GLOBAL SPECIALISTS Annual Report 2016 CORPORATE SPONSORSHIP

Jardine Lloyd Thompson Group plc Annual Report 2016

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 2015- 16 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. OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 1

ehensive Income e alues nance Report eholder Information s Review T Offices ector’s Review ector’s s Statement e we Operate ectors’ Remuneration Report ectors’ Report oup Five Year Review oup Five Year oup Executive Committee T International Network Advisors & Shar Principal JL Consolidated Statement of Compr 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 Gr Review of Operations Finance Dir Risk Management Report Corporate Responsibility Corporate Gover Audit & Risk Committee Report Nominations Committee Report Dir Dir Independent Auditors’ Report Consolidated Income Statement Global Specialists Financial Highlights Wher V Our Mission, Strategy & Cultur Our People, Clients and Our Businesses at a Glance JL Chairman’ Chief Executive’ Our Market Context Our Business Model Delivering on our Strategy Key Performance Indicators Gr

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2 4 5 6 7 8 73 92 12 15 18 22 23 26 27 28 37 42 46 55 63 71 10 Jar 113 119 172 181 182 183 110 111 112 101 108 109

TION

ADVISORS & SHAREHOLDER INFORMA This section includes review and five year the Group information about advisors, and the Group’s shareholders principal offices. This section includes a of our corporate review governance and summaries of the work of our Board and its Committees. FINANCIAL STATEMENTS This section includes and Company the Group financial statements notes. and related STRATEGIC STRATEGIC REPORT This section includes the Statement, Chairman’s and Finance Chief Executive’s as well as Reviews Director’s details of our markets, business model, strategic progress, operations and key risks. CORPORATE GOVERNANCE OVERVIEW This section includes an with to JLT introduction of 2016, a brief review including performance highlights, information on our people, our culture and our Mission, Strategy and Values.

2 54 11 180 100 CONTENTS OVERVIEW

GLOBAL SPECIALISTS

Focusing and growing in specialist areas where we offer distinctive products, services and independent choice, such as:

AEROSPACE ENERGY CONSTRUCTION

more than £ 39% 30% 100bn

JLT represents 39% of the JLT handles in excess JLT's London construction world's large airline operators, of 30% of the world's team arranged coverage for with individual fleet values mobile drilling rig fleet projects globally with a total in excess of USD50m value of £100bn

2 Jardine Lloyd Thompson Group plc Annual Report 2016 OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 3

No.1 UK's EMPLOYEE BENEFITS is the UK's largest JLT administrator of private sector pensions dine Lloyd Thompson Group plc Annual Report 2016 dine Lloyd Thompson Group

Jar

of the top

6 10 Property Our Specialty, & Casualty team provides services to 6 of the top 10 global pharmaceutical companies LIFE SCIENCE

bn 14 Our Financial Lines Group placed M&A insurance on transactions with a total value of £14.4bn in 2016 £ FINANCIAL LINES 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 2016 2015 Change Pence per share 2016 2015 Change Total revenue 1,261.3 1,155.1 9% Underlying diluted EPS* 51.4p 52.2p (2%) Underlying trading profit* 193.7 187.5 3% Reported diluted EPS 37.8p 48.0p (21%) Excl. US investment** 220.7 208.0 6% Total dividend per share 32.2p 30.6p 5% Underlying profit before tax* 172.6 170.1 1% Excl. US investment** 199.6 190.6 5% * Underlying results exclude exceptional items ** Excludes the US investment of £27.0m in 2016 (2015: £20.5m) Reported profit before tax 134.9 155.0 (13%) 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 Rest of the World 4% United Kingdom 29% £300.3m Europe 8% 24% Australia & New Zealand 13%

Asia 16% Risk & Insurance £1,256.6m £1,256.6m £956.3m 76% Americas 30%

Total Revenue Underlying Trading Profit* (£m) (£m) 196.8 187.5 193.7 1,261.3 1,104.1 1,155.1 +9% +3% 2016 Growth Rate 2016 Growth Rate

2014 2015 2016 2014 2015 2016

Underlying Profit Before Tax* Underlying Diluted EPS* (£m) (pence)

57.1 183.0 170.1 172.6 52.2 51.4 +1% (2)% 2016 Growth Rate 2016 Growth Rate

2014 2015 2016 2014 2015 2016

Turnover = Revenue excluding investment income

4 Jardine Lloyd Thompson Group plc Annual Report 2016 OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 5

* + COUNTRIES 135 + dine Lloyd Thompson Group plc Annual Report 2016 dine Lloyd Thompson Group EMPLOYEES Jar 10,000 40 TERRITORIES Macau Malaysia Myanmar Netherlands New Zealand Norway Peru Philippines Singapore South Africa South Korea Sweden Switzerland Taiwan Thailand Turkey UAE (Dubai) UK USA Vietnam e detail on

Associates Owned locations Austria/ Central & Eastern Europe India Italy Malta Mexico Spain Argentina Australia Bahrain Barbados Bermuda Brazil Canada Chile China Colombia Denmark Finland France Germany Guernsey Hong Kong India Indonesia Ireland Japan See page 10 for mor the JLT International Network the JLT * JLT owns offices in 40 territories and has more than 10,000 colleagues. Supported by the owns offices in 40 territories and JLT International Network, we service clients in over 135 countries. JLT JLT is one of the world’s leading providers of insurance, reinsurance and employee benefits related leading providers of insurance, reinsurance is one of the world’s JLT Our deep expertise and entrepreneurial are specialists. services.advice, brokerage and associated We freedom and tenacity to go beyond the routine and deliver better culture give us the insights, creative clients come first. JLT, results for our clients. Because at WE OPERATE WE WHERE WHERE OVERVIEW

OUR MISSION, STRATEGY & VALUES

OUR MISSION

CLIENT FIRST INDEPENDENT RESULTS BASED

We act in our clients’ best We advise our clients without We expect to be judged interests and bring the best influence or bias and value and rewarded based of JLT to all of our clients. innovation and creativity. 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 Building our Improving our Providing a Operating growing in international reach efficiency and distinctive working collaboratively specialist areas and relevance effectiveness environment as ‘One JLT’ Focusing and growing Building our Improving the way Providing a distinctive, Operating in specialist areas international reach and we work and serve entrepreneurial and collaboratively as within our operations relevance, especially in clients through results-based work ‘One JLT’ to bring where we can offer the world’s high growth innovation and environment that the best of JLT to distinctive products, economies, to better by investing in attracts, develops our clients and trading services and meet the needs of the efficiency and and retains the best partners anywhere independent choice. local and multi-national effectiveness of individuals. in the world. clients and trading our people, systems partners. and processes.

OUR VALUES

COLLABORATION AGILITY RIGOUR

We recognise that our people drive We think fast, move swiftly We work with integrity and discipline our success. and act decisively. and stand up for what we believe in.

Our people work together as ‘One JLT’ Our entrepreneurial drive gives Our work is thorough and our solutions to share knowledge, solve problems and us the freedom to take on new are robust, because it matters to deliver the best solutions for our clients. challenges, think creatively and capture us to do what is right for our clients, opportunities that others cannot. our people, our trading partners and our investors.

6 Jardine Lloyd Thompson Group plc Annual Report 2016 OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 7

dine Lloyd Thompson Group plc Annual Report 2016 dine Lloyd Thompson Group Jar INTERNATIONAL SENIOR MANAGEMENT PROGRAMME SENIOR INTERNATIONAL runs the International Senior Management Each year JLT leaders (ISMP), for some of our most promising Programme Its purpose is to build world- the Group. across drawn from understanding class leadership capabilities, deepen people’s collaboration, strengthen greater promote Group, of the JLT culture. the Group’s and preserve relationships Employees attending the 2016 ISMP included: Stuart Beatty, Andres Rick Burridge, Catherine Christiansen, David Gordon, Guiulfo, Keith Harrison, Ed Hochberg, Guy Holland-Bosworth, Damian Schinck, Doug Turk, David Payne, Dave Richards, Williams-Walker. Heukelum, Conor Whelan and Nick Hans Van In 2016 we embedded our new mentoring framework and madeIn 2016 we embedded our new mentoring range of colleagues at multiple levels it available to a broader than alone hosted more the business. Our London office across 18 apprenticeships 149 work experience placements, created 10 graduates. and hired also ran our employee survey, which showed strong We completion rates and high overall engagement. continue to listen to our people. Using this insight, action We issues and implemented locally to address created plans were raised by the survey. the International have two flagship training programmes, We and the Emerging Leaders Senior Management Programme intensive and immersive multi-day Both provide Programme. business. the our leaders across training to better prepare

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EXPERT OUR CLIENT FIRST

CULTURE

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U O O ENTREPRENEURIAL H RE HA OUR S

OUR PEOPLE the best in the industry. believe that our people are We OUR CULTURE is about having the best people who specialise and Our culture the helps us attract and retain work to serve clients. Our culture their expertise. Our very best talent by valuing and recognising clients, colleagues and trading partners work with us because delivers consistent outcomes. our culture we and, as we grow, of our culture protective fiercely are We the that it always supports ensure it. We to preserve take care successful and compelling client very best talent and creates values. Our employees core Collaboration is one of JLT's results. globally for their clients, their strengths work together to share expertise. pooling experience and developing each other’s we achieve unparalleled results for our clients. we achieve unparalleled results the very best people and invest in attract and retain We range of learning a comprehensive and them by offering far beyond mandatory development opportunities that stretch training courses. OUR CLIENTS allows our specialists to solve complex risk with Our culture and put our 'client-first' are and collaboration. We creativity not all things are of everything we do. We clients at the centre focus and understand that success requires to all people. We aligned and when specialty and expertise are trade-offs, Our people are the reason for JLT's success. Our people collaborate, take personal accountability success. Our people are the reason for JLT's for their efforts. and are recognised and rewarded CLIENTS AND CULTURE AND CLIENTS OUR PEOPLE, PEOPLE, OUR 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 Specialist insurance Other services Advice to our clients on their Acting on our clients’ behalf, products Providing a range of related insurance and reinsurance using our specialist knowledge Providing our clients with services to our clients requirements, ensuring that to negotiate and place access to certain exclusive and insurance market they understand the likelihood insurance cover with insurers insurance facilities, binders counterparties in areas and potential severity of the and reinsurers all over and other products, without such as captive management, risks they face, the options the world. taking any balance sheet claims management and available to mitigate those underwriting risk. administration, and capital risks and the potential cost raising and corporate of doing so. insurance advice.

RISK & INSURANCE CONTRIBUTION TO OUR BUSINESSES 2016 GROUP REVENUE 2016

JLT Specialty p29 Revenue Underlying Trading Profit JLT Re p29 £960.9m £166.6m JLT Australia & NZ p30 +11% +4% JLT Asia p30 JLT Latin America p30 2015: £866.6m 2015: £160.9m % JLT US Specialty p31 JLT Canada p31 Trading Margin Employees 76 % * JLT Europe, 17 5,460 Middle East and Africa p32 2015: 19% 2015: 5,602 JLT Insurance Management p32

* Excludes employees in shared service operations

8 Jardine Lloyd Thompson Group plc Annual Report 2016 OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 9 p34 p34 p34 p35 p35 p35

Technology Solutions Technology of one of the most Provider widely-used UK pensions administration and fund platforms accounting software to private sector pension schemes. integrated web Providing solutions for access to information and services and benefits management. OUR BUSINESSES UK & Ireland Canada Middle East Europe, and Africa Asia Australia & NZ Latin America dine Lloyd Thompson Group plc Annual Report 2016 dine Lloyd Thompson Group Jar % Wealth and Investment Wealth Management Advice and support to high net worth individuals on financial support planning, at-retirement requirements. and life protection management Discretionary of assets for both high net worth individuals and company pension schemes, in addition to asset-hosting services. 24 CONTRIBUTION TO GROUP REVENUE 2016

* m Trustee & Corporate & Corporate Trustee Benefits Consulting 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. Employee health and benefit medical claims programmes, administration, occupational health services and placement of health and risk policies. protection % 14 2015: 3,121 Underlying Trading Profit Underlying Trading £49.5 + 2015: £43.6m Employees 2,656

% 4 Providing a range of Providing administration services designed to meet the of pension requirements trustees, corporate sponsors and scheme members, from support to fully back-office administration. outsourced Supplemented with payroll, communication, documentation and technical services. Pension Administration OUR GLOBAL EMPLOYEE BENEFITS BUSINESSES PROVIDE SERVICESOUR GLOBAL EMPLOYEE BENEFITS INCLUDING:

Our Employee Benefits business offers a comprehensive range of employee benefits advice and servicesOur Employee Benefits business offers individuals. to companies, pension trustees and intermediaries and serviceOur specialist teams act as advisers, in the areas of pensions providers benefits and healthcare, life insurance and wealth management. consultancy and administration, employee EMPLOYEE BENEFITS 16 2015: 15% 2015: £288.5m Margin Trading £300.4 + Revenue * Excludes employees in shared service operations EMPLOYEE BENEFITS 2016 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 a distribution channel for JLT’s specialty, wholesale, reinsurance and employee benefits activities.

All brokers in the Network are carefully selected for their A further area of differentiation is JLT’s Global Service Team, specialist knowledge, local market reputation and quality a multilingual group that provides clients with a single point of service. We expect them to have the capability not only of contact who can manage their global programme and help to service JLT’s multinational clients to the highest standards, resolve any issues on a daily basis. This central function acts but to compete for and win the largest accounts in their own as the focal point for JLT’s international account co-ordination territories in collaboration with JLT’s specialty, wholesale and and is used as a centre of excellence, delivering insights to reinsurance teams. clients and colleagues globally on market practices, regulation and the compliance of global insurance programmes. Service standards are underpinned by a set of clear operating procedures to ensure that each client, regardless of their size, Overall responsibility for the Network sits with the JLT consistently receives the highest level of care and attention International Network Management team, whose role is to in the delivery of risk management, insurance broking, and ensure common service standards by sharing expertise and advisory services. Each member of the network is also required best practices across the Network, whilst offering a clear to adhere to JLT’s Code of Ethical Conduct. channel through which to escalate and resolve issues with speed and efficiency.

10 Jardine Lloyd Thompson Group plc Annual Report 2016 OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 11

dine Lloyd Thompson Group plc Annual Report 2016 dine Lloyd Thompson Group Jar ector’s Review ector’s oup Executive Committee Corporate Responsibility Risk Management Report Finance Dir Review of Operations Gr

46 42 37 28 27 s Review

s Statement

Key Performance Indicators Delivering on our Strategy Our Business Model Our Market Context Chief Executive’ Chairman’

26 23 22 18 15 12

REPORT Statement, Chief Executive’s This section includes the Chairman’s Reviews as well as details of our markets, and Finance Director’s business model, strategic progress, operations and key risks. STRATEGIC 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 before tax increased by 1% to £172.6 2017 to shareholders who are on Annual Report for the financial year million. The Group's trading profit margin the register as at 31 March 2017. ended 31 December 2016. reduced from 16.2% to 15.4%. This will bring the total dividend for JLT has delivered a good set of financial The reduction in the Group’s underlying the year to 32.2 pence per share, an results in 2016, when set against trading profit reflects JLT's continued overall increase of 5.2% and the eighth the continued challenging trading investment in building out its US consecutive year that JLT has paid an environment. In 2016 we have continued Specialty operation and the challenging increased dividend. to face severe external headwinds in business environment. More detail on The business has delivered a Total the economies in which we operate, both of these are set out in the Chief Shareholder Return (TSR) of 195% in the industries in which we specialise Executive’s Review on pages 15 to 17. over the past 8 years, as illustrated and in the insurance market. We are Excluding the US Specialty net in the chart on page 88. also addressing the challenges that investment of £27.0 million, the Group’s have been specific to JLT, including the underlying profit before tax would have build-out of our organic start-up in US increased by 5%, and the Group’s Specialty and the challenges posed by £1,261.3m trading profit margin would have been legal and regulatory changes in our UK broadly maintained at 18.1%, compared Employee Benefits business. We now TOTAL with 18.4% for 2015. have a clear line of sight to the benefits REVENUE that will flow from all our efforts to Our reported profit before tax reduced address those challenges. by 13% to £134.9 million, which includes the impact of exceptional costs of 9% PERFORMANCE £37.7 million and, as a consequence, reported diluted EPS decreased to INCREASE Total revenues increased by 9%, 37.8p and underlying diluted EPS or 3% at constant rates of exchange, decreased to 51.4p. ON 2015 to £1.26 billion with overall organic revenue growth of 2%. INCREASED DIVIDEND 20.6p The Group’s underlying trading profit The Directors have recommended a final increased by 3% to £193.7 million; FINAL dividend of 20.6 pence per share (2015: however at constant rates of exchange 19.5 pence) for the year to 31 December it decreased by 9%. Underlying profit DIVIDEND 2016. The dividend will be paid on 4 May

12 Jardine Lloyd Thompson Group plc Annual Report 2016

CORPORATE ACTIVITY HIGHLIGHTS JLT’s share incentive schemes are designed to ensure that decisions are made by management to support long-term Our Risk & Insurance businesses delivered organic revenue growth, that the right behaviours are rewarded and that growth of 3% in the year, with particularly strong performances management’s interests are aligned with those of shareholders. OVERVIEW in Construction and Aviation in all markets around the world. Further details of the operation of these schemes can be found in the Remuneration Committee Report set out on pages 73 JLT Re achieved market leading organic revenue growth of 4%, to 91. double 2015’s rate of growth, with an improved trading profit margin of 21%, as that business gained further momentum The strength and support of Jardine Matheson has been, and as a global reinsurance broker and advisor. will continue to be, an important factor in the success of JLT. Since 2014 a Relationship Agreement has been in place with We successfully implemented the restructure of our UK Jardine Matheson, in accordance with the Listing Rules of the Employee Benefits business. This included delivering the Financial Conduct Authority (FCA), which require shareholders anticipated savings of £9 million in the year, and a further

with a 30% or more shareholding to comply with certain STRATEGIC REPORT saving of £5 million will be secured in 2017. The business is independence provisions set out in a written and legally now positioned once again to grow its revenues and profits. binding agreement. The build-out of our US Specialty platform continues, with In March 2016 an amended Relationship Agreement was revenues increasing by 57% in the year to US$56 million. signed, formalising the processes the Company has in place With the peak of the investment programme being reached in to control the provision of information to Jardine Matheson 2016, we are now fully focused on narrowing our investment and clarifying when and how information may be requested losses this year and next, to achieve profits as planned in 2019. by Jardine Matheson from JLT. The recently announced investment in, and partnership More detail on the relationship with Jardine Matheson with, Construction Risk Partners (CRP), a highly respected is set out on page 60. CORPORATE GOVERNANCE Construction specialist broker, will establish a market-leading Construction practice as part of the US Specialty business. The acquisition also completes our global Construction SENIOR MANAGEMENT DEVELOPMENTS capability and enables us to serve international contractors wherever they operate around the world. There were a number of Board and senior management changes during the year. In the year the Group completed 7 new acquisitions, for a total consideration of £25.3 million, as it continued to build further James Twining stepped down from the Board with effect from scale in its existing businesses and geographies. 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 CORPORATE GOVERNANCE November 2016. Bruce will unfortunately be stepping down FINANCIAL STATEMENTS from the Board at the end of June, following his appointment The Board recognises the need for a strong corporate as Chairman of Lloyd's of London. Sadly Lord Leach, our governance framework and supporting processes across Deputy Chairman, died in June 2016 (see next page). Adam the Group and believes that good governance, with tone set Keswick joined the Board as Deputy Chairman with effect from from the top, is a key factor in delivering sustainable business 1 September 2016. Richard Harvey retired from the Board performance and creating value for the Group's stakeholders. with effect from 31 December 2016 and Jonathan Dawson The Board and I feel that the Board has a good balance of succeeded him as Senior Independent Director with effect from experience, skills and knowledge to support and challenge the same date. I would like to thank Richard and James for their the management team, and that it is supported by effective contribution to the Board and wish them both well for the future. governance and controls systems. More information on these systems can be found in the Corporate Governance Report on Mike Rice, CEO of JLT's US Specialty business, and SHAREHOLDER INFORMATION pages 55 to 62. In addition, the Directors’ Report on pages 92 William Nabarro, Special Adviser to the Group Chief Executive, to 99 reports on JLT’s compliance with the 2014 UK Corporate both joined the Group Executive Committee with effect from Governance Code (the Code) during 2016. 1 May 2016. Lucy Clarke, Deputy CEO of JLT Specialty, joined the Group Executive Committee with effect from During the year, the Board and each of its Committees 26 September 2016. undertook reviews of their effectiveness. The conclusions from these reviews provided useful feedback to each body on its With effect from 28 February 2017, the following senior performance. Further details are provided in the Corporate management changes are being made: Mike Methley is being Governance Report on pages 55 to 62. 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 STRATEGIC REPORT

Canada, in addition to his current role as Deputy Group CEO. We are also keen to ensure that we minimise our Mike Reynolds, Global CEO of JLT Re, assumes responsibility environmental impact and we take a number of steps to for JLT Insurance Management. Bala Viswanathan, CEO of JLT reduce our carbon footprint, such as encouraging the use of UK & Ireland Employee Benefits, also becomes International teleconferencing facilities where possible, instead of travelling Chairman of Employee Benefits. to face-to-face meetings.

OUR PEOPLE SHARE BUY-BACK AUTHORITY

On behalf of the Board I would like to thank everyone in JLT We will be seeking renewal of our standing share buy-back for their continued hard work and contribution to the Group’s authority at the forthcoming Annual General Meeting (AGM), results in 2016. I would also like to welcome all our new up to a maximum of 10% of the Company’s issued share colleagues who have joined JLT during the year. We have a capital. As in previous years, we will not be seeking shareholder distinctive culture at JLT that values agility and entrepreneurial approval for a dispensation under Rule 9 of the Takeover drive, rigour and depth of thought and a collaborative approach Code in relation to this authority. that puts customers first. We invest in our people and provide This means that if the directors were to initiate a buy-back, exciting opportunities to develop their careers as well as a first then in order to avoid triggering a mandatory offer obligation class working environment. There is further information about on Jardine Matheson Holdings (JMH) under Rule 37 of the our people and culture on page 7. Takeover Code, JMH would need to be able to participate in those buy-backs so that its overall percentage holding (which OUR ROLE IN SOCIETY as at 10 February 2017 was 40.16%) did not increase following the buy-back. JLT takes its role in society very seriously and has an active Corporate Responsibility programme. JLT’s approach is Although the Company has not utilised the authority to buy coordinated by a Corporate Responsibility Steering Committee, back shares since 2008, the Board believes it would be in the chaired by the Deputy CEO and whose members also include interests of all shareholders for the Company to have the right the Group Finance Director, the Group Head of Investor to purchase its own shares in the market in the appropriate Relations and the Group Company Secretary, as well as circumstances. We would only exercise this authority if we representatives from each of the Group's principal businesses. believe it is in the best interests of the shareholders and Our Diversity Committee has defined our Diversity agenda would result in an improvement of earnings per share. 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 Geoffrey Howe Group. We currently focus on three strategic partners aligned Chairman to our own areas of business: sharing the social benefits of 28 February 2017 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-by- business, 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. Lord Leach Deputy Chairman We match pound-for-pound money raised by UK staff in February 1997 - June 2016 fundraising activities and all UK staff are entitled to take Sadly Lord Leach, our Deputy Chairman and a Non-Executive one Charity Day per year, when they can spend company Director since 1997, and a representative of Jardine Matheson time helping a charity. The Group Charities Committee on our Board, died in June 2016. Rodney had been a hugely considers the many requests we receive from charities respected source of great wisdom and invaluable advice to the Board as well as to Dominic, myself and our predecessors and takes a particular interest in those charities connected over many years. He will be sorely missed. to communities local to our offices.

14 Jardine Lloyd Thompson Group plc Annual Report 2016

CHIEF EXECUTIVE’S OVERVIEW REVIEW

JLT had a number of successes STRATEGIC REPORT “ “ in the year, demonstrating the fundamental strength and resilience of our global franchise.

Dominic Burke

Our underlying trading profit increased rates continue their downward trend

KEY FINANCIAL CORPORATE GOVERNANCE by 3% to £193.7 million; however at CRE across all Specialty lines. The business HIGHLIGHTS it decreased by 9%. Underlying profit had to contend in particular with the JLT has delivered a good set of financial before tax increased by 1% to £172.6 reduced economic activity in the energy results in 2016, particularly when set million. The trading profit margin reduced and marine sectors. Trading profit in against the continued challenging trading from 16.2% to 15.4%. JLT Specialty increased by 7% to £73.1 million, with the trading margin of 22% environment, which persisted all year. The reduction in the Group’s underlying maintained at the same level as 2015. This included the sustained softness in trading profit at CRE largely reflects both the insurance and reinsurance rating our continued investment in building We also delivered strong growth in our environment, depressed commodity out our US Specialty operation and the international Specialty businesses, which prices and lacklustre global GDP growth. challenging business environment. together accounted for £437.8 million of revenues, an increase of 15% (or 4% The weakness of sterling from June Excluding the US net investment of £27 FINANCIAL STATEMENTS at CRE), with organic growth of 3%. 2016 was a positive factor in the Group’s million, the Group’s underlying profit results; the estimated impact of £22.2 before tax would have increased by 5% JLT Australia & New Zealand delivered million, at the underlying profit before to £199.6 million and the Group’s trading trading profit of £34.1 million, compared tax level, provided a helpful offset to the profit margin would have been broadly with £32.7 million in 2015, but saw a challenging trading environment. maintained at 18.1%, compared decrease at constant rates of exchange The Group entered 2017 with momentum to 18.4% for 2015. to £30.6 million. The trading environment intact and confident that JLT is well has been particularly competitive in the region and this, coupled with continued positioned to deliver organic revenue RISK & INSURANCE growth across the Group’s businesses. significant pressure on rates in the Our global Risk & Insurance businesses, region, has masked a good underlying SHAREHOLDER INFORMATION JLT achieved total revenues of £1,261.3 which represent 76% of the Group’s performance by the business. million in 2016, an increase of 9% revenue, grew revenues to £960.9 million, over 2015, or 3% at constant rates of Our Latin American operations achieved an increase of 11%, with organic revenue good revenue growth of 13%, with exchange (CRE). This included organic growth of 3%. revenue growth of 2%, consistent with organic revenue growth of 4%. Trading that of 2015, once again impacted JLT Specialty generated a 5% increase profit, however, reduced slightly year-on- by the decline in revenues in the in headline revenues to £327.5 million year, from £21.3 million to £21.1 million, UK and Ireland Employee Benefits in the year, or a 3% increase both at reflecting the planned investment in (UK Employee Benefits) business. CRE and on an organic revenue basis, building specialty capabilities across a strong performance in challenging the region, the benefits of which we trading conditions which saw insurance expect to start to see in 2017.

Jardine Lloyd Thompson Group plc Annual Report 2016 15 STRATEGIC REPORT

This business is successfully collaborating with our other offices exceeded those of the same period in 2015 of £82.4 million, around the world to win market share. The Group’s operations which was an encouraging indication of the stabilisation in in Brazil performed strongly despite the difficult economic the revenue run rate. backdrop in that country. At the time of our interim results we indicated that the business Our US Specialty business has continued to make progress would deliver the majority of its profits in the second half and in its second full year of operation, achieving organic revenue this has been the case. Trading profit for the year was £12.3 growth in excess of 50%, higher than the rate in 2015. We million, compared to breakeven at the half year. continued with our programme of recruitment, with headcount The business has successfully completed its restructuring reaching 223 employees at the year end. Revenues for the year programme, which has resulted in a flatter, more client-centric were $56 million, up from $36 million in 2015, while continued structure and a headcount reduction of over 300 employees. investment in the business resulted in losses of $37 million. Our The programme will deliver £14 million of annualised savings net investment spend in 2016 in this business was £27 million. in 2017, £9 million of which was delivered in 2016 (£7 million The recently announced investment in, and partnership with, of that in the second half). Construction Risk Partners, will establish a market-leading The focus in 2016 was, and will continue to be into 2017, Construction practice as part of the US Specialty business. very much on transitioning and rebalancing the business so that The acquisition also completes our global Construction trading profit margins can grow. The emphasis of the business capability and enables us to serve international contractors continues to be on investing to strengthen and enhance wherever they operate around the world. platforms and to build out the sales function. JLT Re, our global reinsurance broking business, delivered While the profitability of the business in 2016 was weighted a strong performance in 2016, with reported revenues towards the second half of the year, UK Employee Benefits increasing by 13% to £195.6 million, representing market- is anticipating organic revenue growth for 2017 and this, leading organic revenue growth of 4%, twice the rate of 2015. taken with the £5 million residual benefit of the restructuring This performance was delivered despite the well documented, programme, means we are confident that this business is multi-year decline in pricing across most lines of reinsurance making steady progress towards delivering a 15% trading and in most geographies and the continued consolidation in profit margin for 2018. capital providers. Our Employee Benefits businesses in other parts of the world JLT Re’s trading profits increased to £40.5 million and this is performed well. reflected in an improved trading margin of 21%, delivering upon management's guidance that profitability would be improved In Asia, PCS, our high net worth life insurance broking business, in this business. This margin improvement was achieved while saw some slowdown in first half revenues due to regional the business continues to invest significantly for future growth, economic uncertainty in South Asia; however, steps were taken not only in recruiting leading talent to further strengthen its in the second half to broaden the range of products offered by General Property, Casualty and Specialty lines and its analytics the business. This succeeded in pulling revenues back up from capabilities, but also in its infrastructure and systems. the half year position, which had been negative year-on-year.

Our Australian Employee Benefits business achieved 36% EMPLOYEE BENEFITS revenue growth, following the acquisitions made in 2015 and 2016 in rehabilitation services provided in relation to Workers Within our global Employee Benefits operations, which Compensation insurance. Organic growth was 4%. With a represent 24% of the Group’s revenue, revenues increased series of major client wins as a result of the expanded capability by 4% overall, but declined by 3% on an organic basis. These of the business, accelerated revenue growth and improved results were impacted by the decline in first half revenues in margins are projected in 2017. The trading margin of the the UK and Ireland business. business improved from 16% in 2015 to 20% in 2016. Reported revenues for the year for JLT’s UK and Ireland JLT’s Latin American Employee Benefits operations Employee Benefits business (UK Employee Benefits) were delivered organic revenue growth of 10%. Performance was £160 million, compared to £167.4 million in 2015, a decline of particularly notable in Colombia - on the back of the Workers 4%, or 8% on an organic basis. This reflects the final impact Compensation offering - and in Brazil, despite the challenging of the cessation of commission revenue from life assurers local economic backdrop. Investment has continued to be - which amounted to £5 million earned in 2015. Putting the made in building out capabilities and expanding the offering performance of UK Employee Benefits into context is best done in the region; this is the underlying reason for a smaller increase by looking at second half performance, given the restructure in trading profit and a 200 bps reduction in trading margin. programme in 2016. Second half revenues of £85.1 million

16 Jardine Lloyd Thompson Group plc Annual Report 2016

Details of the performance of each individual business are JLT’s operations in Europe, outside of the UK, primarily set out in the Review of Operations on pages 28 to 36. 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 OVERVIEW A YEAR OF FURTHER PROGRESS risks and access to the London Market for clients across the Continent – but we do not have JLT-owned operations of a 2016 saw some of the most challenging trading and economic significant size in France or Germany. The services we provide conditions that I’ve experienced in my 11 years as Chief to Continental European clients cover only the most specialist Executive. Despite the headwinds, JLT had a number of portion of their risk management requirements. The Group's successes in the year, demonstrating the fundamental strength aggregate revenues received from EU countries into the UK and resilience of our global franchise. in 2016 was modest – no more than 4%. 2016 was also a year of significant change for JLT. The Group In light of the priority given in the recent UK Government continued to evolve and grow, building momentum in ways White Paper to protecting the UK’s strength in financial services STRATEGIC REPORT not always apparent in revenues or profits. There were steady and to agreeing appropriate transitional arrangements, we improvements in barometers such as client advocacy scores, are confident that, after the UK leaves the EU, Continental new business win rates, staff retention and client renewal rates, European insureds will still be able to secure continuing access which underpin my strong belief that we are well equipped for to the London Market insurance expertise that is essential accelerating progress. for them to meet their business requirements. Examples of the changes the Group is going through include: • The disposal of two businesses during the year. One of LOOKING FORWARD these was Thistle, in the UK, a business which no longer

fitted the Group’s strategy; At many times in recent years the word ‘resilient’ has perfectly CORPORATE GOVERNANCE described JLT’s performance. We have grown, evolved and • The recently announced investment in and partnership with flourished despite setbacks and headwinds. And that is exactly CRP followed 7 new acquisitions made during 2016 to add what we have done once again in 2016. Not only have we further specialty capabilities to our business; as a result, continued to address external headwinds in the economies in today we have global construction capabilities totalling which we operate, in the industries in which we specialise and some 400 colleagues across the Group; in the insurance market; we are also addressing the challenges • The improving performance of UK Employee Benefits and that have been specific to JLT – the challenge of an organic the re-establishment of its revenue momentum and profit start-up from scratch in our US Specialty business; and the growth; and challenges posed by legal and regulatory change in our UK • The success of JLT Re, now firmly established as a Employee Benefits business. We now have clear sight of the principal component of the Group following the substantial benefits that will flow from all the effort we have put in FINANCIAL STATEMENTS acquisition made 3 years ago. JLT Re’s success has been to address those challenges and opportunities. achieved despite reinsurance premium rate reductions of 30% and more since the acquisition was made. The JLT has entered 2017 with good momentum across all of its combination of its strong market position with regional businesses. We are therefore confident that we will deliver insurers in the US, and the strength of JLT Group’s organic revenue growth more in line with historical rates, relationships with global insurers has provided a powerful generating sustained year-on-year financial progress. platform from which to grow.

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 SHAREHOLDER INFORMATION clients in the industries in which we specialise wherever they Dominic Burke operate around the world now defines us as a global broker. Group Chief Executive We are, however, a global broker with our own distinctive 28 February 2017 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.

Jardine Lloyd Thompson Group plc Annual Report 2016 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 policies. At the same time, a strong US dollar could adversely underlying macro-economic and demographic factors affect growth prospects in the US and weakening currencies than short-term insurance and reinsurance rating trends. could exacerbate capital outflows from emerging economies, Higher levels of economic growth are both the cause especially China. A plethora of political uncertainties exists as and effect of greater levels of corporate activity, a number of countries go to vote in early 2017 in Europe, the investment and increasing personal wealth. This activity UK invokes Article 50 to trigger the process of leaving the EU stimulates demand for our services, whether that is and the new administration takes charge of the White House. placing the insurance for a major infrastructure project, If political uncertainties are safely negotiated and various fiscal or helping a company arrange and manage its employee and structural reforms are implemented, the global economy benefits programme. is likely to grow at a sound rate.

