinsurance brokers,
with approximately 700 professionals across 33 locations
in 16 countries, delivering world-class risk analysis and risk
transfer solutions.
Review of Operations
JLT Re delivered a strong performance in the year, with reported
revenues increasing by 13% to £195.6 million and marketleading organic revenue growth of 4%, twice the rate of 2015.
This performance was delivered despite the well documented,
multi-year decline in pricing across most lines of reinsurance
and in most geographies and the continued consolidation in
capital providers. JLT Re has continued to grow revenues
and profits steadily despite consecutive years of downward
rating pressure.
JLT Re’s trading profits increased to £40.5 million, with an
improved trading margin of 21% (2015: 19%). This margin
improvement was achieved while the business continued to
invest significantly for future growth, not only in recruiting leading
talent to further strengthen its General Property, Casualty and
Specialty lines and its analytics capabilities, but also in its
infrastructure and systems. Two acquisitions were completed
in December, to deepen our capabilities in Healthcare and in
the Central American region.
JLT Re operates on a global basis, and all regions delivered
organic revenue growth in the year. In the UK & Europe, JLT
Re’s most mature market, the organic growth came through
initiatives in Facultative, Binders and Healthcare, despite the
significant adverse rating environment in International Property,
Marine, Energy and Aviation.
Asia Pacific once again achieved very strong levels of organic
growth, with every territory showing growth.
North America continues to deliver strong performance, with
the benefits of the significant investments made in talent and
infrastructure now beginning to be realised.
Looking to 2017 and the recent January renewals, a reduced
rate of decline from prior years has been evident, with global
property-catastrophe pricing falling by 5.7%; this compares
with 8.2% in 2016 and double digit reductions in the two years
prior to that. Casualty price reductions were, however, similar
to those seen in 2016, with Specialty classes seeing more
substantial rate reductions than other areas, but again
a reduced rate of decline was noted.
Jardine Lloyd Thompson Group plc Annual Report 2016
29
SHAREHOLDER INFORMATION
In addition there were important client wins in the Cyber
division across a range of major financial institutions and
corporate clients, which in turn helped to drive growth
across our Financial Lines specialty.
% Change
13%
FINANCIAL STATEMENTS
The revenue base of Specialty is, however, both diverse
and well-balanced, which enables JLT better to withstand
sector-specific challenges. In 2016 there were particularly
strong performances by a number of divisions - including
Aerospace, Construction, Cargo and Food & Agriculture – with
higher revenues driven by client retention and market share
penetration.
Trading margin
2015
£173.6m
CORPORATE GOVERNANCE
This was a strong performance in challenging trading
conditions, which saw insurance rates continuing their
downward trend across all Specialty lines. The business had to
contend in particular with the reduced economic activity in the
energy and marine sectors, which led to a lower total value of
risk to insure. To put this in context, it has been reported that
in excess of $1 trillion of oil and gas capital projects in 2015
and 2016 were deferred, delayed or abandoned. JLT's Energy
and Marine divisions saw a £12 million reduction in year-onyear revenues, despite increasing their client bases and market
shares, and an estimated £8.5 million negative impact on Group
trading profit.
Underlying trading profit
2016
£195.6m
STRATEGIC REPORT
JLT Specialty, which includes our wholesale operations,
provides insurance broking, risk management and claims
services for clients across a wide range of business sectors.
The division employs some 1,400 people, primarily based
in London, but who also work in close collaboration with all
of JLT’s international offices, supplying them with industry
expertise, advice and access to international markets.
Total revenue
OVERVIEW
Total revenue
JLT RE
STRATEGIC REPORT
Today JLT Re is positioned amongst the leading global
reinsurance brokers, providing real choice and differentiation.
The strong start to the year which this business has had
underlines how the strategic investments made are enabling
it to continue to take market share from its competitors.
All classes of Treaty and Facultative Reinsurance and Corporate
Finance Advisory.
JLT AUSTRALIA & NEW ZEALAND
Underlying trading profit
Trading margin
Total revenue
2016
£90.3m
2015
£76.6m
% Change
18%
Underlying trading profit
£16.8m
£12.7m
33%
19%
17%
Trading margin
Principal lines of business
Total revenue
JLT ASIA
2016
£117.7m
2015
£109.5m
% Change
7%
£34.1m
£32.7m
4%
29%
30%
JLT Australia & New Zealand is one of the leading insurance
brokers in the region, combining international depth with
local, specialist expertise to deliver a comprehensive range of
insurance and risk solutions products and services to its clients.
The division employs over 800 people across 20 offices.
Review of Operations
On a reported basis our Australia and New Zealand businesses
saw revenues increase by 7% to £117.7 million, although this
translated to a 4% reduction on a CRE basis. The trading
environment has been particularly competitive in Australia and
New Zealand and this, coupled with the continued significant
pressure on rates in the region, masked a good underlying
performance by the business, with high levels of client retention
and a number of high profile client wins, particularly in the
Financial Lines and Corporate divisions. The new business
wins have included an increasing number of ‘coast to coast’
appointments, further underlining JLT’s growing national
Specialty presence.
Principal lines of business
Construction, Energy, Entertainment & Leisure, Financial &
Professional Services, Food & Agribusiness, Government,
Manufacturing, Mining, People Risks, Real Estate, Retail,
SME & Consumer Products, Sport, Transport and Logistics.
JLT Asia provides insurance broking and risk management
services in selected Specialties across the region. The
business’s rich history and in-depth local knowledge, together
with the close working relationship it enjoys with Jardine
Matheson, have enabled it to become one of the market
leaders in Asia. The division employs around 1,000 people
across 13 territories.
Review of Operations
Asia produced a strong performance in the year, with a headline
18% increase in revenues to £90.3 million and a 5% organic
growth rate. Trading profits grew strongly, with an increase of
17% at CRE. This was a good performance when set against
the challenging economic conditions and fierce rating pressure
in the region.
Principal lines of business
Aviation, Capital Risks, Construction, Cyber, Energy,
Entertainment & Leisure, Financial & Professional Services,
Food & Agribusiness, Manufacturing, Mining, People Risks,
Real Estate, Retail, SME & Consumer Products, Transport
and Logistics.
JLT LATIN AMERICA
Total revenue
2016
£71.4m
2015
£63.1m
% Change
13%
Underlying trading profit
£21.1m
£21.3m
(1%)
30%
34%
Trading margin
JLT Latin America provides insurance broking, reinsurance
broking and affinity insurance distribution through subsidiary
operations in Argentina, Brazil, Chile, Colombia and Peru. One
of the largest brokers in the region, the business prides itself
on its in-depth capabilities in its chosen Specialties. It employs
approximately 700 people across 22 offices in 5 countries.
Review of Operations
Our Latin American business delivered good revenue growth
of 13%, with organic revenue growth of 4%. Operations in Brazil
performed strongly despite the difficult economic backdrop in
that country. While the Group’s Latin American Risk & Insurance
operations experienced good revenue growth, trading profit
reduced year-on-year, reflecting the planned investment in
building specialty capabilities across the region, the benefits
of which we expect to start to see in 2017.
30 Jardine Lloyd Thompson Group plc Annual Report 2016
Principal lines of business
OTHER RISK & INSURANCE
BUSINESSES
JLT CANADA
JLT US SPECIALTY
Total revenue
Underlying trading profit
Trading margin
2016
£41.3m
2015
£23.3m
% Change
77%
(£27.0m)
(£20.5m)
(31%)
-
-
Review of Operations
The business now has proven capability and a track record of
winning business in specialist areas such as Financial Lines
and Cyber, Energy, Real Estate and Entertainment.
Significant over-capacity in the Canadian insurance marketplace
remains, which is putting downward pressure on premiums
and commissions overall. The underlying performance of the
business presents a good outlook for the future, as significant
investments and strategic changes to the business have
been made to react to the changing economic factors of the
Canadian economy. The competitive landscape remains strong,
and given our brand strength and specialty focus in areas in
which we choose to compete, we have maintained market
share and continue to show growth within our core specialties,
which include public sector, construction, and healthcare.
We continue to invest in attracting specialist talent and
positioning JLT Canada to become a leading specialty broker.
SHAREHOLDER INFORMATION
Given the investments to date in hiring and a steadily growing
client list, we are confident that US Specialty revenues will
once again see a significant uplift in 2017 and that the level
of investment losses will reduce. The progress that has now
been made in the US Specialty business means that 2016
represented the maximum level of losses from investment,
and the business is on track to deliver profit in 2019.
Principal lines of business
Energy, Entertainment & Hospitality, Aerospace, Construction,
Real Estate, Technology, Financial Institutions and Marine.
FINANCIAL STATEMENTS
The recently announced investment in, and partnership with,
Construction Risk Partners, a highly respected Construction
specialist broker, will establish a market-leading construction
practice as part of the US Specialty business. The acquisition
also completes our global Construction capability and enables
us to serve international clients wherever they operate around
the world.
JLT Canada reported revenue of £19.2 million in 2016,
a reduction of 6% on 2015. The business generated a trading
loss of £0.5 million, which was due to several factors: firstly,
a depressed economic market in natural resources which led
to many oil companies ‘right sizing’ which decreased overall
premium volumes; secondly, surety activity in Western Canada
has been lower than expected due to longer than expected
project life cycles, which led to fewer projects being started
during the year.
CORPORATE GOVERNANCE
US Specialty continued to make progress in its second full year
of operation, achieving organic revenue growth in excess of
50%, higher than the rate in 2015 and continuing a programme
of recruitment, with headcount reaching 223 employees at the
year end. Revenues for the year were $56 million, up from $36
million in 2015, while continued investment resulted in losses
of $37 million.
Review of Operations
STRATEGIC REPORT
US Specialty was formed in August 2014 as a Specialty broker
to serve leading US and global firms within specific industries
and product lines where we are able to use our expertise to
provide clients with bespoke risk management solutions.
The division employs some 220 people in 13 locations across
the US.
JLT Canada provides insurance broking and risk management
services across Canada. We focus on markets central to the
Canadian economy, such as construction, public sector, natural
resources, life science, healthcare and professional groups.
JLT Canada employs approximately 180 people across
7 locations.
OVERVIEW
Aviation, Construction, Energy & Power, Financial Lines, Marine,
Industrial Property & Casualty, Public Sector, Affinity Marketing
& Distribution, Reinsurance (Treaty & Facultative).
Jardine Lloyd Thompson Group plc Annual Report 2016
31
STRATEGIC REPORT
JLT EUROPE, MIDDLE EAST & AFRICA
JLT Europe, Middle East and Africa (EMEA) offers insurance
broking and risk management expertise in a region with a
growing demand for a Specialty offering. The division employs
nearly 300 people across 11 countries with owned operations in
Denmark, Finland, France, Germany, Netherlands, Norway and
Sweden across Europe, and in Bahrain, Turkey, the United Arab
Emirates as a regional hub across the Middle East and in
South Africa.
Review of Operations
JLT EMEA reported revenue of £41.8 million in 2016,
representing revenue growth of 39%, or 28% growth at CRE.
Organic growth was 17%. The business grew its trading
profit by 13% to £6.8 million, but its trading margin reduced
by 400 bps to 16%, mainly due to investments in people and
restructure costs.
The European operations in the EMEA region have been
transferred to JLT Specialty with effect from 1 January 2017.
JLT INSURANCE MANAGEMENT
JLT Insurance Management provides leading corporations
with Captive Management and Consulting services in Barbados,
Bermuda, Guernsey, Malta, Singapore and the US.
The business employs approximately 50 people across
these locations.
Review of Operations
Soft insurance and reinsurance markets continued to dampen
demand for captives, however the business delivered revenues
of £9.3 million, a 13% increase on 2015, or an increase of
2% at constant rates of exchange. Trading profit increased to
£0.8 million from £0.5 million in 2015. Through the provision of
captive management and consultancy services, JLT Insurance
Management supports some of JLT’s largest global clients and,
as such, plays a key role in programmes that deliver a significant
amount of revenue to the wider JLT Group.
32 Jardine Lloyd Thompson Group plc Annual Report 2016
EMPLOYEE BENEFITS
Our specialist teams act as advisors, intermediaries and service providers in the areas of pensions
consultancy and administration, employee benefits and healthcare, life insurance and wealth management.
OVERVIEW
Our Employee Benefits business offers a comprehensive range of employee benefits advice
and services to companies, pension trustees and individuals.
OUR GLOBAL EMPLOYEE BENEFITS BUSINESSES PROVIDE SERVICES INCLUDING:
WEALTH AND INVESTMENT MANAGEMENT
Providing an array of administration services designed to meet
the requirements of pension trustees, corporate sponsors and
scheme members, from back-office support to fully outsourced
administration. The range is supplemented with payroll,
communication, documentation and technical services.
Providing integrated risk management services to the UK
pensions market, to meet the requirements of both pension
trustees and corporate sponsors, including actuarial,
investment and risk transfer consultancy, scheme design,
governance and independent trustee services.
EMPLOYEE BENEFITS
2016
Revenue
Provider of one of the most widely used UK pensions
administration and fund accounting software to trustees of UK
private sector pension schemes and their administration and
accounting teams, whether in-house or through third parties.
These are available with integrated web solutions to enable
member and trustee access to information and services.
JLT also provides a comprehensive online integrated benefits
management solution to corporate and trust-based clients.
CONTRIBUTION TO
GROUP REVENUE 2016
OUR BUSINESSES
Underlying Trading Profit
+14%
2015: £288.5m
2015: £43.6m
Trading Margin
Employees
16%
2,656*
2015: 15%
2015: 3,121
24
%
UK & Ireland
p34
Asia
p34
Australia & NZ
p34
Latin America
p35
Canada
p35
Europe, Middle East
and Africa
p35
* Excludes employees in shared service operations
Jardine Lloyd Thompson Group plc Annual Report 2016
33
SHAREHOLDER INFORMATION
£300.4m £49.5m
+4%
FINANCIAL STATEMENTS
Our benefits consulting team provides advice on and
implementation of employee health and benefit programmes,
medical claims administration, occupational health services and
placement of health and risk protection policies for corporate
workforces, combined with rehabilitation services. Our BenPal
software creates the gateway for employees to easily access
and manage their benefits package.
TECHNOLOGY SOLUTIONS
CORPORATE GOVERNANCE
TRUSTEE & CORPORATE AND BENEFITS
CONSULTING
Offering advice and support to high net worth individuals in
respect of their financial planning, at-retirement support and life
protection requirements. Providing discretionary management
of assets for both high net worth individuals and company
pension schemes, in addition to asset-hosting services.
STRATEGIC REPORT
PENSION ADMINISTRATION
STRATEGIC REPORT
UK & IRELAND
Total revenue
Underlying trading profit
Trading margin
ASIA
2016
£160.0m
2015
£167.4m
% Change
(4%)
£12.3m
£12.8m
(4%)
8%
8%
Total revenue
2016
£87.3m
2015
£78.9m
% Change
11%
Underlying trading profit
£27.2m
£24.5m
11%
31%
31%
Trading margin
JLT Employee Benefits is one of the largest employee benefit
and pension consultants in the UK, offering a comprehensive
range of employee benefits advice and services to companies,
pension trustees and individuals. The business employs some
1,500 people across 16 locations in the UK and Ireland.
Our Employee Benefits business in Asia primarily focuses on
helping companies develop employee benefit programmes
and on wealth management for high net worth individuals.
The division employs more than 460 people across 13
locations.
Review of Operations
Review of Operations
Reported revenues for the year for our UK EB business were
£160.0 million, compared to £167.4 million in 2015, reflecting
the final impact of the cessation of commission revenue from
life assurers - which amounted to £5 million earned in 2015.
Second half revenues of £85.1 million exceeded those of the
same period in 2015 of £82.4 million, following the successful
completion of the restructure of the business, which was an
encouraging indication of the stabilisation in the revenue
run rate.
In Asia, the Private Client Services (PCS) high net worth life
assurance broking business saw some slowdown in first half
revenues due to regional economic uncertainty in South Asia;
however, steps were taken in the second half to broaden the
range of products offered by the business. This succeeded in
pulling revenues back up from the half year position, which had
been negative year-on-year.
At the time of its 2016 interim results the Group indicated
that the business would deliver the majority of its profits in the
second half and this has been the case. Trading profit for the
year was £12.3 million, compared to break even at the half year.
The business successfully completed its restructure
programme, which has resulted in a flatter, more client-centric
structure and a headcount reduction of over 300 employees.
The programme will deliver £14 million of annualised savings
in 2017, £9 million of which were delivered in 2016 (£7 million
of that in the second half).
The focus in 2016 was, and will continue to be into 2017,
very much on transitioning and rebalancing the business so that
revenues and trading profit margins can grow. The emphasis
of the business continues to be on investing to strengthen and
enhance platforms and to build out the sales function.
It is anticipated that UK EB will deliver organic revenue growth
for 2017 and this, taken with the £5 million residual benefit of
the restructure programme, means the Group is confident that
this business is making steady progress towards delivering
a 15% trading profit margin for 2018.
Principal lines of business
Pension Administration, Trustee & Corporate and
Benefits Consulting, Wealth & Investment Management,
Software Solutions.
34 Jardine Lloyd Thompson Group plc Annual Report 2016
Principal lines of business
Healthcare insurance programmes, including Life & Dental,
and risk management services including wellness consulting
and prevention. Flexible benefit consulting and platform design
and implementation.
AUSTRALIA & NEW ZEALAND
Total revenue
Underlying trading profit
Trading margin
2016
2015
% Change
£27.5m
£20.3m
36%
£5.5m
£3.3m
67%
20%
16%
The Employee Benefits business in Australia & New Zealand
provides consultancy and administration services to corporate
and private clients across a wide range of company-paid and
voluntary employee benefits programmes. The business is also
one of the region’s leading workplace injury risk consultancies
and rehabilitation providers, having acquired Recovre and
Workwise Occupational Health in Australia and Alpha in New
Zealand over the past two years. The division employs some
300 people across 30 locations.
Review of Operations
The Australia and New Zealand EB business achieved 36%
revenue growth, following the acquisitions made in 2015 and
2016 of rehabilitation services providers in relation to workers
compensation insurance. Organic growth was 4%. With a
series of major client wins as a result of the expanded capability
of the business, accelerated revenue growth and improved
margins are anticipated in 2017. The trading margin of the
Australian EB business improved from 16% in 2015 to 20%
in 2016.
Principal lines of business
Underlying trading profit
Trading margin
CANADA
Our Employee Benefits business has been providing
consultancy, technology and administration services to
clients across Canada for over 25 years.
LATIN AMERICA
Total revenue
OTHER EMPLOYEE BENEFITS
BUSINESSES
OVERVIEW
Corporate Health Insurance, Corporate Life & Group
Income Protection, Personal Accident Insurance, Workers
Compensation, Software Solutions, Occupational Rehabilitation,
Workplace Health Safety Consulting.
2016
£21.7m
2015
£18.9m
% Change
15%
£3.7m
£3.5m
7%
17%
19%
Review of Operations
Principal lines of business
Our Employee Benefits business operates in Europe, Middle
East and Africa. In South Africa we offer healthcare consultancy
to corporate and private clients, as well as retirement fund
consultancy services. The division employs over 50 people
across the three territories.
Review of Operations
Our South African business has continued to show progress,
delivering revenue growth of 14% on an organic basis, and
reporting revenue of £1.9 million for the year. The retirement
funding division has shown good growth, now accounting
for almost 15% of total income, and we believe this business
remains well-positioned for further growth.
FINANCIAL STATEMENTS
Healthcare insurance programmes, including Life and Dental,
and risk management services including wellness consulting
and prevention.
EUROPE, MIDDLE EAST & AFRICA
CORPORATE GOVERNANCE
Our Latin American EB operations delivered organic revenue
growth of 10%. Performance was particularly notable in
Colombia - driven by the workers compensation business and Brazil, despite the challenging local economic backdrop.
Investment has continued to be made in building out
capabilities and expanding the offering in the region, which
drove a small increase in trading profit but a 200 bps reduction
in trading margin.
Our Canada Employee Benefits business delivered revenues
of £2 million, an increase of 35% on an organic basis. The
business reported a trading profit of £0.6 million, compared to
a loss of £0.2 million reported in 2015. The expansion of the
Employee Benefits business in Canada has continued and, with
investments to improve branding, software and the addition
of new personnel, we remain optimistic about its growth
potential and opportunities for national expansion.
STRATEGIC REPORT
In Latin America, our Employee Benefits business focuses on
providing employee benefits programmes, often built around
a healthcare insurance offering. This is a rapidly developing
market where we see the opportunity to expand our capabilities
through health management and consulting. The division
currently employs nearly 350 people across our office network.
Review of Operations
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016
35
STRATEGIC REPORT
ASSOCIATES
The Group’s income from its Associates in 2016 reduced by £4.5 million to £1.0 million following
the disposal of JLT’s stake in the French associate in May 2015.
Total underlying contribution
to JLT after tax
2016
2015
% Change
£1.0m
£5.5m
(82%)
Associate holding at 31 December 2016
GrECo
Central & Eastern Europe/CIS
20%
MAG-JLT
Italy
25%
March-JLT
Spain
25%
JLT Sterling
Mexico
36%
JLT Independent
India
49%
GRECO (CEE/CIS)
JLT STERLING (MEXICO)
JLT has a 20% shareholding in the GrECo Group, a leading
specialist insurance broker in Central & Eastern Europe, the
Balkans and the CIS regions. With its headquarters in Vienna,
GrECo has 53 offices with 770 employees in 16 countries.
Sterling Re Intermedio de Reaseguro Sa de CV, which trades as
JLT Sterling, is an associate company in which JLT has a 36%
shareholding, with the balance of shares being held by Lorant
MMS, a leading independent retail insurance broker, based
in Mexico City. JLT Sterling provides specialist wholesale and
reinsurance services in the Aviation, Casualty, Construction,
Energy, Marine, Marine Cargo, Property and Specie sectors.
Principal specialist areas are Aviation, Construction & Real
Estate, Employee Benefits, Energy, Marine & Marine Cargo,
Communications, Technology & Media, Financial Institutions
and Hospital & Churches.
MAG-JLT (ITALY)
JLT INDEPENDENT (INDIA)
JLT has a 25% shareholding in MAG-JLT, a leading Specialty
broker in Italy with 200 employees in Milan, Naples, Rome and
offices in a further 5 cities around the country, as well as a
Lloyd’s broking arm in London.
JLT has a 49% shareholding in JLT Independent. Our joint
venture partner is Sunidhi Group, a leading Indian Financial
Services Group. JLT Independent has 250 employees with
offices in Mumbai, New Delhi, Chennai, Bengaluru, Hyderabad,
Gurgaon and Pune. Key business areas include Energy,
Construction, Marine, Aviation, Reinsurance, Employee
Benefits, Credit, Political & Security Risks, and Liability.
Key business areas are Corporate (Risk Management & Middle
Market), Aviation, Marine (Hull & Machinery, Liability & P&I,
Cargo), High Net Worth (Yacht, Fine Art, Contingency), and
Affinity (Employee Benefits, Motor).
MARCH-JLT (SPAIN)
JLT has a 25% shareholding in March-JLT, which is the
4th largest commercial insurance broker in Spain. The joint
venture partner is Banca March, Spain’s leading privatelyowned financial institution. Its core business is corporatefocused, with Specialty capabilities including Construction,
Tourism and Marine. The business employs 130 staff, with
offices in Barcelona, Bilbao, La Palmas, Madrid, Mallorca,
Seville and Valencia.
36 Jardine Lloyd Thompson Group plc Annual Report 2016
OVERVIEW
FINANCE DIRECTOR'S
REVIEW
INCOME STATEMENT
“
I am pleased to present the 2016
Finance Director’s Review for
another year of revenue growth
and progress for JLT.
Charles Rozes
Operating costs
Our Risk & Insurance businesses,
which represent approximately 76%
of the Group’s revenue, grew revenues
to £960.9 million, an increase of 11%,
or 3% on an organic basis.
Our Employee Benefits businesses
grew revenues by 4% overall, although,
reduced by 3% on an organic basis.
This was due to a 4% reduction (8% on
an organic basis) in the revenues of our
UK & Ireland business. reflecting the final
impact of the cessation of commission
revenues as a consequence of the
Total underlying operating costs
(excluding exceptional items) increased
by £100 million, or 10%, to £1,068
million. Of the increase, £53 million
stemmed from changes in foreign
exchange rates, our investment in US
Specialty added £17 million and £9 million
came from JLT Specialty, in line with the
continued growth of that business. The
mix of the cost base remained broadly
unchanged with staff and premises costs
being the major individual expense items.
£m
Total revenue
2016
2015
SHAREHOLDER INFORMATION
UNDERLYING OPERATING COST RATIO
Variance
1,261
100%
1,155
100%
106
Operating costs:
Staff costs
785
62.3%
704
61.0%
81
Premises
64
5.1%
59
5.1%
5
Depreciation & Amortisation
34
2.7%
31
2.6%
3
Travel & entertainment
50
4.0%
46
4.0%
4
Other operating costs
135
10.5%
128
11.1%
7
1,068
84.6%
968
83.8%
100
Jardine Lloyd Thompson Group plc Annual Report 2016
FINANCIAL STATEMENTS
The 2016 results have been favourably
impacted by the significant changes in
foreign exchange rates which provided
an offset to the continuing weakness
in the insurance and reinsurance
rating environments, as well as to the
investment in our business for growth.
Compared with 2015, JLT delivered
a 9% increase in total revenue, 3%
at constant rates of exchange (CRE),
with 2% organic growth.
CORPORATE GOVERNANCE
Retail Distribution Review. However,
this was offset by the performance of
our international Employee Benefits
businesses which grew by 16%,
or 3% on an organic basis.
Revenue
The Group’s total revenue for the year
was £1.26 billion. Underlying profit before
tax was £172.6 million, with reported
profit before tax of £134.9 million (after
exceptional items) and reported profit
after tax and non-controlling interests
of £81.5 million. Diluted earnings per
share (EPS) was 37.8p.
STRATEGIC REPORT
“
37
STRATEGIC REPORT
Trading profit
The Group’s underlying trading profit increased by 3% to
£193.7 million and the trading profit margin reduced from
16.2% to 15.4%. Excluding US Specialty, the trading margin
was 18.1%, compared to 18.4% in 2015.
Associates
The Group’s income from its Associates reduced by £4.5 million
to £1.0 million, reflecting the reduction in profits following the
disposal of our French Associate business in May 2015.
Finance costs
Net finance costs reduced by £1 million to £22 million as a
result of changes in the net pension expense and external
borrowing costs, partly offset by foreign exchange movements.
Underlying profit before tax
The Group’s underlying profit before tax increased by £2.5
million to £172.6 million. The profit of the Group excluding
the US Specialty investment increased by 5% to £199.6 million.
Exceptional costs
In 2016, net exceptional costs were £37.7 million (2015: £15.1
million), primarily driven by £21.1 million related to a litigation
settlement, £13.9 million of restructuring costs associated with
the UK Employee Benefits business, and a net loss on the
disposal of subsidiaries of £1.6 million.
Tax
The tax charge for the year was £44.0 million, representing
an effective tax rate of 32.6% (2015: 26.8%). The underlying
tax expense was £52.3 million, representing an effective tax
rate of 30.3% (2015: 27.9%). The year-on-year increase in
the underlying tax expense was mainly due to deferred tax
assets not being recognised in respect of certain of the Group’s
overseas operations combined with the global nature of JLT’s
business and the different tax rates across those geographies.
• Increase of £10 million in the investments in Associates,
£3 million relating to the increase to 49% (from 26%) in the
Group’s interest in JLT Independent Insurance Brokers Pvt
Limited. Approximately £6 million of the increase related
to foreign exchange.
• A net increase in working capital of £31 million, which
included £14 million in respect of foreign exchange retranslation. The balance of the net increase is predominantly
driven by an increase in JLT Specialty Limited’s debtors
in line with their business, with debtor days remaining
consistent year-on-year. JLT Re’s debtors increased as a
result of the nature of their business where, for certain lines,
the collection period is more than 12 months from initial
revenue recognition.
• The pension liability increased to £198 million, from £130
million in 2015 as a result of changes in corporate bond
yields and inflation rates. The deferred tax asset attributable
to this change was recognised in the tax line.
Net debt, defined as own funds less total borrowings net
of transaction costs, was £496 million (2015: £440 million).
The Group’s principal measure of leverage, the Net
Debt:EBITDA ratio, reduced to 1.6:1 (bank covenant basis).
At 31 December 2016, the Group had committed long-term
unsecured revolving credit facilities of £500 million and drawn
private placement loan notes equivalent to £508 million,
resulting in total debt facilities equivalent to £1,008 million with
maturities between 2017 and 2029. Gross borrowings were
£688 million, which includes £671 million of borrowings under
the Group’s committed facilities, leaving unutilised committed
facilities headroom of £337 million.
OPERATIONAL CASH FLOWS
£m
2016
2015
2014
2013
2012
209
EBITDA*
238
244
240
219
Profit after tax and non-controlling interests
Net interest
(15)
(15)
(15)
(9)
(6)
Working capital
(43)
1
(55)
(25)
(58)
Profit after tax and non-controlling interests was £81.5 million
(2015: £103.1 million). Diluted earnings per share was 37.8p
on a reported basis (2015 restated: 48.0p).
(39)
(60)
(49)
(72)
(32)
Operational free cash flow
141
170
121
113
113
Dividends paid
(66)
(63)
(60)
(58)
(54)
7
54
(68)
(177)
(40)
Annual capex
Acquisitions/disposals
Tax paid
(46)
(37)
(37)
(41)
(35)
BALANCE SHEET
Net shares acquired
(18)
(26)
(32)
(21)
(15)
The net assets of the Group increased to £351 million
from £331 million. The key movements were:
Other
(33)
(30)
(21)
(22)
(8)
Net cash (outflow)/inflow
(15)
68
(97)
(206)
(39)
(440)
(474)
(345)
(142)
(100)
(41)
(34)
(32)
3
(3)
(496)
(440)
(474)
(345)
(142)
• Increase in goodwill of £47 million driven by the retranslation
of goodwill recognised in foreign currencies. The Group
completed 7 acquisitions in 2016 for a total consideration
of £25.3 million, the goodwill impact of which was offset
by the two disposals in the year.
38 Jardine Lloyd Thompson Group plc Annual Report 2016
Opening net debt
Non-cash movements
Closing net debt
* EBITDA is represented by underlying trading profit plus depreciation and amortisation,
including amortisation of share options; income from associates; less settled exceptional
costs excluding net gains on disposals.
The Group primarily monitors operational cash flows,
which report cash and net debt movements but exclude
fiduciary funds; statutory cash flows include movements in
fiduciary funds.
The Board has recommended a final dividend in respect of
2016 of 20.6p per share. Together with the interim dividend
of 11.6p per share, this brings the total dividend to 32.2p per
share, an increase of 5.2%. This represents dividend cover
of 1.6 times, based on underlying diluted earnings per share,
compared to 1.7 times in 2015.
BASIS OF PRESENTATION
Statutory accounts of individual Group companies are
prepared, as required, in accordance with applicable local
accounting standards.
PRINCIPAL FINANCIAL RISKS
The Group has identified four principal financial risks: capital
and liquidity risk, foreign currency risk, counterparty risk and
the defined benefit pension scheme risk.
The total capital of the Group at 31 December 2016 and 2015
was as follows:
£m
2016
2015
Total own funds
(191.6)
(163.5)
Borrowings
687.8
603.5
Net debt
496.2
440.0
Total equity
350.9
330.8
Total capital
847.1
770.8
2) Foreign Currency Risk
The Group has transactional and translational foreign currency
exposures. The transactional exposure arises primarily in the
London Market businesses, which have a sterling cost base but
which have a significant proportion of US dollar-denominated
revenues (USD357 million in 2016, representing some 20%
of the Group’s revenue).
The Group continues to operate a US dollar hedging
programme to reduce the volatility caused by exchange
rate movements, by entering into forward foreign exchange
contracts. As at 25 February 2017, 80% of these anticipated
dollar revenues for 2017 earned in the UK (approximately
USD385 million) are hedged at an average rate of USD1.46.
For 2018, 70% of expected dollar revenues are hedged at
an average rate of USD1.38, for 2019 50% are hedged at an
average rate of USD1.32 and 35% are hedged for 2020 at
an average rate of USD1.31. Other hedging programmes are
Jardine Lloyd Thompson Group plc Annual Report 2016
SHAREHOLDER INFORMATION
Following changes to certain of the Group’s equity share plans
for staff awards, the basis on which earnings per share (EPS)
is calculated has been reviewed and revised, resulting in a
small increase to EPS. Comparatives have been restated.
The insurance and reinsurance broking operations within
the Group operate in a number of jurisdictions where local
regulation requires a minimum level of capital to be maintained.
The total regulatory capital to be held by the Group is not
considered significant in the context of the total available capital.
FINANCIAL STATEMENTS
The balance sheet of the Company, Jardine Lloyd Thompson
Group plc, on page 174, has been prepared in accordance
with generally accepted accounting practice in the UK.
Following the changes to generally accepted accounting
practice in 2015 affecting the Group’s subsidiaries in the United
Kingdom, the company has made a revision to the recognition
of the employee share trust and the prior year comparatives
have been restated.
In order to manage liquidity risk, the Group maintains
committed, long-term credit facilities to ensure that it is well
positioned to meet seasonal capital requirements and to
support the strategic growth of the business. There are no
restrictions on the use of these facilities in the normal course
of business. At 31 December 2016 the facility headroom was
£337 million.
CORPORATE GOVERNANCE
The Group’s 2016 consolidated financial statements include
an income statement, statement of comprehensive income,
balance sheet, statement of changes in equity and a statement
of cash flows. These statements have been prepared in
accordance with International Financial Reporting Standards
as adopted by the European Union.
The Group manages its balance sheet through monthly reviews,
management controls and financial reporting.
STRATEGIC REPORT
DIVIDENDS
The Group’s objectives when managing capital are to safeguard
its ability to continue to provide returns for shareholders and
benefits for other stakeholders and to maintain an efficient
capital structure to ensure an optimal cost of capital. In order
to achieve these objectives, the Group may adjust, for example,
the amount of dividends paid to shareholders, return capital
by a share buy-back, issue new shares or sell assets to
reduce debt.
OVERVIEW
In 2016, the Group generated £238 million of EBITDA, which
included £31 million of outflows in respect of exceptional items
(2015: £12 million). Operational free cash flows reduced to
£141 million, reflecting a 2015 inflow of working capital due
to timing differences. A net cash outflow of £15 million was
realised in 2016.
1) Capital and Liquidity Risk
39
STRATEGIC REPORT
operated for other transactional currency exposures, primarily
in respect of the euro, Indian rupee and Canadian dollar.
The Group has significant investments in overseas operations.
Movements in exchange rates between balance sheet dates
will affect the sterling value of the Group’s consolidated
balance sheet.
The currency profile of the Group’s borrowings is managed
to mitigate balance sheet translation exposures where practical
and cost effective.
In addition to the transactional foreign exchange exposure,
JLT is also exposed to translational foreign exchange
movements which are not hedged. Given the relative size and
profitability of the Group’s Australian business, this is the most
material such exposure.
3) Counterparty Risk
The Group’s gross exposure to credit risk at 31 December
2016 is £1,613 million, representing own cash, fiduciary
funds, investments and deposits, derivative assets, and trade
receivables. The Group maintains a counterparty policy based
on credit analysis, market data and published credit ratings
to manage the concentration of funds and its exposure to
individual counterparties. Deposit limits are assigned to
each counterparty appropriate to its credit rating and
overall financial profile.
The Group manages its own cash and invested fiduciary
funds in the form of deposits with a number of banks, AA
money market funds, and other secure short-term money
market instruments.
The Group’s counterparty approval criteria include a
requirement that financial institutions maintain a minimum longterm investment grade rating, except where this is not possible
or practical due to local operating or regulatory requirements.
The Group’s credit criteria also include reference to credit
default swap spreads and capital ratios. All exposures to
individual counterparties are subject to a formal credit limit to
control concentrations of credit exposure and limit the impact
of default risk. Counterparty limits, ratings and credit default
spread rates, together with utilisation levels, are reviewed
regularly and reported to the Board.
The respective credit quality by rating of each class of financial
asset is included within the notes to these accounts.
40 Jardine Lloyd Thompson Group plc Annual Report 2016
4) Defined Benefit Pension Scheme Risk
The Group has exposure to movements in the balance sheet,
income statement and statement of comprehensive income as
a consequence of changes in the valuation of retirement benefit
assets and liabilities and the impact of such changes on the
Group’s defined benefit pension scheme positions.
The Group seeks to manage this exposure through regular
monitoring and reporting of scheme asset performance and
liability positions, suitable scheme investment and risk mitigation
strategies and appropriate funding arrangements based on
periodic actuarial valuations.
Assets held in the UK defined benefit pension scheme include
annuity buy-in contracts which secure the future benefits
relating to approximately 73% of pensioner liabilities and which
reduce exposure to ongoing longevity and asset risk arising
from that portion of the pension scheme liabilities.
The pension trustees will conduct a revaluation of the UK
defined benefit pension scheme during 2017 and agree
a revised deficit recovery schedule by 2018. This is part
of the scheduled triennial revaluation process.
PERFORMANCE SUMMARY
Total Revenue
Trading Profit
Growth
CRE
Organic
2015
2016
CRE
2015
2016
CRE
2015
Risk & Insurance
327.5
5%
3%
3%
311.2
22%
21%
22%
73.1
67.8
68.3
JLT Re
195.6
13%
4%
4%
173.6
21%
19%
19%
40.5
34.8
32.4
JLT Australia & New Zealand
117.7
7%
(4%)
(3%)
109.5
29%
29%
30%
34.1
30.6
32.7
JLT Asia
90.3
18%
5%
5%
76.6
19%
18%
17%
16.8
14.8
12.7
JLT Latin America
71.4
13%
5%
4%
63.1
30%
27%
34%
21.1
17.6
21.3
JLT Insurance Services
46.8
(7%)
(11%)
(11%)
50.6
2%
-
12%
0.9
-
6.0
JLT Europe, Middle East & Africa
41.8
39%
28%
17%
30.1
16%
16%
20%
6.8
6.1
6.0
JLT US Specialty
41.3
77%
57%
52%
23.3
-
-
-
(27.0)
(24.0)
(20.5)
JLT Canada
19.2
(6%)
(14%)
(14%)
20.4
(2%)
(3%)
7%
(0.5)
(0.6)
1.5
9.3
13%
2%
2%
8.2
8%
8%
6%
0.8
0.7
0.5
960.9
11%
4%
3%
866.6
17%
16%
19%
166.6
147.8
160.9
JLT Insurance Management
Employee Benefits
UK & Ireland
(4%)
(5%)
(8%)
167.4
8%
7%
8%
12.3
11.9
12.8
87.3
11%
(2%)
-
78.9
31%
31%
31%
27.2
23.7
24.5
Australia & New Zealand
27.5
36%
22%
4%
20.3
20%
20%
16%
5.5
4.9
3.3
Latin America
21.7
15%
10%
10%
18.9
17%
18%
19%
3.7
3.7
3.5
Europe, Middle East & Africa
1.9
13%
15%
14%
1.7
10%
10%
(17%)
0.2
0.2
(0.3)
Canada
2.0
47%
35%
35%
1.3
31%
31%
(17%)
0.6
0.6
(0.2)
300.4
4%
(1%)
(3%)
288.5
16%
16%
15%
49.5
45.0
43.6
Central Costs
Total
-
-
-
-
-
-
-
-
(22.4)
(22.6)
(17.0)
1,261.3
9%
3%
2%
1,155.1
15.4%
14.4%
16.2%
193.7
170.2
187.5
Underlying trading profit
Underlying share of associates
Net finance costs
Underlying profit before taxation
Exceptional items
2016
2015
193.7
187.5
1.0
5.5
(22.1)
(22.9)
172.6
170.1
(15.1)
Profit before taxation
134.9
155.0
Underlying tax expense
(52.3)
(47.5)
Tax on exceptional items
8.3
5.9
Non-controlling interests
(9.4)
(10.3)
Profit after taxation and non-controlling interests
Underlying profit after taxation and non-controlling interests
81.5
103.1
110.9
112.3
Diluted earnings per share
37.8p
48.0p*
Underlying diluted earnings per share
51.4p
52.2p*
Total dividend per share
32.2p
30.6p
- CRE: Constant rates of exchange.
- Underlying results exclude exceptional items.
* On a restated basis: see Note 9 to the Financial Statements on page 129.
Charles Rozes
Finance Director
28 February 2017
Jardine Lloyd Thompson Group plc Annual Report 2016
41
SHAREHOLDER INFORMATION
Notes:
- Organic growth is based on total revenue excluding the effect of currency,
acquisitions, disposals and investment income.
- Total revenue comprises fees, commissions and investment income.
FINANCIAL STATEMENTS
(37.7)
CORPORATE GOVERNANCE
160.0
Asia
STRATEGIC REPORT
JLT Specialty
OVERVIEW
2016
Trading Margin
STRATEGIC REPORT
RISK MANAGEMENT
REPORT
CE
IAN
PL
2ND
LIN
1ST
L
T
ROUP INTERNA
EG
LA
LIN
UD
I
S
I
R
K
RD
P
&
U
C
O
O
M
GR
E
E
E TH BUSI
IN
SS
NE
FULLY
ACCOUNTABLE FOR
THE IDENTIFICATION,
ASSESSMENT AND
MANAGEMENT OF
RISK
3
As a global company, JLT faces a range of risks, any of which has the potential to impact on the
achievement of our strategic business objectives, as well as providing opportunity in the right circumstances.
INDEPENDENTLY
ASSESSES RISK
MANAGEMENT
AND CONTROL
EFFECTIVENESS
PROVIDES POLICY
ADVICE, GUIDANCE
AND CHALLENGE
TO THE 1ST LINE
JLT’S INTERNAL CONTROL
FRAMEWORK
• Clear, skilled roles for the control functions in the second
line of defence, providing specialist advice and strong
oversight to the businesses internationally; and
JLT 3 lines of defence
• An enhanced focus on risk management disciplines
across the business.
The Group operates a “3 lines of defence” (3LOD) model
as a core component of its governance arrangements,
as shown above.
The current 3LOD model has been in place and operating
for four years across the Group, and has been subject to
iterative enhancements during that time. In addition, JLT
completed an internal review of its 3LOD model in the
UK businesses during Q1 2016, building upon the solid
governance framework already in place. The core principles
of the review were to deliver:
• Enhanced accountability and ownership of risk within
the businesses, ensuring that the right people with the
right skills are available to the businesses close
to decision making processes;
42 Jardine Lloyd Thompson Group plc Annual Report 2016
We have been implementing the recommendations from
the review throughout the year and are making good progress.
The next phase of the review, starting in early 2017, will focus
on the international businesses.
JLT regularly reviews its governance arrangements through
Board and Audit & Risk Committee (ARC) effectiveness
reviews which are carried out on an annual basis. More detail
can be found in the Audit & Risk Committee Report on pages
63 to 70.
AUDIT & RISK COMMITTEES
Key JLT policies include:
JLT GROUP PLC BOARD
JLT GROUP PLC AUDIT & RISK COMMITTEE
Entity
Boards
Group Risk &
Compliance
1st line
The Business
External
Audit
2nd Line
Control Functions
3rd Line
Internal & External Audit
INTERNAL CONTROLS
RISK MANAGEMENT FRAMEWORK
JLT’s risk management framework has been refreshed during
2016 and is in the process of being rolled out, referencing
several recognised standards such as the Institute of Risk
Management and ISO 31000. It is based on 7 risk categories
(IT, HR, Finance, Operations etc), each of which has a Group
level sponsor whose daily role is aligned to the subject matter.
The Group specialists are engaged in defining the Group level
risk profile, which is used in deriving the Principal Risks shown
on pages 44 and 45 and in arriving at the Viability Statement
on page 96.
In addition to the above, the businesses maintain their own
risk registers, which are produced by each Executive team and
regularly reviewed by their local ARC. The ARCs consider the
key risks and any mitigating action that can be taken to keep
the identified risks within the risk appetite of the firm, as well
as assessing new opportunities.
PRINCIPAL RISKS
The principal risks faced by the Group are summarised
in the table on pages 44 and 45.
FINANCIAL RISKS
The principal financial risks are also discussed in more detail
in the Finance Director’s Review on pages 39 to 40.
SHAREHOLDER INFORMATION
Underpinning JLT’s governance is a suite of policies, which are
authored and managed by the relevant Group function, signed
off by the relevant senior Group executive and accessible
to employees via the Group’s Policy Portal. There is also a
revolving mandatory programme of e-learning modules for
employees to take throughout the year, reinforcing the policy
messages. Adherence to the Group’s policies is monitored
by the functions who own them and by Group Internal Audit,
who refer to them during the course of their audits, which are
reported to the local entity ARCs and to the Group ARC. In
parallel, the Group’s Compliance team provides assurance that
local regulation is adhered to and that clients' interests are at
the heart of everything we do.
Each business maintains an Operating Procedures Manual,
which contains all key procedures for the business to conduct
itself in a compliant and sustainable manner.
FINANCIAL STATEMENTS
Entity Audit Risk
& Committees
Group Internal
Audit
The Group has also introduced a revised whistleblowing
policy and worldwide confidential whistleblowing help-line
during the year.
Charles Rozes
Finance Director
28 February 2017
Jardine Lloyd Thompson Group plc Annual Report 2016
CORPORATE GOVERNANCE
The following diagram shows the interaction of 3LOD within
the governance model. The Group ARC membership, terms
of reference and key areas of focus are outlined in The Audit
& Risk Committee section on pages 63 to 70.
Anti-money laundering and fraud
Conflicts of interest
Complaints
IT Security
Sanctions
STRATEGIC REPORT
A UK Non-Executive Director forum meets regularly and allows
the sharing of new initiatives and discussion of common topics
of interest. JLT held its first International NED Seminar during
2016 for the Chairs of each of the ARCs across the Group,
supplemented by external speakers on key subjects and a view
from the Financial Conduct Authority, JLT's home regulator.
Anti-bribery and corruption
Gifts and entertainment
Market abuse and insider dealing
HR related policies
Data protection
OVERVIEW
JLT has implemented a consistent governance model across
the Group, run through local Boards and ARCs, which are
operated as committees of each Board and are overseen by
them. There are over 20 Entity ARCs, most chaired by a NonExecutive Director who, in most instances, is also independent
of the JLT Group. The relevant management team (including
the Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer and others as required) attend ARC meetings
to present their view of the risk and compliance environments
across their businesses. Group Risk & Compliance and Group
Internal Audit also attend meetings and provide independent
reporting to ensure that there is adequate discussion of relevant
issues, including key risks and mitigating controls.
43
STRATEGIC REPORT
PRINCIPAL RISKS
NATURE OF RISK
RISK MITIGATION
JLT’s business is more tied to economic activity
and growth than to (re)insurance market rates, since
greater levels of corporate activity generally drive
greater demand for the Group’s services. There is a
risk that economic instability reduces client demand.
•G
lobal business operations balanced across a broad range
of territories and business types.
There are risks to the company’s strategic plan
arising from changes in the external environment,
such as markets, customer behaviour and political
developments such as Brexit, as well as risks arising
from acquisitions and strategic change initiatives.
• Annual strategy review by the Board and the Group Executive
Committee.
STRATEGIC RISKS
Economic
Instability
Strategic Risks
• Well-funded balance sheet and cash generation.
• Annual strategy review at Board and Group Executive Committee.
• Formal three-year strategic planning process for every business
revised annually, which includes consideration of material risks
to the business plan.
• Acquisition due diligence and risk assessment processes.
• Programme governance over strategic change initiatives.
OPERATIONAL RISKS
Loss of Key Staff
The Group’s principal asset is its people; there is a
risk that the organisation may not be able to attract
and retain market leading talent.
• Distinctive entrepreneurial, collaborative, results- and teamorientated culture and environment.
• Effective staff reward and retention strategies.
• Effective staff appraisal and development programmes.
• Succession planning processes.
Business
Interruption
Loss of IT
Environment
Information
Security
The Group operates from over 100 offices in 40
territories across the world, each with a unique local
environment. There is a risk of a business interruption
due to a large, unexpected incident.
• Dedicated Group Business Continuity Management function.
• Detailed
Group business continuity policy and procedures
for each business unit.
egular independent review and testing of business
•R
continuity plans.
The Group is reliant on the ability to process its
transactions on behalf of its clients. Risks arise from
non-performance or failure of an IT outsourcing
provider/IT supplier, malicious act and/or cyber-crime,
and internal operational issues.
• Dedicated IT Security function.
Intermediaries and pension administrators process
and retain confidential data in the normal course of
business. Risks relate to loss of customer records
or breach of confidentiality due to inadequate security
and other key controls.
• Dedicated information risk and data protection functions.
•M
onitoring of compliance with Group IT security policy
and service level agreements.
• Annual IT disaster recovery plan testing by each business.
• Risk-based monitoring and reviews performed by Group
IT Security and Group Internal Audit.
• Regular reporting to business ARCs.
• Data Loss Prevention (DLP) tools and processes.
• Mobile device encryption; restrictions on USB devices,
and access to personal email.
• Technical IT security policies and standards.
Data Privacy
Risks arising from non-compliance with or
misinterpretation of local or international data
privacy regulation/legislation/laws.
•G
roup-wide information classification schema. Regular reviews
of Highly Confidential Data and corresponding controls and
protections.
• Data Protection policy and training.
• Data Loss Prevention (DLP) tools and processes.
•M
obile device encryption; restrictions on USB devices,
and access to personal email.
• Records management policy.
• Technical IT security policies and standards.
ormal General Data Protection Regulation
•F
implementation programme.
44 Jardine Lloyd Thompson Group plc Annual Report 2016
PRINCIPAL RISKS
NATURE OF RISK
RISK MITIGATION
Errors &
Omissions
Intermediaries run a risk of incurring a loss if the
operating procedures in place across the Group
in relation to market security, placement and claims
are not complied with or alleged negligence/breach
of contract in the provision of services/advice
becomes apparent.
• Continuous training in errors and omissions avoidance.
• Central and regional risk and compliance monitoring.
OVERVIEW
•S
trong procedural and systems controls including
workflow management.
• Regular and ongoing quality assurance programmes.
• Professional indemnity insurance programme.
•M
arket security processes, monitoring and Insurer
Impairment Plan.
Litigation
Litigation risk can arise from a number
of different sources such as:
• M&A litigation (eg breach of Sale
& Purchase Agreement).
• Dedicated Legal and M&A functions with oversight responsibilities.
• Continuous staff training in HR policies and procedures.
• Formal recruitment processes based upon HR and legal advice.
STRATEGIC REPORT
• Breach of Employment Law.
• Tortious liability arising from the recruitment
of individuals where appropriate recruitment
controls are not adhered to.
Regulatory
Breach/ Financial
Crime (including
internal and
external fraud)
Risks arise from non-compliance with or
misinterpretation of local and international regulations
and failure to meet regulatory standards both in
the present, and retrospectively, in relation to past
business activities.
• Dedicated Compliance and Financial Crime functions.
•R
egular sanctions and third party payments screening
programme.
• Continuous staff training programmes.
• Conduct risk requirements.
• Regulatory monitoring programmes.
• Quality assurance programmes.
CORPORATE GOVERNANCE
• Central and regional risk and compliance oversight.
FINANCIAL RISKS
Capital Risk
and Liquidity
Foreign Currency
Risks arising from an inability to maintain an effective
and efficient capital structure and ensure an optimal
cost of capital, or meet the short-term financial
demands of the business.
The Group has foreign exchange exposures to:
• ‘Translational’ risk arising from the need to convert
currencies into GBP for reporting purposes.
• ‘Transactional’ risk arising from revenues and costs
being denominated in different currencies.
There is a risk associated with a failure of a key
counterparty resulting in a loss of own cash, fiduciary
funds, investments & deposits, derivative assets
and/or trade receivables.
•C
ompliance with regulatory minimum capital requirements
and regular stress testing.
• Maintenance of a conservative funding profile.
•P
rudent management of transactional currency exposures
through a structured hedging programme.
•R
egular review and sensitivity analysis of currency translation
impacts to financial reports.
FINANCIAL STATEMENTS
Counterparty
Risk
• Maintenance of adequate committed credit facilities.
• Board-approved investment and counterparty policy to limit the
concentration of funds and exposure with any one counter-party.
• Defined cash and investments policy.
• Active management and monitoring of counterparty limits,
financial strength and credit profile of key counterparties.
• Regular review by Board and Audit & Risk Committee of
counterparty limits, ratings, credit default swap spread rates,
utilisation levels and compliance with applicable regulation.
Defined Benefit
Pension Scheme
•A
ppropriate scheme investment strategy and diversification.
• Triennial actuarial valuations and regular trustee funding updates.
• Agreed deficit funding plan.
SHAREHOLDER INFORMATION
Risk of adverse impact on the balance sheet and
income statement as a consequence of increase
in the Defined Benefit Pension Scheme deficit.
• Regular review of long term de-risking strategy.
• Regular scheme membership data verification.
• Effective independent trustee governance.
• Regular review of employer covenant.
Jardine Lloyd Thompson Group plc Annual Report 2016
45
STRATEGIC REPORT
CORPORATE
RESPONSIBILITY
We see it as essential to act in the interests of all our stakeholders – in particular our clients, our people,
our shareholders and our trading partners – in order to build a sustainable, long-term business; one that
balances risk with opportunity and that makes a positive contribution to the communities in which we
live and work.
We also recognise that one of the key duties which our Directors have under the Companies Act 2006
(the Act) is to promote the success of JLT for the benefit of its shareholders, whilst having regard to the
interests of the Company's broad range of other stakeholders and wider social responsibilities. In this
section we review the activities of the Group over the past year in terms of how we have sought to
fulfil our Environmental, Social and Governance responsibilities.
MANAGEMENT OF CORPORATE
RESPONSIBILITY
Our approach to Corporate Responsibility (CR) has a strong
focus on the interests of our clients. Our clients increasingly
seek evidence that their service providers are well governed,
and that we make a sustainable, positive contribution to solving
the challenges that face our communities, our society and
the environment. It is therefore integral to our success that
JLT demonstrates high standards of CR – not only delivering
the best commercial outcomes for our clients, but also taking
every opportunity to do so in the most socially responsible and
sustainable way.
Our CR Steering Group actively pursues the achievement
of higher standards in both our socially responsible behaviours,
and our capacity to measure and benchmark those behaviours
for our stakeholders.
In 2016, we expanded the Steering Group to include senior
representation for each of JLT’s main operating companies,
worldwide. These designated representatives are responsible
for driving CR activity at a local level and liaise closely with the
Steering Group. The Group's approach to charitable giving is
coordinated by the Group Charities Committee.
At JLT our functional teams - including HR, Property Services,
Procurement, Finance, Risk and Marketing – have a strong
focus on delivering CR-related projects. Each of our businesses
across the Group is also closely involved and colleagues around
the world regularly volunteer for a wide range of activities.
The Group's CR strategy and activities are coordinated by
the CR Steering Group, which is chaired by the Deputy Group
CEO and has Board, Group Executive Committee and senior
management membership.
JLT is proud to feature in the
FTSE4Good ethical investment index.
46 Jardine Lloyd Thompson Group plc Annual Report 2016
ENVIRONMENTAL SUSTAINABILITY
We recognise that climate change and the scarcity of natural resources will pose an increasingly significant
OVERVIEW
challenge to society over time. We believe that JLT has a social responsibility to minimise our environmental impact
as far as possible. We therefore seek to take commercially sustainable measures to manage our environmental
impact, including in how we manage our property portfolio. For example, our preference is always to use
energy-efficient lighting technologies where we can, and to take measures to use water efficiently.
