March 25 (Bloomberg) -- RSA Insurance Group Plc Chief Executive Officer Stephen Hester, drafted in to turn around the U.K. insurer, may be paid as much as 5.6 million pounds ($9.3 million) for his first 12 months in the job.
Hester’s total compensation includes a base salary of 950,000 pounds, a long-term incentive plan of as much as 300 percent of pay in shares, an annual bonus of up to 160 percent of salary and a pension, the insurer said in its annual report published today. His car allowance is 20,000 pounds.
Hester started a 773 million-pound rights offering today to rebuild RSA’s capital after less than a month in the job. The 53-year-old former chief of Royal Bank of Scotland Group Plc succeeded Simon Lee, who quit the London-based insurer in December after three profit warnings in the fourth quarter and an accounting scandal at its Irish unit.
“Competitive remuneration packages are offered in order to attract, retain and reward the levels of high caliber talent which are essential to RSA’s success,” the insurer said in the report today.
RSA reviewed and modified its compensation plan set in 2006 after the scandal in Ireland. Chairman Martin Scicluna’s pay package was unchanged.
Hester’s long term incentive plan won’t vest until 2017 and will be based on performance, according to the report. Half of his annual bonus will also be deferred in shares for three years. The insurer, which lost more than 1 billion pounds in market value in 2013, said executive directors will retain any awards granted under the previous incentive plan.
Mark Wilson, the CEO of Aviva Plc, Britain’s second-largest insurer, was awarded a 1.1 million-pound bonus in cash and deferred stock yesterday. Wilson, who was also hired to rebuild depleted capital, scrapped directors’ bonuses for 2012 and froze pay for managers when he joined the company. He restored the variable compensation last month.
RSA climbed as much as 2.2 percent in London trading as the rights offering began. The stock was up 1.8 percent to 95 pence at 2:02 p.m. in London, extending the stock’s gain this year to about 4 percent. It slid 27 percent last year.
Shareholders can buy three new shares for every eight already owned at 56 pence apiece, according to a separate statement from the insurer today. That’s 40 percent less than yesterday’s closing price. The capital raising is being underwritten by Bank of America Merrill Lynch and JPMorgan Cazenove.
To contact the reporter on this story: Kiel Porter in London at firstname.lastname@example.org
To contact the editors responsible for this story: Keith Campbell at email@example.com Jon Menon