CURRENT TRENDS IMPACT ON JLT 2016 was a year of surprises and contrasts. The year started A great deal of preparatory work is currently underway with the spectre of China’s hard landing, falling bond yields, within the UK Government to formulate negotiating positions low commodity prices and crumbling global trade. This was as regards both the UK’s exit from, and the subsequent compounded by widespread volatility in the stock markets trading relationships with, the EU and the rest of the world. which forced central bankers to adopt unconventional policies JLT is watching these developments closely, and has been such as negative interest rates to combat deflation. However, contributing to the inputs being made to Government by much of this reversed towards the end of the year. Inflation various insurance industry groups and the financial services expectations and growth prospects made a notable industry more generally, to ensure that we are well equipped comeback with the US presidential election and the for the range of possible Brexit outcomes. Our commitment anticipation of promised pro-growth policies of a Trump is to ensure that our clients can depend on continuing quality administration. The prospect of a reflationary trend in major service from their broker and uninterrupted access to markets. economies resulted in higher bond yields and triggered a 'risk- on' sentiment. Commodity prices began to recover against the Macro-economic headwinds and a volatile geo-political backdrop of easing supply glut. Global trade recovered and environment inevitably impact demand for insurance-related the stock markets rose to new highs. Productivity growth and services as new projects and investments are delayed, scaled structural reforms, however, continued to remain elusive. back or cancelled and companies look to drive more value out of their broker relationships. Industries or countries with 2016 witnessed the outcomes of the Brexit vote and the US particular exposure to commodity prices (such as mining elections in particular posing material risks to global trade and and energy) or foreign exchange are particularly exposed. migration, which are likely to shape the policy decisions and the major macro-economic trends of 2017. 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 FUTURE OUTLOOK to collaborate with clients across geographies and capitalise 2017 is likely to see strong growth in the US and Japan, backed on evolving opportunities. by fiscal measures. Populist and protectionist political agendas Over the longer term, we also believe that our strategy aligns could, however, adversely affect trade relations, impacting us well with faster-growing sectors and geographies where emerging markets the most. Stabilising commodity prices and demand is driven by long-term and fundamental demographic low unemployment rates in the developed world could assist factors and market trends such as population growth, ageing, in reducing deflationary pressures and in normalising monetary medical inflation (in the case of international Employee Benefits), urbanisation and accelerating middle-class wealth.

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2 THE (RE)INSURANCE RATING ENVIRONMENT 3 INTEREST RATES

The insurance and reinsurance industry is inherently Insurance brokers earn interest income on the fiduciary

cyclical, with the price of insurance and reinsurance funds that they hold on behalf of clients. This essentially OVERVIEW fluctuating depending on demand for cover and the comprises premiums passing through to underwriters supply of capital into the market. A lack of capital, and paid claims being passed back to clients. typically caused by one or more large losses or by investors choosing to invest in alternative asset classes, CURRENT TRENDS can lead to a ‘hard market’, when the cost of insurance Since the global financial crisis, the world economy has been and reinsurance increases. An over-supply of capital characterised by a sustained period of very low interest rates, can lead to a ‘soft market’, which results in premiums most notably in ‘developed’ economies, as policy makers have reducing. Today, near record levels of capital remain the sought to stimulate growth by reducing the cost of borrowing dominant force in maintaining soft pricing environments, and boosting exports, as well as injecting unprecedented levels as excess supply chases relatively muted demand. of liquidity into the market in the form of quantitative easing STRATEGIC REPORT stimulus programmes. CURRENT TRENDS Base rates in the UK and the Eurozone today stand at 0.25% Moderating capital inflows, the prospect of higher insured and 0%, respectively. In December 2016, the US again catastrophe losses, reserving volatility and inflationary and increased its short-term interest rate to 0.75%. interest rate concerns are coalescing to counteract price declines. As a result, downward reinsurance pricing pressure eased in 2016. This was due to: FUTURE OUTLOOK • Limited scope for further price reductions for some classes Market expectations are that the US will continue to increase of business as rates neared technical minimums; interest rates in modest increments during 2017. While there can be no certainty as to future movements in interest

• Static levels of reinsurance supply due to a marked rates, those in the UK and Eurozone are expected to remain CORPORATE GOVERNANCE slowdown in the rate of third-party capital entry in particular; unchanged during 2017, particularly whilst uncertainty relating • Growing demand for reinsurance as cedents recognised to the outcome of Brexit negotiations continues. that current pricing levels presented opportunities; and • Increased underwriting discipline amidst elevated loss experiences, growing reserving volatility (with some notable IMPACT ON JLT instances of reserve strengthening) and a changing Historically, investment income has provided JLT with a macroeconomic environment (including rising inflation significant flow of revenue – 17% of underlying trading profit in expectations). 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% FUTURE OUTLOOK to £797 million. Rising interest rates tend to lead to higher levels Nevertheless, excess capital and historically low cession rates of economic activity, which in turn provide more opportunities continue to prevent any meaningful pricing upturn at present, for JLT to grow its business. The level of interest rates also has FINANCIAL STATEMENTS and unless 2017 sees the market hit by one or more major an impact on the Group's pension liabilities. catastrophic events, and/or there is a sharp increase in the We estimate that, for every 1% improvement in our average global interest rate environment (which may drive capital to achieved deposit rate, JLT generates approximately £8 million other asset classes), it is hard to see insurance or reinsurance of additional investment income, assuming broadly consistent rates firming in the immediate future. 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. IMPACT ON JLT 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 SHAREHOLDER INFORMATION retain and win business, increasing competition on our fee- based 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.

Jardine Lloyd Thompson Group plc Annual Report 2016 19 STRATEGIC REPORT

2016 Foreign exchange rates 4 EXCHANGE RATES

0.85 USD: GBP AUD: GBP As a global business, JLT has both ‘translational’ 0.8 (ie reporting of foreign financial statements in sterling) 0.75 and ‘transactional’ foreign exchange exposures. 0.7 Our largest transactional exposure arises in our London Market businesses, which have sterling cost bases, 0.65 but generate a large amount of US dollar revenue. 0.6 In 2016, this amounted to some USD 357 million. 0.55 0.5 CURRENT TRENDS 0.45 Sterling depreciated significantly against other major currencies 0.4 during 2017, following the outcome of the EU referendum in 1 Jan 31 Dec 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 5 COMPETITION 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 With owned insurance broking and employee benefits to our profits), which traded at an average of 1.83 during 2016 operations spanning 40 territories, JLT faces a large compared to 2.04 in 2015. number and range of local, regional and international competitors. Given this, it is impossible to comment on the relative individual strengths and weaknesses FUTURE OUTLOOK of all of our competitors. Market consensus continues to suggest that the US dollar is expected to outperform sterling and other currencies during CURRENT TRENDS 2017. This is primarily a reflection of expected relative interest rate yields, with further moderate increases in US interest rates Macro-economic headwinds and the continued weakening anticipated during 2017 compared to UK and Eurozone GDP in the insurance and reinsurance rating environment have growth forecasts, and the continued support from a lower combined, over recent years, to create a very challenging and oil price and uncertainty over Brexit negotiations continuing competitive environment, with some rivals willing to discount to weigh on both sterling and euro during 2017. 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 FUTURE OUTLOOK the US dollar) increases JLT’s revenue relative to its sterling cost base (transactional) and affects the sterling equivalent The competitive environment is unlikely to ease significantly value of the income statements and balance sheets of our in the near future. The nature of our competition is changing, international operations when consolidated at the Group level however, as we continue to grow. (translational). Overall, we experienced a favourable foreign exchange impact of £23.5 million on underlying trading profit in 2016 versus 2015. IMPACT ON JLT JLT has historically been able to attract people and clients due JLT does not hedge its accounting translational foreign to its differentiated Specialty-led offering and distinctive culture. exchange exposure. However, to mitigate the transactional This can be seen, for example, in how we have been able to impact of foreign currency movements arising from actual consistently attract market-leading talent around the world. cash flows, we operate a rolling currency hedging programme, We remain confident that our client and people proposition covering our US dollar exposures in particular, as well as other and growth momentum will allow us to continue to attract transactional currency exposures, to reduce the impact of weak and retain industry talent and win clients. 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

6 REGULATION 7 TECHNOLOGY

JLT operates under the jurisdiction of a number of Technology influences every aspect of life, with different regulators around the world. Its principal implications for the risks our clients face, how we operate OVERVIEW regulator is the UK Financial Conduct Authority (FCA). as a company and how we adapt to the rapidly-changing external and competitive environment. CURRENT TRENDS The level of oversight exercised by the various financial services CURRENT TRENDS regulators around the world varies from country to country and As advances in technology take place, both JLT and its often by business activity. In previous years, we have stated clients face rapid changes in how their businesses are run that the regulatory environments in some of the jurisdictions and the risks they face. Technological developments create in which we operate are likely to strengthen, which is proving opportunities for JLT to find ways of carrying out its operations to be the case in countries such as Hong Kong, South Africa, more efficiently and cost-effectively. They also allow us to

Malaysia and Japan. Moreover, several are in the process of enhance the service we provide to clients, for example through STRATEGIC REPORT implementing ‘conduct’ orientated regimes similar to the the collection and use of data to drive better insights for our UK’s FCA. clients, or through the adoption of new channels for engaging and communicating with them. Technological change also gives We also observe that there is more consistency in the type rise to new areas, such as cyber risk, in which JLT's expertise in of regulation being introduced across many countries, in risk management can be applied to support and service clients. areas such as data protection. These trends place additional strain and cost on the business and increase the chances On the other hand, the level of risk to our own business from of some form of regulatory action being taken in those cyber risk continues to increase and requires substantial jurisdictions. However, we recognise that good regulation also investment in systems and procedures to counter the threats creates a more level playing field and helps stimulate greater it poses. Technological advances also potentially enable a client demand. Proportionate and fair regulation is therefore new generation of competitors to disrupt existing industries

something we welcome as being positive for our clients, and players. CORPORATE GOVERNANCE our people and the industry as a whole.

FUTURE OUTLOOK IMPACT ON JLT The rapid pace of technological change is likely to lead to As JLT grows, we can expect a greater level of regulatory further operational efficiencies and a significant increase in scrutiny in line with our increased scale, particularly for those the volume of data that can be collected and analysed, which of our businesses that carry consumer ‘conduct risk’. We could have a significant impact on the industry’s actuarial continue to invest in our risk and compliance frameworks to understanding of underlying risk trends and how they should ensure that we have the right skills to enable us to advise our be priced. businesses on the implications of the changing regulatory environment, as discussed in the Risk Management Report on Cyber risk will continue to pose a significant risk for many pages 42 to 45. We are committed to working constructively organisations, including ours, but also an opportunity for risk management organisations.

with all of our regulators to ensure that we meet our regulatory FINANCIAL STATEMENTS commitments and protect our clients’ interests. IMPACT ON JLT 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. SHAREHOLDER INFORMATION

Jardine Lloyd Thompson Group plc Annual Report 2016 21 STRATEGIC REPORT

OUR BUSINESS MODEL

CLIENTS AND SERVICES

Risk & Insurance Employee Benefits Acting as an intermediary for our clients with insurers and reinsurers Acting as an advisor, intermediary and service provider in the and providing related risk management, analytical, advisory and pensions consultancy and administration, employee benefits other administrative services. and healthcare, life insurance and wealth management sectors. Clients include multinational corporations and other public and Clients include multinational corporations, public and private private sector organisations, retail insurance brokers and individuals. sector organisations, pension trustees and individuals.

FEES AND COMMISSIONS

Fees are typically charged either on a time-cost Commissions are typically based on a percentage of the or a fixed-fee basis and are earned in both the insurance or reinsurance premium being paid by the client. Employee Benefits and Risk & Insurance business Frequently, the level of this commission payment is also groups. These fees are paid by the client rather subject to negotiation with the client. This commission is than the insurer or reinsurer. paid by the insurer or reinsurer rather than the client and is largely earned in the Group’s Risk & Insurance businesses.

ACQUISITIONS INVESTMENT INCOME PEOPLE

The Group’s Strategy (see page 23) includes Investment income arises from the holding of cash The Group continues to retain and recruit a commitment to grow its Specialty-led and investments on behalf of clients. The holding of market-leading individuals across all of its capabilities and build out its international client monies largely relates to premium and claims global operations. payments which the business holds for a short period reach and relevance. Acquisitions have JLT now has 10,232 employees working of time in its role as the intermediary. been, and will continue to be, an important for the Group. Key to the success of our element of delivering on this strategy. recruitment approach has been retaining In 2016, the Group made 7 new acquisitions and attracting individuals who not only add for a total consideration of £25.3 million. further capabilities, but also fit JLT’s distinctive culture. In the last 5 years, the Group has made a total of 39 acquisitions for a total COSTS The Group is committed to investing in the consideration of £360 million. 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 REMITTED TO SHAREHOLDERS

22 Jardine Lloyd Thompson Group plc Annual Report 2016

DELIVERING ON OVERVIEW OUR STRATEGY

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, STRATEGIC REPORT and to be Results Based in our focus on delivering for clients within JLT’s performance-based culture.

Our strategy is founded on the concept of specialisation. Our proposition is based primarily on client advocacy, deep We choose to only operate in those areas where we have knowledge, tailored advice and service excellence. Our aim deep-seated expertise and knowledge that adds value is to drive strong revenue and profit growth in a way that is to clients and provides us with a competitive edge. We sustainable and that balances the interests of our four key carefully prioritise our specialisms based on where we stakeholders: our clients, our people, our trading partners

see the best opportunity to establish a leadership position, and our shareholders. We believe our strategy is distinctive CORPORATE GOVERNANCE supported by long-term growth trends. 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:

DRIVING GROWTH ENABLING GROWTH

We seek to drive growth through two main pillars: To enable this growth, we are focused on delivering 1. Focusing and growing in Specialist areas against three further pillars: 2. Building our international reach and relevance 3. Improving our efficiency and effectiveness FINANCIAL STATEMENTS These two pillars are rooted in our view of long term economic 4. Providing a distinctive working environment trends relating both to the improving prospects of ‘developed’ 5. Operating collaboratively as ‘One JLT’ world economies, such as the United States, where we are focused on building a significant presence, and the continued We have significantly enhanced the efficiency and effectiveness opportunity represented by the ‘developing’ world, where of our processes, systems and operating models over the last factors such as population growth, ageing and increasing few years to improve the way we serve clients. In 2016 we personal prosperity are driving long term demand, as detailed commenced a global initiative to introduce a consistent in the Our Market Context section (pages 18 to 21). Our Operating Model in all our businesses, supported by improved specialist focus positions us well to continue to capitalise IT platforms. on those trends, as long term investment in areas such as We continue to invest in our people proposition to ensure infrastructure, construction, telecommunications, aviation that we are able to attract and retain the very best talent in and healthcare continues. SHAREHOLDER INFORMATION the market. We continue to see significant financial benefit We are already amongst the world’s leading construction, from collaboration between our Specialty operations offshore energy, aerospace, commodity and brokers of high around the world. value life assurance policies, with improving positions in On the following pages, we describe in more detail each a range of further specialty areas which are set to benefit element of our strategy, selected highlights of our progress from global economic activity. 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 23 STRATEGIC REPORT

STRATEGY ELEMENT SELECTED ACHIEVEMENTS IN 2016 PRIORITIES FOR 2017 OBJECTIVE

BUILDING OUR • Continued the build-out of our US retail operations through • Invest in the continued build-out of our Building our international reach and INTERNATIONAL REACH organic development US Specialty business, through recruitment relevance, especially in the world’s AND RELEVANCE • Strengthened our Healthcare capability in Australia by acquiring and selected bolt-on acquisitions high growth economies, to better a further leading occupational health business • Reinforce our retail, Employee Benefits and meet the needs of local and multinational clients and trading partners 2 • Recently acquired a majority interest in Construction Risk Partners, Reinsurance activities in developing markets, a leading US-based construction risk and surety specialty insurance through selected investments, bolt-on acquisitions broker, accelerating JLT’s presence as a focused Specialty broker and partnerships in the world’s largest insurance market

IMPROVING OUR • Established a global Operations Forum to deliver • Continue to roll out robotic process automation Improving the way we work and EFFICIENCY AND more effective working practices across the Group across the Group where relevant to provide faster, serve clients through innovation EFFECTIVENESS more consistent and higher quality processes and by investing in the efficiency • Commenced a global initiative to improve the Group’s and effectiveness of our people, digital capabilities • Rationalise our applications landscape and develop digital-ready IT platforms in our businesses systems and processes • Rolled out a single common reinsurance platform across 3 the Group’s international operations • Enhance our risk mitigation and control activities across our UK and international businesses • 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 • Completed the 2016 Global Employee Engagement Survey, • Develop global talent pools which will ensure Providing a distinctive, entrepreneurial WORKING ENVIRONMENT with high levels of participation, identifying opportunities to drive JLT’s talent is being deployed in the right place, and results based work environment even stronger employee engagement and further improve the at the right time that attracts, develops and retains working environment • Continue development of diversity programmes the best individuals • Organised the second Emerging Leaders Programme, to ensure that we recruit the best and foster 4 helping to develop the next generation of JLT leadership career development without limitation • Progressed a range of programmes to encourage the development • Build our technical training capability of greater diversity in our workforce, led by a global advisory group on a global scale

OPERATING • Continued to win major global accounts through improved • Optimise use of our Customer Relationship Operating collaboratively as ‘One JLT’ COLLABORATIVELY collaboration across the Group, including the Group’s largest Management Tool to improve insight and alignment to bring the best of JLT to our clients AS ‘ONE JLT’ international Employee Benefits client win to date around key accounts and the opportunity pipeline and trading partners anywhere in • Embedded global initiatives in Mining, Construction, • Develop our portfolio management activities the world Communication, Technology & Media and Credit and Political across all our operating entities and geographies, 5 & Security, to ensure an aligned global approach to identifying, supported by an appropriate operating platform prospecting and servicing key accounts

24 Jardine Lloyd Thompson Group plc Annual Report 2016

STRATEGY ELEMENT SELECTED ACHIEVEMENTS IN 2016 PRIORITIES FOR 2017 OBJECTIVE OVERVIEW

FOCUSING AND GROWING • Invested further in building our capabilities in key Specialty areas • Continue to develop our Healthcare offering Focusing and growing in specialist IN SPECIALIST AREAS including Representations & Warranties and Fine Art, Jewellery around the world to take advantage of areas within our existing operations and Specie changing client demands where we can offer distinctive products, services and • Enhanced analytics and modelling capabilities across • Grow our Mining business around the world, independent choice 1 the Group to improve our client advisory proposition leveraging the global practice group and leadership • Completed a number of new acquisitions to deepen our • Continue to invest in strengthening our Specialty Specialty capabilities in developing markets and economies, offering around the world, both organically and including in Peru and in our India associate business through selective bolt-on acquisitions STRATEGIC REPORT BUILDING OUR • Continued the build-out of our US retail operations through • Invest in the continued build-out of our Building our international reach and INTERNATIONAL REACH organic development US Specialty business, through recruitment relevance, especially in the world’s AND RELEVANCE • Strengthened our Healthcare capability in Australia by acquiring and selected bolt-on acquisitions high growth economies, to better a further leading occupational health business • Reinforce our retail, Employee Benefits and meet the needs of local and multinational clients and trading partners 2 • Recently acquired a majority interest in Construction Risk Partners, Reinsurance activities in developing markets, a leading US-based construction risk and surety specialty insurance through selected investments, bolt-on acquisitions broker, accelerating JLT’s presence as a focused Specialty broker and partnerships in the world’s largest insurance market CORPORATE GOVERNANCE

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 The underlying trading margin decreased from 16.2% to a combination of the reduction in headcount in UK Employee 15.4%, reflecting the continued investment in our US Specialty Benefits and the impact of foreign exchange. Across the business and the reduction in the revenues of our Energy and Group we continued to invest in our Specialty capabilities Marine businesses. Excluding the cost of the net US Specialty through the ongoing recruitment of leading industry investment, the Group’s trading profit margin would have been professionals and targeted acquisitions. broadly maintained at 18.1%, compared to 18.4% for 2015.

120.1 114.4 108.9 17.8 16.2 15.4

£120.1 £'000 15.4 % 2014 2015 2016 2014 2015 2016

Underlying PBT*** Underlying Diluted EPS*** Underlying PBT increased by 1% reflecting the reduction in Underlying diluted EPS decreased by 2% in the year. The the revenues of our Energy and Marine businesses, together performance related remuneration of the executive directors with the impact of the cost of the investment in building out and other senior executives within the Group is closely aligned the US Specialty operation. Excluding the net US investment, to PBT and EPS performance. This is discussed in more detail the underlying PBT would have increased by 5%. in the Remuneration Report on pages 73 to 91.

183.0 57.1 170.1 172.6 52.2 51.4

£172.6 £'m 51.4 Pence 2014 2015 2016 2014 2015 2016

RISK & INSURANCE EMPLOYEE BENEFITS Total Revenue Per Employee* Trading Margin** Total Revenue Per Employee* Trading Margin** £’000 % £’000 %

155.6 19 86.5 15 16 144.7 17 76.3

2015 2016 2015 2016 2015 2016 2015 2016

HOW WE CALCULATE OUR KEY PERFORMANCE INDICATORS

* 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

*Executive Director of Jardine Lloyd Thompson Group plc

GROUP EXECUTIVE COMMITTEE

DOMINIC BURKE* PAUL KNOWLES OVERVIEW Group Chief Executive CEO, JLT Specialty Dominic joined the Group in 2000 when his business Paul was appointed CEO of JLT Specialty and joined the Burke Ford was acquired by JLT and became CEO GEC in January 2016. He has been with JLT for more than of JLT’s UK Retail and Employee Benefits business. 20 years and has held a number of senior roles, including He was appointed Group COO in January 2005 and leading the Construction and Real Estate business and became Group Chief Executive in December 2005. JLT Specialty’s Major Corporate business.

MARK DRUMMOND BRADY* MIKE METHLEY Deputy Group CEO, CEO JLT Latin America Group Chief Operating Officer and Chairman, JLT Canada Mike joined JLT in 1994. He is a member of the GEC. Mark has been with the JLT Group since 1987. He joined He was CEO of JLT Latin America from 2013 to 2017 and Chairman of JLT Canada and JLT Insurance Management

the GEC in 2006 and was appointed Deputy Group CEO in STRATEGIC REPORT September 2014. He is also a director of JLT’s US Specialty from 2014 to 2017. Mike was previously Managing Director business. From 28 February 2017, Mark assumes the roles of JLT Asia. Mike has been appointed as Group Chief of CEO JLT Latin America and Chairman of JLT Canada, Operating Officer with effect from 28 February 2017. in addition to his current role as Deputy Group CEO.

CHARLES ROZES* WILLIAM NABARRO Group Finance Director Special Adviser to the Group Chief Executive Charles joined JLT in September 2015 as Group William rejoined JLT in early 2016 and became a member of the Finance Director. He is also a director of JLT India. GEC in May 2016. He previously worked for JLT between 2003 Charles has also held senior roles over a period of and 2010 in a range of senior roles, including as a plc Director 25 years at Barclays, Bank of America, IBM and and Executive Chairman of Employee Benefits. Prior to this he PricewaterhouseCoopers. 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.

LUCY CLARKE JONATHAN PALMER-BROWN CORPORATE GOVERNANCE Deputy CEO, JLT Specialty Adviser to the Group Chief Executive Lucy has worked within the insurance industry in the Jonathan joined JLT and became a member of the London market for over 25 years. She joined JLT in 2002 GEC in 2010. He is a former Chairman of the London and leads JLT Specialty's Energy and Marine teams. and International Insurance Brokers’ Association She was appointed as Deputy CEO of JLT Specialty in and sat on the London Market Group. September 2015 and joined the GEC in September 2016. He currently serves as Chairman of the LIIBA Aviation Executive, a post he has held for over 20 years.

LEO DEMER MIKE REYNOLDS CEO, JLT Australia and New Zealand Global CEO, JLT Re Leo joined JLT Australia in 1985 and was appointed Mike joined JLT in November 2012 as Group Finance Managing Director of the Risk Services Division in 2000. Director, before his appointment as Global CEO, JLT Re He became Managing Director of JLT’s Australian and on 1 September 2014. Mike had worked in a number of New Zealand businesses in January 2008 and was then senior finance roles in the insurance industry, including as appointed CEO and joined the GEC in January 2010. CFO of ACE European Group Limited and Aon Benfield.

From 28 February 2017 Mike has assumed responsibility FINANCIAL STATEMENTS for JLT Insurance Management.

ADRIAN GIRLING MIKE RICE JR Chairman, JLT Specialty CEO, JLT Specialty USA Adrian has been with JLT for over 30 years. Mike joined the Group in August 2014 as the CEO He was CEO of Jardine Lloyd Thompson UK Limited of US Specialty, responsible for overseeing JLT's US before being appointed Chairman of JLT Specialty in operations and expansion. He joined the GEC in February 2012. Following the merger of JLT Specialty May 2016. Prior to joining JLT, Mike held several and Lloyd & Partners Adrian became Chairman of the senior positions within Aon over a 25 year career. enlarged business.

ROSS HOWARD DOMINIC SAMENGO-TURNER Executive Chairman, JLT Re CEO, JLT Asia Ross joined JLT in November 2013 on completion of the Dominic joined JLT and the GEC on 9 February 2015 acquisition of Towers Watson Re and joined the GEC in and was appointed CEO of JLT Asia in May 2015. SHAREHOLDER INFORMATION January 2014. Ross was formerly the global leader of Dominic joined the Group from Willis, where he Towers Watson’s reinsurance business. spent 20 years, most recently as Co-Chief Executive He has over 35 years’ experience in the industry. of Global Specialties and a director of Willis Limited.

KEITH JOHNSON BALA VISWANATHAN Group General Counsel CEO, JLT UK & Ireland Employee Benefits, Keith was appointed as General Counsel for the JLT International Chairman of Employee Benefits Group in August 2014 and joined the GEC at the same Bala joined the JLT Group in 2006 as CEO of its time. He was formerly a partner of Linklaters, with more operations in India. In April 2014 he was appointed Group than 20 years’ corporate and management experience COO based in London and joined the GEC at the same time. in the UK, Sweden and Asia. 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 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 Providing our clients with access to certain exclusive insurance requirements, ensuring that they understand the likelihood and facilities, binders and other products, without taking any potential severity of the risks they face, the options available to balance sheet underwriting risk. mitigate these risks and the potential cost of doing so.

BROKERAGE AND PLACEMENT OTHER SERVICES

Acting on our clients’ behalf, using our specialist knowledge Providing a range of related services to our clients and to negotiate and place insurance cover with insurers and insurance market counterparties in areas such as captive reinsurers all over the world. management, claims management and administration, and capital raising and corporate finance advice.

RISK & INSURANCE CONTRIBUTION TO OUR BUSINESSES 2016 GROUP REVENUE 2016

* Excludes employees in shared service operations

28 Jardine Lloyd Thompson Group plc Annual Report 2016

JLT SPECIALTY JLT RE

2016 2015 % Change 2016 2015 % Change

Total revenue £327.5m £311.2m 5% Total revenue £195.6m £173.6m 13% OVERVIEW Underlying trading profit £73.1m £68.3m 7% Underlying trading profit £40.5m £32.4m 25% Trading margin 22% 22% Trading margin 21% 19%

JLT Specialty, which includes our wholesale operations, JLT Re is one of the world’s largest reinsurance brokers, provides insurance broking, risk management and claims with approximately 700 professionals across 33 locations services for clients across a wide range of business sectors. in 16 countries, delivering world-class risk analysis and risk The division employs some 1,400 people, primarily based transfer solutions. in London, but who also work in close collaboration with all of JLT’s international offices, supplying them with industry Review of Operations expertise, advice and access to international markets. JLT Re delivered a strong performance in the year, with reported STRATEGIC REPORT revenues increasing by 13% to £195.6 million and market- Review of Operations leading organic revenue growth of 4%, twice the rate of 2015. JLT Specialty generated a 5% increase in headline revenues to This performance was delivered despite the well documented, £327.5 million, or a 3% increase at constant rates of exchange multi-year decline in pricing across most lines of reinsurance (CRE), all of which was organic. Trading profit increased by 7% and in most geographies and the continued consolidation in to £73.1 million, with the trading margin maintained at 22%. capital providers. JLT Re has continued to grow revenues This was a strong performance in challenging trading and profits steadily despite consecutive years of downward conditions, which saw insurance rates continuing their rating pressure. downward trend across all Specialty lines. The business had to CORPORATE GOVERNANCE JLT Re’s trading profits increased to £40.5 million, with an contend in particular with the reduced economic activity in the improved trading margin of 21% (2015: 19%). This margin energy and marine sectors, which led to a lower total value of improvement was achieved while the business continued to risk to insure. To put this in context, it has been reported that invest significantly for future growth, not only in recruiting leading in excess of $1 trillion of oil and gas capital projects in 2015 talent to further strengthen its General Property, Casualty and and 2016 were deferred, delayed or abandoned. JLT's Energy Specialty lines and its analytics capabilities, but also in its and Marine divisions saw a £12 million reduction in year-on- infrastructure and systems. Two acquisitions were completed year revenues, despite increasing their client bases and market in December, to deepen our capabilities in Healthcare and in shares, and an estimated £8.5 million negative impact on Group the Central American region. trading profit. JLT Re operates on a global basis, and all regions delivered The revenue base of Specialty is, however, both diverse organic revenue growth in the year. In the UK & Europe, JLT FINANCIAL STATEMENTS and well-balanced, which enables JLT better to withstand Re’s most mature market, the organic growth came through sector-specific challenges. In 2016 there were particularly initiatives in Facultative, Binders and Healthcare, despite the strong performances by a number of divisions - including significant adverse rating environment in International Property, Aerospace, Construction, Cargo and Food & Agriculture – with Marine, Energy and Aviation. higher revenues driven by client retention and market share penetration. Asia Pacific once again achieved very strong levels of organic growth, with every territory showing growth. In addition there were important client wins in the Cyber division across a range of major financial institutions and North America continues to deliver strong performance, with corporate clients, which in turn helped to drive growth the benefits of the significant investments made in talent and SHAREHOLDER INFORMATION across our Financial Lines specialty. infrastructure now beginning to be realised.

Principal lines of business Looking to 2017 and the recent January renewals, a reduced Accident & Health, Aerospace, Construction, Communications, rate of decline from prior years has been evident, with global Technology & Media, Cargo, Credit, Political & Security, Cyber, property-catastrophe pricing falling by 5.7%; this compares Energy, Financial & Professional, Fine Art, Jewellery & Specie, with 8.2% in 2016 and double digit reductions in the two years Food & Agribusiness, Life Science, Marine, Mining, Power, prior to that. Casualty price reductions were, however, similar Renewables, Real Estate and Specialty Property & Casualty. 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 STRATEGIC REPORT

Today JLT Re is positioned amongst the leading global JLT ASIA reinsurance brokers, providing real choice and differentiation. The strong start to the year which this business has had 2016 2015 % Change underlines how the strategic investments made are enabling Total revenue £90.3m £76.6m 18% it to continue to take market share from its competitors. Underlying trading profit £16.8m £12.7m 33% Trading margin 19% 17% Principal lines of business All classes of Treaty and Facultative Reinsurance and Corporate JLT Asia provides insurance broking and risk management Finance Advisory. 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 JLT AUSTRALIA & NEW ZEALAND Matheson, have enabled it to become one of the market leaders in Asia. The division employs around 1,000 people 2016 2015 % Change across 13 territories. Total revenue £117.7m £109.5m 7% Underlying trading profit £34.1m £32.7m 4% Review of Operations Trading margin 29% 30% Asia produced a strong performance in the year, with a headline 18% increase in revenues to £90.3 million and a 5% organic JLT Australia & New Zealand is one of the leading insurance growth rate. Trading profits grew strongly, with an increase of brokers in the region, combining international depth with 17% at CRE. This was a good performance when set against local, specialist expertise to deliver a comprehensive range of the challenging economic conditions and fierce rating pressure insurance and risk solutions products and services to its clients. in the region. The division employs over 800 people across 20 offices. Principal lines of business Review of Operations Aviation, Capital Risks, Construction, Cyber, Energy, On a reported basis our Australia and New Zealand businesses Entertainment & Leisure, Financial & Professional Services, saw revenues increase by 7% to £117.7 million, although this Food & Agribusiness, Manufacturing, Mining, People Risks, translated to a 4% reduction on a CRE basis. The trading Real Estate, Retail, SME & Consumer Products, Transport environment has been particularly competitive in Australia and and Logistics. 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 JLT LATIN AMERICA and a number of high profile client wins, particularly in the Financial Lines and Corporate divisions. The new business 2016 2015 % Change wins have included an increasing number of ‘coast to coast’ Total revenue £71.4m £63.1m 13% appointments, further underlining JLT’s growing national Underlying trading profit £21.1m £21.3m (1%) Specialty presence. Trading margin 30% 34%

Principal lines of business JLT Latin America provides insurance broking, reinsurance Construction, Energy, Entertainment & Leisure, Financial & broking and affinity insurance distribution through subsidiary Professional Services, Food & Agribusiness, Government, operations in Argentina, Brazil, Chile, Colombia and Peru. One Manufacturing, Mining, People Risks, Real Estate, Retail, of the largest brokers in the region, the business prides itself SME & Consumer Products, Sport, Transport and Logistics. 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 Aviation, Construction, Energy & Power, Financial Lines, Marine, BUSINESSES Industrial Property & Casualty, Public Sector, Affinity Marketing

& Distribution, Reinsurance (Treaty & Facultative). OVERVIEW JLT CANADA

JLT US SPECIALTY JLT Canada provides insurance broking and risk management services across Canada. We focus on markets central to the 2016 2015 % Change Canadian economy, such as construction, public sector, natural Total revenue £41.3m £23.3m 77% resources, life science, healthcare and professional groups. Underlying trading profit (£27.0m) (£20.5m) (31%) JLT Canada employs approximately 180 people across Trading margin - - 7 locations.

US Specialty was formed in August 2014 as a Specialty broker Review of Operations STRATEGIC REPORT to serve leading US and global firms within specific industries JLT Canada reported revenue of £19.2 million in 2016, and product lines where we are able to use our expertise to a reduction of 6% on 2015. The business generated a trading provide clients with bespoke risk management solutions. loss of £0.5 million, which was due to several factors: firstly, The division employs some 220 people in 13 locations across a depressed economic market in natural resources which led the US. to many oil companies ‘right sizing’ which decreased overall Review of Operations premium volumes; secondly, surety activity in Western Canada has been lower than expected due to longer than expected US Specialty continued to make progress in its second full year project life cycles, which led to fewer projects being started of operation, achieving organic revenue growth in excess of

during the year. CORPORATE GOVERNANCE 50%, higher than the rate in 2015 and continuing a programme of recruitment, with headcount reaching 223 employees at the Significant over-capacity in the Canadian insurance marketplace year end. Revenues for the year were $56 million, up from $36 remains, which is putting downward pressure on premiums million in 2015, while continued investment resulted in losses and commissions overall. The underlying performance of the of $37 million. business presents a good outlook for the future, as significant investments and strategic changes to the business have The business now has proven capability and a track record of been made to react to the changing economic factors of the winning business in specialist areas such as Financial Lines Canadian economy. The competitive landscape remains strong, and Cyber, Energy, Real Estate and Entertainment. and given our brand strength and specialty focus in areas in The recently announced investment in, and partnership with, which we choose to compete, we have maintained market Construction Risk Partners, a highly respected Construction share and continue to show growth within our core specialties, specialist broker, will establish a market-leading construction which include public sector, construction, and healthcare. FINANCIAL STATEMENTS practice as part of the US Specialty business. The acquisition We continue to invest in attracting specialist talent and also completes our global Construction capability and enables positioning JLT Canada to become a leading specialty broker. us to serve international clients wherever they operate around the world.

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 SHAREHOLDER INFORMATION 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.

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 Employee Benefits business offers a comprehensive range of employee benefits advice OVERVIEW and services to companies, pension trustees and individuals. 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.

OUR GLOBAL EMPLOYEE BENEFITS BUSINESSES PROVIDE SERVICES INCLUDING: STRATEGIC REPORT

PENSION ADMINISTRATION WEALTH AND INVESTMENT MANAGEMENT

Providing an array of administration services designed to meet Offering advice and support to high net worth individuals in the requirements of pension trustees, corporate sponsors and respect of their financial planning, at-retirement support and life scheme members, from back-office support to fully outsourced protection requirements. Providing discretionary management administration. The range is supplemented with payroll, of assets for both high net worth individuals and company communication, documentation and technical services. pension schemes, in addition to asset-hosting services.