EXECUTIVE SUMMARY
The intensity ratio for 2016 is 1.74 tCO2e/employee.
CORPORATE GOVERNANCE
The scope of JLT's reporting encompasses its operational
boundary and includes emissions associated with JLT's
offices worldwide. JLT has reported on the mandatory scopes
1 and 2, and for the optional scope 3 has opted to include
global business travel (given that air travel in particular is
acknowledged as a large contributor to greenhouse gas
emissions) and non-purchased electricity (ie used by
JLT but purchased by the landlord) where available.
As in previous years, to demonstrate JLT's emissions relative
to a quantifiable measure of its business activities, JLT has
calculated its carbon intensity ratio on the basis of the number
of JLT employees, as this is considered to relate to Company
growth and GHG emissions.
JLT’S GHG EMISSIONS BY SCOPE AND INTENSITY RATIO
Scope
Details
Sub Total Tonnes CO2e
Purchased
Fuels
Natural gas purchased
directly by JLT
207.23
Fugitive emissions
Refrigerant leaks and top
ups for equipment under
direct responsibility of JLT
360.13
Transport
Transport owned
or controlled by JLT
1,507.24
Purchased Electricity
Location Based
Electricity purchased
directly by JLT
Purchased Electricity
Market Based
Total Tonnes
CO2e
2015
Base Year
Intensity Ratio
2,170.04
2,368.55
0.19
2,591.59
2,591.59
2,829.67
3,842.87
0.23
Electricity purchased
directly by JLT
2,319.34
2,319.34
2,713.75
3,842.87
0.21
Air Travel
Flights taken by
JLT employees for
business purposes
11,066.09
Rail Travel (UK Only)
Rail Travel by JLT
employees for
business purposes
181.16
14,782.14
13,406.19
11,908.57
1.32
Non Purchased Electricity
Electricity used by
JLT but purchased
by the landlord
3,534.89
Scope 2
Scope 3
TOTAL LOCATION BASED
19,448.33
19,448.33
18,405.90
18,119.99
1.74
TOTAL MARKET BASED
19,176.08
19,176.08
18,289.98
18,119.99
1.71
1.74
1.74
1.62
2.18
Intensity Ratio (Location Based)
*What is tCO2e?
It is standard practice to report GHG emissions in tonnes of CO2 equivalents (tCO2e). This is a universal unit of measurement used to indicate the global warming potential of the GHG in relation
to the global warming potential of one unit of carbon dioxide. The seven main greenhouse gases that are converted into tCO2e are Carbon dioxide (CO2), Methane (CH4), Hydrofluorocarbons
(HFCs), Nitrous oxide (N2O), Perfluorocarbons (PFCs), Sulphur hexafluoride (SF6) and Nitrogen trifluoride (NF3).
Jardine Lloyd Thompson Group plc Annual Report 2016
47
SHAREHOLDER INFORMATION
2,074.60
FINANCIAL STATEMENTS
Scope 1
Source
STRATEGIC REPORT
In line with Mandatory Carbon Reporting (MCR) requirements
within the Companies Act 2006, this report outlines JLT's
Greenhouse Gas (GHG) emissions covering the period
1 January 2016 - 31 December 2016.
JLT's total GHG emissions for 2016 were 19,448 tCO2e*.
The largest proportion of JLT's GHG emissions can be
accounted for by air travel which comprises 57% of the
total emissions, equating to 11,066 CO2e.
STRATEGIC REPORT
JLT’s GHG Emissions by Scope
Carbon Intensity Ratio (tCO2e/employee)
Scope 1
11%
2.18
1.78
Scope 2
13%
Scope 3
76%
2013
2014
1.62
2015
1.74
2016
METHODOLOGY
YEAR-ON-YEAR REVIEW
The methodology employed to calculate the GHG emissions is
in accordance with the GHG Protocol Corporate Reporting and
Accounting Standard (revised edition). Data has been collated
from JLT's global offices for electricity, fuels, refrigerants and
transport directly purchased or controlled by JLT, in line with
the mandatory scopes 1 and 2.
The total emissions associated with JLT’s operations have
increased. The intensity ratio of emissions per employee has
increased by 0.12 tCO2e/employee. The number of employees
has decreased slightly. There has been a wider data set
included this year, for instance more countries able to report
on non-purchased electricity, and estimates include increased
activity, for example in the USA.
With regard to the optional scope 3, JLT has included within
its report emissions relating to air travel by its employees for
business use as this recognised as a significant contributor
to carbon emissions. JLT has also reported on non-purchased
electricity usage for countries that have this data available and
for the UK only, rail travel. The relevant UK or international
emissions factors have been applied.
There were some limitations in reporting due to gaps in data,
and where necessary every reasonable effort has been made
to fill these and estimate data as accurately as possible. For
air travel, some countries were excluded as this data is not
available for this reporting period. JLT will be working with its
global offices to further improve data availability for the 2017
reporting period.
48 Jardine Lloyd Thompson Group plc Annual Report 2016
The wider data set has meant that the scope 3 emissions
has increased and both scopes 1 and 2 have decreased.
JLT's focus on reducing its environmental impact extends
beyond reporting on its emissions. 2016 has seen the design
stage of the implementation of an Environmental Management
System which will continue to be progressed throughout 2017.
RECYCLING
We actively promote recycling and encourage the removal of
general waste bins and the provision of sorting bins and facilities
in our offices. This initiative has been particularly successful in
our London headquarters and in our Mumbai operations, which
between them represent more than 30% of JLT’s colleagues.
OVERVIEW
STRATEGIC REPORT
In London, the Corporation of London’s
Clean City Awards scheme has awarded
our London headquarters, The St Botolph
Building, a Gold rating for its “zero to landfill”
approach to waste management.
Where appropriate we will reduce our usage of any mode of
travel with teleconferencing and we continue to invest in our
teleconferencing infrastructure to reduce both the costs and
the GHG impact of business travel, on a per capita measure.
We recognise both a cost benefit and an environmental benefit
in limiting our consumption of paper, and seek to manage our
consumption of paper with the environment in mind. To that end
we uphold the following principles:
We now use around 80 teleconferencing suites installed in
our premises, adding further locations according to need.
To use recycled paper for office purposes. This is adopted
within the UK and many non-UK offices.
We continue to invest in online collaboration platforms, to share
knowledge and collaborate more efficiently across all markets,
ensuring that our expertise is available to service clients with the
most efficient use of air travel. Colleagues seeking expertise and
solutions for clients make new links daily across borders via our
Chatter platform, for example.
To set laser printer defaults to two-sided printing. Adopted
in JLT Group IT policy, this requirement is reducing paper
consumption and waste.
SHAREHOLDER INFORMATION
We also monitor air travel usage retrospectively as part of our
statutory GHG reporting responsibilities. In 2016, our Group
Finance Director commissioned a project to deliver a Group
wide view of our airline usage, to enable active management
of our air travel usage across the world. We have chosen
to remediate wherever possible rather than offset. The CR
Steering Group reviews this position on a regular basis.
Circulate documents (eg meeting agenda and papers) in a
format that avoids the need for printing. The Group Secretariat
employs software to issue committee papers electronically for
all major UK legal entities, saving on paper as well as reducing
overheads associated with distribution.
FINANCIAL STATEMENTS
PAPER CONSUMPTION
CORPORATE GOVERNANCE
TRAVEL
Jardine Lloyd Thompson Group plc Annual Report 2016
49
STRATEGIC REPORT
SOCIAL RESPONSIBILITY
Our colleagues across the world are active and enthusiastic contributors to community life. They take
real pride in exercising their personal responsibility to make a positive contribution to the environment
and to the communities in which they live and work. We believe community engagement makes a
positive difference to our team spirit and ultimately to the quality of the work our teams can deliver for
clients. JLT supports and encourages colleagues' initiatives – this can include time off work to take
part in volunteering activities and matched-funding to support charitable fund-raising.
CHARITY
DIVERSITY & INCLUSION
To maximise the impact we can have, we focus on 3 strategic
partners aligned to our own business of sharing the social
benefits of knowledge (Specialty), wellbeing (Employee Benefits)
and resilience (Reinsurance).
At JLT we aim to provide an inclusive working environment
that encourages everyone to fulfil their potential. We believe
an inclusive culture encourages diversity, which in turn leads
to better business decisions and better solutions for clients,
drawing on a wide range of experience. We aim to recruit the
most talented and ambitious people, irrespective of differences
in education, religion, nationality, race, gender, age, physical
ability, social background or sexual orientation.
Our current partners on these strategic themes are: Udaan
Foundation (knowledge), Alzheimer's Society (wellbeing) and
RedR (resilience). We manage the majority of our charitable
giving business-by-business, with a central fund to provide
greater support to our strategic partners.
Charitable Donations as a percentage of PBT
0.55%
0.42%
0.45%
Having established our Diversity Committee in 2015, we defined
JLT’s Diversity agenda on the basis of three pillars - Networking,
Sponsorship and Involvement. In 2016 JLT supported many
initiatives, both internally and in public events in the London
Market and other insurance hubs, to help to drive a more
diverse and inclusive business and to play our part in solving
these challenges in our industry.
All Employees
Senior Management
71.7%
49.2%
2014
2015
50.8%
2016
We regularly engage clients in joint fund-raising activities
and see this as an important part of client relationship building.
A good example is JLT’s annual golf days in aid of Sydney’s
Westmead Hospital, which to date have raised more than
AU$1.6million for the Children’s Cystic Fibrosis clinic.
We actively manage the risk that charitable payments may
be misused as inducements, with training and monitoring in
place as part of our bribery and corruption controls framework.
28.3%
Male
Female
(TOTAL: 10,454 employees)
Male
Female
(TOTAL: 1,254 employees)
Networking
In 2016 in the UK, JLT became a corporate member of the
City Women Network. Additionally, JLT colleagues across the
UK participated in the Women In Insurance (iWin) network
and JLT joined the Gender Inclusion Network for Insurance.
Internationally, networking is underway in Asia & Australia,
with an internal Diversity Network being established in the USA.
50 Jardine Lloyd Thompson Group plc Annual Report 2016
OVERVIEW
STRATEGIC REPORT
In June, alumni of JLT’s International Senior Management Programme Class of 2012
came together to raise funds for the Udaan Foundation with a sponsored skydive.
During 2012's ISMP programme the team formed an enduring bond with the
Udaan school - and their bravery in 2016 raised more than £65,000.
In July, 40 boys from the Orlando West United Football Club, Johannesburg, visited
JLT South Africa’s offices to collect our donation of club equipment, part of JLT SA’s
ongoing support for this community initiative.
On City Giving Day in September, JLT wore red for RedR, the disaster relief specialists,
to celebrate the launch of our new strategic partnership with the charity.
US Specialty was among the proud sponsors of the 2016 Silver Bell Award, presented
at the SCI mariner’s welfare charity fundraising dinner in New York.
JLT Asia's support for Jardine Matheson's charity partner, Mindset, included a vertical
race in Singapore, raising funds for a new centre that now supports people with
mental health issues back into an active life.
CORPORATE GOVERNANCE
In 2016, our Solidária team in Brazil launched a joint project with JLT Brasil's insurance
market peers, Amanhã Seguro, to create inclusive opportunities for children to build
their skills and potential.
FINANCIAL STATEMENTS
Jardine Lloyd Thompson Group plc Annual Report 2016
SHAREHOLDER INFORMATION
51
STRATEGIC REPORT
Sponsorship
Our sponsorship of Lloyd’s Dive In festival (Diversity and
Inclusion in Insurance) continued for a second year, and we
extended our support internationally with colleagues in Australia
being involved in the organisation of this event alongside
hosting an event in our London headquarters.
We also hosted a number of events with other organisations
including the Insurance Supper Club & Hiscox focused around
Women in Leadership.
JLT supports the Chartered Insurance Institute’s involvement in
the HeForShe campaign which aims to achieve gender parity.
We recognise that making diversity part of our DNA demands
an inclusive environment. To that end, we are piloting a training
programme on 'unconscious bias' for hiring managers, to
deploy in 2017. Once complete, this training will feature in all of
our leadership and development programmes. We are making
the way we recruit more deliberately inclusive, and enhancing
our ability to track and manage our performance on a range
of relevant metrics.
HEALTH & WELLBEING
As a major global provider of Employee Benefits services to
our clients' employees, we have a natural insight into the health
and welfare responsibilities of employers, especially through the
Occupational Rehabilitation services we deliver on behalf of our
clients in various territories.
We offer a range of standard and discretionary health benefits
to our employees in most territories, alongside support for
healthy lifestyles such as the UK Cycle to Work scheme.
One of the five pillars of our global strategy is to create a
distinctive working environment for all our colleagues, a
contributor to good mental health. The ‘Wellbeing’ theme in our
internal CR programme includes a range of activities with third
parties, for example the Mindset charity in Hong Kong
and Singapore, working with Jardine Matheson.
LABOUR STANDARDS
As a specialist professional services firm, our exposure to the
risk of low labour standards is not significant. We are opposed
to forced labour or child labour. Our Employee Handbooks
specify clear standards for acceptable working practices. We
apply due diligence in our procurement policy and processes
to ensure that we work with appropriate sub-contractors.
In addition, our Employee Benefits business frequently helps
clients to improve their own capabilities in the area of employee
wellbeing through helping to minimise risks, deliver healthcare
and rehabilitation support services, contributing to enhanced
labour standards in the markets we serve.
52 Jardine Lloyd Thompson Group plc Annual Report 2016
HUMAN RIGHTS & MODERN SLAVERY
As an employer in both the developing and developed worlds
and with clients who have diverse businesses in some of the
most remote and poor, as well as the most affluent, corners of
the world, we recognise and support the need to work together
to ensure that principles of respect, fairness and integrity remain
at the heart of how we run our business.
We respect and uphold the human rights and principles set out
in detail in:
• The UN Universal Declaration of Human Rights; and
• The International Labour Organisation’s Declaration on
Fundamental Principles and Rights at Work
In 2016 we established a new process for evaluating risks in
our Supply Chain in respect of the specific abuse of human
rights that is human trafficking, in recognition of both the spirit
and letter of the UK’s Modern Slavery Act. In accordance with
that Act, we now publish on our website an annual statement
detailing our commitments and the progress we are making
towards assuring that our supply chain conforms to the
principles we uphold.
SOCIAL BUSINESS & PRO BONO WORK
We are increasingly looking for opportunities to apply our
professional expertise to support the communities in which
we operate. Our Local Community Insurance Services (LCIS)
team in JLT Australia, for example, delivers low cost access
to insurance services for small not-for-profit organisations and
clubs who might otherwise face insurmountable obstacles to
hosting events or accepting volunteers.
At the same time, we are sometimes able to offer our specialist
expertise ‘Pro Bono’ for good causes, which we are pleased to
do whenever our expert advisers can spare some capacity. To
date, JLT plans to develop simple reporting of the amount of
time volunteered by such colleagues, globally, in 2017.
GOVERNANCE RESPONSIBILITY
RISK MANAGEMENT
For more detail on the specific risks we track and the
governance structure we apply to maintain rigorous risk
management, see pages 42 to 45.
WHISTLEBLOWING
BRIBERY & CORRUPTION
Integrity is at the heart of what we do, and who we are as a
company. Alongside our firm cultural commitment to excellence
in risk management, our UK-based financial services companies
are subject to regulation by the UK Financial Conduct Authority
(FCA) and observe the strictest standards of business conduct
and regulatory compliance.
In 2016, JLT Group published its principles on tax transparency
on our website – jlt.com. We believe these principles are
based on good corporate practice in the area of tax
management and tax transparency, balancing the interests
of our stakeholders. We will continue to revise and strengthen
these principles as necessary, in response to the needs and
expectations of our stakeholders.
The Strategic Report is signed for and on behalf of the Board.
Dominic Burke
Group Chief Executive
28 February 2017
Jardine Lloyd Thompson Group plc Annual Report 2016
53
SHAREHOLDER INFORMATION
We guard against bribery and corruption with rigour; the
Board of JLT does not tolerate corrupt activity, and we fully
investigate any concerns relating to bribery or corruption. Our
various Employee Handbooks, defining the terms under which
JLT offers contracts of employment in different jurisdictions,
specify in detail the rules our colleagues must observe. These
include rules on unauthorised payments, gifts and hospitality,
anti-competitive practices, bribery, conflicts of interest, tax
compliance, licensing, exchange controls, invoicing, proper
record-keeping, share dealing, fair and respectful treatment
of colleagues – and set out clear processes for whistleblowing
(more detail on which is provided below).
TAX TRANSPARENCY
FINANCIAL STATEMENTS
In 2016, JLT updated its global whistleblowing policy and
implemented a new global third party hotline and website
reporting system, to support those colleagues who might find
themselves unable to report any wrongdoing or suspicions of
wrongdoing through their normal line management channels.
The system conforms with the differing regulatory requirements
of all the countries in which we operate, and gives colleagues
the option of complete confidentiality wherever this is permitted
by law. See also the Audit & Risk Committee Report on pages
63 to 70.
CORPORATE GOVERNANCE
The Group operates an enterprise-wide Risk Framework,
which is based around recognising good practice including
the Institute of Risk Management, ISO 31000 and COSO,
and tailored to align with JLT's role as (re)insurance broker
and employee benefits solutions provider. The Framework is
periodically reviewed to ensure that it remains appropriate,
and in keeping with the nature and scale of the Company
and the landscape within which we trade.
Over and above our contractual agreements with employees
and the awareness campaigns we share with all employees,
we require colleagues to undergo regular training covering Risk
Management, Anti-Bribery & Corruption, Third Party Risks, AntiMoney Laundering, Information Security and Financial Conduct.
To supplement such national training programmes, in 2016 we
launched a set of six principles-based learning modules in eight
languages. These cover Anti-Bribery & Corruption, Anti-Money
Laundering, Anti-Fraud, Conflicts of Interest, Sanctions and
Information Security & Data Protection.
STRATEGIC REPORT
The Group operates a '3 lines of defence' governance model.
The first line (the business) is responsible for the identification
and management of all the risks inherent in its operations;
the second line (Group Risk & Compliance) provides advice,
guidance and challenge to the business; the third line
(Group Internal Audit) independently assesses and reports
on the effectiveness of governance, risk management
and internal controls.
OVERVIEW
As a financial services Group with operations across the world, JLT’s governance capability is highly
developed. We hold each other to high standards of integrity – our culture is committed to transparency
and fairness to the client, and the rigorous pursuit of their best interests. This section highlights topics
of particular relevance to Corporate Responsibility benchmarks. For a fuller account, refer to the Risk
Management section on pages 42 to 45 and the Corporate Governance Report on pages 55 to 62.
CORPORATE
GOVERNANCE
REPORT
This section includes a review of our corporate governance processes
and summaries of the work of the Board and its Committees.
55
63
71
73
92
Corporate Governance Report
Audit & Risk Committee Report
Nominations Committee Report
Directors' Remuneration Report
Directors' Report
CORPORATE GOVERNANCE
We recognise the importance of effective
corporate governance throughout
the Group and of having robust
governance structures and processes
Board. With effect from 28 February
2017, Mark Drummond Brady has
assumed the roles of CEO of JLT Latin
America and Chairman of JLT Canada,
in addition to his current role as Deputy
Group CEO.
BOARD COMPOSITION
We are committed to the principles
established in the Code issued by the
Financial Reporting Council (FRC). We
are pleased to report that throughout
2016 the Company complied with
the main and supporting principles of
the Code, with the exception of B.1.2
(relating to the composition of the Board),
where the Company was non-compliant
for the first four months of the year. An
overview of the Company’s compliance
with the Code and an explanation for
the area where the Company does not
comply can be found in the Directors’
Report on pages 92 to 94.
During 2016 there were a number of
Board changes. James Twining stepped
down from the Board with effect from 26
April 2016. Bruce Carnegie-Brown joined
the Board as a Non-Executive Director
on 1 May 2016 and succeeded Richard
Harvey as Chairman of the Remuneration
Committee on 1 November 2016. Bruce
will unfortunately be stepping down from
the Board at the end of June, following
his appointment as Chairman of Lloyd's
of London. Lord Leach, a Non-Executive
Director for many years, sadly died on
12 June 2016. Adam Keswick joined
the Board as a Jardine Mathesonappointed Non-Executive Director on
1 September 2016. Richard Harvey
retired from the Board with effect from 31
December 2016 and Jonathan Dawson
succeeded him as the Company’s Senior
Independent Director on the same date.
I should like to record the Board's thanks
to Richard Harvey and James Twining
for their respective contributions to the
CODE COMPLIANCE
I should like to thank the Directors of the
Board for their support during the year.
Geoffrey Howe
Chairman
28 February 2017
Jardine Lloyd Thompson Group plc Annual Report 2016
55
SHAREHOLDER INFORMATION
In the following pages you will find details
of how JLT approaches governance,
including the operation of the Board
and its Committees and an explanation
of how we comply with the 2014 UK
Corporate Governance Code (the Code).
You will also find a summary of the key
outputs from the latest review of the
Board's effectiveness, outputs of which
were very positive. This section also
includes reports from each of the
Board's Committees.
in all our businesses. During the year
an Operations Forum was established,
with senior level representation from
all the Group's businesses, to lead the
introduction of consistent and improved
processes and systems across the
Group and share thinking on ways
of working.
FINANCIAL STATEMENTS
On behalf of the Board, I am pleased
to introduce the Corporate Governance
Report for the year ended 31 December
2016. The Board continues to
believe that how JLT does business
is as important as what it does, and
recognises the need for a strong
corporate governance framework
and supporting processes across the
Group. Good governance, with tone
set from the top, is a key factor
in delivering sustainable business
performance and creating value for
the Group's stakeholders.
Geoffrey Howe
CORPORATE GOVERNANCE
INTRODUCTION FROM
THE CHAIRMAN
“
We recognise the importance of
effective corporate governance
throughout the Group and of having
robust governance structures and
processes in all our businesses.
STRATEGIC REPORT
“
OVERVIEW
CORPORATE
GOVERNANCE REPORT
CORPORATE GOVERNANCE
DIRECTORS' PROFILES
GEOFFREY HOWE
DOMINIC BURKE
MARK DRUMMOND BRADY
Group Chairman
Group Chief Executive
Deputy Group CEO
Geoffrey Howe was appointed a
Non-Executive Director in January 2002
and became Joint Deputy Chairman in
November 2004.
Dominic Burke joined Jardine Lloyd Thompson
in 2000, when the Burke Ford Group of
Companies, of which he was chief executive
and co-founder, became part of JLT.
Mark Drummond Brady has been with JLT
since 1987 and has held a number of senior
posts in the Group.
He was appointed Chairman in April 2006
and became Chairman of the Nominations
Committee in June 2016.
He was appointed Chief Executive of the UK
& Ireland Insurance Broking business and
the Group’s Employee Benefits businesses in
2000 and was appointed a Director and Chief
Operating Officer of JLT in January 2005.
Dominic was appointed Group Chief Executive
in December 2005. He was appointed a nonexecutive director and deputy chairman of
Newbury Racecourse plc in November 2010
and became its chairman in June 2011.
Geoffrey is senior independent director
of Close Brothers Group plc. He was formerly
chairman of Nationwide Building Society, chairman
of Railtrack Group plc, a director of Investec plc,
general counsel of Robert Fleming Holdings
and managing partner of Clifford Chance.
He was the Group’s International Chairman of
Risk & Insurance until 1 September 2014, when
he relinquished that role and became the Deputy
Group CEO.
Mark joined the Board in March 2011 and is
a member of the Group Executive Committee.
With effect from 28 February 2017 Mark
becomes CEO of JLT Latin America and
Chairman of JLT Canada, in addition to his
current role as Deputy Group CEO.
CHARLES ROZES
BRUCE CARNEGIE-BROWN
ANNETTE COURT
Group Finance Director
Non-Executive Director
Non-Executive Director
Charles Rozes joined JLT in September 2015 as
Group Finance Director. He is a member of the
Group Executive Committee. He is also a Director
of JLT India and a member of its Audit & Risk
Committee. He joined the Group from Barclays
where, since 2011, he had held the role of Global
Head of Investor Relations.
Bruce Carnegie-Brown was appointed
a Non-Executive Director on 1 May 2016. He
is Chair of the Remuneration Committee and a
member of the Audit & Risk and Nominations
Committees.
Annette Court was appointed a
Non-Executive Director in August 2012. She is
a member of the Audit & Risk, Remuneration
and Nominations Committees.
Prior to that, Charles was chief financial officer
of Barclays UK Retail and Business Banking.
He has also held senior management roles at
Bank of America and IBM, and as a Partner of
PricewaterhouseCoopers over a 25 year period.
He is first vice chairman and lead independent
director of Banco Santander SA, where he has
been a non-executive director since 2015. He has
also been a non-executive director of Santander
UK plc since 2012.
Bruce has been chairman of Moneysupermarket.
com Group plc since 2014, having been a
non-executive director there since 2010. He was
previously chairman of Aon UK Ltd from 2012 to
2015; senior independent director of Catlin Group
Ltd from 2010 to 2014; and a non-executive
director of Close Brothers Group plc from 2006 to
2014 (and senior independent director from 2008
to 2014).
Previously Bruce was managing partner
of 3i Group plc’s Quoted Private Equity business
and CEO of Marsh’s UK and European businesses,
prior to which he spent twenty years in a variety of
roles at JP Morgan and Bank of America.
56 Jardine Lloyd Thompson Group plc Annual Report 2016
Annette has extensive insurance industry
experience. Between 2007 and 2010 she
was chief executive officer for Europe
General Insurance for Zurich Financial Services
and a member of the group executive committee.
She is a former chief executive officer of RBS
Insurance, the insurance division of RBS Group
which owned the Direct Line and Churchill brands.
In the role she was also a member of the RBS
group executive management committee.
Annette is a non-executive director of
Admiral Group plc and Foxtons Group plc
and has previously served as a member of
the board of the ABI.
OVERVIEW
JONATHAN DAWSON
ADAM KESWICK
Non-Executive Director
Non-Executive Director
Jonathan Dawson was appointed a
Non-Executive Director in August 2012.
Adam Keswick was appointed Deputy Chairman
on 1 September 2016. He is a member of the
Remuneration and Nominations Committees.
Non-Executive Director
Lord Sassoon joined the Board as a
Non-Executive Director in April 2013. He is
a member of the Audit & Risk, Remuneration
and Nominations Committees.
Nicholas Walsh joined the Board as a
Non-Executive Director in October 2014.
He is a member of the Audit & Risk,
Remuneration and Nominations Committees.
He began his career at KPMG, before joining
Warburg (later UBS Warburg) in 1985. From 2002
to 2006 he was in the United Kingdom Treasury
as a civil servant, where he had responsibility for
financial services and enterprise policy. Following
this, he chaired the Financial Action Task Force;
and conducted a review of the UK’s system of
financial regulation.
Nicholas has held a variety of underwriting,
distribution and senior management roles in
the insurance industry, with a career of 42
years with American International Group, Inc.
(AIG). His most recent roles were vice chairman
AIG Property & Casualty Inc., chairman of AIG
Europe Limited and AIG Asia Pacific Insurance
Pte. Ltd. Prior to this he was president and CEO
of American International Underwriters.
From 2010 to 2013 Lord Sassoon was the
First Commercial Secretary to the Treasury and
acted as the Government’s front bench treasury
spokesman in the House of Lords. He is a director
of Jardine Matheson Holdings Limited and other
Jardine Matheson Group companies, having joined
the Jardine Matheson Group in January 2013.
He is also chairman of the China-Britain Business
Council, a Trustee of the British Museum and is a
member of the Global Advisory Board of Mitsubishi
UFJ Financial Group, Inc.
SHAREHOLDER INFORMATION
NICHOLAS WALSH
Non-Executive Director
FINANCIAL STATEMENTS
LORD SASSOON, KT
CORPORATE GOVERNANCE
Jonathan's career experience includes eight
years in the UK Ministry of Defence and over 20
years in investment banking with Lazard. In recent
years he has served as the senior independent
non-executive director of Next plc and as a nonexecutive director of Galliford Try plc, National
Australia Group Europe Ltd and Standard Life
Investments (Holdings) Limited.
Adam is a director of the Jardine Matheson
Group companies Dairy Farm International
Holdings Limited, HongKong Land Holdings
Limited, Jardine Matheson Holdings Limited,
Jardine Strategic Holdings Limited and Mandarin
Oriental International Limited. He is chairman
of Jardine Schindler Holdings Limited and of
Matheson & Co., Limited based in London, having
previously held a number of senior management
positions in the Jardine Matheson Group in Asia
since joining it in 2001. Adam is a director of
Ferrari N.V., a Supervisory Board member of
Rothschild & Co and a Council member of the
China Entrepreneurs Forum.
STRATEGIC REPORT
He is a member of the Remuneration and
Nominations Committees and was appointed
Chairman of the Audit & Risk Committee on
5 March 2013. Jonathan took over from
Richard Harvey as Senior Independent
Director with effect from 31 December 2016.
He is a non-executive director of National Grid plc
and chairman of Penfida Limited.
Nicholas is an advisor to Norton Rose Fulbright
LLP.
Nominations Committee
Remuneration Committee
Audit & Risk Committee
Jardine Lloyd Thompson Group plc Annual Report 2016
57
CORPORATE GOVERNANCE
GOVERNANCE FRAMEWORK AND
GROUP COMMITTEES
The work of the Board is supported by the Committees
(Audit & Risk, Remuneration and Nominations Committees).
Terms of reference for each of the Committees can be found
on jlt.com and reports from each of the Committees can be
found on pages 63 to 91. The Committees meet separately
and regularly throughout the year.
The Board has delegated the day-to-day management of the
Group, development of the Group's strategic direction (for
consideration and approval by the Board) and implementation
of the agreed strategy to the Group Chief Executive, Dominic
Burke. The Group Executive Committee operates to support
the Group Chief Executive in the running of the Group. Further
details of the composition of the Group Executive Committee
can be found on page 27.
In addition, the Group has a Disclosure Committee which
oversees the Company’s compliance with the Group’s
disclosure obligations. The Disclosure Committee is not a
Committee of the Board, but reports to the Board or to the
Group Audit & Risk Committee as appropriate. The Committee
is chaired by Charles Rozes, Group Finance Director.
STRUCTURE AT A GLANCE
The structure below sets out the composition of the Board and its committees:
Jardine Lloyd Thompson Group plc
JLT Group Board
Geoffrey Howe (Non-Executive Chairman)
Executive Directors
Dominic Burke (Group Chief Executive)
Mark Drummond Brady (Deputy Group CEO)
Charles Rozes (Group Finance Director)
Non-Executive Directors
Adam Keswick (Deputy Chairman)
Bruce Carnegie-Brown
Annette Court
Jonathan Dawson (Senior Independent Director)
Lord Sassoon
Nicholas Walsh
Audit & Risk Committee
Remuneration Committee
Nominations Committee
Jonathan Dawson (Chairman)
Bruce Carnegie-Brown
Annette Court
Lord Sassoon
Nicholas Walsh
Bruce Carnegie-Brown (Chairman)
Annette Court
Jonathan Dawson
Adam Keswick
Lord Sassoon
Nicholas Walsh
Geoffrey Howe (Chairman)
Bruce Carnegie-Brown
Annette Court
Jonathan Dawson
Adam Keswick
Lord Sassoon
Nicholas Walsh
LEADERSHIP
DIRECTORS
The Board of Directors, as at the date of this Report,
are profiled on pages 56 to 57. As at 10 February 2017,
being the latest date prior to publication of this Report, the
Board comprised the Chairman, three Executive Directors,
four Independent Non-Executive Directors and two NonIndependent Non-Executive Directors.
58 Jardine Lloyd Thompson Group plc Annual Report 2016
BOARD CHANGES
During 2016 there were a number of Board changes. James
Twining stepped down from the Board with effect from 26 April
2016. Bruce Carnegie-Brown joined the Board as a NonExecutive Director on 1 May 2016 and succeeded Richard
Harvey as Chairman of the Remuneration Committee on 1
November 2016. Lord Leach, a Non-Executive Director for
many years, sadly died on 12 June 2016. Adam Keswick joined
the Board as a Jardine Matheson-appointed Non-Executive
Director on 1 September 2016. Richard Harvey retired from
the Board with effect from 31 December 2016 and Jonathan
Dawson succeeded him as the Company’s Senior Independent
Director with effect from the same date.
NON-EXECUTIVE DIRECTORS
The Board is responsible for approving and overseeing the
implementation of the Company’s strategy; reviewing the
performance of management; ensuring that appropriate
systems of internal controls and risk management are in place;
and ensuring that the right resources are in place throughout
the Group to achieve the delivery of long-term value to
shareholders and the long-term success of the Company.
Non-Executive Directors provide a strong independent element
to the Board, and offer constructive challenge to, and support
for, management. They bring independent judgement and a
breadth of skills and experience to the Board and are key to
the effective functioning of the Board's Committees.
During the year the Board spent its time considering a wide
range of matters, including:
• Strategy;
• The performance of key businesses and functions
in the Group;
• Budgets and long-term plans for the Group;
• Cash-flow, financing and dividends;
• Growth and development;
• Risk management, internal controls and compliance;
• Reports from brokers and analysts; and
• People matters, including succession planning and diversity.
CHAIRMAN
The Group Company Secretary, Jonathan Lloyd, acts as
Secretary to the Board and all of its Committees. He supports
the smooth operation of each of the bodies by working with
the Chairman and Chairmen of the Committees. Additionally,
the Group Company Secretary advises the Directors on Board
procedures and corporate governance matters and supports
the Chairman in ensuring compliance with relevant legal and
regulatory requirements.
INDEPENDENT ADVICE
A process is in place to enable any Director to take independent
professional advice at the Company’s expense, relating to the
performance of any aspect of their duties. This is facilitated by
the Group Company Secretary.
DIRECTORS’ CONFLICTS OF INTEREST
Under the Companies Act 2006 all Directors have a duty to
avoid conflicts of interest and disclose any interests and outside
appointments. The Board has formal processes in place for
the declaration and management of conflicts of interest and
the Group Company Secretary maintains a Conflicts of Interest
Register. On appointment, new Directors are advised of the
process for dealing with conflicts of interest and Directors’
interests are reviewed on an ongoing basis. JLT’s relationship
with Jardine Matheson is disclosed on page 60.
Jardine Lloyd Thompson Group plc Annual Report 2016
59
SHAREHOLDER INFORMATION
The Chairman works closely with the Group Chief Executive
to ensure that the strategies and actions agreed by the Board
are effectively implemented. He also provides support and
advice to the Group Chief Executive, while respecting his
executive responsibility for managing the Group. The division
of responsibilities between the Chairman and the Group
Chief Executive has been clearly defined and has been
agreed by the Board.
GROUP COMPANY SECRETARY
FINANCIAL STATEMENTS
The Chairman, Geoffrey Howe, is responsible for leadership
of the Board and providing direction and focus, while making
sure that there is a clear structure for the effective operation of
the Board and its Committees. He sets the agenda for Board
discussions to promote effective and constructive debate and
to support a sound decision-making process. The Chairman is
also responsible for ensuring that the Directors receive accurate,
timely and clear information and that effective communication
takes place with the Company's shareholders.
The Senior Independent Director, Jonathan Dawson, acts as
a sounding board for the Chairman and an intermediary for
other Directors. He is also available as an additional point of
contact for shareholders to discuss matters of concern which
would not be appropriate through normal communication
channels with the Chairman, Chief Executive Officer or Group
Finance Director. No such matters of concern were raised by
shareholders during the year or by 10 February 2017, being
the latest practicable date prior to the date of this Report. The
Senior Independent Director also leads the Chairman's annual
performance evaluation.
CORPORATE GOVERNANCE
• Financial statements and announcements;
SENIOR INDEPENDENT DIRECTOR
STRATEGIC REPORT
Other matters reserved for decision by the Board include
material acquisitions and disposals; approval of financial results
announcements; approval of the Annual Report and shareholder
circulars; approval of share and other capitalisation issues;
and approval of dividend recommendations.
OVERVIEW
THE ROLE OF THE BOARD
CORPORATE GOVERNANCE
DIRECTORS’ ELECTION AND RE-ELECTION
In accordance with the requirements of the Code, newly
appointed directors and all existing directors will be submitting
themselves for election and re-election, respectively, at the
2017 Annual General Meeting. The Board is able to recommend
the election or re-election, as the case may be, of each member
of the Board based upon their skills, experience
and contribution to the Board and its Committees.
RELATIONSHIP WITH JARDINE MATHESON GROUP
The Group continued to have a number of arm’s-length trading
links with the Jardine Matheson group of companies during
the financial year, which are set out in note 32 on page 162.
At 10 February 2017 (being the latest practicable date prior to
the date of this Report), Jardine Matheson Holdings Limited
(Jardine Matheson Holdings) had an interest in 40.16% of the
Company’s issued share capital. This interest is held through
JMH investments Limited, a wholly-owned subsidiary of
Jardine Matheson Holdings.
The Company entered into a Relationship Agreement on 23
October 2014, as required by Listing Rule 9.2.2AR(2)(a), and in
March 2016 an amended Relationship Agreement was signed.
The Agreement is intended to ensure that Jardine Matheson
Holdings, as the Group’s controlling shareholder, complies with
certain independence provisions. It contains undertakings that
transactions and arrangements with Jardine Matheson Holdings
and/or any of its associates will be conducted at arm’s-length
and on normal commercial terms; that neither Jardine Matheson
Holdings nor its associates will take any action which could
prevent the Company from complying with its Listing Rules
obligations; and that neither Jardine Matheson Holdings nor its
associates will propose any shareholder resolution intended to
circumvent the proper application of the Listing Rules.
The Board confirms that, since the date of entry into
the Agreement, the Group has complied with its provisions
and that, so far as the Company is aware, Jardine Matheson
Holdings and its associates have also complied with the
independence and procurement obligations set out in
the Agreement.
The updated Agreement signed last year formalised the
processes the Company has in place to control the provision
of information to Jardine Matheson and clarified when and how
information may be requested by Jardine Matheson from JLT.
BOARD EXPERIENCE AND BALANCE
Following review, the Board remains satisfied that it continues to have the appropriate balance of expertise, experience,
independence and knowledge to run the business effectively and to deliver long-term shareholder value. The chart below
provides an overview of the experience of each of the Directors:
Length
of service
as Board
member as
at 31 Dec
2016 Independent
Other
public
board
experience
Name
Position as at
31 Dec 2016
Geoffrey Howe
Non-Executive
Chairman
15 years
No
•
Non-Executive
Director
8 months
Yes
•
Non-Executive
Director
4 years, 5
months
Yes
Senior Independent
Director
4 years, 5
months
Deputy Chairman
Non-Executive
Director
Lord Sassoon
Operational
experience
Insurance
industry
experience
International
experience
Legal/M&A
experience
•
•
•
•
•
•
•
•
•
•
Yes
•
•
•
•
4 months
No
•
•
•
Non-Executive
Director
3 years, 8
months
No
•
•
•
•
Nicholas Walsh
Non-Executive
Director
2 years, 3
months
Yes
Dominic Burke
Group Chief
Executive
12 years
N/A
Deputy Group
CEO
5 years, 10
months
Group Finance
Director
1 year,
4 months
Bruce
Carnegie-Brown
Annette Court
Jonathan
Dawson
Adam Keswick
Mark Drummond
Brady
Charles Rozes
Key:
Nominations Committee
Remuneration Committee
60 Jardine Lloyd Thompson Group plc Annual Report 2016
•
•
•
•
•
•
•
•
•
•
•
N/A
•
•
•
•
N/A
•
•
•
Audit & Risk Committee
Government
Experience
•
•
•
Finance
Experience
•
•
•
•
BOARD PERFORMANCE REVIEW
The Board held 7 scheduled meetings during the year and
attendance is set out in the following table:
7
7/7
Jonathan Dawson
7
7/7
Richard Harvey
7
7/7
Nicholas Walsh
7
7/7
Lord Sassoon
7
7/7
Bruce Carnegie-Brown
4
3/41
Adam Keswick
2
2/2
Lord Leach
3
2/32
Dominic Burke
7
7/7
Mark Drummond Brady
7
7/7
Charles Rozes
7
7/7
James Twining
2
2/2
1. Bruce Carnegie-Brown was unable to attend the Board meeting held on
30 June 2016 due to a prior commitment notified before he joined the Board.
2. Lord Leach was unable to attend the Board meeting held on 26 April 2016
due to ill-health.
The Directors’ attendance at Committee meetings is set out
in the respective Committee reports on pages 63 to 91.
During the year Board members held a strategy day which
the Board used to consider key market pressures, review the
impact of strategic decisions and to focus on the strategy for
the following years.
DIRECTORS’ INDUCTION AND TRAINING
Meetings were arranged with the Executive Directors, the
members of the GEC and other function heads, including the
Group Head of Internal Audit; the Group Head of Risk; the
Group Treasurer; the Group Human Resources Director; and
the Group Company Secretary.
The Board supports the Code's recommendation that diversity
and gender should be considered when making Director
appointments. The Board aims to ensure that it has the right
balance of skills and experience, independence and knowledge
to enable it to discharge its duties and responsibilities
effectively. The Board's policy is to select the best candidate
irrespective of background. The Company has taken, and
continues to take, steps to promote diversity and inclusion,
including gender diversity, both at senior management level
and in the boardroom. During the year the business has made
significant steps forward with its diversity programme. Further
information about this is available on pages 71 to 72 in the
Nominations Committee Report.
SUCCESSION PLANNING
Succession planning and talent development has been an
important agenda item for the Board in the year, as described
in greater detail in the Nominations Committee Report on page
72. Substantial progress has been made during the year in
promoting talent across the Group and the Board is confident
that there is a strong senior management succession pipeline.
Directors are encouraged to visit different parts of the business
on a regular basis in order to enhance their understanding of
those businesses and the key issues they face.
Jardine Lloyd Thompson Group plc Annual Report 2016
61
SHAREHOLDER INFORMATION
Members of the Board are provided with regular training in
order to keep them abreast of industry and legal and regulatory
developments, facilitated by professional advisers where
appropriate. During the year the Board was provided with a
detailed briefing on the new Market Abuse Regulation and its
implications both for them as individuals and for the Group as a
whole. To assist the Directors in fulfilling their duties, procedures
are in place to provide them with timely information.
BOARD DIVERSITY
FINANCIAL STATEMENTS
A tailored induction programme was agreed for the new
Directors who joined the Board during the year, Bruce
Carnegie-Brown and Adam Keswick. The programme was
facilitated by the Chairman and the Group Company Secretary.
The programme is designed to provide comprehensive
information about the JLT Group of companies, its insurance
and reinsurance broking and its Employee Benefit business.
A number of recommendations were made as to how to
increase the effectiveness of the Board further, including
reviewing the breadth of skills and experience on the Board in
the context of its future needs; providing more qualitative data
to the Board as part of regular management reporting; adopting
improvements to Board processes; extending reporting to the
Board on feedback from stakeholders; and building on the
Board's approach to reviewing strategy.
CORPORATE GOVERNANCE
Annette Court
Geoffrey Howe
The Board’s performance is reviewed annually. Following
internally-led reviews of the Board and Committees in 2014
and 2015, an externally-facilitated review was conducted in
2016. The results of the review were generally very positive,
and the Board was seen as functioning well and covering the
right ground. Discussions were felt to be of a high quality and
there was felt to be open and constructive debate pitched at
the right level, with effective challenge where appropriate. The
Board is seen as being particularly effective at management of
performance and risk, as well as investment appraisal, and has
a clear approach to strategy.
STRATEGIC REPORT
Attended
7/7
OVERVIEW
Eligible to attend
7
CORPORATE GOVERNANCE
RISK MANAGEMENT AND INTERNAL CONTROLS
RELATIONSHIP WITH SHAREHOLDERS
The Board has overall responsibility for the Group's systems
of internal control and for reviewing their effectiveness.
The implementation and maintenance of the risk management
and internal control systems are the responsibility of the
Executive Directors and senior management.
Our Board welcomes the opportunity to openly engage with
shareholders as it recognises the importance of a continuing
effective dialogue, whether with major institutional investors,
private shareholders or employee shareholders. The Chief
Executive Officer and Group Finance Director are closely
involved with investor relations, together with the Group Head
of Investor Relations. The Board is regularly updated on
shareholder views. The Chairman and Non-Executive Directors
are available to meet with institutional shareholders to discuss
any matters relating to the Company.
In accounting to shareholders, the Board is responsible for
presenting a fair, balanced and understandable assessment of
the Group’s position and prospects. The Board’s responsibility
covers the Annual Report and Accounts and half-year results.
A statement relating to this assessment is covered in the Audit
& Risk Committee Report on page 70.
The Board is responsible for determining the nature and extent
of any significant risks the Group is willing to take in order to
achieve its strategic objectives and for maintaining sound risk
management and internal control systems to ensure that an
appropriate culture is embedded throughout the Group.
Owing to the limitation inherent in any system of internal
control, this system provides robust, but not absolute,
assurance against material misstatement or loss. The Group’s
risk management and internal control systems comprise
Group policies, procedures and practices covering a range of
areas including the appropriate authorisation and approval of
transactions, the application of financial reporting standards and
the review of financial performance and significant judgements.
The Board monitors the effectiveness of the Group’s systems
of internal control carefully throughout the year and carries out
an annual review covering their adequacy and effectiveness.
The Board has delegated part of this responsibility to the Audit
& Risk Committee. The role and work of the Audit & Risk
Committee in this regard and the role of the Group’s Internal
Audit function are described in the Audit & Risk Committee
Report on pages 63 to 70.
62 Jardine Lloyd Thompson Group plc Annual Report 2016
Investors are consulted and informed about important business
activity and decisions on an ongoing basis. We keep our
investors up to date with regulatory news releases via the RNS
service and through press releases. Copies of past regulatory
news releases can be found on the Group’s website jlt.com.
CULTURE AND ETHICS
The Board recognises the importance of demonstrating its full
support for ethical conduct and leadership. During the year,
the Board considered the subject of culture and ethics in the
context of JLT's style, tone and organisation. The Board has
a strong focus on ensuring that there is a continuing open
and straightforward culture of integrity and honesty across
the Group.
OVERVIEW
AUDIT & RISK
COMMITTEE REPORT
I am pleased to present the Audit & Risk
Committee Report for the year ended 31
December 2016.
As part of my role as Chairman of the
Committee I have met with the external
auditors, PricewaterhouseCoopers LLP
(PwC), as well as Group Internal Audit,
without management being present.
The Committee remains focused on
ensuring that all relevant laws and
regulations are complied with and that
the business operates within the right
control framework.
Finally, there have been a couple of
changes to the composition of the
Committee during the year. Bruce
Carnegie-Brown joined the Committee
on 1 May 2016, bringing broad skills and
experience, including relevant industry
experience. Unfortunately Bruce will be
stepping down from the Board in June
2017, following his appointment as
Chairman of Lloyd's of London. Richard
Harvey retired on 31 December 2016
and the Committee thanks him for his
valuable and insightful contributions over
his years of service to the Committee.
Jonathan Dawson
Chairman, Audit & Risk Committee
28 February 2017
SHAREHOLDER INFORMATION
This report highlights the extensive work
carried out by the Committee during
2016, including its continued focus on
the risks and controls in key areas of the
Group’s businesses. The Committee’s
work has reflected the further expansion
of the Group’s geographical footprint in
areas including the United States (US)
and the Middle East and Africa (MEA);
external challenges affecting the Group’s
key risk exposures; and internal changes
in business organisation, structure and
leadership.
The Committee also supports the
Board in its assessment of whether the
Annual Report and Financial Statements
are fair, balanced and understandable
and provide sufficient information to
allow an assessment of the Group.
The Committee considers in detail the
processes undertaken by management
in order to meet the requirement on the
Company to include a long-term viability
statement in the Annual Report and
Financial Statements.
The Committee has also carried out a
number of in-depth reviews during the
year, in areas including pensions, cyber
risk, Employee Benefits, Latin America,
Asia, US Specialty and JLT Re.
Jardine Lloyd Thompson Group plc Annual Report 2016
FINANCIAL STATEMENTS
The Committee plays a crucial role in
providing comfort to the Board on the
integrity of the Group's processes and
procedures relating to internal control,
risk management and financial reporting.
Jonathan Dawson
CORPORATE GOVERNANCE
INTRODUCTION FROM
THE COMMITTEE
CHAIRMAN
“
The Committee plays a crucial role in
providing comfort to the Board on the
integrity of the Group’s processes and
procedures relating to internal control,
risk management and financial reporting.
STRATEGIC REPORT
“
63
CORPORATE GOVERNANCE
COMMITTEE COMPOSITION, SKILLS AND
EXPERIENCE
Committee Members
Jonathan Dawson (Chairman)
Bruce Carnegie-Brown (joined 1 May 2016)
Annette Court
Richard Harvey (retired 31 December 2016)
Lord Sassoon
Nicholas Walsh
The members of the Audit Committee who served during
the year are listed in the table above.
The UK Corporate Governance Code 2014 (the Code) requires
the Board to establish an audit committee of at least three
independent, Non-Executive Directors. The Committee currently
comprises five Non-Executive Directors, of which four are
independent. The Committee satisfies the requirements of the
Code, with the exception of having one member, Lord Sassoon,
who is not an independent Non-Executive Director.
Jonathan Dawson has been Chairman of the Committee since
March 2013 and has over 30 years’ experience in financial
services. Lord Sassoon qualified as a Chartered Accountant
and has many years of experience in investment banking and
senior finance roles in government. Both Annette Court and
Nicholas Walsh have many years of experience in senior roles
in the insurance industry. Bruce Carnegie-Brown has had a
long career in financial services and insurance. Full biographies
of each of the members of the Committee are set out on pages
56 to 57.
The Board considers that the members of the Committee,
both individually and collectively, possess the necessary range
of skills and experience to enable it to properly discharge its
responsibilities. Details of the Committee members’ relevant
experience can be found on page 60.
In addition to the Committee members, a number of other
people attend meetings by invitation. The list of the additional
participants is set out in the following table:
Meeting Participants
Group Company Secretary
Group Chairman
Group Chief Executive
Deputy Group CEO
Group Finance Director
Group Head of Internal Audit
Group Head of Risk
Group Head of Enterprise Risk Management
Group General Counsel
Chief Executive Officer, Employee Benefits
External Auditors
64 Jardine Lloyd Thompson Group plc Annual Report 2016
COMMITTEE ATTENDANCE
The Committee held six scheduled meetings during the year,
as in previous years. The Committee’s terms of reference,
which can be accessed on the Company’s website, provide for
additional ad hoc meetings to be held as and when necessary.
The table below shows the Committee members during the
year and their attendance at meetings:
Committee members
Jonathan Dawson
Eligible to attend
6
Attended
6/6
Bruce Carnegie-Brown
3
3/3
Annette Court
6
6/6
Richard Harvey
6
6/6
Lord Sassoon
6
6/6
Nicholas Walsh
6
6/6
Meetings were also held with Group Internal Audit and the
external auditors without management being present.
SUBSIDIARY ARCS
JLT operates Entity ARCs as part of its global governance
structure across the Group’s business units. The role of each
ARC is to assist the relevant business in managing
its governance and controls effectively.
Entity ARCs focus on the oversight of significant risk, audit
and internal control matters affecting their business, together
with their regulatory responsibilities.
Each Entity ARC is chaired by a Non-Executive Director.
There is formal reporting to the Group ARC as well as a regular
forum for Group and Entity ARC chairs to meet during the year
and discuss topical issues and matters of common interest.
During 2016 a seminar was held for NEDs of regulated
subsidiaries both in the UK and internationally, which was also
attended by members of the Group ARC. The seminar included
a presentation by an external speaker on cyber risk and its
implications for the Group. There was also a presentation by the
Group’s home regulator, the Financial Conduct Authority (FCA),
which emphasised the positive progress the Group had made in
developing its compliance and governance approach in the past
few years. The Group Chairman provided an update on group
strategy and there were updates on the work of Group Internal
Audit and Group Risk & Compliance. There was also discussion
of regional risks and common areas of interest across the
Group, including emerging risks.
COMMITTEE ROLE AND RESPONSIBILITIES
• the effectiveness of the Group’s Internal Audit function;
• the external auditors’ independence and objectivity,
together with the policy on the engagement of the external
auditors to supply non-audit services, taking into account
relevant guidance regarding the provision of non-audit
services by the external auditors; and
OVERVIEW
• the effectiveness of the external audit process,
taking into consideration relevant professional and
regulatory requirements;
The role of the Committee is to provide oversight and advice
to the Board on matters of financial reporting, financial
controls and risk management, together with the assessment
and reporting of key risks, whilst maintaining an appropriate
relationship with the Company’s external auditor. The business
of the Committee is closely linked to the Group’s internal
calendar of events and financial audit programme. The
Committee works independently of management and liaises
with other Group committees. Cross-membership between
each of the Committees ensures that members have a better
understanding of the work of each Committee and that
communication is more efficient.
• thematic and business risk reviews.
STRATEGIC REPORT
The responsibilities of the Committee, as detailed in the Terms
of Reference, include the monitoring and review in the ordinary
course of business of:
• the integrity of the financial statements of the Group, any
formal announcements relating to the Group’s financial
performance and significant financial reporting judgements
contained therein;
CORPORATE GOVERNANCE
• the Group’s risk management framework, risk appetite and
risk strategy to ensure that these are appropriate to the
activities of the Group;
• the effectiveness of the Group’s system of internal controls,
including financial, operational and compliance controls and
risk management;
COMMITTEE ACTIVITIES
January
February
April
July
October
November
Financials
Review of Draft Preliminary Statement 2015
•
Review of Draft Annual Report & Accounts 2015
Draft of Audit & Risk Committee Report
•
•
•
•
FINANCIAL STATEMENTS
The table below summarises the main activities carried out by the Committee during 2016. More detail on its activities
is included below:
External Audit
•
•
Audit Fees
•
SHAREHOLDER INFORMATION
PwC Report
Consideration of the Audit Plan
•
•
•
Auditor Independence
•
Other Issues
Internal Audit Report
•
Annual Review of Systems of Internal Control
Risk Management and Compliance
•
•
•
Review of Business Units
Committee Evaluation
•
•
•
•
•
•
•
•
•
•
•
Jardine Lloyd Thompson Group plc Annual Report 2016
65
CORPORATE GOVERNANCE
In order to satisfy its responsibilities, the Committee in
the ordinary course of business reviewed a wide range
of matters, including:
Key business areas and topics reviewed included:
• the drafting of the interim report, preliminary announcement
and relevant sections of the Annual Report and Financial
Statements before their submission to the Board;
• reports from the Group Finance Director, including
updates on currency exposures, the treatment of
exceptional items, market counterparty security and
the Group insurance programme;
• reports from the Group Head of Internal Audit on areas
where control weaknesses had been identified, together
with the mitigation/remediation plans of management, the
activities within the function and resourcing matters;
JLT pension scheme
Asia
UK Employee Benefits
US Specialty
Latin America
JLT Re
The Committee also considered the following thematic topics
during the year:
• a review of the increasing challenges associated with
IT security and in particular cyber risk;
• a review of the global sanctions regimes and their
application across the Group;
• the introduction of a consistent limitation of liability
programme across the Group, commensurate with the
type and nature of services that each business offers;
• reports from the Group Head of Internal Audit in respect
of the overall control environment;
• a review of the Group’s approach to its three lines of
defence governance framework;
• reports from the Group Head of Risk, including
updates on dealings with the regulators in the UK and
in other jurisdictions;
• a review of financial accounting developments;
• reports from the Company’s external auditors, including
any matters relating to reports on the management of
professional indemnity risk exposure and the extent of
any litigation provisions held;
• a review of Group’s tax strategy, considered in the context
of the Company’s disclosure approach; and
• the effectiveness of the Committee.