TRUSTEE & CORPORATE AND BENEFITS TECHNOLOGY SOLUTIONS CORPORATE GOVERNANCE CONSULTING

Providing integrated risk management services to the UK Provider of one of the most widely used UK pensions pensions market, to meet the requirements of both pension administration and fund accounting software to trustees of UK trustees and corporate sponsors, including actuarial, private sector pension schemes and their administration and investment and risk transfer consultancy, scheme design, accounting teams, whether in-house or through third parties. governance and independent trustee services. These are available with integrated web solutions to enable member and trustee access to information and services. Our benefits consulting team provides advice on and JLT also provides a comprehensive online integrated benefits implementation of employee health and benefit programmes, management solution to corporate and trust-based clients. medical claims administration, occupational health services and FINANCIAL STATEMENTS 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.

EMPLOYEE BENEFITS CONTRIBUTION TO OUR BUSINESSES 2016 GROUP REVENUE 2016

UK & Ireland p34 Revenue Underlying Trading Profit

Asia p34 SHAREHOLDER INFORMATION £300.4m £49.5m Australia & NZ p34 +4% +14% Latin America p35 Canada p35 2015: £288.5m 2015: £43.6m % Europe, Middle East 24 and Africa p35 Trading Margin Employees 16% 2,656* 2015: 15% 2015: 3,121

* Excludes employees in shared service operations

Jardine Lloyd Thompson Group plc Annual Report 2016 33 STRATEGIC REPORT

UK & IRELAND ASIA

2016 2015 % Change 2016 2015 % Change Total revenue £160.0m £167.4m (4%) Total revenue £87.3m £78.9m 11% Underlying trading profit £12.3m £12.8m (4%) Underlying trading profit £27.2m £24.5m 11% Trading margin 8% 8% Trading margin 31% 31%

JLT Employee Benefits is one of the largest employee benefit Our Employee Benefits business in Asia primarily focuses on and pension consultants in the UK, offering a comprehensive helping companies develop employee benefit programmes range of employee benefits advice and services to companies, and on wealth management for high net worth individuals. pension trustees and individuals. The business employs some The division employs more than 460 people across 13 1,500 people across 16 locations in the UK and Ireland. locations.

Review of Operations Review of Operations Reported revenues for the year for our UK EB business were In Asia, the Private Client Services (PCS) high net worth life £160.0 million, compared to £167.4 million in 2015, reflecting assurance broking business saw some slowdown in first half the final impact of the cessation of commission revenue from revenues due to regional economic uncertainty in South Asia; life assurers - which amounted to £5 million earned in 2015. however, steps were taken in the second half to broaden the Second half revenues of £85.1 million exceeded those of the range of products offered by the business. This succeeded in same period in 2015 of £82.4 million, following the successful pulling revenues back up from the half year position, which had completion of the restructure of the business, which was an been negative year-on-year. encouraging indication of the stabilisation in the revenue Principal lines of business run rate. Healthcare insurance programmes, including Life & Dental, At the time of its 2016 interim results the Group indicated and risk management services including wellness consulting that the business would deliver the majority of its profits in the and prevention. Flexible benefit consulting and platform design second half and this has been the case. Trading profit for the and implementation. year was £12.3 million, compared to break even at the half year.

The business successfully completed its restructure AUSTRALIA & NEW ZEALAND programme, which has resulted in a flatter, more client-centric structure and a headcount reduction of over 300 employees. 2016 2015 % Change The programme will deliver £14 million of annualised savings Total revenue £27.5m £20.3m 36% in 2017, £9 million of which were delivered in 2016 (£7 million Underlying trading profit £5.5m £3.3m 67% of that in the second half). Trading margin 20% 16% The focus in 2016 was, and will continue to be into 2017, very much on transitioning and rebalancing the business so that The Employee Benefits business in Australia & New Zealand revenues and trading profit margins can grow. The emphasis provides consultancy and administration services to corporate of the business continues to be on investing to strengthen and and private clients across a wide range of company-paid and enhance platforms and to build out the sales function. voluntary employee benefits programmes. The business is also one of the region’s leading workplace injury risk consultancies It is anticipated that UK EB will deliver organic revenue growth and rehabilitation providers, having acquired Recovre and for 2017 and this, taken with the £5 million residual benefit of Workwise Occupational Health in Australia and Alpha in New the restructure programme, means the Group is confident that Zealand over the past two years. The division employs some this business is making steady progress towards delivering 300 people across 30 locations. a 15% trading profit margin for 2018. Review of Operations Principal lines of business The Australia and New Zealand EB business achieved 36% Pension Administration, Trustee & Corporate and revenue growth, following the acquisitions made in 2015 and Benefits Consulting, Wealth & Investment Management, 2016 of rehabilitation services providers in relation to workers Software Solutions. 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.

34 Jardine Lloyd Thompson Group plc Annual Report 2016

Principal lines of business OTHER EMPLOYEE BENEFITS Corporate Health Insurance, Corporate Life & Group BUSINESSES Income Protection, Personal Accident Insurance, Workers

Compensation, Software Solutions, Occupational Rehabilitation, OVERVIEW Workplace Health Safety Consulting. CANADA

Our Employee Benefits business has been providing LATIN AMERICA consultancy, technology and administration services to clients across Canada for over 25 years. 2016 2015 % Change Total revenue £21.7m £18.9m 15% Review of Operations Underlying trading profit £3.7m £3.5m 7% Our Canada Employee Benefits business delivered revenues Trading margin 17% 19% of £2 million, an increase of 35% on an organic basis. The business reported a trading profit of £0.6 million, compared to STRATEGIC REPORT In Latin America, our Employee Benefits business focuses on a loss of £0.2 million reported in 2015. The expansion of the providing employee benefits programmes, often built around Employee Benefits business in Canada has continued and, with a healthcare insurance offering. This is a rapidly developing investments to improve branding, software and the addition market where we see the opportunity to expand our capabilities of new personnel, we remain optimistic about its growth through health management and consulting. The division potential and opportunities for national expansion. currently employs nearly 350 people across our office network.

Review of Operations EUROPE, MIDDLE EAST & AFRICA Our Latin American EB operations delivered organic revenue CORPORATE GOVERNANCE growth of 10%. Performance was particularly notable in Our Employee Benefits business operates in Europe, Middle Colombia - driven by the workers compensation business - East and Africa. In South Africa we offer healthcare consultancy and Brazil, despite the challenging local economic backdrop. to corporate and private clients, as well as retirement fund Investment has continued to be made in building out consultancy services. The division employs over 50 people capabilities and expanding the offering in the region, which across the three territories. drove a small increase in trading profit but a 200 bps reduction Review of Operations in trading margin. Our South African business has continued to show progress, Principal lines of business delivering revenue growth of 14% on an organic basis, and Healthcare insurance programmes, including Life and Dental, reporting revenue of £1.9 million for the year. The retirement and risk management services including wellness consulting funding division has shown good growth, now accounting and prevention. for almost 15% of total income, and we believe this business FINANCIAL STATEMENTS remains well-positioned for further growth. 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.

2016 2015 % Change Associate holding at 31 December 2016 Total underlying contribution GrECo Central & Eastern Europe/CIS 20% £1.0m £5.5m (82%) to JLT after tax 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 Sterling Re Intermedio de Reaseguro Sa de CV, which trades as specialist insurance broker in Central & Eastern Europe, the JLT Sterling, is an associate company in which JLT has a 36% Balkans and the CIS regions. With its headquarters in Vienna, shareholding, with the balance of shares being held by Lorant GrECo has 53 offices with 770 employees in 16 countries. MMS, a leading independent retail insurance broker, based in Mexico City. JLT Sterling provides specialist wholesale and Principal specialist areas are Aviation, Construction & Real reinsurance services in the Aviation, Casualty, Construction, Estate, Employee Benefits, Energy, Marine & Marine Cargo, Energy, Marine, Marine Cargo, Property and Specie sectors. 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 JLT has a 49% shareholding in JLT Independent. Our joint broker in Italy with 200 employees in Milan, Naples, Rome and venture partner is Sunidhi Group, a leading Indian Financial offices in a further 5 cities around the country, as well as a Services Group. JLT Independent has 250 employees with Lloyd’s broking arm in London. offices in Mumbai, New Delhi, Chennai, Bengaluru, Hyderabad, Gurgaon and Pune. Key business areas include Energy, Key business areas are Corporate (Risk Management & Middle Construction, Marine, Aviation, Reinsurance, Employee Market), Aviation, Marine (Hull & Machinery, Liability & P&I, Benefits, Credit, Political & Security Risks, and Liability. 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 privately- owned financial institution. Its core business is corporate- focused, 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

FINANCE DIRECTOR'S OVERVIEW REVIEW

I am pleased to present the 2016

“ STRATEGIC REPORT Finance Director’s Review for another year of revenue growth “ and progress for JLT.

Charles Rozes

INCOME STATEMENT Revenue Retail Distribution Review. However, CORPORATE GOVERNANCE Compared with 2015, JLT delivered this was offset by the performance of The Group’s total revenue for the year a 9% increase in total revenue, 3% our international Employee Benefits was £1.26 billion. Underlying profit before at constant rates of exchange (CRE), businesses which grew by 16%, tax was £172.6 million, with reported with 2% organic growth. or 3% on an organic basis. profit before tax of £134.9 million (after exceptional items) and reported profit Our Risk & Insurance businesses, Operating costs after tax and non-controlling interests which represent approximately 76% Total underlying operating costs of £81.5 million. Diluted earnings per of the Group’s revenue, grew revenues (excluding exceptional items) increased share (EPS) was 37.8p. to £960.9 million, an increase of 11%, by £100 million, or 10%, to £1,068 or 3% on an organic basis. million. Of the increase, £53 million The 2016 results have been favourably stemmed from changes in foreign impacted by the significant changes in Our Employee Benefits businesses

exchange rates, our investment in US FINANCIAL STATEMENTS foreign exchange rates which provided grew revenues by 4% overall, although, Specialty added £17 million and £9 million an offset to the continuing weakness reduced by 3% on an organic basis. came from JLT Specialty, in line with the in the insurance and reinsurance This was due to a 4% reduction (8% on continued growth of that business. The rating environments, as well as to the an organic basis) in the revenues of our mix of the cost base remained broadly investment in our business for growth. UK & Ireland business. reflecting the final unchanged with staff and premises costs impact of the cessation of commission being the major individual expense items. revenues as a consequence of the

UNDERLYING OPERATING COST RATIO SHAREHOLDER INFORMATION

£m 2016 2015 Variance Total revenue 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 37 STRATEGIC REPORT

Trading profit • Increase of £10 million in the investments in Associates, The Group’s underlying trading profit increased by 3% to £3 million relating to the increase to 49% (from 26%) in the £193.7 million and the trading profit margin reduced from Group’s interest in JLT Independent Insurance Brokers Pvt 16.2% to 15.4%. Excluding US Specialty, the trading margin Limited. Approximately £6 million of the increase related was 18.1%, compared to 18.4% in 2015. to foreign exchange. • A net increase in working capital of £31 million, which Associates included £14 million in respect of foreign exchange re- The Group’s income from its Associates reduced by £4.5 million translation. The balance of the net increase is predominantly to £1.0 million, reflecting the reduction in profits following the driven by an increase in JLT Specialty Limited’s debtors disposal of our French Associate business in May 2015. in line with their business, with debtor days remaining consistent year-on-year. JLT Re’s debtors increased as a Finance costs result of the nature of their business where, for certain lines, Net finance costs reduced by £1 million to £22 million as a the collection period is more than 12 months from initial result of changes in the net pension expense and external revenue recognition. borrowing costs, partly offset by foreign exchange movements. • The pension liability increased to £198 million, from £130 Underlying profit before tax million in 2015 as a result of changes in corporate bond yields and inflation rates. The deferred tax asset attributable The Group’s underlying profit before tax increased by £2.5 to this change was recognised in the tax line. million to £172.6 million. The profit of the Group excluding the US Specialty investment increased by 5% to £199.6 million. Net debt, defined as own funds less total borrowings net of transaction costs, was £496 million (2015: £440 million). Exceptional costs The Group’s principal measure of leverage, the Net In 2016, net exceptional costs were £37.7 million (2015: £15.1 Debt:EBITDA ratio, reduced to 1.6:1 (bank covenant basis). million), primarily driven by £21.1 million related to a litigation At 31 December 2016, the Group had committed long-term settlement, £13.9 million of restructuring costs associated with unsecured revolving credit facilities of £500 million and drawn the UK Employee Benefits business, and a net loss on the private placement loan notes equivalent to £508 million, disposal of subsidiaries of £1.6 million. resulting in total debt facilities equivalent to £1,008 million with maturities between 2017 and 2029. Gross borrowings were Tax £688 million, which includes £671 million of borrowings under The tax charge for the year was £44.0 million, representing the Group’s committed facilities, leaving unutilised committed an effective tax rate of 32.6% (2015: 26.8%). The underlying facilities headroom of £337 million. 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 OPERATIONAL CASH FLOWS assets not being recognised in respect of certain of the Group’s overseas operations combined with the global nature of JLT’s £m 2016 2015 2014 2013 2012 business and the different tax rates across those geographies. EBITDA* 238 244 240 219 209 Net interest (15) (15) (15) (9) (6) Profit after tax and non-controlling interests Working capital (43) 1 (55) (25) (58) Profit after tax and non-controlling interests was £81.5 million Annual capex (39) (60) (49) (72) (32) (2015: £103.1 million). Diluted earnings per share was 37.8p Operational free cash flow 141 170 121 113 113 on a reported basis (2015 restated: 48.0p). Dividends paid (66) (63) (60) (58) (54) Acquisitions/disposals 7 54 (68) (177) (40) Tax paid (46) (37) (37) (41) (35) BALANCE SHEET Net shares acquired (18) (26) (32) (21) (15) Other (33) (30) (21) (22) (8) The net assets of the Group increased to £351 million Net cash (outflow)/inflow (15) 68 (97) (206) (39) from £331 million. The key movements were: Opening net debt (440) (474) (345) (142) (100) Non-cash movements (41) (34) (32) 3 (3) • Increase in goodwill of £47 million driven by the retranslation Closing net debt (496) (440) (474) (345) (142) of goodwill recognised in foreign currencies. The Group * EBITDA is represented by underlying trading profit plus depreciation and amortisation, completed 7 acquisitions in 2016 for a total consideration including amortisation of share options; income from associates; less settled exceptional of £25.3 million, the goodwill impact of which was offset costs excluding net gains on disposals. by the two disposals in the year.

38 Jardine Lloyd Thompson Group plc Annual Report 2016

The Group primarily monitors operational cash flows, 1) Capital and Liquidity Risk which report cash and net debt movements but exclude The Group’s objectives when managing capital are to safeguard fiduciary funds; statutory cash flows include movements in its ability to continue to provide returns for shareholders and fiduciary funds. benefits for other stakeholders and to maintain an efficient OVERVIEW In 2016, the Group generated £238 million of EBITDA, which capital structure to ensure an optimal cost of capital. In order included £31 million of outflows in respect of exceptional items to achieve these objectives, the Group may adjust, for example, (2015: £12 million). Operational free cash flows reduced to the amount of dividends paid to shareholders, return capital £141 million, reflecting a 2015 inflow of working capital due by a share buy-back, issue new shares or sell assets to to timing differences. A net cash outflow of £15 million was reduce debt. realised in 2016. The Group manages its balance sheet through monthly reviews, management controls and financial reporting.

DIVIDENDS In order to manage liquidity risk, the Group maintains STRATEGIC REPORT committed, long-term credit facilities to ensure that it is well The Board has recommended a final dividend in respect of positioned to meet seasonal capital requirements and to 2016 of 20.6p per share. Together with the interim dividend support the strategic growth of the business. There are no of 11.6p per share, this brings the total dividend to 32.2p per restrictions on the use of these facilities in the normal course share, an increase of 5.2%. This represents dividend cover of business. At 31 December 2016 the facility headroom was of 1.6 times, based on underlying diluted earnings per share, £337 million. compared to 1.7 times in 2015. The insurance and reinsurance broking operations within the Group operate in a number of jurisdictions where local BASIS OF PRESENTATION

regulation requires a minimum level of capital to be maintained. CORPORATE GOVERNANCE The total regulatory capital to be held by the Group is not The Group’s 2016 consolidated financial statements include considered significant in the context of the total available capital. an income statement, statement of comprehensive income, balance sheet, statement of changes in equity and a statement The total capital of the Group at 31 December 2016 and 2015 of cash flows. These statements have been prepared in was as follows: accordance with International Financial Reporting Standards as adopted by the European Union. £m 2016 2015 Total own funds (191.6) (163.5) Statutory accounts of individual Group companies are Borrowings 687.8 603.5 prepared, as required, in accordance with applicable local Net debt 496.2 440.0 accounting standards. Total equity 350.9 330.8 Total capital 847.1 770.8 The balance sheet of the Company, Jardine Lloyd Thompson FINANCIAL STATEMENTS Group plc, on page 174, has been prepared in accordance with generally accepted accounting practice in the UK. 2) Foreign Currency Risk Following the changes to generally accepted accounting The Group has transactional and translational foreign currency practice in 2015 affecting the Group’s subsidiaries in the United exposures. The transactional exposure arises primarily in the Kingdom, the company has made a revision to the recognition London Market businesses, which have a sterling cost base but of the employee share trust and the prior year comparatives which have a significant proportion of US dollar-denominated have been restated. revenues (USD357 million in 2016, representing some 20% of the Group’s revenue). Following changes to certain of the Group’s equity share plans for staff awards, the basis on which earnings per share (EPS) The Group continues to operate a US dollar hedging SHAREHOLDER INFORMATION is calculated has been reviewed and revised, resulting in a programme to reduce the volatility caused by exchange small increase to EPS. Comparatives have been restated. 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 PRINCIPAL FINANCIAL RISKS USD385 million) are hedged at an average rate of USD1.46. The Group has identified four principal financial risks: capital For 2018, 70% of expected dollar revenues are hedged at and liquidity risk, foreign currency risk, counterparty risk and an average rate of USD1.38, for 2019 50% are hedged at an the defined benefit pension scheme risk. 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 39 STRATEGIC REPORT

operated for other transactional currency exposures, primarily 4) Defined Benefit Pension Scheme Risk in respect of the euro, Indian rupee and Canadian dollar. The Group has exposure to movements in the balance sheet, The Group has significant investments in overseas operations. income statement and statement of comprehensive income as Movements in exchange rates between balance sheet dates a consequence of changes in the valuation of retirement benefit will affect the sterling value of the Group’s consolidated assets and liabilities and the impact of such changes on the balance sheet. Group’s defined benefit pension scheme positions.

The currency profile of the Group’s borrowings is managed The Group seeks to manage this exposure through regular to mitigate balance sheet translation exposures where practical monitoring and reporting of scheme asset performance and and cost effective. liability positions, suitable scheme investment and risk mitigation strategies and appropriate funding arrangements based on In addition to the transactional foreign exchange exposure, periodic actuarial valuations. JLT is also exposed to translational foreign exchange movements which are not hedged. Given the relative size and Assets held in the UK defined benefit pension scheme include profitability of the Group’s Australian business, this is the most annuity buy-in contracts which secure the future benefits material such exposure. relating to approximately 73% of pensioner liabilities and which reduce exposure to ongoing longevity and asset risk arising 3) Counterparty Risk from that portion of the pension scheme liabilities.

The Group’s gross exposure to credit risk at 31 December The pension trustees will conduct a revaluation of the UK 2016 is £1,613 million, representing own cash, fiduciary defined benefit pension scheme during 2017 and agree funds, investments and deposits, derivative assets, and trade a revised deficit recovery schedule by 2018. This is part receivables. The Group maintains a counterparty policy based of the scheduled triennial revaluation process. 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 long- term 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

PERFORMANCE SUMMARY

Total Revenue Trading Margin Trading Profit OVERVIEW 2016 Growth CRE Organic 2015 2016 CRE 2015 2016 CRE 2015

Risk & Insurance JLT Specialty 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 STRATEGIC REPORT 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

JLT Insurance Management 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

Employee Benefits UK & Ireland 160.0 (4%) (5%) (8%) 167.4 8% 7% 8% 12.3 11.9 12.8 Asia 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) CORPORATE GOVERNANCE 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 ------(22.4) (22.6) (17.0) Total 1,261.3 9% 3% 2% 1,155.1 15.4% 14.4% 16.2% 193.7 170.2 187.5

2016 2015

Underlying trading profit 193.7 187.5 Underlying share of associates 1.0 5.5 Net finance costs (22.1) (22.9) Underlying profit before taxation 172.6 170.1 Exceptional items (37.7) (15.1)

Profit before taxation 134.9 155.0 FINANCIAL STATEMENTS 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 81.5 103.1 Underlying profit after taxation and non-controlling interests 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

Notes: SHAREHOLDER INFORMATION - Organic growth is based on total revenue excluding the effect of currency, - CRE: Constant rates of exchange. acquisitions, disposals and investment income. - Underlying results exclude exceptional items. - Total revenue comprises fees, commissions and investment income. * 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 STRATEGIC REPORT

RISK MANAGEMENT REPORT

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.

OUP INTE FULLY GR RNA NE L LI AU ACCOUNTABLE FOR D D R P RISK IT 3 OU & C THE IDENTIFICATION, R OM G P E L ASSESSMENT AND IN IA INDEPENDENTLY L THE B E US N D IN IN C MANAGEMENT OF L E ASSESSES RISK N T S E 2 RISK S S MANAGEMENT 1 AND CONTROL EFFECTIVENESS PROVIDES POLICY ADVICE, GUIDANCE AND CHALLENGE TO THE 1ST LINE

JLT’S INTERNAL CONTROL • Clear, skilled roles for the control functions in the second line of defence, providing specialist advice and strong FRAMEWORK oversight to the businesses internationally; and JLT 3 lines of defence • An enhanced focus on risk management disciplines The Group operates a “3 lines of defence” (3LOD) model across the business. as a core component of its governance arrangements, We have been implementing the recommendations from as shown above. the review throughout the year and are making good progress. The next phase of the review, starting in early 2017, will focus The current 3LOD model has been in place and operating on the international businesses. for four years across the Group, and has been subject to iterative enhancements during that time. In addition, JLT JLT regularly reviews its governance arrangements through completed an internal review of its 3LOD model in the Board and Audit & Risk Committee (ARC) effectiveness UK businesses during Q1 2016, building upon the solid reviews which are carried out on an annual basis. More detail governance framework already in place. The core principles can be found in the Audit & Risk Committee Report on pages of the review were to deliver: 63 to 70.

• 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

AUDIT & RISK COMMITTEES Key JLT policies include: Anti-bribery and corruption Anti-money laundering and fraud JLT has implemented a consistent governance model across Gifts and entertainment Conflicts of interest the Group, run through local Boards and ARCs, which are

Market abuse and insider dealing Complaints OVERVIEW operated as committees of each Board and are overseen by HR related policies IT Security them. There are over 20 Entity ARCs, most chaired by a Non- Data protection Sanctions Executive Director who, in most instances, is also independent The Group has also introduced a revised whistleblowing of the JLT Group. The relevant management team (including policy and worldwide confidential whistleblowing help-line the Chief Executive Officer, Chief Operating Officer and Chief during the year. Financial Officer and others as required) attend ARC meetings to present their view of the risk and compliance environments Each business maintains an Operating Procedures Manual, across their businesses. Group Risk & Compliance and Group which contains all key procedures for the business to conduct Internal Audit also attend meetings and provide independent itself in a compliant and sustainable manner. reporting to ensure that there is adequate discussion of relevant STRATEGIC REPORT issues, including key risks and mitigating controls. RISK MANAGEMENT FRAMEWORK A UK Non-Executive Director forum meets regularly and allows the sharing of new initiatives and discussion of common topics JLT’s risk management framework has been refreshed during of interest. JLT held its first International NED Seminar during 2016 and is in the process of being rolled out, referencing 2016 for the Chairs of each of the ARCs across the Group, several recognised standards such as the Institute of Risk supplemented by external speakers on key subjects and a view Management and ISO 31000. It is based on 7 risk categories from the Financial Conduct Authority, JLT's home regulator. (IT, HR, Finance, Operations etc), each of which has a Group level sponsor whose daily role is aligned to the subject matter.

The following diagram shows the interaction of 3LOD within CORPORATE GOVERNANCE The Group specialists are engaged in defining the Group level the governance model. The Group ARC membership, terms risk profile, which is used in deriving the Principal Risks shown of reference and key areas of focus are outlined in The Audit on pages 44 and 45 and in arriving at the Viability Statement & Risk Committee section on pages 63 to 70. on page 96.

JLT GROUP PLC BOARD In addition to the above, the businesses maintain their own JLT GROUP PLC AUDIT & RISK COMMITTEE risk registers, which are produced by each Executive team and regularly reviewed by their local ARC. The ARCs consider the

Entity Group Risk & Group Internal key risks and any mitigating action that can be taken to keep Boards Compliance Audit the identified risks within the risk appetite of the firm, as well as assessing new opportunities.

Entity Audit Risk External FINANCIAL STATEMENTS & Committees Audit 1st line 2nd Line 3rd Line PRINCIPAL RISKS The Business Control Functions Internal & External Audit The principal risks faced by the Group are summarised INTERNAL CONTROLS in the table on pages 44 and 45. Underpinning JLT’s governance is a suite of policies, which are FINANCIAL RISKS authored and managed by the relevant Group function, signed off by the relevant senior Group executive and accessible The principal financial risks are also discussed in more detail to employees via the Group’s Policy Portal. There is also a in the Finance Director’s Review on pages 39 to 40. SHAREHOLDER INFORMATION 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 Charles Rozes parallel, the Group’s Compliance team provides assurance that Finance Director local regulation is adhered to and that clients' interests are at 28 February 2017 the heart of everything we do.

Jardine Lloyd Thompson Group plc Annual Report 2016 43 STRATEGIC REPORT

PRINCIPAL RISKS NATURE OF RISK RISK MITIGATION STRATEGIC RISKS Economic JLT’s business is more tied to economic activity • Global business operations balanced across a broad range Instability and growth than to (re)insurance market rates, since of territories and business types. greater levels of corporate activity generally drive • Well-funded balance sheet and cash generation. greater demand for the Group’s services. There is a • Annual strategy review at Board and Group Executive Committee. risk that economic instability reduces client demand.

Strategic Risks There are risks to the company’s strategic plan • Annual strategy review by the Board and the Group Executive arising from changes in the external environment, Committee. such as markets, customer behaviour and political • Formal three-year strategic planning process for every business developments such as Brexit, as well as risks arising revised annually, which includes consideration of material risks from acquisitions and strategic change initiatives. 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 • Distinctive entrepreneurial, collaborative, results- and team- risk that the organisation may not be able to attract orientated culture and environment. and retain market leading talent. • Effective staff reward and retention strategies. • Effective staff appraisal and development programmes. • Succession planning processes. Business The Group operates from over 100 offices in 40 • Dedicated Group Business Continuity Management function. Interruption territories across the world, each with a unique local • Detailed Group business continuity policy and procedures environment. There is a risk of a business interruption for each business unit. due to a large, unexpected incident. • Regular independent review and testing of business continuity plans. Loss of IT The Group is reliant on the ability to process its • Dedicated IT Security function. Environment transactions on behalf of its clients. Risks arise from • Monitoring of compliance with Group IT security policy non-performance or failure of an IT outsourcing and service level agreements. provider/IT supplier, malicious act and/or cyber-crime, • Annual IT disaster recovery plan testing by each business. and internal operational issues. Information Intermediaries and pension administrators process • Dedicated information risk and data protection functions. Security and retain confidential data in the normal course of • Risk-based monitoring and reviews performed by Group business. Risks relate to loss of customer records IT Security and Group Internal Audit. or breach of confidentiality due to inadequate security • Regular reporting to business ARCs. and other key controls. • 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 • Group-wide information classification schema. Regular reviews misinterpretation of local or international data of Highly Confidential Data and corresponding controls and privacy regulation/legislation/laws. protections. • Data Protection policy and training. • Data Loss Prevention (DLP) tools and processes. • Mobile device encryption; restrictions on USB devices, and access to personal email. • Records management policy. • Technical IT security policies and standards. • Formal General Data Protection Regulation implementation programme.

44 Jardine Lloyd Thompson Group plc Annual Report 2016

PRINCIPAL RISKS NATURE OF RISK RISK MITIGATION Errors & Intermediaries run a risk of incurring a loss if the • Continuous training in errors and omissions avoidance. Omissions operating procedures in place across the Group • Central and regional risk and compliance monitoring.

in relation to market security, placement and claims • Strong procedural and systems controls including OVERVIEW are not complied with or alleged negligence/breach workflow management. of contract in the provision of services/advice • Regular and ongoing quality assurance programmes. becomes apparent. • Professional indemnity insurance programme. • Market security processes, monitoring and Insurer Impairment Plan. Litigation Litigation risk can arise from a number • Dedicated Legal and M&A functions with oversight responsibilities. of different sources such as: • Continuous staff training in HR policies and procedures. • M&A litigation (eg breach of Sale • Formal recruitment processes based upon HR and legal advice. & Purchase Agreement).

• Breach of Employment Law. STRATEGIC REPORT • Tortious liability arising from the recruitment of individuals where appropriate recruitment controls are not adhered to. Regulatory Risks arise from non-compliance with or • Dedicated Compliance and Financial Crime functions. Breach/ Financial misinterpretation of local and international regulations • Regular sanctions and third party payments screening Crime (including and failure to meet regulatory standards both in programme. internal and the present, and retrospectively, in relation to past • Continuous staff training programmes. external fraud) business activities. • Conduct risk requirements. • Regulatory monitoring programmes. • Quality assurance programmes. CORPORATE GOVERNANCE • Central and regional risk and compliance oversight.

FINANCIAL RISKS Capital Risk Risks arising from an inability to maintain an effective • Maintenance of adequate committed credit facilities. and Liquidity and efficient capital structure and ensure an optimal • Compliance with regulatory minimum capital requirements cost of capital, or meet the short-term financial and regular stress testing. demands of the business. • Maintenance of a conservative funding profile. Foreign Currency The Group has foreign exchange exposures to: • Prudent management of transactional currency exposures • ‘Translational’ risk arising from the need to convert through a structured hedging programme. currencies into GBP for reporting purposes. • Regular review and sensitivity analysis of currency translation • ‘Transactional’ risk arising from revenues and costs impacts to financial reports. being denominated in different currencies. FINANCIAL STATEMENTS Counterparty There is a risk associated with a failure of a key • Board-approved investment and counterparty policy to limit the Risk counterparty resulting in a loss of own cash, fiduciary concentration of funds and exposure with any one counter-party. funds, investments & deposits, derivative assets • Defined cash and investments policy. and/or trade receivables. • 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 Risk of adverse impact on the balance sheet and • Appropriate scheme investment strategy and diversification. Pension Scheme income statement as a consequence of increase • Triennial actuarial valuations and regular trustee funding updates.

in the Defined Benefit Pension Scheme deficit. • Agreed deficit funding plan. SHAREHOLDER INFORMATION • 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 Our CR Steering Group actively pursues the achievement of higher standards in both our socially responsible behaviours, RESPONSIBILITY and our capacity to measure and benchmark those behaviours for our stakeholders. Our approach to Corporate Responsibility (CR) has a strong In 2016, we expanded the Steering Group to include senior focus on the interests of our clients. Our clients increasingly representation for each of JLT’s main operating companies, seek evidence that their service providers are well governed, worldwide. These designated representatives are responsible and that we make a sustainable, positive contribution to solving for driving CR activity at a local level and liaise closely with the the challenges that face our communities, our society and Steering Group. The Group's approach to charitable giving is the environment. It is therefore integral to our success that coordinated by the Group Charities Committee. 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.

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 JLT's total GHG emissions for 2016 were 19,448 tCO2e*. The largest proportion of JLT's GHG emissions can be

In line with Mandatory Carbon Reporting (MCR) requirements accounted for by air travel which comprises 57% of the STRATEGIC REPORT within the Companies Act 2006, this report outlines JLT's total emissions, equating to 11,066 CO2e. Greenhouse Gas (GHG) emissions covering the period 1 January 2016 - 31 December 2016. As in previous years, to demonstrate JLT's emissions relative to a quantifiable measure of its business activities, JLT has The scope of JLT's reporting encompasses its operational calculated its carbon intensity ratio on the basis of the number boundary and includes emissions associated with JLT's of JLT employees, as this is considered to relate to Company offices worldwide. JLT has reported on the mandatory scopes growth and GHG emissions. 1 and 2, and for the optional scope 3 has opted to include global business travel (given that air travel in particular is The intensity ratio for 2016 is 1.74 tCO2e/employee. acknowledged as a large contributor to greenhouse gas CORPORATE GOVERNANCE emissions) and non-purchased electricity (ie used by JLT but purchased by the landlord) where available.

JLT’S GHG EMISSIONS BY SCOPE AND INTENSITY RATIO

Total Tonnes

Scope Source Details Sub Total Tonnes CO2e CO2e 2015 Base Year Intensity Ratio

Purchased Natural gas purchased 207.23 Fuels directly by JLT

Refrigerant leaks and top FINANCIAL STATEMENTS Fugitive emissions ups for equipment under 360.13 Scope 1 2,074.60 2,170.04 2,368.55 0.19 direct responsibility of JLT

Transport owned Transport 1,507.24 or controlled by JLT

Purchased Electricity Electricity purchased 2,591.59 2,591.59 2,829.67 3,842.87 0.23 Location Based directly by JLT Scope 2 Purchased Electricity Electricity purchased 2,319.34 2,319.34 2,713.75 3,842.87 0.21 Market Based directly by JLT

Flights taken by Air Travel JLT employees for 11,066.09 business purposes SHAREHOLDER INFORMATION Rail Travel by JLT Scope 3 Rail Travel (UK Only) employees for 181.16 14,782.14 13,406.19 11,908.57 1.32 business purposes

Electricity used by Non Purchased Electricity JLT but purchased 3,534.89 by the landlord

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

Intensity Ratio (Location Based) 1.74 1.74 1.62 2.18

*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 STRATEGIC REPORT

JLT’s GHG Emissions by Scope Carbon Intensity Ratio (tCO2e/employee)

Scope 1 11%

2.18

1.78 1.74 Scope 2 1.62 13%

Scope 3 76% 2013 2014 2015 2016

METHODOLOGY YEAR-ON-YEAR REVIEW

The methodology employed to calculate the GHG emissions is The total emissions associated with JLT’s operations have in accordance with the GHG Protocol Corporate Reporting and increased. The intensity ratio of emissions per employee has

Accounting Standard (revised edition). Data has been collated increased by 0.12 tCO2e/employee. The number of employees from JLT's global offices for electricity, fuels, refrigerants and has decreased slightly. There has been a wider data set transport directly purchased or controlled by JLT, in line with included this year, for instance more countries able to report the mandatory scopes 1 and 2. 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 The wider data set has meant that the scope 3 emissions business use as this recognised as a significant contributor has increased and both scopes 1 and 2 have decreased. to carbon emissions. JLT has also reported on non-purchased JLT's focus on reducing its environmental impact extends electricity usage for countries that have this data available and beyond reporting on its emissions. 2016 has seen the design for the UK only, rail travel. The relevant UK or international stage of the implementation of an Environmental Management emissions factors have been applied. System which will continue to be progressed throughout 2017. 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 RECYCLING air travel, some countries were excluded as this data is not We actively promote recycling and encourage the removal of available for this reporting period. JLT will be working with its general waste bins and the provision of sorting bins and facilities global offices to further improve data availability for the 2017 in our offices. This initiative has been particularly successful in reporting period. our London headquarters and in our Mumbai operations, which between them represent more than 30% of JLT’s colleagues.

48 Jardine Lloyd Thompson Group plc Annual Report 2016

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.

TRAVEL PAPER CONSUMPTION CORPORATE GOVERNANCE Where appropriate we will reduce our usage of any mode of We recognise both a cost benefit and an environmental benefit travel with teleconferencing and we continue to invest in our in limiting our consumption of paper, and seek to manage our teleconferencing infrastructure to reduce both the costs and consumption of paper with the environment in mind. To that end the GHG impact of business travel, on a per capita measure. we uphold the following principles:

We now use around 80 teleconferencing suites installed in To use recycled paper for office purposes. This is adopted our premises, adding further locations according to need. within the UK and many non-UK offices.

We continue to invest in online collaboration platforms, to share To set laser printer defaults to two-sided printing. Adopted knowledge and collaborate more efficiently across all markets, in JLT Group IT policy, this requirement is reducing paper ensuring that our expertise is available to service clients with the consumption and waste. most efficient use of air travel. Colleagues seeking expertise and FINANCIAL STATEMENTS Circulate documents (eg meeting agenda and papers) in a solutions for clients make new links daily across borders via our format that avoids the need for printing. The Group Secretariat Chatter platform, for example. employs software to issue committee papers electronically for We also monitor air travel usage retrospectively as part of our all major UK legal entities, saving on paper as well as reducing statutory GHG reporting responsibilities. In 2016, our Group overheads associated with distribution. 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. SHAREHOLDER INFORMATION

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 At JLT we aim to provide an inclusive working environment partners aligned to our own business of sharing the social that encourages everyone to fulfil their potential. We believe benefits of knowledge (Specialty), wellbeing (Employee Benefits) an inclusive culture encourages diversity, which in turn leads and resilience (Reinsurance). to better business decisions and better solutions for clients, drawing on a wide range of experience. We aim to recruit the Our current partners on these strategic themes are: Udaan most talented and ambitious people, irrespective of differences Foundation (knowledge), Alzheimer's Society (wellbeing) and in education, religion, nationality, race, gender, age, physical RedR (resilience). We manage the majority of our charitable ability, social background or sexual orientation. giving business-by-business, with a central fund to provide greater support to our strategic partners. Having established our Diversity Committee in 2015, we defined JLT’s Diversity agenda on the basis of three pillars - Networking, Charitable Donations as a percentage of PBT Sponsorship and Involvement. In 2016 JLT supported many initiatives, both internally and in public events in the London 0.55% Market and other insurance hubs, to help to drive a more

0.45% diverse and inclusive business and to play our part in solving 0.42% these challenges in our industry.

All Employees Senior Management

71.7%

49.2% 50.8%

2014 2015 2016

We regularly engage clients in joint fund-raising activities 28.3% 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. Male Female Male Female We actively manage the risk that charitable payments may (TOTAL: 10,454 employees) (TOTAL: 1,254 employees) be misused as inducements, with training and monitoring in place as part of our bribery and corruption controls framework. 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 2016, our Solidária team in Brazil launched a joint project with JLT Brasil's insurance In June, alumni of JLT’s International Senior Management Programme Class of 2012 market peers, Amanhã Seguro, to create inclusive opportunities for children to build came together to raise funds for the Udaan Foundation with a sponsored skydive. their skills and potential. 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. CORPORATE GOVERNANCE

In July, 40 boys from the Orlando West United Football Club, Johannesburg, visited On City Giving Day in September, JLT wore red for RedR, the disaster relief specialists, JLT South Africa’s offices to collect our donation of club equipment, part of JLT SA’s to celebrate the launch of our new strategic partnership with the charity. ongoing support for this community initiative. FINANCIAL STATEMENTS SHAREHOLDER INFORMATION

US Specialty was among the proud sponsors of the 2016 Silver Bell Award, presented JLT Asia's support for Jardine Matheson's charity partner, Mindset, included a vertical at the SCI mariner’s welfare charity fundraising dinner in New York. race in Singapore, raising funds for a new centre that now supports people with mental health issues back into an active life.

Jardine Lloyd Thompson Group plc Annual Report 2016 51 STRATEGIC REPORT

Sponsorship HUMAN RIGHTS & MODERN SLAVERY Our sponsorship of Lloyd’s Dive In festival (Diversity and As an employer in both the developing and developed worlds Inclusion in Insurance) continued for a second year, and we and with clients who have diverse businesses in some of the extended our support internationally with colleagues in Australia most remote and poor, as well as the most affluent, corners of being involved in the organisation of this event alongside the world, we recognise and support the need to work together hosting an event in our London headquarters. to ensure that principles of respect, fairness and integrity remain We also hosted a number of events with other organisations at the heart of how we run our business. including the Insurance Supper Club & Hiscox focused around We respect and uphold the human rights and principles set out Women in Leadership. in detail in: JLT supports the Chartered Insurance Institute’s involvement in • The UN Universal Declaration of Human Rights; and the HeForShe campaign which aims to achieve gender parity. • The International Labour Organisation’s Declaration on We recognise that making diversity part of our DNA demands Fundamental Principles and Rights at Work an inclusive environment. To that end, we are piloting a training programme on 'unconscious bias' for hiring managers, to In 2016 we established a new process for evaluating risks in deploy in 2017. Once complete, this training will feature in all of our Supply Chain in respect of the specific abuse of human our leadership and development programmes. We are making rights that is human trafficking, in recognition of both the spirit the way we recruit more deliberately inclusive, and enhancing and letter of the UK’s Modern Slavery Act. In accordance with our ability to track and manage our performance on a range that Act, we now publish on our website an annual statement of relevant metrics. detailing our commitments and the progress we are making towards assuring that our supply chain conforms to the HEALTH & WELLBEING principles we uphold.

As a major global provider of Employee Benefits services to our clients' employees, we have a natural insight into the health SOCIAL BUSINESS & PRO BONO WORK and welfare responsibilities of employers, especially through the We are increasingly looking for opportunities to apply our Occupational Rehabilitation services we deliver on behalf of our professional expertise to support the communities in which clients in various territories. we operate. Our Local Community Insurance Services (LCIS) We offer a range of standard and discretionary health benefits team in JLT Australia, for example, delivers low cost access to our employees in most territories, alongside support for to insurance services for small not-for-profit organisations and healthy lifestyles such as the UK Cycle to Work scheme. clubs who might otherwise face insurmountable obstacles to hosting events or accepting volunteers. One of the five pillars of our global strategy is to create a distinctive working environment for all our colleagues, a At the same time, we are sometimes able to offer our specialist contributor to good mental health. The ‘Wellbeing’ theme in our expertise ‘Pro Bono’ for good causes, which we are pleased to internal CR programme includes a range of activities with third do whenever our expert advisers can spare some capacity. To parties, for example the Mindset charity in Hong Kong date, JLT plans to develop simple reporting of the amount of and Singapore, working with Jardine Matheson. time volunteered by such colleagues, globally, in 2017.

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

GOVERNANCE RESPONSIBILITY As a financial services Group with operations across the world, JLT’s governance capability is highly OVERVIEW 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.

RISK MANAGEMENT Over and above our contractual agreements with employees and the awareness campaigns we share with all employees,

The Group operates a '3 lines of defence' governance model. we require colleagues to undergo regular training covering Risk STRATEGIC REPORT The first line (the business) is responsible for the identification Management, Anti-Bribery & Corruption, Third Party Risks, Anti- and management of all the risks inherent in its operations; Money Laundering, Information Security and Financial Conduct. the second line (Group Risk & Compliance) provides advice, To supplement such national training programmes, in 2016 we guidance and challenge to the business; the third line launched a set of six principles-based learning modules in eight (Group Internal Audit) independently assesses and reports languages. These cover Anti-Bribery & Corruption, Anti-Money on the effectiveness of governance, risk management Laundering, Anti-Fraud, Conflicts of Interest, Sanctions and and internal controls. Information Security & Data Protection. The Group operates an enterprise-wide Risk Framework, which is based around recognising good practice including WHISTLEBLOWING CORPORATE GOVERNANCE the Institute of Risk Management, ISO 31000 and COSO, and tailored to align with JLT's role as (re)insurance broker In 2016, JLT updated its global whistleblowing policy and and employee benefits solutions provider. The Framework is implemented a new global third party hotline and website periodically reviewed to ensure that it remains appropriate, reporting system, to support those colleagues who might find and in keeping with the nature and scale of the Company themselves unable to report any wrongdoing or suspicions of and the landscape within which we trade. wrongdoing through their normal line management channels. The system conforms with the differing regulatory requirements For more detail on the specific risks we track and the of all the countries in which we operate, and gives colleagues governance structure we apply to maintain rigorous risk the option of complete confidentiality wherever this is permitted management, see pages 42 to 45. by law. See also the Audit & Risk Committee Report on pages

63 to 70. FINANCIAL STATEMENTS BRIBERY & CORRUPTION

Integrity is at the heart of what we do, and who we are as a TAX TRANSPARENCY company. Alongside our firm cultural commitment to excellence In 2016, JLT Group published its principles on tax transparency in risk management, our UK-based financial services companies on our website – jlt.com. We believe these principles are are subject to regulation by the UK Financial Conduct Authority based on good corporate practice in the area of tax (FCA) and observe the strictest standards of business conduct management and tax transparency, balancing the interests and regulatory compliance. of our stakeholders. We will continue to revise and strengthen We guard against bribery and corruption with rigour; the these principles as necessary, in response to the needs and SHAREHOLDER INFORMATION Board of JLT does not tolerate corrupt activity, and we fully expectations of our stakeholders. investigate any concerns relating to bribery or corruption. Our The Strategic Report is signed for and on behalf of the Board. 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 Dominic Burke of colleagues – and set out clear processes for whistleblowing Group Chief Executive (more detail on which is provided below). 28 February 2017

Jardine Lloyd Thompson Group plc Annual Report 2016 53 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 Corporate Governance Report 63 Audit & Risk Committee Report 71 Nominations Committee Report 73 Directors' Remuneration Report 92 Directors' Report CORPORATE GOVERNANCE

CORPORATE OVERVIEW GOVERNANCE REPORT

We recognise the importance of

“ STRATEGIC REPORT effective corporate governance throughout the Group and of having “ robust governance structures and processes in all our businesses. Geoffrey Howe

in all our businesses. During the year Board. With effect from 28 February

INTRODUCTION FROM CORPORATE GOVERNANCE an Operations Forum was established, 2017, Mark Drummond Brady has THE CHAIRMAN with senior level representation from assumed the roles of CEO of JLT Latin all the Group's businesses, to lead the America and Chairman of JLT Canada, On behalf of the Board, I am pleased introduction of consistent and improved in addition to his current role as Deputy to introduce the Corporate Governance processes and systems across the Group CEO. Report for the year ended 31 December Group and share thinking on ways 2016. The Board continues to of working. CODE COMPLIANCE believe that how JLT does business is as important as what it does, and BOARD COMPOSITION We are committed to the principles recognises the need for a strong established in the Code issued by the corporate governance framework During 2016 there were a number of Financial Reporting Council (FRC). We and supporting processes across the Board changes. James Twining stepped are pleased to report that throughout

Group. Good governance, with tone down from the Board with effect from 26 2016 the Company complied with FINANCIAL STATEMENTS set from the top, is a key factor April 2016. Bruce Carnegie-Brown joined the main and supporting principles of in delivering sustainable business the Board as a Non-Executive Director the Code, with the exception of B.1.2 performance and creating value for on 1 May 2016 and succeeded Richard (relating to the composition of the Board), the Group's stakeholders. Harvey as Chairman of the Remuneration where the Company was non-compliant Committee on 1 November 2016. Bruce for the first four months of the year. An In the following pages you will find details will unfortunately be stepping down from overview of the Company’s compliance of how JLT approaches governance, the Board at the end of June, following with the Code and an explanation for including the operation of the Board his appointment as Chairman of Lloyd's the area where the Company does not and its Committees and an explanation of London. Lord Leach, a Non-Executive comply can be found in the Directors’ of how we comply with the 2014 UK

Director for many years, sadly died on Report on pages 92 to 94. SHAREHOLDER INFORMATION Corporate Governance Code (the Code). 12 June 2016. Adam Keswick joined You will also find a summary of the key I should like to thank the Directors of the the Board as a Jardine Matheson- outputs from the latest review of the appointed Non-Executive Director on Board for their support during the year. Board's effectiveness, outputs of which 1 September 2016. Richard Harvey were very positive. This section also retired from the Board with effect from 31 includes reports from each of the December 2016 and Jonathan Dawson Board's Committees. succeeded him as the Company’s Senior We recognise the importance of effective Independent Director on the same date. corporate governance throughout I should like to record the Board's thanks Geoffrey Howe the Group and of having robust to Richard Harvey and James Twining Chairman governance structures and processes for their respective contributions to the 28 February 2017

Jardine Lloyd Thompson Group plc Annual Report 2016 55 CORPORATE GOVERNANCE

DIRECTORS' PROFILES

GEOFFREY HOWE DOMINIC BURKE MARK DRUMMOND BRADY Group Chairman Group Chief Executive Deputy Group CEO

Geoffrey Howe was appointed a Dominic Burke joined Jardine Lloyd Thompson Mark Drummond Brady has been with JLT Non-Executive Director in January 2002 in 2000, when the Burke Ford Group of since 1987 and has held a number of senior and became Joint Deputy Chairman in Companies, of which he was chief executive posts in the Group. November 2004. and co-founder, became part of JLT. He was the Group’s International Chairman of He was appointed Chairman in April 2006 He was appointed Chief Executive of the UK Risk & Insurance until 1 September 2014, when and became Chairman of the Nominations & Ireland Insurance Broking business and he relinquished that role and became the Deputy Committee in June 2016. the Group’s Employee Benefits businesses in Group CEO. 2000 and was appointed a Director and Chief Geoffrey is senior independent director Mark joined the Board in March 2011 and is Operating Officer of JLT in January 2005. of Close Brothers Group plc. He was formerly a member of the Group Executive Committee. Dominic was appointed Group Chief Executive chairman of Nationwide Building Society, chairman With effect from 28 February 2017 Mark in December 2005. He was appointed a non- of Railtrack Group plc, a director of Investec plc, becomes CEO of JLT Latin America and executive director and deputy chairman of general counsel of Robert Fleming Holdings Chairman of JLT Canada, in addition to his Newbury Racecourse plc in November 2010 and managing partner of Clifford Chance. current role as Deputy Group CEO. and became its chairman in June 2011.

CHARLES ROZES BRUCE CARNEGIE-BROWN ANNETTE COURT Group Finance Director Non-Executive Director Non-Executive Director

Charles Rozes joined JLT in September 2015 as Bruce Carnegie-Brown was appointed Annette Court was appointed a Group Finance Director. He is a member of the a Non-Executive Director on 1 May 2016. He Non-Executive Director in August 2012. She is Group Executive Committee. He is also a Director is Chair of the Remuneration Committee and a a member of the Audit & Risk, Remuneration of JLT India and a member of its Audit & Risk member of the Audit & Risk and Nominations and Nominations Committees. Committee. He joined the Group from Barclays Committees. Annette has extensive insurance industry where, since 2011, he had held the role of Global experience. Between 2007 and 2010 she Head of Investor Relations. He is first vice chairman and lead independent director of Banco Santander SA, where he has was chief executive officer for Europe Prior to that, Charles was chief financial officer been a non-executive director since 2015. He has General Insurance for Zurich Financial Services of Barclays UK Retail and Business Banking. also been a non-executive director of Santander and a member of the group executive committee. He has also held senior management roles at UK plc since 2012. She is a former chief executive officer of RBS Bank of America and IBM, and as a Partner of Insurance, the insurance division of RBS Group Bruce has been chairman of Moneysupermarket. PricewaterhouseCoopers over a 25 year period. which owned the Direct Line and Churchill brands. com Group plc since 2014, having been a In the role she was also a member of the RBS non-executive director there since 2010. He was group executive management committee. previously chairman of Aon UK Ltd from 2012 to 2015; senior independent director of Catlin Group Annette is a non-executive director of Ltd from 2010 to 2014; and a non-executive Admiral Group plc and Foxtons Group plc director of Close Brothers Group plc from 2006 to and has previously served as a member of 2014 (and senior independent director from 2008 the board of the ABI. 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

OVERVIEW

JONATHAN DAWSON ADAM KESWICK Non-Executive Director Non-Executive Director Jonathan Dawson was appointed a Adam Keswick was appointed Deputy Chairman Non-Executive Director in August 2012. on 1 September 2016. He is a member of the He is a member of the Remuneration and Remuneration and Nominations Committees.

Nominations Committees and was appointed Adam is a director of the Jardine Matheson STRATEGIC REPORT Chairman of the Audit & Risk Committee on Group companies Dairy Farm International 5 March 2013. Jonathan took over from Holdings Limited, HongKong Land Holdings Richard Harvey as Senior Independent Limited, Jardine Matheson Holdings Limited, Director with effect from 31 December 2016. Jardine Strategic Holdings Limited and Mandarin He is a non-executive director of National Grid plc Oriental International Limited. He is chairman and chairman of Penfida Limited. of Jardine Schindler Holdings Limited and of Jonathan's career experience includes eight Matheson & Co., Limited based in London, having years in the UK Ministry of Defence and over 20 previously held a number of senior management years in investment banking with Lazard. In recent positions in the Jardine Matheson Group in Asia years he has served as the senior independent since joining it in 2001. Adam is a director of non-executive director of Next plc and as a non- Ferrari N.V., a Supervisory Board member of Rothschild & Co and a Council member of the executive director of Galliford Try plc, National CORPORATE GOVERNANCE Australia Group Europe Ltd and Standard Life China Entrepreneurs Forum. Investments (Holdings) Limited.

LORD SASSOON, KT NICHOLAS WALSH Non-Executive Director Non-Executive Director FINANCIAL STATEMENTS Lord Sassoon joined the Board as a Nicholas Walsh joined the Board as a Non-Executive Director in April 2013. He is Non-Executive Director in October 2014. a member of the Audit & Risk, Remuneration He is a member of the Audit & Risk, and Nominations Committees. Remuneration and Nominations Committees. He began his career at KPMG, before joining Nicholas has held a variety of underwriting, Warburg (later UBS Warburg) in 1985. From 2002 distribution and senior management roles in to 2006 he was in the United Kingdom Treasury the insurance industry, with a career of 42 as a civil servant, where he had responsibility for years with American International Group, Inc. financial services and enterprise policy. Following (AIG). His most recent roles were vice chairman this, he chaired the Financial Action Task Force; AIG Property & Casualty Inc., chairman of AIG and conducted a review of the UK’s system of Europe Limited and AIG Asia Pacific Insurance financial regulation. Pte. Ltd. Prior to this he was president and CEO SHAREHOLDER INFORMATION From 2010 to 2013 Lord Sassoon was the of American International Underwriters. First Commercial Secretary to the Treasury and Nicholas is an advisor to Norton Rose Fulbright acted as the Government’s front bench treasury LLP. 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. Nominations Committee Remuneration Committee Audit & Risk Committee

Jardine Lloyd Thompson Group plc Annual Report 2016 57 CORPORATE GOVERNANCE

GOVERNANCE FRAMEWORK AND The Board has delegated the day-to-day management of the Group, development of the Group's strategic direction (for GROUP COMMITTEES consideration and approval by the Board) and implementation The work of the Board is supported by the Committees of the agreed strategy to the Group Chief Executive, Dominic (Audit & Risk, Remuneration and Nominations Committees). Burke. The Group Executive Committee operates to support Terms of reference for each of the Committees can be found the Group Chief Executive in the running of the Group. Further on jlt.com and reports from each of the Committees can be details of the composition of the Group Executive Committee found on pages 63 to 91. The Committees meet separately can be found on page 27. and regularly throughout the year. 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)

Non-Executive Directors Executive Directors Adam Keswick (Deputy Chairman) Dominic Burke (Group Chief Executive) Bruce Carnegie-Brown Mark Drummond Brady (Deputy Group CEO) Annette Court Charles Rozes (Group Finance Director) Jonathan Dawson (Senior Independent Director) Lord Sassoon Nicholas Walsh

Audit & Risk Committee Remuneration Committee Nominations Committee Jonathan Dawson (Chairman) Bruce Carnegie-Brown (Chairman) Geoffrey Howe (Chairman) Bruce Carnegie-Brown Annette Court Bruce Carnegie-Brown Annette Court Jonathan Dawson Annette Court Lord Sassoon Adam Keswick Jonathan Dawson Nicholas Walsh Lord Sassoon Adam Keswick Nicholas Walsh Lord Sassoon Nicholas Walsh

LEADERSHIP BOARD CHANGES During 2016 there were a number of Board changes. James DIRECTORS Twining stepped down from the Board with effect from 26 April 2016. Bruce Carnegie-Brown joined the Board as a Non- The Board of Directors, as at the date of this Report, Executive Director on 1 May 2016 and succeeded Richard are profiled on pages 56 to 57. As at 10 February 2017, Harvey as Chairman of the Remuneration Committee on 1 being the latest date prior to publication of this Report, the November 2016. Lord Leach, a Non-Executive Director for Board comprised the Chairman, three Executive Directors, many years, sadly died on 12 June 2016. Adam Keswick joined four Independent Non-Executive Directors and two Non- the Board as a Jardine Matheson-appointed Non-Executive Independent Non-Executive Directors. 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.

58 Jardine Lloyd Thompson Group plc Annual Report 2016

THE ROLE OF THE BOARD NON-EXECUTIVE DIRECTORS

The Board is responsible for approving and overseeing the Non-Executive Directors provide a strong independent element implementation of the Company’s strategy; reviewing the to the Board, and offer constructive challenge to, and support OVERVIEW performance of management; ensuring that appropriate for, management. They bring independent judgement and a systems of internal controls and risk management are in place; breadth of skills and experience to the Board and are key to and ensuring that the right resources are in place throughout the effective functioning of the Board's Committees. the Group to achieve the delivery of long-term value to shareholders and the long-term success of the Company. SENIOR INDEPENDENT DIRECTOR Other matters reserved for decision by the Board include material acquisitions and disposals; approval of financial results The Senior Independent Director, Jonathan Dawson, acts as announcements; approval of the Annual Report and shareholder a sounding board for the Chairman and an intermediary for other Directors. He is also available as an additional point of circulars; approval of share and other capitalisation issues; STRATEGIC REPORT and approval of dividend recommendations. contact for shareholders to discuss matters of concern which would not be appropriate through normal communication During the year the Board spent its time considering a wide channels with the Chairman, Chief Executive Officer or Group range of matters, including: Finance Director. No such matters of concern were raised by shareholders during the year or by 10 February 2017, being • Strategy; the latest practicable date prior to the date of this Report. The • The performance of key businesses and functions Senior Independent Director also leads the Chairman's annual in the Group; performance evaluation. • Budgets and long-term plans for the Group;

• Financial statements and announcements; CORPORATE GOVERNANCE GROUP COMPANY SECRETARY • Cash-flow, financing and dividends; • Growth and development; The Group Company Secretary, Jonathan Lloyd, acts as Secretary to the Board and all of its Committees. He supports • Risk management, internal controls and compliance; the smooth operation of each of the bodies by working with • Reports from brokers and analysts; and the Chairman and Chairmen of the Committees. Additionally, • People matters, including succession planning and diversity. the Group Company Secretary advises the Directors on Board procedures and corporate governance matters and supports CHAIRMAN the Chairman in ensuring compliance with relevant legal and regulatory requirements. The Chairman, Geoffrey Howe, is responsible for leadership of the Board and providing direction and focus, while making FINANCIAL STATEMENTS sure that there is a clear structure for the effective operation of INDEPENDENT ADVICE the Board and its Committees. He sets the agenda for Board A process is in place to enable any Director to take independent discussions to promote effective and constructive debate and professional advice at the Company’s expense, relating to the to support a sound decision-making process. The Chairman is performance of any aspect of their duties. This is facilitated by also responsible for ensuring that the Directors receive accurate, the Group Company Secretary. timely and clear information and that effective communication takes place with the Company's shareholders.

The Chairman works closely with the Group Chief Executive DIRECTORS’ CONFLICTS OF INTEREST to ensure that the strategies and actions agreed by the Board Under the Companies Act 2006 all Directors have a duty to SHAREHOLDER INFORMATION are effectively implemented. He also provides support and avoid conflicts of interest and disclose any interests and outside advice to the Group Chief Executive, while respecting his appointments. The Board has formal processes in place for executive responsibility for managing the Group. The division the declaration and management of conflicts of interest and of responsibilities between the Chairman and the Group the Group Company Secretary maintains a Conflicts of Interest Chief Executive has been clearly defined and has been Register. On appointment, new Directors are advised of the agreed by the Board. 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 CORPORATE GOVERNANCE

DIRECTORS’ ELECTION AND RE-ELECTION The Company entered into a Relationship Agreement on 23 October 2014, as required by Listing Rule 9.2.2AR(2)(a), and in In accordance with the requirements of the Code, newly March 2016 an amended Relationship Agreement was signed. appointed directors and all existing directors will be submitting The Agreement is intended to ensure that Jardine Matheson themselves for election and re-election, respectively, at the Holdings, as the Group’s controlling shareholder, complies with 2017 Annual General Meeting. The Board is able to recommend certain independence provisions. It contains undertakings that the election or re-election, as the case may be, of each member transactions and arrangements with Jardine Matheson Holdings of the Board based upon their skills, experience and/or any of its associates will be conducted at arm’s-length and contribution to the Board and its Committees. and on normal commercial terms; that neither Jardine Matheson Holdings nor its associates will take any action which could RELATIONSHIP WITH JARDINE MATHESON GROUP prevent the Company from complying with its Listing Rules obligations; and that neither Jardine Matheson Holdings nor its The Group continued to have a number of arm’s-length trading associates will propose any shareholder resolution intended to links with the Jardine Matheson group of companies during circumvent the proper application of the Listing Rules. 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 Board confirms that, since the date of entry into the date of this Report), Jardine Matheson Holdings Limited the Agreement, the Group has complied with its provisions (Jardine Matheson Holdings) had an interest in 40.16% of the and that, so far as the Company is aware, Jardine Matheson Company’s issued share capital. This interest is held through Holdings and its associates have also complied with the JMH investments Limited, a wholly-owned subsidiary of independence and procurement obligations set out in Jardine Matheson Holdings. 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 Other member as public Insurance Position as at at 31 Dec board Operational industry International Legal/M&A Finance Government Name 31 Dec 2016 2016 Independent experience experience experience experience experience Experience Experience Non-Executive Geoffrey Howe 15 years No • • • • • Chairman

Bruce Non-Executive 8 months Yes • • • • • Carnegie-Brown Director

Non-Executive 4 years, 5 Annette Court Yes • • • • • Director months

Jonathan Senior Independent 4 years, 5 Yes • • • • • Dawson Director months Deputy Chairman Adam Keswick Non-Executive 4 months No • • • • Director Non-Executive 3 years, 8 Lord Sassoon No • • • • • • Director months Non-Executive 2 years, 3 Nicholas Walsh Yes • • • • Director months Group Chief Dominic Burke 12 years N/A • • • • • • Executive Mark Drummond Deputy Group 5 years, 10 N/A • • • • Brady CEO months Group Finance 1 year, Charles Rozes N/A • • • • Director 4 months

Key: Nominations Committee Remuneration Committee Audit & Risk Committee

60 Jardine Lloyd Thompson Group plc Annual Report 2016

The Board held 7 scheduled meetings during the year and BOARD PERFORMANCE REVIEW attendance is set out in the following table: The Board’s performance is reviewed annually. Following Eligible to attend Attended internally-led reviews of the Board and Committees in 2014 OVERVIEW Geoffrey Howe 7 7/7 and 2015, an externally-facilitated review was conducted in Annette Court 7 7/7 2016. The results of the review were generally very positive, Jonathan Dawson 7 7/7 and the Board was seen as functioning well and covering the Richard Harvey 7 7/7 right ground. Discussions were felt to be of a high quality and Nicholas Walsh 7 7/7 there was felt to be open and constructive debate pitched at Lord Sassoon 7 7/7 the right level, with effective challenge where appropriate. The 1 Bruce Carnegie-Brown 4 3/4 Board is seen as being particularly effective at management of Adam Keswick 2 2/2 performance and risk, as well as investment appraisal, and has Lord Leach 3 2/32 a clear approach to strategy.

Dominic Burke 7 7/7 STRATEGIC REPORT Mark Drummond Brady 7 7/7 A number of recommendations were made as to how to Charles Rozes 7 7/7 increase the effectiveness of the Board further, including James Twining 2 2/2 reviewing the breadth of skills and experience on the Board in 1. Bruce Carnegie-Brown was unable to attend the Board meeting held on the context of its future needs; providing more qualitative data 30 June 2016 due to a prior commitment notified before he joined the Board. to the Board as part of regular management reporting; adopting 2. Lord Leach was unable to attend the Board meeting held on 26 April 2016 improvements to Board processes; extending reporting to the due to ill-health. Board on feedback from stakeholders; and building on the The Directors’ attendance at Committee meetings is set out Board's approach to reviewing strategy. in the respective Committee reports on pages 63 to 91. During the year Board members held a strategy day which CORPORATE GOVERNANCE BOARD DIVERSITY the Board used to consider key market pressures, review the impact of strategic decisions and to focus on the strategy for The Board supports the Code's recommendation that diversity the following years. and gender should be considered when making Director appointments. The Board aims to ensure that it has the right DIRECTORS’ INDUCTION AND TRAINING balance of skills and experience, independence and knowledge to enable it to discharge its duties and responsibilities A tailored induction programme was agreed for the new effectively. The Board's policy is to select the best candidate Directors who joined the Board during the year, Bruce irrespective of background. The Company has taken, and Carnegie-Brown and Adam Keswick. The programme was continues to take, steps to promote diversity and inclusion, facilitated by the Chairman and the Group Company Secretary. including gender diversity, both at senior management level FINANCIAL STATEMENTS The programme is designed to provide comprehensive and in the boardroom. During the year the business has made information about the JLT Group of companies, its insurance significant steps forward with its diversity programme. Further and reinsurance broking and its Employee Benefit business. information about this is available on pages 71 to 72 in the Nominations Committee Report. 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 SUCCESSION PLANNING Group Treasurer; the Group Human Resources Director; and the Group Company Secretary. Succession planning and talent development has been an important agenda item for the Board in the year, as described

Members of the Board are provided with regular training in in greater detail in the Nominations Committee Report on page SHAREHOLDER INFORMATION order to keep them abreast of industry and legal and regulatory 72. Substantial progress has been made during the year in developments, facilitated by professional advisers where promoting talent across the Group and the Board is confident appropriate. During the year the Board was provided with a that there is a strong senior management succession pipeline. 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.

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 CORPORATE GOVERNANCE

RISK MANAGEMENT AND INTERNAL CONTROLS RELATIONSHIP WITH SHAREHOLDERS

The Board has overall responsibility for the Group's systems Our Board welcomes the opportunity to openly engage with of internal control and for reviewing their effectiveness. shareholders as it recognises the importance of a continuing The implementation and maintenance of the risk management effective dialogue, whether with major institutional investors, and internal control systems are the responsibility of the private shareholders or employee shareholders. The Chief Executive Directors and senior management. Executive Officer and Group Finance Director are closely involved with investor relations, together with the Group Head In accounting to shareholders, the Board is responsible for of Investor Relations. The Board is regularly updated on presenting a fair, balanced and understandable assessment of shareholder views. The Chairman and Non-Executive Directors the Group’s position and prospects. The Board’s responsibility are available to meet with institutional shareholders to discuss covers the Annual Report and Accounts and half-year results. any matters relating to the Company. A statement relating to this assessment is covered in the Audit & Risk Committee Report on page 70. Investors are consulted and informed about important business activity and decisions on an ongoing basis. We keep our The Board is responsible for determining the nature and extent investors up to date with regulatory news releases via the RNS of any significant risks the Group is willing to take in order to service and through press releases. Copies of past regulatory achieve its strategic objectives and for maintaining sound risk news releases can be found on the Group’s website jlt.com. 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 CULTURE AND ETHICS control, this system provides robust, but not absolute, assurance against material misstatement or loss. The Group’s The Board recognises the importance of demonstrating its full risk management and internal control systems comprise support for ethical conduct and leadership. During the year, Group policies, procedures and practices covering a range of the Board considered the subject of culture and ethics in the areas including the appropriate authorisation and approval of context of JLT's style, tone and organisation. The Board has transactions, the application of financial reporting standards and a strong focus on ensuring that there is a continuing open the review of financial performance and significant judgements. and straightforward culture of integrity and honesty across the Group. 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

AUDIT & RISK OVERVIEW COMMITTEE REPORT

The Committee plays a crucial role in

“providing comfort to the Board on the STRATEGIC REPORT integrity of the Group’s processes and “ procedures relating to internal control, risk management and financial reporting. Jonathan Dawson

The Committee also supports the Finally, there have been a couple of

INTRODUCTION FROM CORPORATE GOVERNANCE Board in its assessment of whether the changes to the composition of the THE COMMITTEE Annual Report and Financial Statements Committee during the year. Bruce CHAIRMAN are fair, balanced and understandable Carnegie-Brown joined the Committee and provide sufficient information to on 1 May 2016, bringing broad skills and I am pleased to present the Audit & Risk allow an assessment of the Group. experience, including relevant industry Committee Report for the year ended 31 The Committee considers in detail the experience. Unfortunately Bruce will be December 2016. processes undertaken by management stepping down from the Board in June The Committee plays a crucial role in in order to meet the requirement on the 2017, following his appointment as providing comfort to the Board on the Company to include a long-term viability Chairman of Lloyd's of London. Richard integrity of the Group's processes and statement in the Annual Report and Harvey retired on 31 December 2016 procedures relating to internal control, Financial Statements. and the Committee thanks him for his

risk management and financial reporting. valuable and insightful contributions over FINANCIAL STATEMENTS As part of my role as Chairman of the his years of service to the Committee. This report highlights the extensive work Committee I have met with the external carried out by the Committee during auditors, PricewaterhouseCoopers LLP 2016, including its continued focus on (PwC), as well as Group Internal Audit, the risks and controls in key areas of the without management being present. Group’s businesses. The Committee’s The Committee remains focused on work has reflected the further expansion ensuring that all relevant laws and Jonathan Dawson of the Group’s geographical footprint in regulations are complied with and that Chairman, Audit & Risk Committee areas including the United States (US) the business operates within the right 28 February 2017

and the Middle East and Africa (MEA); SHAREHOLDER INFORMATION control framework. external challenges affecting the Group’s key risk exposures; and internal changes in business organisation, structure and leadership.