In addition to its regular agenda of matters, the Committee
also considered key and emerging risks in a number of business
areas or Group support functions, which were supported by
‘Risk Review’ presentations delivered by senior management
and, in some cases, the Entity ARC chair of the relevant
business area.
• ongoing review of the key risks and themes of Brexit;
• the development and implications of the new Senior
Managers Regime;
• a range of matters in relation to the regulatory environment,
including the forthcoming General Data Protection
Regulation, MiFID II, FCA thematic reviews, FATCA etc;
• a risk scenario analysis which underpins the viability
statement for the report and accounts;
• a semi-annual review of compliance monitoring reviews;
• Members of the Committee also visited a number of the
Group’s operations around the world during the year,
where they met with senior management and in several
cases attended local ARC and board meetings.
SIGNIFICANT FINANCIAL STATEMENT ISSUES CONSIDERED BY THE COMMITTEE
The Committee considered the following significant issues in the year, taking account of the views of the Company’s external
auditors. The issues and how they were addressed by the Committee are detailed below:
Issue
How the issue was addressed by the Committee
Earnings per
Share (EPS)
The Committee reviewed management’s report proposing a revision to the calculation of EPS, which was reviewed following
changes made in 2014 and 2015 to the terms of certain staff awards. Management described the accounting challenges faced by
the complex nature of the awards and the impact of changing the terms of the schemes. PwC confirmed that they had reviewed
the report in line with IFRS and tested the revised calculation. The Committee agreed the treatment and that the prior year
comparatives in the Group accounts should be restated to aid comparison.
Employee
Share Trust
The Committee reviewed management’s report on the accounting for the Employee Share Trust. As part of the transition to new
UK GAAP for 2015, management reviewed the accounting for the Trust in the subsidiaries, and as a result of this concluded that
the ultimate entity responsible for the Trust is JLT Group plc. As a result the retained earnings of the parent company, JLT Group
plc, will be restated to treat the shares held by the trust as treasury shares. PwC confirmed that they had reviewed management’s
assessment and the conclusions reached. The Committee agreed the accounting treatment and that the standalone accounts of
JLT Group plc should be restated to reflect this change in accounting treatment.
66 Jardine Lloyd Thompson Group plc Annual Report 2016
How the issue was addressed by the Committee
Pension
Liability
Valuation
The Committee discussed the maintenance of complete and accurate pension scheme data on which the pension liability
assumptions are based and noted that no exceptions had been found from testing. The Committee considered the
appropriateness of the methodology used by management including the key assumptions used to value the pension liabilities.
The key assumptions include the appropriateness of the discount rate used for the UK scheme by reference to the iBoxx AA
15+ corporate bond index; the adjustment made by management to match the duration of the liabilities and compared this to
assumptions adopted by other schemes with a similar duration; the rates used by management for each of these elements to
the Bank of England inflation curve; and the appropriateness of the base tables selected for use by management by reference
to the mortality experience analysis, completed by the UK Pension Scheme Trustees as part of the 2014 funding valuation.
The Committee concluded that the key assumptions made were reasonable and that the overall pension deficit is appropriately
calculated.
Intangibles
Impairment
Assessment
The Committee reviewed management’s process for testing goodwill and other intangible assets for potential impairment.
This included the results of management’s impairment assessment, including an assessment of the appropriateness of the
methodology used to perform this and the substantive testing done by PwC of all inputs into the valuation such as agreeing to
approved budgets and checking historical performance against the budget. The Committee considered the appropriateness of
the key assumptions within management’s valuation, in particular the terminal growth rates in the forecasts by comparing them
to economic and industry forecasts; and the weighted average cost of capital (WACC) by assessing the cost of capital for the
Company and comparable organisations and the Committee concluded that they are appropriate.
Litigation
Provisions
The Committee members received and reviewed errors and omissions and other litigation reports addressing key disputes,
and discussed with management the key judgements made, including relevant legal advice that may have been received.
The Committee members also discussed litigation provisions with PwC, and received reports from GIA and Group Risk and
Compliance on quality controls designed to minimise the incidence of errors and omissions. As a result, it was determined that the
overall provision is appropriate, but it was recognised that due to the inherent uncertainties of litigation the final results could differ.
AUDIT COMMITTEE EFFECTIVENESS REVIEW
The Committee is accountable to the Board in relation to
the effectiveness of the Group Internal Audit function (GIA).
There were no changes to the terms of reference for the
function, or the holder of the Group Head of Internal Audit
position, during the period.
• the independence of the GIA function;
• the annual GIA plan, and other audit activities undertaken
by the function;
• reports from the Group Head of Internal Audit on the results
of audit work performed, and the effectiveness of the
Group’s systems of internal control;
• co-ordination between the internal and external auditors,
other control functions within the Group, and with
external regulators;
SHAREHOLDER INFORMATION
GROUP INTERNAL AUDIT
During 2016, the Committee reviewed, evaluated and
monitored:
• management’s responsiveness to the findings and
recommendations of GIA, and the monitoring of follow
up actions relating to these;
• the adequacy of the resources of the GIA function,
including plans for managing that resource to meet the
demands of the business; and
• the overall effectiveness of the Group Head of Internal
Audit and the GIA function in promoting and influencing
improvements in the Group’s internal control environment.
Jardine Lloyd Thompson Group plc Annual Report 2016
FINANCIAL STATEMENTS
An internal review of the Committee’s effectiveness was carried
out in respect of 2016. Each member and regular attendees of
the Committee was asked to complete a questionnaire and the
feedback was discussed by the Committee. The results of the
review were generally very positive, with the Committee seen
as well-chaired and covering the right ground. Discussions are
of a high quality and there is open and constructive debate,
with effective challenge where appropriate. Some opportunities
were identified to make Committee papers more concise and
focused. There was seen to be more work to do on providing
professional training to the Committee.
CORPORATE GOVERNANCE
The Committee Chairman provides regular updates
to the Board on the key issues discussed at the
Committee’s meetings.
The Committee believes that GIA is effective. An external
review took place in 2016, in accordance with Chartered
Institute of Internal Auditors' standards and the Committee’s
terms of reference. This confirmed the function’s effectiveness,
and its positive contribution to improving the Group’s
control environment.
STRATEGIC REPORT
REPORTING TO THE BOARD
OVERVIEW
Issue
67
CORPORATE GOVERNANCE
EXTERNAL AUDITORS
The Committee is accountable to the Board in relation to the
appointment of the external auditors, PwC, and for overseeing
the relationship with them. During the year, the Committee:
• agreed PwC’s remuneration for both audit and non-audit
services, including satisfying itself that the level of audit
fee was appropriate to enable an adequate audit to be
carried out;
• approved the external audit plan and ensured that it
was consistent with the scope of the audit engagement;
• approved the terms of engagement, including the
engagement letter issued at the start of each audit,
and the scope of the audit;
• assessed PwC’s independence, including in relation
to non-audit services provided;
• reviewed the findings of GIA, including discussion
of any major issues arising, and any accounting and a
udit judgements; and
• held meetings with PwC without management present.
The Chair of the Committee also met privately with PwC
at other times.
PwC also report regularly on the actions that they have taken
to comply with professional and regulatory requirements and
current best practice in order to maintain their independence.
EFFECTIVENESS OF EXTERNAL AUDITOR
During the year, PwC presented to the Committee its approach
to maintaining a quality audit and a questionnaire was circulated
to those involved in the audit seeking their views on planning,
resources and quality of reporting. The Committee considered
the feedback from the review, which was generally very positive,
and agreed those areas where improvements might be made.
NON-AUDIT FEES
To safeguard auditor objectivity and independence, the
Committee oversees the process for the approval of non-audit
services provided by PwC. Prior to approval, consideration is
given to whether it is in the interests of the Company that the
services are purchased from PwC, rather than another supplier.
Where PwC were chosen to provide non-audit services during
the year, this was as a result of their detailed knowledge of the
structure of our business combined with an understanding of
JLT’s industry, which together made them the best supplier
to carry out the relevant work cost effectively.
68 Jardine Lloyd Thompson Group plc Annual Report 2016
The Group has a policy relating to non-audit fees which requires
all non-audit-related work to be pre-advised to the Group
Finance function. Work with a fee value of £10,000 or less is
required to be approved by the regional Finance Director.
Work with a fee exceeding £10,000 is also required to be
approved by the Group Finance function.
The following table illustrates the level of audit and non-audit
fees paid to PwC in 2016 compared to 2015:
Audit
Non-audit
Total
Total spend on non-audit services as
% of the total fees paid to PwC
2016
£’000
2,649
2015
£’000
2,653
755
742
3,404
3,395
22%
22%
AUDITOR INDEPENDENCE
The Committee remained satisfied with PwC’s independence,
and their responsiveness to management, in respect of work
undertaken in 2016. PwC have confirmed their independence.
Based on the Committee’s recommendation, the Board
are proposing that PwC are reappointed to office at this
year’s AGM.
This year’s internal review of PwC’s effectiveness and
performance concluded that they continue to operate to
a high standard.
EXTERNAL AUDITOR ROTATION
PwC have been the Group’s external auditors since 1991.
The Committee has been kept up to date with the development
of new EU-wide regulations concerning audit tenure and
the longevity of audit firm relationships with the companies
they audit. Under current EU transitional arrangements, it is
anticipated that the last financial year that PwC would audit the
Group’s accounts would be that ending 31 December 2019.
The current audit partner took up his role in 2015.
Continuity and consistency of audit quality are important,
but the Committee is mindful of the fact that PwC have been
in place for 25 years without re-tender and it remains the
Company’s intention to initiate an audit re-tendering process
in 2018. The Company believes that this timing is appropriate
as it aligns with the rotation cycle for the current engagement
partner. There are no contractual obligations that would restrict
the selection of a different auditor.
RISK REVIEW PROCESS
CYBER RISK
Cyber risk and related subjects have been the subject of regular
discussion at the Group ARC for several years. Rather than
running a one off programme, JLT adopts the stance that this
area requires a constant focus across people, processes and
systems in order to stay current and to mitigate this threat.
The Committee recognises that a strong and transparent
corporate culture is a valuable asset and can protect and
generate value. Companies need to have a strong purpose,
culture and ethical values in order to succeed and be
sustainable and to build trust among their stakeholders.
Corporate culture is led by the Board and is not about rules but
about actions. A key objective for both the Board and senior
management is to communicate the behaviours they want to
see in the business and to find constructive ways to encourage
and build those behaviours.
The compliance framework of each of our businesses
will continue to evolve in response both to their growth
and local legal and regulatory changes.
ANTI-BRIBERY PROGRAMME
JLT enforces a rigorous anti-bribery and corruption programme
across all jurisdictions in which it operates. The programme
is underpinned by Group policy, which is not allowed to be
tailored locally and is accompanied by mandatory on-line
training, together with face-to-face training for appropriate
colleague populations.
Any payments to a third party, other than a client, in an
insurance transaction are subject to a strict centrally controlled
approval process. This process is regularly reviewed by GIA,
both centrally and in our regional businesses as part of the
standard audit template. The third party framework has been
externally reviewed.
Jardine Lloyd Thompson Group plc Annual Report 2016
69
SHAREHOLDER INFORMATION
The Audit & Risk Committee also has an important role to play
in supporting the right culture across the Group, by overseeing
the provision of high quality, insightful reporting both internally
and externally to the Group’s stakeholders, which demonstrates
that the Group has in place the right structures and processes
to support the right behaviours by employees. The Committee
needs to recognise and address any instances where there is
misalignment between behaviour, purposes and values.
Where local laws or regulations impose standards or
practices which differ from those of the wider JLT Group
(for example in relation to licensing requirements or the
applicable sanctions regime), adjustments are made to
policies and practices as appropriate.
FINANCIAL STATEMENTS
A healthy corporate culture starts with clear alignment of
business purpose, values, strategy and incentives, where
people at all levels of an organisation understand the values
of the organisation and act in accordance with those values.
Our businesses around the Group are at differing levels of
maturity, but they have all implemented a suitable governance
and control environment, which in many cases either mirror,
or are based upon, JLT Group standards and structures.
Businesses also adopt appropriate quality assurance process
and all significant businesses operate an independently chaired
ARC based on a common Group format. Businesses are
subject to regular internal audits based on a common
Group-wide template and control model.
CORPORATE GOVERNANCE
CULTURE
COMPLIANCE FRAMEWORK
STRATEGIC REPORT
The risk of any firm being compromised by some form of cyber
event is ever present. JLT takes cyber risk very seriously and
seeks to address any threats from both internal or external
sources, whether intentional and malevolent or by simple
human error. JLT also recognises the interrelationship between
addressing cyber risk and dealing with other subjects such as
the forthcoming General Data Protection Regulation, as well as
the fact that creating a strong environment to manage one will
assist addressing the other.
The Committee has increased its focus on this area in the
past year and has discussed a number of matters relevant to
the fostering of an appropriate corporate culture within JLT,
including the launch of a new whistleblowing process; the rollout of the Group’s 3 Lines of Defence model; the development
of a robust enterprise-wide approach to risk management;
the improving maturity of the control environment in the
Group’s businesses; the positive results of the external quality
assessment of GIA; and the year end review of internal controls.
OVERVIEW
A description of the processes followed by the Group to identify
and manage risk is included in the Risk Management Report
on pages 42 to 45.
The Committee’s work in this regard is supported by the key
control functions - including Group Risk & Compliance, Group
Internal Audit and Group Corporate Secretariat – as well as by
the Group’s external auditors.
CORPORATE GOVERNANCE
AUDIT QUALITY REVIEW REPORT
During 2016 the Committee Chairman met with the FRC
in the context of their Audit Quality Review (AQR) reporting
process in respect of the 2015 audit process. The AQR
report concluded that the overall quality of the audit work
was good and the work on calculating pension liabilities
was of a particularly high standard.
DIRECTORS’ FAIR, BALANCED AND
UNDERSTANDABLE STATEMENT
At the request of the Board, the Committee carried out a
detailed review of the robust processes which were followed
in preparing the Annual Report and Financial Statements,
and reported the results of that review to the Board.
The review also supported the Directors in satisfying
themselves that they could make the statement on page
95 of the Annual Report and Financial Statements that
the Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Group’s performance, business model and strategy.
Jonathan Dawson
Chairman, Audit & Risk Committee
28 February 2017
70 Jardine Lloyd Thompson Group plc Annual Report 2016
OVERVIEW
NOMINATIONS
COMMITTEE REPORT
I am pleased to present the Nominations
Committee report for the year ended
31 December 2016.
It has been an active year for the
Committee, with a particular focus on
succession planning for both the Board
and senior management.
There were also several senior
management changes in the year.
Mike Rice, CEO of our US Specialty
business, and William Nabarro, Special
Adviser to the Group Chief Executive,
both joined the Group Executive
Committee on 1 May 2016. Lucy Clarke,
Deputy CEO of JLT Specialty, joined the
Group Executive Committee with effect
from 26 September 2016.
With effect from 28 February 2017, the
following senior management changes
are being made: Mike Methley is being
appointed as Group Chief Operating
Officer. Mark Drummond Brady
becomes CEO of JLT Latin America and
Chairman of JLT Canada, in addition to
his current role as Deputy Group CEO.
Mike Reynolds, Global CEO of JLT Re,
assumes responsibility for JLT Insurance
Management. Bala Viswanathan, CEO of
JLT UK & Ireland Employee Benefits, also
becomes International Chairman
of Employee Benefits.
Another key area of focus for the Group
has continued to be diversity. We have
defined JLT’s diversity agenda on the
basis of three pillars - Networking,
Sponsorship and Involvement. In 2016
JLT supported many initiatives, both
internally and in public events in the
London Market and other insurance
hubs, to help to drive a more diverse
and inclusive business and to play our
part in solving these challenges in our
industry. More details are available in
the Corporate Responsibility Report on
pages 46 to 53.
The Committee continues to focus on
succession planning and executive
development.
I will be available at the AGM to answer
any questions on the work of the
Committee during the year.
SHAREHOLDER INFORMATION
Bruce Carnegie-Brown and Adam
Keswick joined the Board and the
Committee on 1 May 2016 and 1
September 2016 respectively. Richard
Harvey retired from the Board and the
Committee on 31 December 2016.
As I mentioned in my Chairman's
Statement, James Twining, Group
Commercial Director, stepped down
from the Board in April 2016. Bruce will
unfortunately be stepping down from the
Board at the end of June, following his
appointment as Chairman of Lloyd's
of London.
FINANCIAL STATEMENTS
During the year there were a number
of changes to the Committee. We
were saddened by the death of Lord
Leach, the previous Chairman of the
Nominations Committee, in June 2016
after a short illness. Lord Leach was
a greatly valued member of our Board
and also provided strong leadership to
the Nominations Committee for over 19
years. I replaced Lord Leach as Chairman
of the Committee following his death.
Geoffrey Howe
CORPORATE GOVERNANCE
INTRODUCTION FROM
THE COMMITTEE
CHAIRMAN
“
During the year there have been
a number of significant senior
management changes.
STRATEGIC REPORT
“
Geoffrey Howe
Chairman, Nominations Committee
28 February 2017
Jardine Lloyd Thompson Group plc Annual Report 2016
71
CORPORATE GOVERNANCE
COMMITTEE MEMBERSHIP AND ATTENDANCE
SUCCESSION PLANNING
The Committee comprises the following members:
One of the key roles of the Committee is to discuss succession
planning for the Board and other senior management positions. It is
important that a pipeline of talent is recognised and nurtured within
the business and the skills and experience of senior management
are developed. Ultimate responsibility for making senior management
appointments rests with the Group Chief Executive.
Committee Members
Geoffrey Howe (Chairman)
Jonathan Dawson
Bruce Carnegie-Brown
Adam Keswick
Annette Court
Lord Sassoon
Nicholas Walsh
The Group Company Secretary acts as Secretary to the
Committee and, where appropriate, others attend meetings by
invitation, as listed below.
Meeting Participants
Group Chief Executive
Group Human Resources Director
The table below shows the Committee members’ attendance
during 2016:
Committee members
Geoffrey Howe (Chairman)
Eligible to attend
2
Attended
2/2
Bruce Carnegie-Brown
1
1/1
Annette Court
2
2/2
Jonathan Dawson
2
2/2
Richard Harvey
2
2/2
Adam Keswick
1
1/1
Lord Leach
1
1/1
Lord Sassoon
2
2/2
Nicholas Walsh
2
2/2
The Committee is confident that there are in place succession plans for
Directors and senior management which are appropriate to enable the
implementation of our corporate strategy and our future growth plans.
The Committee works to ensure that its succession planning looks
ahead over multiple years, addresses any identified skill shortages and
pays particular attention to the Chairman and Group Chief Executive.
During the year the Committee discussed future succession plans
for the role of Group Chief Executive. The services of Korn Ferry were
engaged in order to carry out an evaluation of several potential internal
candidates for the role, in order to identify development opportunities
for those individuals.
During 2016 the Board appointed two new Non-Executive Directors.
An external search consultancy, The Zygos Partnership, was used for
the appointment of Bruce Carnegie-Brown. The Zygos Partnership
has no other connections with the Company. Adam Keswick was
a nominee of Jardine Matheson and as a result an external search
consultancy was not used.
DIVERSITY AND INCLUSION
COMMITTEE RESPONSIBILITIES
The Committee ensures that there is a formal, rigorous and
transparent process for new Board appointments in place.
It is the Committee’s responsibility to lead this process before
delivering a final recommendation on new appointments to
the Board. Such appointments are made on merit and against
objective criteria. The Committee evaluates the balance of skills,
knowledge and experience on the Board and, in light of that
evaluation, prepares a description of the role and capabilities
required for each particular appointment.
The Terms of Reference of the Committee are available on
the JLT website jlt.com.
The Committee aims to maintain an appropriate balance of skills,
experience, expertise and background on the Board. In preparing to
recommend new appointments, the Committee takes into account the
benefits of maintaining diversity whilst considering candidates on merit
against objective criteria.
The Board fully endorses the recommendations made by Lord Davies
of Abersoch in his report issued in 2011 on “Women on Boards” and
supports the Code’s recommendation that diversity and gender should
be considered when making Board appointments. JLT recognises the
benefits of having a diverse Board and is committed to achieving a
Board which includes and makes the best use of differences in culture,
gender, skills, background, regional, financial and industry experience
and other qualities.
For and on behalf of the Board.
COMMITTEE ACTIVITIES
The Committee met formally on 2 occasions during 2016,
as well as corresponding and meeting informally on a number
of occasions to discuss key events during the year.
Key activities during the year
Succession planning
Executive development
Diversity
During the year the Committee focused on succession
planning and the development of Directors and high performing
members of senior management, as well as on the promotion
of diversity and inclusion across the organisation.
72 Jardine Lloyd Thompson Group plc Annual Report 2016
Geoffrey Howe
Chairman, Nominations Committee
28 February 2017
Aligning the interests of the
business and the Executive
Directors with the interests
of shareholders.
Following a review, the Committee
concluded that the executive
remuneration framework set out in our
current Remuneration Policy (the Policy)
KEY PRINCIPLES
Our Policy is based on the following key
principles:
• Simple, consistent and transparent
• Supports the cultural and behavioural
priorities of the Group
• Achieves a balance between pay and
performance, such that:
--
fixed pay remains at an
appropriate level when
considered against the highly
competitive global market place,
ensuring we are able to attract
and retain high calibre staff; and
--
variable pay and incentives
provide a strong and
demonstrable link between the
performance of the Company
and the performance of its
Executive Directors and senior
management team members.
The Committee believes this philosophy
provides a direct incentive for our
employees to create long-term
sustainable value for our shareholders
together with upholding the strong
cultural identity and expected standards
of behaviour. Share awards continue
to be an essential tool in aligning the
interests of employees with those of
shareholders.
In setting remuneration levels, the
Committee is mindful that our business
operates in a highly competitive global
market. The Committee takes into
account appropriate remuneration data
relevant to UK public companies of a
similar size and complexity but also
recognises that there are no directly
comparable UK companies and that
its principal competitors are often
businesses which are part of much larger
groups, primarily based in the US.
Jardine Lloyd Thompson Group plc Annual Report 2016
73
SHAREHOLDER INFORMATION
The focus on executive pay has
continued from many perspectives
during 2016. The Committee has been
mindful to consider the approach taken
at JLT against the wider market to
ensure that the Remuneration Policy and
practices continue to drive behaviours
that are in the long term interests of
both the Company and its shareholders.
Equally, they are within the spirit of
recent published guidance. As with my
predecessor, I remain committed to an
open and ongoing dialogue with our
investors on the matter of executive pay.
remains appropriate for rewarding
Executive Directors in line with business
performance, as it has been successful in
aligning the interests of the business and
the Executive Directors with the interests
of shareholders. We are therefore
proposing no material changes to our
Policy. We are, however, proposing
three amendments which are discussed
further in this report (an increase in the
shareholding guidelines, a reduction in
maximum bonus for some Executive
Directors and an increase in target
bonus for some Executive Directors).
I consulted with major shareholders on
the proposed Policy and the full Policy
is included in this report on pages 76 to
82 and will be subject to approval by our
shareholders at the 2017 AGM.
FINANCIAL STATEMENTS
I succeeded Richard Harvey as Chairman
of the Remuneration Committee with
effect from 1 November 2016, having
joined the JLT Group plc Board and the
Remuneration Committee on 1 May
2016. I would like to thank Richard
Harvey for his support during 2016.
“
I am pleased to introduce our Directors’
Remuneration Report for the year ended
31 December 2016.
Bruce Carnegie-Brown
CORPORATE GOVERNANCE
INTRODUCTION FROM
THE COMMITTEE
CHAIRMAN
STRATEGIC REPORT
“
OVERVIEW
DIRECTORS’
REMUNERATION REPORT
CORPORATE GOVERNANCE
OUR REMUNERATION FRAMEWORK
Based on these principles, the key elements of our remuneration framework for 2017 are provided below:
Salary
Market competitive
Pensions
Pension contributions are aligned with employees through the business and are at a relatively
low level compared to the market, to reflect our focus on performance-related reward
Bonus
Linked to challenging profit and individual performance targets
Target 125% of salary (150% for CEO). Maximum 150% of salary (200% for CEO)
Enables us to be competitive in the market, particularly in the insurance industry,
to retain and incentivise key executives to deliver performance for shareholders
Deferral mechanism ensures alignment with long-term shareholder returns
LTIP
Shares vest after three years based on the delivery of stretching EPS growth targets
For 2017 awards, the target will be 4% - 12% per annum (12% - 36% over 3 years)
Maximum award of 200% of salary (300% for the CEO)
Shareholding
guideline
Objective to build a long-term shareholding of at least 200% of salary (300% of salary for the CEO)
through retaining ownership of vested shares
MAJOR ACTIVITIES AND DECISIONS
IN 2016
Incentive out-turns in respect of 2016
The Committee agreed at the time of setting the 2016 annual
bonus targets for the Executive Directors, that the underlying
Profit Before Tax (PBT) target would include the budgeted
investment in the US Specialty business. In the second half of
2016, the Board approved a further investment in this business
and the Committee agreed that it would be fair and reasonable
to exclude this additional investment (£2.8 million), that was not
part of the business plan at the time the annual bonus targets
were set.
75% of the Executive Directors’ 2016 bonus was based on
Group underlying PBT targets. The underlying PBT delivered
in the year of £175.4 million (excluding the additional US
investment cost of £2.8 million) was in excess of the Target
of £175.2 million and the Committee therefore exercised its
discretion to limit the award to the Target level. The remaining
25% was based on the achievement of stretching personal
objectives. The bonus awards, which were made in respect
of 2016 (Group Chief Executive 148% of salary, Deputy Group
CEO and Group Finance Director both at 99% of salary) paid
out at just below the Target level and reflect the level of Group
performance and achievement against stretching personal
objectives.
The vesting of LTIP awards made in 2014 was based on
Earnings Per Share (EPS) performance (excluding the US
investment) for the three years to 31 December 2016. Based
on a basic underlying EPS of 52.6p, which has been adjusted
by 12.6p to provide for the US investment impact, growth over
the period was 18.33% and therefore the 2014 LTIP will vest
at 21.47% of the Maximum on 7 April 2017.
74 Jardine Lloyd Thompson Group plc Annual Report 2016
Plans for 2017
Salary: Executive Directors did not receive a base salary
increase in 2016. The Committee have agreed to award a base
salary increase in 2017 of 3.5% to the Group Chief Executive,
representing an average salary increase of 1.75% over 2 years.
The Deputy Group CEO and Group Finance Director are each
being awarded a salary increase of 7% with no further salary
review until 2019. This represents an average salary increase
over a three year period of 2.33% for both the Deputy Group
CEO and Group Finance Director. These average increases
are broadly in line with the wider employee population.
Annual Bonus: The annual bonus will be adjusted from 75%
based on Group results (measured on basic underlying PBT)
and 25% based on the achievement of personal objectives,
to 80% of the bonus out-turn to be based on Group results
(measured on basic underlying PBT) and 20% to be based
on the achievement of personal objectives. The Target
bonus award for the Deputy Group CEO and Group Finance
Director will increase to 125% (from 100%) of salary, whilst
the Maximum bonus award has been reduced under the new
Policy to 150% (from 200%) of salary. The Target and Maximum
bonus awards for the Group Chief Executive will remain the
same (150% and 200% of salary respectively).
LTIP Award: EPS has been used as the measure of
performance for the LTIP for a number of years and continues
to be an important and appropriate measure of the long-term
success of JLT and is aligned to shareholder returns. The
Committee proposes no change to the EPS targets for the
2017 LTIP award, which remain appropriately challenging
in the current trading environment.
Shareholding Guidelines
To further align Executive Directors with shareholders, the
Committee has increased the shareholding requirements
for Executive Directors from 200% to 300% of salary for the
Group Chief Executive and from 100% to 200% of salary for
all other Executive Directors.
• James Twining resigned as a Company Director on
26 April 2016 and left the Company on 31 December
2016. The termination arrangements as determined by the
Committee included no payment for loss of office and no
entitlement to a 2016 annual bonus. He will continue to
be eligible for his 2014 and 2015 LTIP awards which will
vest on the normal vesting dates, subject to performance
conditions and reduced pro rata for time. His 2016 LTIP
award lapsed in full.
• Richard Harvey resigned as Chairman of the Remuneration
Committee from 31 October 2016 and as a member of the
Board with effect from 31 December 2016.
• Bruce Carnegie-Brown joined the Board on 1 May 2016
and was appointed Chairman of the Remuneration
Committee from 1 November 2016.
• Following Lord Leach's death on 12 June 2016,
Adam Keswick joined the Board on 1 September 2016.
OTHER KEY DECISIONS
There will be no changes to the Non-Executive Directors’
fees for 2017.
We will continue to keep our remuneration policies under
review, to ensure they remain appropriate in the face of evolving
best practice, regulatory developments and market data.
CORPORATE GOVERNANCE
The Committee is aware that some shareholders and investor
bodies have a preference for post-vesting holding periods,
which extend the LTIP time horizon beyond the conventional
three years. The Committee considered this issue carefully
during the review and continues to believe that a time horizon
of 3 years is appropriately aligned to our business cycle and
necessary to remain competitive in our talent markets.
In 2016 a number of changes took place at Board and
senior management level:
STRATEGIC REPORT
Since 2014, the investment costs associated with the
US Specialty business have been excluded from the EPS
calculation for the purpose of measuring LTIP performance.
For the 2017 LTIP award, there will no longer be any
adjustments to exclude the US Specialty investment in the
EPS calculation. The 2016 EPS used as the base year from
which the 2017 award is calculated, will therefore reflect
no adjustment.
Changes to the Board and Management
OVERVIEW
Accordingly, EPS growth is set at a range of 4% per annum
(12% over 3 years) to 12% per annum (36% over 3 years).
The threshold level of vesting will remain at 20% of the
Maximum award. 75% of the Maximum award will be payable
on EPS growth of 8% per annum (24% over 3 years).
Full vesting of the award will, as in prior years, remain subject
to the achievement of growth in EPS of 12% per annum
(36% over 3 years).
2013 LTIP OUT-TURN ADJUSTMENT
FINANCIAL STATEMENTS
Bruce Carnegie-Brown
28 February 2017
SHAREHOLDER INFORMATION
The vesting of the 2013 LTIP was based on EPS performance
measured to the 2015 financial year. As explained in detail in
Note 9 to the Financial Statements on page 129, the 2015
basic underlying EPS has been restated from 51.2p to 52.9p
following a review of the calculation of EPS. The Committee
re-calculated the performance out-turn for the 2013 LTIP using
the re-stated 2015 EPS figure, and as a result, the vesting will
be adjusted from 49.27% reported last year to 61.79% of the
Maximum. The relevant disclosures in the Single Total Figure
of Remuneration on page 82 have been adjusted accordingly.
Accordingly, the performance out-turn for the 2012 LTIP was
also re-calculated on the same basis, however, the increase
in vesting out-turn was considered immaterial.
Jardine Lloyd Thompson Group plc Annual Report 2016
75
CORPORATE GOVERNANCE
THE 2017 REMUNERATION POLICY - INTRODUCTION
The 2017 Remuneration Policy is presented for approval at the 2017 AGM and will be effective from that date. The full Remuneration
Policy is provided below and will be available in the investor relations section of the Group’s website, jlt.com.
The main changes in the Policy between 2014 and 2017 are:
1. Greater clarity on the Annual Bonus parameters.
Our existing Policy states a Maximum bonus of 200% for all Executive Directors. Under our new Policy, we will separate the
Maximum for the Group Chief Executive (which will remain at 200% of salary) and other Executive Directors. For other Executive
Directors, the Target award will be increased to 125% of salary with a Maximum award of 150% of salary. This represents a
reduction in the Maximum bonus award, which may be payable under the existing Policy.
2. Flexibility for future LTIP performance measures.
The new Policy will allow future LTIP awards to include, if the Committee considers appropriate, additional performance measures to
complement the current measure of EPS. This may include measures which are used to drive and report performance internally, but
which maintain alignment with the strategy and objectives communicated externally. Whilst these will generally be financial metrics,
there may be specific strategic objectives that will have other objective measures. Should such measures be introduced, we would
intend to consult major with investors at that time.
2017 REMUNERATION POLICY
This report has been prepared by the Remuneration Committee in line with the 2014 UK Corporate Governance Code, Listing Rules
and Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended).
This Remuneration Policy, determined by the Company’s Remuneration Committee (“the Committee”), will be effective following
shareholder approval at the 2017 Annual General Meeting.
POLICY TABLE FOR EXECUTIVE DIRECTORS
Component and
purpose/link to
strategy
Operation
Maximum
BASE SALARY
To provide a base
salary, as a major
component of fixed
remuneration, which
is competitive in the
markets in which the
Company operates
and in which the
Executive Director
is based.
Contractual fixed cash amount paid monthly.
There is no prescribed
maximum salary.
Salaries are normally set in the home currency and
reviewed annually. Any changes are normally made
effective from 1 April.
Salaries are set by the Committee, taking into
account all relevant factors which include: the scale
and complexity of the Group and / or business unit,
the scope and responsibilities of the role, the skills
and experience of the individual, performance in
role, the level of increase within the business, and
the Committee’s assessment of the competitive
environment including consideration of appropriate
market data. This includes salary levels and total
remuneration of global insurance brokers and other
top US and UK multi-national businesses.
76 Jardine Lloyd Thompson Group plc Annual Report 2016
Any increases will be
at the discretion of the
Committee, taking into
account factors such as:
changes in the size and
complexity of the business,
scope of the role,
competitive positioning
against the market, and,
the level of salary increase
within the business.
Performance framework
N/A
Operation
Maximum
BENEFITS
To provide benefits,
as an element of fixed
remuneration, which
are competitive in the
markets in which the
Company operates.
Benefits reflect home country norms
of the Executive Director.
Benefit provision, for which
there is no prescribed
monetary maximum, is
set at an appropriate level
for the specific nature and
location of the role.
Benefit plans are reviewed
periodically to ensure
they remain competitive
in the market in which the
company operates, provide
appropriate value to and
remain appropriate for our
employee population.
Participation in all
employee share plans is
subject to statutory limits.
Executive Directors will participate in the company
pension schemes that apply to their home country.
Current UK Executive
Directors receive a
maximum DC / cash
supplement of 15% of
pensionable earnings.
The maximum additional
annual fixed salary
supplement for current
Executive Directors
impacted by the closure
of the DB scheme are:
£79,000 for Dominic
Burke; £24,000 for Mark
Drummond Brady.
FINANCIAL STATEMENTS
Members of the Defined Benefit (DB) section of
the scheme will continue to receive benefits in
accordance with the terms of this plan, although
it is closed to further accrual or to new members.
Since the closure of the DB scheme in 2006,
affected employees, including some Executive
Directors, receive a fixed salary supplement, which
was determined at the time the scheme was closed
based on each individual's circumstances.
N/A
CORPORATE GOVERNANCE
Executive Directors may also participate in the
Save As You Earn (SAYE) and Share Incentive Plan
(SIP) on the same basis as other employees.
In the UK, this is provided via contributions to the
Defined Contribution (DC) section of the JLT UK
Pension Scheme or as a cash salary supplement.
Contributions, in line with the Scheme Rules,
are made by reference to pensionable earnings
(currently a maximum of £140,000 but reviewed
annually).
N/A
STRATEGIC REPORT
PENSION
To provide an element
of tax-efficient savings
where possible within
the tax framework
of the Executive
Director's home
country.
Incorporates various cash / non-cash benefits
which are competitive in the relevant market, and
which may include: a company car (or equivalent
cash allowance), subscriptions, life assurance,
death-in-service pension, private medical, annual
medical check-up, permanent health cover,
reimbursed business expenses (including any
associated tax liability) incurred when travelling in
performance of duties, and, where necessary, other
benefits to reflect specific individual circumstances,
such as housing, relocation, travel or other
expatriate allowances.
Performance framework
OVERVIEW
Component and
purpose/link to
strategy
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016
77
CORPORATE GOVERNANCE
Component and
purpose/link to
strategy
Operation
Maximum
Performance framework
ANNUAL BONUS
A variable pay
opportunity,
competitive in the
markets in which the
Company operates,
which motivates and
rewards performance
against objectives
and is aligned with
the culture of the
organisation. Deferral
aligns reward with
long-term value of
JLT shares.
Total overall bonus (before any deferral) provides
an opportunity for additional reward (up to a target
and maximum specified as a percentage of salary)
based on annual performance against objectives
set and assessed by the Committee.
Maximum awards under
the annual bonus plan are:
Paid in cash, except that any bonus in excess
of a limit, normally 100% of salary, is deferred into
Company shares in accordance with the terms of
the Deferred Bonus Share Plan (DBSP).
150% of salary for other
Executive Directors
Payment is determined by
reference to performance
assessed over one financial
year. Performance may
be assessed using a
combination of financial,
strategic and personal
performance measures,
normally weighted towards
the financial measures.
200% of salary for the
Chief Executive
Under the DBSP, participants are granted a
conditional award of shares which normally vest
over three years, subject to continued employment.
Dividend equivalent provisions apply.
Importance is placed on
promoting the culture of
the organisation and
mitigating risk.
Malus and clawback provisions apply in relation to
annual bonuses.
“Target” bonus is set at
150% of salary for the
Chief Executive and 125%
of salary for the other
Executive Directors.
Bonus payments are not pensionable.
LONG-TERM
INCENTIVE PLAN
(LTIP)
Awards are made under the terms of the JLT
Long Term Incentive Plan 2013, approved by
shareholders at the 2013 Annual General Meeting.
A variable pay
opportunity,
competitive in the
markets in which the
Company operates,
which motivates and
rewards long-term
performance and
is aligned with the
value created for
shareholders.
Awards are normally in the form of a right to acquire
shares in the Company for a zero or nominal
amount. The vesting of the award is subject to the
satisfaction of performance conditions reviewed
and agreed by the Committee each year.
Malus, clawback and dividend equivalent
provisions apply.
Maximum annual
awards are:
300% of salary for the
Chief Executive
200% of salary for other
Executive Directors
Vesting is determined by
reference to performance
assessed over a period
of three years, against
key measures aligned to
the strategy and creation
of shareholder value.
Performance measures
currently include EPS
and may also include
other financial or strategic
measures aligned to strategy
and shareholder value.
The threshold level of
vesting is 20% of the
maximum award.
The Committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any
discretions available to it in connection with such payments) notwithstanding that they are not in line with the policy set out above
where the terms of the payment were agreed (i) before 29 April 2014 (the date the Company’s first shareholder-approved Directors’
remuneration policy came into effect); (ii) before this Directors’ remuneration policy came into effect provided that the terms of the
payment were consistent with the shareholder-approved Directors’ remuneration policy in force at the time they were agreed; or (iii)
at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was
not in consideration for the individual becoming a Director of the Company. For these purposes “payments” includes the Committee
satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are “agreed” at the
time the award is granted.
The Committee may make minor amendments to the Policy (for regulatory, exchange control, tax or administrative purposes or
to take account of a change in legislation) without obtaining shareholder approval.
78 Jardine Lloyd Thompson Group plc Annual Report 2016
POLICY TABLE FOR NON-EXECUTIVE DIRECTORS
Component
Chairman fees
Approach of the Company
Determined by the Remuneration Committee.
OVERVIEW
A single fee which reflects all Board and Committee duties, set at a level which reflects skills, experience,
time commitment and relevant market data.
Non-Executive fees
Determined by the Board excluding the Non-Executive Directors.
The fee encompasses a basic fee and may also include supplementary fees for Committee or other duties,
set at a level which reflects skills, experience, time commitment and relevant market data.
Benefits
The current Chairman receives a club subscription, medical insurance and an annual medical check-up.
Non-Executive Directors may be reimbursed for business expenses (and any associated tax liabilities)
incurred when travelling in performance of duties.
EXPLANATORY NOTES TO
POLICY TABLES
Share awards
• be granted as conditional share awards or nil-cost options
or be in such other form that the Committee determines has
the same economic effect;
• have any performance conditions applicable to them
amended or substituted by the Committee if an event
occurs which causes the Committee to determine an
amended or substituted performance condition would be
more appropriate and not materially less difficult to satisfy;
• be settled in cash at the Committee’s discretion; and
Malus and clawback provisions
DBSP and LTIP awards are subject to a malus clause such that
unvested awards may be reduced, cancelled or made subject
to additional conditions at the Committee’s discretion, in the
event of material misstatement of results or gross misconduct.
Dividends
Upon vesting of DBSP and LTIP awards, participants will
receive income (in the form of shares or cash) equal in value to
the dividends payable on the relevant number of vested shares
during the performance period.
Awards under the LTIP may have any performance conditions
applicable to them amended or substituted by the Committee if
an event occurs which causes the Committee to determine an
amended or substituted performance condition would be more
appropriate and not materially less difficult to satisfy.
DIFFERENCES IN THE COMPANY'S POLICY ON THE
REMUNERATION OF EMPLOYEES GENERALLY
JLT operates in a number of different sectors and countries
and therefore employee remuneration practices vary widely
across the employee population within the Group.
However, employee remuneration policies are normally based
on the same broad principles:
• Sufficient to attract and retain the calibre of talent necessary
to deliver the strategy for shareholders.
• Where appropriate, a proportion should be aligned to
results and performance, based on relevant specific
and measurable criteria. A significant number of Group
employees are eligible to participate in cash bonus, share
awards or other incentive arrangements.
Jardine Lloyd Thompson Group plc Annual Report 2016
79
SHAREHOLDER INFORMATION
Clawback will apply for a period of three years following
the payment of a bonus and for two years following the
vesting of an LTIP, in the event of material misstatement or
gross misconduct.
The LTIP is based on long-term financial performance,
using performance measures which the Committee feel are
most appropriate for the Company (for example EPS). The
performance targets for LTIP awards are determined by the
Committee each year at the time of grant.
FINANCIAL STATEMENTS
• be adjusted in the event of any variation of the Company’s
share capital or any demerger, delisting, special dividend or
other event that may affect the Company’s share price.
The annual bonus is assessed against both financial and
personal targets determined by the Committee. This enables
the Committee to reward both annual financial performance
delivered for shareholders and performance against specific
financial, operational or strategic objectives set for each director.
CORPORATE GOVERNANCE
Awards under any of the Company’s share plans referred to in
this report may:
Performance measures and target setting
STRATEGIC REPORT
The Chairman and Non-Executive Directors do not participate in any bonus or share incentive scheme, nor do they participate in
any pension arrangements.
CORPORATE GOVERNANCE
• In addition to the DBSP and LTIP, the Group operates a
number of other share incentive schemes to encourage
employee share ownership. These include the Senior
Executive Share Scheme (SESS), and Sharesave/Share
Incentive Plan all employee schemes (within which all
employees, including Executive Directors, in the UK and
certain overseas jurisdictions are eligible to participate).
• Executive Directors participate in the defined contribution
pension scheme on the same basis as other employees.
£’000
2,500
2,000
LTIP
Annual Bonus
Fixed Pay (salary)
Finance Director
(Charles Rozes)
1,500
1,000
500
0
Minimum
Target
Maximum
ILLUSTRATION OF REMUNERATION POLICY
The charts below illustrate the potential value of the
remuneration packages under the following scenarios (no share
price growth is assumed):
• Minimum – reflects fixed pay only (base salary as at 1 April
2017 and benefits/pension included using the disclosed
values for the year ending 31 December 2016)
• Target – reflects fixed pay, Target bonus (CEO: 150% of
salary, other Executive Directors 125% of salary) and LTIP
awards (CEO: 300% of salary, other Executive Directors
200% of salary) vesting at 20% of Maximum
• Maximum – reflects fixed pay, Maximum bonus (CEO:
200% of salary, other Executive Directors 150% of salary)
and LTIP awards vesting in full.
£’000
6,000
5,000
LTIP
Annual Bonus
Fixed Pay (salary)
Group Chief Executive
(Dominic Burke)
3,000
2,000
1,000
Minimum
£’000
2,500
2,000
LTIP
Annual Bonus
Fixed Pay (salary)
Target
Maximum
Deputy Group CEO
(Mark Drummond Brady)
1,500
1,000
500
0
Minimum
Target
When determining the remuneration package for a newly
appointed Executive Director, the Committee would seek to
apply the following principles:
• The package should be market competitive to facilitate the
recruitment of individuals of sufficient calibre to lead the
business. At the same time, the Committee would intend
to pay no more than it believes is necessary to secure the
required talent.
• The structure of the on-going remuneration package would
normally include the components set out in the Policy
Table for Executive Directors. Salaries would typically be
set at an appropriately competitive level to reflect skills and
experience. They may be set at a level to allow future salary
progression to reflect performance in role.
• The maximum level of variable remuneration which may be
awarded (excluding any compensatory awards referred to
below) is five times salary.
4,000
0
APPROACH TO RECRUITMENT REMUNERATION
Maximum
80 Jardine Lloyd Thompson Group plc Annual Report 2016
• The Committee considers that having flexibility to respond
to specific commercial realities of a recruitment scenario is
in the best interests of the Company and its shareholders.
Therefore, the Committee has discretion, in exceptional
or unexpected circumstances, to include other fixed
remuneration components (eg to reflect local market
practice in pension provision) or performance-related
awards which it believes are appropriate taking into account
the specific circumstances of the individual, and always
subject to the five times salary limit on variable remuneration
set out above. The rationale for any such component would
be disclosed.
• Where an individual forfeits remuneration with a previous
employer as a result of appointment to the Company, the
Committee may offer compensatory payments or awards
to facilitate recruitment. Such payments or awards could
include cash as well as performance and non-performance
related share awards, and would be in such form as the
Committee considers appropriate considering all relevant
factors such as the form, expected value, anticipated
vesting and timing of forfeited remuneration. There is no
• Any share awards referred to in this section will be granted
as far as possible under the Company’s existing share
plans. If necessary, awards may be granted outside of
these plans as currently permitted under the Listing Rules,
but within the limits set out in this section.
SERVICE CONTRACTS
Non-Executive Directors are appointed for a three year term,
which is renewable, with three months’ notice on either side.
The contract for the Chairman is subject to a six month notice
provision on either side. For both Non-Executive Directors and
the Chairman, no contractual termination payments would be
due and both are subject to retirement pursuant to the Articles
of Association at the Annual General Meeting.
• Relevant contractual obligations (referred to in the section
above) are observed or taken into account should an
Executive Director leave employment by mutual consent.
While not a contractual obligation, the Committee may
make termination payments on a phased basis and
subject to reduction in the event that alternative
employment is found.
• The Committee has discretion to make a payment under the
annual bonus in respect of the year of leaving employment,
subject to performance.
• The treatment of outstanding share awards would be
determined by the relevant plan rules. The table below
summarises the treatment of awards if a participant ceases
to be an employee of the Group for any of the reasons
shown. To the extent that an award does not vest in
accordance with these terms, the award will lapse.
• Members of the Defined Benefit section of the JLT UK
Pension Scheme will receive benefits in accordance with the
terms of that scheme.
• The Committee reserves the right to make any other
payments in connection with a director’s cessation of office
or employment where the payments are made in good
faith in discharge of an existing legal obligation (or by way
of damages for breach of such an obligation) or by way
of settlement of any claim arising in connection with the
cessation of a director’s office or employment. Any such
payments may include but are not limited to paying any fees
for outplacement assistance and/or the director’s legal and/
or professional advice fees in connection with his cessation
of office or employment.
Treatment
Ill-health, injury or disability;
Retirement with the agreement of the Company;
Awards will normally vest on the original vesting date subject to the
original performance conditions. Alternatively, the Committee has
discretion to vest the awards on an earlier date, subject to performance
conditions.
The participant’s employing company ceasing to be under
the control of the Company;
The Committee also has discretion to reduce the award to reflect the
proportion of the performance period that has elapsed.
Death;
SHAREHOLDER INFORMATION
Reasons for leaving
A sale of the business or entity for which the participant
works out of the Group;
Redundancy; and
Any other reason, if the Committee so decide in any particular case.
Jardine Lloyd Thompson Group plc Annual Report 2016
FINANCIAL STATEMENTS
Under all the current Executive Director service contracts, the
Company may terminate employment by making a payment
in lieu of notice which would not exceed 12 months’ salary,
benefits and pension contributions. This policy would be
applied to future appointments.
• The Committee’s objective is to find an outcome which is
in the best interests of the Company and its shareholders,
taking into account the specific circumstances and
performance of the individual.
CORPORATE GOVERNANCE
It is the Company’s standard policy that Executive Directors
should have service contracts with an indefinite term which
can be terminated by the Company or the director by giving
notice not exceeding 12 months. This applies to all current
Executive Directors and would normally be applied to future
appointments. The Committee retains discretion to offer service
agreements with notice periods which exceed 12 months (up to
a maximum of 24 months). If such a contract was offered, the
notice period would normally be reduced during the first year of
employment to the standard 12 month notice period.
Where an Executive Director leaves employment, the
Committee’s approach to determining any payment for loss of
office will normally be based on the following principles:
STRATEGIC REPORT
The remuneration package for a newly appointed NonExecutive Director would normally be in line with the structure
set out in the Policy Table for Non-Executive Directors.
POLICY ON PAYMENT FOR LOSS OF OFFICE
OVERVIEW
limit on the value of such compensatory awards, but the
Committee’s intention is that broadly the value awarded
would be no higher than value forfeited. While cash
may be included to reflect the forfeiture of cash-based
remuneration, the Committee does not envisage that
substantial “golden hello” type cash payments would
generally be offered.
81
CORPORATE GOVERNANCE
CHANGE OF CONTROL OF THE COMPANY
The Committee considers salary increases within the business
but does not formally consider any other comparison metrics.
Where there is a takeover of the Company, awards will only vest
to the extent that any applicable performance conditions have
been satisfied. The Committee has discretion to determine that
the extent to which LTIP awards vest in these circumstances
shall be reduced to reflect the proportion of the performance
period that has elapsed.
CONSIDERATION OF SHAREHOLDER VIEWS
Views expressed by the Company’s shareholders were taken
into account by the Committee in the development of the
Company’s remuneration framework.
The Company’s largest shareholder (Jardine Matheson) is
represented on the Remuneration Committee. The Committee
undertook an extensive consultation between the Remuneration
Committee Chairman and key independent shareholders (and
shareholder representative bodies) prior to shareholder
approval of the current Remuneration Policy at the 2014 AGM.
The Committee also engaged with key shareholders on the
changes to Policy set out above and regularly reviews the
policies in the context of published shareholder guidelines.
CONSIDERATION OF CONDITIONS ELSEWHERE IN
THE COMPANY
When setting the policy for the remuneration of the Executive
Directors, the Committee will have regard to the pay and
employment conditions of employees within the Company.
The Committee does not consult directly with employees when
formulating the Remuneration Policy for Executive Directors.
ANNUAL REPORT ON REMUNERATION
The table below summarises the remuneration for the directors in respect of 2016. Further discussion of each of the components,
including the intended operation of the policy for 2017, is set out on the pages which follow. Some of the disclosures in these
sections, where indicated, have been audited by PwC.
Single Total Figure of Remuneration Table (audited)
The remuneration in respect of the year ended 31 December 2016 of the Executive Directors who served during the year is shown
in the table below (with the prior year comparative):
Directors
Salary
£’000
Pension 5
£’000
Benefits 4
£’000
Annual Bonus 6
£’000
Total
£’000
LTIP 7
£’000
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Dominic Burke
740
731
101
84
95
95
1,093
605
477
1,381
2,506
2,896
Mark Drummond Brady
420
420
38
19
39
39
417
226
125
361
1,039
1,065
Charles Rozes1
425
142
11
3
13
2
872
425
-
-
1,321
572
James Twining2
105
330
6
21
4
14
-
199
75
340
190
904
-
280
-
19
-
8
-
152
-
412
-
871
Michael Reynolds3
Charles Rozes: 2015 figures reflect the salary, benefits and pension in respect of his employment with the Company and of his role on the Group
Board, from 1 September 2015 and the guaranteed bonus in respect of the 2015 performance year. The 2016 Annual Bonus column includes the
annual bonus and the first tranche of sign-on bonus (cash and value of vested shares), the details of which were disclosed in the 2015 Directors'
Remuneration Report.
1
2
James Twining: 2016 figures reflect the salary and bonus in respect of his role on the Group Board, to 26 April 2016 and the 2014 LTIP, which will vest in 2017 reflects the full performance period for the pro rated number of shares.
Michael Reynolds: The 2015 figures reflect the salary and bonus in respect of his role on the Group Board, to 1 September 2015 and the LTIP
reflects the full performance period.
3
Benefits include: a company car (or equivalent cash allowance), subscriptions, life assurance, private medical and permanent health cover.
4
Pension includes all forms of cash contribution paid in respect of pension entitlements, including contributions to the Defined Contribution section of
the JLT UK Pension Scheme (or a cash salary supplement) and, where relevant, the fixed cash salary supplement paid to those directors impacted
by the closure of the DB Scheme in 2006. Further details are set out in the Pensions section on page 87.
5
6
Annual bonus includes the full value of the annual bonus awarded in respect of the relevant financial year. For Dominic Burke, £641,000 of the
amount shown for 2016 will be deferred under the terms of the DBSP.
The 2016 LTIP column includes the value of the 2014 LTIP award, which is based on performance measured to 31 December 2016 and will vest on
7 April 2017. The value is calculated using the average share price over the final quarter of 2016 of 990.8p and includes the value of the dividends
on the shares which will vest. The 2015 LTIP column shows the value of the 2013 LTIP which was based on performance to 2015. The numbers
have been updated from those shown last year to reflect the actual share price on the date of vesting and the adjustment in the vesting out-turn
from 49.27% to 61.79%, as explained on page 75 of this Remuneration Report, on page 66 of the Audit & Risk Committee report and in note 9 to
the Financial Statements on page 129.
7
82 Jardine Lloyd Thompson Group plc Annual Report 2016
The remuneration in respect of the year ending 31 December 2016 of the Chairman and Non-Executive Directors who served during
the year is shown in the table below (with the prior year comparative):
Benefits
£’000
2015
293
2016
4
2015
3
2016
304
43
-
-
-
43
-
60
60
-
-
60
60
83
83
-
-
83
83
87
90
-
-
87
90
20
-
-
-
20
-
30
60
3
6
33
66
2016
300
2015
296
60
60
-
-
60
60
148
98
-
-
148
98
1
Benefits include: Geoffrey Howe: a club subscription and medical insurance. Lord Leach: a company car.
2
Adam Keswick, Lord Leach and Lord Sassoon waived their fees in favour of Matheson & Co.
3
Total
£’000
Nicholas Walsh received £87.5k in respect of the work he carried out to support the board and ARC of the US Specialty business and the Executive
Committee and ARC of the US Reinsurance business.
KEY COMPONENTS OF REMUNERATION
Salary
For the other Executive Directors, the Committee proposes an
increase of 7% from 1 April 2017 with the next review in April
2019. The other Executive Directors did not receive a salary
increase in 2016 and as such their proposed increase is set
2017
£766,000
2016
£740,000
Change
3.5%
Mark Drummond Brady
£450,000
£420,000
7%
Charles Rozes
£455,000
£425,000
7%
Annual bonus
In 2016, the Executive Directors had a target bonus opportunity
of 100% of salary (150% of salary for the Group Chief
Executive). In exceptional circumstances, the Committee could
award a maximum of 200% of salary. In 2016, the bonus
was based on a combination of both financial and personal
performance measures, requiring the achievement of stretching
performance targets, as follows:
• 75% on Group underlying PBT performance. As described
in more detail on page 26, 2016 saw a Group underlying
PBT of £172.6 million (£175.4 million excluding the
additional investment cost in the US Specialty business of
£2.8 million). This exceeded the Target of £175.2 million.
The Committee does not operate a conventional threshold
to maximum target range and therefore this represents full
disclosure of the underlying PBT targets.
• 25% on the achievement of personal objectives. Each of
the Executive Directors and Senior Management team set
their objectives with the Group Chief Executive (or in the
case of the Group Chief Executive, with the Remuneration
Jardine Lloyd Thompson Group plc Annual Report 2016
83
SHAREHOLDER INFORMATION
The Committee proposes to increase the Group Chief
Executive’s salary by 3.5% from 1 April 2017 with the next
review in April 2018. The Group Chief Executive did not receive
a salary increase in 2016, whilst the all employee UK salary
increase averaged 3.1% for the April 2016 salary review, with a
similar increase anticipated for 2017.
Directors
Dominic Burke
FINANCIAL STATEMENTS
In setting salaries, the Committee takes into account the scale
and complexity of the Group, the scope and responsibilities of
the role, the skills and experience of the individual, performance
in role, the level of salary increase within the business, and
the Committee’s assessment of the competitive environment
including consideration of appropriate market data. The
Committee also takes into account appropriate remuneration
data relevant to UK public companies of a similar size and
complexity but also recognises that there are no directly
comparable UK companies and that the Company’s principal
international competitors are businesses which are part of much
larger groups, primarily in the US. The base salaries of the
Executive Directors effective 1 April 2017 are set out in the table
opposite, together with the prior year comparative.
CORPORATE GOVERNANCE
The following sections describe how the Committee
implemented key elements of the policy in the year ended 31
December 2016 and how it is intended to operate in the year
ending 31 December 2017.
against the all UK employee salary increase average of 3.1% for
the April 2016 salary review and an anticipated average all UK
employee salary increase over 3 years (2016/2017/2018) of 3%.
The Committee recognises the concerns of investors around
executive salary inflation which is why it is committing that
the salaries of the Deputy Chief Executive and Group Finance
Director will remain unchanged until at least 1 April 2019.
STRATEGIC REPORT
Geoffrey Howe1
Bruce Carnegie-Brown
Annette Court
Jonathan Dawson
Richard Harvey
Adam Keswick2
Lord Leach1, 2
Lord Sassoon2
Nicholas Walsh3
Fees
£’000
OVERVIEW
Directors
CORPORATE GOVERNANCE
Committee). These are documented and reviewed mid-year
to ensure they continue to be operationally and strategically
relevant and an overall assessment is made at the end
of the performance year. Personal objectives align to the
Group's strategic priorities.
Dominic Burke's personal objectives during 2016 have focused
on maximising value to shareholders by supporting the longterm development of our business. They included:
• the continued development of our US Specialty business
and the transformation of our UK Employee Benefits
business; and
• overseeing the implementation of effective governance
and risk structures, in particular, of the technology and
operational effectiveness investment programmes, which
were approved by the Board in 2016.
Charles Rozes' personal objectives, in his first full year as
Group Finance Director, have particularly focused on effective
governance and have included:
• strengthening financial control and reporting across the
Group;
• embedding a new risk framework, which will continue to
develop and evolve as the business grows;
• providing consistency of oversight and controls to the
Audit & Risk Committees to ensure continued effective
governance; and
• fully executing the 2016 Group Internal Audit plan.
Mark Drummond Brady has continued to be externally focused
and his personal objectives in 2016 included:
• identifying and driving new business opportunities,
particularly in Asia, US Specialty and our MEA businesses,
by supporting the regional CEOs and Chairmen;
• continuing to strengthen relationships with our European
partners;
• promoting greater alignment and co-ordination across the
Group with respect to relationships with global carriers; and
• leading the development of Diversity and Inclusion initiatives
across the Group.
Based on performance against the targets set, the Committee
determined that the Executive Directors would receive the
bonus for the year as shown in the Single Total Figure of
Remuneration Table (98.5% of Target bonus for the Group Chief
Executive and 99% of Target for other Executive Directors).
This has been based on meeting the underlying PBT target and
the achievement of personal objectives.
84 Jardine Lloyd Thompson Group plc Annual Report 2016
For 2017, the annual bonus will operate on a similar basis as
for 2016, based on an appropriate combination of stretching
Group underlying PBT targets and personal objectives related
to the enablement and achievement of the Company strategy of
driving growth, international reach and relevance, and improving
operational efficiency and effectiveness. However, the weighting
of the financial measures will increase to 80% of the total
target and 20% will be based on the achievement of stretching
personal objectives. In addition, the Target bonus opportunity
will be increased from 100% to 125% for the Deputy CEO and
the Group Finance Director in line with the new Policy.
The Committee and Board of JLT believe the specific
performance targets are commercially sensitive and therefore
it is inappropriate to publish further detail here. It is the current
intention that they will be disclosed next year to the extent that
the Committee is comfortable they are no longer sensitive.
LTIP – 2014 award, vesting in respect of 2016
The 2014 LTIP was based on basic EPS growth (excluding
exceptional items and impairment charges and measured
on actual exchange rates) in the three financial years to 31
December 2016 in accordance with the targets laid out below,
determined by the Committee at the time of grant. Following
the announcement of the expansion into the US, the Committee
considered the impact of the significant expected investment
costs, which were not anticipated when the awards were
granted, on outstanding LTIP awards (ie 2013, 2014 and 2015
awards). The Committee determined that it was appropriate to
adopt the following approach:
• In respect of a financial year in which US investment costs
occur, that such cost will be added back to the EPS for that
year for the purposes of measuring LTIP performance; and
• The Committee retains discretion over whether to apply
such an approach in respect of any financial year and
on the proportion of the cost which is added back. Any
adjustment will be verified by the Company’s auditors
prior to the vesting date and clearly disclosed in the
relevant Remuneration Report. The Committee believes
that although the costs are not “exceptional costs” from
a technical accounting perspective (and therefore will not
be excluded from “Underlying EPS”) they are exceptional
for the purposes of LTIP measurement. The approach is
consistent with the rules of the LTIP and with the Policy.
In respect of 2016, the adjustment for unbudgeted but
authorised additional US investment costs had an impact on
EPS of 12.6p.
The Committee determined that the 2016 EPS for the purposes
of the LTIP was 65.2p and that the 2014 LTIP will therefore vest
at 21.47% on 7 April 2017.
EPS growth over a 3 year period
Below 6% per annum (18% over 3 years)
Vesting (% of maximum)
0%
6% per annum (18% over 3 years)
20%
12% per annum (36% over 3 years)
100%
Vesting is on a pro rata basis between these points.
The Committee reviewed the performance targets for the LTIP
and believes the current target range (as shown in the table
below) continues to be appropriately stretching in the context of
the current environment. Therefore, this target range will apply
to the 2017 LTIP award.
Vesting (% of maximum)
0%
Face
value Threshold
£’000
vesting
End of
performance
period
300% of
salary
2,220
20%
31 December
2018
150% of
salary
630
20%
31 December
2018
150% of
salary
637.5
20%
31 December
2018
150% of
salary
495
20%
31 December
2018
Basis of
award
Awards under the LTIP are made in the form of nil-cost
conditional share awards.
The face value has been calculated using the average share
price used to determine the number of shares awarded, being
£8.5883 (the average over the three days to 30 March 2016).
James Twining's 2016 LTIP award lapsed in full on 26 April 2016.
20%
Shareholder guidelines and share interests
8% per annum (24% over 3 years)
75%
12% per annum (36% over 3 years)
100%
Following the review of the Remuneration Policy, the JLT Share
Ownership Guidelines have increased. From 2017, Executive
Directors are required to build up long-term share interests
equivalent to 200% of base salary (300% of base salary for
the Group Chief Executive). In summary, the guidelines are for
Executive Directors to retain 50% of shares acquired on the
vesting of share awards after the payment of income tax and
national insurance, until such time as the guideline has been
met. Deferred shares count towards the guideline (on a net of
tax basis).The Chairman and Non-Executive Directors are not
subject to the share ownership guidelines.
Vesting is on a pro rata basis between these points.
The calculation of EPS is underlying basic EPS, excluding
exceptional items and impairment charges and measured on
actual achieved exchange rates and will be verified by the
Company’s auditors.
The Committee reviewed the current approach of excluding
the impact of US investment costs when calculating the
EPS performance and concluded it was now appropriate to
cease making further adjustments for new awards. To ensure
consistency in the measurement basis, the unadjusted 2016
underlying basic EPS will be used as the base year for the
purposes of this award.
FINANCIAL STATEMENTS
4% per annum (12% over 3 years)
CORPORATE GOVERNANCE
EPS growth over a 3 year period
Below 4% per annum (12% over 3 years)
Executive Type of
Director
Interest
Dominic
LTIP
Burke
Mark
Drummond
LTIP
Brady
Charles
LTIP
Rozes
James
LTIP
Twining
STRATEGIC REPORT
LTIP – 2017 AWARD, WILL VEST IN 2020
The following table sets out details of LTIP awards made during
the year ending 31 December 2016 for Executive Directors who
served during the year.
OVERVIEW
The value of these vested 2014 awards to Dominic Burke, Mark
Drummond Brady and James Twining is shown in the Single
Total Figure of Remuneration Table on page 82.
SHARE INTERESTS AWARDED TABLE (AUDITED)
Awards will be made at the same level as in 2016, as set out in
the Policy.
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016
85
CORPORATE GOVERNANCE
STATEMENT OF SHAREHOLDER AND SHARE INTEREST (AUDITED)
The following table sets out for Directors who served during the year, their shareholding (including connected persons)
in the Company as at 31 December 2016 and current interests in long-term incentives.
Current share interests
Shareholding
Number of shares
Shareholding as
a % of salary
Guideline
met?
LTIP
DBSP/Other
Executive Directors
Dominic Burke
406,170
544%
Yes
703,809
Mark Drummond Brady
131,329
310%
Yes
194,537
58,600
-
Charles Rozes
11,841
28%
No
74,300
33,573
James Twining1
23,0111
n/a
n/a
105,9341
-
Non-Executive Directors
Bruce Carnegie-Brown
4,000
Annette Court
0
Jonathan Dawson
5,000
Richard Harvey
0
Geoffrey Howe
25,709
Adam Keswick
0
Lord Leach2
1
19,2822
Lord Sassoon
0
Nicholas Walsh3
0
to date of leaving the Board of Directors on 26 April 2016
2
to date of death
3
Nicholas Walsh acquired 1,000 shares on 13 January 2017
The Shareholding as a percentage of Salary is calculated using the Shareholding and base salary as at 31 December 2016 and the average share price in the
final quarter of 2016.
Bruce Carnegie-Brown had a prior share interest in 4,000 shares held in a SIPP, which were disclosed on joining the Board.
With the exception of the Directors’ interests disclosed in the table above, no Director had any additional interest in the share capital of the Company during
the year. Between 1 January 2017 and 10 February 2017 (being the latest practicable date prior to the posting of this report) the trustees of the Jardine Lloyd
Thompson Group plc All Employee Share Plan have acquired 26 shares on behalf of Dominic Burke. Nicholas Walsh purchased shares as disclosed in note 3
above.
The table below provides details of the interests of the Executive Directors in long-term incentives during the year.
Dominic Burke
Mark
Drummond
Brady
Charles Rozes
Lapsed
shares
(90,367)
(23,614)
-
Number of
shares
(31 Dec
2016)
32,600
26,000
29,609
205,100
210,600
258,500
7,737
53,600
59,800
73,400
Share price
on grant
(pence)
838.00
1029.00
1047.33
850.00
1029.00
1054.00
858.83
850.00
1029.00
1054.00
858.83
(22,382)
-
33,573
1041.00
74,300
-
74,300
858.83
Grant date
28.03.13
07.04.14
25.03.15
08.05.13
07.04.14
01.04.15
31.03.16
08.05.13
07.04.14
01.04.15
31.03.16
Number of
shares
(1 Jan 2016)
38,800
32,600
26,000
236,500
205,100
210,600
61,800
53,600
59,800
-
Awarded /
(exercised)
(During 2016)
(38,800)
(116,524)
258,500
(30,449)
73,400
PSP 9.4.2
21.09.15
55,955
2016 LTIP
31.03.16
-
Plan
2013 DBSP
2014 DBSP
2015 DBSP
2013 LTIP
2014 LTIP
2015 LTIP
2016 LTIP
2013 LTIP
2014 LTIP
2015 LTIP
2016 LTIP
Date from
which
exercisable
28.03.16
07.04.17
25.03.18
08.05.16
07.04.17
01.04.18
31.03.19
08.05.16
07.04.17
01.04.18
31.03.19
01.09.16
01.09.18
31.03.19
DBSP: Awards under the Deferred Bonus Share Plan are made in the form of conditional shares and are not subject to any further performance conditions.
LTIP: Awards under the Long Term Incentive Plan are made in the form of nil cost options (2013, 2014 and 2015 awards) or conditional share awards (2016)
subject to EPS growth performance conditions. For the 2014 and 2015 LTIP awards, the performance condition requires EPS growth over a three year period of
6% pa (18% over 3 years) for 20% vesting, to 12% pa (36% over 3 years) for full vesting. 2016 LTIP awards are based on the performance conditions set out on
pages 84 and 85.
As explained on page 75 of this report, the 2013 LTIP award vested at 61.79% on the basis of the re-calculated performance outcome using the re-stated 2015
EPS. The table above reflects the vesting of the 2013 LTIP award at this level.
86 Jardine Lloyd Thompson Group plc Annual Report 2016
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
PENSION
Dominic Burke, Charles Rozes and James Twining do not
have any entitlement under a Company Defined Benefit
pension arrangement.
Contributions in respect of 2016 are included in the Single Total
Figure of Remuneration Table on page 82.
To reflect the closure of the DB scheme in 2006, affected
employees, including some Executive Directors, also received a
fixed cash supplement, which was calculated as a percentage
of salary determined at the time the scheme was closed based
on each individual’s circumstances. These cash supplements
are included in the Single Total Figure of Remuneration Table on
page 82.
The fees of the Chairman and Non-Executive Directors were reviewed during the year.
2016
£300,000
2015
£300,000
Change
0%
£60,000
£60,000
0%
Chairman of Group Audit & Risk Committee Chairman
£22,500
£22,500
0%
Chairman of Group Remuneration Committee
£20,000
£20,000
0%
Group Senior Independent Director
£10,000
£10,000
0%
Group Non-Executive Chairman
Basic fee for Non-Executive Director
Supplementary fees for:
FINANCIAL STATEMENTS
Nicholas Walsh has been appointed as a member of the board and ARC of the US Specialty business and of the ARC of the US Reinsurance
business. He also attends meetings of the Executive Committee of the US Reinsurance business. He is paid an annual fee of £87,500 in respect
of these commitments.
CORPORATE GOVERNANCE
Chairman and Non-Executive Director fees
STRATEGIC REPORT
Pension benefits are provided to Executive Directors via the
Defined Contribution (DC) section of the JLT UK Pension
Scheme or as a cash salary supplement. Member contributions
are matched by a Company contribution equivalent to 2.5
times the amount paid by the member subject to a maximum of
5% to 15% of pensionable earnings for the Scheme (currently
£140,000 but reviewed annually).
OVERVIEW
James Twining resigned from the Board on 26 April 2016 and
ceased employment with the Group on 31 December 2016.
The Committee determined his remuneration arrangements in
line with the Policy. He received no payment for loss of office
and was not entitled to a 2016 annual bonus. He will continue
to be eligible for his 2014 and 2015 LTIP awards which will
vest on the normal vesting dates, subject to performance and
reduced pro rata for time. His 2016 LTIP award lapsed in full.
Mark Drummond Brady was a deferred member of the Defined
Benefit (DB) section of the Scheme, which had been closed to
further accrual or to new members. On 17 February 2016, the
Executive Director transferred the benefit out of the Scheme,
therefore fully extinguishing his liability in the DB scheme.
The transfer value (£4,499k) was settled on 17 February 2016.
This was calculated on the standard transfer value basis for the
scheme with no enhancements.
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016
87
CORPORATE GOVERNANCE
SUPPORTING DISCLOSURES AND ADDITIONAL
CONTEXT
Performance graph and table
Percentage change in remuneration of Group Chief
Executive
The table below compares the percentage change in the salary,
benefits and annual bonus of the Group Chief Executive and
the average percentage change in salary, benefits and annual
bonus of all JLT UK employees paid in respect of the year
ended 31 December 2016.
Group Chief Executive
1%
All JLT UK employees
3%
Benefits
20%
8%
Annual Bonus
81%
25%
Salary
The chart shows the TSR of JLT in the eight year period to
31 December 2016 against the TSR of the FTSE 100, 250
and All Share Indices. TSR refers to share price growth and
assumes dividends are reinvested over the relevant period. The
Committee believes the FTSE 100, 250 and All Share Indices
are the most appropriate indices against which the TSR of JLT
should be measured, as there is no directly comparable quoted
peer group for the Company in the UK.
Total shareholder return from 2008 to 2016
250
Jardine Lloyd Thompson Group
FTSE 250 index
FTSE 100 index
SE All Share Index
200
150
100
50
0
-50
Data taken at December 31st
08
09
10
11
12
13
14
15
16
The table below provides remuneration data for the Group Chief Executive for each of the eight financial years over
the equivalent period.
2009
£’000
2,836
Single Total Figure of Remuneration
Bonus (% of Maximum)
LTIP vesting (% of Maximum)
2010
£’000
3,728
2011
£’000
3,831
2012
£’000
3,821
2013
£’000
3,969
2014
£’000
3,322
2015
£’000
2,896
2016
£’000
2,506
75%
75%
73%
75%
75%
69%
41%
74%
100%
100%
100%
100%
100%
72%
62%
21%
Relative importance of spend on pay
Dilution
The chart below shows total employee remuneration and
distributions to shareholders, in respect of the years ending
31 December 2015 and 2016 (and the difference between
the two).
The Company continues to operate its share schemes in line
with the Investment Association guidelines on dilution.
Total employee remuneration
2016
£794.4m
2015
£727.3m
Change (%)
9%
Distributions to shareholders
£70.5m
£67.2m
5%
Total employee remuneration represents amounts included in
note 6 to the accounts in respect of wages, social security,
pension and incentive costs for all Group employees.
Distributions to shareholders include the total dividend in
respect of each financial year (see note 10 to the accounts).
External non-executive directorships held by
Executive Directors
Dominic Burke is non-executive chairman of Newbury
Racecourse plc. He retained the fee of £20,000 paid by
Newbury Racecourse in respect of 2016. No other Executive
Directors hold outside paid posts.
88 Jardine Lloyd Thompson Group plc Annual Report 2016
The Company follows a conservative approach to hedging for
share awards made under LTIP, DBSP and other share-based
schemes, whereby shares to satisfy such awards are normally
purchased in the market and held in an employee trust.
The Company seeks to be fully hedged as far as possible
against awards made. At 31 December 2016 the total awards
outstanding in respect of the LTIP, DBSP and other share-based
schemes totalled 9,913,527 shares representing 4.5% of the
Company’s issued share capital. This comprised 0.31% in
respect of awards which were fully vested and 4.19% in respect
of awards which have not yet vested.
DIRECTORS’ SERVICE AGREEMENTS AND LETTERS OF APPOINTMENT
The dates on which directors’ service agreements or letters of appointment commenced and the current expiry dates are as follows:
Expiry date of current service
agreement or letter of appointment
Notice Period by the
Individual
Notice Period by
the Company
Chairman and Executive Directors
Geoffrey Howe
11 January 2006
N/A
6 months
6 months
Dominic Burke
14 December 2001
N/A
12 months
12 months
Charles Rozes
1 September 2015
N/A
12 months
12 months
1 April 2005
N/A
12 months
12 months
17 December 2009
16 December 2018
30 April 2013
30 April 2019
1 May 2016
30 April 2019
Mark Drummond Brady
OVERVIEW
Date of
Appointment
Non-Executive Directors
Richard Harvey
Lord Sassoon
Annette Court
1 August 2012
31 July 2018
Jonathan Dawson
1 August 2012
31 July 2018
Adam Keswick
1 September 2016
31 August 2019
Nicholas Walsh
1 October 2014
30 September 2017
STRATEGIC REPORT
Bruce Carnegie-Brown
Statement of voting at Annual General Meeting
The Committee is directly accountable to shareholders and, in this context, is committed to an open and transparent dialogue
with shareholders on the issue of executive remuneration.
At the Annual General Meeting held on 26 April 2016, votes were cast by proxy and at the meeting in respect of directors’
remuneration are shown in the table.
Votes For
Resolutions
Annual remuneration for
year ending 31 December
2015
Votes Against
No. of shares
%
No. of shares
%
174,865,580
93.91
11,348,970
6.09
Total votes cast
Votes withheld
186,214,550
1,785,397
THE COMMITTEE
Committee Membership & Attendance
The table below shows the Committee members during the
year and their attendance:
Eligible to attend
Attended
3
3/3
Richard Harvey
6
6/6
Annette Court
6
6/6
Lord Leach
3
3/3
Lord Sassoon
6
6/6
6/6
Nicholas Walsh
6
Jonathan Dawson1
5
5/6
Adam Keswick
2
2/2
The Committee comprises the six Non-Executive Directors.
The Chairman, Group Chief Executive, Group Chief Financial
Director and Group HR Director may attend the committee
by invitation, except when their own remuneration is being
discussed. No Director is involved in determining his or her
own remuneration. None of the Committee members has any
personal financial interest except as shareholders.
SHAREHOLDER INFORMATION
Bruce CarnegieBrown (Chairman)
FINANCIAL STATEMENTS
Votes For include votes registered as “Discretion”.
The Group Company Secretary acts as Secretary to the
Committee.
Jonathan Dawson was not able to attend the meeting on 11 February
2016 due to travel commitments.
1
Jardine Lloyd Thompson Group plc Annual Report 2016
CORPORATE GOVERNANCE
The Remuneration Committee Chairman is available to answer questions from shareholders regarding remuneration at the AGM.
89
CORPORATE GOVERNANCE
THE ROLE OF THE COMMITTEE
The principal purpose of the Committee is to determine the
Company’s policy on the remuneration of the Chairman,
Executive Directors and other members of the Group Executive
Committee, as well as to approve specific remuneration
packages for each of them. The full terms of reference of the
Committee are available on the Group’s website, jlt.com
Key Responsibilities
The Committee’s key responsibilities are:
• to determine and agree with the Board the framework and
policy for the remuneration of the Group Chief Executive,
Chairman, the Executive Directors and other members of
the Group Executive Committee (GEC);
• in determining such policy, to take into account information
about remuneration in other relevant companies and trends
in remuneration across the Group;
• to approve the design of, and determine targets and vesting
schedules for, any annual bonus plans for the Executive
Directors and other members of the GEC;
• to review the design of all share incentive plans for approval
by the Board and (where applicable) shareholders. To
determine whether awards will be made and, if so, the
overall amount of such awards and the performance targets
to be used;
• within the terms of the agreed Policy, to determine the total
individual remuneration package of each Executive Director
and other members of the GEC and the terms of any
compensation payable for loss of office or employment;
• to be informed of, and be consulted by, the Group
Chief Executive on any significant proposals relating to
remuneration for executives below the GEC level, including
significant new hirings;
• to ensure that all disclosure requirements in relation to
remuneration are fulfilled; and
• to appoint and manage the engagement of any
remuneration consultants who advise the Committee.
90 Jardine Lloyd Thompson Group plc Annual Report 2016
Effectiveness Review
During the year the Committee carried out an evaluation of its
effectiveness. Questionnaires were submitted to all members
of the Committee and the results of the evaluation were shared
with the Committee and discussed. The results of the evaluation
were generally very positive, suggesting that the Committee
functions well and covers the right ground, with open channels
of communication. The Committee is regarded as well-chaired
and the quality of debate is good. Papers are of a high quality.
Some opportunities were identified to focus more on ongoing
professional development.
Committee Advisers
The Remuneration Committee advisers are appointed by the
Committee and their roles are kept under review.
During the year Deloitte LLP have been retained by the
Committee in their capacity as Remuneration Committee
advisers. Deloitte LLP were originally appointed in 2011
following a selection process undertaken by the Committee.
Deloitte LLP is a member of the Remuneration Consultants
Group and as such voluntarily operates under the Code of
Conduct in relation to executive remuneration consulting in
the UK. The Committee is comfortable that the Deloitte LLP
engagement partner and team that provide remuneration
advice to the Committee do not have connections with Jardine
Lloyd Thompson Group plc that may impair their objectivity
and independence. The fees charged by Deloitte LLP for the
provision of independent advice to the Committee during 2016
were £70,300. Deloitte LLP also provide services to the Group
in respect of corporate tax advice, internal audit assistance,
regulatory reporting and Company share schemes.
Remuneration Committee Activities in 2016
The following provides a summary of the key areas of focus at each of the Committee’s meetings during the year:
Strategy and
policy
11 Feb
2016
Discussion of the DRR
Approval of the DRR
26 Feb
2016
•
19 July
2016
6 Oct
2016
•
•
28 Nov
2016
•
Consideration of remuneration strategy and approach
•
Consideration/approval of the Remuneration Policy
Annual Salary
Annual Bonus
Other
•
Review of salaries for Executive Directors and GEC
•
Review of executives’ personal objectives
•
•
Review of executive performance
•
•
Determination of bonus outcomes
•
Setting of measures and targets
•
Determination of vesting levels
•
Setting of measures and targets
•
•
Senior management reward arrangements
•
•
Committee Effectiveness
•
Approval of Chairman’s fees
•
Other issues as required
•
•
•
•
•
•
•
•
•
•
•
•
•
STRATEGIC REPORT
LTIP
OVERVIEW
19 Jan
2016
COMPLIANCE
CORPORATE GOVERNANCE
In carrying out its duties, the Committee gives full consideration
to best practice. The Committee was constituted and operated
throughout the period in accordance with the principles outlined
in the FCA's Listing Rules derived from the Code. The auditor’s
report, set out on pages 101 to 107, covers the disclosures
referred to in this report that are specified by the FCA.
This report has been prepared by the Committee in accordance
with the Code, Schedule 8 of the Large and Medium sized
Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013 and the Listing Rules.
FINANCIAL STATEMENTS
For and on behalf of the Board.
Bruce Carnegie-Brown
28 February 2017
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016
91
CORPORATE GOVERNANCE
DIRECTORS’ REPORT
The directors present their report and audited consolidated financial statements of the Group for the
year ended 31 December 2016.
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
As a company with a premium listing on the London Stock Exchange, we are committed to complying with the Code, which is
available on the FRC website at frc.org.uk. Throughout the accounting period, we have complied with the provisions of Sections A
to E of the Code as detailed below, with the exception of Section B.1.2, as explained in the following table.
Provision Requirement
B.1.2
At least half the Board, excluding
the Chairman, should comprise
non-executive directors
determined by the Board to be
independent.
B.2.1
The Chairman or an Independent
Non-Executive Director should
chair the nomination committee.
Non-compliance
Between 1 January 2016 and 25 April 2016, excluding the Chairman, there were six Non-Executive
Directors (four Independent and two Non-Independent) and four Executive Directors. On 26 April
2016, James Twining stepped down from the Board.
The Company became compliant with the Code on 1 May 2016, when Bruce Carnegie-Brown was
appointed as an Independent Non-Executive Director.
The Company remained compliant with the Code until 31 December 2016, when Richard Harvey
resigned as an Independent Non-Executive Director. As at the date of this Report, excluding the
Chairman, there are three Executive Directors, four Independent Non-Executive Directors and two
Non-Independent Non-Executive Directors.
Between 1 January 2016 and 12 June 2016 Lord Leach of Fairford (a Non-Independent NonExecutive Director) chaired this Committee. The Company become compliant with the Code on 12
June 2016 when Geoffrey Howe (Chairman of the Board) took over as Chairman of this Committee.
Since 1997, other than a short period following the cessation
of Lord Leach's role on 12 June 2016 and the appointment of
Adam Keswick on 1 September 2016, JLT has appointed two
representatives from Jardine Matheson to the Board. Jardine
Matheson currently has a 40.16% interest in the Company.
As a result, the Jardine Matheson-appointed Directors are
considered to be Non-Independent Non-Executive Directors.
The relationship with Jardine Matheson is maintained on an
arm’s-length basis as detailed on page 60 and in note 32 on
page 162.
The Jardine Matheson-appointed directors, Lord Sassoon and
Adam Keswick, will be standing for re-election and election
respectively, at the Company’s AGM. In addition to their Board
roles, the Jardine Matheson-appointed Directors hold Committee
memberships. Lord Sassoon is a member of the Audit & Risk,
Nominations and Remuneration Committees and Adam Keswick
is a member of the Nominations and Remuneration Committees.
As a consequence of the above, JLT has, for a number of
years, not been in full compliance with Code provision B.1.2.
Nonetheless, JLT has always sought to satisfy shareholders
with an appropriate explanation of any areas where it does
not comply with the Code and to provide a full explanation
for retaining two Jardine Matheson directors on the Board.
The Board strongly believes that the continuation of these
arrangements is in the best interests of the Company’s
shareholders for the following reasons:
92 Jardine Lloyd Thompson Group plc Annual Report 2016
• We believe our Board functions very well at its current
size and that the Board has an appropriate combination
of Independent and Non-Independent Non-Executive
Directors, in-line with the Code’s principle that no individual
or small group of individuals should be able to dominate the
Board’s decision-making.
• There are at least three Independent Non-Executive
Directors on each Board Committee and all the Committees
have a majority of independent directors.
• The business and profits of JLT have grown significantly
in recent years and we believe the overall contribution of
Jardine Matheson and its nominated Directors has been
material to this.
• Jardine Matheson has clearly demonstrated that it is a
committed, long-term shareholder. We believe that its
interests are fundamentally aligned to the interests of all
other shareholders. In the Board’s experience, over many
years, conflicts of interest between Jardine Matheson and
the other shareholders of JLT rarely occur, but, if they do (for
example where Jardine Matheson has sought to increase
its shareholding in JLT) the Jardine Matheson-appointed
Directors absent themselves from any relevant discussion.
• We believe that the continuing support of Jardine Matheson
has been, and will continue to be, of great importance to
the success of JLT, especially in Asia, a key growth market
for the Company, where Jardine Matheson’s reputation and
connections are of great value to us.
OVERVIEW
The Independent Non-Executive Directors regularly consider the composition of our Board, and believe
that the Board and its Committees have the appropriate balance of skills, experience, independence
and knowledge of the Company to enable them to discharge their respective duties and responsibilities
effectively, as set out in the Code.
The following describes in more detail how we have complied with the respective provisions of the Code:
A
LEADERSHIP
B
EFFECTIVENESS
B1 The composition of the Board
The Board is responsible for setting the Company’s strategy
and monitoring the performance of the Company as a whole.
Details of matters discussed by the Board are set out on
page 59.
The Nominations Committee annually reviews the balance
and experience of the Board. The Nominations Committee
has also considered the issue of director independence and
knowledge and confirmed that the Directors have the right level
of experience to promote the long-term performance of the
Company. Details of the Directors’ experience are shown in the
chart on page 60.
A2 Division of Responsibilities
A3 Non-Executive Directors
B3 Commitment
Non-Executive Directors are advised on appointment of the time
commitment expected of them, and this is reviewed regularly.
External appointments which might impact on existing time
commitments must be agreed with the Chairman.
B4 Development
All new Directors are invited to take part in a comprehensive
induction programme. Details of the programme undertaken
by Bruce Carnegie-Brown and Adam Keswick, who were both
appointed during the year, are set out on page 61.
B5 Information and Support
The Chairman and Group Company Secretary work together to
ensure that all Directors receive full and accurate information in
a timely manner.
B6 Evaluation
The Board and Committees undertake internal evaluations
every year. The Board underwent an external evaluation
exercise in 2016 and the results the Board evaluation are
shown on page 61.
B7 Re-election
All Directors were subject to shareholder election or re-election
at the 2016 AGM, and the same process will apply at the
2017 AGM.
Jardine Lloyd Thompson Group plc Annual Report 2016
93
SHAREHOLDER INFORMATION
The Non-Executive Directors provide strong and robust
independent oversight to the proceedings of the Board. In
addition, they bring external experience from other financial
services companies and international businesses. The letters
of appointment for the Non-Executive Directors are available
for inspection at the AGM of the Company. All Non-Executive
Directors confirm on appointment they have sufficient time to
fulfil their commitments.
The process for the appointment of new Directors to the Board
is led by the Nominations Committee. Further details of the
appointments made during the year and succession planning
activities can be found in the Nominations Committee’s report
on pages 71 to 72.
FINANCIAL STATEMENTS
The Group Chief Executive, Dominic Burke, is responsible
for the day-to-day operation of the business in line with the
strategy and commercial objectives agreed by the Board.
He is also responsible for promoting and conducting the affairs
of the Company with the highest standards of ethics, integrity
and corporate governance.
B2 Appointments to the Board
CORPORATE GOVERNANCE
The roles of the Chairman and Group Chief Executive are
distinctly separate and are clearly defined. The Chairman,
Geoffrey Howe, is responsible for the leadership and
governance of the Board, ensuring its effectiveness, setting
agendas, ensuring that the Directors receive accurate, timely
and clear information and that there is effective communication
with shareholders. He facilitates the effective contribution to
the Board of the Non-Executive Directors in particular ensuring
constructive relationships between the Executive and NonExecutive Directors.
STRATEGIC REPORT
A1 The role of the Board
CORPORATE GOVERNANCE
C
ACCOUNTABILITY
C1 Financial and Business Reporting
The Strategic Report, which can be found on pages 12 to 53,
sets out details of the Company’s performance, business model
and strategy, and the risks and uncertainties relating to the
Company’s future prospects.
C2 Risk Management and Internal Control
The Board is responsible for the Group’s risk management
and internal control systems, and for regularly reviewing their
effectiveness. The activities of the Audit & Risk Committee,
which supports the Board in this area, are described on pages
63 to 70 and the Risk Management Report is included on
pages 42 to 45.
C3 Audit & Risk Committee and auditors
The Board has delegated a number of responsibilities to the
Audit & Risk Committee, which is responsible for overseeing the
Company’s financial reporting processes, internal controls and
risk management framework, and the work undertaken by the
external auditors.
PRINCIPAL ACTIVITIES AND STRATEGIC REPORT
Jardine Lloyd Thompson Group plc is a holding company,
domiciled and incorporated in the UK with Registered Number
01679424, for an international group of insurance brokers, risk
specialists and employee benefits consultants.
The Strategic Report on pages 12 to 53 covers the activities of
the Group, its performance during the year and likely
future developments.
RESULTS AND DIVIDENDS
The financial statements for the Company for the year to 31
December 2016 are detailed on pages 173 to 179. These
are prepared in accordance with the Generally Accepted
Accounting Practice in the UK, also known as UK GAAP.
The Directors recommend that a final dividend of 20.6 pence
per share be paid on 4 May 2017 to shareholders on the
register on 31 March 2017. This brings the total dividend for the
year to 32.2 pence per share, 5.2% higher than 2016.
SUBSIDIARIES AND ASSOCIATED COMPANIES
D
REMUNERATION
D1 The level and components of remuneration
The Remuneration Committee is responsible for setting the
Company’s remuneration policy. The key principles and
framework adopted by the Committee are set out in the
Committee’s report on pages 73 to 91.
D2 Procedure
The Remuneration Committee is responsible for setting
the remuneration of all Executive Directors. Details of the
composition and the activities of the Committee are set out in
the Committee’s Report on pages 73 to 91.
E
RELATIONSHIPS WITH SHAREHOLDERS
A table of the Company’s subsidiaries and associated
companies is included on pages 164 to 171. In addition, the
Company operated though branches in a number of countries.
IMPORTANT EVENTS
The Board decided during 2016 to sell the major part of the
Group's Thistle business and an agreement for its disposal was
signed on 30 December 2016. The remaining elements of the
business were incorporated into the JLT Specialty division.
On 27 January 2017 an agreement was signed for the
acquisition by JLT of a 50.1% stake in Construction Risk
Partners LLC, a leading construction risk and surety specialist
insurance broker in the US, for cash consideration of $50m,
subject to the achievement of performance conditions in the 12
month period following completion. The terms of the transaction
allow JLT to increase its shareholding to 100% over time.
E1 Dialogue with shareholders
The Board seeks to engage actively with all shareholders.
Details of activity undertaken in this area can be found on
page 62.
E2 Constructive use of the AGM
The AGM provides the Board with an important opportunity
to meet with shareholders. All of the Directors (including the
Chairmen of the Board Committees) are expected to attend
and will be available to answer questions from shareholders
attending the meeting.
94 Jardine Lloyd Thompson Group plc Annual Report 2016
EMPLOYMENT POLICIES
The Group aims to provide an environment where individuals
can excel. Wide share ownership, share option schemes and
the Share Incentive Plan encourage employee engagement.
Regular briefings and consultation, using the JLT intranet where
possible, keep the employees informed about the Group’s
performance and matters that affect them as employees.
Additionally we offer a wide range of benefits for employees
including health and lifestyle benefits.
The information about the Group’s employees, employment of
disabled people and employment practices is in the Group’s
Corporate Responsibility statement set out on pages 46 to 53.
ENVIRONMENTAL REPORTING
The Group’s Corporate Responsibility statement is set out
on pages 46 to 53. This includes the Group’s position on the
environment as well as the Group’s Greenhouse Gas Emissions
Report for the year ended 31 December 2016.
At 31 December 2016 and 10 February 2017 (the latest
practicable date prior to the date of this report), the Company
had been notified of the following significant holdings of voting
rights in its shares:
10 February
2017
% of voting
rights
% of voting
rights
40.16
40.16
MFS Investment Management
8.85
8.76
Royal Bank of Canada
(EBT Trustee)
4.16
3.98
• state whether IFRSs as adopted by the European Union
and IFRS issued by the IASB and applicable UK Accounting
Standards have been followed, subject to any material
departures disclosed and explained in the Group and parent
company financial statements respectively; and
• prepare the financial statements on a going concern basis,
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose, with reasonable accuracy at any
time, the financial position of the Company and the Group, and
enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies
Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and the Group and,
hence, for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report, taken as a
whole, is fair, balanced and understandable and provides
Jardine Lloyd Thompson Group plc Annual Report 2016
95
SHAREHOLDER INFORMATION
31 December
2016
• make judgements and accounting estimates that are
reasonable and prudent;
FINANCIAL STATEMENTS
SUBSTANTIAL SHAREHOLDINGS
• select suitable accounting policies and then apply them
consistently;
CORPORATE GOVERNANCE
It is JLT Group policy not to make donations to any EU or nonEU political party.
JMH Investments Limited
Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
the Company, and of the profit or loss of the Group and the
Company for that period.
In preparing these financial statements, the Directors are
required to:
POLITICAL DONATIONS
Shareholder
STRATEGIC REPORT
The Group is an equal opportunities employer and encourages
diversity. We are fully committed to ensuring that disabled
people are afforded equality of opportunity in respect of entering
and continuing employment with us. If existing employees
become disabled, every effort is made to make sure their
employment with the Group continues. If such employees are
unable to continue to work, every effort is made to safeguard
their financial interests. The Group aims to provide training,
development and promotion opportunities that are identical, as
far as possible, for disabled and non-disabled employees.
The Directors are responsible for preparing the Annual
Report, the Directors’ Remuneration Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
have prepared the Group financial statements in accordance
with International Financial Reporting Standards (IFRSs), as
adopted by the European Union, and the parent Company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law).
OVERVIEW
DIVERSITY
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
CORPORATE GOVERNANCE
the information necessary for shareholders to assess the
Company’s position, performance, business model and
strategy. Each of the Directors whose names and functions are
listed on pages 56 and 57 confirms that, to the best of their
knowledge:
• the Group financial statements, which have been prepared
in accordance with IFRSs as adopted by the EU, give a true
and fair view of the assets, liabilities, financial position and
profit of the Group; and
• the Strategic Report, contained in pages 12 to 53 of the
Annual Report, includes a fair review of the development
and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that it faces.
4. Principal Risks & Environmental Factors – Reviewing the
company’s Principal Risks in the context of the key environment
factors/considerations over the next three years. These included
key trends, issues, uncertainties (eg regulatory environment),
known potentially impactful events (eg UK EU Referendum) and
emerging risks (eg geo-political risk).
As a result of this assessment, the Directors can confirm it is
their reasonable expectation that, over the next three years,
JLT will continue to operate and meet its on-going liabilities
as they fall due. This statement is underpinned by various
mitigating factors including the Group’s control environment,
capital requirements and resources and the quality and
accessibility of facilities.
Each Director as at the date of this report, further confirms that:
GOING CONCERN
(a) so far as the Director is aware, there is no relevant
audit information of which the Company’s auditors are
unaware; and
The Strategic Report on pages 12 to 53 includes information
on the Group structure, the performance of our businesses,
the markets in which we operate and the principal risks and
uncertainties faced by the business. The Financial Statements
on pages 101 to 171 include information on our Group financial
results, cash flow and balance sheet position.
(b) the Director has taken all the steps that he ought to have
taken as a Director in order to make himself aware of
any relevant audit information and to establish that the
Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the
Companies Act 2006.
JLT VIABILITY STATEMENT
As prescribed by provision C.2.2 of the UK Corporate
Governance Code, the Board of Directors have conducted a
detailed assessment of those risk events that could threaten
JLT Group’s ability to continue to operate and meet its liabilities
as they fall due. For this assessment Directors have selected a
period of three years over which the Viability Statement would
be considered. This timescale is believed to be appropriate
given its alignment with the Group’s business and strategic
planning process. JLT has undertaken a rigorous assessment,
which included the following core components:
1. Financial Sensitivity Testing – For example; levels of planned
revenue, the development of key strategic operations, changes
in foreign exchange and interest rates, and cash consumption.
2. Risk Scenario Testing – Assessing the impact of a
combination of principal risks crystallising during the
viability period.
3. Reverse Stress Testing – Estimating the quantum of a loss,
which may ultimately threaten the company’s viability, if not
effectively managed, then reviewing this in the context of one of
the key risks facing an insurance intermediary (eg E&O risk).
96 Jardine Lloyd Thompson Group plc Annual Report 2016
The Directors have also considered the Group's cash flow
projections presented in the review of the budget for the full
year to 31 December 2017 as well as work undertaken for the
Viability Statement. The Directors are satisfied that these cash
flow projections, taking into account reasonably possible risk
sensitivities associated with these forecasts and the Group's
current funding and facilities, alongside the Group's funding
strategy, show that the Group will continue to operate for the
foreseeable future.
The Directors therefore continue to have a reasonable
expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future and continue
to adopt a going concern basis (in accordance with the
guidance "Going Concern and Liquidity Risk: Guidance for
the Directors of UK Companies 2009" issued by the FRC) in
preparing the financial statements.
There has been no significant change in the financial or trading
position of the Group since 31 December 2016.
OTHER STATUTORY INFORMATION
Directors’ Indemnity and Insurance
The Company provides the appropriate level of Directors'
and Officers' Liability Insurance in respect of any legal actions
brought against its Directors, in addition to the indemnity
included in the Company's Articles of Association. Neither the
insurance nor the indemnity provides cover where the relevant
Director or Officer acted fraudulently or dishonestly.
LISTING RULE COMPLIANCE
For compliance with DTR 4.1.5 R (2) and DTR 4.1.8 R, the content of the Management Report can be found in the Strategic Report
and the Directors’ Report (on pages 12 to 53 and pages 92 to 99 respectively).
OVERVIEW
The Company has included in this report a Strategic Report (on pages 12 to 53) which provides an overview of the Company’s
business, its position and performance during the year ended 31 December 2016. The Strategic Report also includes any likely
developments in the Group and the Company.
For the purposes of LR 9.8.4 C R, the information required by section LR 9.8.4 R can be found at the locations provided in the
table below:
Location
Not applicable
2
Publication of unaudited financial information
Not applicable
3
N/A (Section 3 removed from the FCA handbook)
Not applicable
4
Long-term incentive schemes
Page 125
5
Director waiver of emoluments
Not applicable
6
Director waiver of future emoluments
Not applicable
7
Non pre-emptive issues of shares for cash
Not applicable
8
Non pre-emptive issues by a major subsidiary undertaking
Not applicable
9
Any participation in a placing by a listed subsidiary undertaking
Not applicable
10
Contracts of significance
Not applicable
11
Provision of services by a controlling shareholder
Not applicable
12
Shareholder waivers of dividend
See paragraph below
13
Shareholder waiver of future dividend
See paragraph below
14
Agreements with controlling shareholders
Page 60
In relation to LR 9.8.4R(12) and (13) the Trustees of the JLT Employee Benefit Trust agree to waive dividends on the shares held by the Trust to meet the awards under the Long Term
Incentive Plans and Senior Executive Share Scheme.
SHAREHOLDER INFORMATION
SHARE CAPITAL AND SHAREHOLDER RIGHTS
The Board has the power to implement the purchase by the
Company of its own shares in accordance with the power
granted at the AGM each year, and will be seeking renewal of
that power at the forthcoming AGM within the limits set out in
the notice of that meeting.
DIVIDENDS AND DISTRIBUTIONS
Shareholders can declare final dividends by passing an ordinary
resolution, but the amount of the dividend cannot exceed the
amount recommended by the Board.
The Board can pay interim dividends whenever the financial
position of the Company, in the opinion of the Board, justifies
such payment. The Board can withhold payment of all or any
part of any dividend or other monies payable in respect of the
Company’s shares from any person with a 0.25 per cent interest
(as set out in the Articles) if that person has been served with
Jardine Lloyd Thompson Group plc Annual Report 2016
97
SHAREHOLDER INFORMATION
The Company has one class of share capital, being ordinary
shares of 5 pence each, and all the shares rank pari passu.
No person holds securities carrying special rights with regard
to control of the Company. The Company did not purchase any
shares during the year.
At 31 December 2016, the Jardine Lloyd Thompson Employee
Benefit Trust (the Trust) held 8,715,895 shares in the Company
representing 3.98% of the issued capital (excluding treasury
shares). At 10 February 2017 (being the latest practicable date
prior to the posting of this report), the Trust held 8,667,083
shares representing 3.96% of the issued capital (excluding
treasury shares).
FINANCIAL STATEMENTS
Movements in the share capital of the Company during the
year ended 31 December 2016 are set out in note 24 on page
147. At 31 December 2016, the issued share capital consisted
of 220,181,007 ordinary shares of 5 pence each, of which
1,143,131 shares were held as treasury shares for which voting
rights would not be exercised.
All the Company’s share schemes contain provisions relating
to a change of control. Outstanding options and awards would
normally vest and become exercisable on a change of control,
subject to the satisfaction of any performance conditions as
may be appropriate at that time.
CORPORATE GOVERNANCE
Subject
Interest capitalised
STRATEGIC REPORT
Section
1
CORPORATE GOVERNANCE
a notice after failure to provide the Company with information
concerning interests in those shares required to be provided
under the Companies Act. The Directors may also retain any
dividends payable on shares on which the Company has a lien,
and may apply the same in or towards satisfaction of the debts,
liabilities or engagements in respect of which the lien exists.
VOTING RIGHTS
On a show of hands at a general meeting, every member
present in person has one vote and on a poll, every member
who is present in person or by proxy has one vote for each
share held. In the case of joint holders of a share, the vote of
the senior holder who tenders a vote, whether in person or by
proxy, will be accepted to the exclusion of the votes of the other
joint holders and, for this purpose, seniority will be determined
by the order in which the names stand in the Register of
Members in respect of the share. Voting rights in relation to
treasury shares are suspended and the voting rights are not
normally exercised in respect of the shares held in the Trust.
The Trust holds shares which are used to satisfy awards made
under the Company’s share plans.
RESTRICTIONS ON VOTING
No member, unless the Directors otherwise determine, is
entitled to vote either in person or by proxy at any general
meeting in respect of any shares held by the member if any call
or other sum then payable by the member in respect of that
share remains unpaid. In addition, no member is entitled to
vote if the member has been served with a notice after failure to
provide the Company with information concerning interests in
those shares required to be provided under the Companies Act.
DEADLINES FOR VOTING
Votes may be exercised in person, by proxy or in relation to
corporate members, by corporate representative. The Articles
provide a deadline for submission of proxy forms of not less
than 48 hours before the time appointed for the holding of
the meeting or adjourned meeting, and the notice of AGM will
specify the deadline for exercising voting rights.
A member that is a corporation may appoint an individual to
act on its behalf at a general meeting or class meetings as
a corporate representative. The person so authorised shall
be entitled to exercise the same powers on behalf of such
corporation as the corporation could exercise if it were an
individual member of the Company.
98 Jardine Lloyd Thompson Group plc Annual Report 2016
VARIATION OF RIGHTS
If, at any time, the capital of the Company is divided into
different classes of shares then, subject to statute, the Articles
specify that rights attached to any class of shares may be
varied with the written consent of the holders of at least 75%
in nominal value of the issued shares of that class, or with the
sanction of a special resolution passed at a separate general
meeting of the holders of those shares. At every such separate
general meeting, the quorum is two persons holding or
representing by proxy at least one third in nominal value of the
issued shares of the class (calculated excluding any shares held
as treasury shares).
PURCHASE OF OWN SHARES
We will, as in previous years, be seeking renewal of our
standing share buy-back authority at the forthcoming Annual
General Meeting of up to a maximum of 10% of the Company’s
issued capital.
As was the case last year, we will not be seeking shareholder
approval for a ‘Rule 9’ dispensation in relation to this authority
pursuant to the Takeover Code. This means that in the event
that the Directors were to initiate a buy-back, in order to avoid
triggering a mandatory offer obligation upon Jardine Matheson
Holdings Limited (JMH) under Rule 37 of the Takeover Code,
JMH would need to participate in any such buy-back so that
its overall percentage holding (which at 10 February 2017 was
40.16%) did not increase following the buy-back.
Although the Company has not utilised the authority to buy
back shares since 2008, the Board believes that it would
be in the interests of all shareholders for the Company to
continue to have the right to purchase its own shares in the
market in appropriate circumstances. We would only exercise
this authority if we believe that it is in the best interests of
shareholders and would result in an improvement in earnings
per share.
TRANSFER OF SHARES
All transfers of shares which are in certificated form may be
effected by transfer in writing in any usual or common form, or
in any other form acceptable to the Directors. The instrument
of transfer must be signed by or on behalf of the transferor
and (except in the case of fully-paid shares) by or on behalf
of the transferee. The transferor shall remain the holder of the
shares concerned until the name of the transferee is entered in
the Register of Members of the Company. Transfers of shares
which are in uncertificated form are effected by means of the
CREST system.
Subject to statutes and applicable CREST rules, the Directors
may determine that any class of shares may be transferred by
means of the CREST system, or that shares of any class should
cease to be so held and transferred.
The Directors are not aware of any agreements between
shareholders that might result in restrictions on the transfer of
shares or on voting rights.
ARTICLES OF ASSOCIATION
ANNUAL GENERAL MEETING
The AGM notice is included in the Circular that accompanies
this Annual Report. The meeting will be held at noon
on Thursday 27 April 2017 at the St Botolph Building,
138 Houndsditch, London, EC3A 7AW. At that meeting,
shareholders will be asked to vote separately on the Annual
Report, and on the Report on Directors’ Remuneration.
Separate resolutions will also be proposed on every
substantially different issue. A poll will be held on each
resolution to ensure that the votes of shareholders unable to
attend the meeting are taken into account, and the results of
the voting will be placed on our website as soon as possible
after the meeting. The special business includes the renewal
(within prescribed limits) of:
• The Directors’ authority to allot Company securities within
The Investment Association guidelines;
• The disapplication of statutory pre-emption rights; and
• The authority of the Company to purchase its own shares
by way of market purchases.
INDEPENDENT AUDITORS
Following review, the Board proposes that
PricewaterhouseCoopers LLP are re-appointed as the
Company auditors. A resolution proposing this will be put to
the AGM.
FINANCIAL STATEMENTS
The powers of the Directors are determined by UK legislation
and the Articles of Association. The Directors are authorised
to issue and allot shares, and to undertake purchases of
Company shares, subject to shareholder approval at the AGM.
Any amendment of the Articles requires shareholder approval in
accordance with legislation in force from time to time. Copies
will be available at the Company’s AGM and can also be
accessed on the Group’s website: jlt.com.
• Use of financial instruments, information on the Group’s
financial risk management objectives and policies, its
exposure to credit risk and foreign currency risk and its use
of financial instruments (pages 44 to 45).
CORPORATE GOVERNANCE
A shareholder does not need to obtain the approval of the
Company, or of other shareholders of shares in the Company,
for a transfer of shares to take place.
• An indication of likely future developments in the business
of the Company (pages 12 to 53); and
STRATEGIC REPORT
The Directors may decline to recognise any instrument of
transfer unless the instrument of transfer is in respect of only
one class of share and, when submitted for registration, is
accompanied by the relevant share certificates and such other
evidence as the Directors may reasonably require.
• The final dividend proposed by the Board (page 12);
INFORMATION SET OUT IN THE STRATEGIC
REPORT
• Information about our people (page 7);
By Order of the Board.
SHAREHOLDER INFORMATION
As permitted by the Companies Act, the following information
(required by law to be included in the Report of the Directors)
has been included in the Strategic Report:
Jonathan Lloyd
Group Company Secretary
28 February 2017
• Information about greenhouse gas emissions
(pages 47 to 48);
OVERVIEW
The Directors may refuse to register a transfer of certificated
shares that are not fully paid provided that partly paid shares
must be transferable free from restrictions and investors must
be provided with sufficient information to allow dealing on
an open and proper basis. The Directors may also refuse to
register an allotment or transfer of shares (whether fully-paid or
not) in favour of more than four persons jointly. If the Directors
refuse to register an allotment or transfer, they must give the
transferee notice of the refusal as soon as is practicable and, in
any event, within two months after the date on which the letter
of allotment or transfer was lodged with the Company.
Jardine Lloyd Thompson Group plc Annual Report 2016
99
FINANCIAL
STATEMENTS
Includes the report of the Independent Auditor and the primary reporting
statements as well as the accounting policies under which the financial
statements have been prepared.
101
108
109
110
111
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
112 Consolidated Statement of Cash Flows
113 Significant Accounting Policies
NOTES TO THE FINANCIAL STATEMENTS
Contains the supporting notes to the financial statements
which provide further detail and analysis
119 Alternative income statement
120 Segment information
123 Operating profit
124 Investment income
124 Finance income and costs
125 Employee information
127Services provided by the Company’s auditor and its
associates
128 Income tax expense
129 Earnings per share
130 Dividends
130 Goodwill
132 Other intangible assets
133 Property, plant and equipment
134 Investments in associates
135 Available-for-sale financial assets
136 Derivative financial instruments
137
138
138
139
142
145
146
147
147
148
149
149
150
155
157
162
163
163
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Financial instruments by category
Borrowings
Deferred income taxes
Provisions for liabilities and charges
Share capital and premium
Non-controlling interests
Other reserves
Qualifying Employee Share Ownership Trust
Cash generated from operations
Business combinations
Business disposals
Retirement benefit obligations
Related-party transactions
Commitments
Subsequent events
164 Subsidiaries and associated companies
COMPANY FINANCIAL STATEMENTS
Includes UK GAAP accounts of the company
173
174
174
175
176
Independent Auditors’ Report
Income Statement
Balance Sheet
Statement of Changes in Equity
Significant Accounting Policies
177 Notes to the Company Financial Statements
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT
to the members of the Jardine Lloyd Thompson Group plc
OVERVIEW
REPORT ON THE GROUP FINANCIAL STATEMENTS
What we have audited
In our opinion, Jardine Lloyd Thompson Group plc’s group
financial statements (the “financial statements”):
The financial statements, included within the Annual Report,
comprise:
• give a true and fair view of the state of the group’s affairs
as at 31 December 2016 and of its profit and cash flows
for the year then ended;
• the Consolidated Balance Sheet as at 31 December 2016;
• have been properly prepared in accordance with
International Financial Reporting Standards (“IFRSs”)
as adopted by the European Union; and
• the Consolidated Income Statement and the
Consolidated Statement of Comprehensive Income
for the year then ended;
• the Consolidated Statement of Cash Flows for the
year then ended;
• have been prepared in accordance with the
requirements of the Companies Act 2006 and
Article 4 of the IAS Regulation.