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 63 CORPORATE GOVERNANCE

COMMITTEE COMPOSITION, SKILLS AND COMMITTEE ATTENDANCE EXPERIENCE The Committee held six scheduled meetings during the year, as in previous years. The Committee’s terms of reference, Committee Members which can be accessed on the Company’s website, provide for Jonathan Dawson (Chairman) additional ad hoc meetings to be held as and when necessary. Bruce Carnegie-Brown (joined 1 May 2016) Annette Court The table below shows the Committee members during the Richard Harvey (retired 31 December 2016) year and their attendance at meetings: Lord Sassoon Nicholas Walsh Committee members Eligible to attend Attended Jonathan Dawson 6 6/6 The members of the Audit Committee who served during Bruce Carnegie-Brown 3 3/3 the year are listed in the table above. Annette Court 6 6/6 Richard Harvey 6 6/6 The UK Corporate Governance Code 2014 (the Code) requires Lord Sassoon 6 6/6 the Board to establish an audit committee of at least three Nicholas Walsh 6 6/6 independent, Non-Executive Directors. The Committee currently comprises five Non-Executive Directors, of which four are Meetings were also held with Group Internal Audit and the independent. The Committee satisfies the requirements of the external auditors without management being present. Code, with the exception of having one member, Lord Sassoon, who is not an independent Non-Executive Director. SUBSIDIARY ARCS Jonathan Dawson has been Chairman of the Committee since March 2013 and has over 30 years’ experience in financial JLT operates Entity ARCs as part of its global governance services. Lord Sassoon qualified as a Chartered Accountant structure across the Group’s business units. The role of each and has many years of experience in investment banking and ARC is to assist the relevant business in managing senior finance roles in government. Both Annette Court and its governance and controls effectively. Nicholas Walsh have many years of experience in senior roles Entity ARCs focus on the oversight of significant risk, audit in the insurance industry. Bruce Carnegie-Brown has had a and internal control matters affecting their business, together long career in financial services and insurance. Full biographies with their regulatory responsibilities. of each of the members of the Committee are set out on pages 56 to 57. Each Entity ARC is chaired by a Non-Executive Director. There is formal reporting to the Group ARC as well as a regular The Board considers that the members of the Committee, forum for Group and Entity ARC chairs to meet during the year both individually and collectively, possess the necessary range and discuss topical issues and matters of common interest. of skills and experience to enable it to properly discharge its responsibilities. Details of the Committee members’ relevant During 2016 a seminar was held for NEDs of regulated experience can be found on page 60. subsidiaries both in the UK and internationally, which was also attended by members of the Group ARC. The seminar included In addition to the Committee members, a number of other a presentation by an external speaker on cyber risk and its people attend meetings by invitation. The list of the additional implications for the Group. There was also a presentation by the participants is set out in the following table: Group’s home regulator, the Financial Conduct Authority (FCA), which emphasised the positive progress the Group had made in Meeting Participants developing its compliance and governance approach in the past Group Company Secretary few years. The Group Chairman provided an update on group Group Chairman strategy and there were updates on the work of Group Internal Group Chief Executive Audit and Group Risk & Compliance. There was also discussion Deputy Group CEO of regional risks and common areas of interest across the Group Finance Director Group Head of Internal Audit Group, including emerging risks. 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 ROLE AND RESPONSIBILITIES • the effectiveness of the Group’s Internal Audit function; • the effectiveness of the external audit process, The role of the Committee is to provide oversight and advice taking into consideration relevant professional and to the Board on matters of financial reporting, financial

regulatory requirements; OVERVIEW controls and risk management, together with the assessment and reporting of key risks, whilst maintaining an appropriate • the external auditors’ independence and objectivity, relationship with the Company’s external auditor. The business together with the policy on the engagement of the external of the Committee is closely linked to the Group’s internal auditors to supply non-audit services, taking into account calendar of events and financial audit programme. The relevant guidance regarding the provision of non-audit Committee works independently of management and liaises services by the external auditors; and with other Group committees. Cross-membership between • thematic and business risk reviews. each of the Committees ensures that members have a better understanding of the work of each Committee and that communication is more efficient. 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;

• the Group’s risk management framework, risk appetite and CORPORATE GOVERNANCE 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 FINANCIAL STATEMENTS The table below summarises the main activities carried out by the Committee during 2016. More detail on its activities is included below:

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 • • • External Audit

PwC Report • • • SHAREHOLDER INFORMATION Consideration of the Audit Plan • Audit Fees • • 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 Key business areas and topics reviewed included: the ordinary course of business reviewed a wide range JLT pension scheme Asia of matters, including: UK Employee Benefits US Specialty • the drafting of the interim report, preliminary announcement Latin America JLT Re and relevant sections of the Annual Report and Financial The Committee also considered the following thematic topics Statements before their submission to the Board; during the year: • reports from the Group Finance Director, including updates on currency exposures, the treatment of • a review of the increasing challenges associated with exceptional items, market counterparty security and IT security and in particular cyber risk; the Group insurance programme; • a review of the global sanctions regimes and their • reports from the Group Head of Internal Audit on areas application across the Group; where control weaknesses had been identified, together • the introduction of a consistent limitation of liability with the mitigation/remediation plans of management, the programme across the Group, commensurate with the activities within the function and resourcing matters; type and nature of services that each business offers; • reports from the Group Head of Internal Audit in respect • a review of the Group’s approach to its three lines of of the overall control environment; defence governance framework; • reports from the Group Head of Risk, including • a review of financial accounting developments; updates on dealings with the regulators in the UK and • ongoing review of the key risks and themes of Brexit; in other jurisdictions; • the development and implications of the new Senior • reports from the Company’s external auditors, including Managers Regime; any matters relating to reports on the management of • a range of matters in relation to the regulatory environment, professional indemnity risk exposure and the extent of including the forthcoming General Data Protection any litigation provisions held; Regulation, MiFID II, FCA thematic reviews, FATCA etc; • a review of Group’s tax strategy, considered in the context • a risk scenario analysis which underpins the viability of the Company’s disclosure approach; and statement for the report and accounts; • the effectiveness of the Committee. • a semi-annual review of compliance monitoring reviews; In addition to its regular agenda of matters, the Committee • Members of the Committee also visited a number of the also considered key and emerging risks in a number of business Group’s operations around the world during the year, areas or Group support functions, which were supported by where they met with senior management and in several ‘Risk Review’ presentations delivered by senior management cases attended local ARC and board meetings. and, in some cases, the Entity ARC chair of the relevant business area.

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

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 Earnings per the complex nature of the awards and the impact of changing the terms of the schemes. PwC confirmed that they had reviewed Share (EPS) 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.

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 Employee the ultimate entity responsible for the Trust is JLT Group plc. As a result the retained earnings of the parent company, JLT Group Share Trust 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

Issue How the issue was addressed by the Committee

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 OVERVIEW 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 Pension 15+ corporate bond index; the adjustment made by management to match the duration of the liabilities and compared this to Liability assumptions adopted by other schemes with a similar duration; the rates used by management for each of these elements to Valuation 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.

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 STRATEGIC REPORT Intangibles methodology used to perform this and the substantive testing done by PwC of all inputs into the valuation such as agreeing to Impairment approved budgets and checking historical performance against the budget. The Committee considered the appropriateness of Assessment 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.

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. Litigation The Committee members also discussed litigation provisions with PwC, and received reports from GIA and Group Risk and Provisions 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. CORPORATE GOVERNANCE

REPORTING TO THE BOARD The Committee believes that GIA is effective. An external review took place in 2016, in accordance with Chartered The Committee Chairman provides regular updates Institute of Internal Auditors' standards and the Committee’s to the Board on the key issues discussed at the terms of reference. This confirmed the function’s effectiveness, Committee’s meetings. and its positive contribution to improving the Group’s control environment.

AUDIT COMMITTEE EFFECTIVENESS REVIEW During 2016, the Committee reviewed, evaluated and monitored: An internal review of the Committee’s effectiveness was carried FINANCIAL STATEMENTS out in respect of 2016. Each member and regular attendees of • the independence of the GIA function; the Committee was asked to complete a questionnaire and the • the annual GIA plan, and other audit activities undertaken feedback was discussed by the Committee. The results of the by the function; review were generally very positive, with the Committee seen • reports from the Group Head of Internal Audit on the results as well-chaired and covering the right ground. Discussions are of audit work performed, and the effectiveness of the of a high quality and there is open and constructive debate, Group’s systems of internal control; with effective challenge where appropriate. Some opportunities • co-ordination between the internal and external auditors, were identified to make Committee papers more concise and other control functions within the Group, and with focused. There was seen to be more work to do on providing

external regulators; SHAREHOLDER INFORMATION professional training to the Committee. • management’s responsiveness to the findings and recommendations of GIA, and the monitoring of follow GROUP INTERNAL AUDIT up actions relating to these;

The Committee is accountable to the Board in relation to • the adequacy of the resources of the GIA function, the effectiveness of the Group Internal Audit function (GIA). including plans for managing that resource to meet the There were no changes to the terms of reference for the demands of the business; and function, or the holder of the Group Head of Internal Audit • the overall effectiveness of the Group Head of Internal position, during the period. 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 67 CORPORATE GOVERNANCE

EXTERNAL AUDITORS The Group has a policy relating to non-audit fees which requires all non-audit-related work to be pre-advised to the Group The Committee is accountable to the Board in relation to the Finance function. Work with a fee value of £10,000 or less is appointment of the external auditors, PwC, and for overseeing required to be approved by the regional Finance Director. the relationship with them. During the year, the Committee: Work with a fee exceeding £10,000 is also required to be approved by the Group Finance function. • agreed PwC’s remuneration for both audit and non-audit services, including satisfying itself that the level of audit The following table illustrates the level of audit and non-audit fee was appropriate to enable an adequate audit to be fees paid to PwC in 2016 compared to 2015: carried out;

• approved the external audit plan and ensured that it 2016 2015 was consistent with the scope of the audit engagement; £’000 £’000 Audit 2,649 2,653 • approved the terms of engagement, including the Non-audit 755 742 engagement letter issued at the start of each audit, Total 3,404 3,395 and the scope of the audit; Total spend on non-audit services as 22% 22% • assessed PwC’s independence, including in relation % of the total fees paid to PwC to non-audit services provided;

• reviewed the findings of GIA, including discussion AUDITOR INDEPENDENCE of any major issues arising, and any accounting and a udit judgements; and The Committee remained satisfied with PwC’s independence, • held meetings with PwC without management present. and their responsiveness to management, in respect of work undertaken in 2016. PwC have confirmed their independence. The Chair of the Committee also met privately with PwC Based on the Committee’s recommendation, the Board at other times. are proposing that PwC are reappointed to office at this year’s AGM. PwC also report regularly on the actions that they have taken to comply with professional and regulatory requirements and This year’s internal review of PwC’s effectiveness and current best practice in order to maintain their independence. performance concluded that they continue to operate to a high standard.

EFFECTIVENESS OF EXTERNAL AUDITOR EXTERNAL AUDITOR ROTATION During the year, PwC presented to the Committee its approach to maintaining a quality audit and a questionnaire was circulated PwC have been the Group’s external auditors since 1991. to those involved in the audit seeking their views on planning, The Committee has been kept up to date with the development resources and quality of reporting. The Committee considered of new EU-wide regulations concerning audit tenure and the feedback from the review, which was generally very positive, the longevity of audit firm relationships with the companies and agreed those areas where improvements might be made. 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. NON-AUDIT FEES The current audit partner took up his role in 2015.

To safeguard auditor objectivity and independence, the Continuity and consistency of audit quality are important, Committee oversees the process for the approval of non-audit but the Committee is mindful of the fact that PwC have been services provided by PwC. Prior to approval, consideration is in place for 25 years without re-tender and it remains the given to whether it is in the interests of the Company that the Company’s intention to initiate an audit re-tendering process services are purchased from PwC, rather than another supplier. in 2018. The Company believes that this timing is appropriate Where PwC were chosen to provide non-audit services during as it aligns with the rotation cycle for the current engagement the year, this was as a result of their detailed knowledge of the partner. There are no contractual obligations that would restrict structure of our business combined with an understanding of the selection of a different auditor. 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

RISK REVIEW PROCESS The Committee’s work in this regard is supported by the key control functions - including Group Risk & Compliance, Group A description of the processes followed by the Group to identify Internal Audit and Group Corporate Secretariat – as well as by and manage risk is included in the Risk Management Report the Group’s external auditors. OVERVIEW on pages 42 to 45. The Committee has increased its focus on this area in the past year and has discussed a number of matters relevant to CYBER RISK the fostering of an appropriate corporate culture within JLT, including the launch of a new whistleblowing process; the roll- The risk of any firm being compromised by some form of cyber out of the Group’s 3 Lines of Defence model; the development event is ever present. JLT takes cyber risk very seriously and of a robust enterprise-wide approach to risk management; seeks to address any threats from both internal or external the improving maturity of the control environment in the sources, whether intentional and malevolent or by simple Group’s businesses; the positive results of the external quality human error. JLT also recognises the interrelationship between assessment of GIA; and the year end review of internal controls. STRATEGIC REPORT 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 COMPLIANCE FRAMEWORK assist addressing the other. Our businesses around the Group are at differing levels of Cyber risk and related subjects have been the subject of regular maturity, but they have all implemented a suitable governance discussion at the Group ARC for several years. Rather than and control environment, which in many cases either mirror, running a one off programme, JLT adopts the stance that this or are based upon, JLT Group standards and structures. area requires a constant focus across people, processes and Businesses also adopt appropriate quality assurance process systems in order to stay current and to mitigate this threat. and all significant businesses operate an independently chaired CORPORATE GOVERNANCE ARC based on a common Group format. Businesses are subject to regular internal audits based on a common CULTURE Group-wide template and control model. The Committee recognises that a strong and transparent Where local laws or regulations impose standards or corporate culture is a valuable asset and can protect and practices which differ from those of the wider JLT Group generate value. Companies need to have a strong purpose, (for example in relation to licensing requirements or the culture and ethical values in order to succeed and be applicable sanctions regime), adjustments are made to sustainable and to build trust among their stakeholders. policies and practices as appropriate. A healthy corporate culture starts with clear alignment of The compliance framework of each of our businesses business purpose, values, strategy and incentives, where

will continue to evolve in response both to their growth FINANCIAL STATEMENTS people at all levels of an organisation understand the values and local legal and regulatory changes. of the organisation and act in accordance with those values.

Corporate culture is led by the Board and is not about rules but ANTI-BRIBERY PROGRAMME about actions. A key objective for both the Board and senior management is to communicate the behaviours they want to JLT enforces a rigorous anti-bribery and corruption programme see in the business and to find constructive ways to encourage across all jurisdictions in which it operates. The programme and build those behaviours. is underpinned by Group policy, which is not allowed to be tailored locally and is accompanied by mandatory on-line The Audit & Risk Committee also has an important role to play training, together with face-to-face training for appropriate in supporting the right culture across the Group, by overseeing colleague populations. SHAREHOLDER INFORMATION the provision of high quality, insightful reporting both internally and externally to the Group’s stakeholders, which demonstrates Any payments to a third party, other than a client, in an that the Group has in place the right structures and processes insurance transaction are subject to a strict centrally controlled to support the right behaviours by employees. The Committee approval process. This process is regularly reviewed by GIA, needs to recognise and address any instances where there is both centrally and in our regional businesses as part of the misalignment between behaviour, purposes and values. standard audit template. The third party framework has been externally reviewed.

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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

NOMINATIONS OVERVIEW COMMITTEE REPORT

During the year there have been

“ STRATEGIC REPORT a number of significant senior management changes. “

Geoffrey Howe

As I mentioned in my Chairman's Another key area of focus for the Group

INTRODUCTION FROM CORPORATE GOVERNANCE Statement, James Twining, Group has continued to be diversity. We have THE COMMITTEE Commercial Director, stepped down defined JLT’s diversity agenda on the CHAIRMAN from the Board in April 2016. Bruce will basis of three pillars - Networking, unfortunately be stepping down from the Sponsorship and Involvement. In 2016 I am pleased to present the Nominations Board at the end of June, following his JLT supported many initiatives, both Committee report for the year ended appointment as Chairman of Lloyd's internally and in public events in the 31 December 2016. of London. London Market and other insurance It has been an active year for the hubs, to help to drive a more diverse There were also several senior Committee, with a particular focus on and inclusive business and to play our management changes in the year. succession planning for both the Board part in solving these challenges in our Mike Rice, CEO of our US Specialty and senior management. industry. More details are available in business, and William Nabarro, Special the Corporate Responsibility Report on FINANCIAL STATEMENTS Adviser to the Group Chief Executive, During the year there were a number pages 46 to 53. of changes to the Committee. We both joined the Group Executive were saddened by the death of Lord Committee on 1 May 2016. Lucy Clarke, The Committee continues to focus on Leach, the previous Chairman of the Deputy CEO of JLT Specialty, joined the succession planning and executive Nominations Committee, in June 2016 Group Executive Committee with effect development. after a short illness. Lord Leach was from 26 September 2016. I will be available at the AGM to answer a greatly valued member of our Board With effect from 28 February 2017, the any questions on the work of the and also provided strong leadership to following senior management changes Committee during the year. the Nominations Committee for over 19 are being made: Mike Methley is being

years. I replaced Lord Leach as Chairman SHAREHOLDER INFORMATION appointed as Group Chief Operating of the Committee following his death. Officer. Mark Drummond Brady Bruce Carnegie-Brown and Adam becomes CEO of JLT Latin America and Keswick joined the Board and the Chairman of JLT Canada, in addition to Committee on 1 May 2016 and 1 his current role as Deputy Group CEO. Mike Reynolds, Global CEO of JLT Re, September 2016 respectively. Richard Geoffrey Howe assumes responsibility for JLT Insurance Harvey retired from the Board and the Chairman, Nominations Committee Management. Bala Viswanathan, CEO of Committee on 31 December 2016. 28 February 2017 JLT UK & Ireland Employee Benefits, also becomes International Chairman of Employee Benefits.

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 Committee Members important that a pipeline of talent is recognised and nurtured within Geoffrey Howe (Chairman) Jonathan Dawson Nicholas Walsh the business and the skills and experience of senior management Bruce Carnegie-Brown Adam Keswick are developed. Ultimate responsibility for making senior management Annette Court Lord Sassoon appointments rests with the Group Chief Executive.

The Group Company Secretary acts as Secretary to the The Committee is confident that there are in place succession plans for Committee and, where appropriate, others attend meetings by Directors and senior management which are appropriate to enable the invitation, as listed below. implementation of our corporate strategy and our future growth plans. The Committee works to ensure that its succession planning looks Meeting Participants ahead over multiple years, addresses any identified skill shortages and Group Chief Executive Group Human Resources Director pays particular attention to the Chairman and Group Chief Executive.

The table below shows the Committee members’ attendance During the year the Committee discussed future succession plans during 2016: 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 Committee members Eligible to attend Attended candidates for the role, in order to identify development opportunities Geoffrey Howe (Chairman) 2 2/2 for those individuals. Bruce Carnegie-Brown 1 1/1 Annette Court 2 2/2 During 2016 the Board appointed two new Non-Executive Directors. Jonathan Dawson 2 2/2 An external search consultancy, The Zygos Partnership, was used for Richard Harvey 2 2/2 the appointment of Bruce Carnegie-Brown. The Zygos Partnership Adam Keswick 1 1/1 has no other connections with the Company. Adam Keswick was Lord Leach 1 1/1 a nominee of Jardine Matheson and as a result an external search Lord Sassoon 2 2/2 consultancy was not used. Nicholas Walsh 2 2/2 DIVERSITY AND INCLUSION COMMITTEE RESPONSIBILITIES The Committee aims to maintain an appropriate balance of skills, The Committee ensures that there is a formal, rigorous and experience, expertise and background on the Board. In preparing to transparent process for new Board appointments in place. recommend new appointments, the Committee takes into account the It is the Committee’s responsibility to lead this process before benefits of maintaining diversity whilst considering candidates on merit delivering a final recommendation on new appointments to against objective criteria. the Board. Such appointments are made on merit and against The Board fully endorses the recommendations made by Lord Davies objective criteria. The Committee evaluates the balance of skills, of Abersoch in his report issued in 2011 on “Women on Boards” and knowledge and experience on the Board and, in light of that supports the Code’s recommendation that diversity and gender should evaluation, prepares a description of the role and capabilities be considered when making Board appointments. JLT recognises the required for each particular appointment. benefits of having a diverse Board and is committed to achieving a The Terms of Reference of the Committee are available on Board which includes and makes the best use of differences in culture, the JLT website jlt.com. gender, skills, background, regional, financial and industry experience and other qualities.

COMMITTEE ACTIVITIES For and on behalf of the Board.

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 Geoffrey Howe Chairman, Nominations Committee During the year the Committee focused on succession 28 February 2017 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

DIRECTORS’ OVERVIEW REMUNERATION REPORT

Aligning the interests of the

“ STRATEGIC REPORT business and the Executive Directors with the interests “ of shareholders.

Bruce Carnegie-Brown

INTRODUCTION FROM remains appropriate for rewarding competitive global market place,

Executive Directors in line with business ensuring we are able to attract CORPORATE GOVERNANCE THE COMMITTEE performance, as it has been successful in and retain high calibre staff; and CHAIRMAN aligning the interests of the business and -- variable pay and incentives the Executive Directors with the interests I am pleased to introduce our Directors’ provide a strong and of shareholders. We are therefore Remuneration Report for the year ended demonstrable link between the proposing no material changes to our 31 December 2016. performance of the Company Policy. We are, however, proposing and the performance of its I succeeded Richard Harvey as Chairman three amendments which are discussed Executive Directors and senior of the Remuneration Committee with further in this report (an increase in the management team members. effect from 1 November 2016, having shareholding guidelines, a reduction in joined the JLT Group plc Board and the maximum bonus for some Executive The Committee believes this philosophy Directors and an increase in target

Remuneration Committee on 1 May provides a direct incentive for our FINANCIAL STATEMENTS 2016. I would like to thank Richard bonus for some Executive Directors). employees to create long-term Harvey for his support during 2016. I consulted with major shareholders on sustainable value for our shareholders the proposed Policy and the full Policy together with upholding the strong The focus on executive pay has is included in this report on pages 76 to cultural identity and expected standards continued from many perspectives 82 and will be subject to approval by our of behaviour. Share awards continue during 2016. The Committee has been shareholders at the 2017 AGM. to be an essential tool in aligning the mindful to consider the approach taken interests of employees with those of at JLT against the wider market to shareholders. ensure that the Remuneration Policy and KEY PRINCIPLES practices continue to drive behaviours In setting remuneration levels, the Our Policy is based on the following key SHAREHOLDER INFORMATION that are in the long term interests of Committee is mindful that our business principles: both the Company and its shareholders. operates in a highly competitive global Equally, they are within the spirit of • Simple, consistent and transparent market. The Committee takes into recent published guidance. As with my account appropriate remuneration data • Supports the cultural and behavioural predecessor, I remain committed to an relevant to UK public companies of a priorities of the Group open and ongoing dialogue with our similar size and complexity but also investors on the matter of executive pay. • Achieves a balance between pay and recognises that there are no directly performance, such that: comparable UK companies and that Following a review, the Committee -- fixed pay remains at an its principal competitors are often concluded that the executive appropriate level when businesses which are part of much larger remuneration framework set out in our considered against the highly groups, primarily based in the US. current Remuneration Policy (the Policy)

Jardine Lloyd Thompson Group plc Annual Report 2016 73 CORPORATE GOVERNANCE

OUR REMUNERATION FRAMEWORK

Based on these principles, the key elements of our remuneration framework for 2017 are provided below:

Salary Market competitive Pension contributions are aligned with employees through the business and are at a relatively Pensions 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 Objective to build a long-term shareholding of at least 200% of salary (300% of salary for the CEO) guideline through retaining ownership of vested shares

MAJOR ACTIVITIES AND DECISIONS Plans for 2017 IN 2016 Salary: Executive Directors did not receive a base salary increase in 2016. The Committee have agreed to award a base Incentive out-turns in respect of 2016 salary increase in 2017 of 3.5% to the Group Chief Executive, representing an average salary increase of 1.75% over 2 years. The Committee agreed at the time of setting the 2016 annual The Deputy Group CEO and Group Finance Director are each bonus targets for the Executive Directors, that the underlying being awarded a salary increase of 7% with no further salary Profit Before Tax (PBT) target would include the budgeted review until 2019. This represents an average salary increase investment in the US Specialty business. In the second half of over a three year period of 2.33% for both the Deputy Group 2016, the Board approved a further investment in this business CEO and Group Finance Director. These average increases and the Committee agreed that it would be fair and reasonable are broadly in line with the wider employee population. to exclude this additional investment (£2.8 million), that was not part of the business plan at the time the annual bonus targets Annual Bonus: The annual bonus will be adjusted from 75% were set. based on Group results (measured on basic underlying PBT) and 25% based on the achievement of personal objectives, 75% of the Executive Directors’ 2016 bonus was based on to 80% of the bonus out-turn to be based on Group results Group underlying PBT targets. The underlying PBT delivered (measured on basic underlying PBT) and 20% to be based in the year of £175.4 million (excluding the additional US on the achievement of personal objectives. The Target investment cost of £2.8 million) was in excess of the Target bonus award for the Deputy Group CEO and Group Finance of £175.2 million and the Committee therefore exercised its Director will increase to 125% (from 100%) of salary, whilst discretion to limit the award to the Target level. The remaining the Maximum bonus award has been reduced under the new 25% was based on the achievement of stretching personal Policy to 150% (from 200%) of salary. The Target and Maximum objectives. The bonus awards, which were made in respect bonus awards for the Group Chief Executive will remain the of 2016 (Group Chief Executive 148% of salary, Deputy Group same (150% and 200% of salary respectively). CEO and Group Finance Director both at 99% of salary) paid out at just below the Target level and reflect the level of Group LTIP Award: EPS has been used as the measure of performance and achievement against stretching personal performance for the LTIP for a number of years and continues objectives. to be an important and appropriate measure of the long-term success of JLT and is aligned to shareholder returns. The The vesting of LTIP awards made in 2014 was based on Committee proposes no change to the EPS targets for the Earnings Per Share (EPS) performance (excluding the US 2017 LTIP award, which remain appropriately challenging investment) for the three years to 31 December 2016. Based in the current trading environment. 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

Accordingly, EPS growth is set at a range of 4% per annum Changes to the Board and Management (12% over 3 years) to 12% per annum (36% over 3 years). In 2016 a number of changes took place at Board and The threshold level of vesting will remain at 20% of the senior management level: Maximum award. 75% of the Maximum award will be payable OVERVIEW on EPS growth of 8% per annum (24% over 3 years). • James Twining resigned as a Company Director on Full vesting of the award will, as in prior years, remain subject 26 April 2016 and left the Company on 31 December to the achievement of growth in EPS of 12% per annum 2016. The termination arrangements as determined by the (36% over 3 years). Committee included no payment for loss of office and no entitlement to a 2016 annual bonus. He will continue to Since 2014, the investment costs associated with the be eligible for his 2014 and 2015 LTIP awards which will US Specialty business have been excluded from the EPS vest on the normal vesting dates, subject to performance calculation for the purpose of measuring LTIP performance. conditions and reduced pro rata for time. His 2016 LTIP For the 2017 LTIP award, there will no longer be any award lapsed in full. adjustments to exclude the US Specialty investment in the STRATEGIC REPORT EPS calculation. The 2016 EPS used as the base year from • Richard Harvey resigned as Chairman of the Remuneration which the 2017 award is calculated, will therefore reflect Committee from 31 October 2016 and as a member of the no adjustment. Board with effect from 31 December 2016. • Bruce Carnegie-Brown joined the Board on 1 May 2016 The Committee is aware that some shareholders and investor and was appointed Chairman of the Remuneration bodies have a preference for post-vesting holding periods, Committee from 1 November 2016. which extend the LTIP time horizon beyond the conventional three years. The Committee considered this issue carefully • Following Lord Leach's death on 12 June 2016, during the review and continues to believe that a time horizon Adam Keswick joined the Board on 1 September 2016. of 3 years is appropriately aligned to our business cycle and CORPORATE GOVERNANCE necessary to remain competitive in our talent markets. OTHER KEY DECISIONS

Shareholding Guidelines There will be no changes to the Non-Executive Directors’ fees for 2017. To further align Executive Directors with shareholders, the Committee has increased the shareholding requirements We will continue to keep our remuneration policies under for Executive Directors from 200% to 300% of salary for the review, to ensure they remain appropriate in the face of evolving Group Chief Executive and from 100% to 200% of salary for best practice, regulatory developments and market data. all other Executive Directors.

2013 LTIP OUT-TURN ADJUSTMENT FINANCIAL STATEMENTS

The vesting of the 2013 LTIP was based on EPS performance measured to the 2015 financial year. As explained in detail in Bruce Carnegie-Brown Note 9 to the Financial Statements on page 129, the 2015 28 February 2017 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 SHAREHOLDER INFORMATION 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 Operation Maximum Performance framework purpose/link to strategy

BASE SALARY Contractual fixed cash amount paid monthly. There is no prescribed N/A To provide a base maximum salary. salary, as a major Salaries are normally set in the home currency and component of fixed reviewed annually. Any changes are normally made Any increases will be remuneration, which effective from 1 April. at the discretion of the is competitive in the Committee, taking into markets in which the Salaries are set by the Committee, taking into account factors such as: Company operates account all relevant factors which include: the scale changes in the size and and in which the and complexity of the Group and / or business unit, complexity of the business, Executive Director the scope and responsibilities of the role, the skills scope of the role, is based. and experience of the individual, performance in competitive positioning role, the level of increase within the business, and against the market, and, the Committee’s assessment of the competitive the level of salary increase environment including consideration of appropriate within the business. 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

Component and Operation Maximum Performance framework purpose/link to strategy

BENEFITS Benefits reflect home country norms Benefit provision, for which N/A OVERVIEW To provide benefits, of the Executive Director. there is no prescribed as an element of fixed monetary maximum, is remuneration, which Incorporates various cash / non-cash benefits set at an appropriate level are competitive in the which are competitive in the relevant market, and for the specific nature and markets in which the which may include: a company car (or equivalent location of the role. Company operates. cash allowance), subscriptions, life assurance, death-in-service pension, private medical, annual Benefit plans are reviewed medical check-up, permanent health cover, periodically to ensure reimbursed business expenses (including any they remain competitive associated tax liability) incurred when travelling in in the market in which the

performance of duties, and, where necessary, other company operates, provide STRATEGIC REPORT benefits to reflect specific individual circumstances, appropriate value to and such as housing, relocation, travel or other remain appropriate for our expatriate allowances. employee population.

Executive Directors may also participate in the Participation in all Save As You Earn (SAYE) and Share Incentive Plan employee share plans is (SIP) on the same basis as other employees. subject to statutory limits.

PENSION Executive Directors will participate in the company Current UK Executive N/A To provide an element pension schemes that apply to their home country. Directors receive a of tax-efficient savings maximum DC / cash CORPORATE GOVERNANCE where possible within In the UK, this is provided via contributions to the supplement of 15% of the tax framework Defined Contribution (DC) section of the JLT UK pensionable earnings. of the Executive Pension Scheme or as a cash salary supplement. Director's home Contributions, in line with the Scheme Rules, The maximum additional country. are made by reference to pensionable earnings annual fixed salary (currently a maximum of £140,000 but reviewed supplement for current annually). Executive Directors impacted by the closure Members of the Defined Benefit (DB) section of of the DB scheme are: the scheme will continue to receive benefits in £79,000 for Dominic accordance with the terms of this plan, although Burke; £24,000 for Mark it is closed to further accrual or to new members. Drummond Brady.

Since the closure of the DB scheme in 2006, FINANCIAL STATEMENTS 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. SHAREHOLDER INFORMATION

Jardine Lloyd Thompson Group plc Annual Report 2016 77 CORPORATE GOVERNANCE

Component and Operation Maximum Performance framework purpose/link to strategy

ANNUAL BONUS Total overall bonus (before any deferral) provides Maximum awards under Payment is determined by A variable pay an opportunity for additional reward (up to a target the annual bonus plan are: reference to performance opportunity, and maximum specified as a percentage of salary) assessed over one financial competitive in the based on annual performance against objectives 200% of salary for the year. Performance may markets in which the set and assessed by the Committee. Chief Executive be assessed using a Company operates, combination of financial, which motivates and Paid in cash, except that any bonus in excess 150% of salary for other strategic and personal rewards performance of a limit, normally 100% of salary, is deferred into Executive Directors performance measures, against objectives Company shares in accordance with the terms of normally weighted towards and is aligned with the Deferred Bonus Share Plan (DBSP). the financial measures. the culture of the organisation. Deferral Under the DBSP, participants are granted a Importance is placed on aligns reward with conditional award of shares which normally vest promoting the culture of long-term value of over three years, subject to continued employment. the organisation and JLT shares. Dividend equivalent provisions apply. mitigating risk.

Malus and clawback provisions apply in relation to “Target” bonus is set at annual bonuses. 150% of salary for the Chief Executive and 125% Bonus payments are not pensionable. of salary for the other Executive Directors.

LONG-TERM Awards are made under the terms of the JLT Maximum annual Vesting is determined by INCENTIVE PLAN Long Term Incentive Plan 2013, approved by awards are: reference to performance (LTIP) shareholders at the 2013 Annual General Meeting. assessed over a period 300% of salary for the of three years, against A variable pay Awards are normally in the form of a right to acquire Chief Executive key measures aligned to opportunity, shares in the Company for a zero or nominal the strategy and creation competitive in the amount. The vesting of the award is subject to the 200% of salary for other of shareholder value. markets in which the satisfaction of performance conditions reviewed Executive Directors Performance measures Company operates, and agreed by the Committee each year. currently include EPS which motivates and and may also include rewards long-term Malus, clawback and dividend equivalent other financial or strategic performance and provisions apply. measures aligned to strategy is aligned with the and shareholder value. value created for shareholders. 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 Approach of the Company Chairman fees 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.

The Chairman and Non-Executive Directors do not participate in any bonus or share incentive scheme, nor do they participate in any pension arrangements. STRATEGIC REPORT

EXPLANATORY NOTES TO Performance measures and target setting POLICY TABLES The annual bonus is assessed against both financial and personal targets determined by the Committee. This enables Share awards the Committee to reward both annual financial performance Awards under any of the Company’s share plans referred to in delivered for shareholders and performance against specific financial, operational or strategic objectives set for each director. this report may: CORPORATE GOVERNANCE

• be granted as conditional share awards or nil-cost options The LTIP is based on long-term financial performance, or be in such other form that the Committee determines has using performance measures which the Committee feel are the same economic effect; most appropriate for the Company (for example EPS). The performance targets for LTIP awards are determined by the • have any performance conditions applicable to them Committee each year at the time of grant. amended or substituted by the Committee if an event occurs which causes the Committee to determine an Awards under the LTIP may have any performance conditions amended or substituted performance condition would be applicable to them amended or substituted by the Committee if more appropriate and not materially less difficult to satisfy; an event occurs which causes the Committee to determine an • be settled in cash at the Committee’s discretion; and amended or substituted performance condition would be more appropriate and not materially less difficult to satisfy.

• be adjusted in the event of any variation of the Company’s FINANCIAL STATEMENTS share capital or any demerger, delisting, special dividend or other event that may affect the Company’s share price. DIFFERENCES IN THE COMPANY'S POLICY ON THE Malus and clawback provisions REMUNERATION OF EMPLOYEES GENERALLY

DBSP and LTIP awards are subject to a malus clause such that JLT operates in a number of different sectors and countries unvested awards may be reduced, cancelled or made subject and therefore employee remuneration practices vary widely to additional conditions at the Committee’s discretion, in the across the employee population within the Group. event of material misstatement of results or gross misconduct. However, employee remuneration policies are normally based on the same broad principles: Clawback will apply for a period of three years following SHAREHOLDER INFORMATION the payment of a bonus and for two years following the • Sufficient to attract and retain the calibre of talent necessary vesting of an LTIP, in the event of material misstatement or to deliver the strategy for shareholders. gross misconduct. • Where appropriate, a proportion should be aligned to Dividends results and performance, based on relevant specific and measurable criteria. A significant number of Group Upon vesting of DBSP and LTIP awards, participants will employees are eligible to participate in cash bonus, share receive income (in the form of shares or cash) equal in value to awards or other incentive arrangements. the dividends payable on the relevant number of vested shares during the performance period.