STRATEGIC REPORT
Our opinion
• the Consolidated Statement of Changes in Equity
for the year then ended; and
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial
statements. These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted
by the European Union, and applicable law.
CORPORATE GOVERNANCE
• the notes to the financial statements, which include
a summary of significant accounting policies and other
explanatory information.
OUR AUDIT APPROACH
• Overall group materiality: £8.6m which represents 5% of underlying profit before tax,
which comprises profit before tax adjusted for non-recurring exceptional items.
Materiality
• We scoped the audit based on entities that significantly contribute to revenue (greater
than 15%), thereafter based on material components in order to obtain sufficient coverage
of the group.
• We conducted full scope audits of the financial information of 17 reporting entities,
across 7 countries.
Audit scope
• Taken together, these territories and functions where we performed our audit work
accounted for 75% of group revenues and 96% of underlying profit before tax.
X
Area of focus
We focused our work on:
• Complex and judgemental areas of revenue recognition.
• Completeness and valuation of litigation provisions.
• Valuation and impairment of intangible assets.
• Valuation of the defined benefit pension deficit.
• Treatment of the long term incentive plans and the Employee Share Trust.
Jardine Lloyd Thompson Group plc Annual Report 2016 101
SHAREHOLDER INFORMATION
• Certain group functions and entities, including those covering treasury, taxation
and pensions were also subject to full scope audits.
FINANCIAL STATEMENTS
Overview
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT CONTINUED
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits
we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias
by the directors that represented a risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort,
are identified as “areas of focus” in the table below. We have also set out how we tailored our audit to address these specific areas
in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures
should be read in this context. This is not a complete list of all risks identified by our audit.
Area of focus
Complex and judgemental areas of revenue recognition
The significant accounting policies section of the financial statements
discloses JLT’s revenue accounting policy (refer to page 116).
How our audit addressed the area of focus
• We have performed walkthroughs of key controls relevant to material
revenue streams and performed testing over these controls in order
to obtain comfort over the cut off, occurrence and accuracy of revenue
around the Group.
Revenue is the largest balance in the group financial statements.
• We substantively tested the timing of recognising revenue in material
The Group has a number of revenue streams for which the timing and
revenue streams by reviewing and assessing contractual terms and
extent of revenue recognition is considered to be more complex or
performance obligations to customers.
judgemental, for example, revenue streams with ongoing performance
• We substantively tested accrued and deferred revenue by evaluating
conditions, long term revenue streams which generate significant
the appropriateness of the key assumptions and considering the
accrued income balances and third party revenue sharing arrangements.
accuracy of prior year estimates against the current year realisation
which did not identify unusual or irregular items.
• We reviewed unusual or complex contracts, for example, third party
pay away arrangements, and assessed them to ensure there is
appropriate revenue recognition in line with the terms of the contract.
Based on the results of our testing we did not identify any areas where
we deemed revenue recognition was inappropriate.
Completeness and valuation of litigation provisions
As at 31 December 2016, the Group had a litigation provision of £7.4m
(2015: £18.2m).
The significant accounting policies section of the financial statements
discloses JLT’s accounting policy in relation to litigation provisions (refer
to page 116) and Note 23 outlines the detailed provision disclosures.
There is an inherent level of uncertainty that surrounds litigation
provisions in relation to potential and actual claims where clients or
third parties believe there has been fault in the services provided.
Consequently a high degree of management judgement is involved
in determining the level of provision required.
• We updated our understanding of management’s process to identify
and evaluate provisions for potential and outstanding litigation for
the group.
• We met with management to discuss new significant legal provisions
as well as changes to significant existing potential and actual
legal provisions.
• We reviewed the E&O register maintained by the Group Legal
department as well as minutes of committee meetings.
• In instances where external legal counsel was engaged, we obtained
external confirmations.
• We substantively tested legal expenses across the Group to identify
any other potential areas of unrecorded potential and actual claims.
• We understood the underlying assumptions, rationale and sensitivities
having regard to the potential for bias.
• We considered the appropriateness of the judgements and sensitivities
management have adopted to determine any significant legal
provisions, as well as the resulting disclosures.
• We have reviewed the accuracy of management’s estimates in the
prior years against actual settlements or current estimates.
As a result of this we determined that the overall provision is appropriate.
The nature of the provisions, being determined on an assessment of legal
outcomes, means any final settlement is subject to significant uncertainty.
The results could differ, possibly materially, from the amounts provided.
102Jardine Lloyd Thompson Group plc Annual Report 2016
How our audit addressed the area of focus
• We evaluated the results of management’s impairment assessment,
including an assessment of the appropriateness of the methodology
used to perform this and performed substantive testing of all inputs into
their valuation such as agreeing to the approved budgets and checking
historical performance against the budget.
The significant accounting policies section of the financial statements
discloses JLT’s accounting policy in relation to goodwill and intangibles
(refer to page 114), and Notes 11 and 12 outline the detailed goodwill
and intangible disclosures.
• We considered the appropriateness of the following key assumptions
within management’s valuation:
Based on the results of their impairment analysis, management
determined there was considerable headroom of the recoverable
amount above the net asset value in each of the group’s Cash
Generating Units (‘CGUs’), and therefore there was no impairment.
-- Terminal growth rates in the forecasts by comparing them to
economic and industry forecasts; and
-- WACC by assessing the cost of capital for the company and
comparable organisations.
• We performed sensitivity analysis around the key assumptions above
to ascertain the extent of change in those assumptions that either
individually or collectively would be required for goodwill to be impaired.
• For computer software intangibles we performed substantive testing
to check the amount that has been capitalised is directly associated
with the production of identifiable and unique software products that
will generate economic benefits exceeding costs beyond one year.
Specifically for the Employee Benefits bespoke system, we obtained
the model and assessed the assumptions to identify if these were
realistic based on the business plan and through a scenario based
sensitivity analysis.
Based on our testing we determined that management's impairment
assessment is reasonable based on the current business plans and
historical performance for both goodwill and significant intangible assets.
Valuation of pension deficit
As at 31 December 2016, the net pension liability is £198.4m
(2014: £130.4m).
The significant accounting policies section of the financial statements
discloses JLT’s accounting policy in relation to the various pension
arrangements (refer to page 116), and Note 31 outlines the detailed
pension disclosures.
• Discount rate: Under IAS 19, the discount rate should be set with
reference to the yield on high quality corporate bonds of term
appropriate to the duration of the liabilities.
• Inflation rate: We agreed the rates used by management for each
of these elements to the Bank of England inflation curve.
• Mortality: We considered the appropriateness of the base tables
selected for use by management by reference to the mortality
experience analysis completed by the UK Pension Scheme Trustees
as part of the 2014 funding valuation.
No material exceptions were identified as part of our testing of the
assumptions outlined above and we consider the assumptions used
to be in line with recognised market practices. We are satisfied that
the overall pension deficit is appropriately valued.
• Future rates of price inflation: the level of future pension payments
is linked to price inflation indices. Various investment market statistics
are used to form a view on the long term average rates of price retail
and consumer price inflation.
SHAREHOLDER INFORMATION
• Post retirement mortality: Scheme specific base tables are used
with an allowance for future improvements in life expectancy based
on recent projections. These projections will depend on future
expectations of improvements in life expectancy and are therefore
uncertain.
• We tested the controls over the completeness and accuracy
of pension scheme data on which the pension liability assumptions
are based. We noted no exceptions from our testing.
• We assessed the appropriateness of the methodology used by
management including the key assumptions used to value the
UK pension liabilities.
FINANCIAL STATEMENTS
We focus on this area as the pension scheme obligation is highly
sensitive to changes in the assumptions used within the model
to calculate the valuation and subsequent charge or credit to the
Statement of Other Comprehensive Income (‘OCI’).Those assumptions
to which the liability is most sensitive are as follows:
• Discount rate: We considered the appropriateness of the 2.80%
discount rate assumption used by reference to the iBoxx AA 15+
corporate bond index. We reviewed the adjustment made by
management to match the duration of the liabilities and compared
this to assumptions adopted by other schemes with a similar duration.
CORPORATE GOVERNANCE
• For capitalised employment contracts we performed substantive testing
over a sample of contracts to ensure there were relevant performance
conditions to allow the capitalisation of the contracts.
STRATEGIC REPORT
We focused on this area because the determination of whether or
not certain elements of goodwill and intangible assets were impaired
involves complex and subjective judgements by the Directors about
the future results of the relevant parts of the business. Management
calculates the recoverable amount by using a value in use (‘VIU’)
discounted cash flow model underpinned by key assumptions which
are the terminal growth rates and weighted average cost of capital
(‘WACC’) by CGU.
OVERVIEW
Area of focus
Valuation and impairment of intangible assets
As at 31 December 2016, the group had goodwill of £543.0m
(2015: £496.2m) and intangible assets of £102.0m (2015: £104.3m)
(comprised of computer software and capitalised employment
contracts).
Jardine Lloyd Thompson Group plc Annual Report 2016 103
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT CONTINUED
Area of focus
Accounting for long term incentive plans and the
Employee Share Trust (‘EST’)
During the year management identified a change to the employee
share plans which changed the dividend rights attaching during the
vesting period. Following their analysis management considered that
both the treatment of the share plans in the calculation of basic earnings
per share (‘EPS’) and diluted EPS was incorrect and that the Employee
Share Trust should be accounted for in the company balance sheet of
Jardine Lloyd Thompson Group plc.
How our audit addressed the area of focus
• We obtained the various share schemes that were in issue from 2014
to 2016 and read the key features of these schemes paying particular
attention to the dividend rights attaching under the schemes.
• We assessed the ownership, funding and control arrangements
relating to the Employee Share Trust and the transaction flows
between Jardine Lloyd Thompson Group plc, JIB Group Limited
and the trading entities.
• We assessed management’s accounting paper and the proposed
restatement of the 2015 basic and diluted EPS calculation.
The accounting for share based payments is a complex area of IFRS,
• We tested the revised calculation of basic and diluted EPS.
in particular the interaction with the Employee Share Trust and treatment
• We assessed the accounting entries to correctly present the Employee
of the options in the calculation of basic and diluted EPS.
Share Trust in the Company balance sheet of Jardine Lloyd Thompson
In assessing the accounting for these plans the key features we
Group plc.
considered were:
As a result of these procedures we have not identified any material
• The dividend rights attaching to each employee share plan;
issues and concur with management’s proposed restatements. We have
• The ownership and control of the Employee Share Trust and
assessed the disclosure of the restatements within the Jardine Lloyd
dividend rights attaching to shares purchased by the Trust; and
Thompson Group plc financial statements as satisfactory.
• The treatment of the issued share awards and the Employee Share
Trust in the calculation of the average weighted shares in issue in
the basic and diluted EPS calculation.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the geographic
structure of the group, the accounting processes and controls,
and the industry in which the group operates.
The group is organised on a worldwide basis into three main
segments, based on the services and products offered: ‘Risk
& Insurance’, ‘Employee Benefits’ and ‘Head Office & Other
operations’. The Risk & Insurance business comprises JLT’s
global specialist, wholesale, reinsurance broking, personal lines
and SME activities. The Employee Benefits business consists
of pension administration, outsourcing and employee benefits
consultancy, healthcare and wealth management activities.
Head Office & Other operations consists of holding companies,
central administration functions and investments in associates.
There are several shared service centres around the world
particularly in India. Although these business segments are
managed on a worldwide basis, they operate in five principal
geographical areas of the world.
There were four financially significant components made
up of JLT Specialty (Risk & Insurance), JLT UK Employee
Benefits (Employee Benefits), JLT Re (Risk & Insurance),
and JLT Australia (Risk & Insurance). In addition we selected
thirteen further reporting entities based on their size and risk
characteristics for full scope audits of their financial information,
and one further reporting entity based on its size and risk
characteristic for specified procedures. Taken together, the
territories and functions where we performed our audit work
accounted for 75% of group revenues and 96% of underlying
profit before tax.
104Jardine Lloyd Thompson Group plc Annual Report 2016
In establishing the overall approach to the group audit we
determined the type of work that needed to be performed
at the reporting units by us, as the group engagement team,
or component auditors from other PwC network firms operating
under our instruction. Where the work was performed by
component auditors, we determined the level of involvement
we needed to have in the audit work at those reporting units
to be able to conclude whether sufficient appropriate audit
evidence had been obtained as a basis for our opinion on
the group financial statements as a whole.
We issued instructions to each component engagement team.
As part of the supervision process the group engagement team
based in the UK visited the US and Canada. We have held
regular planning and coordination calls with our component
audit teams. During our half year review and year-end audit
we held weekly calls with each component audit team to ensure
significant audit and accounting issues are discussed and
insights are shared in a timely manner. We rotate our remote
review of significant component work papers, this year focusing
on Australia, Brazil, Colombia and the US.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us
to determine the scope of our audit and the nature, timing
and extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the
effect of misstatements, both individually and on the financial
statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as follows:
Rationale for
benchmark
applied
£8.6m (2015: £8.5m).
We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above £0.4m
(2015: £0.4m) as well as misstatements below that amount
that, in our view, warranted reporting for qualitative reasons.
Going concern
Under ISAs (UK & Ireland) we are required to report to you
if we have anything material to add or to draw attention to
in relation to the directors’ statement about whether they
considered it appropriate to adopt the going concern basis in
preparing the financial statements. We have nothing material
to add or to draw attention to.
• the information given in the Strategic Report and the
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
• the Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements.
In addition, in light of the knowledge and understanding of the
group and its environment obtained in the course of the audit,
we are required to report if we have identified any material
misstatements in the Strategic Report and the Directors’
Report. We have nothing to report in this respect.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if,
in our opinion:
• information in the Annual Report is:
-- materially inconsistent with the information
in the audited financial statements; or
We have no
exceptions
to report.
-- apparently materially incorrect based on,
or materially inconsistent with, our knowledge
of the group acquired in the course of
performing our audit; or
-- otherwise misleading.
• the statement given by the directors on page
95, in accordance with provision C.1.1 of the UK
Corporate Governance Code (the “Code”), that
they consider the Annual Report taken as a whole
to be fair, balanced and understandable and
provides the information necessary for members
to assess the group’s position and performance,
business model and strategy is materially
inconsistent with our knowledge of the group
acquired in the course of performing our audit.
• the section of the Annual Report on pages 63 to
70, as required by provision C.3.8 of the Code,
describing the work of the Audit Committee does
not appropriately address matters communicated
by us to the Audit Committee.
We have no
exceptions
to report.
We have no
exceptions
to report.
Jardine Lloyd Thompson Group plc Annual Report 2016 105
SHAREHOLDER INFORMATION
In our opinion, based on the work undertaken in the
course of the audit:
FINANCIAL STATEMENTS
As noted in the directors’ statement, the directors have
concluded that it is appropriate to adopt the going concern
basis in preparing the financial statements. The going concern
basis presumes that the group has adequate resources to
remain in operation, and that the directors intend it to do so,
for at least one year from the date the financial statements
were signed. As part of our audit we have concluded that
the directors’ use of the going concern basis is appropriate.
However, because not all future events or conditions can
be predicted, these statements are not a guarantee as to
the group’s ability to continue as a going concern.
Companies Act 2006 reporting
CORPORATE GOVERNANCE
Under the Listing Rules we are required to review the directors’
statement, set out on page 96, in relation to going concern.
We have nothing to report having performed our review.
CONSISTENCY OF OTHER INFORMATION AND
COMPLIANCE WITH APPLICABLE REQUIREMENTS
STRATEGIC REPORT
5% of underlying profit before tax, which comprises
profit before tax adjusted for non-recurring
exceptional items.
When reviewing financial performance management
focus on underlying profit (that is, profit before
tax excluding non-recurring exceptional items).
It is this measure that is used both to discuss
performance of the group with investors and in
calculating employee bonuses and therefore we
have concluded it is the most appropriate measure
of performance against which to set our materiality
benchmark.
OVERVIEW
Overall Group
materiality
How we
determined it
OTHER REQUIRED REPORTING
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT CONTINUED
The directors’ assessment of the prospects of the
group and of the principal risks that would threaten
the solvency or liquidity of the group
Under ISAs (UK & Ireland) we are required to report to you
if we have anything material to add or to draw attention to
in relation to:
• the directors’ confirmation on page 62 of the
Annual Report, in accordance with provision C.2.1
of the Code, that they have carried out a robust
assessment of the principal risks facing the group,
including those that would threaten its business
model, future performance, solvency or liquidity.
We have
nothing
material to
add or to draw
attention to.
We have
nothing
material to
add or to draw
attention to.
We have
• the directors’ explanation on page 96 of the
Annual Report, in accordance with provision C.2.2 nothing
material to
of the Code, as to how they have assessed the
prospects of the group, over what period they have add or to draw
attention to.
done so and why they consider that period to be
appropriate, and their statement as to whether
they have a reasonable expectation that the group
will be able to continue in operation and meet its
liabilities as they fall due over the period of their
assessment, including any related disclosures
drawing attention to any necessary qualifications
or assumptions.
• the disclosures in the Annual Report that describe
those risks and explain how they are being
managed or mitigated.
Under the Listing Rules we are required to review the directors’
statement that they have carried out a robust assessment of
the principal risks facing the group and the directors’ statement
in relation to the longer-term viability of the group. Our review
was substantially less in scope than an audit and only consisted
of making inquiries and considering the directors’ process
supporting their statements; checking that the statements
are in alignment with the relevant provisions of the Code; and
considering whether the statements are consistent with the
knowledge acquired by us in the course of performing our audit.
We have nothing to report having performed our review.
Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report to
you if, in our opinion, we have not received all the information
and explanations we require for our audit. We have no
exceptions to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report
to you if, in our opinion, certain disclosures of directors’
remuneration specified by law are not made. We have no
exceptions to report arising from this responsibility.
106Jardine Lloyd Thompson Group plc Annual Report 2016
Corporate governance statement
Under the Listing Rules we are required to review the part
of the Corporate Governance Statement relating to ten further
provisions of the Code. We have nothing to report having
performed our review.
RESPONSIBILITIES FOR THE FINANCIAL
STATEMENTS AND THE AUDIT
Our responsibilities and those of the directors
As explained more fully in the of Directors’ Responsibilities
Statement set out on page 95, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and ISAs
(UK & Ireland). Those standards require us to comply with the
Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for
and only for the parent company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not, in giving these
opinions, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by
our prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error.
This includes an assessment of:
• whether the accounting policies are appropriate to the
group’s circumstances and have been consistently applied
and adequately disclosed;
• the reasonableness of significant accounting estimates
made by the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing
the directors’ judgements against available evidence,
forming our own judgements, and evaluating the disclosures
in the financial statements.
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We
obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
OVERVIEW
In addition, we read all the financial and non-financial
information in the Annual Report to identify material
inconsistencies with the audited financial statements
and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit.
If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
With respect to the Strategic Report and Directors’ Report,
we consider whether those reports include the disclosures
required by applicable legal requirements.
STRATEGIC REPORT
Nick Wilks (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
28 February 2017
CORPORATE GOVERNANCE
• The maintenance and integrity of the Jardine Lloyd
Thompson Group plc website is the responsibility of the
directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly,
the auditors accept no responsibility for any changes that
may have occurred to the financial statements since they
were initially presented on the website.
• Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 107
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2016
Notes
2016
£'000
2015
£'000
2
2,4
2
1,256,556
4,730
1,261,286
1,151,392
3,689
1,155,081
6
3
1,2,3
(794,363)
(66,849)
(209,518)
(34,951)
155,605
(727,334)
(61,167)
(163,685)
(30,538)
172,357
1,2
3
193,672
(1,245)
187,462
(21,155)
Restructuring costs
Net litigation costs
Net gain on sale of associate
Other exceptional items
Operating profit
3
3
3
3
1,2,3
(13,900)
(21,114)
(1,808)
155,605
(9,878)
(1,556)
18,595
(1,111)
172,357
Finance costs
Finance income
Finance costs - net
Share of results of associates
Profit before taxation
Income tax expense
5
5
5
(24,225)
2,147
(22,078)
1,353
134,880
(44,018)
(24,473)
1,612
(22,861)
5,531
155,027
(41,586)
90,862
113,441
81,466
9,396
90,862
103,099
10,342
113,441
38.6p
37.8p
restated
48.6p
48.0p
Fees and commissions
Investment income
Total revenue
Salaries and associated expenses
Premises
Other operating costs
Depreciation, amortisation and impairment charges
Operating profit
Analysed as:
Operating profit before exceptional items
Acquisition and integration costs
1,2
8
Profit for the year
Profit attributable to:
Owners of the parent
Non-controlling interests
Earnings per share attributable to the owners of the parent during the year
(expressed in pence per share)
Basic earnings per share
Diluted earnings per share
The notes on pages 113 to 171 form an integral part of these consolidated financial statements.
108Jardine Lloyd Thompson Group plc Annual Report 2016
2
9
OVERVIEW
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 December 2016
Notes
Profit for the year
2016
£'000
2015
£'000
90,862
113,441
(71,642)
11,850
(59,792)
43,149
(8,856)
34,293
42
(181)
(41,487)
105,369
63,743
(34)
10
(12,569)
(13,622)
(26,215)
3,951
94,813
8,078
121,519
80,889
13,924
94,813
112,552
8,967
121,519
Other comprehensive (expense)/income
31
Other comprehensive income net of tax
Total comprehensive income for the year
Attributable to: Owners of the parent
Non-controlling interests
CORPORATE GOVERNANCE
Items that may be reclassified subsequently to profit or loss
Fair value gains/(losses) net of tax:
- available-for-sale
- available-for-sale reclassified to the income statement
- cash flow hedges
Currency translation differences
Total items that may be reclassified subsequently to profit or loss
STRATEGIC REPORT
Items that will not be reclassified to profit or loss
Remeasurement of post-employment benefit obligations
Taxation thereon
Total items that will not be reclassified to profit or loss
The notes on pages 113 to 171 form an integral part of these consolidated financial statements.
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 109
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
as at 31 December 2016
2016
£'000
2015
£'000
11
12
13
14
15,20
16,20
31
22
543,013
101,963
64,330
50,928
23,805
117,043
509
70,088
971,679
496,166
104,323
63,167
41,180
15,466
33,684
366
51,023
805,375
Notes
NET OPERATING ASSETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments in associates
Available-for-sale financial assets
Derivative financial instruments
Retirement benefit surpluses
Deferred tax assets
Current assets
17
588,640
528,595
Derivative financial instruments
16,20
7,930
1,544
Available-for-sale financial assets
15,20
116,933
19
Cash and cash equivalents
18,20
939,945
1,653,448
901,087
1,431,245
20,21
19
16,20
(54,729)
(1,257,782)
(33,136)
(5,119)
(8,826)
(1,359,592)
293,856
(22,338)
(1,086,278)
(6,115)
(8,749)
(18,594)
(1,142,074)
289,171
20,21
16,20
22
31
23
(633,103)
(69,652)
(11,378)
(198,921)
(1,571)
(914,625)
350,910
(581,244)
(33,726)
(16,978)
(130,753)
(1,043)
(763,744)
330,802
24
24,26
26
26
11,008
104,111
(54,453)
83,561
183,919
328,146
22,764
350,910
11,008
104,074
(12,827)
(17,280)
227,362
312,337
18,465
330,802
Trade and other receivables
Current liabilities
Borrowings
Trade and other payables
Derivative financial instruments
Current tax liabilities
Provisions for liabilities and charges
23
Net current assets
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liabilities
Retirement benefit obligations
Provisions for liabilities and charges
TOTAL EQUITY
Capital and reserves attributable to the owners of the parent
Ordinary shares
Share premium
Fair value and hedging reserves
Exchange reserves
Retained earnings
Shareholders’ equity
Non-controlling interests
The notes on pages 113 to 171 form an integral part of these consolidated financial statements.
The consolidated financial statements on pages 108 to 171 were approved by the Board on 28 February 2017 and signed on its behalf by:
Charles Rozes
Finance Director
110Jardine Lloyd Thompson Group plc Annual Report 2016
OVERVIEW
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year ended 31 December 2016
Notes
Balance at 1 January 2016
Total comprehensive income for the year
Dividends
Amounts in respect of share based payments:
10
Noncontrolling
interests
£’000
18,465
Total
equity
£’000
330,802
81,466
9,396
90,862
Other
reserves
£’000
73,967
-
-
81,466
-
59,215
(59,792)
(577)
4,528
3,951
-
59,215
-
21,674
(67,962)
80,889
(67,962)
13,924
(8,435)
94,813
(76,397)
- reversal of amortisation net of tax
-
-
24,952
24,952
-
24,952
- shares acquired
-
-
(17,809)
(17,809)
-
(17,809)
Acquisitions
29
-
-
-
-
(1,159)
(1,159)
Disposals
Change in non-controlling interests
30
-
-
(4,298)
(4,298)
(31)
-
(31)
(4,298)
Issue of share capital
24
Notes
Balance at 1 January 2015
10
37
-
37
-
37
133,219
183,919
328,146
22,764
350,910
Ordinary
shares
£’000
Other
reserves
£’000
Retained
earnings
£’000
Shareholders’
equity
£’000
Noncontrolling
interests
£’000
Total
equity
£’000
11,006
98,674
178,932
288,612
17,940
306,552
-
-
103,099
103,099
10,342
113,441
-
(24,840)
34,293
9,453
(1,375)
8,078
-
(24,840)
-
137,392
(64,484)
112,552
(64,484)
8,967
(8,923)
121,519
(73,407)
Amounts in respect of share based payments:
- reversal of amortisation net of tax
-
-
21,740
21,740
-
21,740
- shares acquired
-
-
(26,056)
(26,056)
-
(26,056)
Acquisitions
-
-
-
-
(787)
(787)
Disposals
Change in non-controlling interests
-
-
(20,162)
(20,162)
1,268
-
1,268
(20,162)
Issue of share capital
Balance at 31 December 2015
24
2
133
-
135
-
135
11,008
73,967
227,362
312,337
18,465
330,802
FINANCIAL STATEMENTS
Profit for the period
Other comprehensive (expense)/
income for the period
Total comprehensive (expense)/
income for the period
Dividends
11,008
CORPORATE GOVERNANCE
Balance at 31 December 2016
STRATEGIC REPORT
Profit for the period
Other comprehensive income/(expense) for
the year
Retained Shareholders’
earnings
equity
£’000
£’000
227,362
312,337
Ordinary
shares
£’000
11,008
The notes on pages 113 to 171 form an integral part of these consolidated interim financial statements.
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 111
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2016
Notes
2016
£'000
2015
£'000
28
166,712
215,380
(17,403)
(16,448)
Cash flows from operating activities
Cash generated from operations
Interest paid
6,639
5,116
Taxation paid
(46,241)
(37,003)
Increase in net insurance broking payables
137,510
883
247,217
167,928
Interest received
Dividend received from associates
Net cash generated from operating activities
935
800
248,152
168,728
Cash flows from investing activities
Purchase of property, plant and equipment
13
(9,556)
(15,183)
Purchase of other intangible assets
12
(30,215)
(45,940)
928
1,282
29
(13,381)
(20,824)
(3,013)
(411)
30
15,141
(122)
2
-
80,235
15
(107,636)
(5,081)
Proceeds from disposal of property, plant and equipment
Acquisition of businesses, net of cash acquired
Acquisition of associates
Proceeds from disposal of businesses, net of cash disposed
Proceeds from disposal of associates
Purchase of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial assets
Purchase of available-for-sale other investments
15
Proceeds from disposal of available-for-sale other investments
Net cash used in investing activities
20
5,039
-
(1,964)
303
243
(147,409)
(2,726)
Cash flows from financing activities
Dividends paid to owners of the parent
(66,388)
(63,094)
Purchase of shares
(17,809)
(26,056)
37
135
355
17,637
Repayments of borrowings
(5,056)
(50,118)
Dividends paid to non-controlling interests
(8,435)
(8,923)
(97,296)
(130,419)
Proceeds from issuance of ordinary shares
24
Proceeds from borrowings
Net cash used in financing activities
Net increase in cash and cash equivalents
3,447
35,583
Cash and cash equivalents at beginning of year
901,087
871,246
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at end of year
The notes on pages 113 to 171 form an integral part of these consolidated financial statements.
112Jardine Lloyd Thompson Group plc Annual Report 2016
18
35,411
(5,742)
939,945
901,087
SIGNIFICANT ACCOUNTING POLICIES
for the year ended 31 December 2016
Compliance with IFRS
Historical cost convention
The consolidated financial statements have been prepared on
a going concern basis, under the historical cost convention, except
for the following:
•
the available-for-sale financial assets, financial assets and liabilities
(including derivative financial instruments) are measured at fair value;
and
•
defined benefit pension plans where plan assets are measured
at fair value.
No new standards, amendments or interpretations, effective for the
first time for the financial year beginning on or after 1 January 2016
have had a material impact on the Group.
BASIS OF CONSOLIDATION
Subsidiaries
Subsidiaries are all entities (including structured entities) over which
the Group has control.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are de-consolidated from the date
that control ceases.
Acquisition related costs are expensed as incurred.
If a business combination is achieved in stages, the fair value of the
Group’s previously held equity interest in the acquiree is remeasured
to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised
at fair value at the acquisition date. Subsequent changes to the fair value
The difference between fair value of any consideration paid and the
relevant share acquired of the carrying value of net assets of the subsidiary
is recorded in equity. Gains or losses on disposals to non-controlling
interests are also recorded in equity.
Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity
is remeasured to its fair value at the date when control is lost, with the
change in carrying amount recognised in profit or loss.
The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, joint
venture or financial asset. In addition, any amounts previously recognised
in other comprehensive income in respect of that entity are accounted
for as if the Group had directly disposed of the related assets or liabilities.
This may mean that amounts previously recognised in other
comprehensive income are reclassified to profit or loss.
Associates
Associates are entities over which the Group has significant influence
but not control, generally accompanying a shareholding of between 20%
and 50% of the voting rights. Investments in associates are accounted
for using the equity method of accounting.
Under the equity method, the investment is initially recognised at cost,
and the carrying amount is increased or decreased to recognise
the investor’s share of the profit or loss of the investee after the date
of acquisition.
The Group’s investment in associates includes goodwill identified
on acquisition.
If the ownership interest in an associate is reduced but significant
influence is retained, only a proportionate share of the amounts previously
recognised in other comprehensive income is reclassified to profit or
loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the
income statement, and its share of post-acquisition movements in other
comprehensive income is recognised in other comprehensive income with
a corresponding adjustment to the carrying amount of the investment.
Jardine Lloyd Thompson Group plc Annual Report 2016 113
SHAREHOLDER INFORMATION
The Group uses the acquisition method of accounting to account for
business combinations. The consideration transferred for the acquisition
of a subsidiary is the fair values of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination
are measured initially at their fair values at the acquisition date. On an
acquisition-by-acquisition basis, the Group recognises any non-controlling
interest in the acquiree either at fair value or at the non-controlling
interest’s proportionate share of the acquiree’s net assets.
Transactions with non-controlling interests that do not result in loss
of control are accounted for as equity transactions that is, as transactions
with the owners in their capacity as owners.
FINANCIAL STATEMENTS
The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity.
Transactions with non-controlling interests
CORPORATE GOVERNANCE
STANDARDS, AMENDMENTS AND
INTERPRETATIONS EFFECTIVE IN 2016
The excess of the consideration transferred, the amount of any noncontrolling interest in the acquiree and the acquisition-date fair value
of any previous equity interest in the acquiree over the fair value of
the identifiable net assets acquired is recorded as goodwill. If the total
of consideration transferred, non-controlling interest recognised and
previously held interest measured is less than the fair value of the net
assets of the subsidiary acquired in the case of a bargain purchase, the
difference is recognised directly in the income statement. Inter-company
transactions, balances, income and expenses on transactions between
Group companies are eliminated. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies
adopted by the Group.
STRATEGIC REPORT
The consolidated financial statements of the Group have been prepared
in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU) and
interpretations issued by the IFRS Interpretations Committee (IFRS IC) and
the Companies Act 2006 applicable to Companies reporting under IFRSs.
The financial statements comply with IFRS as issued by the International
Accounting Standards Board (IASB).
of the contingent consideration that is deemed to be an asset or liability
is recognised in accordance with IAS 39 either in profit or loss or as a
charge to other comprehensive income. Contingent consideration that
is classified as equity is not remeasured, and its subsequent settlement
is accounted for within equity.
OVERVIEW
BASIS OF PREPARATION
FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
When the Group’s share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the
Group does not recognise further losses, unless it has incurred legal or
constructive obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates
are eliminated to the extent of the Group’s interest in the associates.
Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Accounting policies
of the associates have been modified where necessary to ensure
consistency with the policies adopted by the Group.
SEGMENT REPORTING
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker. The chief
operating decision-maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified
as the Chief Executive Officer.
FOREIGN CURRENCIES
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities
are measured using the currency of the primary economic environment
in which the entity operates (‘the functional currency’).
The consolidated financial statements are presented in sterling,
which is the Group’s functional and presentational currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange rates
of monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement, except when deferred in equity
as qualifying cash flow hedges and qualifying net investment hedges.
Translation differences on non-monetary items, such as equities held
at fair value through profit or loss, are reported as part of the fair value gain
or loss. Translation differences on non-monetary items, such as equities
classified as available-for-sale financial assets, are included in other
comprehensive income.
GOODWILL ARISING ON CONSOLIDATION
Goodwill represents the excess of the cost of an acquisition over the
fair value of the Group’s share of the identifiable net assets of the acquired
subsidiary/associate at the date of acquisition. Goodwill on acquisitions
of subsidiaries is shown separately on the Balance Sheet. Goodwill on
acquisitions of associates is included in investments in associates.
Goodwill is not amortised but it is tested for impairment annually or more
frequently if events or changes in circumstances indicate that it might be
impaired, and is carried at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount
of goodwill relating to the entity sold. Goodwill is allocated to cash
generating units, or groups of cash generating units, for the purpose of
impairment testing. Cash generating units represent the lowest level of
geographical and business segment combinations that the Group uses
for internal reporting purposes.
OTHER INTANGIBLE ASSETS
Computer software
Acquired computer software licenses are capitalised on the basis of
the costs incurred to acquire them and bring them to use. These costs
are amortised over their estimated useful lives. Costs associated with
maintaining computer software programmes are recognised as an
expense as incurred.
Development costs that are directly associated with the production of
identifiable and unique software products controlled by the Group, and
that will generate economic benefits exceeding costs beyond one year,
are recognised as intangible assets. Direct costs include the software
development employee costs and an appropriate portion of relevant
overheads. Capitalised development costs are amortised over their
estimated useful lives from the point when the asset is ready to use.
The rates of amortisation are between 14% and 100% per annum.
Capitalised employment contract payments
The Group makes payments to certain key employees in recognition of
them signing a long-term employment contact, usually three to five years.
These payments are capitalised as intangible assets since legal rights
protect the expected benefits that the Group will derive from the contracts.
The asset recognised is then amortised over the duration of the underlying
contract within salaries and associated expenses.
Group companies
Other
The results and financial position of all the Group entities (none of which
has the currency of a hyperinflationary economy) that have a functional
currency different from the presentational currency are translated into
the presentational currency as follows:
For acquisitions completed after 1 January 2004, the business acquired
is reviewed to identify assets that meet the definition of an intangible
asset per IAS 38. Examples of such assets include customer contracts,
expectations of business renewal and contract related customer
relationships. These assets are valued on the basis of the present value
of future cash flows and are amortised to the income statement over
the life of the contract or their estimated economic life.
1. assets and liabilities for each balance sheet presented are translated
at the closing rate at the date of that balance sheet;
2. income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated
at the rate on the dates of the transactions); and
3. all resulting exchange differences are recognised in other
comprehensive income. On consolidation exchange differences
arising from the translation of net investment in foreign entities, and
of borrowings and other currency instruments designated as hedges
of such investments, are taken to other comprehensive income. When
a foreign operation is sold, such exchange differences are recognised
in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and translated
at the closing rate. Exchange differences arising are recognised in other
comprehensive income.
114Jardine Lloyd Thompson Group plc Annual Report 2016
The current maximum estimated economic life is fifteen years.
IMPAIRMENT OF ASSETS
Goodwill and other intangible assets that have an indefinite useful life are
not subject to amortisation and are tested annually for impairment. Assets
that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs
to sell and value-in-use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units).
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Offsetting financial instruments
Assets are stated at their net book amount (historical cost less
accumulated depreciation). Cost includes the original purchase price
of the asset and the costs attributable to bringing the asset to its working
condition for its intended use. Depreciation is calculated to write off the
cost of such assets over their estimated useful lives.
Financial assets and liabilities are offset and the net amount reported
in the balance sheet when there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis
or realise the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events and must be
enforceable in the normal course of business and in the event of default,
insolvency or bankruptcy of the company or the counterparty.
The principal rates of depreciation are as follows:
•
Freehold land and buildings – between 0% and 2%
per annum.
•
Leasehold improvements – between 10% and 20%
per annum or over the life of the lease.
•
Furniture and office equipment – between 10% and 20% per annum.
•
Computer hardware – between 20% and 100% per annum.
•
Motor vehicles – between 25% and 33.33% per annum.
FINANCIAL ASSETS
The Group classifies its financial assets as loans and receivables and
available-for-sale assets. The classification depends upon the purpose
for which the financial assets were acquired. Management determines
the classification of its financial assets at initial recognition.
Loans and receivables
The Group’s loans and receivables comprise trade and other receivables
and cash and cash equivalents in the balance sheet. Loans and
receivables are carried at amortised cost.
Available-for-sale financial assets
Available-for-sale financial assets are categorised into one of two
categories:
1.
Other investments include securities and other investments held
for strategic purposes and some debt instruments. These
investments are held at fair value unless a fair value cannot be
accurately determined in which case they are held at cost less
any provision for impairment.
Interest on deposits and interest-bearing investments is credited
as it is earned.
Available-for-sale assets are subsequently carried at fair value.
The fair values of quoted investments are determined based upon
current bid price.
When securities classified as available-for-sale are sold or impaired,
the accumulated fair value adjustments recognised in equity are included
in the income statement.
Interest on available-for-sale securities calculated using the effective
interest method is recognised in the income statement as part of finance
income. Dividends on available-for-sale equity instruments are recognised
in the income statement as part of finance income when the Group’s right
to receive payments is established.
These advances are reflected in the consolidated balance sheet
as part of trade receivables.
TRADE RECEIVABLES
Trade receivables are recognised initially at fair value and subsequently
at amortised cost, less provision for impairment.
A provision for impairment of trade receivables is established when there
is objective evidence that the Group will not be able to collect all amounts
due according to the original terms of the receivables. Significant financial
difficulties of the debtor, dispute, default or delinquency in payments are
considered indicators that the receivable is impaired.
The carrying amount of the asset is reduced through the use of an
allowance account, and the amount of the loss is recognised in the
income statement.
When a trade receivable is uncollectible, it is written off against the
allowance account for trade receivables.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash in hand, deposits held at
call with banks and other short-term highly liquid investments with original
maturities of three months or less. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
Whilst held in the Group’s non-statutory trust accounts under appropriate
client money regulation, fiduciary funds held are controlled by the Group
and economic benefits are derived from them. As such these funds are
recognised as an asset on the Group’s balance sheet.
TRADE PAYABLES
Trade payables are initially recognised at fair value and subsequently
measured at amortised cost except for deferred and contingent
consideration which is always measured at fair value based on the
underlying criteria of each transaction.
BORROWINGS
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date. Borrowings are recognised initially at fair
value, net of transaction costs incurred. They are subsequently stated
at amortised cost using the effective interest rate method.
Jardine Lloyd Thompson Group plc Annual Report 2016 115
SHAREHOLDER INFORMATION
Regular purchases and sales of financial assets are recognised on the
trade date - the date on which the Group commits to purchase or sell
the asset. Investments are initially recognised at fair value plus transaction
costs. Financial assets are derecognised when the rights to receive
cash flows have expired or have been transferred and the Group has
transferred substantially all risks and rewards of ownership.
In certain circumstances, the Group advances premiums, refunds
or claims to insurance underwriters or clients prior to collection.
FINANCIAL STATEMENTS
2.
Investments and deposits consist mainly of fixed term deposits,
bonds and certificates of deposit. These investments are held at
fair value and are classified between current and non-current assets
according to the maturity date.
Insurance brokers act as agents in placing the insurable risks of their
clients with insurers and, as such, are not liable as principals for amounts
arising from such transactions. In recognition of this relationship, debtors
from insurance broking transactions are not included as an asset of the
Group. Other than the receivable for fees and commissions earned on
a transaction, no recognition of the insurance transaction occurs until the
Group receives cash in respect of premiums or claims, at which time a
corresponding liability is established in favour of the insurer or the client.
CORPORATE GOVERNANCE
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are
included in current assets, except for maturities greater than 12 months
after the balance sheet date.
INSURANCE BROKING RECEIVABLES
AND PAYABLES
STRATEGIC REPORT
The depreciation rates are reviewed on an annual basis.
OVERVIEW
PROPERTY, PLANT AND EQUIPMENT
FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
DEFERRED INCOME TAX
Share-based compensation
The charge for taxation is based on the result for the year at current
rates of tax and takes into account deferred tax.
The Group operates a number of equity-settled, share-based
compensation plans. The fair value of the employee services received
in exchange for the grant of the options is recognised as an expense.
Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial
statements. However, if the deferred income tax arises from initial
recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting
nor taxable profit or loss, it is not recognised. Deferred income tax
is determined using tax rates (and laws) that have been enacted or
substantively enacted by the balance sheet date and are expected
to apply when the related deferred income tax asset is realised or
the deferred income tax liability is settled.
Deferred income tax is charged or credited to equity in respect of
any items, which is itself either charged or credited directly to equity.
Any subsequent recognition of the deferred gain or loss in the
consolidated income statement is accompanied by the corresponding
deferred income tax.
Deferred income tax assets are recognised to the extent that it is probable
that future taxable profit will be available against which the temporary
differences can be utilised.
Deferred income tax is provided on temporary differences arising on
investments in subsidiaries and associates, except where the Group
controls the timing of the reversal of the temporary difference and it
is probable that the temporary difference will not reverse in the
foreseeable future.
EMPLOYEE BENEFITS
Pension obligations
The Group operates a number of defined benefit pension schemes,
and a number of employees are members of defined contribution
pension schemes.
Full actuarial valuations of the Group’s defined benefit schemes
a re carried out at least every three years.
A qualified actuary updates these valuations to 31 December each year.
For the purposes of these annual updates, scheme assets are included
at market value and scheme liabilities are measured on an actuarial basis
using the projected unit credit method; these liabilities are discounted at
the current rate of return of a high quality corporate bond of equivalent
currency and term. The defined benefit surplus or deficit is calculated
as the present value of defined benefit obligations less the fair value of
the plan assets and is included on the Group’s balance sheet. Surpluses
are included only to the extent that they are recoverable through reduced
contributions in the future or through refunds from the schemes. The net
interest on the defined benefit surplus/deficit is included within finance
costs. Actuarial gains and losses, including differences between the
expected and actual return on scheme assets, are recognised through
the consolidated statement of comprehensive income.
A defined contribution plan is a pension plan under which the Group
pays fixed contributions into a separate entity. The Group has no legal
or constructive obligations to pay further contributions if the fund does
not hold sufficient assets to pay all employees the benefits relating to
employee service in the current and prior periods.
The costs of the Group’s defined contribution pension schemes are
charged to the income statement in the period in which they fall due.
116Jardine Lloyd Thompson Group plc Annual Report 2016
The total amount to be expensed over the vesting period is determined
by reference to the fair value of the options granted, excluding the
impact of any non-market vesting conditions (for example, profitability
and sales growth targets). Non-market vesting conditions are included in
assumptions about the number of options that are expected to become
exercisable. At each balance sheet date, the entity revises its estimates
of the number of options that are expected to become exercisable. It
recognises the impact of the revision of original estimates, if any, in the
income statement, and a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs
are credited to share capital (at nominal value) and share premium (excess
over nominal value) when the options are exercised.
PROVISIONS FOR LIABILITIES AND CHARGES
A provision is recognised where there is a present obligation, whether
legal or constructive, as a result of a past event for which it is probable
that a transfer of economic benefits will be required to settle the obligation
and a reasonable estimate can be made of the amount of the obligation.
Where appropriate the Group discounts provisions to their present value.
The unwinding of the provision discounting is included as an ‘interest
expense’ within finance costs in the income statement.
REVENUE
Fees and commissions
Fees and commissions are derived from three principal sources:
Insurance broking
Income relating to insurance broking is accounted for at the later of policy
inception date or when the policy placement has been completed and
confirmed.
Where there is an expectation of future servicing requirements an element
of income relating to the policy is deferred to cover the associated
contractual obligation.
Employee benefits
Income relating to employee benefit services includes fees and
commissions. Fees are charged on a time-cost or fixed-fee basis and
are recognised in line with the performance of the underlying service.
Commission is recognised upon confirmation of the underlying policy
or product.
Other services
Fees and other income receivable are recognised in the period to
which they relate and when they can be measured with reasonable
certainty.
Investment income
Investment income arises from the holding of cash and investments
relating to fiduciary funds and is recognised on an accruals basis.
EXCEPTIONAL ITEMS
Exceptional items are separately identified to provide greater
understanding of the Group’s underlying performance. Items classified
as exceptional items may include, but are not limited to: gains or
losses arising from the sale of businesses and investments; closure
costs for businesses; restructuring costs; professional fees in respect
of acquisitions; post acquisition integration costs; post acquisition and
disposal adjustments to balance sheet items; and other credits and
charges of a non-recurring nature that require inclusion in order to provide
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
additional insight into the underlying business performance. Items of a
non-recurring and material nature are charged or credited to operating
profit and are classified to the appropriate income statement headings.
LEASES
Assets held under leasing agreements, which transfer substantially all
the risks and rewards of ownership to the Group are included in property,
plant and equipment. The capital elements of the related lease obligations
are included in liabilities. The interest elements of the lease obligations
are charged to the income statement over the period of the lease term.
Leases in which a significant portion of the risks and rewards of ownership
are retained by the lessor are classified as operating leases. Payments
made under operating leases (net of any incentives received from the
lessor) are charged to the income statement on a straight-line basis
over the period of the lease.
DERIVATIVE FINANCIAL INSTRUMENTS
The method of recognising the resulting gain or loss is dependent
on the nature of the item being hedged.
The Group designates derivatives as either a hedge of the fair value
of a recognised asset or liability (fair value hedge), a hedge of a forecasted
transaction or of the foreign currency risk on a firm commitment (cash
flow hedge), or a hedge of a net investment in a foreign entity (net
investment hedges).
Changes in the fair value of derivatives that are designated and qualify
as cash flow hedges and that are highly effective, are recognised in
equity. Where the forecasted transaction or firm commitment results in
the recognition of a non-financial asset or of a non-financial liability, the
gains and losses previously deferred in equity are transferred from equity
and included in the initial measurement of the cost of the asset or liability.
Otherwise, amounts deferred in equity are transferred to the consolidated
income statement and classified as income or expense in the same
periods during which the hedged firm commitment or forecasted
transaction affects the income statement.
Estimates and judgments used in preparing the financial statements
are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be
reasonable. The resulting accounting estimates will, by definition, seldom
equal the related actual results.
The estimates and assumptions that have a significant effect on the
carrying amounts of assets and liabilities are discussed below.
a) Fair value estimation
The fair value of financial instruments traded in active markets (such as
available-for-sale) is based upon quoted market prices at the balance
sheet date. The quoted market price used for financial assets held by
the Group is the current bid price.
The carrying value less impairment provision of trade receivables and
payables are assumed to approximate their fair values. The fair values
of financial liabilities is estimated by discounting the future contractual
cash flows at the current market interest rate that is available to the
Group for similar financial instruments.
The fair value of acquired intangible assets is estimated based upon
the present value of modelled related expected future cash flows.
Judgement may be applied in the determination of the growth rates,
discount rates and the expected cash flows.
b) Impairment of assets
The Group tests annually whether goodwill and other assets that have
indefinite useful lives suffered any impairment. Other assets are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset exceeds its recoverable amount.
The recoverable amount of an asset or a cash generating unit is
determined based on value-in-use calculations prepared on the basis
of management’s assumptions and estimates. This determination requires
significant judgment. In making this judgment, the Group evaluates,
among other factors, the duration and extent to which the fair value of
an investment is less than its cost; and the financial health of and nearterm business outlook for the investment, including factors such as
industry and sector performance, changes in regional economies and
operational and financing cash flow.
c) Income taxes
The Group is subject to income taxes in numerous jurisdictions.
Significant judgement is required in determining the worldwide provision
for income taxes. There are many transactions and calculations for which
the ultimate tax determination is uncertain during the ordinary course of
business. Where the final tax outcome of these matters is different from
the amounts that were initially recorded, such differences will impact
the income tax and deferred tax provisions in the period in which such
determination is made.
Jardine Lloyd Thompson Group plc Annual Report 2016 117
SHAREHOLDER INFORMATION
The gain or loss relating to the ineffective portion is recognised
immediately in the income statement. When a hedging instrument
expires or is sold, any cumulative gain or loss existing in equity at that
time remains in the hedging reserves and is recognised in the income
statement when a hedge no longer meets the criteria for hedge
accounting or when the committed or forecasted transaction ultimately
occurs. When a committed or forecasted transaction is no longer
expected to occur, the cumulative gain or loss that was reported in
equity is immediately recognised in the income statement.
CRITICAL ACCOUNTING ESTIMATES
AND JUDGMENTS
FINANCIAL STATEMENTS
Changes in the fair value of derivatives that are designated and qualify
as fair value hedges and that are highly effective, are recorded in the
income statement, along with any changes in the fair value of the hedged
asset or liability that is attributable to the hedged risk.
The Group’s exposure to financial risks and its financial and capital
management policies are detailed in the Finance Director’s Review
and the Risk Management Report on pages 39 to 45.
CORPORATE GOVERNANCE
The Group only enters into derivative financial instruments in order
to hedge underlying financial and commercial exposures. Derivative
financial instruments are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently re-measured
at their fair value.
FINANCIAL AND CAPITAL RISK MANAGEMENT
STRATEGIC REPORT
The property, plant and equipment acquired under finance leases is
depreciated over the shorter of the useful life of the asset and the
lease term.
Dividends proposed or declared after the balance sheet date are not
recognised as a liability at the balance sheet date. Final dividends are
recognised as a charge to equity once approved and interim dividends
are charged once paid.
OVERVIEW
To assist in the analysis and understanding of the underlying trading
position of the Group these items are summarised within the operating
profit, note 3 on page 123, under the heading of “Exceptional items”.
DIVIDEND DISTRIBUTION
FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
d) Pension obligations
The present value of the pension obligations depends on a number
of factors that are determined on an actuarial basis using a number
of assumptions.
The assumption used in determining the net cost or income for pension
obligations is a discount rate based upon high quality corporate bonds.
Any changes in the assumptions may impact the carrying amount of
pension obligations, the charge in the income statement, or statement
of comprehensive income.
The Group determines the appropriate discount rate at the end of each
year. This is the interest rate that should be used to determine the present
value of estimated future cash outflows expected to be required to settle
the pension obligations.
In determining the appropriate discount rate, the Group considers the
interest rates of high-quality corporate bonds that are denominated in
the currency in which the benefits will be paid, and that have terms to
maturity approximating the terms of the related pension liability. Other key
assumptions for pension obligations are based in part on current market
conditions. As well as the discount rate, the inflation rates and
life expectancy are also key assumptions.
To set the price inflation assumptions the Group considers market
expectations of inflation at the appropriate durations. Adjustments are
made to these rates where necessary to reflect an inflation risk premium.
In determining the life expectancy assumptions the Group considers the
mortality assumptions used by the Trustees of the pension schemes in
their latest actuarial valuations and also mortality guidance laid out by
legislation. This enables the Group to determine a best estimate of life
expectancy that is appropriate for accounting purposes.
e) Errors and omissions liability
During the ordinary course of business the Group can be subject to claims
for errors and omissions made in connection with its broking activities.
A balance sheet provision is established in respect of such claims when
it is probable that the liability has been incurred and the amount of the
liability can be reasonably estimated.
The Group analyses its litigation exposures based on available information,
including external legal consultation where appropriate, to assess its
potential liability.
The outcome of the currently pending and future proceedings cannot be
predicted with certainty. Thus, an adverse decision in a current or future
lawsuit could result in additional costs that are not covered, either wholly
or partially, under insurance policies and are in excess of the presently
established provisions. It is possible therefore that the financial position,
results of operations or cash flows of the Group could be materially
affected by the unfavourable outcome of litigation.
FUTURE DEVELOPMENTS
The following standards, other than IFRS 16, have been published and
are not mandatory for 31 December 2016 reporting periods and the
Group has not adopted them early.
Accounting standards and interpretation applicable on or after
1 January 2017
IFRS 9 -Financial Instruments
IFRS 9, (‘Financial instruments’) addresses the classification,
measurement and recognition of financial assets and financial liabilities.
The complete version of IFRS 9 was issued in July 2015. It replaces the
guidance in IAS 39 that relates to the classification and measurement of
financial instruments. IFRS 9 retains but simplifies the mixed measurement
model and establishes three primary measurement categories for financial
assets: amortised cost, fair value through other comprehensive income
(OCI) and fair value through profit or loss.
118Jardine Lloyd Thompson Group plc Annual Report 2016
The basis of classification depends on the entity’s business model
and the contractual cash flow characteristics of the financial asset.
Investments in equity instruments are required to be measured at fair
value through profit or loss with the irrevocable option at inception to
present changes in fair value in OCI not recycling. There is now a new
expected credit losses model that replaces the incurred loss impairment
model used in IAS 39. For financial liabilities there were no changes to
classification and measurement except for the recognition of changes in
own credit risk in other comprehensive income, for liabilities designated
at fair value through profit or loss. IFRS 9 relaxes the requirements for
hedge effectiveness by replacing the bright line hedge effectiveness
tests. It requires an economic relationship between the hedged item
and hedging instrument and for the ‘hedged ratio’ to be the same as
the one management actually use for risk management purposes.
Contemporaneous documentation is still required but is different to that
currently prepared under IAS 39. The standard is effective for accounting
periods beginning on or after 1 January 2018. Early adoption is permitted.
The changes to the hedge accounting requirements are not expected
to have a material impact on the Group. The classification of Financial
Instruments is not expected to have a material impact on the Group,
with the exception of any items that are classified as fair value through
OCI, where there will be no recycling through the Income statement.
The change to an expected loss model will mainly focus of the Group’s
impairment of trade receivables. The impact of this is being assessed.
IFRS 15 - Revenue from contracts with customers
IFRS 15 (‘revenue from contracts with customers’) is effective for annual
periods beginning on or after 1 January 2018 and addresses revenue
recognition for customer contracts, with particular focus on aligning
revenue recognition with the separate and distinct performance obligation
to the customer. The standard replaces IAS 18 (‘revenue’) and IAS 11
(‘construction contracts’) and related interpretations. The Group’s review
of the standard is on-going, but will implement in January 2018,
reporting revenues on this basis for the half year period ending 30 June
2018 and full year period ending 31 December 2018. Restatements of
2017 revenues for these corresponding periods will be completed at
those intervals.
Under existing accounting policies, the primary trigger for revenue
recognition is the policy inception date, and this is anticipated to remain
the same under the new standard. The Group defers some elements
of revenue currently, primarily to reflect anticipated claims handling
activity but is considering non-claims servicing requirements under
the new standard. At this time, the Group is not able to conclude or
quantify the impact of the new standard on revenues, but it is likely that
further elements of revenue will be deferred for both insurance broking
arrangements and long-term administrative contracts. The standard also
requires costs to be aligned with revenue recognition wherever possible
and this is also being reviewed.
IFRS 16 – Leases
IFRS 16, (‘Leases’) requires lessees to recognise a lease liability reflecting
future lease payments and a ‘right-of-use asset’ for virtually all lease
contracts. This differs from IAS 17 ‘Leases’ where a distinction between
a finance lease (on balance sheet) and an operating lease (off balance
sheet) was required.
The standard is effective for annual periods beginning on or after
1 January 2019 and earlier application is permitted subject to EU
endorsement. The Group is yet to assess IFRS 16’s full impact.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
OVERVIEW
1. ALTERNATIVE INCOME STATEMENT
The format of the consolidated income statement on page 108 conforms to the requirements of IFRS. The alternative income statement set out
below, which is provided by way of additional information, has been prepared on a basis that conforms more closely to the approach adopted
by the Group in assessing its performance. The statement provides a reconciliation between the underlying results used by the Group to assess
performance and the IFRS income statement.
(9,699)
(2,542)
(25,345)
(481)
(38,067)
378
(37,689)
(794,363)
(66,849)
(209,518)
(34,951)
155,605
(22,078)
1,353
134,880
Year ended 31 December 2015
Underlying
Exceptional
profit
items
Total
£’000
£’000
£’000
1,151,392
1,151,392
3,689
3,689
(704,435)
(22,899)
(727,334)
(58,852)
(2,315)
(61,167)
(173,794)
10,109
(163,685)
(30,538)
(30,538)
187,462
(15,105)
172,357
(22,861)
(22,861)
5,531
5,531
170,132
(15,105)
155,027
In 2015 total other operating costs includes the gain on the disposal of the Group’s interest in Milestone, the holding company of Siaci Saint Honoré,
and elements of the net litigation costs.
FINANCIAL STATEMENTS
Fees and commissions
Investment income
Salaries and associated expenses
Premises
Other operating costs
Depreciation, amortisation and impairment charges
Trading profit
Finance costs - net
Share of results of associates
Profit before taxation
(784,664)
(64,307)
(184,173)
(34,470)
193,672
(22,078)
975
172,569
CORPORATE GOVERNANCE
Salaries and associated expenses
Premises
Other operating costs
Depreciation, amortisation and impairment charges
Trading profit
Finance costs - net
Share of results of associates
Profit before taxation
STRATEGIC REPORT
Fees and commissions
Investment income
Year ended 31 December 2016
Underlying
Exceptional
profit
items
Total
£’000
£’000
£’000
1,256,556
1,256,556
4,730
4,730
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 119
FINANCIAL STATEMENTS
2. SEGMENT INFORMATION
Management has determined its operating segments based on the analysis used to make strategic decisions.
BUSINESS SEGMENT ANALYSIS
The Group is organised on a worldwide basis into three main segments: Risk & Insurance, Employee Benefits and Head Office & Other operations.
These segments are consistent with the internal reporting structure of the Group.
The Risk & Insurance segment comprises JLT’s global specialist, wholesale, reinsurance broking, personal lines and SME activities. The Employee
Benefits segment consists of pension administration, outsourcing and employee benefits consultancy, healthcare and wealth management activities.
Certain Risk & Insurance and Employee Benefits operating segments have been disclosed within the reporting segments given their individual size.
The Head Office & Other segment consists mainly of holding companies, central administration functions, the Group’s captive insurance companies
and the Group’s investments in associates.
JLT USA now qualifies as a reportable operating segment and as a result comparatives have been restated.
SEGMENT RESULTS
Management assesses the performance of the operating segments based upon a measure of underlying trading profit. Segment results include the
net income or expense derived from the trading activities of the segment together with the investment income earned on fiduciary funds. Interest
income on the Group’s own funds and finance costs are excluded since the trading activities of the Group’s primary segments are not of a financial
nature. Income tax expense and the charge in respect of non-controlling interests are excluded from the segmental allocation.
SEGMENT ASSETS AND LIABILITIES
Assets and liabilities are not allocated to individual segments and are therefore all reported within Head Office & Other.
INVESTMENTS IN ASSOCIATES
The Group owns the following stakes in its principal associates: 20% of GrECo, which operates mainly in Austria and Eastern Europe; 25% of MAG
JLT, which operates mainly in Italy and 25% of March-JLT, which operates mainly in Spain. The investment and the Group’s share of the net results of
these associates are included in the Head Office & Other segment, together with the investment and results of the Group’s other associates, Sterling
Re Intermediaro de Reaseguro SA de CV, JLT Insurance Management Malta, JLT Energy (France) SAS and JLT Independent Insurance Brokers
Private Ltd.
During the year, the Group increased its stake in JLT Independent Insurance Brokers Private Ltd. from 26% to 49% for a consideration of £3,013,000.
On 6 May 2015, the Group disposed of its 26% stake in Milestone, the holding company of Siaci Saint Honoré, generating cash proceeds of
£80,235,000 and net exceptional gain of £18,595,000.
OTHER SEGMENT ITEMS
Capital expenditure comprises additions to property, plant and equipment and other intangible assets.
120Jardine Lloyd Thompson Group plc Annual Report 2016
2. SEGMENT INFORMATION CONTINUED
Fees and commissions
Investment income
Total revenue
Underlying trading profit
325,675 195,065
Employee Benefits
Other
JLT
Risk &
USA Insurance
£’000
£’000
115,950
90,133
41,313
541
1,702
149
-
327,451 195,606
73,016 40,521
117,652
34,137
90,282
16,825
41,313
(26,981)
1,776
UK &
Ireland
£’000
Other
Employee
Asia Benefits
£’000
£’000
Head
Office
& Other
£’000
Total
£’000
87,260
53,041
-
1,256,556
2
17
55
-
4,730
188,591 160,018
29,060 12,315
87,277
27,130
53,096
10,029
(2,390) 23,290
188,103 160,016
488
- 1,261,286
(22,380)
193,672
40,589
34,135
19,404
(26,981)
30,742
9,851
(25,207)
155,605
-
-
-
-
-
-
-
-
-
(22,078)
(22,078)
Share of results of associates
-
-
-
-
-
-
-
-
-
1,353
1,353
52,172
40,589
34,135
19,404
(26,981)
30,742
(2,390) 23,290
9,851
(45,932)
134,880
Profit before taxation
Income tax expense
-
-
-
-
-
-
-
-
-
(44,018)
(44,018)
Non-controlling interests
-
-
-
-
-
-
-
-
-
(9,396)
(9,396)
52,172
40,589
34,135
19,404
(26,981)
30,742
(2,390) 23,290
9,851
Net profit attributable to
the owners of the parent
Segment assets
Investments in associates
(99,346)
81,466
2,574,199 2,574,199
50,928
50,928
2,625,127
Segment liabilities
(2,274,217) (2,274,217)
2,625,127
Total liabilities
(2,274,217) (2,274,217)
Other segment items:
2,997
7,406
2,821
1,401
3,204
4,759
11,338
314
391
5,140
39,771
(9,434)
(3,141)
(2,274)
(2,932)
(3,434)
(4,424)
(7,583)
(1,262)
(1,109)
(14,310)
(49,903)
Other
Employee Head Office
Benefits
& Other
£’000
£’000
Total
£’000
Year ended
31 December 2015
JLT
Specialty
£’000
Fees and commissions
310,366 173,274
Investment income
Total revenue
JLT
Re
£’000
Risk & Insurance
JLT
Australia
& New
JLT
Zealand
Asia
£’000
£’000
Employee Benefits
JLT
USA
£’000
107,504
76,406
23,285
286
2,032
177
-
311,171 173,560
109,536
76,583
23,285
805
Other
Risk &
Insurance
£’000
UK &
Ireland
£’000
Asia
£’000
172,138 167,376
78,903
42,140
-
1
13
28
-
3,689
172,485 167,377
78,916
42,168
-
1,155,081
347
1,151,392
Underlying trading profit
68,294
32,416
32,745
12,657
(20,544)
35,286
12,829
24,433
6,295
(16,949)
187,462
Operating profit
60,071
36,739
32,745
12,814
(20,984)
33,303
8,041
24,431
4,481
(19,284)
172,357
Finance costs - net
-
-
-
-
-
-
-
-
-
(22,861)
(22,861)
Share of results of associates
-
-
-
-
-
-
-
-
-
5,531
5,531
60,071
36,739
32,745
12,814
(20,984)
33,303
8,041
24,431
4,481
(36,614)
155,027
Profit before taxation
-
-
-
-
-
-
-
-
-
(41,586)
(41,586)
-
-
-
-
-
-
-
-
-
(10,342)
(10,342)
60,071
36,739
32,745
12,814
(20,984)
33,303
8,041
24,431
4,481
Net profit attributable to the
owners of the parent
(88,542)
103,099
2,195,440
41,180
2,195,440
41,180
Total assets
2,236,620
2,236,620
Segment liabilities
(1,905,818) (1,905,818)
Total liabilities
(1,905,818) (1,905,818)
Segment assets
Investments in associates
Other segment items:
Capital expenditure
10,578
8,877
1,737
2,752
7,531
4,374
10,851
1,510
473
12,440
61,123
Depreciation, amortisation
and impairment charges
(8,232)
(1,949)
(2,614)
(2,638)
(2,577)
(4,114)
(6,561)
(880)
(775)
(12,570)
(42,910)
Jardine Lloyd Thompson Group plc Annual Report 2016 121
SHAREHOLDER INFORMATION
Income tax expense
Non-controlling interests
FINANCIAL STATEMENTS
Capital expenditure
Depreciation, amortisation
and impairment charges
CORPORATE GOVERNANCE
Total assets
STRATEGIC REPORT
52,172
Finance costs - net
Operating profit
OVERVIEW
Year ended
31 December 2016
JLT
Specialty
£’000
Risk & Insurance
JLT
Australia
JLT
& New
JLT
Re Zealand
Asia
£’000
£’000
£’000
FINANCIAL STATEMENTS
2. SEGMENT INFORMATION CONTINUED
GEOGRAPHICAL SEGMENT ANALYSIS
Although the Group’s two business segments are managed on a worldwide basis, they operate in five principal geographical areas of the world.
The United Kingdom is the home country of the parent company Jardine Lloyd Thompson Group plc.
The Risk & Insurance segment operates in the United Kingdom, the Group’s home country. In the Americas, the Risk & Insurance segment operates
in Argentina, Bermuda, the Caribbean, Brazil, Canada, Colombia, Peru, Chile, and the United States. The Australian segment includes operations in
Australia and New Zealand. In Europe, it operates in the Republic of Ireland, Sweden, Finland, Norway, Denmark, Germany, Guernsey, France, The
Netherlands, Spain, Switzerland and Russia. The Asian segment includes operations in Singapore, Hong Kong, Taiwan, Indonesia, Japan, Thailand,
South Korea, Philippines, Malaysia, China, Vietnam, Dubai, Qatar, Bahrain and Turkey. In Rest of the World, it operates in South Africa.
The Employee Benefits segment operates in the United Kingdom. In the Americas, the Employee Benefits segment operates in Brazil, Canada,
Colombia and Peru. The Australian segment includes operations in Australia and New Zealand. In Europe, it operates in the Republic of Ireland
and Switzerland. The Asian segment includes operations in Singapore, Hong Kong, Taiwan, Indonesia, Japan, Thailand, South Korea, Philippines,
Malaysia, China and Vietnam. In Rest of the World, it operates in South Africa.
The Head Office & Other activities segment is mainly based in the United Kingdom with minor operations in the Americas, Europe and Asia.
The Group’s captive operations are included in the United Kingdom segment.
Fees and commissions are disclosed by (1) the country in which the office is located and (2) the country in which the customer is located.
Segment non-current assets, segment assets and segment liabilities are disclosed based on the country in which they are located or occur. Interest
bearing assets (eg cash & cash equivalents and investments & deposits) relating to the Group’s own funds and deferred tax assets are excluded from
segment assets. Interest bearing liabilities (eg borrowings) and income and deferred tax liabilities are excluded from segment liabilities. Items excluded
from segmental allocation are referred to as “unallocated”.
Year ended 31 December 2016
UK
Americas
Australia
Asia
Europe
Rest of the World
Fees and
commissions
(1)
£’000
600,837
259,226
146,958
204,504
37,717
7,314
1,256,556
Fees and
commissions
(2)
£’000
360,840
375,886
158,821
199,823
107,668
53,518
1,256,556
Segment
non-current
assets
£’000
356,861
223,614
49,651
46,660
24,711
7,809
709,306
Fees and
commissions
(1)
£’000
592,652
218,962
130,470
173,305
31,000
5,003
1,151,392
Fees and
commissions
(2)
£’000
365,892
335,914
140,631
175,082
87,804
46,069
1,151,392
Segment
non-current
assets
£’000
391,344
167,288
32,725
44,462
21,745
6,092
663,656
Investments in associates
Unallocated assets/(liabilities)
Total assets/(liabilities)
Year ended 31 December 2015
UK
Americas
Australia
Asia
Europe
Rest of the World
Investments in associates
Unallocated assets/(liabilities)
Total assets/(liabilities)
122Jardine Lloyd Thompson Group plc Annual Report 2016
Segment
assets
£’000
1,427,263
462,989
141,369
218,807
38,386
9,699
2,298,513
50,928
275,686
2,625,127
Segment
liabilities
£’000
(1,045,964)
(233,192)
(88,657)
(152,245)
(37,531)
(3,641)
(1,561,230)
(712,987)
(2,274,217)
Segment
assets
£’000
1,271,524
345,628
112,941
162,495
58,465
8,433
1,959,486
41,180
235,954
2,236,620
Segment
liabilities
£’000
(854,669)
(178,662)
(74,525)
(124,704)
(31,818)
(4,986)
(1,269,364)
(636,454)
(1,905,818)
3. OPERATING PROFIT
The following items have been (credited)/charged in arriving at operating profit:
Foreign exchange gains:
- fees and commissions
- other operating costs
Restructuring costs of which:
- included in salaries and associated expenses
- included in premises costs
- included in other operating costs
Costs associated with a regulatory review:
- included in salaries and associated expenses
- included in other operating costs
Net gain on sale of associate
Pension curtailment gain
Release of contingent considerations
Impairment of goodwill
Total exceptional items included within operating profit
Profit on sale of associates' subsidiary - included in share of results of associates
Total exceptional items
17,171
1,767
12,291
235
481
34,951
11,316
284
30,538
14,952
(10)
12,372
60
41,233
792
543
36,409
821
364
(426)
42,142
(376)
37,218
(87)
8
(79)
41
72
113
228
70
947
1,245
13,274
1,736
6,145
21,155
9,355
1,689
2,856
13,900
9,314
233
331
9,878
21,114
21,114
529
346
681
1,556
488
488
274
1,258
1,532
116
783
391
370
1,660
(127)
(324)
111
38,067
(378)
37,689
527
527
(18,595)
(492)
(456)
15,105
15,105
Jardine Lloyd Thompson Group plc Annual Report 2016 123
SHAREHOLDER INFORMATION
Net loss on disposal of businesses of which:
- included in salaries and associated expenses
- included in premises costs
- included in other operating costs
- included in depreciation, amortisation and impairment charges
19,813
2,131
FINANCIAL STATEMENTS
Net litigation costs:
- included in salaries and associated expenses
- included in premises costs
- included in other operating costs
(3,133)
(3,236)
(6,369)
CORPORATE GOVERNANCE
Exceptional items:
Acquisition and integration costs of which:
- included in salaries and associated expenses
- included in premises costs
- included in other operating costs
(5,841)
(10,838)
(16,679)
STRATEGIC REPORT
Available-for-sale financial assets:
- fair value (gains)/losses
- losses on sale
2015
£’000
OVERVIEW
Amortisation of other intangible assets:
- software costs
- other intangible assets
Depreciation on property, plant and equipment:
- owned assets
- leased assets under finance leases
Impairment of goodwill (included in exceptional items below)
Total depreciation, amortisation and impairment charges
Amortisation of other intangible assets:
- employment contract payments (included in salaries and associated expenses)
(Gains)/losses on disposal of property, plant and equipment
Operating lease rentals payable:
- minimum lease payments:
- land and buildings
- furniture, equipment and motor vehicles
- computer equipment and software
- sub-leases receipts:
- land and buildings
2016
£’000
FINANCIAL STATEMENTS
4. INVESTMENT INCOME
Interest receivable - fiduciary funds
Prior year investment income
Effect of:
- average cash balance variance
- interest yield variance
- foreign exchange variance
2016
£’000
4,730
2015
£’000
3,689
3,689
4,398
(190)
799
432
4,730
127
(614)
(222)
3,689
The Group’s investment income arises from its holdings of cash and investments relating to fiduciary funds. Equivalent average cash and investment
balances during the year amounted to £797 million (2015: £766 million) denominated principally in US dollars (57%), sterling (18%) and Australian
dollars (10%). The average return for 2016 was 0.60% (2015: 0.50%). Based upon average invested balances each 1% movement in the average
achieved rate of return would impact anticipated interest income by some £8.0 million.
5. FINANCE INCOME AND COSTS
Interest receivable - own funds
Investment income from available for-sale financial assets
Interest expense:
- bank and other borrowings
- finance leases
- interest in respect of liability discounting
Pension financing:
- expected return on post employment scheme assets
- interest on post employment scheme liabilities
Net pension financing expense
Finance costs - net
Finance costs
Finance income
Finance costs - net
2016
£’000
1,938
209
2015
£’000
1,503
109
(17,434)
(57)
(1,862)
(16,733)
(49)
(1,567)
19,065
(23,937)
(4,872)
(22,078)
(24,225)
2,147
(22,078)
18,749
(24,873)
(6,124)
(22,861)
(24,473)
1,612
(22,861)
INTEREST RATE RISK
The Group has both interest bearing assets, explained in note 4, and interest bearing liabilities that give rise to net exposures to changes in interest
rates, primarily in US dollars and sterling. Where appropriate, the Group uses interest rate swaps to hedge or match these interest rate exposures.
The Group’s policy is to continue to manage net interest rate exposures arising from the Group’s cash (including fiduciary funds) and borrowings.
Each 1% movement in the average achieved interest rate impacts interest expense by approximately £5.6 million based on average net borrowings
in 2016.
124Jardine Lloyd Thompson Group plc Annual Report 2016
6. EMPLOYEE INFORMATION
Other staff costs
25,174
25,174
56,501
794,363
19,991
84
20,075
43,903
727,334
2016
2015
3,878
1,813
1,130
3,292
253
133
10,499
4,131
1,679
1,133
3,322
234
105
10,604
6,174
3,475
850
10,499
5,990
3,778
836
10,604
2016
£’000
2015
£’000
13,792
406
333
2,812
17,343
13,893
457
448
5,992
20,790
The remuneration of the Directors is disclosed on pages 73 to 91.
Key management personnel are defined as persons having authority and responsibility for planning, directing and controlling the activities
of the Group directly or indirectly, including any director of the Group. This represents the Group Board of Directors and the Group Executive
Committee only.
The Group’s equity-settled share-based payments comprise the JLT Long Term Incentive Plan (2004/2013), Senior Executive Share Scheme,
Executive Share Option Scheme and the Sharesave Schemes.
The Group operates the Long Term Incentive Plan (LTIP) for Executive Directors and persons discharging managerial responsibility (PDMRs).
The scheme was renewed in 2013. Awards under the scheme are granted in the form of nil-priced options and are satisfied using market-purchased
shares. The awards vest in full or in part depending on satisfaction of the performance conditions which are set out on pages 84 and 85 of the
Director’s Remuneration Report. The awards have a 3 year performance period and have a 10 year life from the date of grant. Options attract
discretionary dividend equivalents (DDEs) that are rolled up and paid, in cash, on vesting. DDEs are paid to option holders only on the options that
have vested. Forfeited or lapsed options are not eligible to DDEs and the DDE that has accrued on the balance sheet is released to equity at the
date of forfeiture.
Jardine Lloyd Thompson Group plc Annual Report 2016 125
SHAREHOLDER INFORMATION
JLT LONG TERM INCENTIVE PLAN (2013)
FINANCIAL STATEMENTS
c) Key management compensation
Salaries and short-term employee benefits
Post employment benefits
Other long-term benefits
Share-based payments
573,723
49,448
40,185
CORPORATE GOVERNANCE
Business segment:
- Risk & Insurance
- Employee Benefits
- Head Office & Other
619,422
51,881
41,385
STRATEGIC REPORT
b) Analysis of employees
Monthly average number of persons employed by the Group during the year
Geographical segment:
- UK
- Americas
- Australasia
- Asia
- Europe
- Rest of the world
2015
£’000
OVERVIEW
a) Salaries and associated expenses
Wages and salaries
Social security costs
Pension costs
Equity settled share-based payments:
- incentive schemes (LTIP, SESS, ESOS)
- Sharesave Scheme
2016
£’000
FINANCIAL STATEMENTS
6. EMPLOYEE INFORMATION CONTINUED
SENIOR EXECUTIVE SHARE SCHEME
The Group operates a Senior Executive Share Scheme for senior management and employees. Awards under the scheme are granted in the form
of nil-priced options and are satisfied using market-purchased shares. The majority of awards have no specific performance criteria attached, other
than the requirement that employees remain in employment with the Group. Certain awards have been granted with specific performance targets
defined for the individual executives. In general these require targets for revenue and profit growth to be met over the vesting period. The awards
have a 10 year life from the date of grant. Options granted prior to 1 January 2014 attract unconditional DDEs throughout the vesting period, this
means that DDEs are paid to the option holders as and when dividends are paid to ordinary shareholders, there is no clawback on the dividends
in the event of a forfeiture of the options. The options granted post 1 January 2014 attract DDEs that are rolled up and paid in cash, on vesting.
The Group amended the plan rules on the 8 June 2015. From that date, all vested options are no longer eligible to DDEs.
EXECUTIVE SHARE OPTION SCHEME
Options were granted at a fixed price (usually market price) and are exercisable after the vesting period (usually 3 years). Options are satisfied by
the issue of new shares or market-purchased shares. Some options carry performance conditions where they are only exercisable when earnings
per share is in excess of RPI for the three consecutive financial accounting periods preceding the date of exercise. The awards have a 10 year life
from the date of grant. This scheme is now closed for new grants and options were last granted under this scheme on 29 September 2006.
SHARESAVE SCHEME
The Sharesave Scheme is open to all employees and are exercised after 5 years from the date of grant. Options are satisfied by the issue of new
shares or market-purchased shares. The price at which options are offered is not less than 80% of the market price on the date preceding the
date of invitation. All Sharesave Scheme options have no performance criteria attached, other than the requirement that the employee remains
in employment with the Group. All options must be exercised within 6 months of the vesting date. As at 31 December 2016, there are no options
outstanding in the scheme.
FAIR VALUE OF AWARDS
Under IFRS 2 the fair value of awards granted during the year, calculated using a Black-Scholes model, is set out below:
Exercise
price
pence
Performance
period
-
2016 - 22
2016 - 21
Black-Scholes model assumptions
Share price
Dividend
Risk free
on grant date Volatility
yield Maturity Interest rate
pence
%
%
years
%
Fair value of
one award
pence
JLT Long Term Incentive Plan (2013)/
Senior Executive Share Scheme
2016
2016
31 March
23 September
844.50
1,013.00
20.67
21.87
-
1-6
1-5
0.86
0.21
844.50
1,013.00
The option holders who have awards under the JLT Long Term Incentive Plan (2004/2013) and the Senior Executive Share Scheme also receive
payments equating to the dividends payable on their shares (subject to meeting the performance criteria). Assuming that the dividend yield is zero
and that the options are issued with no cost to the employees, then the fair value will equal the share price at date of grant.
The volatility has been calculated based on the historical share price of the Company, using a 3 year term.
All options granted under the share option schemes are conditional upon the employees remaining in the Group’s employment during the vesting
period of the option, the actual period varies according to the scheme in which the employee participates. In calculating the cost of options granted,
a factor is included to take account of anticipated lapse rates. For Executive Share Option and Sharesave Schemes this is 20%. For the JLT Long
Term Incentive Plan (2004/2013) and the Senior Executive Share Scheme it is nil as both are issued with no cost to the employee.
126Jardine Lloyd Thompson Group plc Annual Report 2016
6. EMPLOYEE INFORMATION CONTINUED
Movement in number of options
Granted
number
Lapsed
number
(492,737)
Options
outstanding
Exercised at 31 Dec 16
number
number
Weighted
average
Options
exercise exercisable
(sale) at 31 Dec 16
price (p)
number
Remaining
contractual
life years
JLT Long Term Incentive Plan (2004/2013)
1,927,782
925,700
(374,210)
1,986,535
873.22
-
8.42
Senior Executive Share Scheme
7,167,782
2,527,139
(128,558) (1,639,371)
7,926,992
882.69
681,113
7.96
Executive Share Option Scheme
64,800
9,160,364
3,452,839
(18,800)
(46,000)
(640,095) (2,059,581)
9,913,527
963.70
882.78
681,113
8.05
Weighted
average
Options
exercise exercisable at
(sale)
31 Dec 15
price (p)
number
Remaining
contractual
life years
Total
OVERVIEW
Options
outstanding
at 1 Jan 16
number
Movement in number of options
Granted
number
Lapsed
number
Exercised
number
Options
outstanding
at 31 Dec 15
number
(326,796)
(686,266)
1,927,782
1,052.56
37,514
8.18
(686,913) (1,936,272)
7,167,782
1,026.77
887,022
8.00
0.75
JLT Long Term Incentive Plan (2004/2013)
2,178,744
762,100
Senior Executive Share Scheme
7,006,456
2,784,511
Executive Share Option Scheme
301,576
-
-
(236,776)
64,800
1,018.15
64,800
Sharesave Scheme
417,429
-
(19,919)
(397,510)
-
1,010.94
-
-
9,904,205
3,546,611
(1,033,628) (3,256,824)
9,160,364
1,029.65
989,336
7.98
Total
During the year the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditor and its associates:
2015
£’000
217
2,449
254
130
46
190
135
3,404
2,436
417
120
51
131
23
3,395
In addition to the above, fees payable to the Company’s auditor and its associates for audit services supplied to the Company’s associated pension
schemes amounted to £18,700 (2015: £18,200).
The Audit & Risk Committee has a policy on the use of the external auditors for non-audit services to ensure that the auditor’s independence is
maintained and that appropriate approvals are sought for non-audit services depending upon their nature and value. Each year a limit is set on the
total fees that can be paid to the external auditor in relation to non-audit services. For 2016 the Audit & Risk Committee has set this limit at £1 million
(2015: £1 million).
FINANCIAL STATEMENTS
Fees payable to the Group’s auditor for the audit of the parent Company and consolidated financial statements
Fees payable to the Group’s auditor and its associates for other services:
- the audit of the Company’s subsidiaries
- audit related assurance services
- tax compliance services
- tax advisory services
- other assurance services
- other non-audit services
2016
£’000
200
CORPORATE GOVERNANCE
7. SERVICES PROVIDED BY THE COMPANY’S AUDITOR AND ITS ASSOCIATES
STRATEGIC REPORT
Options
outstanding
at 1 Jan 15
number
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 127
FINANCIAL STATEMENTS
8. INCOME TAX EXPENSE
Current tax expense
Current year
Adjustments in respect of prior years
Deferred tax (credit)/expense
Origination and reversal of temporary differences
Reduction in tax rate
Adjustments in respect of prior years
Total income tax expense
2016
£’000
2015
£’000
51,499
(7,129)
44,370
43,153
(2,167)
40,986
(4,912)
240
4,320
(352)
44,018
(1,515)
655
1,460
600
41,586
The total income tax expense in the income statement of £44,018,000 (2015: £41,586,000) includes a tax credit on exceptional items of £8,245,000
(2015: £5,914,000). There were no non-recurring tax credits in the year.
In July 2015 the UK Government announced further measures in relation to the UK corporation tax rate, reducing the headline rate of corporation
tax to 19% from April 2017 and then to 18% from April 2020. A further 1% reduction in the main rate of corporation tax rate to 17% from 1 April 2020
was announced in Budget 2016. As at 31 December 2016, the additional 1% rate reduction to 17% from April 2020 has been enacted. The impact
of the rate reduction to 17% has been incorporated into the income tax charge for the year ended 31 December 2016, taking into consideration
when timing differences are expected to reverse.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company
as follows:
Profit before taxation
Tax calculated at UK Corporation Tax rate of 20% (2015: 20.25%)
Non-deductible expenses
Non recognition of tax losses
Other*
Adjustments in respect of prior years
Effect of difference between UK and non-UK tax rates
Effect of reduction in tax rate
Tax on associates
Total income tax expense
*O
ther includes the non-taxable gain on disposal of subsidiaries
128Jardine Lloyd Thompson Group plc Annual Report 2016
2016
£’000
134,880
26,976
4,214
4,538
(595)
(2,809)
11,725
240
(271)
44,018
2015
£’000
155,027
31,393
4,405
5,037
(3,878)
(707)
5,801
655
(1,120)
41,586
9. EARNINGS PER SHARE
Diluted EPS is calculated by adjusting the weighted average number of ordinary shares in issue to take account of the potential dilutive effect
of outstanding share options.
Basic and diluted EPS are also calculated based on underlying earnings attributable to shareholders, which exclude any exceptional items.
A reconciliation of earnings is set out below:
2016
No. of shares
2016
£’000
£’000
£’000
Adjusted
earnings
for basic
earnings per
share
Pence
Pence
Basic
earnings
per share
Diluted
earnings
per share
(175)
110,735
52.6
51.4
45
(130)
(29,399)
81,336
(14.0)
38.6
(13.6)
37.8
Earnings Adjustments2
Underlying profit after taxation and non-controlling
interests1
110,910
Exceptional items before tax
(37,689)
8,245
(29,444)
81,466
Profit attributable to the owners of the parent
2015
£’000
£’000
Pence
Pence
Basic
earnings
per share
restated
Diluted
earnings
per share
restated
(782)
111,508
52.9
52.2
63
(719)
(9,128)
102,380
(4.3)
48.6
(4.2)
48.0
Earnings Adjustments2
Underlying profit after taxation and non-controlling interests
112,290
Exceptional items before tax
(15,105)
1
Profit attributable to the owners of the parent
1
2
5,914
(9,191)
103,099
Underlying excludes exceptional items
Adjustments related to the dividends and undistributed earnings on unvested share options carrying dividends equivalent rights.
Jardine Lloyd Thompson Group plc Annual Report 2016 129
SHAREHOLDER INFORMATION
£’000
Adjusted
earnings
for basic
earnings per
share
FINANCIAL STATEMENTS
Taxation thereon
Taxation thereon
CORPORATE GOVERNANCE
210,455,334
5,210,752
215,666,086
Weighted average number of shares
Effect of outstanding share options
Adjusted weighted average number of shares
2015
No. of shares
restated
210,767,437
4,172,293
214,939,730
STRATEGIC REPORT
Under the revised calculation, basic EPS is calculated by dividing the profit attributable to shareholders by the sum of the weighted average number
of ordinary shares in issue during the year and the vested share options eligible for discretionary dividend equivalents, excluding unallocated shares
held by the Trustees of the Employees’ Share Ownership Plan Trust, which are treated as treasury shares. The profit attributable to shareholders is
the profit attributable to the owners of the parent adjusted for the dividend equivalents and undistributed earnings attributable to the unvested share
options carrying unconditional dividend equivalent rights.
OVERVIEW
Following changes to the terms of several share-based staff compensation schemes, whereby dividend rights eligibility were removed in certain
circumstances, a comprehensive review of IAS 33 (‘earnings per share’ or ‘EPS’) was undertaken in the year to determine the impact of these
changes. The schemes affected by this change include the JLT Long Term Incentive Plan (2004/2013), the Senior Executive Share Scheme, the
Executive Share Option Scheme, and the Sharesave Scheme. The review considered whether the share options in these plans continued to qualify
as participating equity instruments under IAS 33 for the purposes of calculating basic and diluted EPS. With the changes to schemes, the review
concluded that only vested share options eligible to receive discretionary dividend equivalents should be included in the basic calculation. As a result,
for the basic EPS calculation, the number of ordinary shares in 2015 should reduce from 219,234,336 to 210,767,437, resulting in an increase in
basic EPS of 1.6p from 47.0p to 48.6p. The review also concluded that unvested share options should be included in the diluted EPS calculation,
using the treasury stock method. This has the effect of reducing the number of ordinary shares in the 2015 diluted EPS calculation from 219,451,514
to 214,939,730, resulting in an increase in diluted EPS of 1.0p from 47.0p to 48.0p.
FINANCIAL STATEMENTS
10. DIVIDENDS
2016
£’000
42,713
(200)
42,513
25,449
67,962
Final dividend in respect of 2015 of 19.5p per share (2014: 18.3p)
Less: adjustment*
Interim dividend in respect of 2016 of 11.6p per share (2015: 11.1p)
2015
£’000
40,141
(164)
39,977
24,507
64,484
* Adjustment relating to dividend equivalents accrued in respect of various performance related share awards and long-term incentive plans not
currently anticipated to fully vest.
A final dividend in respect of 2016 of 20.6p per share (2015: 19.5p) amounting to a total of £45,100,000 (2015: £42,710,000) is proposed by the
Board. The dividend proposed will not be accounted for until it has been approved at the Annual General Meeting on 27 April 2017.
11. GOODWILL
At 31 December 2016
Opening net book amount
Exchange differences
Impairment
Acquisitions
Disposals
Closing net book amount
At 31 December 2015
Opening net book amount
Exchange differences
Acquisitions
Disposals
Closing net book amount
130Jardine Lloyd Thompson Group plc Annual Report 2016
Gross
amount
£’000
Impairment
losses
£’000
Net carrying
amount
£’000
500,434
47,380
17,854
(17,551)
548,117
(4,268)
(355)
(481)
(5,104)
496,166
47,025
(481)
17,854
(17,551)
543,013
480,176
(2,266)
23,239
(715)
500,434
(4,479)
211
(4,268)
475,697
(2,055)
23,239
(715)
496,166
11. GOODWILL CONTINUED
IMPAIRMENT TESTS FOR GOODWILL
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial
budgets approved by management covering a five year period and are discounted using the weighted average cost of capital. Cash flows beyond
the five year period are extrapolated using the estimated growth rates stated below:
Net carrying
amount
£’000
OVERVIEW
Goodwill is allocated to the Group’s cash generating units (CGUs) identified according to country of operation and business segment. A summary
of the goodwill allocation is presented below.
Key assumptions
Growth
Discount
rate (1)
rate (2)
%
%
At 31 December 2016
186,215
2.10%
7.06%
JLT Specialty
110,811
2.00%
6.05%
UK & Ireland Employee Benefits
78,717
2.00%
6.05%
Latin America
42,262
3.39%
11.16%
JLT Insurance Services
9,806
2.41%
7.24%
Asia
29,912
2.41%
6.48%
Australia & New Zealand
38,455
2.50%
8.26%
Others
46,835
2.46%
7.28%
543,013
2.28%
6.98%
JLT Re
161,767
2.13%
7.36%
JLT Specialty
101,669
2.12%
6.45%
UK & Ireland Employee Benefits
79,729
2.13%
6.46%
Latin America
31,670
3.75%
11.14%
JLT Insurance Services
30,894
2.09%
7.01%
Asia
27,513
2.59%
7.06%
Australia & New Zealand
24,068
2.82%
7.36%
Others
38,856
2.35%
7.78%
496,166
2.42%
7.23%
STRATEGIC REPORT
JLT Re
At 31 December 2015
CORPORATE GOVERNANCE
1) Average growth rate used to extrapolate cash flows beyond five years.
2) Pre-tax discount rate applied to the cash flow projections.
The budgeted trading profit growth: Management determines budgeted trading profit based on past experience and its expectation for market
development.
The budgeted IBA interest income growth is based on past experience and long-term interest rates projections.
The discount rates used are pre-tax and reflect specific risks relating to the relevant segment and country of operation.
The weighted average growth rates used are consistent with long-term economic forecasts in the countries of operation.
The value-in-use is compared to an adjusted goodwill. The adjusted goodwill is the goodwill grossed up to reflect a 100% ownership by the Group.
The key sensitivity analysis are:
FINANCIAL STATEMENTS
The key assumptions used in value-in-use calculations were:
A decrease of 1% on the growth rate resulted in a reduction of 19% in the excess between the value in use and the adjusted carrying
value of goodwill.
A combined decrease of 1% on the growth rate and an increase of 2% in the discount rate resulted in a reduction of 44% in the excess between
the value in use and the adjusted carrying value of goodwill.
Jardine Lloyd Thompson Group plc Annual Report 2016 131
SHAREHOLDER INFORMATION
An increase of 2% on the discount rate resulted in a reduction of 36% in the excess between the value in use and the adjusted carrying
value of goodwill.
FINANCIAL STATEMENTS
12. OTHER INTANGIBLE ASSETS
Computer
software
£’000
Capitalised
employment
contract
payments
£’000
Other
£’000
Total
£’000
At 31 December 2016
Opening net book amount
Exchange differences
Reclassification
Additions
Companies acquired
Companies disposed
61,883
1,234
20,342
3
(3,590)
25,902
1,157
(455)
7,682
-
16,538
1,783
455
2,191
3,921
(187)
104,323
4,174
30,215
3,924
(3,777)
Amortisation charge
Closing net book value
(19,813)
60,059
(14,952)
19,334
(2,131)
22,570
(36,896)
101,963
175,155
(115,096)
60,059
61,424
(42,090)
19,334
33,573
(11,003)
22,570
270,152
(168,189)
101,963
At 31 December 2015
Opening net book amount
Exchange differences
Additions
Companies acquired
Amortisation charge
Closing net book value
55,353
(231)
23,884
48
(17,171)
61,883
16,005
213
22,056
(12,372)
25,902
15,137
(152)
3,320
(1,767)
16,538
86,495
(170)
45,940
3,368
(31,310)
104,323
At 31 December 2015
Cost
Accumulated amortisation and impairment
Closing net book amount
159,357
(97,474)
61,883
54,892
(28,990)
25,902
25,846
(9,308)
16,538
240,095
(135,772)
104,323
135,451
(80,098)
55,353
36,039
(20,034)
16,005
22,878
(7,741)
15,137
194,368
(107,873)
86,495
At 31 December 2016
Cost
Accumulated amortisation and impairment
Closing net book amount
At 31 December 2014
Cost
Accumulated amortisation and impairment
Closing net book amount
Additions to computer software during 2016 include £18,097,000 of capitalised costs in respect of internal developments (2015: £20,523,000).
132Jardine Lloyd Thompson Group plc Annual Report 2016
13. PROPERTY, PLANT AND EQUIPMENT
Motor
vehicles
£’000
Total
£’000
At 31 December 2016
Opening net book amount
Exchange differences
Additions
Companies acquired
18
2
-
46,035
3,094
4,667
66
14,618
2,112
3,955
116
2,496
359
934
69
63,167
5,567
9,556
251
Companies disposed
Disposals
Depreciation charge
Closing net book amount
20
(377)
(168)
(6,161)
47,156
(121)
(303)
(5,360)
15,017
(269)
(447)
(1,005)
2,137
(767)
(918)
(12,526)
64,330
At 31 December 2016
Cost
Accumulated depreciation
Closing net book amount
74
(54)
20
93,572
(46,416)
47,156
95,805
(80,788)
15,017
5,936
(3,799)
2,137
195,387
(131,057)
64,330
At 31 December 2015
Opening net book amount
210
43,660
14,163
3,372
61,405
Exchange differences
Additions
Companies acquired
Companies disposed
Disposals
Depreciation charge
Closing net book amount
2
(193)
(1)
18
(498)
8,050
452
(166)
(5,463)
46,035
(574)
6,039
345
(22)
(368)
(4,965)
14,618
(197)
1,094
13
(615)
(1,171)
2,496
(1,267)
15,183
810
(22)
(1,342)
(11,600)
63,167
At 31 December 2015
Cost
Accumulated depreciation
Closing net book amount
63
(45)
18
88,093
(42,058)
46,035
88,076
(73,458)
14,618
5,769
(3,273)
2,496
182,001
(118,834)
63,167
365
(155)
210
82,333
(38,673)
43,660
85,400
(71,237)
14,163
6,493
(3,121)
3,372
174,591
(113,186)
61,405
CORPORATE GOVERNANCE
Furniture &
equipment
£’000
STRATEGIC REPORT
Leasehold
improvements
£’000
OVERVIEW
Land &
buildings
£’000
At 31 December 2014
The net book amount of property, plant and equipment held under finance leases is as follows:
Furniture, equipment and motor vehicles
2016
£’000
777
2015
£’000
650
FINANCIAL STATEMENTS
Cost
Accumulated depreciation
Closing net book amount
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 133
FINANCIAL STATEMENTS
14. INVESTMENTS IN ASSOCIATES
None of the associates are considered individually material to the Group. A reconciliation of the summarised financial information of the associates
is presented in aggregate below.
On 6 May 2015, the Group disposed of its stake in its principal associate Milestone, the holding company of Siaci Saint Honoré. Milestone,
in the opinion of the directors, was the only material associate to the Group. The associate had share capital consisting solely of ordinary shares,
which was held directly by the Group; the country of incorporation or registration was also its principal place of business.
Place of
business/country of
incorporation
% of
ownership
interest (2016)
% of
ownership
interest (2015)
Nature of
the relationship
Measurement
method
France
-
-
Note 1
Equity
Milestone (Siaci Saint Honoré)
Note 1: Siaci Saint Honoré is a leading independent provider of insurance broking and employee benefit services to major French companies
and multinational corporations.
Milestone is a private company and there is no quoted market price available for its shares.
There are no contingent liabilities relating to the Group’s interest in the associate.
Summarised Income Statement and Statement of Comprehensive Income
Revenue
Depreciation and amortisation
Interest income
Interest expense
Profit from continuing operations
Income tax expense
Profit after tax from continuing operations
Other comprehensive income
Total comprehensive income
Siaci
2016
£’000
-
2015
£’000
54,820
(2,132)
1,018
(73)
22,078
(7,200)
14,878
-
14,878
Reconciliation of summarised financial information
Reconciliation of the summarised financial information presented to the carrying amount of its interest in associates.
Opening net assets
Disposal during the year
Profit for the year
Other comprehensive income
Dividends
Change in non-controlling interests
Capital increase
Exchange differences
Closing net assets
Carrying value
134Jardine Lloyd Thompson Group plc Annual Report 2016
Siaci
2016
£’000
-
2015
£’000
203,594
(208,416)
14,878
(491)
(9,565)
-
Others
2016
£’000
35,072
1,330
(4,592)
2,854
4,663
39,327
50,928
2015
£’000
30,176
6,671
167
(2,306)
90
1,677
(1,403)
35,072
41,180
Total
2016
£’000
35,072
1,330
(4,592)
2,854
4,663
39,327
50,928
2015
£’000
233,770
(208,416)
21,549
167
(2,306)
(401)
1,677
(10,968)
35,072
41,180
15. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale financial assets are categorised into one of two categories:
2. Other investments include securities and other investments held for strategic purposes and some debt instruments. The investments
are held at fair value unless a fair value cannot be accurately determined in which case they are held at cost less any provision for impairment.
Total
£’000
15,485
11,967
107,636
6,301
(331)
11
(331)
140,738
13,079
13,079
116,933
10,726
127,659
116,933
23,805
140,738
Analysis of available-for-sale investments & deposits
Fiduciary funds
Own funds
At 31 December 2016
127,358
301
127,659
4,746
194
1,964
(243)
(82)
(143)
6,436
9,642
(571)
5,081
(5,099)
(4)
9,049
14,388
(377)
7,045
(5,342)
(86)
(143)
15,485
Analysis of available-for-sale financial assets
Current
Non-current
At 31 December 2015
6,436
6,436
19
9,030
9,049
19
15,466
15,485
8,894
155
9,049
The credit quality of available-for-sale investments and deposits is assessed by reference to external credit ratings, where available, and other current
and historical credit data including counterparty default rates. This is summarised as follows:
AA
AA/A
A
BBB
Total
2016
£’000
49,621
37,297
19,932
20,809
127,659
2015
£’000
4,133
4,916
9,049
Jardine Lloyd Thompson Group plc Annual Report 2016 135
SHAREHOLDER INFORMATION
Analysis of available-for-sale investments & deposits
Fiduciary funds
Own funds
At 31 December 2015
FINANCIAL STATEMENTS
At 1 January 2015
Exchange differences
Additions
Disposals/maturities
Revaluation gain/(deficit) (included within equity)
Amounts to be written off
At 31 December 2015
CORPORATE GOVERNANCE
Analysis of available-for-sale financial assets
Current
Non-current
At 31 December 2016
Investments
& deposits
£’000
9,049
10,983
107,636
(20)
11
127,659
STRATEGIC REPORT
At 1 January 2016
Exchange differences
Additions
Companies disposed
Disposals/maturities
Revaluation deficit (included within equity)
Amounts to be written off
At 31 December 2016
Other
investments
£’000
6,436
984
6,301
(311)
(331)
13,079
OVERVIEW
1. Investments and deposits, consist mainly of fixed term deposits, bonds and certificates of deposit. These investments are held at fair value
and are classified between current and non-current assets according to the maturity date.
FINANCIAL STATEMENTS
16. DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swaps - fair value hedges
Forward foreign exchange contracts - cash flow hedges
Redemption liabilities - option contracts
Total
Current
Non-current
Total
At 31 December 2016
Assets
Liabilities
£’000
£’000
32,740
(3,477)
92,233
(69,674)
(29,637)
124,973
(102,788)
7,930
(33,136)
117,043
(69,652)
124,973
(102,788)
At 31 December 2015
Assets
Liabilities
£’000
£’000
11,654
(5,490)
23,574
(11,725)
(22,626)
35,228
(39,841)
1,544
(6,115)
33,684
(33,726)
35,228
(39,841)
The credit quality of counterparties with whom derivative financial assets are held is assessed by reference to external credit ratings, where available,
and other current and historical credit data including counterparty default rates. This is summarised as follows:
2015
£’000
16,419
2,973
15,836
35,228
2016
£’000
73,169
9,374
42,430
124,973
AA
AA/A
BBB
Total
Maturity analysis
The table below analyses the Group’s derivative financial instruments, which will be settled on a gross basis, into relevant maturity groupings based
upon the remaining period at the balance sheet date to contractual maturity. The amounts disclosed are the contractual undiscounted cash flows.
At 31 December 2016
Forward foreign exchange contracts
Outflow
Inflow
At 31 December 2015
Forward foreign exchange contracts
Outflow
Inflow
Less than
1 year
£’000
Greater than
1 year
£’000
(477,260)
443,578
(719,936)
755,747
Less than
1 year
£’000
Greater than
1 year
£’000
(275,406)
269,827
(442,156)
461,276
The Group’s treasury policies are approved by the Board
and are implemented by a centralised treasury department.
The treasury department operates within a framework of
policies and procedures that establish specific guidelines
to manage currency risk, liquidity risk and interest rate risk
and the use of counterparties and financial instruments to
manage these risks. The treasury department is subject to
periodic review by internal audit.
outstanding as at 31 December 2016 will be released
to the income statement at various dates up to:
revenue, with a corresponding impact on trading profit
equal to approximately 70% of the revenue change.
i)47 months in respect of cash flow hedges on
currency denominated UK earnings.
b) Interest rate swaps
The Group uses various derivative instruments including
forward foreign exchange contracts, interest rate swaps
and, from time to time, foreign currency collars and options
to manage the risks arising from variations in currency
and interest rates. Derivative instruments purchased are
primarily denominated in the currencies of the Group’s
main markets.
iii)10 years in respect of interest rate hedges on
sterling denominated long-term debt drawn under
the Group’s private placement programme.
Where forward foreign exchange contracts have been
entered into to manage currency risk, they are designated
as hedges of currency risk on specific future cash flows,
and qualify as highly probable transactions for which hedge
accounting is applied. The Group anticipates that hedge
accounting requirements will continue to be met on its
foreign currency and interest rate hedging activities and that
no material ineffectiveness will arise which will result in gains
or losses being recognised through the income statement.
The fair value of financial derivatives based upon market
values as at 31 December 2016 and designated as
effective cash flow hedges was a net asset of £22.6 million
and has been deferred in equity (2015: net asset of £11.8
million). Gains and losses arising on derivative instruments
ii)13 years in respect of specific hedges on USD
denominated long-term debt drawn under the
Group’s USD private placement programme.
No material amounts were transferred to the income
statement during the year in respect of the fair value
of financial derivatives.
Transactions maturing within 12 months of the balance
sheet date are classified in current maturities. Transactions
maturing in a period in excess of 12 months of the balance
sheet date are classified as non-current maturities.
a) Forward foreign exchange contracts
The Group’s major currency transaction exposure arises
in USD and the Group continues to adopt a prudent
approach in actively managing this exposure. As at 31
December 2016 the Group had outstanding foreign
exchange contracts, principally in USD, amounting to a
principal value of £1,199,325,000 (2015: £731,103,000).
As a guide, each 1 cent movement in the achieved
rate (taking into account the hedges in place) currently
translates into a change of approximately £1.8 million in
136Jardine Lloyd Thompson Group plc Annual Report 2016
The Group uses interest rate hedges, principally interest
rate swaps, to mitigate the impact of changes in interest
rates. The notional principal amount of outstanding
cross currency interest rate swaps as at 31 December
2016 was USD500,000,000 and £75,000,000 (2015:
USD500,000,000 and £75,000,000). A net gain of £29.3
million (2015: net gain £6.2 million) on these instruments
was offset by a fair value loss of £29.3 million (2015: loss
£6.2 million) on the private placement loans, both of which
were recognised in the income statement in the year.
c) Redemption liabilities
The redemption liabilities represent the valuation of the
put options provided in the shareholders agreements
of JLT Specialty Insurance Services Inc., JLT Sigorta ve
Reasurans Brokerligi Ltd Sirketi and JLT SCK Corretora
e Administradora de Seguros Ltda. Fair value of these
liabilities resulted in an expense of £699,000 which
was recognised in the income statement in the year.
d) Price risk
he Group does not have a material exposure
T
to commodity price risk.
The maximum exposure to credit risk at the reporting
date is the fair value of the derivatives in the balance sheet.
17. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables - net
Other receivables
Prepayments
OVERVIEW
2015
£’000
368,215
(15,018)
353,197
152,282
23,116
528,595
2016
£’000
440,941
(20,961)
419,980
143,703
24,957
588,640
As at 31 December 2016, the Group had exposures to individual trade counterparties within trade receivables. In accordance with Group policy,
Group operating companies continually monitor exposures against credit limits and concentration of risk. No individual trade counterparty credit
exposure is considered significant in the ordinary course of trading activity. Management does not expect any significant losses from nonperformance by trade counterparties that have not been provided for.
At 1 January
Currency translation adjustments
Companies acquired
Provisions for impairment of trade receivables
Receivables written off during the year as uncollectible
Unused amounts reversed
At 31 December
The creation and release of provisions for impaired receivables have been included in ‘Other operating costs’ in the income statement.
The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk at the reporting
date is the carrying value of each class of receivables mentioned above. The Group does not hold any collateral as security.
The following table sets out details of the age of trade receivables that are not overdue as well as an analysis of overdue amounts impaired
and provided for.
Past due more than six months and not more than one year
Past due more than one year
At 31 December 2015
Not overdue
Past due not more than three months
Past due more than three months and not more than six months
Net trade
receivables
£’000
324,227
74,614
14,420
12,684
11,814
440,941
(5,965)
(11,814)
(20,961)
6,719
419,980
Trade
receivables
£’000
270,706
60,212
19,002
Provision for
impairment
£’000
(539)
(2,600)
Net trade
receivables
£’000
270,706
59,673
16,402
8,512
9,783
368,215
(2,975)
(8,904)
(15,018)
5,537
879
353,197
Jardine Lloyd Thompson Group plc Annual Report 2016 137
SHAREHOLDER INFORMATION
Past due more than six months and not more than one year
Past due more than one year
Provision for
impairment
£’000
(805)
(2,377)
FINANCIAL STATEMENTS
At 31 December 2016
Not overdue
Past due not more than three months
Past due more than three months and not more than six months
Trade
receivables
£’000
324,227
75,419
16,797
CORPORATE GOVERNANCE
2015
£’000
(10,724)
(26)
(28)
(9,849)
2,499
3,110
(15,018)
2016
£’000
(15,018)
(1,483)
(243)
(8,355)
2,980
1,158
(20,961)
STRATEGIC REPORT
Movements on the Group provision for impairment of trade receivables are as follows:
FINANCIAL STATEMENTS
18. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term bank deposits
Fiduciary funds
Own funds
2016
£’000
514,474
425,471
939,945
2015
£’000
463,665
437,422
901,087
748,628
191,317
939,945
737,676
163,411
901,087
Fiduciary funds represent client money held in the form of premiums due to underwriters, claims paid by insurers and due to policyholders,
and funds held to defray commissions and other income. Fiduciary funds are not available for general corporate purposes.
The credit quality of cash at bank and in hand and short-term deposits is assessed by reference to external credit ratings, where available
and other current and historical credit data including counterparty default rates. This is summarised as follows:
AAA
AA
AA/A
A
BBB
Other
Total
2015
£’000
12,237
336,311
112,869
107,744
327,567
4,359
901,087
2016
£’000
10,685
318,613
125,247
146,111
322,953
16,336
939,945
The effective interest rate in respect of short-term deposits was 0.94% (2015: 0.87%). These deposits have an average maturity of 16 days
(2015: 24 days).
19. TRADE AND OTHER PAYABLES
Insurance payables
Social security and other taxes
Other payables
Accruals and deferred income
Deferred and contingent consideration
All payables are considered current as the non-current portion is not material.
138Jardine Lloyd Thompson Group plc Annual Report 2016
2016
£’000
2015
£’000
875,986
18,735
198,156
137,408
27,497
1,257,782
746,570
17,161
166,880
137,905
17,762
1,086,278
20. FINANCIAL INSTRUMENTS BY CATEGORY
The accounting policies for financial instruments have been applied to the line items below:
Derivatives
used for
hedging
£’000
(29,637)
(73,151)
(102,788)
Other
financial
liabilities
£’000
(687,832)
(1,120,374)
(1,808,206)
Total
£’000
(687,832)
(1,120,374)
(29,637)
(73,151)
(1,910,994)
Derivatives
used for
hedging
£’000
35,228
35,228
Availablefor-sale
£’000
15,485
15,485
Total
£’000
15,485
35,228
505,479
901,087
1,457,279
Derivatives
used for
hedging
£’000
(22,626)
(17,215)
(39,841)
Other
financial
liabilities
£’000
(603,582)
(948,373)
(1,551,955)
Total
£’000
(603,582)
(948,373)
(22,626)
(17,215)
(1,591,796)
(a) Prepayments are excluded from the trade and other receivables balance, as this analysis is required only for financial instruments.