Jardine Lloyd Thompson Group plc Annual Report 2016 79 CORPORATE GOVERNANCE

• In addition to the DBSP and LTIP, the Group operates a £’000 Finance Director (Charles Rozes) number of other share incentive schemes to encourage 2,500 LTIP Annual Bonus employee share ownership. These include the Senior Fixed Pay (salary) Executive Share Scheme (SESS), and Sharesave/Share 2,000

Incentive Plan all employee schemes (within which all 1,500 employees, including Executive Directors, in the UK and certain overseas jurisdictions are eligible to participate). 1,000 • Executive Directors participate in the defined contribution 500 pension scheme on the same basis as other employees. 0 Minimum Target Maximum ILLUSTRATION OF REMUNERATION POLICY

The charts below illustrate the potential value of the APPROACH TO RECRUITMENT REMUNERATION remuneration packages under the following scenarios (no share price growth is assumed): When determining the remuneration package for a newly appointed Executive Director, the Committee would seek to • Minimum – reflects fixed pay only (base salary as at 1 April apply the following principles: 2017 and benefits/pension included using the disclosed values for the year ending 31 December 2016) • The package should be market competitive to facilitate the • Target – reflects fixed pay, Target bonus (CEO: 150% of recruitment of individuals of sufficient calibre to lead the salary, other Executive Directors 125% of salary) and LTIP business. At the same time, the Committee would intend awards (CEO: 300% of salary, other Executive Directors to pay no more than it believes is necessary to secure the 200% of salary) vesting at 20% of Maximum required talent. • Maximum – reflects fixed pay, Maximum bonus (CEO: • The structure of the on-going remuneration package would 200% of salary, other Executive Directors 150% of salary) normally include the components set out in the Policy and LTIP awards vesting in full. 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. £’000 Group Chief Executive • The maximum level of variable remuneration which may be 6,000 LTIP (Dominic Burke) Annual Bonus awarded (excluding any compensatory awards referred to 5,000 Fixed Pay (salary) below) is five times salary. 4,000 • The Committee considers that having flexibility to respond 3,000 to specific commercial realities of a recruitment scenario is

2,000 in the best interests of the Company and its shareholders. Therefore, the Committee has discretion, in exceptional 1,000 or unexpected circumstances, to include other fixed 0 remuneration components (eg to reflect local market Minimum Target Maximum 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 £’000 Deputy Group CEO be disclosed. (Mark Drummond Brady) 2,500 LTIP Annual Bonus • Where an individual forfeits remuneration with a previous Fixed Pay (salary) 2,000 employer as a result of appointment to the Company, the Committee may offer compensatory payments or awards 1,500 to facilitate recruitment. Such payments or awards could 1,000 include cash as well as performance and non-performance related share awards, and would be in such form as the 500 Committee considers appropriate considering all relevant 0 factors such as the form, expected value, anticipated Minimum Target Maximum vesting and timing of forfeited remuneration. There is no

80 Jardine Lloyd Thompson Group plc Annual Report 2016

limit on the value of such compensatory awards, but the POLICY ON PAYMENT FOR LOSS OF OFFICE Committee’s intention is that broadly the value awarded would be no higher than value forfeited. While cash Where an Executive Director leaves employment, the may be included to reflect the forfeiture of cash-based Committee’s approach to determining any payment for loss of OVERVIEW remuneration, the Committee does not envisage that office will normally be based on the following principles: substantial “golden hello” type cash payments would • The Committee’s objective is to find an outcome which is generally be offered. in the best interests of the Company and its shareholders, • Any share awards referred to in this section will be granted taking into account the specific circumstances and as far as possible under the Company’s existing share performance of the individual. plans. If necessary, awards may be granted outside of • Relevant contractual obligations (referred to in the section these plans as currently permitted under the Listing Rules, above) are observed or taken into account should an but within the limits set out in this section. Executive Director leave employment by mutual consent.

The remuneration package for a newly appointed Non- While not a contractual obligation, the Committee may STRATEGIC REPORT Executive Director would normally be in line with the structure make termination payments on a phased basis and set out in the Policy Table for Non-Executive Directors. subject to reduction in the event that alternative employment is found. • The Committee has discretion to make a payment under the SERVICE CONTRACTS annual bonus in respect of the year of leaving employment, It is the Company’s standard policy that Executive Directors subject to performance. should have service contracts with an indefinite term which • The treatment of outstanding share awards would be can be terminated by the Company or the director by giving determined by the relevant plan rules. The table below notice not exceeding 12 months. This applies to all current summarises the treatment of awards if a participant ceases CORPORATE GOVERNANCE Executive Directors and would normally be applied to future to be an employee of the Group for any of the reasons appointments. The Committee retains discretion to offer service shown. To the extent that an award does not vest in agreements with notice periods which exceed 12 months (up to accordance with these terms, the award will lapse. a maximum of 24 months). If such a contract was offered, the • Members of the Defined Benefit section of the JLT UK notice period would normally be reduced during the first year of Pension Scheme will receive benefits in accordance with the employment to the standard 12 month notice period. terms of that scheme.

Under all the current Executive Director service contracts, the • The Committee reserves the right to make any other Company may terminate employment by making a payment payments in connection with a director’s cessation of office in lieu of notice which would not exceed 12 months’ salary, or employment where the payments are made in good benefits and pension contributions. This policy would be faith in discharge of an existing legal obligation (or by way applied to future appointments. of damages for breach of such an obligation) or by way FINANCIAL STATEMENTS of settlement of any claim arising in connection with the Non-Executive Directors are appointed for a three year term, cessation of a director’s office or employment. Any such which is renewable, with three months’ notice on either side. payments may include but are not limited to paying any fees The contract for the Chairman is subject to a six month notice for outplacement assistance and/or the director’s legal and/ provision on either side. For both Non-Executive Directors and or professional advice fees in connection with his cessation the Chairman, no contractual termination payments would be of office or employment. due and both are subject to retirement pursuant to the Articles of Association at the Annual General Meeting.

Reasons for leaving Treatment SHAREHOLDER INFORMATION Ill-health, injury or disability; Awards will normally vest on the original vesting date subject to the original performance conditions. Alternatively, the Committee has Death; discretion to vest the awards on an earlier date, subject to performance Retirement with the agreement of the Company; conditions. The participant’s employing company ceasing to be under The Committee also has discretion to reduce the award to reflect the the control of the Company; proportion of the performance period that has elapsed. 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 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 CONSIDERATION OF SHAREHOLDER VIEWS the extent to which LTIP awards vest in these circumstances Views expressed by the Company’s shareholders were taken shall be reduced to reflect the proportion of the performance into account by the Committee in the development of the period that has elapsed. Company’s remuneration framework.

The Company’s largest shareholder (Jardine Matheson) is CONSIDERATION OF CONDITIONS ELSEWHERE IN represented on the Remuneration Committee. The Committee THE COMPANY undertook an extensive consultation between the Remuneration Committee Chairman and key independent shareholders (and When setting the policy for the remuneration of the Executive shareholder representative bodies) prior to shareholder Directors, the Committee will have regard to the pay and approval of the current Remuneration Policy at the 2014 AGM. employment conditions of employees within the Company. The Committee also engaged with key shareholders on the The Committee does not consult directly with employees when changes to Policy set out above and regularly reviews the formulating the Remuneration Policy for Executive Directors. policies in the context of published shareholder guidelines.

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):

Salary Benefits 4 Pension 5 Annual Bonus 6 LTIP 7 Total Directors £’000 £’000 £’000 £’000 £’000 £’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 Michael Reynolds3 - 280 - 19 - 8 - 152 - 412 - 871

1 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. 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. 3 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. 4 Benefits include: a company car (or equivalent cash allowance), subscriptions, life assurance, private medical and permanent health cover. 5 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. 6 Annual bonus includes the full value of the annual bonus awarded in respect of the relevant financial year. For Dominic Burke, £353,000 of the amount shown for 2016 will be deferred under the terms of the DBSP. 7 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.

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):

Fees Benefits Total Directors £’000 £’000 £’000 OVERVIEW 2016 2015 2016 2015 2016 2015 Geoffrey Howe1 300 293 4 3 304 296 Bruce Carnegie-Brown 43 - - - 43 - Annette Court 60 60 - - 60 60 Jonathan Dawson 83 83 - - 83 83 Richard Harvey 87 90 - - 87 90 Adam Keswick2 20 - - - 20 - Lord Leach1, 2 30 60 3 6 33 66

Lord Sassoon2 60 60 - - 60 60 STRATEGIC REPORT Nicholas Walsh3 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 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 against the all UK employee salary increase average of 3.1% for the April 2016 salary review and an anticipated average all UK CORPORATE GOVERNANCE The following sections describe how the Committee employee salary increase over 3 years (2016/2017/2018) of 3%. implemented key elements of the policy in the year ended 31 The Committee recognises the concerns of investors around December 2016 and how it is intended to operate in the year executive salary inflation which is why it is committing that ending 31 December 2017. the salaries of the Deputy Chief Executive and Group Finance Director will remain unchanged until at least 1 April 2019. Salary

In setting salaries, the Committee takes into account the scale Directors 2017 2016 Change and complexity of the Group, the scope and responsibilities of Dominic Burke £766,000 £740,000 3.5% the role, the skills and experience of the individual, performance Mark Drummond Brady £450,000 £420,000 7% in role, the level of salary increase within the business, and Charles Rozes £455,000 £425,000 7% the Committee’s assessment of the competitive environment Annual bonus including consideration of appropriate market data. The FINANCIAL STATEMENTS Committee also takes into account appropriate remuneration In 2016, the Executive Directors had a target bonus opportunity data relevant to UK public companies of a similar size and of 100% of salary (150% of salary for the Group Chief complexity but also recognises that there are no directly Executive). In exceptional circumstances, the Committee could comparable UK companies and that the Company’s principal award a maximum of 200% of salary. In 2016, the bonus international competitors are businesses which are part of much was based on a combination of both financial and personal larger groups, primarily in the US. The base salaries of the performance measures, requiring the achievement of stretching Executive Directors effective 1 April 2017 are set out in the table performance targets, as follows: opposite, together with the prior year comparative. • 75% on Group underlying PBT performance. As described The Committee proposes to increase the Group Chief in more detail on page 26, 2016 saw a Group underlying SHAREHOLDER INFORMATION Executive’s salary by 3.5% from 1 April 2017 with the next PBT of £172.6 million (£175.4 million excluding the review in April 2018. The Group Chief Executive did not receive additional investment cost in the US Specialty business of a salary increase in 2016, whilst the all employee UK salary £2.8 million). This exceeded the Target of £175.2 million. increase averaged 3.1% for the April 2016 salary review, with a The Committee does not operate a conventional threshold similar increase anticipated for 2017. to maximum target range and therefore this represents full disclosure of the underlying PBT targets. For the other Executive Directors, the Committee proposes an • 25% on the achievement of personal objectives. Each of increase of 7% from 1 April 2017 with the next review in April the Executive Directors and Senior Management team set 2019. The other Executive Directors did not receive a salary their objectives with the Group Chief Executive (or in the increase in 2016 and as such their proposed increase is set case of the Group Chief Executive, with the Remuneration

Jardine Lloyd Thompson Group plc Annual Report 2016 83 CORPORATE GOVERNANCE

Committee). These are documented and reviewed mid-year For 2017, the annual bonus will operate on a similar basis as to ensure they continue to be operationally and strategically for 2016, based on an appropriate combination of stretching relevant and an overall assessment is made at the end Group underlying PBT targets and personal objectives related of the performance year. Personal objectives align to the to the enablement and achievement of the Company strategy of Group's strategic priorities. driving growth, international reach and relevance, and improving Dominic Burke's personal objectives during 2016 have focused operational efficiency and effectiveness. However, the weighting on maximising value to shareholders by supporting the long- of the financial measures will increase to 80% of the total term development of our business. They included: target and 20% will be based on the achievement of stretching personal objectives. In addition, the Target bonus opportunity • the continued development of our US Specialty business will be increased from 100% to 125% for the Deputy CEO and and the transformation of our UK Employee Benefits the Group Finance Director in line with the new Policy. business; and The Committee and Board of JLT believe the specific • overseeing the implementation of effective governance performance targets are commercially sensitive and therefore and risk structures, in particular, of the technology and it is inappropriate to publish further detail here. It is the current operational effectiveness investment programmes, which intention that they will be disclosed next year to the extent that were approved by the Board in 2016. the Committee is comfortable they are no longer sensitive. Charles Rozes' personal objectives, in his first full year as Group Finance Director, have particularly focused on effective LTIP – 2014 award, vesting in respect of 2016 governance and have included: The 2014 LTIP was based on basic EPS growth (excluding exceptional items and impairment charges and measured • strengthening financial control and reporting across the on actual exchange rates) in the three financial years to 31 Group; December 2016 in accordance with the targets laid out below, • embedding a new risk framework, which will continue to determined by the Committee at the time of grant. Following develop and evolve as the business grows; the announcement of the expansion into the US, the Committee • providing consistency of oversight and controls to the considered the impact of the significant expected investment Audit & Risk Committees to ensure continued effective costs, which were not anticipated when the awards were governance; and granted, on outstanding LTIP awards (ie 2013, 2014 and 2015 • fully executing the 2016 Group Internal Audit plan. awards). The Committee determined that it was appropriate to Mark Drummond Brady has continued to be externally focused adopt the following approach: and his personal objectives in 2016 included: • In respect of a financial year in which US investment costs • identifying and driving new business opportunities, occur, that such cost will be added back to the EPS for that particularly in Asia, US Specialty and our MEA businesses, year for the purposes of measuring LTIP performance; and by supporting the regional CEOs and Chairmen; • The Committee retains discretion over whether to apply • continuing to strengthen relationships with our European such an approach in respect of any financial year and partners; on the proportion of the cost which is added back. Any adjustment will be verified by the Company’s auditors • promoting greater alignment and co-ordination across the prior to the vesting date and clearly disclosed in the Group with respect to relationships with global carriers; and relevant Remuneration Report. The Committee believes • leading the development of Diversity and Inclusion initiatives that although the costs are not “exceptional costs” from across the Group. a technical accounting perspective (and therefore will not Based on performance against the targets set, the Committee be excluded from “Underlying EPS”) they are exceptional determined that the Executive Directors would receive the for the purposes of LTIP measurement. The approach is bonus for the year as shown in the Single Total Figure of consistent with the rules of the LTIP and with the Policy. Remuneration Table (98.5% of Target bonus for the Group Chief In respect of 2016, the adjustment for unbudgeted but Executive and 99% of Target for other Executive Directors). authorised additional US investment costs had an impact on This has been based on meeting the underlying PBT target and EPS of 12.6p. the achievement of personal objectives.

84 Jardine Lloyd Thompson Group plc Annual Report 2016

The Committee determined that the 2016 EPS for the purposes SHARE INTERESTS AWARDED TABLE (AUDITED) of the LTIP was 65.2p and that the 2014 LTIP will therefore vest at 21.47% on 7 April 2017. The following table sets out details of LTIP awards made during the year ending 31 December 2016 for Executive Directors who OVERVIEW The value of these vested 2014 awards to Dominic Burke, Mark served during the year. Drummond Brady and James Twining is shown in the Single Total Figure of Remuneration Table on page 82. Face End of Executive Type of Basis of value Threshold performance Director Interest award £’000 vesting period EPS growth over a 3 year period Vesting (% of maximum) Dominic 300% of 31 December Below 6% per annum (18% over 3 years) 0% LTIP 2,220 20% Burke salary 2018 6% per annum (18% over 3 years) 20% Mark 150% of 31 December 12% per annum (36% over 3 years) 100% Drummond LTIP 630 20% salary 2018 Brady Vesting is on a pro rata basis between these points. Charles 150% of 31 December STRATEGIC REPORT LTIP 637.5 20% Rozes salary 2018 James 150% of 31 December LTIP 495 20% LTIP – 2017 AWARD, WILL VEST IN 2020 Twining salary 2018

The Committee reviewed the performance targets for the LTIP Awards under the LTIP are made in the form of nil-cost and believes the current target range (as shown in the table conditional share awards. below) continues to be appropriately stretching in the context of The face value has been calculated using the average share the current environment. Therefore, this target range will apply price used to determine the number of shares awarded, being to the 2017 LTIP award. £8.5883 (the average over the three days to 30 March 2016). CORPORATE GOVERNANCE EPS growth over a 3 year period Vesting (% of maximum) James Twining's 2016 LTIP award lapsed in full on 26 April 2016. Below 4% per annum (12% over 3 years) 0% 4% per annum (12% over 3 years) 20% Shareholder guidelines and share interests 8% per annum (24% over 3 years) 75% Following the review of the Remuneration Policy, the JLT Share 12% per annum (36% over 3 years) 100% Ownership Guidelines have increased. From 2017, Executive Vesting is on a pro rata basis between these points. Directors are required to build up long-term share interests equivalent to 200% of base salary (300% of base salary for The calculation of EPS is underlying basic EPS, excluding the Group Chief Executive). In summary, the guidelines are for exceptional items and impairment charges and measured on Executive Directors to retain 50% of shares acquired on the actual achieved exchange rates and will be verified by the vesting of share awards after the payment of income tax and Company’s auditors. national insurance, until such time as the guideline has been FINANCIAL STATEMENTS The Committee reviewed the current approach of excluding met. Deferred shares count towards the guideline (on a net of the impact of US investment costs when calculating the tax basis).The Chairman and Non-Executive Directors are not EPS performance and concluded it was now appropriate to subject to the share ownership guidelines. 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.

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 Shareholding as Guideline Number of shares a % of salary met? LTIP DBSP/Other Executive Directors Dominic Burke 406,170 544% Yes 703,809 58,600 Mark Drummond Brady 131,329 310% Yes 194,537 - 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 19,2822 Lord Sassoon 0 Nicholas Walsh3 0

1 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.

Number of Number of Awarded / shares Share price Date from shares (exercised) Lapsed (31 Dec on grant which Plan Grant date (1 Jan 2016) (During 2016) shares 2016) (pence) exercisable 2013 DBSP 28.03.13 38,800 (38,800) - - 838.00 28.03.16 2014 DBSP 07.04.14 32,600 - - 32,600 1029.00 07.04.17 2015 DBSP 25.03.15 26,000 - - 26,000 1047.33 25.03.18 Dominic Burke 2013 LTIP 08.05.13 236,500 (116,524) (90,367) 29,609 850.00 08.05.16 2014 LTIP 07.04.14 205,100 - - 205,100 1029.00 07.04.17 2015 LTIP 01.04.15 210,600 - - 210,600 1054.00 01.04.18 2016 LTIP 31.03.16 - 258,500 - 258,500 858.83 31.03.19 2013 LTIP 08.05.13 61,800 (30,449) (23,614) 7,737 850.00 08.05.16 Mark 2014 LTIP 07.04.14 53,600 - - 53,600 1029.00 07.04.17 Drummond 2015 LTIP 01.04.15 59,800 - - 59,800 1054.00 01.04.18 Brady 2016 LTIP 31.03.16 - 73,400 - 73,400 858.83 31.03.19 01.09.16 PSP 9.4.2 21.09.15 55,955 (22,382) - 33,573 1041.00 Charles Rozes 01.09.18 2016 LTIP 31.03.16 - 74,300 - 74,300 858.83 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) Mark Drummond Brady was a deferred member of the Defined Benefit (DB) section of the Scheme, which had been closed to James Twining resigned from the Board on 26 April 2016 and further accrual or to new members. On 17 February 2016, the ceased employment with the Group on 31 December 2016. Executive Director transferred the benefit out of the Scheme, OVERVIEW The Committee determined his remuneration arrangements in therefore fully extinguishing his liability in the DB scheme. line with the Policy. He received no payment for loss of office The transfer value (£4,499k) was settled on 17 February 2016. and was not entitled to a 2016 annual bonus. He will continue This was calculated on the standard transfer value basis for the to be eligible for his 2014 and 2015 LTIP awards which will scheme with no enhancements. vest on the normal vesting dates, subject to performance and reduced pro rata for time. His 2016 LTIP award lapsed in full. Dominic Burke, Charles Rozes and James Twining do not have any entitlement under a Company Defined Benefit pension arrangement. PENSION Contributions in respect of 2016 are included in the Single Total STRATEGIC REPORT Pension benefits are provided to Executive Directors via the Figure of Remuneration Table on page 82. Defined Contribution (DC) section of the JLT UK Pension To reflect the closure of the DB scheme in 2006, affected Scheme or as a cash salary supplement. Member contributions employees, including some Executive Directors, also received a are matched by a Company contribution equivalent to 2.5 fixed cash supplement, which was calculated as a percentage times the amount paid by the member subject to a maximum of of salary determined at the time the scheme was closed based 5% to 15% of pensionable earnings for the Scheme (currently on each individual’s circumstances. These cash supplements £140,000 but reviewed annually). are included in the Single Total Figure of Remuneration Table on page 82. CORPORATE GOVERNANCE Chairman and Non-Executive Director fees The fees of the Chairman and Non-Executive Directors were reviewed during the year.

2016 2015 Change Group Non-Executive Chairman £300,000 £300,000 0% Basic fee for Non-Executive Director £60,000 £60,000 0% Supplementary fees for: 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%

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 FINANCIAL STATEMENTS of these commitments. SHAREHOLDER INFORMATION

Jardine Lloyd Thompson Group plc Annual Report 2016 87 CORPORATE GOVERNANCE

SUPPORTING DISCLOSURES AND ADDITIONAL Performance graph and table CONTEXT The chart shows the TSR of JLT in the eight year period to 31 December 2016 against the TSR of the FTSE 100, 250 Percentage change in remuneration of Group Chief and All Share Indices. TSR refers to share price growth and Executive assumes dividends are reinvested over the relevant period. The The table below compares the percentage change in the salary, Committee believes the FTSE 100, 250 and All Share Indices benefits and annual bonus of the Group Chief Executive and are the most appropriate indices against which the TSR of JLT the average percentage change in salary, benefits and annual should be measured, as there is no directly comparable quoted bonus of all JLT UK employees paid in respect of the year peer group for the Company in the UK. ended 31 December 2016. Total shareholder return from 2008 to 2016 Group Chief Executive All JLT UK employees Salary 1% 3% 250 Jardine Lloyd Thompson Group Benefits 20% 8% FTSE 250 index FTSE 100 index Annual Bonus 81% 25% 200 SE All Share Index

150

100

0 Data taken at December 31st -50 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 2010 2011 2012 2013 2014 2015 2016 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Single Total Figure of Remuneration 2,836 3,728 3,831 3,821 3,969 3,322 2,896 2,506 Bonus (% of Maximum) 75% 75% 73% 75% 75% 69% 41% 74% LTIP vesting (% of Maximum) 100% 100% 100% 100% 100% 72% 62% 21%

Relative importance of spend on pay Dilution The chart below shows total employee remuneration and The Company continues to operate its share schemes in line distributions to shareholders, in respect of the years ending with the Investment Association guidelines on dilution. 31 December 2015 and 2016 (and the difference between The Company follows a conservative approach to hedging for the two). share awards made under LTIP, DBSP and other share-based

2016 2015 Change (%) schemes, whereby shares to satisfy such awards are normally Total employee remuneration £794.4m £727.3m 9% purchased in the market and held in an employee trust. Distributions to shareholders £70.5m £67.2m 5% The Company seeks to be fully hedged as far as possible Total employee remuneration represents amounts included in against awards made. At 31 December 2016 the total awards note 6 to the accounts in respect of wages, social security, outstanding in respect of the LTIP, DBSP and other share-based pension and incentive costs for all Group employees. schemes totalled 9,913,527 shares representing 4.5% of the Company’s issued share capital. This comprised 0.31% in Distributions to shareholders include the total dividend in respect of awards which were fully vested and 4.19% in respect respect of each financial year (see note 10 to the accounts). of awards which have not yet vested. 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

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:

Date of Expiry date of current service Notice Period by the Notice Period by OVERVIEW Appointment agreement or letter of appointment Individual 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 Mark Drummond Brady 1 April 2005 N/A 12 months 12 months Non-Executive Directors Richard Harvey 17 December 2009 16 December 2018 Lord Sassoon 30 April 2013 30 April 2019 Bruce Carnegie-Brown 1 May 2016 30 April 2019 STRATEGIC REPORT 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

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. CORPORATE GOVERNANCE The Remuneration Committee Chairman is available to answer questions from shareholders regarding remuneration at the AGM.

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 Votes Against Total votes cast Votes withheld Resolutions No. of shares % No. of shares % Annual remuneration for year ending 31 December 174,865,580 93.91 11,348,970 6.09 186,214,550 1,785,397 2015 FINANCIAL STATEMENTS Votes For include votes registered as “Discretion”.

THE COMMITTEE The Committee comprises the six Non-Executive Directors. The Chairman, Group Chief Executive, Group Chief Financial Committee Membership & Attendance Director and Group HR Director may attend the committee The table below shows the Committee members during the by invitation, except when their own remuneration is being year and their attendance: discussed. No Director is involved in determining his or her own remuneration. None of the Committee members has any Eligible to attend Attended personal financial interest except as shareholders.

Bruce Carnegie- SHAREHOLDER INFORMATION 3 3/3 Brown (Chairman) The Group Company Secretary acts as Secretary to the Richard Harvey 6 6/6 Committee. Annette Court 6 6/6 Lord Leach 3 3/3 Lord Sassoon 6 6/6 Nicholas Walsh 6 6/6 Jonathan Dawson1 5 5/6 Adam Keswick 2 2/2

1Jonathan Dawson was not able to attend the meeting on 11 February 2016 due to travel commitments.

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THE ROLE OF THE COMMITTEE Effectiveness Review During the year the Committee carried out an evaluation of its The principal purpose of the Committee is to determine the effectiveness. Questionnaires were submitted to all members Company’s policy on the remuneration of the Chairman, of the Committee and the results of the evaluation were shared Executive Directors and other members of the Group Executive with the Committee and discussed. The results of the evaluation Committee, as well as to approve specific remuneration were generally very positive, suggesting that the Committee packages for each of them. The full terms of reference of the functions well and covers the right ground, with open channels Committee are available on the Group’s website, jlt.com of communication. The Committee is regarded as well-chaired Key Responsibilities and the quality of debate is good. Papers are of a high quality. Some opportunities were identified to focus more on ongoing The Committee’s key responsibilities are: professional development. • to determine and agree with the Board the framework and Committee Advisers policy for the remuneration of the Group Chief Executive, Chairman, the Executive Directors and other members of The Remuneration Committee advisers are appointed by the the Group Executive Committee (GEC); Committee and their roles are kept under review.

• in determining such policy, to take into account information During the year Deloitte LLP have been retained by the about remuneration in other relevant companies and trends Committee in their capacity as Remuneration Committee in remuneration across the Group; advisers. Deloitte LLP were originally appointed in 2011 • to approve the design of, and determine targets and vesting following a selection process undertaken by the Committee. schedules for, any annual bonus plans for the Executive Deloitte LLP is a member of the Remuneration Consultants Directors and other members of the GEC; Group and as such voluntarily operates under the Code of • to review the design of all share incentive plans for approval Conduct in relation to executive remuneration consulting in by the Board and (where applicable) shareholders. To the UK. The Committee is comfortable that the Deloitte LLP determine whether awards will be made and, if so, the engagement partner and team that provide remuneration overall amount of such awards and the performance targets advice to the Committee do not have connections with Jardine to be used; Lloyd Thompson Group plc that may impair their objectivity and independence. The fees charged by Deloitte LLP for the • within the terms of the agreed Policy, to determine the total provision of independent advice to the Committee during 2016 individual remuneration package of each Executive Director were £70,300. Deloitte LLP also provide services to the Group and other members of the GEC and the terms of any in respect of corporate tax advice, internal audit assistance, compensation payable for loss of office or employment; regulatory reporting and Company share schemes. • 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

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:

19 Jan 11 Feb 26 Feb 19 July 6 Oct 28 Nov OVERVIEW 2016 2016 2016 2016 2016 2016 Discussion of the DRR • Strategy and Approval of the DRR • policy Consideration of remuneration strategy and approach • • • Consideration/approval of the Remuneration Policy • Annual Salary Review of salaries for Executive Directors and GEC • Review of executives’ personal objectives • • • Review of executive performance • • Annual Bonus Determination of bonus outcomes • Setting of measures and targets • STRATEGIC REPORT Determination of vesting levels • • • • LTIP Setting of measures and targets • • • • • Senior management reward arrangements • • • • • Committee Effectiveness • Other Approval of Chairman’s fees • Other issues as required • • •

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 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 At least half the Board, excluding 2016, James Twining stepped down from the Board. the Chairman, should comprise B.1.2 non-executive directors The Company became compliant with the Code on 1 May 2016, when Bruce Carnegie-Brown was determined by the Board to be appointed as an Independent Non-Executive Director. independent. 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.

The Chairman or an Independent Between 1 January 2016 and 12 June 2016 Lord Leach of Fairford (a Non-Independent Non- B.2.1 Non-Executive Director should Executive Director) chaired this Committee. The Company become compliant with the Code on 12 chair the nomination committee. 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 • We believe our Board functions very well at its current of Lord Leach's role on 12 June 2016 and the appointment of size and that the Board has an appropriate combination Adam Keswick on 1 September 2016, JLT has appointed two of Independent and Non-Independent Non-Executive representatives from Jardine Matheson to the Board. Jardine Directors, in-line with the Code’s principle that no individual Matheson currently has a 40.16% interest in the Company. or small group of individuals should be able to dominate the As a result, the Jardine Matheson-appointed Directors are Board’s decision-making. considered to be Non-Independent Non-Executive Directors. • There are at least three Independent Non-Executive The relationship with Jardine Matheson is maintained on an Directors on each Board Committee and all the Committees arm’s-length basis as detailed on page 60 and in note 32 on have a majority of independent directors. page 162. • The business and profits of JLT have grown significantly The Jardine Matheson-appointed directors, Lord Sassoon and in recent years and we believe the overall contribution of Adam Keswick, will be standing for re-election and election Jardine Matheson and its nominated Directors has been respectively, at the Company’s AGM. In addition to their Board material to this. roles, the Jardine Matheson-appointed Directors hold Committee • Jardine Matheson has clearly demonstrated that it is a memberships. Lord Sassoon is a member of the Audit & Risk, committed, long-term shareholder. We believe that its Nominations and Remuneration Committees and Adam Keswick interests are fundamentally aligned to the interests of all is a member of the Nominations and Remuneration Committees. other shareholders. In the Board’s experience, over many As a consequence of the above, JLT has, for a number of years, conflicts of interest between Jardine Matheson and years, not been in full compliance with Code provision B.1.2. the other shareholders of JLT rarely occur, but, if they do (for Nonetheless, JLT has always sought to satisfy shareholders example where Jardine Matheson has sought to increase with an appropriate explanation of any areas where it does its shareholding in JLT) the Jardine Matheson-appointed not comply with the Code and to provide a full explanation Directors absent themselves from any relevant discussion. for retaining two Jardine Matheson directors on the Board. • We believe that the continuing support of Jardine Matheson The Board strongly believes that the continuation of these has been, and will continue to be, of great importance to arrangements is in the best interests of the Company’s the success of JLT, especially in Asia, a key growth market shareholders for the following reasons: for the Company, where Jardine Matheson’s reputation and connections are of great value to us.

92 Jardine Lloyd Thompson Group plc Annual Report 2016

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 OVERVIEW 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

A1 The role of the Board B1 The composition of the Board

The Board is responsible for setting the Company’s strategy The Nominations Committee annually reviews the balance STRATEGIC REPORT and monitoring the performance of the Company as a whole. and experience of the Board. The Nominations Committee Details of matters discussed by the Board are set out on has also considered the issue of director independence and page 59. knowledge and confirmed that the Directors have the right level of experience to promote the long-term performance of the A2 Division of Responsibilities Company. Details of the Directors’ experience are shown in the The roles of the Chairman and Group Chief Executive are chart on page 60. distinctly separate and are clearly defined. The Chairman, Geoffrey Howe, is responsible for the leadership and B2 Appointments to the Board governance of the Board, ensuring its effectiveness, setting The process for the appointment of new Directors to the Board agendas, ensuring that the Directors receive accurate, timely is led by the Nominations Committee. Further details of the CORPORATE GOVERNANCE and clear information and that there is effective communication appointments made during the year and succession planning with shareholders. He facilitates the effective contribution to activities can be found in the Nominations Committee’s report the Board of the Non-Executive Directors in particular ensuring on pages 71 to 72. constructive relationships between the Executive and Non- Executive Directors. B3 Commitment Non-Executive Directors are advised on appointment of the time The Group Chief Executive, Dominic Burke, is responsible commitment expected of them, and this is reviewed regularly. for the day-to-day operation of the business in line with the External appointments which might impact on existing time strategy and commercial objectives agreed by the Board. commitments must be agreed with the Chairman. He is also responsible for promoting and conducting the affairs

of the Company with the highest standards of ethics, integrity B4 Development FINANCIAL STATEMENTS and corporate governance. All new Directors are invited to take part in a comprehensive induction programme. Details of the programme undertaken A3 Non-Executive Directors by Bruce Carnegie-Brown and Adam Keswick, who were both The Non-Executive Directors provide strong and robust appointed during the year, are set out on page 61. independent oversight to the proceedings of the Board. In addition, they bring external experience from other financial B5 Information and Support services companies and international businesses. The letters The Chairman and Group Company Secretary work together to of appointment for the Non-Executive Directors are available ensure that all Directors receive full and accurate information in for inspection at the AGM of the Company. All Non-Executive a timely manner.

Directors confirm on appointment they have sufficient time to SHAREHOLDER INFORMATION fulfil their commitments. 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 CORPORATE GOVERNANCE

C ACCOUNTABILITY PRINCIPAL ACTIVITIES AND STRATEGIC REPORT Jardine Lloyd Thompson Group plc is a holding company, C1 Financial and Business Reporting domiciled and incorporated in the UK with Registered Number The Strategic Report, which can be found on pages 12 to 53, 01679424, for an international group of insurance brokers, risk sets out details of the Company’s performance, business model specialists and employee benefits consultants. and strategy, and the risks and uncertainties relating to the The Strategic Report on pages 12 to 53 covers the activities of Company’s future prospects. the Group, its performance during the year and likely C2 Risk Management and Internal Control future developments. The Board is responsible for the Group’s risk management and internal control systems, and for regularly reviewing their RESULTS AND DIVIDENDS effectiveness. The activities of the Audit & Risk Committee, which supports the Board in this area, are described on pages The financial statements for the Company for the year to 31 63 to 70 and the Risk Management Report is included on December 2016 are detailed on pages 173 to 179. These pages 42 to 45. are prepared in accordance with the Generally Accepted Accounting Practice in the UK, also known as UK GAAP. C3 Audit & Risk Committee and auditors The Directors recommend that a final dividend of 20.6 pence The Board has delegated a number of responsibilities to the per share be paid on 4 May 2017 to shareholders on the Audit & Risk Committee, which is responsible for overseeing the register on 31 March 2017. This brings the total dividend for the Company’s financial reporting processes, internal controls and year to 32.2 pence per share, 5.2% higher than 2016. risk management framework, and the work undertaken by the external auditors. SUBSIDIARIES AND ASSOCIATED COMPANIES

D REMUNERATION 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. D1 The level and components of remuneration The Remuneration Committee is responsible for setting the Company’s remuneration policy. The key principles and IMPORTANT EVENTS framework adopted by the Committee are set out in the The Board decided during 2016 to sell the major part of the Committee’s report on pages 73 to 91. Group's Thistle business and an agreement for its disposal was D2 Procedure signed on 30 December 2016. The remaining elements of the The Remuneration Committee is responsible for setting business were incorporated into the JLT Specialty division. the remuneration of all Executive Directors. Details of the On 27 January 2017 an agreement was signed for the composition and the activities of the Committee are set out in acquisition by JLT of a 50.1% stake in Construction Risk the Committee’s Report on pages 73 to 91. 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 E RELATIONSHIPS WITH SHAREHOLDERS 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. EMPLOYMENT POLICIES Details of activity undertaken in this area can be found on page 62. The Group aims to provide an environment where individuals can excel. Wide share ownership, share option schemes and E2 Constructive use of the AGM the Share Incentive Plan encourage employee engagement. The AGM provides the Board with an important opportunity Regular briefings and consultation, using the JLT intranet where to meet with shareholders. All of the Directors (including the possible, keep the employees informed about the Group’s Chairmen of the Board Committees) are expected to attend performance and matters that affect them as employees. and will be available to answer questions from shareholders attending the meeting.