(b) Non-financial liabilities are excluded from the trade and other payables balance, as this analysis is required only for financial instruments.
FINANCIAL STATEMENTS
Liabilities per balance sheet
Borrowings
Trade and other payables (b)
Redemption liabilities - option contracts
Derivative financial instruments
Total
Total
£’000
140,738
124,973
563,683
939,945
1,769,339
CORPORATE GOVERNANCE
At 31 December 2015
Assets per balance sheet
Available-for-sale financial assets
Derivative financial instruments
Trade and other receivables (a)
Cash and cash equivalents
Total
Loans and
receivables
£’000
505,479
901,087
1,406,566
Availablefor-sale
£’000
140,738
140,738
STRATEGIC REPORT
Liabilities per balance sheet
Borrowings
Trade and other payables (b)
Redemption liabilities - option contracts
Derivative financial instruments
Total
Derivatives
used for
hedging
£’000
124,973
124,973
OVERVIEW
At 31 December 2016
Assets per balance sheet
Available-for-sale financial assets
Derivative financial instruments
Trade and other receivables (a)
Cash and cash equivalents
Total
Loans and
receivables
£’000
563,683
939,945
1,503,628
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 139
FINANCIAL STATEMENTS
20. FINANCIAL INSTRUMENTS BY CATEGORY CONTINUED
The following table presents the Group’s financial assets and liabilities that are measured at fair value at 31 December 2016.
At 31 December 2016
Assets
Derivatives used for hedging
Available-for-sale financial assets
- equity securities
- debt investments
- fixed deposits
Total
Liabilities
Deferred and contingent consideration
Redemption liabilities - option contracts
Derivatives used for hedging
Total
At 31 December 2015
Assets
Derivatives used for hedging
Available-for-sale financial assets
- equity securities
- debt investments
- fixed deposits
Total
Liabilities
Deferred and contingent consideration
Redemption liabilities - option contracts
Derivatives used for hedging
Total
Level 1
Level 2
Level 3
Total
£’000
£’000
£’000
£’000
-
124,973
-
124,973
127,659
127,659
124,973
1,115
11,964
13,079
1,115
11,964
127,659
265,711
-
(73,151)
(73,151)
(27,497)
(29,637)
(57,134)
(27,497)
(29,637)
(73,151)
(130,285)
Level 1
Level 2
Level 3
Total
£’000
£’000
£’000
£’000
-
35,228
-
35,228
311
9,049
9,360
35,228
1,312
4,813
6,125
1,623
4,813
9,049
50,713
-
(17,215)
(17,215)
(17,762)
(22,626)
(40,388)
(17,762)
(22,626)
(17,215)
(57,603)
Apart from where disclosed, there are no differences between the fair value and the carrying value of financial assets and liabilities.
Instruments included in level 1 are financial instruments traded in active markets for which the fair value is based upon quoted market prices at the
balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry
group, pricing service, or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s-length basis.
Instruments included in level 2 are financial instruments that are not traded in an active market (for example, over-the-counter derivatives) and for
which the fair value is determined by using internal and external models. These models maximise the use of observable market data where it is
available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the
instrument is included in level 2. Level 2 includes derivatives used for hedging. The valuations of which are performed using a discounted cash
flow methodology incorporating observable market forward foreign exchange and interest rates.
140Jardine Lloyd Thompson Group plc Annual Report 2016
20. FINANCIAL INSTRUMENTS BY CATEGORY CONTINUED
During the year there were no transfers between level 1 and level 2. There were no changes in valuation techniques during the year.
A 1% movement in the discount rate applied in the calculation of the redemption liability in respect of JLT Specialty Insurance Services Inc.,
the largest item within the redemption liability, would result in a change of the overall redemption liability of 10%.
OVERVIEW
Instruments included in level 3 are financial instruments for which one or more of the significant inputs is not based on observable market data.
In respect of deferred and contingent consideration and Redemption liabilities – option contracts, unobservable inputs include management’s
assessment of the expected future performance of relevant acquired businesses and are valued using a discounted cash flow methodology.
A reconciliation of the movements in level 3 is provided below:
Liabilities
Level 3
£’000
(40,388)
(8,509)
(12,686)
6,686
(2,237)
(57,134)
STRATEGIC REPORT
At 1 January 2016
Exchange differences
Companies disposed
Companies acquired
Utilised in the year
Charged to income statement
At 31 December 2016
Assets
Level 3
£’000
6,125
984
6,301
(331)
13,079
Of the £331,000 charged to the income statement, £148,000 is included in net finance costs and £183,000 in Other operating costs.
Of the £2,237,000 charged to the income statement, £1,862,000 is included in net finance costs and £375,000 in Other operating costs.
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 141
FINANCIAL STATEMENTS
21. BORROWINGS
Current
Bank overdraft
Unsecured loan notes
Bank borrowings
Finance lease liabilities
2016
£’000
2015
£’000
18,223
35,980
243
283
54,729
21,702
418
218
22,338
471,975
160,629
499
633,103
687,832
419,394
161,435
415
581,244
603,582
Non Current
Unsecured loan notes
Bank borrowing
Finance lease liabilities
Total borrowings
The borrowings include secured liabilities (finance leases) of £782,000 (2015: £633,000).
Borrowings are discussed in the Finance Director’s Review on page 38.
The exposure of the borrowings of the Group to interest rate changes and the periods in which the borrowings re-price are as follows:
6 months
or less
£’000
6-12
months
£’000
1-5
years
£’000
Over
5 years
£’000
Fixed rate
£’000
Total
£’000
At 31 December 2016
632,035
243
-
-
55,554
687,832
At 31 December 2015
557,334
-
418
-
45,830
603,582
The effective interest rates at the balance sheet date were as follows:
Bank overdraft
Unsecured loan notes - private placement
Bank borrowings
Finance lease liabilities
142Jardine Lloyd Thompson Group plc Annual Report 2016
2016
£’000
2015
£’000
2.69%
1.34%
9.96%
2.84%
1.53%
8.14%
21. BORROWINGS CONTINUED
Maturity of non-current borrowings (excluding finance lease liabilities):
2015
£’000
2
67,386
160,626
404,590
632,604
30,220
6
56,092
494,511
580,829
OVERVIEW
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Over 5 years
2016
£’000
Finance lease liabilities - minimum lease payments:
2015
£’000
No later than 1 year
337
255
Later than 1 year and no later than 2 years
268
204
Later than 2 years and no later than 3 years
173
142
Later than 3 years and no later than 4 years
78
80
Later than 4 years and no later than 5 years
32
31
Later than 5 years
-
-
888
712
(106)
(79)
Present value of finance lease liabilities
782
633
2016
£’000
2015
£’000
The present value of finance lease liabilities is as follows:
No later than 1 year
283
218
Later than 1 year and no later than 2 years
233
180
Later than 2 years and no later than 3 years
161
127
Later than 3 years and no later than 4 years
74
73
Later than 4 years and no later than 5 years
31
35
Later than 5 years
-
-
782
633
FINANCIAL STATEMENTS
Lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default.
CORPORATE GOVERNANCE
Future finance charges on finance leases
STRATEGIC REPORT
2016
£’000
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 143
FINANCIAL STATEMENTS
21. BORROWINGS CONTINUED
The carrying amount of the Group’s borrowings are denominated in the following currencies:
Sterling
US Dollar
Other currencies
2016
£’000
2015
£’000
264,657
422,148
1,027
687,832
263,729
338,796
1,057
603,582
2016
£’000
2015
£’000
337,000
336,000
Borrowing facilities
The Group has undrawn committed borrowing facilities of:
Floating rate
- expiring beyond one year
Facilities expiring within one year relate to:
a)Senior unsecured loan notes totalling USD42 million (£33.9 million) issued by JIB Group Limited under the Group’s 2010 private placement
programme in September 2017 with a coupon of 5.02%.
Facilities expiring beyond one year relate to:
b)
The committed unsecured £500 million revolving credit facilities in the name of JIB Group Limited. As at the balance sheet date, drawings
under the revolving credit facilities are subject to a margin and fees of 115 basis points above the relevant LIBOR interest rate and additional
commitment fees on the undrawn facility. In January 2017, the Group agreed with its relationship banks to exercise an extension option,
under existing agreed terms, by a further one year from February 2021 to a new maturity date of February 2022.
c) Senior unsecured loan notes totalling USD83 million issued by JIB Group Limited under the Group’s 2010 private placement programme with
USD42 million (£33.9 million) in September 2020 with a coupon of 5.59% and USD41 million (£33.1 million) in September 2022 with a coupon
of 5.69%. Drawings under the Group’s private placement programme are swapped into sterling floating and are subject to an equivalent spread
over LIBOR of between 227 and 238 basis points.
d) Senior unsecured loan notes totalling USD250 million issued by JIB Group Limited under the Group’s 2012 private placement programme
with maturities of USD40 million (£32.3 million) in January 2020 with a coupon of 3.21%, USD140 million (£113.2 million) in January 2023 with
a coupon of 3.78% and USD70 million (£56.6 million) in January 2025 with a coupon of 3.93%. The proceeds of this placement have been
swapped into sterling at fixed and LIBOR based floating rates and are subject to an equivalent spread over LIBOR of between 205 and 220
basis points.
e) Senior unsecured loan notes totalling £75 million issued by JIB Group Limited under the Group’s April 2014 private placement programme
maturing in April 2026 with a coupon of 4.27%. The proceeds of this placement have been swapped into LIBOR based floating rates and
are subject to an equivalent spread over LIBOR of 150 basis points.
f)Senior unsecured loan notes totalling USD125 million issued by JIB Group Limited under the Group’s October 2014 private placement
programme with maturities of USD62.5 million (£50.5 million) in October 2026 with a coupon of 3.93% and USD62.5 million (£50.5 million)
in October 2029 with a coupon of 4.13%. The proceeds of this private placement in October 2014 have been swapped into sterling at LIBOR
based floating rates and are subject to an equivalent spread over LIBOR of between 146 and 157 basis points.
The terms and conditions of the Group’s facilities include common debt and interest cover covenants with which the Group expects to continue
to comply.
Liquidity risk
Liquidity risk arises from an inability to maintain an optimal cost of capital or meet the short term financial demands of the business.
The Group has implemented the following steps to mitigate the risk:
- Management reviews of business unit balance sheets and cash flows
- Maintenance of committed credit facilities
- Compliance with regulatory minimum capital requirements and regular stress testing
- Maintenance of a conservative funding profile.
144Jardine Lloyd Thompson Group plc Annual Report 2016
22. DEFERRED INCOME TAXES
The following amounts, determined after appropriate offsetting, are shown in the consolidated balance sheet.
Assets
2016
£’000
2015
£’000
Liabilities
2016
£’000
2015
£’000
Net
2016
£’000
2015
£’000
(554)
(5,273)
(5,386)
(616)
(3,046)
(1,826)
(131)
(746)
(910)
(8,619)
(48)
(6,024)
(2,933)
(93)
1,001
10,664
1,858
(4,507)
2,436
(2,748)
1,581
32,401
1,359
10,678
2,986
(8,334)
2,388
(5,787)
4,100
22,032
Share based payments
Fair values
4,858
11,166
6,554
-
-
(1,931)
4,858
11,166
6,554
(1,931)
Tax assets/(liabilities)
Set off of tax
75,542
(5,454)
55,349
(4,326)
(16,832)
5,454
(21,304)
4,326
58,710
-
34,045
-
Net tax assets/(liabilities)
70,088
51,023
(11,378)
(16,978)
58,710
34,045
At 1
January
2016
£’000
Exchange
differences
£’000
Credit/
(charge)
to income
£’000
Accelerated tax depreciation
Provisions
Losses
Deferred income
Other intangibles
Goodwill
Other
Pensions
1,359
10,678
2,986
(8,334)
2,388
(5,787)
4,100
22,032
(204)
58
44
3,241
454
3,446
(4,534)
7
(154)
(79)
(1,172)
586
(102)
(407)
2,015
828
9,534
7
(304)
-
1,001
10,664
1,858
(4,507)
2,436
(2,748)
1,581
32,401
Share based payments
Fair values
6,554
(1,931)
-
(1,163)
-
(533)
13,097
-
4,858
11,166
34,045
2,512
352
22,098
(297)
58,710
The majority of the deferred tax is not expected to reverse within 12 months.
Net tax assets
At 31
December
2016
£’000
The total current and deferred income tax charged to equity during the year is as follows:
Credit/(charge)
to equity
£’000
11,850
(222)
At 31 December
2016
£’000
46,201
11,811
- foreign exchange
(16)
13,196
13,180
- available-for-sale
(30)
199
169
(46)
13,395
13,349
46,338
25,023
71,361
Pensions
Share based payments
Fair values:
Jardine Lloyd Thompson Group plc Annual Report 2016 145
SHAREHOLDER INFORMATION
At 1 January
2016
£’000
34,351
12,033
FINANCIAL STATEMENTS
2,105
11,588
2,986
285
2,436
237
7,033
22,125
CORPORATE GOVERNANCE
1,555
15,937
1,858
879
3,052
298
3,407
32,532
STRATEGIC REPORT
Property, plant and equipment
Provisions
Losses
Deferred income
Other intangibles
Goodwill
Other
Pensions
Credit/ Acquisitions/
(charge)
disposals
to equity
of sub
£’000
£’000
OVERVIEW
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when the deferred income taxes relate to the same fiscal authority.
FINANCIAL STATEMENTS
22. DEFERRED INCOME TAXES CONTINUED
Deferred tax assets are recognised to the extent that the realisation of the related tax benefits through the future taxable profits is considered
probable. A deferred tax asset relating to tax losses of £14,340,000 (2015: £7,660,000) has not been recognised in the balance sheet in respect
of certain of the Group’s operations, principally US, China, Singapore and Japan, where it is considered likely that the losses will expire before use.
A deferred tax asset relating to other deferred tax balances of £7,473,000 (2015: £5,030,000) has not been recognised in the balance sheet in
respect of certain of the Group’s overseas operations, principally the US, where it is considered that the asset is unlikely to be realised in the
short-term.
Deferred tax liabilities have not been recognised on temporary differences of £124,000,000 (2015: £86,000,000) representing the unremitted
earnings of subsidiaries and joint ventures. Such amounts are permanently reinvested. Deferred tax liabilities have not been recognised on
temporary differences of nil (2015: nil) representing unremitted earnings of associates.
23. PROVISIONS FOR LIABILITIES AND CHARGES
Property
related
provisions
£’000
Litigation
provisions
£’000
Other
£’000
Total
£’000
At 1 January 2016
Exchange differences
Utilised in the year
Charged/(credited) to the income statement
Companies disposed
At 31 December 2016
1,300
94
(349)
1,984
(110)
2,919
18,223
230
(16,328)
5,326
(9)
7,442
114
(78)
36
19,637
324
(16,677)
7,232
(119)
10,397
At 1 January 2015
Exchange differences
Reclassification from current liabilities
Utilised in the year
4,881
19
462
(3,372)
5,570
30
(3,710)
362
(8)
10,813
49
462
(7,090)
Credited/(charged) to the income statement
At 31 December 2015
(690)
1,300
16,333
18,223
(240)
114
15,403
19,637
2016
£’000
2015
£’000
8,826
1,571
10,397
18,594
1,043
19,637
Analysis of total provisions
Current - to be utilised within one year
Non-current - to be utilised in more than one year
Property related provisions
The Group recognises a provision for onerous contracts when the expected benefits to be derived from a contract are less than the unavoidable
costs of meeting the obligations under the contract. Provision is made for the future rental cost of vacant property and expected dilapidation
expenses. In calculating the provision required, account is taken of the duration of the lease and any recovery of cost achievable from subletting.
Property provisions occur principally in the US and UK and relate to a variety of lease commitments. The longest lease term expires in 2026.
Litigation provisions
At any point in time the Group can be involved in a variety of litigation and dispute issues. A provision is established in respect of such issues when it
is probable that the liability has been incurred and the amount of the liability can be reasonably estimated. The Group analyses its litigation exposures
based on available information, including external legal consultation where appropriate, to assess its potential liability. Where appropriate the Group
also provides for the cost of defending or initiating such matters. However, the final outcome could differ materially from the amount provided.
The amount charged to the income statement in 2016 includes litigation costs related to employment contract disputes.
146Jardine Lloyd Thompson Group plc Annual Report 2016
23. PROVISIONS FOR LIABILITIES AND CHARGES CONTINUED
Other
OVERVIEW
Where a litigation provision has been made it is stated gross of any third party recovery. All such recoveries are included as “Other receivables” within
trade and other receivables. At 31 December 2016, in connection with certain litigation matters, the Group’s litigation provisions include an amount
of £0.1million (2015: £0.1million) to reflect this gross basis and the corresponding insurance recovery has been included within trade and other
receivables. This presentation has had no effect on the consolidated income statement for the year ended 31 December 2016 (2015: nil).
Other provisions include provisions for clawback of commission which arises on certain types of Employee Benefits contracts.
24. SHARE CAPITAL AND PREMIUM
Ordinary
shares
£’000
Share
premium
£’000
Total
£’000
220,136,567
34,440
220,171,007
10,000
220,181,007
11,006
2
11,008
11,008
103,941
133
104,074
37
104,111
114,947
135
115,082
37
115,119
STRATEGIC REPORT
Allotted, called up and fully paid
At 1 January 2015
Issued during the year
At 31 December 2015
Issued during the year
At 31 December 2016
Number of
shares
Ordinary shares carry rights to dividends, voting and proceeds on winding up and have a par value of £0.05.
The Employee Benefit Trust holds 8,715,895 ordinary shares (2015: 8,994,952) acquired to settle employee share based payments. Acquisitions
of such shares are booked directly to equity.
25. NON-CONTROLLING INTERESTS
The Group’s total non-controlling interests’ financial position for the year is £22,764,000 of which £10,556,000 is attributed to JLT’s Private Client
Services group of business (PCS). PCS is defined as a material non-controlling interest to the Group. The non-controlling interests in respect of
other entities are not individually material.
CORPORATE GOVERNANCE
During the year the Company issued 10,000 (2015: 34,440) ordinary shares for a consideration of £38,250 (2015: £134,532) following exercises
by executives of options held under the Jardine Lloyd Thompson Group plc Executive Share Option Scheme.
Set out below is the summarised financial information for PCS.
2015
£’000
62,294
(34,218)
28,076
49,451
(28,535)
20,916
3,152
(316)
2,836
30,912
2,998
(312)
2,686
23,602
Jardine Lloyd Thompson Group plc Annual Report 2016 147
SHAREHOLDER INFORMATION
Current
Assets
Liabilities
Total
Non-current
Assets
Liabilities
Total
Net assets
2016
£’000
FINANCIAL STATEMENTS
Summarised Balance Sheet
FINANCIAL STATEMENTS
25. NON-CONTROLLING INTERESTS CONTINUED
Summarised Statement of Comprehensive Income
Revenue
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Total comprehensive income attributable to non-controlling interests
Dividends paid to non-controlling interests
2016
£’000
2015
£’000
64,018
20,663
550
21,213
55,357
18,195
95
18,290
5,166
2,229
4,575
4,289
2016
£’000
2015
£’000
19,897
(291)
(18,348)
1,258
34,522
(1,403)
(17,340)
15,779
Summarised Statement of Cash Flows
Net cash generated from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net increase in cash and cash equivalents
The information above is the amount before inter-company eliminations.
26. OTHER RESERVES
Share
premium
£’000
Fair value
and hedging
£’000
Exchange
reserves
£’000
Total
£’000
At 1 January 2016
Fair value gains/(losses) net of tax:
- available-for-sale
- available-for-sale reclassified to the income statement
- cash flow hedges
Currency translation differences
104,074
(12,827)
(17,280)
73,967
-
42
(181)
(41,487)
-
100,841
42
(181)
(41,487)
100,841
Net (losses)/gains recognised directly in equity
Issue of share capital
At 31 December 2016
37
104,111
(41,626)
(54,453)
100,841
83,561
59,215
37
133,219
Share
premium
£’000
Fair value and
hedging
£’000
Exchange
reserves
£’000
Total
£’000
103,941
(234)
(5,033)
98,674
133
104,074
(34)
10
(12,569)
(12,593)
(12,827)
(12,247)
(12,247)
(17,280)
(34)
10
(12,569)
(12,247)
(24,840)
133
73,967
At 1 January 2015
Fair value (losses)/gains net of tax:
- available-for-sale
- available-for-sale reclassified to the income statement
- cash flow hedges
Currency translation differences
Net losses recognised directly in equity
Issue of share capital
At 31 December 2015
148Jardine Lloyd Thompson Group plc Annual Report 2016
27. QUALIFYING EMPLOYEE SHARE OWNERSHIP TRUST
During the year, the Qualifying Employee Share Ownership Trust (QUEST) allocated nil ordinary shares to employees in satisfaction of options
that have been exercised under the Sharesave schemes (2015: nil).
OVERVIEW
28. CASH GENERATED FROM OPERATIONS
134,880
(6,877)
17,491
(87)
4,872
1,862
12,526
36,896
24,892
(1,353)
5,294
1,660
(10)
8
(67,160)
24,788
(12,440)
(10,530)
166,712
155,027
(5,301)
16,782
41
6,124
1,567
11,600
31,310
20,075
(5,531)
21,959
527
60
72
(19,142)
(23,475)
22,539
(7,833)
(11,021)
215,380
CORPORATE GOVERNANCE
2015
£’000
STRATEGIC REPORT
Profit before taxation
Investment and finance income
Interest payable on bank loans and finance leases
Fair value (gains)/losses on available-for-sale financial assets
Net pension financing expenses
Unwinding of liability discounting
Depreciation
Amortisation of other intangible assets
Amortisation of share based payments
Share of results of associates’ undertakings
Non cash exceptional items
Losses on disposal of businesses
(Gains)/losses on disposal of property, plant and equipment
Losses on disposal of available-for-sale financial assets
Gain on sale of associates
Increase in trade and other receivables
Increase in trade and other payables - excluding insurance broking balances
Decrease in provisions for liabilities and charges
Decrease in retirement benefit obligations
Net cash inflow from operations
2016
£’000
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 149
FINANCIAL STATEMENTS
29. BUSINESS COMBINATIONS
Adjustments in respect of prior year acquisitions
During the year, the contingent consideration booked in respect of acquisitions completed in previous years has been revised following
the final settlement of amounts due or the revision of amounts due or the revision of estimates based on performance conditions.
Revisions to contingent consideration during the year
Ingham Holdings Limited
Keenan Insurances (Ireland)
Consideration
at 31 Dec 15
£'000
Change in
estimated
consideration
impacting
goodwill
£'000
1,577
(1,577)
-
-
46
(46)
-
-
1,623
(1,623)
-
-
Consideration
at 31 Dec 2016
£'000
Paid during
the year
£'000
2016 Acquisitions
During the year, the process of finalising the provisional fair values in respect of acquisitions carried out during 2015 has resulted in following changes.
Close Brothers Asset Management (Close brothers)
Pierre Leblanc & Associés SAS (PL&A)
Revised fair
value acquired
£'000
Provisional
fair value
reported at
31 Dec 2015
£'000
Change in fair
value
£'000
491
1,127
1,618
580
990
1,570
(89)
137
48
Revised fair
value acquired
£’000
Provisional
fair value
reported at
31 Dec 2015
£’000
Change in
fair value
£’000
43
1,068
4
1,068
39
-
713
713
-
These changes in fair value affected the following balance sheet classes:
Property, plant and equipment
Other intangible assets
Trade and other receivables
Cash and cash equivalents
- own cash
- fiduciary cash
Insurance payables
Trade and other payables
Current taxation
Goodwill calculation
Purchase consideration
- cash paid
- contingent consideration
- deferred consideration
Total purchase consideration
Less: fair value of net assets acquired
Goodwill
150Jardine Lloyd Thompson Group plc Annual Report 2016
511
511
-
2,218
(2,218)
(793)
76
1,618
2,218
(2,218)
(704)
(22)
1,570
(89)
98
48
At
31 Dec 2016
£’000
At
31 Dec 2015
£’000
Change
£’000
6,030
717
248
6,995
1,618
5,377
6,030
717
248
6,995
1,570
5,425
48
(48)
29. BUSINESS COMBINATIONS CONTINUED
At
31 Dec 2015
£’000
6,030
6,030
-
(511)
(511)
-
Purchase consideration settled in cash
Cash and cash equivalents - own cash in subsidiaries acquired
Change
£’000
5,519
5,519
Cash and cash equivalents - fiduciary cash in subsidiaries acquired
(2,218)
(2,218)
-
Cash outflow on acquisition
3,301
3,301
-
Notes
Acquisition
date
Percentage
voting rights
acquired
Cost
£’000
i
ii
iii
iv
May 2016
Dec 2016
Jan - Dec 2016
Jan - Dec 2016
100%
100%
various
various
OVERVIEW
At
31 Dec 2016
£’000
Current year acquisitions
Broderick Piller Pty Ltd (Workwise)
Stonehill Reinsurance Partners, LLC (Stonehill)
Acquisition of other new businesses completed during the year
Additional investments in existing businesses
7,135
8,790
9,392
5,489
30,806
On 10 May 2016, the Group completed the acquisition of Broderick Piller Pty Ltd trading as Workwise Occupational Health, a leading provider
of workplace, health & safety and rehabilitation services in Western Australia. The acquired business contributed revenue of £1,243,000 and net
profit, including acquisition and integration costs incurred to date, of £70,000 to the Group for the period since acquisition. If the acquisition had
taken place on 1 January 2016, we estimate the contribution to Group revenue would have been £2,086,000 and net profit, including acquisition
and integration costs incurred to date, would have been £434,000.
£’000
Purchase consideration
- cash paid
- contingent consideration
Total purchase consideration
Less: fair value of net assets acquired
Goodwill
4,415
2,720
7,135
1,258
5,877
The assets and liabilities arising from the acquisition were as follows:
Acquiree’s
carrying
amount
£’000
Property, plant and equipment
Purchase consideration settled in cash
Cash and cash equivalents - own cash in subsidiary acquired
Cash outflow on acquisition
59
59
3
277
606
277
497
(181)
655
497
(181)
1,258
£’000
4,415
(497)
3,918
Jardine Lloyd Thompson Group plc Annual Report 2016 151
SHAREHOLDER INFORMATION
Other intangible assets
Trade and other receivables
Cash and cash equivalents
- own cash
Deferred taxation
Fair value
£’000
FINANCIAL STATEMENTS
Goodwill calculation
CORPORATE GOVERNANCE
i) Acquisition of Broderick Piller Pty Ltd (Workwise)
STRATEGIC REPORT
During the year the following new business acquisitions and additional investments were completed:
FINANCIAL STATEMENTS
29. BUSINESS COMBINATIONS CONTINUED
As at 31 December 2016, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated
above are provisional.
The contingent consideration of £2,720,000 is primarily based upon the expected profit before tax of the business for future periods up to 2020.
None of the goodwill recognised is expected to be deductible for income tax purposes.
ii) Acquisition of Stonehill Reinsurance Partners, LLC (Stonehill)
On 15 December 2016, the Group acquired the assets of Stonehill Reinsurance Partners LLC in North America, a reinsurance intermediary
specialised in Medical Professional Liability and healthcare related business. The acquired business contributed revenue of £147,000 and net profit,
including acquisition and integration costs incurred to date, of £24,000 to the Group for the year since acquisition. If the acquisition had taken place
on 1 January 2016, we estimate the contribution to Group revenue would have been £3,804,000 and net profit, including acquisition and integration
costs incurred to date, would have been £529,000.
Goodwill calculation
Purchase consideration
- cash paid
- contingent consideration
Total purchase consideration
£’000
Less: fair value of net assets acquired
Goodwill
2,085
6,705
2,657
6,133
8,790
The assets and liabilities arising from the acquisition were as follows:
Property, plant and equipment
Other intangible assets
Trade and other receivables
Cash and cash equivalents
- own cash
- fiduciary cash
Insurance creditors
Trade and other payables
Purchase consideration settled in cash
Cash and cash equivalents - own cash in subsidiary acquired
Cash and cash equivalents - fiduciary cash in subsidiary acquired
Cash outflow on acquisition
Acquiree’s
carrying
amount
141
243
Fair value
£’000
141
1,626
243
1,015
1,098
(1,098)
(940)
459
1,015
1,098
(1,098)
(940)
2,085
£’000
2,657
(1,015)
1,642
(1,098)
544
As at 31 December 2016, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated
above are provisional.
The contingent consideration of £6,133,000 is based upon expected revenues up to 2020.
The maximum consideration is capped at USD15,000,000.
Goodwill recognised is expected to be deductible for income tax purposes.
152Jardine Lloyd Thompson Group plc Annual Report 2016
29. BUSINESS COMBINATIONS CONTINUED
Goodwill calculation
Purchase consideration
- cash paid
- contingent consideration
- deferred consideration
£’000
OVERVIEW
iii) Other acquisitions and additional investments
9,315
4,641
815
110
14,881
3,608
4,330
6,943
The assets and liabilities arising from acquisitions were as follows:
Fair value
£’000
12
1,692
846
106
290
(290)
(64)
(27)
(116)
1,159
1,916
106
290
(290)
(64)
(27)
(116)
1,159
3,608
£’000
9,315
(106)
Cash and cash equivalents - fiduciary cash in subsidiary acquired
Cash outflow on acquisition
9,209
(290)
8,919
As at 31 December 2016, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated
above are provisional.
The contingent consideration of £4,641,000 relates to various acquisitions of which the largest individual consideration of £1,347,000 is based
upon expected revenues from 2017 to 2020.
FINANCIAL STATEMENTS
Purchase consideration settled in cash
Cash and cash equivalents - own cash in subsidiary acquired
CORPORATE GOVERNANCE
Property, plant and equipment
Other intangible assets
Trade and other receivables
Cash and cash equivalents
- own cash
- fiduciary cash
Insurance payables
Trade and other payables
Current taxation
Deferred taxation
Non-controlling interests
Acquiree’s
carrying
amount
12
846
STRATEGIC REPORT
- cancellation of loans
Total purchase consideration
Less fair value of net assets acquired
Less equity movement on transactions with non-controlling interests
Goodwill
The deferred consideration of £815,000 is based upon the net assets in the completion accounts.
None of the goodwill recognised is expected to be deductible for income tax purposes.
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 153
FINANCIAL STATEMENTS
29. BUSINESS COMBINATIONS CONTINUED
Group summary of the net assets acquired and goodwill
The assets and liabilities arising from acquisitions were as follows:
Purchase consideration:
- cash paid
- contingent consideration
- deferred consideration
- cancellation of loans
Total purchase consideration
Less fair value of net assets acquired
Less equity movement on transactions with non-controlling interests
Goodwill on acquisitions occurring during the year
Impact of revisions to deferred consideration
Workwise
£'000
Stonehill
£'000
Others
£'000
Total
£'000
4,415
2,720
7,135
1,258
5,877
2,657
6,133
8,790
2,085
6,705
9,315
4,641
815
110
14,881
3,608
4,330
6,943
16,387
13,494
815
110
30,806
6,951
4,330
19,525
(1,623)
Impact of revision to fair value adjustment in relation to acquisitions
completed in 2015
Net increase in goodwill
Impact of additional investments
Net decrease in equity
(48)
17,854
4,330
4,330
Group summary of cash flows
Purchase consideration settled in cash
Cash and cash equivalents - own cash in subsidiary acquired
Cash and cash equivalents - fiduciary cash in subsidiary acquired
Total purchase consideration
154Jardine Lloyd Thompson Group plc Annual Report 2016
Workwise
£'000
4,415
(497)
Stonehill
£'000
2,657
(1,015)
Others
£'000
9,315
(106)
Total
£'000
16,387
(1,618)
3,918
3,918
1,642
(1,098)
544
9,209
(290)
8,919
14,769
(1,388)
13,381
30. BUSINESS DISPOSALS
On 30 December 2016, the Group disposed of 100% of its shareholdings in Thistle Insurance Services Limited.
8,548
9,196
(9,196)
(2,202)
(119)
39,627
3,438
43,065
Deferred proceeds
Cash inflow on disposal during the year
Total consideration
Total
£’000
10,570
32,495
43,065
Disposal consideration settled in cash
Cash and cash equivalents - own cash in subsidiaries disposed
- own cash in subsidiary sold
- fiduciary cash in subsidiary sold
Cash inflow on disposal during the year
Total
£’000
32,495
(8,548)
(9,196)
14,751
FINANCIAL STATEMENTS
The deferred proceeds of £10,570,000 include an amount of £4,269,000 based upon the balance sheet positions at completion and an amount
of £6,301,000 contingent upon the recovery of certain assets, the majority of which were included in the final closing balance sheet of the company
disposed of. The contingent consideration of £6,301,000 is recognised as an available-for-sale asset. Including the cost on disposal of £3,484,000,
the net loss is £46,000.
CORPORATE GOVERNANCE
Trade and other payables
Provisions for liabilities and charges
Net assets at disposal
Gain on disposal
Proceeds on disposal
STRATEGIC REPORT
Goodwill
Property, plant and equipment
Other intangible assets
Trade and other receivables
Cash and cash equivalents
- own cash
- fiduciary cash
Insurance payables
Fair value
£’000
15,846
591
3,553
13,410
OVERVIEW
Net assets and proceeds of disposal
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 155
FINANCIAL STATEMENTS
30. BUSINESS DISPOSALS CONTINUED
Other disposals
During the year the Group completed other disposals, none of which were individually significant.
Net assets and proceeds of disposal
Total
£’000
Goodwill
Property, plant and equipment
Other intangible assets
Trade and other receivables
Cash and cash equivalents
- own cash
- fiduciary cash
Insurance payables
1,705
176
224
366
Trade and other payables
Current taxation
Non-controlling interests
Net assets at disposal
Exchange gains recycled from exchange reserves
Equity movement on transactions with non-controlling interests
Loss on disposal
Proceeds on disposal
(894)
90
(31)
2,130
325
32
(770)
1,717
Deferred proceeds
Cash inflow on disposal during the year
Total consideration
Total
£’000
547
1,170
1,717
494
286
(286)
Total
£’000
1,170
Disposal consideration settled in cash
Cash and cash equivalents - own cash in subsidiaries disposed
- own cash in subsidiary sold
- fiduciary cash in subsidiary sold
Cash inflow on disposal during the year
(494)
(286)
390
Including the cost on disposal of £844,000, the net loss is £1,614,000.
Group summary of cash flows
Disposal consideration settled in cash
Cash and cash equivalents - own cash in subsidiaries disposed
- own cash in subsidiary sold
- fiduciary cash in subsidiary sold
Cash inflow on disposal during the year
156Jardine Lloyd Thompson Group plc Annual Report 2016
Thistle
£’000
32,495
Others
£’000
1,170
Total
£’000
33,665
(8,548)
(9,196)
14,751
(494)
(286)
390
(9,042)
(9,482)
15,141
31. RETIREMENT BENEFIT OBLIGATIONS
The pension service costs accrued for the year are as follows:
Defined benefit schemes
Defined contribution schemes
UK Schemes
2016
2015
£’000
£’000
20,824
21,265
20,824
21,265
Overseas Schemes
2016
2015
£’000
£’000
487
2,630
19,254
15,723
19,741
18,353
Total
2016
£’000
487
40,078
40,565
OVERVIEW
The Group operates a number of pension schemes throughout the world, the most significant of which are of the defined benefit type and operate
on a funded basis. The principal pension schemes are the Jardine Lloyd Thompson UK Pension Scheme, the JLT (USA) Incentive Savings Plan, the
JLT (USA) Employee Retirement Plan, the JLT (USA) Stable Value Plan, the Pension Plan for Employees of Jardine Lloyd Thompson Canada Inc and
the Jardine Lloyd Thompson Ireland Limited Pension Fund.
2015
£’000
2,630
36,988
39,618
With effect from 1 December 2006 the defined benefit section of the Scheme was amended to cease future benefits accruals. Under the Scheme
as amended, a participant’s normal retirement benefit will be determined based on their service and compensation prior to 1 December 2006.
The latest finalised triennial actuarial funding valuation of the Jardine Lloyd Thompson UK Pension Scheme was undertaken as at 31 March 2014.
This valuation was updated to 31 December 2016 by a qualified actuary employed by the Group. An updated triennial actuarial valuation will be
performed in 2017.
STRATEGIC REPORT
The Jardine Lloyd Thompson UK Pension Scheme has two sections; one providing defined benefits and the other providing benefits on a defined
contribution basis. The assets of the scheme are held in a trustee administered fund separate from the Company.
The principal overseas schemes are:
b) The JLT (USA) Employee Retirement Plan which is a defined benefit scheme. The latest actuarial valuation was undertaken at 1 January 2016
by independent actuaries. With effect from 31 July 2005 the plan was amended to eliminate future benefit accruals. Under the plan as amended,
a participant’s normal retirement benefit will be determined based on their service and compensation prior to 31 July 2005. The average
compensation and length of service will be determined as at 31 July 2005.
The Group has made a settlement gain of £127,000 (2015: £492,000) relating to non-routine lump sum payments and it is disclosed under
the curtailment gain.
d) The Pension Plan for Employees of Jardine Lloyd Thompson Canada Inc. has two sections; one providing defined benefits based primarily
on the 2007 pensionable salary and the other providing benefits on a defined contribution basis. The JLT pension contribution for the defined
contribution plan ranges from 3% to 13% based on age and service. The company makes additional contribution to defined contribution plans,
not exceeding 2% of pensionable earnings, if the member makes a matching voluntary contributions. The Defined Benefit Pension Plan was
amended on 1 January 2009 in order to close the plan to new entrants and eliminate future benefit accruals from this date forward.
The JLT Canada Defined Pension Plans last formal valuation was undertaken as of 31 December 2013 by a qualified third party actuary.
The next actuarial valuation is due and being carried out as part of the current renewal of the Scheme for 1 January 2017.
Jardine Lloyd Thompson Group plc Annual Report 2016 157
SHAREHOLDER INFORMATION
e)The Jardine Lloyd Thompson Ireland Limited Pension Fund, which is a defined benefit pension scheme, has its assets held in a separately
administered fund. The contributions to it are agreed between the Trustees and the Company, based on the advice of an appropriately qualified
independent actuary. The most recent triennial actuarial valuation for funding purposes was carried out by the appropriately qualified independent
actuary as at 1 January 2014. With effect from 30 November 2008, the scheme was closed to new entrants and future service accrual ceased.
The company also operates a defined contribution scheme, namely The Jardine Lloyd Thompson 2004 Retirement Benefits Scheme, which is
held and administered under a separate trust.
FINANCIAL STATEMENTS
c) The JLT (USA) Stable Value Plan. The latest actuarial valuation was undertaken as at 1 January 2016 by independent actuaries. With effect from
31 March 2016 the Plan was amended to eliminate future benefit accruals. Under the Plan as amended, a participant's normal retirement benefit
will be determined based on their service and compensation prior to 31 March 2016. The average compensation and length of service will be
determined as at 31 March 2016. The Plan was closed in 2016, however the Group made an allowance for the upcoming closure of the Stable
Value Plan to future accrual in the 2015 accounts. As a result, a curtailment gain of £506,000 was recognised in 2015. No further gain or loss
on curtailment was recognised in 2016.
CORPORATE GOVERNANCE
a) The JLT (USA) Incentive Savings Plan which is a defined contribution scheme. Employees may contribute up to 50% of their salary subject to
an IRS maximum each year USD18,000 in 2016 and the Group contributes at a rate of 100% of each 1% contributed by the employee up to a
maximum employee contribution of 4%, up to a maximum of USD10,600. Employees aged over 50 may make “catch-up” contributions subject
to an IRS maximum each year USD6,000 in 2016.
FINANCIAL STATEMENTS
31. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
The principal actuarial assumptions used were as follows:
At 31 December 2016
Rate of increase in salaries
Rate of increase of pensions in payment (a)
Discount rate (b)
Inflation rate
Revaluation rate for deferred pensioners
UK
Scheme
n/a
3.24%
2.80%
3.34%
2.34%
US
Scheme
n/a
n/a
4.00%
2.00%
n/a
Canadian
Scheme
3.25%
3.25%
3.90%
2.25%
n/a
Irish
Scheme
n/a
3.00%
1.90%
1.50%
1.50%
US Stable
Value Plan
n/a
n/a
3.35-3.40%
2.00%
n/a
21.8
21.3
22.0
22.8
21.3
UK
Scheme
n/a
2.82%
3.86%
2.92%
1.92%
US
Scheme
n/a
n/a
4.20%
2.00%
n/a
Canadian
Scheme
2.50%
3.25%
4.00%
2.25%
n/a
Irish
Scheme
n/a
3.00%
2.50%
1.75%
1.75%
US Stable
Value Plan
n/a
n/a
3.50-3.55%
2.00%
n/a
21.7
21.7
22.0
22.8
21.7
Mortality - life expectancy at age 65 for male members: (c)
Aged 65 at 31 December (years)
At 31 December 2015
Rate of increase in salaries
Rate of increase of pensions in payment (a)
Discount rate (b)
Inflation rate
Revaluation rate for deferred pensioners
Mortality - life expectancy at age 65 for male members: (c)
Aged 65 at 31 December (years)
a)In respect of the UK scheme, where there are inflation linked benefits, the inflation increases are limited to a maximum of 5% per annum (some
are limited to 3% per annum).
(b) In line with IAS 19 (Revised) the expected return on scheme assets assumption is the same as the discount rate assumed for the liabilities.
(c)Mortality assumptions for the UK scheme are based on 105% of the S2PxA tables, with improvements based on CMI 2015 tables with a 1.25%
p.a. long-term rate of improvement.
Mortality assumptions for the US Scheme and US Stable Value Plan are based on the RP2014 Mortality Table with MP2016 Projections.
Mortality assumptions for the Canadian Scheme are based on the CPM-2014 Private Table with generational projection using scale CPMB1D2014.
ortality assumptions for the Irish Scheme, assume that deaths after retirement will be in accordance with standard mortality tables 90%
M
PxA92C=2004 with allowance for expected future mortality improvements. There is assumed to be no pre-retirement mortality.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Discount rate
Inflation rate
Life expectancy
Impact on defined benefit obligation
Change in
Change to
assumptions
obligation
decrease of 0.1%
increase of 2.0%
increase of 0.1%
increase of 1.0%
increase of 1 year
increase of 4.0%
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely
to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end
of the reporting period) has been applied as when calculating the pension liability recognised within the balance sheet. Note this sensitivity is for
defined benefit obligations only and does not consider the impact that changes in assumptions may have on the assets, in particular the assets
held in respect of the insured pensioners.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.
158Jardine Lloyd Thompson Group plc Annual Report 2016
31. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
Defined benefit obligation
Overseas Schemes
2016
2015
£’000
£’000
(72,315)
(61,940)
58,399
50,500
(13,916)
(11,440)
Total
2016
2015
£’000
£’000
(746,344)
(638,283)
547,932
507,896
(198,412)
(130,387)
UK Schemes
2016
2015
£’000
£’000
(118,947)
(162,620)
(4,778)
(5,902)
10,952
11,117
(71,723)
38,458
(184,496)
(118,947)
Overseas Schemes
2016
2015
£’000
£’000
(11,440)
(16,415)
(2,169)
(396)
(1,274)
(2,421)
886
3,101
81
4,691
(13,916)
(11,440)
Total
2016
2015
£’000
£’000
(130,387)
(179,035)
(2,169)
(396)
(6,052)
(8,323)
11,838
14,218
(71,642)
43,149
(198,412)
(130,387)
UK Schemes
2016
2015
£’000
£’000
(576,343)
(641,759)
(21,435)
(22,366)
(121,841)
50,051
45,590
37,731
(674,029)
(576,343)
Overseas Schemes
2016
2015
£’000
£’000
(61,940)
(78,044)
(11,626)
(870)
(487)
(2,630)
(2,502)
(2,507)
127
998
1,315
5,773
(1,120)
5,453
3,918
9,887
(72,315)
(61,940)
Total
2016
2015
£’000
£’000
(638,283)
(719,803)
(11,626)
(870)
(487)
(2,630)
(23,937)
(24,873)
127
998
1,315
5,773
(122,961)
55,504
49,508
47,618
(746,344)
(638,283)
UK Schemes
2016
2015
£’000
£’000
457,396
479,139
17,034
16,722
50,118
(11,593)
10,952
11,117
(45,590)
(37,731)
(377)
(258)
489,533
457,396
Overseas Schemes
2016
2015
£’000
£’000
50,500
61,629
9,457
474
2,031
2,027
1,201
(762)
886
3,101
(3,918)
(9,887)
(1,315)
(5,773)
(443)
(309)
58,399
50,500
Total
2016
2015
£’000
£’000
507,896
540,768
9,457
474
19,065
18,749
51,319
(12,355)
11,838
14,218
(49,508)
(47,618)
(1,315)
(5,773)
(820)
(567)
547,932
507,896
OVERVIEW
Present value of funded obligations
Fair value of plan assets
Net liability recognised in the balance sheet
UK Schemes
2016
2015
£’000
£’000
(674,029)
(576,343)
489,533
457,396
(184,496)
(118,947)
Reconciliation of defined benefit liability
STRATEGIC REPORT
Opening defined benefit liability
Exchange differences
Pension expense
Employer contributions
Total (loss)/gain recognised in reserves
Net liability recognised in the balance sheet
Reconciliation of defined benefit obligation
CORPORATE GOVERNANCE
Opening defined benefit obligation
Exchange differences
Service cost
Interest cost
Curtailment gain
Settlement amount
(Loss)/gain on defined benefit obligation
Actual benefit payments
Closing defined benefit obligation
Reconciliation of fair value of assets
Jardine Lloyd Thompson Group plc Annual Report 2016 159
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTS
Opening value of assets
Exchange differences
Expected return on assets
Actuarial gain/(loss)
Employer contributions
Actual benefit payments
Settlement amount
Expenses
Closing value of assets
FINANCIAL STATEMENTS
31. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
The analysis of the fair value of the scheme assets is as follows:
At 31 December 2016
Equities
Bonds
Investment funds
Qualifying insurance policies
Other assets
Cash
Total market value
UK Schemes
Value
Value
£’000
%
186,674
38%
95,360
19%
205,719
42%
1,780
1%
489,533
100%
Overseas Schemes
Value
Value
£’000
%
34,795
60%
10,454
18%
3,827
6%
9,323
16%
58,399
100%
At 31 December 2015
Equities
Bonds
Investment funds
Qualifying insurance policies
Other assets
Cash
Total market value
UK Schemes
Value
Value
£’000
%
174,843
38%
99,079
22%
176,996
39%
6,478
1%
457,396
100%
Overseas Schemes
Value
Value
£’000
%
32,395
64%
14,848
30%
2,656
5%
601
1%
50,500
100%
Other assets include hedge funds and property. The schemes do not hold cash as a strategic investment and cash balances at 31 December
represent working balances.
Reconciliation of return on assets
Expected return on assets
Actuarial gain/(loss)
Actual return on assets
UK Schemes
2016
2015
£’000
£’000
17,034
16,722
50,118
(11,593)
67,152
5,129
Overseas Schemes
2016
2015
£’000
£’000
2,031
2,027
1,201
(762)
3,232
1,265
Total
2016
£’000
19,065
51,319
70,384
2015
£’000
18,749
(12,355)
6,394
Overseas Schemes
2016
2015
£’000
£’000
Total
2016
£’000
2015
£’000
The amounts recognised in the consolidated income statement are as follows:
UK Schemes
2016
2015
£’000
£’000
Service cost
Settlement and curtailment gain
Expenses
Total (included within salaries and associated expenses)
Interest cost
Expected return on assets
Total (included within finance costs)
Expenses before taxation
160Jardine Lloyd Thompson Group plc Annual Report 2016
-
-
(487)
127
(2,630)
998
(487)
127
(2,630)
998
(377)
(377)
(21,435)
17,034
(4,401)
(4,778)
(258)
(258)
(22,366)
16,722
(5,644)
(5,902)
(443)
(803)
(2,502)
2,031
(471)
(1,274)
(309)
(1,941)
(2,507)
2,027
(480)
(2,421)
(820)
(1,180)
(23,937)
19,065
(4,872)
(6,052)
(567)
(2,199)
(24,873)
18,749
(6,124)
(8,323)
31. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
The amounts included in the consolidated statement of comprehensive income are as follows:
Overseas Schemes
2016
2015
£’000
£’000
(1,120)
5,453
1,201
(762)
81
4,691
(32,756)
(32,837)
Total
2016
2015
£’000
£’000
(122,961)
55,504
51,319
(12,355)
(71,642)
43,149
(309,918)
(238,276)
OVERVIEW
(Loss)/gain on defined benefit obligation
Actuarial gain/(loss)
Total actuarial (loss)/gain recognised
Cumulative actuarial loss recognised
UK Schemes
2016
2015
£’000
£’000
(121,841)
50,051
50,118
(11,593)
(71,723)
38,458
(277,162)
(205,439)
The five year history of experience adjustments is as follows:
Defined benefit obligation at end of year
Fair value of plan assets
Deficit in the schemes
2016
£’000
(674,029)
489,533
(184,496)
2015
£’000
(576,343)
457,396
(118,947)
2014
£’000
(641,759)
479,139
(162,620)
2013
£’000
(583,745)
458,727
(125,018)
2012
£’000
restated
(574,360)
463,621
(110,739)
STRATEGIC REPORT
UK Schemes
Difference between the actual and expected return on plan assets
- amount (£’000)
Experience (gain)/loss on plan liabilities
- amount (£’000)
-e
xpressed as a percentage of the present value of the plan
liabilities
50,118
(11,593)
16,437
(22,217)
32,889
10.24%
(2.53%)
3.43%
(4.84%)
7.09%
(7,009)
(8,840)
1,592
1,364
11,890
1.04%
1.53%
(0.25%)
(0.23%)
(2.07%)
Overseas Schemes
2015
£’000
(61,940)
50,500
(11,440)
2014
£’000
(78,044)
61,629
(16,415)
2013
£’000
(60,566)
54,957
(5,609)
2012
£’000
restated
(68,937)
48,285
(20,652)
Difference between the actual and expected return on plan assets
- amount (£’000)
1,201
- expressed as a percentage of the plan assets
2.06%
(762)
(1.51%)
2,450
3.98%
6,863
12.49%
3,034
6.28%
(4,450)
(1,427)
1,265
377
(3,925)
6.15%
2.30%
(1.62%)
(0.62%)
5.69%
Defined benefit obligation at end of year
Fair value of plan assets
Deficit in the schemes
Experience (gain)/loss on plan liabilities
- amount (£’000)
-e
xpressed as a percentage of the present value of the plan
liabilities
UK Scheme
Irish Scheme
Total expected contributions
Defined
benefit
£’000
15,500
892
16,392
Jardine Lloyd Thompson Group plc Annual Report 2016 161
SHAREHOLDER INFORMATION
The expected employer contributions in respect of the year ending 31 December 2017 are as follows:
FINANCIAL STATEMENTS
2016
£’000
(72,315)
58,399
(13,916)
CORPORATE GOVERNANCE
- expressed as a percentage of the plan assets
FINANCIAL STATEMENTS
32. RELATED-PARTY TRANSACTIONS
Transactions with the Jardine Matheson Group
As at 10 February 2017 the Jardine Matheson Group owns 40.16% of the Company’s shares via its wholly-owned subsidiary JMH Investments
Limited. The remaining 59.84% of the shares are widely held.
In the normal course of business a number of the Group’s subsidiaries undertake, on an arm’s-length basis, a variety of transactions with the Jardine
Matheson Group (JMG) and its associates (JMA).
The following transactions were carried out during the year:
Income
Fees and commissions
Expenditure
Administrative expenses
Year-end balances arising from these transactions:
Trade and other receivables
Trade and other payables
JMG
£’000
2016
JMA
£’000
Total
£’000
JMG
£’000
2015
JMA
£’000
Total
£’000
3,999
1,941
5,940
3,472
1,794
5,266
1,598
-
1,598
1,729
-
1,729
962
(82)
880
642
642
1,604
(82)
1,522
522
(58)
464
253
(1)
252
775
(59)
716
Transactions with associates
The following transactions were carried out with associates during the year:
Income
Fees and commissions
Finance income
Interest receivable - own funds
Expenditure
Administrative expenses
Year-end balances arising from these transactions:
Trade and other receivables
Trade and other payables
Transactions with key management
The related-party disclosure regarding key management is detailed in note 6 on page 125.
162Jardine Lloyd Thompson Group plc Annual Report 2016
2016
£’000
2015
£’000
3,238
5,994
8
194
19
67
4,966
(1)
4,965
5,115
(140)
4,975
33. COMMITMENTS
Capital commitments
OVERVIEW
Capital expenditure contracted for 2016 at the balance sheet date amounts to £1,293,000. In 2015 there was no significant capital
expenditure contracted.
Operating lease commitments - where a Group company is the lessee
The future aggregate minimum lease payments under a non-cancellable operating leases are as follows:
2016
£’000
42,981
146,090
300,912
489,983
No later than 1 year
Later than 1 year and no later than 5 years
Later than 5 years
2015
£’000
24,987
121,441
264,356
410,784
Sub-leases
STRATEGIC REPORT
The Group leases various offices under non-cancellable operating lease agreements. The principal lease term on the Group’s headquarters at The
St Botolph Building is for 22 years from the balance sheet date. Rents will be reviewed on 1 October 2018, and every 5 years thereafter, and will be
calculated by reference to the prevailing market rate.
Operating lease commitments - where a Group company is the lessor
The future aggregate minimum lease payments under non-cancellable operating sub-leases are as follows:
2015
£’000
143
370
513
Legal and other loss contingencies
Jardine Lloyd Thompson Group plc and its subsidiaries are subject to various claims and legal proceedings and disputes including alleged
errors and omissions in connection with the placement of insurance and reinsurance risks and consulting services.
IFRS requires that liabilities for contingencies be recorded when it is probable that a liability has been incurred before the balance sheet date and
the amount can be reasonably estimated. Significant management judgement is required to comply with this guidance. The Group analyses its
litigation exposure based on available information, including external legal consultation where appropriate, to assess its potential liability.
As at 31 December 2016, the Group has contingent liabilities in respect of guarantees and letters of credit given on behalf of Group companies
amounting to £12,024,000 (2015: £7,113,000).
In the UK, the Group is working with the UK Financial Conduct Authority following a market-wide thematic review of financial advice provided to
customers who were offered enhanced transfer value products (‘ETVs’). Pending the outcome of the UK Financial Conduct Authority’s review a
provision has been created for the estimated administration costs of completing the work for this review. It is too early to determine whether any
further liability exists.
On 27 January 2017, the Group announced the acquisition of a 50.1% ownership interest in CRP Holding Company LLC, the holding company
of Construction Risk Partners LLC, one of the leading construction risk and surety specialty brokers in the USA, for a consideration of USD
50,000,000 subject to adjustment.
Jardine Lloyd Thompson Group plc Annual Report 2016 163
SHAREHOLDER INFORMATION
34. SUBSEQUENT EVENTS
FINANCIAL STATEMENTS
On the basis of present information, amounts already provided, availability of insurance coverages and legal advice received, it is the opinion
of management that the disposition or ultimate determination of such claims will not have a material adverse effect on the consolidated financial
position of the Group. However, it is possible that future results of operations or cash flows for any annual period could be materially affected by
an unfavourable resolution of these matters.