94 Jardine Lloyd Thompson Group plc Annual Report 2016

Additionally we offer a wide range of benefits for employees STATEMENT OF DIRECTORS’ RESPONSIBILITIES including health and lifestyle benefits. The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial OVERVIEW DIVERSITY statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial The Group is an equal opportunities employer and encourages statements for each financial year. Under that law, the Directors diversity. We are fully committed to ensuring that disabled have prepared the Group financial statements in accordance people are afforded equality of opportunity in respect of entering with International Financial Reporting Standards (IFRSs), as and continuing employment with us. If existing employees adopted by the European Union, and the parent Company become disabled, every effort is made to make sure their financial statements in accordance with United Kingdom employment with the Group continues. If such employees are Generally Accepted Accounting Practice (United Kingdom unable to continue to work, every effort is made to safeguard Accounting Standards and applicable law).

their financial interests. The Group aims to provide training, STRATEGIC REPORT development and promotion opportunities that are identical, as Under company law, the Directors must not approve the far as possible, for disabled and non-disabled employees. financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and The information about the Group’s employees, employment of the Company, and of the profit or loss of the Group and the disabled people and employment practices is in the Group’s Company for that period. Corporate Responsibility statement set out on pages 46 to 53. In preparing these financial statements, the Directors are required to: POLITICAL DONATIONS • select suitable accounting policies and then apply them It is JLT Group policy not to make donations to any EU or non- consistently; CORPORATE GOVERNANCE EU political party. • make judgements and accounting estimates that are reasonable and prudent; ENVIRONMENTAL REPORTING • state whether IFRSs as adopted by the European Union and IFRS issued by the IASB and applicable UK Accounting The Group’s Corporate Responsibility statement is set out Standards have been followed, subject to any material on pages 46 to 53. This includes the Group’s position on the departures disclosed and explained in the Group and parent environment as well as the Group’s Greenhouse Gas Emissions company financial statements respectively; and Report for the year ended 31 December 2016. • prepare the financial statements on a going concern basis, unless it is inappropriate to presume that the Company will

SUBSTANTIAL SHAREHOLDINGS continue in business. FINANCIAL STATEMENTS

At 31 December 2016 and 10 February 2017 (the latest The Directors are responsible for keeping adequate accounting practicable date prior to the date of this report), the Company records that are sufficient to show and explain the Company’s had been notified of the following significant holdings of voting transactions and disclose, with reasonable accuracy at any rights in its shares: time, the financial position of the Company and the Group, and enable them to ensure that the financial statements and the 31 December 10 February Directors’ Remuneration Report comply with the Companies 2016 2017 Act 2006 and, as regards the Group financial statements, % of voting % of voting Article 4 of the IAS Regulation. They are also responsible for Shareholder rights rights safeguarding the assets of the Company and the Group and, SHAREHOLDER INFORMATION JMH Investments Limited 40.16 40.16 hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities. MFS Investment Management 8.85 8.76 Royal Bank of Canada The Directors are responsible for the maintenance and 4.16 3.98 (EBT Trustee) 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 CORPORATE GOVERNANCE

the information necessary for shareholders to assess the 4. Principal Risks & Environmental Factors – Reviewing the Company’s position, performance, business model and company’s Principal Risks in the context of the key environment strategy. Each of the Directors whose names and functions are factors/considerations over the next three years. These included listed on pages 56 and 57 confirms that, to the best of their key trends, issues, uncertainties (eg regulatory environment), knowledge: known potentially impactful events (eg UK EU Referendum) and emerging risks (eg geo-political risk). • the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true As a result of this assessment, the Directors can confirm it is and fair view of the assets, liabilities, financial position and their reasonable expectation that, over the next three years, profit of the Group; and JLT will continue to operate and meet its on-going liabilities • the Strategic Report, contained in pages 12 to 53 of the as they fall due. This statement is underpinned by various Annual Report, includes a fair review of the development mitigating factors including the Group’s control environment, and performance of the business and the position of the capital requirements and resources and the quality and Group, together with a description of the principal risks and accessibility of facilities. uncertainties that it faces. 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 The Strategic Report on pages 12 to 53 includes information audit information of which the Company’s auditors are on the Group structure, the performance of our businesses, unaware; and the markets in which we operate and the principal risks and (b) the Director has taken all the steps that he ought to have uncertainties faced by the business. The Financial Statements taken as a Director in order to make himself aware of on pages 101 to 171 include information on our Group financial any relevant audit information and to establish that the results, cash flow and balance sheet position. Company’s auditors are aware of that information. The Directors have also considered the Group's cash flow This confirmation is given and should be interpreted in projections presented in the review of the budget for the full accordance with the provisions of Section 418 of the year to 31 December 2017 as well as work undertaken for the Companies Act 2006. 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 JLT VIABILITY STATEMENT current funding and facilities, alongside the Group's funding strategy, show that the Group will continue to operate for the As prescribed by provision C.2.2 of the UK Corporate foreseeable future. Governance Code, the Board of Directors have conducted a detailed assessment of those risk events that could threaten The Directors therefore continue to have a reasonable JLT Group’s ability to continue to operate and meet its liabilities expectation that the Group has adequate resources to continue as they fall due. For this assessment Directors have selected a in operational existence for the foreseeable future and continue period of three years over which the Viability Statement would to adopt a going concern basis (in accordance with the be considered. This timescale is believed to be appropriate guidance "Going Concern and Liquidity Risk: Guidance for given its alignment with the Group’s business and strategic the Directors of UK Companies 2009" issued by the FRC) in planning process. JLT has undertaken a rigorous assessment, preparing the financial statements. which included the following core components: There has been no significant change in the financial or trading 1. Financial Sensitivity Testing – For example; levels of planned position of the Group since 31 December 2016. revenue, the development of key strategic operations, changes in foreign exchange and interest rates, and cash consumption. OTHER STATUTORY INFORMATION 2. Risk Scenario Testing – Assessing the impact of a combination of principal risks crystallising during the Directors’ Indemnity and Insurance viability period. The Company provides the appropriate level of Directors' 3. Reverse Stress Testing – Estimating the quantum of a loss, and Officers' Liability Insurance in respect of any legal actions which may ultimately threaten the company’s viability, if not brought against its Directors, in addition to the indemnity effectively managed, then reviewing this in the context of one of included in the Company's Articles of Association. Neither the the key risks facing an insurance intermediary (eg E&O risk). insurance nor the indemnity provides cover where the relevant Director or Officer acted fraudulently or dishonestly.

96 Jardine Lloyd Thompson Group plc Annual Report 2016

LISTING RULE COMPLIANCE

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 OVERVIEW developments in the Group and the Company.

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).

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:

Section Subject Location 1 Interest capitalised Not applicable

2 Publication of unaudited financial information Not applicable STRATEGIC REPORT 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 CORPORATE GOVERNANCE 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 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, SHARE CAPITAL AND SHAREHOLDER RIGHTS subject to the satisfaction of any performance conditions as may be appropriate at that time. Movements in the share capital of the Company during the FINANCIAL STATEMENTS year ended 31 December 2016 are set out in note 24 on page At 31 December 2016, the Jardine Lloyd Thompson Employee 147. At 31 December 2016, the issued share capital consisted Benefit Trust (the Trust) held 8,715,895 shares in the Company of 220,181,007 ordinary shares of 5 pence each, of which representing 3.98% of the issued capital (excluding treasury 1,143,131 shares were held as treasury shares for which voting shares). At 10 February 2017 (being the latest practicable date rights would not be exercised. prior to the posting of this report), the Trust held 8,667,083 shares representing 3.96% of the issued capital (excluding The Company has one class of share capital, being ordinary treasury shares). 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 DIVIDENDS AND DISTRIBUTIONS shares during the year. SHAREHOLDER INFORMATION Shareholders can declare final dividends by passing an ordinary The Board has the power to implement the purchase by the resolution, but the amount of the dividend cannot exceed the Company of its own shares in accordance with the power amount recommended by the Board. 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 Board can pay interim dividends whenever the financial the notice of that meeting. 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 CORPORATE GOVERNANCE

a notice after failure to provide the Company with information VARIATION OF RIGHTS concerning interests in those shares required to be provided under the Companies Act. The Directors may also retain any If, at any time, the capital of the Company is divided into dividends payable on shares on which the Company has a lien, different classes of shares then, subject to statute, the Articles and may apply the same in or towards satisfaction of the debts, specify that rights attached to any class of shares may be liabilities or engagements in respect of which the lien exists. 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 VOTING RIGHTS meeting of the holders of those shares. At every such separate general meeting, the quorum is two persons holding or On a show of hands at a general meeting, every member representing by proxy at least one third in nominal value of the present in person has one vote and on a poll, every member issued shares of the class (calculated excluding any shares held who is present in person or by proxy has one vote for each as treasury shares). 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 PURCHASE OF OWN SHARES joint holders and, for this purpose, seniority will be determined by the order in which the names stand in the Register of We will, as in previous years, be seeking renewal of our Members in respect of the share. Voting rights in relation to standing share buy-back authority at the forthcoming Annual treasury shares are suspended and the voting rights are not General Meeting of up to a maximum of 10% of the Company’s normally exercised in respect of the shares held in the Trust. issued capital.

The Trust holds shares which are used to satisfy awards made As was the case last year, we will not be seeking shareholder under the Company’s share plans. 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 RESTRICTIONS ON VOTING triggering a mandatory offer obligation upon Jardine Matheson Holdings Limited (JMH) under Rule 37 of the Takeover Code, No member, unless the Directors otherwise determine, is JMH would need to participate in any such buy-back so that entitled to vote either in person or by proxy at any general its overall percentage holding (which at 10 February 2017 was meeting in respect of any shares held by the member if any call 40.16%) did not increase following the buy-back. or other sum then payable by the member in respect of that share remains unpaid. In addition, no member is entitled to Although the Company has not utilised the authority to buy vote if the member has been served with a notice after failure to back shares since 2008, the Board believes that it would provide the Company with information concerning interests in be in the interests of all shareholders for the Company to those shares required to be provided under the Companies Act. 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 DEADLINES FOR VOTING shareholders and would result in an improvement in earnings per share. 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 TRANSFER OF SHARES than 48 hours before the time appointed for the holding of the meeting or adjourned meeting, and the notice of AGM will All transfers of shares which are in certificated form may be specify the deadline for exercising voting rights. effected by transfer in writing in any usual or common form, or in any other form acceptable to the Directors. The instrument A member that is a corporation may appoint an individual to of transfer must be signed by or on behalf of the transferor act on its behalf at a general meeting or class meetings as and (except in the case of fully-paid shares) by or on behalf a corporate representative. The person so authorised shall of the transferee. The transferor shall remain the holder of the be entitled to exercise the same powers on behalf of such shares concerned until the name of the transferee is entered in corporation as the corporation could exercise if it were an the Register of Members of the Company. Transfers of shares individual member of the Company. which are in uncertificated form are effected by means of the CREST system.

98 Jardine Lloyd Thompson Group plc Annual Report 2016

The Directors may refuse to register a transfer of certificated • The final dividend proposed by the Board (page 12); shares that are not fully paid provided that partly paid shares • An indication of likely future developments in the business must be transferable free from restrictions and investors must of the Company (pages 12 to 53); and be provided with sufficient information to allow dealing on • Use of financial instruments, information on the Group’s OVERVIEW an open and proper basis. The Directors may also refuse to financial risk management objectives and policies, its register an allotment or transfer of shares (whether fully-paid or exposure to credit risk and foreign currency risk and its use not) in favour of more than four persons jointly. If the Directors of financial instruments (pages 44 to 45). 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 ANNUAL GENERAL MEETING of allotment or transfer was lodged with the Company. The AGM notice is included in the Circular that accompanies The Directors may decline to recognise any instrument of this Annual Report. The meeting will be held at noon transfer unless the instrument of transfer is in respect of only on Thursday 27 April 2017 at the St Botolph Building, STRATEGIC REPORT one class of share and, when submitted for registration, is 138 Houndsditch, London, EC3A 7AW. At that meeting, accompanied by the relevant share certificates and such other shareholders will be asked to vote separately on the Annual evidence as the Directors may reasonably require. Report, and on the Report on Directors’ Remuneration. Separate resolutions will also be proposed on every Subject to statutes and applicable CREST rules, the Directors substantially different issue. A poll will be held on each may determine that any class of shares may be transferred by resolution to ensure that the votes of shareholders unable to means of the CREST system, or that shares of any class should attend the meeting are taken into account, and the results of cease to be so held and transferred. the voting will be placed on our website as soon as possible A shareholder does not need to obtain the approval of the after the meeting. The special business includes the renewal CORPORATE GOVERNANCE Company, or of other shareholders of shares in the Company, (within prescribed limits) of: for a transfer of shares to take place. • The Directors’ authority to allot Company securities within The Directors are not aware of any agreements between The Investment Association guidelines; shareholders that might result in restrictions on the transfer of • The disapplication of statutory pre-emption rights; and shares or on voting rights. • The authority of the Company to purchase its own shares by way of market purchases. ARTICLES OF ASSOCIATION INDEPENDENT AUDITORS The powers of the Directors are determined by UK legislation and the Articles of Association. The Directors are authorised Following review, the Board proposes that to issue and allot shares, and to undertake purchases of PricewaterhouseCoopers LLP are re-appointed as the FINANCIAL STATEMENTS Company shares, subject to shareholder approval at the AGM. Company auditors. A resolution proposing this will be put to Any amendment of the Articles requires shareholder approval in the AGM. 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.

INFORMATION SET OUT IN THE STRATEGIC REPORT 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) Jonathan Lloyd has been included in the Strategic Report: Group Company Secretary 28 February 2017 • Information about our people (page 7); • Information about greenhouse gas emissions (pages 47 to 48);

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 Independent Auditors’ Report 137 Trade and other receivables 108 Consolidated Income Statement 138 Cash and cash equivalents 109 Consolidated Statement of Comprehensive Income 138 Trade and other payables 110 Consolidated Balance Sheet 139 Financial instruments by category 111 Consolidated Statement of Changes in Equity 142 Borrowings 112 Consolidated Statement of Cash Flows 145 Deferred income taxes 113 Significant Accounting Policies 146 Provisions for liabilities and charges 147 Share capital and premium NOTES TO THE FINANCIAL STATEMENTS 147 Non-controlling interests Contains the supporting notes to the financial statements 148 Other reserves which provide further detail and analysis 149 Qualifying Employee Share Ownership Trust 149 Cash generated from operations 119 Alternative income statement 150 Business combinations 120 Segment information 155 Business disposals 123 Operating profit 157 Retirement benefit obligations 124 Investment income 162 Related-party transactions 124 Finance income and costs 163 Commitments 125 Employee information 163 Subsequent events 127 Services provided by the Company’s auditor and its associates 164 Subsidiaries and associated companies 128 Income tax expense 129 Earnings per share COMPANY FINANCIAL STATEMENTS 130 Dividends Includes UK GAAP accounts of the company 130 Goodwill 173 Independent Auditors’ Report 132 Other intangible assets 174 Income Statement 133 Property, plant and equipment 174 Balance Sheet 134 Investments in associates 175 Statement of Changes in Equity 135 Available-for-sale financial assets 176 Significant Accounting Policies 136 Derivative financial instruments 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

Our opinion What we have audited In our opinion, Jardine Lloyd Thompson Group plc’s group The financial statements, included within the Annual Report, financial statements (the “financial statements”): comprise:

• give a true and fair view of the state of the group’s affairs • the Consolidated Balance Sheet as at 31 December 2016; STRATEGIC REPORT as at 31 December 2016 and of its profit and cash flows • the Consolidated Income Statement and the for the year then ended; Consolidated Statement of Comprehensive Income • have been properly prepared in accordance with for the year then ended; International Financial Reporting Standards (“IFRSs”) as adopted by the European Union; and • the Consolidated Statement of Cash Flows for the • have been prepared in accordance with the year then ended; requirements of the Companies Act 2006 and • the Consolidated Statement of Changes in Equity Article 4 of the IAS Regulation. for the year then ended; and CORPORATE GOVERNANCE • the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

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.

OUR AUDIT APPROACH FINANCIAL STATEMENTS Overview • Overall group materiality: £8.6m which represents 5% of underlying profit before tax, which comprises profit before tax adjusted for non-recurring exceptional items.

• 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

Materiality of the group. • We conducted full scope audits of the financial information of 17 reporting entities, across 7 countries. • Certain group functions and entities, including those covering treasury, taxation Audit scope and pensions were also subject to full scope audits. SHAREHOLDER INFORMATION • Taken together, these territories and functions where we performed our audit work X accounted for 75% of group revenues and 96% of underlying profit before tax.

We focused our work on: Area of focus • 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.

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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 How our audit addressed the area of focus Complex and judgemental areas of revenue recognition • We have performed walkthroughs of key controls relevant to material The significant accounting policies section of the financial statements revenue streams and performed testing over these controls in order discloses JLT’s revenue accounting policy (refer to page 116). 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 • We updated our understanding of management’s process to identify As at 31 December 2016, the Group had a litigation provision of £7.4m and evaluate provisions for potential and outstanding litigation for (2015: £18.2m). the group. • We met with management to discuss new significant legal provisions The significant accounting policies section of the financial statements as well as changes to significant existing potential and actual discloses JLT’s accounting policy in relation to litigation provisions (refer legal provisions. to page 116) and Note 23 outlines the detailed provision disclosures. • We reviewed the E&O register maintained by the Group Legal department as well as minutes of committee meetings. There is an inherent level of uncertainty that surrounds litigation provisions in relation to potential and actual claims where clients or • In instances where external legal counsel was engaged, we obtained third parties believe there has been fault in the services provided. external confirmations. Consequently a high degree of management judgement is involved • We substantively tested legal expenses across the Group to identify in determining the level of provision required. 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.

102 Jardine Lloyd Thompson Group plc Annual Report 2016

Area of focus How our audit addressed the area of focus Valuation and impairment of intangible assets • We evaluated the results of management’s impairment assessment, As at 31 December 2016, the group had goodwill of £543.0m including an assessment of the appropriateness of the methodology (2015: £496.2m) and intangible assets of £102.0m (2015: £104.3m) used to perform this and performed substantive testing of all inputs into OVERVIEW (comprised of computer software and capitalised employment their valuation such as agreeing to the approved budgets and checking contracts). historical performance against the budget. The significant accounting policies section of the financial statements • We considered the appropriateness of the following key assumptions discloses JLT’s accounting policy in relation to goodwill and intangibles within management’s valuation: (refer to page 114), and Notes 11 and 12 outline the detailed goodwill -- Terminal growth rates in the forecasts by comparing them to and intangible disclosures. economic and industry forecasts; and Based on the results of their impairment analysis, management -- WACC by assessing the cost of capital for the company and determined there was considerable headroom of the recoverable comparable organisations. amount above the net asset value in each of the group’s Cash • We performed sensitivity analysis around the key assumptions above Generating Units (‘CGUs’), and therefore there was no impairment. to ascertain the extent of change in those assumptions that either STRATEGIC REPORT We focused on this area because the determination of whether or individually or collectively would be required for goodwill to be impaired. not certain elements of goodwill and intangible assets were impaired • For computer software intangibles we performed substantive testing involves complex and subjective judgements by the Directors about to check the amount that has been capitalised is directly associated the future results of the relevant parts of the business. Management with the production of identifiable and unique software products that calculates the recoverable amount by using a value in use (‘VIU’) will generate economic benefits exceeding costs beyond one year. discounted cash flow model underpinned by key assumptions which Specifically for the Employee Benefits bespoke system, we obtained are the terminal growth rates and weighted average cost of capital the model and assessed the assumptions to identify if these were (‘WACC’) by CGU. realistic based on the business plan and through a scenario based sensitivity analysis. • For capitalised employment contracts we performed substantive testing over a sample of contracts to ensure there were relevant performance CORPORATE GOVERNANCE conditions to allow the capitalisation of the contracts. 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 • Discount rate: We considered the appropriateness of the 2.80% As at 31 December 2016, the net pension liability is £198.4m discount rate assumption used by reference to the iBoxx AA 15+ (2014: £130.4m). corporate bond index. We reviewed the adjustment made by The significant accounting policies section of the financial statements management to match the duration of the liabilities and compared discloses JLT’s accounting policy in relation to the various pension this to assumptions adopted by other schemes with a similar duration. arrangements (refer to page 116), and Note 31 outlines the detailed • Inflation rate: We agreed the rates used by management for each pension disclosures. of these elements to the Bank of England inflation curve.

We focus on this area as the pension scheme obligation is highly • Mortality: We considered the appropriateness of the base tables FINANCIAL STATEMENTS sensitive to changes in the assumptions used within the model selected for use by management by reference to the mortality to calculate the valuation and subsequent charge or credit to the experience analysis completed by the UK Pension Scheme Trustees Statement of Other Comprehensive Income (‘OCI’).Those assumptions as part of the 2014 funding valuation. to which the liability is most sensitive are as follows: No material exceptions were identified as part of our testing of the • Discount rate: Under IAS 19, the discount rate should be set with assumptions outlined above and we consider the assumptions used reference to the yield on high quality corporate bonds of term to be in line with recognised market practices. We are satisfied that appropriate to the duration of the liabilities. 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.

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INDEPENDENT AUDITORS’ REPORT CONTINUED

Area of focus How our audit addressed the area of focus Accounting for long term incentive plans and the • We obtained the various share schemes that were in issue from 2014 Employee Share Trust (‘EST’) to 2016 and read the key features of these schemes paying particular During the year management identified a change to the employee attention to the dividend rights attaching under the schemes. share plans which changed the dividend rights attaching during the • We assessed the ownership, funding and control arrangements vesting period. Following their analysis management considered that relating to the Employee Share Trust and the transaction flows both the treatment of the share plans in the calculation of basic earnings between Jardine Lloyd Thompson Group plc, JIB Group Limited per share (‘EPS’) and diluted EPS was incorrect and that the Employee and the trading entities. Share Trust should be accounted for in the company balance sheet of • We assessed management’s accounting paper and the proposed Jardine Lloyd Thompson Group plc. 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 of the options in the calculation of basic and diluted EPS. • We assessed the accounting entries to correctly present the Employee 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 In establishing the overall approach to the group audit we We tailored the scope of our audit to ensure that we performed determined the type of work that needed to be performed enough work to be able to give an opinion on the financial at the reporting units by us, as the group engagement team, statements as a whole, taking into account the geographic or component auditors from other PwC network firms operating structure of the group, the accounting processes and controls, under our instruction. Where the work was performed by and the industry in which the group operates. component auditors, we determined the level of involvement we needed to have in the audit work at those reporting units The group is organised on a worldwide basis into three main to be able to conclude whether sufficient appropriate audit segments, based on the services and products offered: ‘Risk evidence had been obtained as a basis for our opinion on & Insurance’, ‘Employee Benefits’ and ‘Head Office & Other the group financial statements as a whole. operations’. The Risk & Insurance business comprises JLT’s global specialist, wholesale, reinsurance broking, personal lines We issued instructions to each component engagement team. and SME activities. The Employee Benefits business consists As part of the supervision process the group engagement team of pension administration, outsourcing and employee benefits based in the UK visited the US and Canada. We have held consultancy, healthcare and wealth management activities. regular planning and coordination calls with our component Head Office & Other operations consists of holding companies, audit teams. During our half year review and year-end audit central administration functions and investments in associates. we held weekly calls with each component audit team to ensure There are several shared service centres around the world significant audit and accounting issues are discussed and particularly in India. Although these business segments are insights are shared in a timely manner. We rotate our remote managed on a worldwide basis, they operate in five principal review of significant component work papers, this year focusing geographical areas of the world. on Australia, Brazil, Colombia and the US.

There were four financially significant components made Materiality up of JLT Specialty (Risk & Insurance), JLT UK Employee The scope of our audit was influenced by our application of Benefits (Employee Benefits), JLT Re (Risk & Insurance), materiality. We set certain quantitative thresholds for materiality. and JLT Australia (Risk & Insurance). In addition we selected These, together with qualitative considerations, helped us thirteen further reporting entities based on their size and risk to determine the scope of our audit and the nature, timing characteristics for full scope audits of their financial information, and extent of our audit procedures on the individual financial and one further reporting entity based on its size and risk statement line items and disclosures and in evaluating the characteristic for specified procedures. Taken together, the effect of misstatements, both individually and on the financial territories and functions where we performed our audit work statements as a whole. accounted for 75% of group revenues and 96% of underlying profit before tax.

104 Jardine Lloyd Thompson Group plc Annual Report 2016

Based on our professional judgement, we determined OTHER REQUIRED REPORTING materiality for the financial statements as a whole as follows:

Overall Group £8.6m (2015: £8.5m).

materiality CONSISTENCY OF OTHER INFORMATION AND OVERVIEW How we 5% of underlying profit before tax, which comprises COMPLIANCE WITH APPLICABLE REQUIREMENTS determined it profit before tax adjusted for non-recurring exceptional items. Companies Act 2006 reporting Rationale for When reviewing financial performance management In our opinion, based on the work undertaken in the benchmark focus on underlying profit (that is, profit before applied tax excluding non-recurring exceptional items). course of the audit: It is this measure that is used both to discuss performance of the group with investors and in • the information given in the Strategic Report and the calculating employee bonuses and therefore we Directors’ Report for the financial year for which the have concluded it is the most appropriate measure financial statements are prepared is consistent with the of performance against which to set our materiality financial statements; and STRATEGIC REPORT benchmark. • the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.4m In addition, in light of the knowledge and understanding of the (2015: £0.4m) as well as misstatements below that amount group and its environment obtained in the course of the audit, that, in our view, warranted reporting for qualitative reasons. we are required to report if we have identified any material misstatements in the Strategic Report and the Directors’ Going concern Report. We have nothing to report in this respect. Under the Listing Rules we are required to review the directors’ statement, set out on page 96, in relation to going concern. ISAs (UK & Ireland) reporting CORPORATE GOVERNANCE We have nothing to report having performed our review. Under ISAs (UK & Ireland) we are required to report to you if, in our opinion: Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to • information in the Annual Report is: We have no in relation to the directors’ statement about whether they -- materially inconsistent with the information exceptions considered it appropriate to adopt the going concern basis in in the audited financial statements; or to report. preparing the financial statements. We have nothing material -- apparently materially incorrect based on, to add or to draw attention to. or materially inconsistent with, our knowledge of the group acquired in the course of As noted in the directors’ statement, the directors have performing our audit; or concluded that it is appropriate to adopt the going concern -- otherwise misleading. basis in preparing the financial statements. The going concern • the statement given by the directors on page We have no FINANCIAL STATEMENTS basis presumes that the group has adequate resources to 95, in accordance with provision C.1.1 of the UK exceptions remain in operation, and that the directors intend it to do so, Corporate Governance Code (the “Code”), that to report. they consider the Annual Report taken as a whole for at least one year from the date the financial statements to be fair, balanced and understandable and were signed. As part of our audit we have concluded that provides the information necessary for members the directors’ use of the going concern basis is appropriate. to assess the group’s position and performance, However, because not all future events or conditions can business model and strategy is materially be predicted, these statements are not a guarantee as to inconsistent with our knowledge of the group acquired in the course of performing our audit. the group’s ability to continue as a going concern. • the section of the Annual Report on pages 63 to We have no 70, as required by provision C.3.8 of the Code, exceptions SHAREHOLDER INFORMATION describing the work of the Audit Committee does to report. not appropriately address matters communicated by us to the Audit Committee.

Jardine Lloyd Thompson Group plc Annual Report 2016 105 FINANCIAL STATEMENTS

INDEPENDENT AUDITORS’ REPORT CONTINUED

The directors’ assessment of the prospects of the Corporate governance statement group and of the principal risks that would threaten Under the Listing Rules we are required to review the part the solvency or liquidity of the group of the Corporate Governance Statement relating to ten further Under ISAs (UK & Ireland) we are required to report to you provisions of the Code. We have nothing to report having if we have anything material to add or to draw attention to performed our review. in relation to:

• the directors’ confirmation on page 62 of the We have RESPONSIBILITIES FOR THE FINANCIAL Annual Report, in accordance with provision C.2.1 nothing of the Code, that they have carried out a robust material to STATEMENTS AND THE AUDIT assessment of the principal risks facing the group, add or to draw including those that would threaten its business attention to. Our responsibilities and those of the directors model, future performance, solvency or liquidity. As explained more fully in the of Directors’ Responsibilities Statement set out on page 95, the directors are responsible • the disclosures in the Annual Report that describe We have for the preparation of the financial statements and for being those risks and explain how they are being nothing managed or mitigated. material to satisfied that they give a true and fair view. add or to draw attention to. Our responsibility is to audit and express an opinion on the • the directors’ explanation on page 96 of the We have financial statements in accordance with applicable law and ISAs Annual Report, in accordance with provision C.2.2 nothing (UK & Ireland). Those standards require us to comply with the of the Code, as to how they have assessed the material to Auditing Practices Board’s Ethical Standards for Auditors. prospects of the group, over what period they have add or to draw done so and why they consider that period to be attention to. This report, including the opinions, has been prepared for appropriate, and their statement as to whether and only for the parent company’s members as a body in they have a reasonable expectation that the group accordance with Chapter 3 of Part 16 of the Companies Act will be able to continue in operation and meet its liabilities as they fall due over the period of their 2006 and for no other purpose. We do not, in giving these assessment, including any related disclosures opinions, accept or assume responsibility for any other purpose drawing attention to any necessary qualifications or to any other person to whom this report is shown or into or assumptions. whose hands it may come save where expressly agreed by our prior consent in writing. Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust assessment of What an audit of financial statements involves the principal risks facing the group and the directors’ statement An audit involves obtaining evidence about the amounts in relation to the longer-term viability of the group. Our review and disclosures in the financial statements sufficient to give was substantially less in scope than an audit and only consisted reasonable assurance that the financial statements are free of making inquiries and considering the directors’ process from material misstatement, whether caused by fraud or error. supporting their statements; checking that the statements This includes an assessment of: are in alignment with the relevant provisions of the Code; and • whether the accounting policies are appropriate to the considering whether the statements are consistent with the group’s circumstances and have been consistently applied knowledge acquired by us in the course of performing our audit. and adequately disclosed; We have nothing to report having performed our review. • the reasonableness of significant accounting estimates Adequacy of information and explanations received made by the directors; and Under the Companies Act 2006 we are required to report to • the overall presentation of the financial statements. you if, in our opinion, we have not received all the information We primarily focus our work in these areas by assessing and explanations we require for our audit. We have no the directors’ judgements against available evidence, exceptions to report arising from this responsibility. forming our own judgements, and evaluating the disclosures Directors’ remuneration in the financial statements. Under the Companies Act 2006 we are required to report We test and examine information, using sampling and other to you if, in our opinion, certain disclosures of directors’ auditing techniques, to the extent we consider necessary to remuneration specified by law are not made. We have no provide a reasonable basis for us to draw conclusions. We exceptions to report arising from this responsibility. obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

106 Jardine Lloyd Thompson Group plc Annual Report 2016

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 OVERVIEW 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

• The maintenance and integrity of the Jardine Lloyd CORPORATE GOVERNANCE 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

2016 2015 Notes £'000 £'000 Fees and commissions 2 1,256,556 1,151,392 Investment income 2,4 4,730 3,689 Total revenue 2 1,261,286 1,155,081

Salaries and associated expenses 6 (794,363) (727,334) Premises (66,849) (61,167) Other operating costs (209,518) (163,685) Depreciation, amortisation and impairment charges 3 (34,951) (30,538) Operating profit 1,2,3 155,605 172,357

Analysed as: Operating profit before exceptional items 1,2 193,672 187,462 Acquisition and integration costs 3 (1,245) (21,155) Restructuring costs 3 (13,900) (9,878) Net litigation costs 3 (21,114) (1,556) Net gain on sale of associate 3 - 18,595 Other exceptional items 3 (1,808) (1,111) Operating profit 1,2,3 155,605 172,357

Finance costs 5 (24,225) (24,473) Finance income 5 2,147 1,612 Finance costs - net 5 (22,078) (22,861) Share of results of associates 1,353 5,531 Profit before taxation 1,2 134,880 155,027 Income tax expense 8 (44,018) (41,586) Profit for the year 90,862 113,441

Profit attributable to: Owners of the parent 2 81,466 103,099 Non-controlling interests 9,396 10,342 90,862 113,441

Earnings per share attributable to the owners of the parent during the year (expressed in pence per share) 9 restated Basic earnings per share 38.6p 48.6p Diluted earnings per share 37.8p 48.0p

The notes on pages 113 to 171 form an integral part of these consolidated financial statements.