CORPORATE GOVERNANCE
No later than 1 year
Later than 1 year and no later than 5 years
2016
£’000
151
231
382
FINANCIAL STATEMENTS
35. SUBSIDIARIES AND ASSOCIATED COMPANIES
The following were the subsidiaries and associated undertakings at 31 December 2016. Unless otherwise shown, the capital of each company
is wholly-owned, is in ordinary shares and the principal country of operation is the country of incorporation/registration.
Company
% Holding
(if less than
100%)
Registered Office address
Notes
United Kingdom
Agnew Higgins Pickering & Company Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Aldgate Trustees Ltd
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Aviary Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Burke Ford Group Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Burke Ford Trustees (Leicester) Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
CPRM Limited
Lochside House, 7 Lochside Avenue, Edinburgh, EH12 9DJ, Scotland
Echelon Consulting Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Expacare Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Fly Fizzi Limited
33.00
Pyers Croft, Compton, Chichester, West Sussex, PO18 9EX, England
GCube Underwriting Limited
155 Fenchurch Street, London, EC3M 6AL, England
Gracechurch Trustees Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Gresham Pension Trustees Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Hayward Aviation Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
iimia (Holdings) Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Independent Trustee Services Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Ingham & Co (Liabilities) Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Ingham (Holdings) Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Jardine (Lloyd's Underwriting Agents) Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Jardine Lloyd Thompson Reinsurance Holdings
Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Jardine Lloyd Thompson Reinsurance Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Jardine Reinsurance Management Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
JIB Group Holdings Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JIB Group Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JIB Overseas Holdings Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JIB UK Holdings Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JIS (1974) Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Actuaries and Consultants Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Advisory Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Benefit Consultants Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Benefit Solutions Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Capital Markets Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
JLT Colombia Retail Limited
JLT Colombia Wholesale Limited
3
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
91.87
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Consultants & Actuaries Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Corporate Services Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT EB Holdings Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
164Jardine Lloyd Thompson Group plc Annual Report 2016
3
35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED
Company
% Holding
(if less than
100%)
Registered Office address
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Financial Consultants Ltd
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT iimia Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
JLT Insurance Group Holdings Ltd
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Investment Management Limited
JLT LATAM (Southern Cone) Wholesale Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
51.00
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Management Services Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Mexico Holdings Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Nominees Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Pension Trustees Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Pensions Administration Holdings Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Pensions Administration Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
80.07
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Peru Wholesale Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Quest Trustee Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
JLT Re Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Reinsurance Brokers Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Secretaries Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Specialty Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Trustees (Southern) Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Trustees Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT UK Investment Holdings Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
JLT Wealth Management (Falmouth) Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
JLT Wealth Management Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Leadenhall Independent Trustees Ltd
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Lloyd & Partners Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Marine, Aviation & General (London) Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
25.00
10 Eastcheap, London, EC3M 1AJ, England
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Pavilion Insurance Management Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Pavilion Insurance Network Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Pension Capital Strategies Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Personal Pension Trustees Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Pet Animal Welfare Scheme Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
PIN Finance Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Portland Pensions Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Portsoken Trustees (No. 2) Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Portsoken Trustees Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Premier Pension Trustees Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Profund Solutions Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Jardine Lloyd Thompson Group plc Annual Report 2016 165
SHAREHOLDER INFORMATION
P3 Corporate Pensions Software Limited
FINANCIAL STATEMENTS
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
CORPORATE GOVERNANCE
JLT Peru Retail Limited
M.P. Bolshaw and Company Limited
STRATEGIC REPORT
JLT Latin American Holdings Limited
JLT Peru Reinsurance Solutions Limited
OVERVIEW
JLT EB Services Limited
Notes
FINANCIAL STATEMENTS
35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED
Company
% Holding
(if less than
100%)
Registered Office address
Renewable Energy Loss Adjusters Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
The Hayward Holding Group Limited
The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England
Thistle Underwriters Limited
BDO LLP, 55 Baker Street, London, W1U 7EU, England
Notes
Angola
Jardines PF (Angola) Lda
Rua Lucrecia Paim 9, PO Box 239, Luanda, Republica de Angola
Anguilla
JLT Towner Insurance Management (Anguilla)
Limited
Babrow's Commercial Complex, The Valley, AI-2640, Anguilla
Argentina
JLT Re Argentina Corredores de Reaseguros S.A.
51.00
Della Paolera 265, Torre Boston, 24th Floor Retiro, C.A.B.A, Argentina
Australia
AssetVal Pty Ltd
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Australian Insurance Brokers Pty Ltd
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Broderick Piller Pty Ltd
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Echelon Australia Pty Limited
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Group Promoters Pty Limited
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Jardine Lloyd Thompson Australia Pty Limited
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
JLT Group Services Pty Limited
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Jardine Lloyd Thompson Pty Limited
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
JLT Re Pty Ltd
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Local Government Insurance Brokers Pty Limited
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Premium Services Australia Pty Limited
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
The Recovre Group Pty Ltd
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Risk Management Australia Pty Limited
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Thistle Underwriting Services Pty Ltd
Level 11, 66 Clarence Street, Sydney NSW 2000, Australia
Austria
GrECo International Holding AG
20.00
1190 Vienna, Elmargasse 2-4, Postfach 299, Vienna, Austria
Isosceles Insurance (Barbados) Limited
90.91
1st Floor, Limegrove Centre, Holetown, St James, Barbados
JLT Holdings (Barbados) Ltd
90.91
1st Floor, Limegrove Centre, Holetown, St James, Barbados
JLT Insurance Management (Barbados) Ltd
90.91
1st Floor, Limegrove Centre, Holetown, St James, Barbados
JLT Management (Barbados) Ltd
90.91
1st Floor, Limegrove Centre, Holetown, St James, Barbados
JLT Trust Services (Barbados) Limited
90.91
1st Floor, Limegrove Centre, Holetown, St James, Barbados
Barbados
Bermuda
Agnew Higgins Pickering & Co. (Bermuda) Ltd
Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda
Eagle & Crown Limited
Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda
Evolution Management Ltd
Isosceles Insurance Ltd
Crawford House, 50 Cedar Avenue, Hamilton, HM11, Bermuda
98.36
Crawford House, 50 Cedar Avenue, Hamilton, HM11, Bermuda
JLT Holdings (Bermuda) Ltd.
Crawford House, 50 Cedar Avenue, Hamilton, HM11, Bermuda
JLT Bermuda Ltd
Crawford House, 50 Cedar Avenue, Hamilton, HM11, Bermuda
JLT Insurance Management (Bermuda) Limited
Crawford House, 50 Cedar Avenue, Hamilton, HM11, Bermuda
Sail Insurance Company Limited
Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda
Secure Limited
Jardine House, 33-35 Reid Street, Hamilton, Bermuda
166Jardine Lloyd Thompson Group plc Annual Report 2016
3
35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED
Company
% Holding
(if less than
100%)
Notes
OVERVIEW
JLT Re Limited
Registered Office address
Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda
Brazil
78.57
Avenida Beira Mar no. 200, 8º andar (parte), Centro, Rio de Janeiro, Brazil
78.57
Rua Sete de Abril, 230 - 2 andar, cep-01044-000 Sao Paulo, Brazil
JLT RE Brasil, Administracao e Corretagem de
Resseguros Ltda
78.57
Avenida Beira Mar no. 200, 8º andar (parte), Centro, Rio de Janeiro, Brazil
JLT SCK Affinity Administracao e Corretora de
Seguros Ltda.
58.92
Ave. Presidente Wilson, 231, 74.107.483/0001-64, Centro, Rio de Janeiro,
Brazil
58.92
Ave. Presidente Wilson, 231, 74.107.483/0001-64, Centro, Rio de Janeiro,
Brazil
JLT SCK Corretora e Administradora de Seguros
1
STRATEGIC REPORT
JLT Brasil Holdings Participacoes Ltd
JLT do Brasil Corretagem de Seguros Ltda
Canada
Jardine Lloyd Thompson Canada Inc
Suite 2900, 550 Burrard Street Vancouver BC V6C 0A3, Canada
Cayman Islands
74.50
Maples Corporate Services Ltd, Ugland House , PO Box 309, Grand
Cayman, KY1 1104, Cayman Islands
JLT Chile Corredores de Reaseguro Limitada
50.10
Costanera Sur 2730, Piso 14, Las Condes, Santiago, Chile
Alta SA
50.10
Costanera Sur 2730, Piso 14, Las Condes, Santiago, Chile
JLT Asesorias Ltda
50.10
Costanera Sur 2730, Piso 14, Las Condes, Santiago, Chile
Colombian Insurance Broking Wholesale Limited
Chile
JLT-Orbital Corredores de Seguros Limitada
CORPORATE GOVERNANCE
JLT Chile Holdings SpA
Miraflores 222 piso 28 Santiago, Chile
50.10
Costanera Sur 2730, Piso 14, Las Condes, Santiago, Chile
China
The Pinnacle, 17 Zhu Jiang Road West, Tianhe District, Guangzhou 510623,
China
JLT Insurance Brokers Co., Limited
Colombia
85.00
Carrera 7 # 71- 21 , Torre B, Bogota, Colombia
Beneficios Integrales Oportunos SA
68.00
Calle 72 N° 10 – 07 Of. 1004. Bogota, Colombia
JLT Re Colombia, Corredores Colombianos de
Reaseguros
91.87
Calle 742 No. 10-51 PH, Bogota, Colombia
Jardine Lloyd Thompson Valencia y Iragorri
Corredores de Seguros SA
68.00
Calle 72 N° 10 – 07 Of. 1004. Bogota, Colombia
FINANCIAL STATEMENTS
JLT Affinity Colombia Solutions SAS
Denmark
JLT Specialty Insurance Broker A/S
Hellerupgardvej 18, 2900 Hellerup, Denmark
France
JLT France Holdings
JLT Energy (France) SAS
24/26 Rue de la Pepiniere, 75008, Paris, France
35.40
JLT PLA
18 Rue de Courcelles, 75008, Paris, France
24/26 Rue de la Pépinière, 75008, Paris, France
4
Germany
Arnulfstrabe 19, 80335, Munchen, Germany
Guernsey
Isosceles PCC Limited
Mill Court, La Charroterie, St Peter Port, GY1 4ET, Guernsey
JLT Insurance Management (Guernsey) Limited
Mill Court, La Charroterie, St Peter Port, GY1 4ET, Guernsey
Hong Kong
25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay,
Hong Kong
JLT Agencies Limited
JLT Essential Holdings Limited
51.00
25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay,
Hong Kong
Jardine Lloyd Thompson Group plc Annual Report 2016 167
SHAREHOLDER INFORMATION
JLT Reinsurance Brokers GmbH
FINANCIAL STATEMENTS
35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED
Company
% Holding
(if less than
100%)
Jardine ShunTak Insurance Brokers Limited
50.00
25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay,
Hong Kong
Jardine Lloyd Thompson PCS Limited
75.00
20th Floor, Cityplaza Four, 12 Taikoo Wan Road, Taikoo Shing, Island East,
Hong Kong
Registered Office address
JLT Agency Services Limited
25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay,
Hong Kong
Jardine Lloyd Thompson Limited
25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay,
Hong Kong
Lambert Brothers Holdings Limited
25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay,
Hong Kong
Lambert Brothers Insurance Brokers (Employee
Benefits) Ltd
25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay,
Hong Kong
Lambert Brothers Insurance Brokers (Hong Kong)
Ltd
25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay,
Hong Kong
JLT Insurance Agencies Limited
25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay,
Hong Kong
India
JLT Independent Insurance Brokers Private Limited
49.00
Peninsula Corporate Park, Ganpat Rao Kadam Marg, Off, Senapati Bapat
Marg, Mumbai, 400013, India
Jardine Lloyd Thompson Insurance Consultants
Limited
92.61
E-2/16, 2nd Floor, White House, Ansari Road, Darya Ganj, New Dehli,
110002, India
1001-A, Supreme Business Park, Supreme City, Hiranandani Gardens,
Powai, Mumbai, Maharashtra, 400076, India
Jardine Lloyd Thompson India Private Limited
Indonesia
PT Jardine Lloyd Thompson
80.00
World Trade Center, Jl. Jendral Sudirman Kav. 29-31, Jakarta 12920,
Indonesia
Antam Office Park Tower B, JI Letjen TB Simatupang No.1 RT 010 RW 004
Kel. Tanjung Barat Kec. Jagakarsa Selatan, Indonesia
PT Nexus Asia Pacific
Ireland
JLT Risk Management Limited
Cherrywood Business Park, Loughlinstown, Dublin 18, Ireland
Freedom Trust Services Limited
Cherrywood Business Park, Loughlinstown, Dublin 18, Ireland
JLT Intellectual Property Limited
Cherrywood Business Park, Loughlinstown, Dublin 18, Ireland
International Loss Control Services Limited
Cherrywood Business Park, Loughlinstown, Dublin 18, Ireland
Jardine Pension Trustees Ireland Limited
Cherrywood Business Park, Loughlinstown, Dublin 18, Ireland
Jardine Lloyd Thompson Ireland Holdings Limited
Cherrywood Business Park, Loughlinstown, Dublin 18, Ireland
Jardine Lloyd Thompson Ireland
Cherrywood Business Park, Loughlinstown, Dublin 18, Ireland
JLT Financial Planning Limited
Cherrywood Business Park, Loughlinstown, Dublin 18, Ireland
JLT Insurance Brokers Ireland Limited
Cherrywood Business Park, Loughlinstown, Dublin 18, Ireland
JLT Financial Services Limited
Cherrywood Business Park, Loughlinstown, Dublin 18, Ireland
Italy
MAG JLT SpA
25.00
Francesco Crispi 74, Naples, Italy
Japan
JLT Holdings Japan Limited
Halifax Bldg. 4F, 16-26 Roppoongi 3-chome, Minato-ku, Tokyo, Japan
JLT Risk Services Japan Limited
Halifax Bldg. 4F, 16-26 Roppoongi 3-chome, Minato-ku, Tokyo, Japan
JLT Japan Limited
Halifax Bldg. 4F, 16-26 Roppoongi 3-chome, Minato-ku, Tokyo, Japan
Republic of Korea
Jardine Lloyd Thompson Korea Limited
(Gongpyeong-dong), 16th Floor, 47, Jongno-gu, Seoul, Republic of Korea
Malaysia
Echelon Claims Consultants Sdn Bhd
168Jardine Lloyd Thompson Group plc Annual Report 2016
Faber Imperial Court, 21A Jalan Sultan Ismail, 50250, Kuala Lumpur,
Malaysia
Notes
35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED
Company
% Holding
(if less than
100%)
Registered Office address
Menara Shell, No 211 Jalan Tun Sambathan 50470 Kuala Lumpur, Malaysia
JLT Re Labuan Limited
Saguking Commercial Building, Jalan Patau-Patau 87000 Labuan FT,
Malaysia
Jardine Lloyd Thompson Sdn Bhd
49.00
Faber Imperial Court, 21A Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia
JLT Insurance Management Malta Limited
34.00
Abate Rigord Street, Ta'Xbiex, XBX 1111, Malta
Manoel Management Services Ltd
34.00
Abate Rigord Street, Ta'Xbiex, XBX 1111, Malta
92.61
c/o International Management (Mauritius) Ltd, Les Cascades,
Edith Cavell Street, Port Louis, Republic of Mauritius
OVERVIEW
JLT Asia Shared Services Sdn Bhd
Notes
Malta
Mauritius
Mexico
JLT Mexico, Intermediario de Reaseguro, S.A. de
C.V.
Sterling Re Intermediario de Reaseguro, SA de CV
Avenida Insurgentes Sur 1898, Piso 19, Colonia Florida, CP 01030
México City
35.50
Insurgentes, Colonia, Torre 01030, Mexico DF
Netherlands
Schouwburgplein 30-34, 3012 CL, Rotterdam, Netherlands
JLT Asia Holdings BV
Atrium Building, Strawinskylaan 3007, 1077 ZX Amsterdam, Netherlands
JMIB Holdings BV
Atrium Building, Strawinskylaan 3007, 1077 ZX Amsterdam, Netherlands
New Zealand
Alpha Consultants (2002) Limited
Client Provide Limited
Level 5, Tower Centre, 45 Queen Street, Auckland, New Zealand
75.40
Level 5, Tower Centre, 45 Queen Street, Auckland, New Zealand
Echelon New Zealand Limited
Level 5, Tower Centre, 45 Queen Street, Auckland, New Zealand
JLT Holdings (NZ) Limited
Level 5, Tower Centre, 45 Queen Street, Auckland, New Zealand
Jardine Lloyd Thompson Limited
Level 5, Tower Centre, 45 Queen Street, Auckland, New Zealand
Wellnz Limited
75.40
Level 5, Tower Centre, 45 Queen Street, Auckland, New Zealand
CORPORATE GOVERNANCE
JLT Netherlands BV
STRATEGIC REPORT
JI Holdings Limited
Norway
JLT Norway AS
Strandveien 35, 1324 Lysaker, P.O.BOX 142, Norway
JLT Affinity Latam S.A.C.
85.00
Avenida Angamos Oeste 1209, Miraflores, Lima 18, Peru
JLT Corredores de Reaseguros SA
80.10
Avda Santa Maria 110-140, oficina 202. Miraflores, Lima, Peru
JLT Peru Corredores de Seguros SA
91.62
Av, Santo Toribio 173, San Isidro, Lima, Peru
Philippines
Jardine Lloyd Thompson Insurance and Reinsurance
Brokers, Inc.
111 Paseo de Roxas Building, Legaspi Village, Makati City 1229, Philippines
FINANCIAL STATEMENTS
Peru
Russian Federation
Office 226, Building 14, 39 Leningradskiy Prospect, Moscow, Russia
JLT (Insurance Brokers) Limited
Office 226, Building 14, 39 Leningradskiy Prospect, Moscow, Russia
Singapore
Anda Insurance Agencies Pte Ltd
239 Alexandra Road, Singapore 159930
Jardine Lloyd Thompson Private Limited
239 Alexandra Road, Singapore 159930
Jardine Lloyd Thompson Asia Pte Limited
239 Alexandra Road, Singapore 159930
JLT Interactive Pte Ltd
239 Alexandra Road, Singapore 159930
JLTPCS Holdings Pte. Ltd
75.00
239 Alexandra Road, Singapore 159930
Jardine Lloyd Thompson PCS Pte Ltd
75.00
239 Alexandra Road, Singapore 159930
Jardine Lloyd Thompson Group plc Annual Report 2016 169
SHAREHOLDER INFORMATION
Jardine IBR Limited
FINANCIAL STATEMENTS
35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED
Company
% Holding
(if less than
100%)
Registered Office address
JLT Specialty Pte Ltd
239 Alexandra Road, Singapore 159930
JLT Singapore Holdings Pte Ltd
239 Alexandra Road, Singapore 159930
South Africa
Eikos Risk Applications (Pty) Ltd
Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191,
South Africa
JLT Employee Benefits SA (Pty) Ltd
Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191,
South Africa
Jardine Lloyd Thompson (Proprietary) Limited
63.00
Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191,
South Africa
JLT Benefit Solutions SA (Pty) Ltd
Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191,
South Africa
JLT Employee Benefits Holding Company (Pty) LTD
Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191,
South Africa
JLT SA IB Holding Company (Proprietary) Limited
Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191,
South Africa
Spain
March-JLT, Correduria de Seguros y Reaseguros,
S.A.
25.00
Calle de Lagasca 88, Madrid, Spain
65.00
Jakobsbergsgatan 7, 11144 Stockholm, Sweden
Sweden
JLT Re (Northern Europe) AB
JLT Risk Solutions AB
Jakobsbergsgatan 7, 11144 Stockholm, Sweden
Lavaretus Underwriting AB
Jakobsbergsgatan 7, 11144 Stockholm, Sweden
Switzerland
Jardine Lloyd Thompson PCS SA
75.00
Rue de Chantepoulet 1-3, 1201, Geneva, Switzerland
Taiwan
Jardine Lloyd Thompson Limited
13F, 50 Hsin Sheng S. Road, Sec 1, Taipei, Taiwan
Thailand
Jardine Lloyd Thompson Limited
49.00
The 9th Towers, 31st Floor, Rama 9 Road, Huay Khwang, Bangkok, 10310,
Thailand
The 9th Towers, 31st Floor, Rama 9 Road, Huay Khwang, Bangkok, 10310,
Thailand
JLT Life Assurance Brokers Limited
Turkey
75.20
Kavak Sok, Smart Plaza, No: 31/1 B Blok Kat: 4, 34805 Beykoz, Instanbul,
Turkey
Insure Direct (Brokers) LLC
49.00
Burj Al Salam , World Trade Centre Roundabout, Sheikh Zayed Road, Dubai,
P.O.BOX 57006, UAE
Insure Direct - Jardine Lloyd Thompson Limited
61.30
P.O. Box 9731, Dubai, UAE
Jardine Lloyd Thompson PCS (Dubai) Limited
75.00
Gate Precinct Building 5, Dubai International Financial Centre, Dubai,
PO BOX 507288, UAE
JLT Sigorta ve Reasürans Brokerliği A.Ş.
United Arab Emirates
United States
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
1763 Enterprises LLC
Charter Risk Management Services LLC
35.70
141 Weston Street #1981, Hartford, Connecticut 06144
Core Risks Ltd. LLC
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
GCube Insurance Services Inc
CSC Lawyers Indorporating Service, 2710 Gateway Oaks Drive, Suite 150N,
Sacramento, CA95833
Jardine Lloyd Thompson Capital Markets Inc.
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
Jardine Lloyd Thompson Insurance Services, Inc
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
170Jardine Lloyd Thompson Group plc Annual Report 2016
Notes
35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED
Company
% Holding
(if less than
100%)
Registered Office address
JLT Aerospace (North America) Inc
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
JLT Holdings Inc
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
JLT Re Consultants Inc
Corporation Service Company, 1201 Hays Street, Tallahassee, FL 32301
JLT Re (North America) Inc
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
JLT Re Solutions Inc
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
JLT Specialty Insurance Services Inc
91.30
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
JLT Towner Insurance Management (USA) LLC
70.00
100 Main Street, Suite 2, Barre, VT 0541
Weston Preference LLC
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
Worldlink Specialty Insurance Services Inc
CSC Lawyers Indorporating Service, 2710 Gateway Oaks Drive, Suite 150N,
Sacramento, CA95833
STRATEGIC REPORT
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808
OVERVIEW
JLT Facilities, Inc.
Notes
Vietnam
Jardine Lloyd Thompson Limited
5th Floor, CJ Building, 6 Le Thanh Ton Street, District 1, Ho Chi Minh City,
Vietnam
JIB Holdings (Pacific) Limited
Skelton Building, Main Street, Road Town, Tortola, British Virgin Islands
Notes
Thistle Insurance Services Limited was sold on 30 December 2016.
JLT acquired a 50.1% stake in CRP Holding Company, LLC on 27 January 2017.
1 = Quotas;
2 = Preference shares;
3 = Ordinary and Preference shares; and
CORPORATE GOVERNANCE
Virgin Islands, British
4 = Pierre le Blanc changed its name on 1 January 2017
Shares held in all companies are Ordinary shares unless where stated.
FINANCIAL STATEMENTS
The proportion of voting rights held corresponds to the aggregate interest percentage held by the holding company and its subsidiary undertakings.
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 171
FINANCIAL STATEMENTS
COMPANY
FINANCIAL
STATEMENTS
for the year ended 31 December 2016
173
174
174
175
176
Independent Auditors’ Report
Income Statement
Balance Sheet
Statement of Changes in Equity
Significant Accounting Policies
172Jardine Lloyd Thompson Group plc Annual Report 2016
177Notes to the Company Financial Statements
a) Finance income and expense
b) Income tax
c) Investment in subsidiaries
d) Trade and other receivables
e) Creditors
f) Accounting for the Employee Share Trust
INDEPENDENT AUDITORS’ REPORT
REPORT ON THE FINANCIAL
STATEMENTS
What we have audited
The financial statements, included within
the Annual Report, comprise:
OPINIONS ON OTHER
MATTERS PRESCRIBED BY THE
COMPANIES ACT 2006
• the information given in the Strategic
Report and the Directors’ Report for
the financial year for which the financial
statements are prepared is consistent
with the financial statements; and
• the Strategic Report and the Directors’
Report have been prepared in
accordance with applicable legal
requirements.
• In addition, in light of the knowledge
and understanding of the company
and its environment obtained in the
Directors’ remuneration
Under the Companies Act 2006 we
are required to report to you if, in our
opinion, certain disclosures of directors’
remuneration specified by law are not made.
We have no exceptions to report arising
from this responsibility.
RESPONSIBILITIES FOR THE
FINANCIAL STATEMENTS AND
THE AUDIT
Our responsibilities and those of
the directors
As explained more fully in the Directors’
Responsibilities Statement, the directors
are responsible for the preparation of the
financial statements and for being satisfied
that they give a true and fair view.
Our responsibility is to audit and express
an opinion on the financial statements
in accordance with applicable law and
International Standards on Auditing (UK
and Ireland) (“ISAs (UK & Ireland)”). Those
standards require us to comply with the
Auditing Practices Board’s Ethical Standards
for Auditors.
This report, including the opinions, has been
prepared for and only for the company’s
members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not,
in giving these opinions, accept or assume
responsibility for any other purpose or to
any other person to whom this report is
shown or into whose hands it may come
save where expressly agreed by our prior
consent in writing.
We test and examine information, using
sampling and other auditing techniques,
to the extent we consider necessary to
provide a reasonable basis for us to draw
conclusions. We obtain audit evidence
through testing the effectiveness of controls,
substantive procedures or a combination
of both.
In addition, we read all the financial and
non-financial information in the Annual
Report to identify material inconsistencies
with the audited financial statements and
to identify any information that is apparently
materially incorrect based on, or materially
inconsistent with, the knowledge acquired
by us in the course of performing the
audit. If we become aware of any apparent
material misstatements or inconsistencies
we consider the implications for our report.
With respect to the Strategic Report and
Directors’ Report, we consider whether
those reports include the disclosures
required by applicable legal requirements.
OTHER MATTER
We have reported separately on group
financial statements of Jardine Lloyd
Thompson Group plc for the year ended
31 December 2016.
Nick Wilks (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers
LLP Chartered Accountants and Statutory
Auditors
London
28 February 2017
Jardine Lloyd Thompson Group plc Annual Report 2016 173
SHAREHOLDER INFORMATION
In our opinion, based on the work
undertaken in the course of the audit:
• we have not received all the information
and explanations we require for our
audit; or
• adequate accounting records have
not been kept, or returns adequate for
our audit have not been received from
branches not visited by us; or
• the financial statements are not in
agreement with the accounting records
and returns.
We have no exceptions to report arising
from this responsibility.
FINANCIAL STATEMENTS
In applying the financial reporting
framework, the directors have made
a number of subjective judgements, for
example in respect of significant accounting
estimates. In making such estimates, they
have made assumptions and considered
future events.
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
• whether the accounting policies
are appropriate to the company’s
circumstances and have been
consistently applied and adequately
disclosed;
• the reasonableness of significant
accounting estimates made by
the directors; and
• the overall presentation of the
financial statements.
We primarily focus our work in these areas
by assessing the directors’ judgements
against available evidence, forming our own
judgements, and evaluating the disclosures
in the financial statements.
CORPORATE GOVERNANCE
• the Balance Sheet as at 31 December
2016;
• the Income Statement for the year
then ended;
• the Statement of changes in Equity
for the year then ended;
• the accounting policies; and
• the notes to the financial statements,
which include other explanatory
information.
The financial reporting framework that
has been applied in the preparation of the
financial statements is United Kingdom
Accounting Standards, comprising FRS
101 “Reduced Disclosure Framework”, and
applicable law (United Kingdom Generally
Accepted Accounting Practice).
Adequacy of accounting records and
information and explanations received
STRATEGIC REPORT
• give a true and fair view of the state
of the company’s affairs as at 31
December 2016 and of its profit for
the year then ended;
• have been properly prepared in
accordance with United Kingdom
Generally Accepted Accounting
Practice; and
• have been prepared in accordance
with the requirements of the
Companies Act 2006.
OTHER MATTERS ON WHICH
WE ARE REQUIRED TO REPORT
BY EXCEPTION
What an audit of financial statements
involves
We conducted our audit in accordance
with ISAs (UK & Ireland). An audit involves
obtaining evidence about the amounts
and disclosures in the financial statements
sufficient to give reasonable assurance
that the financial statements are free from
material misstatement, whether caused
by fraud or error. This includes an
assessment of:
OVERVIEW
Our opinion
In our opinion, Jardine Lloyd Thompson
Group plc’s financial statements (the
“financial statements”):
course of the audit, we are required to
report if we have identified any material
misstatements in the Strategic Report
and the Directors’ Report. We have
nothing to report in this respect.
FINANCIAL STATEMENTS
INCOME STATEMENT
for the year ended 31 December 2016
Administrative expenses
Other (expense)/income
Operating profit
2016
£’000
(9,765)
(3)
(9,768)
2015
£’000
(55,911)
4
(55,907)
Income from subsidiary
88,000
106,000
Profit on ordinary activities before interest and taxation
78,232
50,093
Notes
Finance income
a
9,085
7,746
Finance costs
a
(5,547)
(5,375)
Finance income - net
a
Profit on ordinary activities before income tax
Income tax (expense)/credit on ordinary activities
b
Profit for the year
3,538
2,371
81,770
52,464
(5,112)
3,934
76,658
56,398
BALANCE SHEET
as at 31 December 2016
2016
£’000
2015
£’000
restated
Notes
Fixed assets
Investment in subsidiaries
c
68,995
68,995
68,916
68,916
Current assets
Trade and other receivables
d
387,548
475,836
Cash and cash equivalents
Creditors
Net current assets
Net assets
Equity
Ordinary shares
Share premium
Merger reserve
Retained earnings
Total shareholders’ funds
e
561
432
388,109
476,268
(219,001)
(323,179)
169,108
238,103
153,089
222,005
11,008
11,008
104,111
9,604
113,380
238,103
104,074
9,604
97,319
222,005
The notes on pages 176 to 179 form an integral part of these financial statements.
The financial statements on pages 174 to 179 were authorised for the issue by the Board on 28 February 2017 and were signed on its behalf by:
Charles Rozes
Finance Director
174Jardine Lloyd Thompson Group plc Annual Report 2016
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Share
premium
£’000
Merger
reserve
£’000
Retained
earnings
£’000
Total
£’000
222,005
11,008
104,074
9,604
97,319
Profit for the year
-
-
-
76,658
76,658
Total comprehensive income for the year
-
-
-
76,658
76,658
Dividends
-
-
-
(67,962)
(67,962)
Issue of share capital
-
37
-
-
37
- capital contribution to subsidiaries
-
-
-
25,174
25,174
- shares acquired
-
-
-
(17,809)
(17,809)
11,008
104,111
9,604
113,380
238,103
Ordinary
shares
£’000
Share
premium
£’000
Merger
reserve
£’000
Retained
earnings
£’000
Total
£’000
235,062
Balance at 31 December 2016
Balance at 1January 2015 (restated)
103,941
9,604
110,511
-
-
-
56,398
56,398
Total comprehensive income for the year
-
-
-
56,398
56,398
Dividends
-
-
-
(64,484)
(64,484)
Issue of share capital
2
133
-
-
135
Amounts in respect of share based payments:
- capital contribution to subsidiaries
-
-
-
20,950
20,950
- shares acquired
-
-
-
(26,056)
(26,056)
11,008
104,074
9,604
97,319
222,005
Balance at 31 December 2015 (restated)
The restatement is detailed in note f.
CORPORATE GOVERNANCE
11,006
Profit for the year
STRATEGIC REPORT
Amounts in respect of share based payments:
OVERVIEW
Balance at 1 January 2016
Ordinary
shares
£’000
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 175
FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
for the year ended 31 December 2016
The significant accounting policies applied in the preparation of these financial
statements are set out below. These policies have been consistently applied
to all the years presented, unless otherwise stated.
Basis of preparation
These financial statements have been prepared in accordance with Financial
Reporting Standard 101, ‘Reduced Disclosure Framework’ (FRS 101).
The preparation of financial statements in conformity with FRS 101 requires
the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the company's
accounting policies.
These separate entity level accounts have been produced on a going concern
basis under the historical cost convention and in accordance with the
Companies Act 2006 and applicable accounting standards.
The following exemptions from the requirements of IFRS have been applied
in the preparation of these financial statements, in accordance with FRS 101:
1. IFRS 7 “Financial Instruments disclosures” as the equivalent disclosures
are included in the consolidated financial statements of the Group,
2. Paragraphs 91 to 99 of IFRS 13 “Fair value measurement” in respect
of disclosure of valuation techniques and inputs used for fair value
measurement of assets and liabilities,
3. Paragraph 30 and 31 of IAS 8 “Accounting policies, changes in accounting
estimates and errors” in respect of the requirement for the disclosure of
information when an entity has not applied a new IFRS that has been
issued but is not yet effective,
4. IAS 24 “Related party disclosures” in respect of the disclosure of related
party transactions entered into between two or more members of a Group
5. IAS 7 “Statement of cash flows” in respect of the preparation of a
statement of cash flow
6. The following paragraphs of IAS 1 “Presentation of financial statements”:
i. Paragraph 79(a)(iv) of IAS 1 in respect of the disclosure of the number
of shares outstanding at the beginning and at the end of the period
ii. Paragraph 10(d) in respect of the disclosure of Statement of cash flows
iii. Paragraph 10(f) in respect of the Balance Sheet as at the beginning
of the preceding period when an entity applies an accounting policy
retrospectively or makes a retrospective restatement of items in
its financial statements, or when it reclassifies items in its financial
statements
iv. Paragraph 16 in respect of the statement of compliance with all IFRS,
v. Paragraph 38A in respect of the requirement for minimum of two primary
statements, including cash flow statements,
vi. Paragraph 40A-D in respect of the requirement for a third balance
sheet when an accounting policy is applied retrospectively or makes
a retrospective restatement of items in its financial statements or
reclassifies items in its financial statements,
vii. Paragraph 111 in respect of cash flow information which provides users
of financial statements with a basis to assess the ability of the entity to
generate cash and cash equivalents and the needs of the entity
to utilise those cash flows and
viii. Paragraph 134-136 in respect of capital management disclosures.
Consolidated financial statements
Consolidated financial statements have been prepared and are presented
on pages 108 to 171. These financial statements are separate financial
statements.
Employee Share Trust
The Employee Share Trust (EST) has been subject to a review in 2016.
The accounting adopted in respect of the EST is discussed in note f.
176Jardine Lloyd Thompson Group plc Annual Report 2016
Foreign currency translation
Foreign currency transactions are translated into sterling using the exchange
rates prevailing at the date of transaction. Monetary assets and liabilities
denominated in foreign currencies are translated into sterling at rates of
exchange ruling at the balance sheet date. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement,
except when deferred in other comprehensive income as qualifying cash
flow hedges. All other foreign exchange gains and losses are presented
in the income statement within ‘Other operating income’.
Investment in subsidiaries
Investments in subsidiaries are held at cost less accumulated impairment
losses. A list of subsidiaries is set out in note 35 on page 164.
Trade and other receivables
Trade and other receivables includes amounts due from Group undertakings.
They are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method, less provision for
impairment.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less and bank overdrafts.
Creditors
Creditors are obligations to pay for goods or services that have been acquired
in the ordinary course of business from suppliers and include amounts due
to Group undertakings. Creditors are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method.
Income taxes
Tax is recognised in the income statement, except to the extent that it
relates to items recognised in other comprehensive income or directly
in shareholders’ funds. In this case, the tax is also recognised in other
comprehensive income or directly in shareholders’ funds, respectively.
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the balance sheet date in the countries
where the company operates and generates taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid
to the tax authorities.
Interest income
Interest income is recognised using the effective interest method. When a
loan and receivable is impaired, the company reduces the carrying amount
to its recoverable amount, being the estimated future cash flow discounted at
the original effective interest rate of the instrument, and continues unwinding
the discount as interest income. Interest income on impaired loan and
receivables is recognised using the original effective interest rate.
Dividend income
Dividend income is recognised when the right to receive payment
is established.
Dividend distribution
Dividends proposed or declared after the balance sheet dates are not
recognised as a liability at the balance sheet date. Dividend distributions to
the company’s shareholders are recognised as a liability in the company’s
financial statements in the period in which the dividends are approved by
the company’s shareholders.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2016
2015
£’000
7,746
Finance expense
Interest on amounts due to Group undertakings
2016
£’000
(5,547)
2015
£’000
(5,375)
Finance income
Finance expense
Finance income - net
2016
£’000
9,085
(5,547)
3,538
2015
£’000
7,746
(5,375)
2,371
2016
£’000
2015
£’000
(5,729)
10,841
5,112
(10,841)
6,907
(3,934)
STRATEGIC REPORT
2016
£’000
9,085
Finance income
Interest on amounts due from Group undertakings
OVERVIEW
a. Finance income and expense
b. Income tax
The tax for the year is lower than the standard rate of corporation tax in the UK for the year ended 31 December 2016 of 20% (2015: 20.25%). The
differences are explained below:
2015
£’000
52,464
Tax calculated at UK Corporation Tax rate of 20% (2015: 20.25%)
Adjustments in respect of prior years
Non taxable income
Total income tax expense/(credit)
16,354
10,841
(22,083)
5,112
10,624
6,907
(21,465)
(3,934)
In July 2015 the UK Government announced further measures in relation to the UK corporation tax rate, reducing the headline rate of corporation tax
to 19% from April 2017 and then to 18% from April 2020. A further 1% reduction in the main rate of corporation tax rate to 17% from 1 April 2020
was announced in Budget 2016. As at 31 December 2016, the additional 1% rate reduction to 17% from April 2020 has been enacted. The impact
of the rate reduction to 17% has been incorporated into the income tax charge for the year ended 31 December 2016, taking into consideration when
FINANCIAL STATEMENTS
Profit before taxation
2016
£’000
81,770
CORPORATE GOVERNANCE
Current tax (credit)/expense:
- UK Corporation tax on profits for the year
- Adjustment in respect of prior year
Total income tax expense/(credit)
timing differences are expected to reverse.
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 177
FINANCIAL STATEMENTS
c. Investment in subsidiaries
2016
£’000
68,916
79
68,995
At 1 January
Increase/(decrease)
At 31 December
2015
£’000
restated
72,666
(3,750)
68,916
Investment comprises equity shares in JIB Group Ltd and JLT Lixin Insurance Brokers Co. Limited, neither of which are publicly traded.
The company owns 100% of the ordinary share capital of JIB Group Ltd (2015: 100%). JIB Group Ltd is incorporated in the UK. During the year
dividends of £88,000,000 (2015: £106,000,000) were received from JIB Group Ltd. The company owns 100% of the ordinary share capital of
JLT Lixin Insurance Brokers Co. Limited incorporated in China (2015: 100%).
The investment in subsidiaries also increases due to the capital contributions towards the subsidiaries of the Group as a result of awards of share
options made to employees to acquire Company's shares, the increase is offset by a contribution from the subsidiaries towards the costs
of purchase of the shares.
d. Trade and other receivables
Amounts due from Group undertakings
Corporation tax
2016
£’000
383,018
4,530
387,548
2015
£’000
466,194
9,642
475,836
Amounts due from Group undertakings are unsecured, have no fixed date of repayment and are repayable on demand.
e. Creditors
2016
£’000
Amounts due to Group undertakings
Dividends payable
Other creditors
213,834
4,794
373
219,001
2015
£’000
restated
319,675
3,220
284
323,179
Amounts due to Group undertakings are unsecured, have no fixed date of repayment and are repayable on demand.
f. Accounting for the Employee Share Trust
During the year the Company has undertaken a review of the legal structure of its Employee Share Trust (EST). The EST is controlled by the
Company and is included in the consolidated accounts of the Group. The purchase of shares by the EST is funded by JIB Group Limited and a
recharge mechanism is operated between the company and its subsidiaries to recover the cash paid by JIB Group Limited, as a result no cash
transactions go through the company directly. Following the review of the Group's UK subsidiaries accounting for the transition to FRS101, it was
concluded that the most appropriate treatment was that the company is the ultimate Group entity responsible for the settlement of the share options
under the various option schemes currently in place. As a result, the purchase of shares by the EST and the recharge recovery operated by JIB Group
Limited should be recognised in the company's financial statements. The financial transactions in respect of the EST were previously recognised in
JIB Group Limited.
The EST transactions mainly consist of three main transactions: 1) the purchase of shares by the EST results in the recognition of treasury shares
reducing the reserves and crediting the amounts due to Group undertakings, 2) the recognition of an additional capital contribution to the subsidiaries
equating to the equity settled share-based payment charge for the year results in an increase of the investment in subsidiaries and an increase in
reserves, 3) the recharges from the Company to the subsidiaries, which are directly linked to the equity settled share-based payment charge, result in
a reduction of the capital contribution (investment in subsidiaries) and an increase in the amounts due from Group undertakings.
178Jardine Lloyd Thompson Group plc Annual Report 2016
f. Accounting for the Employee Share Trust continued
The following table summarises the adjustments made to the statement of financial position as a result of recognising the above change:
Impact of
restatement
£'000
Balance at
31 Dec 2015
restated
£'000
Impact of
restatement
£'000
71,002
1,664
72,666
70,944
(2,028)
68,916
71,002
1,664
72,666
70,944
(2,028)
68,916
419,037
-
419,037
475,836
-
475,836
-
460
460
-
-
-
715
-
715
432
-
432
Fixed assets
Investment in subsidiaries
Current assets
Trade & other receivables
Available-for-sale financial assets
Cash & cash equivalents
460
420,212
476,268
-
476,268
(210,379)
(47,437)
(257,816)
(274,788)
(48,391)
(323,179)
Net current assets
209,373
(46,977)
162,396
201,480
(48,391)
153,089
Net assets
280,375
(45,313)
235,062
272,424
(50,419)
222,005
Equity
Ordinary shares
Share premium
Merger reserve
Retained earnings
Total shareholders' funds
11,006
103,941
9,604
155,824
280,375
(45,313)
(45,313)
11,006
103,941
9,604
110,511
235,062
11,008
104,074
9,604
147,738
272,424
(50,419)
(50,419)
11,008
104,074
9,604
97,319
222,005
The following table summarises the adjustments made to the statement of changes in equity as a result of recognising the EST:
Merger
reserve
£'000
9,604
9,604
9,604
Total
Retained shareholders'
earnings
funds
£'000
£'000
155,824
280,375
(45,313)
(45,313)
110,511
235,062
56,398
56,398
56,398
56,398
(64,484)
(64,484)
135
(5,106)
(5,106)
97,319
222,005
Retained
earnings
£'000
Total
shareholders'
funds
£'000
20,950
(26,056)
(5,106)
20,950
(26,056)
(5,106)
Jardine Lloyd Thompson Group plc Annual Report 2016 179
SHAREHOLDER INFORMATION
a) the movement of the restatement is detailed as follows:
Amounts in respect of share based payments:
- capital contribution to subsidiaries
- shares acquired
Total movement
Share
premium
£'000
103,941
103,941
133
104,074
FINANCIAL STATEMENTS
Balance at 1 January 2015
EST restatement
Restated balance at 1 January 2015
Profit for the year
Total comprehensive income for the year
Dividends
Issue of share capital
EST restatement (a)
Balance at 31 December 2015
Ordinary
share capital
£'000
11,006
11,006
2
11,008
CORPORATE GOVERNANCE
419,752
Creditors
STRATEGIC REPORT
Balance at
1 Jan 2015
£'000
OVERVIEW
Balance at
31 Dec 2015
as previously
reported
£'000
Balance at
1 Jan 2015
restated
£'000
OTHER SHAREHOLDER INFORMATION
ADVISORS
& SHAREHOLDER
INFORMATION
181 Group Five Year Review
182Advisors & Shareholder Information
183 Principal JLT Offices
180Jardine Lloyd Thompson Group plc Annual Report 2016
OVERVIEW
GROUP
FIVE YEAR REVIEW
2013
£’000
2014
£’000
2015
£’000
2016
£’000
Fees and commissions
874,320
974,623
1,099,728
1,151,392
1,256,556
Investment income
Total revenue
5,744
880,064
4,529
979,152
4,398
1,104,126
3,689
1,155,081
4,730
1,261,286
Salaries and associated expenses
(519,119)
(580,968)
(671,758)
(727,334)
(794,363)
(44,408)
(53,638)
(57,927)
(61,167)
(66,849)
(140,179)
(157,386)
(172,426)
(163,685)
(209,518)
Premises
Other operating costs
Depreciation, amortisation and impairment charges
Operating profit
Finance costs - net
(24,667)
(28,139)
(30,538)
(34,951)
162,493
173,876
172,357
155,605
(12,051)
(16,035)
(21,446)
(22,861)
(22,078)
8,271
151,541
(39,814)
111,727
8,106
154,564
(41,789)
112,775
7,306
159,736
(42,072)
117,664
5,531
155,027
(41,586)
113,441
1,353
134,880
(44,018)
90,862
(9,574)
(10,815)
(12,373)
(10,342)
(9,396)
102,153
101,960
105,291
103,099
81,466
restated2
restated2
restated2
restated2
Diluted earnings per share
Underlying diluted earnings per share
47.0p
48.8p
46.8p
55.0p
48.7p
57.1p
48.0p
52.2p
37.8p
51.4p
Dividends per share
25.5p
27.2p
28.9p
30.6p
32.2p
Non-controlling interests
Profit attributable to the owners of the parent
The earnings per share has been restated to reflect the changes following the review of the calculation in 2016.
2
FINANCIAL STATEMENTS
The 2012 income statement has been restated to reflect the impact of IAS19 (Revised).
1
CORPORATE GOVERNANCE
Share of results of associates
Profit before taxation
Income tax expense
Profit for the year
(21,037)
155,321
STRATEGIC REPORT
2012
£’000
restated1
SHAREHOLDER INFORMATION
Jardine Lloyd Thompson Group plc Annual Report 2016 181
OTHER SHAREHOLDER INFORMATION
ADVISORS &
SHAREHOLDER INFORMATION
SHAREHOLDER ENQUIRIES
SHARE PRICE INFORMATION
Any shareholder with enquiries relating
to their shareholding should in the first
instance contact Capita our registrars
using the address on this page.
The information on the Company’s share
price is available from the investor pages
via jlt.com
*C
alls cost 12p per minute plus your
phone company’s access charge.
Lines are open between 09:00 - 17:30,
Monday to Friday excluding public
holidays in England and Wales.
FINANCIAL CALENDAR
Email: [email protected]
ELECTRONIC SHAREHOLDER
COMMUNICATIONS
Shareholders who would prefer to view
documentation electronically can elect
to receive automatic notification by
email each time the company distributes
documents instead of receiving paper
versions of such documents. Registering
for electronic communications can be
done via capitashareportal.com
There is no fee for using this service
and you will be advised that your request
has been registered. Should you wish
to change your mind or request a paper
version of any documents in the future,
you can do this by contacting the
Registrar by email or by post.
Financial Year-end
31 December 2016
Ex Dividend Date
30 March 2017
Record Date
31 March 2017
BROKERS
JPMorgan Securities plc
25 Bank Street,
London E14 5JP
Tel: +44 (0) 20 7742 4900
Final Dividend Payable
4 May 2017
Interim Results Announced
Numis Securities Limited
26 July 2017
10 Paternoster Square
London EC4M 7LT
Tel: +44 (0) 20 7260 1000
Interim Dividend Payable
Shareholders who would like their
dividends to be paid directly to a bank
account should contact Capita Registrars
either online via capitashareportal.com
or by returning the dividend mandate
form attached to the dividend cheque.
Q3 Interim Management Statement
7 November 2017
(all future dates are indicative and subject
to change)
INVESTOR RELATIONS
sharegift.org
Tel: +44 (0) 20 7930 3737
7 More London Riverside
London SE1 2RT
Tel: +44 (0) 20 7583 5000
27 April 2017
3 October 2017
If you have a small holding that is
uneconomical to sell you may wish to
consider donating it to ShareGift. The
Orr Mackintosh Foundation operates this
charity share donation scheme. Details of
the scheme are available via ShareGift at:
PricewaterhouseCoopers LLP
Annual General Meeting
DIVIDEND MANDATES
SHAREGIFT
AUDITORS
Email:
[email protected]
jlt.com/contact-us
REGISTRARS
Capita Asset Services
The Registry
34 Beckenham Road
Kent BR3 4TU
Tel*: 0871 664 0300
Tel: + 44 (0) 20 8639 3399
capitaassetservices.com
182Jardine Lloyd Thompson Group plc Annual Report 2016
COMPANY SECRETARY
AND REGISTERED OFFICE
Jonathan Lloyd
Jardine Lloyd Thompson Group plc
The St Botolph Building
138 Houndsditch
London EC3A 7AW
Tel: +44 (0) 20 7528 4690
jlt.com
Registered Number: 01679424
London Stock Exchange
FTSE 250
Symbol: JLT
ISIN: GB0005203376
PRINCIPAL JLT OFFICES
UK
Jardine Lloyd Thompson Group plc
+44 20 7528 4444
JLT Specialty Limited
+44 20 7528 4444
Denmark
Germany
JLT Specialty Insurance Broker A/S
+45 2424 2214
JLT Risk Solutions AB
+35 810 322 9909
Finland
Guernsey
JLT Risk Solutions AB
+46 8442 5730
JLT Insurance Management
(Guernsey) UK
+44 1481 737 120
JLT Insurance Brokers Ireland Limited
+35 31 20 26 000
Netherlands
Norway
JLT Norway AS
+47 4000 2111
Sweden
JLT Risk Solutions AB
+46 8 442 5730
Switzerland
JLT do Brasil Corretagem de Seguros
Ltda
+55 11 3156 3900
JLT Re Brasil Administracao e
Corretagem de Reasseguros Ltda
+ 55 21 2220 2970
Chile
Orbital-JLT Corredores de Seguros
Limitada
+56 (2) 2232 7776
CANADA
Jardine Lloyd Thompson Canada Inc
+1 416 941 9551
JLT Chile Corredores de Reaseguros
Limitada
+56 (2) 2338 9290
Colombia
CARIBBEAN
Barbados
Jardine Lloyd Thompson Valencia y
Iragorri Corredores de Seguros SA
+571 326 6100
JLT Insurance Management (Barbados)
Limited
+1 246 432 4000
JLT Re Colombia, Corredores
Colombianos de Reaseguros SA
+571 326 6100
Peru
OTHER
Bermuda
JLT Insurance Management (Bermuda)
+1 441 292 4364
Mariategui JLT Corredores de Seguros
SA
+511 610 9900
JLT Corredores de Reaseguros SA
+511 610 9900
SHAREHOLDER INFORMATION
JLT Reinsurance Brokers Limited
(Basel Branch)
+41 61 461 0253
FINANCIAL STATEMENTS
JLT Netherlands BV
+31 104400555
Brazil
CORPORATE GOVERNANCE
Ireland
JLT Re Argentina
+54 (11) 5280 3550
STRATEGIC REPORT
EUROPE
JLT Reinsurance Brokers Limited
(Paris Branch)
+33 1 4022 8770
Argentina
JLT Reinsurance Brokers Limited
+44 20 7466 1300
JLT Employee Benefits
+44 20 7528 4000
France
LATIN AMERICA
UK
OVERVIEW
HEAD OFFICE
Jardine Lloyd Thompson Group plc Annual Report 2016 183
OTHER SHAREHOLDER INFORMATION
For a full list of JLT’s worldwide offices
and JLT International Network partners,
please visit our website jlt.com.
PRINCIPAL JLT OFFICES CONTINUED
USA
JLT Re (North America) Inc.
+1 212 510 1800
JLT Specialty Insurance Services Inc.
+1 720 501 2800
AFRICA/MIDDLE EAST
South Africa
Jardine Lloyd Thompson (Proprietary)
Limited
+27 11 3610000
Bahrain
Indonesia
Thailand
PT Jardine Lloyd Thompson
+6221 2995 2500
Jardine Lloyd Thompson Limited
+662 626 5600
Japan
Vietnam
JLT Risk Services Japan Limited
+813 6730 3500
Jardine Lloyd Thompson Limited
+848 3822 2340
South Korea
Jardine Lloyd Thompson Korea Limited
+82 2 397 8100
Macau
Jardine Lloyd Thompson Limited
+853 2875 5743
AUSTRALIA & NZ
Australia
Jardine Lloyd Thompson Australia
Pty Limited
+612 9290 8000
Insure Direct (Brokers) LLC
+973 1782 2622
Jardine ShunTak Insurance Brokers
Limited
+852 2864 5524
JLT Re Ltd
+61 2 9290 8000
Turkey
Malaysia
JLT Turkey
+90 444 9558
Jardine Lloyd Thompson Sdn Bhd
+60 3 2723 3388
Jardine Lloyd Thompson Limited
+649 379 5376
UAE (Dubai)
Myanmar
JLT Specialty Limited
+971 4 10 46666
Jardine Lloyd Thompson Limited
+959 43110001
ASIA
China
JLT Insurance Brokers Co Limited
+8620 6681 4888
Hong Kong
Jardine Lloyd Thompson Limited
+852 2864 5333
India
Jardine Lloyd Thompson India
Pvt. Limited
+91 22 4068 7500
JLT Independent Insurance Brokers
Pvt. Limited
+91 22 4340 1313
Philippines
Jardine Lloyd Thompson Insurance
Brokers Inc
+632 706 8500
Singapore
Jardine Lloyd Thompson Pte Limited
+65 6333 6311
JLT Risk Solutions Asia Pte Limited
+65 6333 6006
JLT Specialty Pte Limited
+65 6333 6006
JLT Re Asia
+65 6333 6006
Taiwan
Jardine Lloyd Thompson Limited
+886 2 2356 1155
184Jardine Lloyd Thompson Group plc Annual Report 2016
New Zealand
OVERVIEW
OVERVIEW
GLOBAL
SPECIALISTS
Focusing and growing in specialist areas where we offer distinctive products, services and independent
choice, such as:
STRATEGIC REPORT
CORPORATE GOVERNANCE
ENERGY
more than
39% 30%
2
JLT handles in excess
of 30% of the world's
mobile drilling rig fleet
Jardine Lloyd Thompson Group plc Annual Report 2016
100bn
FINANCIAL LINES
EMPLOYEE
BENEFITS
LIFE SCIENCE
14bn 6 10
£
JLT's London construction
team arranged coverage for
projects globally with a total
value of £100bn
Our Financial Lines Group
placed M&A insurance on
transactions with a total
value of £14.4bn in 2016
of
the
top
Our Specialty, Property
& Casualty team provides
services to 6 of the top
10 global pharmaceutical
companies
UK's
No.1
JLT is the UK's largest
administrator of private
sector pensions
Jardine Lloyd Thompson Group plc Annual Report 2016
SHAREHOLDER INFORMATION
JLT represents 39% of the
world's large airline operators,
with individual fleet values
in excess of USD50m
CONSTRUCTION
£
FINANCIAL STATEMENTS
AEROSPACE
3
Our website contains a dedicated investor area with
latest news, results webcasts and dynamic annual report
pdf. www.jlt.com/investors/annual-and-interim-reports
This Annual Report is printed on 100% recycled paper made from
post-consumer waste. It was printed by CPI Colour using vegetable
based inks. Both the paper and printer are Environmental Standard
ISO 14001 and Forest Stewardship Council® (FSC®) registered. CPI
Colour is also a CarbonNeutral® printing company.
Jardine Lloyd Thompson Group plc
COVER PHOTO
The St Botolph Building
138 Houndsditch
London EC3A 7AW
Beijing Metro: during 2016 JLT China was appointed by
the Beijing Metro Construction Administration Corporation
to provide Construction related insurance services.
This business win was only made possible through the
close collaboration between JLT China and the Group’s
market leading global Construction specialty team.
Tel
+44 (0)20 7528 4444
jlt.com
Company registration No. 1679424