108 Jardine Lloyd Thompson Group plc Annual Report 2016

CONSOLIDATED STATEMENT OF

COMPREHENSIVE INCOME OVERVIEW for the year ended 31 December 2016

2016 2015 Notes £'000 £'000 Profit for the year 90,862 113,441

Other comprehensive (expense)/income

Items that will not be reclassified to profit or loss STRATEGIC REPORT Remeasurement of post-employment benefit obligations 31 (71,642) 43,149 Taxation thereon 11,850 (8,856) Total items that will not be reclassified to profit or loss (59,792) 34,293

Items that may be reclassified subsequently to profit or loss Fair value gains/(losses) net of tax: - available-for-sale 42 (34) - available-for-sale reclassified to the income statement (181) 10 - cash flow hedges (41,487) (12,569) Currency translation differences 105,369 (13,622) CORPORATE GOVERNANCE Total items that may be reclassified subsequently to profit or loss 63,743 (26,215)

Other comprehensive income net of tax 3,951 8,078 Total comprehensive income for the year 94,813 121,519

Attributable to: Owners of the parent 80,889 112,552 Non-controlling interests 13,924 8,967 94,813 121,519

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 2015 Notes £'000 £'000 NET OPERATING ASSETS Non-current assets Goodwill 11 543,013 496,166 Other intangible assets 12 101,963 104,323 Property, plant and equipment 13 64,330 63,167 Investments in associates 14 50,928 41,180 Available-for-sale financial assets 15,20 23,805 15,466 Derivative financial instruments 16,20 117,043 33,684 Retirement benefit surpluses 31 509 366 Deferred tax assets 22 70,088 51,023 971,679 805,375 Current assets Trade and other receivables 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 18,20 939,945 901,087 1,653,448 1,431,245 Current liabilities Borrowings 20,21 (54,729) (22,338) Trade and other payables 19 (1,257,782) (1,086,278) Derivative financial instruments 16,20 (33,136) (6,115) Current tax liabilities (5,119) (8,749) Provisions for liabilities and charges 23 (8,826) (18,594) (1,359,592) (1,142,074) Net current assets 293,856 289,171 Non-current liabilities Borrowings 20,21 (633,103) (581,244) Derivative financial instruments 16,20 (69,652) (33,726) Deferred tax liabilities 22 (11,378) (16,978) Retirement benefit obligations 31 (198,921) (130,753) Provisions for liabilities and charges 23 (1,571) (1,043) (914,625) (763,744) 350,910 330,802 TOTAL EQUITY Capital and reserves attributable to the owners of the parent Ordinary shares 24 11,008 11,008 Share premium 24,26 104,111 104,074 Fair value and hedging reserves 26 (54,453) (12,827) Exchange reserves 26 83,561 (17,280) Retained earnings 183,919 227,362 Shareholders’ equity 328,146 312,337 Non-controlling interests 22,764 18,465 350,910 330,802

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

110 Jardine Lloyd Thompson Group plc Annual Report 2016

CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY OVERVIEW for the year ended 31 December 2016

Non- Ordinary Other Retained Shareholders’ controlling Total shares reserves earnings equity interests equity Notes £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 January 2016 11,008 73,967 227,362 312,337 18,465 330,802 Profit for the period - - 81,466 81,466 9,396 90,862 Other comprehensive income/(expense) for STRATEGIC REPORT the year - 59,215 (59,792) (577) 4,528 3,951 Total comprehensive income for the year - 59,215 21,674 80,889 13,924 94,813 Dividends 10 - - (67,962) (67,962) (8,435) (76,397) Amounts in respect of share based payments: - 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 30 - - - - (31) (31) Change in non-controlling interests - - (4,298) (4,298) - (4,298) Issue of share capital 24 - 37 - 37 - 37 CORPORATE GOVERNANCE Balance at 31 December 2016 11,008 133,219 183,919 328,146 22,764 350,910

Non- Ordinary Other Retained Shareholders’ controlling Total shares reserves earnings equity interests equity Notes £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 January 2015 11,006 98,674 178,932 288,612 17,940 306,552 Profit for the period - - 103,099 103,099 10,342 113,441 Other comprehensive (expense)/ income for the period - (24,840) 34,293 9,453 (1,375) 8,078 Total comprehensive (expense)/ income for the period - (24,840) 137,392 112,552 8,967 121,519 FINANCIAL STATEMENTS Dividends 10 - - (64,484) (64,484) (8,923) (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 - - - - 1,268 1,268 Change in non-controlling interests - - (20,162) (20,162) - (20,162) Issue of share capital 24 2 133 - 135 - 135 Balance at 31 December 2015 11,008 73,967 227,362 312,337 18,465 330,802

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

2016 2015 Notes £'000 £'000 Cash flows from operating activities Cash generated from operations 28 166,712 215,380 Interest paid (17,403) (16,448) Interest received 6,639 5,116 Taxation paid (46,241) (37,003) Increase in net insurance broking payables 137,510 883 247,217 167,928 Dividend received from associates 935 800 Net cash generated from operating activities 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) Proceeds from disposal of property, plant and equipment 928 1,282 Acquisition of businesses, net of cash acquired 29 (13,381) (20,824) Acquisition of associates (3,013) (411) Proceeds from disposal of businesses, net of cash disposed 30 15,141 (122) Proceeds from disposal of associates 2 - 80,235 Purchase of available-for-sale financial assets 15 (107,636) (5,081) Proceeds from disposal of available-for-sale financial assets 20 5,039 Purchase of available-for-sale other investments 15 - (1,964) Proceeds from disposal of available-for-sale other investments 303 243 Net cash used in investing activities (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) Proceeds from issuance of ordinary shares 24 37 135 Proceeds from borrowings 355 17,637 Repayments of borrowings (5,056) (50,118) Dividends paid to non-controlling interests (8,435) (8,923) Net cash used in financing activities (97,296) (130,419) 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 35,411 (5,742) Cash and cash equivalents at end of year 18 939,945 901,087

The notes on pages 113 to 171 form an integral part of these consolidated financial statements.

112 Jardine Lloyd Thompson Group plc Annual Report 2016

SIGNIFICANT ACCOUNTING POLICIES for the year ended 31 December 2016 OVERVIEW

BASIS OF PREPARATION 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 Compliance with IFRS charge to other comprehensive income. Contingent consideration that The consolidated financial statements of the Group have been prepared is classified as equity is not remeasured, and its subsequent settlement in accordance with International Financial Reporting Standards as is accounted for within equity. adopted by the European Union (IFRSs as adopted by the EU) and The excess of the consideration transferred, the amount of any non- interpretations issued by the IFRS Interpretations Committee (IFRS IC) and controlling interest in the acquiree and the acquisition-date fair value the Companies Act 2006 applicable to Companies reporting under IFRSs. of any previous equity interest in the acquiree over the fair value of The financial statements comply with IFRS as issued by the International the identifiable net assets acquired is recorded as goodwill. If the total

Accounting Standards Board (IASB). of consideration transferred, non-controlling interest recognised and STRATEGIC REPORT previously held interest measured is less than the fair value of the net Historical cost convention assets of the subsidiary acquired in the case of a bargain purchase, the The consolidated financial statements have been prepared on difference is recognised directly in the income statement. Inter-company a going concern basis, under the historical cost convention, except transactions, balances, income and expenses on transactions between for the following: Group companies are eliminated. Accounting policies of subsidiaries have • the available-for-sale financial assets, financial assets and liabilities been changed where necessary to ensure consistency with the policies (including derivative financial instruments) are measured at fair value; adopted by the Group. and Transactions with non-controlling interests • defined benefit pension plans where plan assets are measured Transactions with non-controlling interests that do not result in loss at fair value. of control are accounted for as equity transactions that is, as transactions

with the owners in their capacity as owners. CORPORATE GOVERNANCE STANDARDS, AMENDMENTS AND The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary INTERPRETATIONS EFFECTIVE IN 2016 is recorded in equity. Gains or losses on disposals to non-controlling No new standards, amendments or interpretations, effective for the interests are also recorded in equity. first time for the financial year beginning on or after 1 January 2016 have had a material impact on the Group. 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 BASIS OF CONSOLIDATION change in carrying amount recognised in profit or loss. Subsidiaries The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint Subsidiaries are all entities (including structured entities) over which venture or financial asset. In addition, any amounts previously recognised the Group has control. in other comprehensive income in respect of that entity are accounted The Group controls an entity when the Group is exposed to, or has for as if the Group had directly disposed of the related assets or liabilities. FINANCIAL STATEMENTS rights to, variable returns from its involvement with the entity and has This may mean that amounts previously recognised in other the ability to affect those returns through its power over the entity. comprehensive income are reclassified to profit or loss. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date Associates that control ceases. Associates are entities over which the Group has significant influence The Group uses the acquisition method of accounting to account for but not control, generally accompanying a shareholding of between 20% business combinations. The consideration transferred for the acquisition and 50% of the voting rights. Investments in associates are accounted of a subsidiary is the fair values of the assets transferred, the liabilities for using the equity method of accounting. incurred and the equity interests issued by the Group. The consideration Under the equity method, the investment is initially recognised at cost, transferred includes the fair value of any asset or liability resulting from a and the carrying amount is increased or decreased to recognise contingent consideration arrangement. Identifiable assets acquired and the investor’s share of the profit or loss of the investee after the date liabilities and contingent liabilities assumed in a business combination of acquisition. SHAREHOLDER INFORMATION are measured initially at their fair values at the acquisition date. On an The Group’s investment in associates includes goodwill identified acquisition-by-acquisition basis, the Group recognises any non-controlling on acquisition. interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously Acquisition related costs are expensed as incurred. recognised in other comprehensive income is reclassified to profit or If a business combination is achieved in stages, the fair value of the loss where appropriate. Group’s previously held equity interest in the acquiree is remeasured The Group’s share of post-acquisition profit or loss is recognised in the to fair value at the acquisition date through profit or loss. income statement, and its share of post-acquisition movements in other Any contingent consideration to be transferred by the Group is recognised comprehensive income is recognised in other comprehensive income with at fair value at the acquisition date. Subsequent changes to the fair value a corresponding adjustment to the carrying amount of the investment.

Jardine Lloyd Thompson Group plc Annual Report 2016 113 FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES CONTINUED

When the Group’s share of losses in an associate equals or exceeds its GOODWILL ARISING ON CONSOLIDATION interest in the associate, including any other unsecured receivables, the Goodwill represents the excess of the cost of an acquisition over the Group does not recognise further losses, unless it has incurred legal or fair value of the Group’s share of the identifiable net assets of the acquired constructive obligations or made payments on behalf of the associate. subsidiary/associate at the date of acquisition. Goodwill on acquisitions Unrealised gains on transactions between the Group and its associates of subsidiaries is shown separately on the Balance Sheet. Goodwill on are eliminated to the extent of the Group’s interest in the associates. acquisitions of associates is included in investments in associates. Unrealised losses are also eliminated unless the transaction provides Goodwill is not amortised but it is tested for impairment annually or more evidence of an impairment of the asset transferred. Accounting policies frequently if events or changes in circumstances indicate that it might be of the associates have been modified where necessary to ensure impaired, and is carried at cost less accumulated impairment losses. consistency with the policies adopted by the Group. 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 SEGMENT REPORTING generating units, or groups of cash generating units, for the purpose of impairment testing. Cash generating units represent the lowest level of Operating segments are reported in a manner consistent with the geographical and business segment combinations that the Group uses internal reporting provided to the chief operating decision-maker. The chief for internal reporting purposes. operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer. OTHER INTANGIBLE ASSETS

Computer software FOREIGN CURRENCIES Acquired computer software licenses are capitalised on the basis of Functional and presentation currency the costs incurred to acquire them and bring them to use. These costs are amortised over their estimated useful lives. Costs associated with Items included in the financial statements of each of the Group’s entities maintaining computer software programmes are recognised as an are measured using the currency of the primary economic environment expense as incurred. in which the entity operates (‘the functional currency’). Development costs that are directly associated with the production of The consolidated financial statements are presented in sterling, identifiable and unique software products controlled by the Group, and which is the Group’s functional and presentational currency. that will generate economic benefits exceeding costs beyond one year, Transactions and balances are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant Foreign currency transactions are translated into the functional currency overheads. Capitalised development costs are amortised over their using the exchange rates prevailing at the dates of the transactions. estimated useful lives from the point when the asset is ready to use. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates The rates of amortisation are between 14% and 100% per annum. of monetary assets and liabilities denominated in foreign currencies are Capitalised employment contract payments recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. The Group makes payments to certain key employees in recognition of Translation differences on non-monetary items, such as equities held them signing a long-term employment contact, usually three to five years. at fair value through profit or loss, are reported as part of the fair value gain These payments are capitalised as intangible assets since legal rights or loss. Translation differences on non-monetary items, such as equities protect the expected benefits that the Group will derive from the contracts. classified as available-for-sale financial assets, are included in other The asset recognised is then amortised over the duration of the underlying comprehensive income. contract within salaries and associated expenses.

Group companies Other The results and financial position of all the Group entities (none of which For acquisitions completed after 1 January 2004, the business acquired has the currency of a hyperinflationary economy) that have a functional is reviewed to identify assets that meet the definition of an intangible currency different from the presentational currency are translated into asset per IAS 38. Examples of such assets include customer contracts, the presentational currency as follows: expectations of business renewal and contract related customer 1. assets and liabilities for each balance sheet presented are translated relationships. These assets are valued on the basis of the present value at the closing rate at the date of that balance sheet; of future cash flows and are amortised to the income statement over the life of the contract or their estimated economic life. 2. income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable The current maximum estimated economic life is fifteen years. 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 IMPAIRMENT OF ASSETS 3. all resulting exchange differences are recognised in other Goodwill and other intangible assets that have an indefinite useful life are comprehensive income. On consolidation exchange differences not subject to amortisation and are tested annually for impairment. Assets arising from the translation of net investment in foreign entities, and that are subject to amortisation are reviewed for impairment whenever of borrowings and other currency instruments designated as hedges events or changes in circumstances indicate that the carrying amount of such investments, are taken to other comprehensive income. When may not be recoverable. An impairment loss is recognised for the amount a foreign operation is sold, such exchange differences are recognised by which the asset’s carrying amount exceeds its recoverable amount. in the income statement as part of the gain or loss on sale. The recoverable amount is the higher of an asset’s fair value less costs Goodwill and fair value adjustments arising on the acquisition of a foreign to sell and value-in-use. For the purposes of assessing impairment, assets entity are treated as assets and liabilities of the foreign entity and translated are grouped at the lowest levels for which there are separately identifiable at the closing rate. Exchange differences arising are recognised in other cash flows (cash-generating units). comprehensive income.

114 Jardine Lloyd Thompson Group plc Annual Report 2016

SIGNIFICANT ACCOUNTING POLICIES CONTINUED

PROPERTY, PLANT AND EQUIPMENT Offsetting financial instruments Assets are stated at their net book amount (historical cost less Financial assets and liabilities are offset and the net amount reported accumulated depreciation). Cost includes the original purchase price in the balance sheet when there is a legally enforceable right to offset of the asset and the costs attributable to bringing the asset to its working the recognised amounts and there is an intention to settle on a net basis condition for its intended use. Depreciation is calculated to write off the or realise the asset and settle the liability simultaneously. The legally OVERVIEW cost of such assets over their estimated useful lives. 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, The principal rates of depreciation are as follows: insolvency or bankruptcy of the company or the counterparty. • Freehold land and buildings – between 0% and 2% per annum. • Leasehold improvements – between 10% and 20% INSURANCE BROKING RECEIVABLES per annum or over the life of the lease. AND PAYABLES • Furniture and office equipment – between 10% and 20% per annum. Insurance brokers act as agents in placing the insurable risks of their • Computer hardware – between 20% and 100% per annum. clients with insurers and, as such, are not liable as principals for amounts • Motor vehicles – between 25% and 33.33% per annum. arising from such transactions. In recognition of this relationship, debtors from insurance broking transactions are not included as an asset of the STRATEGIC REPORT The depreciation rates are reviewed on an annual basis. Group. Other than the receivable for fees and commissions earned on a transaction, no recognition of the insurance transaction occurs until the FINANCIAL ASSETS 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. The Group classifies its financial assets as loans and receivables and In certain circumstances, the Group advances premiums, refunds available-for-sale assets. The classification depends upon the purpose or claims to insurance underwriters or clients prior to collection. for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. These advances are reflected in the consolidated balance sheet as part of trade receivables. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or TRADE RECEIVABLES

determinable payments that are not quoted in an active market. They are CORPORATE GOVERNANCE included in current assets, except for maturities greater than 12 months Trade receivables are recognised initially at fair value and subsequently after the balance sheet date. at amortised cost, less provision for impairment. The Group’s loans and receivables comprise trade and other receivables A provision for impairment of trade receivables is established when there and cash and cash equivalents in the balance sheet. Loans and is objective evidence that the Group will not be able to collect all amounts receivables are carried at amortised cost. due according to the original terms of the receivables. Significant financial difficulties of the debtor, dispute, default or delinquency in payments are Available-for-sale financial assets considered indicators that the receivable is impaired. Available-for-sale financial assets are categorised into one of two The carrying amount of the asset is reduced through the use of an categories: allowance account, and the amount of the loss is recognised in the 1. Investments and deposits consist mainly of fixed term deposits, income statement. bonds and certificates of deposit. These investments are held at When a trade receivable is uncollectible, it is written off against the fair value and are classified between current and non-current assets allowance account for trade receivables. according to the maturity date. 2. Other investments include securities and other investments held FINANCIAL STATEMENTS for strategic purposes and some debt instruments. These CASH AND CASH EQUIVALENTS investments are held at fair value unless a fair value cannot be Cash and cash equivalents includes cash in hand, deposits held at accurately determined in which case they are held at cost less call with banks and other short-term highly liquid investments with original any provision for impairment. maturities of three months or less. Bank overdrafts are shown within Interest on deposits and interest-bearing investments is credited borrowings in current liabilities on the balance sheet. as it is earned. Whilst held in the Group’s non-statutory trust accounts under appropriate Regular purchases and sales of financial assets are recognised on the client money regulation, fiduciary funds held are controlled by the Group trade date - the date on which the Group commits to purchase or sell and economic benefits are derived from them. As such these funds are the asset. Investments are initially recognised at fair value plus transaction recognised as an asset on the Group’s balance sheet. costs. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the Group has SHAREHOLDER INFORMATION transferred substantially all risks and rewards of ownership. TRADE PAYABLES Available-for-sale assets are subsequently carried at fair value. Trade payables are initially recognised at fair value and subsequently The fair values of quoted investments are determined based upon measured at amortised cost except for deferred and contingent current bid price. consideration which is always measured at fair value based on the underlying criteria of each transaction. 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. BORROWINGS Interest on available-for-sale securities calculated using the effective Borrowings are classified as current liabilities unless the Group has an interest method is recognised in the income statement as part of finance unconditional right to defer settlement of the liability for at least 12 months income. Dividends on available-for-sale equity instruments are recognised after the balance sheet date. Borrowings are recognised initially at fair in the income statement as part of finance income when the Group’s right value, net of transaction costs incurred. They are subsequently stated to receive payments is established. at amortised cost using the effective interest rate method.

Jardine Lloyd Thompson Group plc Annual Report 2016 115 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 The Group operates a number of equity-settled, share-based rates of tax and takes into account deferred tax. 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 The total amount to be expensed over the vesting period is determined and liabilities and their carrying amounts in the consolidated financial by reference to the fair value of the options granted, excluding the statements. However, if the deferred income tax arises from initial impact of any non-market vesting conditions (for example, profitability recognition of an asset or liability in a transaction other than a business and sales growth targets). Non-market vesting conditions are included in combination that at the time of the transaction affects neither accounting assumptions about the number of options that are expected to become nor taxable profit or loss, it is not recognised. Deferred income tax exercisable. At each balance sheet date, the entity revises its estimates is determined using tax rates (and laws) that have been enacted or of the number of options that are expected to become exercisable. It substantively enacted by the balance sheet date and are expected recognises the impact of the revision of original estimates, if any, in the to apply when the related deferred income tax asset is realised or income statement, and a corresponding adjustment to equity. the deferred income tax liability is settled. The proceeds received net of any directly attributable transaction costs Deferred income tax is charged or credited to equity in respect of are credited to share capital (at nominal value) and share premium (excess any items, which is itself either charged or credited directly to equity. over nominal value) when the options are exercised. Any subsequent recognition of the deferred gain or loss in the consolidated income statement is accompanied by the corresponding PROVISIONS FOR LIABILITIES AND CHARGES deferred income tax. A provision is recognised where there is a present obligation, whether Deferred income tax assets are recognised to the extent that it is probable legal or constructive, as a result of a past event for which it is probable that future taxable profit will be available against which the temporary that a transfer of economic benefits will be required to settle the obligation differences can be utilised. and a reasonable estimate can be made of the amount of the obligation. Deferred income tax is provided on temporary differences arising on Where appropriate the Group discounts provisions to their present value. investments in subsidiaries and associates, except where the Group The unwinding of the provision discounting is included as an ‘interest controls the timing of the reversal of the temporary difference and it expense’ within finance costs in the income statement. is probable that the temporary difference will not reverse in the foreseeable future. REVENUE EMPLOYEE BENEFITS Fees and commissions Fees and commissions are derived from three principal sources: Pension obligations Insurance broking The Group operates a number of defined benefit pension schemes, and a number of employees are members of defined contribution Income relating to insurance broking is accounted for at the later of policy pension schemes. inception date or when the policy placement has been completed and confirmed. Full actuarial valuations of the Group’s defined benefit schemes a re carried out at least every three years. Where there is an expectation of future servicing requirements an element of income relating to the policy is deferred to cover the associated A qualified actuary updates these valuations to 31 December each year. contractual obligation. For the purposes of these annual updates, scheme assets are included at market value and scheme liabilities are measured on an actuarial basis Employee benefits using the projected unit credit method; these liabilities are discounted at Income relating to employee benefit services includes fees and the current rate of return of a high quality corporate bond of equivalent commissions. Fees are charged on a time-cost or fixed-fee basis and currency and term. The defined benefit surplus or deficit is calculated are recognised in line with the performance of the underlying service. as the present value of defined benefit obligations less the fair value of Commission is recognised upon confirmation of the underlying policy the plan assets and is included on the Group’s balance sheet. Surpluses or product. are included only to the extent that they are recoverable through reduced Other services contributions in the future or through refunds from the schemes. The net interest on the defined benefit surplus/deficit is included within finance Fees and other income receivable are recognised in the period to costs. Actuarial gains and losses, including differences between the which they relate and when they can be measured with reasonable expected and actual return on scheme assets, are recognised through certainty. the consolidated statement of comprehensive income. Investment income A defined contribution plan is a pension plan under which the Group Investment income arises from the holding of cash and investments pays fixed contributions into a separate entity. The Group has no legal relating to fiduciary funds and is recognised on an accruals basis. 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. EXCEPTIONAL ITEMS The costs of the Group’s defined contribution pension schemes are Exceptional items are separately identified to provide greater charged to the income statement in the period in which they fall due. 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

116 Jardine Lloyd Thompson Group plc Annual Report 2016

SIGNIFICANT ACCOUNTING POLICIES CONTINUED additional insight into the underlying business performance. Items of a DIVIDEND DISTRIBUTION non-recurring and material nature are charged or credited to operating Dividends proposed or declared after the balance sheet date are not profit and are classified to the appropriate income statement headings. recognised as a liability at the balance sheet date. Final dividends are To assist in the analysis and understanding of the underlying trading recognised as a charge to equity once approved and interim dividends position of the Group these items are summarised within the operating are charged once paid. OVERVIEW profit, note 3 on page 123, under the heading of “Exceptional items”.

FINANCIAL AND CAPITAL RISK MANAGEMENT LEASES The Group’s exposure to financial risks and its financial and capital Assets held under leasing agreements, which transfer substantially all management policies are detailed in the Finance Director’s Review the risks and rewards of ownership to the Group are included in property, and the Risk Management Report on pages 39 to 45. 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. CRITICAL ACCOUNTING ESTIMATES The property, plant and equipment acquired under finance leases is AND JUDGMENTS depreciated over the shorter of the useful life of the asset and the STRATEGIC REPORT lease term. Estimates and judgments used in preparing the financial statements are continually evaluated and are based on historical experience and other Leases in which a significant portion of the risks and rewards of ownership factors, including expectations of future events that are believed to be are retained by the lessor are classified as operating leases. Payments reasonable. The resulting accounting estimates will, by definition, seldom made under operating leases (net of any incentives received from the equal the related actual results. lessor) are charged to the income statement on a straight-line basis over the period of the lease. The estimates and assumptions that have a significant effect on the carrying amounts of assets and liabilities are discussed below. a) Fair value estimation DERIVATIVE FINANCIAL INSTRUMENTS The fair value of financial instruments traded in active markets (such as The Group only enters into derivative financial instruments in order available-for-sale) is based upon quoted market prices at the balance to hedge underlying financial and commercial exposures. Derivative sheet date. The quoted market price used for financial assets held by financial instruments are initially recognised at fair value on the date a the Group is the current bid price. CORPORATE GOVERNANCE derivative contract is entered into and are subsequently re-measured The carrying value less impairment provision of trade receivables and at their fair value. payables are assumed to approximate their fair values. The fair values The method of recognising the resulting gain or loss is dependent of financial liabilities is estimated by discounting the future contractual on the nature of the item being hedged. cash flows at the current market interest rate that is available to the The Group designates derivatives as either a hedge of the fair value Group for similar financial instruments. of a recognised asset or liability (fair value hedge), a hedge of a forecasted The fair value of acquired intangible assets is estimated based upon transaction or of the foreign currency risk on a firm commitment (cash the present value of modelled related expected future cash flows. flow hedge), or a hedge of a net investment in a foreign entity (net Judgement may be applied in the determination of the growth rates, investment hedges). discount rates and the expected cash flows. Changes in the fair value of derivatives that are designated and qualify b) Impairment of assets as fair value hedges and that are highly effective, are recorded in the The Group tests annually whether goodwill and other assets that have income statement, along with any changes in the fair value of the hedged indefinite useful lives suffered any impairment. Other assets are reviewed asset or liability that is attributable to the hedged risk. FINANCIAL STATEMENTS for impairment whenever events or changes in circumstances indicate Changes in the fair value of derivatives that are designated and qualify that the carrying amount of the asset exceeds its recoverable amount. as cash flow hedges and that are highly effective, are recognised in The recoverable amount of an asset or a cash generating unit is equity. Where the forecasted transaction or firm commitment results in determined based on value-in-use calculations prepared on the basis the recognition of a non-financial asset or of a non-financial liability, the of management’s assumptions and estimates. This determination requires gains and losses previously deferred in equity are transferred from equity significant judgment. In making this judgment, the Group evaluates, and included in the initial measurement of the cost of the asset or liability. among other factors, the duration and extent to which the fair value of Otherwise, amounts deferred in equity are transferred to the consolidated an investment is less than its cost; and the financial health of and near- income statement and classified as income or expense in the same term business outlook for the investment, including factors such as periods during which the hedged firm commitment or forecasted industry and sector performance, changes in regional economies and transaction affects the income statement. operational and financing cash flow. The gain or loss relating to the ineffective portion is recognised c) Income taxes immediately in the income statement. When a hedging instrument SHAREHOLDER INFORMATION expires or is sold, any cumulative gain or loss existing in equity at that The Group is subject to income taxes in numerous jurisdictions. time remains in the hedging reserves and is recognised in the income Significant judgement is required in determining the worldwide provision statement when a hedge no longer meets the criteria for hedge for income taxes. There are many transactions and calculations for which accounting or when the committed or forecasted transaction ultimately the ultimate tax determination is uncertain during the ordinary course of occurs. When a committed or forecasted transaction is no longer business. Where the final tax outcome of these matters is different from expected to occur, the cumulative gain or loss that was reported in the amounts that were initially recorded, such differences will impact equity is immediately recognised in the income statement. 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 FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES CONTINUED d) Pension obligations The basis of classification depends on the entity’s business model The present value of the pension obligations depends on a number and the contractual cash flow characteristics of the financial asset. of factors that are determined on an actuarial basis using a number Investments in equity instruments are required to be measured at fair of assumptions. 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 The assumption used in determining the net cost or income for pension expected credit losses model that replaces the incurred loss impairment obligations is a discount rate based upon high quality corporate bonds. model used in IAS 39. For financial liabilities there were no changes to Any changes in the assumptions may impact the carrying amount of classification and measurement except for the recognition of changes in pension obligations, the charge in the income statement, or statement own credit risk in other comprehensive income, for liabilities designated of comprehensive income. at fair value through profit or loss. IFRS 9 relaxes the requirements for The Group determines the appropriate discount rate at the end of each hedge effectiveness by replacing the bright line hedge effectiveness year. This is the interest rate that should be used to determine the present tests. It requires an economic relationship between the hedged item value of estimated future cash outflows expected to be required to settle and hedging instrument and for the ‘hedged ratio’ to be the same as the pension obligations. the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that In determining the appropriate discount rate, the Group considers the currently prepared under IAS 39. The standard is effective for accounting interest rates of high-quality corporate bonds that are denominated in periods beginning on or after 1 January 2018. Early adoption is permitted. 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 The changes to the hedge accounting requirements are not expected assumptions for pension obligations are based in part on current market to have a material impact on the Group. The classification of Financial conditions. As well as the discount rate, the inflation rates and Instruments is not expected to have a material impact on the Group, life expectancy are also key assumptions. with the exception of any items that are classified as fair value through OCI, where there will be no recycling through the Income statement. To set the price inflation assumptions the Group considers market The change to an expected loss model will mainly focus of the Group’s expectations of inflation at the appropriate durations. Adjustments are impairment of trade receivables. The impact of this is being assessed. made to these rates where necessary to reflect an inflation risk premium. In determining the life expectancy assumptions the Group considers the IFRS 15 - Revenue from contracts with customers mortality assumptions used by the Trustees of the pension schemes in IFRS 15 (‘revenue from contracts with customers’) is effective for annual their latest actuarial valuations and also mortality guidance laid out by periods beginning on or after 1 January 2018 and addresses revenue legislation. This enables the Group to determine a best estimate of life recognition for customer contracts, with particular focus on aligning expectancy that is appropriate for accounting purposes. revenue recognition with the separate and distinct performance obligation e) Errors and omissions liability to the customer. The standard replaces IAS 18 (‘revenue’) and IAS 11 (‘construction contracts’) and related interpretations. The Group’s review During the ordinary course of business the Group can be subject to claims of the standard is on-going, but will implement in January 2018, for errors and omissions made in connection with its broking activities. reporting revenues on this basis for the half year period ending 30 June A balance sheet provision is established in respect of such claims when 2018 and full year period ending 31 December 2018. Restatements of it is probable that the liability has been incurred and the amount of the 2017 revenues for these corresponding periods will be completed at liability can be reasonably estimated. those intervals. The Group analyses its litigation exposures based on available information, Under existing accounting policies, the primary trigger for revenue including external legal consultation where appropriate, to assess its recognition is the policy inception date, and this is anticipated to remain potential liability. the same under the new standard. The Group defers some elements The outcome of the currently pending and future proceedings cannot be of revenue currently, primarily to reflect anticipated claims handling predicted with certainty. Thus, an adverse decision in a current or future activity but is considering non-claims servicing requirements under lawsuit could result in additional costs that are not covered, either wholly the new standard. At this time, the Group is not able to conclude or or partially, under insurance policies and are in excess of the presently quantify the impact of the new standard on revenues, but it is likely that established provisions. It is possible therefore that the financial position, further elements of revenue will be deferred for both insurance broking results of operations or cash flows of the Group could be materially arrangements and long-term administrative contracts. The standard also affected by the unfavourable outcome of litigation. requires costs to be aligned with revenue recognition wherever possible and this is also being reviewed. FUTURE DEVELOPMENTS IFRS 16 – Leases IFRS 16, (‘Leases’) requires lessees to recognise a lease liability reflecting The following standards, other than IFRS 16, have been published and future lease payments and a ‘right-of-use asset’ for virtually all lease are not mandatory for 31 December 2016 reporting periods and the contracts. This differs from IAS 17 ‘Leases’ where a distinction between Group has not adopted them early. a finance lease (on balance sheet) and an operating lease (off balance Accounting standards and interpretation applicable on or after sheet) was required. 1 January 2017 The standard is effective for annual periods beginning on or after IFRS 9 -Financial Instruments 1 January 2019 and earlier application is permitted subject to EU endorsement. The Group is yet to assess IFRS 16’s full impact. 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.

118 Jardine Lloyd Thompson Group plc Annual Report 2016

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.

Year ended 31 December 2016 STRATEGIC REPORT Underlying Exceptional profit items Total £’000 £’000 £’000 Fees and commissions 1,256,556 - 1,256,556 Investment income 4,730 - 4,730 Salaries and associated expenses (784,664) (9,699) (794,363) Premises (64,307) (2,542) (66,849) Other operating costs (184,173) (25,345) (209,518) Depreciation, amortisation and impairment charges (34,470) (481) (34,951) Trading profit 193,672 (38,067) 155,605 CORPORATE GOVERNANCE Finance costs - net (22,078) - (22,078) Share of results of associates 975 378 1,353 Profit before taxation 172,569 (37,689) 134,880

Year ended 31 December 2015 Underlying Exceptional profit items Total £’000 £’000 £’000 Fees and commissions 1,151,392 - 1,151,392 Investment income 3,689 - 3,689 Salaries and associated expenses (704,435) (22,899) (727,334) Premises (58,852) (2,315) (61,167) FINANCIAL STATEMENTS Other operating costs (173,794) 10,109 (163,685) Depreciation, amortisation and impairment charges (30,538) - (30,538) Trading profit 187,462 (15,105) 172,357 Finance costs - net (22,861) - (22,861) Share of results of associates 5,531 - 5,531 Profit before taxation 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. 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.

120 Jardine Lloyd Thompson Group plc Annual Report 2016

2. SEGMENT INFORMATION CONTINUED

Risk & Insurance Employee Benefits

JLT OVERVIEW Australia Other Other Head JLT JLT & New JLT JLT Risk & UK & Employee Office Year ended Specialty Re Zealand Asia USA Insurance Ireland Asia Benefits & Other Total 31 December 2016 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Fees and commissions 325,675 195,065 115,950 90,133 41,313 188,103 160,016 87,260 53,041 - 1,256,556 Investment income 1,776 541 1,702 149 - 488 2 17 55 - 4,730

Total revenue 327,451 195,606 117,652 90,282 41,313 188,591 160,018 87,277 53,096 - 1,261,286 Underlying trading profit 73,016 40,521 34,137 16,825 (26,981) 29,060 12,315 27,130 10,029 (22,380) 193,672 Operating profit 52,172 40,589 34,135 19,404 (26,981) 30,742 (2,390) 23,290 9,851 (25,207) 155,605 STRATEGIC REPORT Finance costs - net ------(22,078) (22,078) Share of results of associates ------1,353 1,353 Profit before taxation 52,172 40,589 34,135 19,404 (26,981) 30,742 (2,390) 23,290 9,851 (45,932) 134,880 Income tax expense ------(44,018) (44,018) Non-controlling interests ------(9,396) (9,396) Net profit attributable to the owners of the parent 52,172 40,589 34,135 19,404 (26,981) 30,742 (2,390) 23,290 9,851 (99,346) 81,466 Segment assets 2,574,199 2,574,199 Investments in associates 50,928 50,928 Total assets 2,625,127 2,625,127 Segment liabilities (2,274,217) (2,274,217) CORPORATE GOVERNANCE Total liabilities (2,274,217) (2,274,217) Other segment items: Capital expenditure 2,997 7,406 2,821 1,401 3,204 4,759 11,338 314 391 5,140 39,771 Depreciation, amortisation and impairment charges (9,434) (3,141) (2,274) (2,932) (3,434) (4,424) (7,583) (1,262) (1,109) (14,310) (49,903)

Risk & Insurance Employee Benefits JLT Australia Other Other JLT JLT & New JLT JLT Risk & UK & Employee Head Office Year ended Specialty Re Zealand Asia USA Insurance Ireland Asia Benefits & Other Total

31 December 2015 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 FINANCIAL STATEMENTS Fees and commissions 310,366 173,274 107,504 76,406 23,285 172,138 167,376 78,903 42,140 - 1,151,392 Investment income 805 286 2,032 177 - 347 1 13 28 - 3,689 Total revenue 311,171 173,560 109,536 76,583 23,285 172,485 167,377 78,916 42,168 - 1,155,081 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 Profit before taxation 60,071 36,739 32,745 12,814 (20,984) 33,303 8,041 24,431 4,481 (36,614) 155,027 Income tax expense ------(41,586) (41,586) Non-controlling interests ------(10,342) (10,342) SHAREHOLDER INFORMATION Net profit attributable to the owners of the parent 60,071 36,739 32,745 12,814 (20,984) 33,303 8,041 24,431 4,481 (88,542) 103,099 Segment assets 2,195,440 2,195,440 Investments in associates 41,180 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) 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 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”.

Fees and Fees and Segment commissions commissions non-current Segment Segment (1) (2) assets assets liabilities Year ended 31 December 2016 £’000 £’000 £’000 £’000 £’000 UK 600,837 360,840 356,861 1,427,263 (1,045,964) Americas 259,226 375,886 223,614 462,989 (233,192) Australia 146,958 158,821 49,651 141,369 (88,657) Asia 204,504 199,823 46,660 218,807 (152,245) Europe 37,717 107,668 24,711 38,386 (37,531) Rest of the World 7,314 53,518 7,809 9,699 (3,641) 1,256,556 1,256,556 709,306 2,298,513 (1,561,230) Investments in associates 50,928 - Unallocated assets/(liabilities) 275,686 (712,987) Total assets/(liabilities) 2,625,127 (2,274,217)

Fees and Fees and Segment commissions commissions non-current Segment Segment (1) (2) assets assets liabilities Year ended 31 December 2015 £’000 £’000 £’000 £’000 £’000 UK 592,652 365,892 391,344 1,271,524 (854,669) Americas 218,962 335,914 167,288 345,628 (178,662) Australia 130,470 140,631 32,725 112,941 (74,525) Asia 173,305 175,082 44,462 162,495 (124,704) Europe 31,000 87,804 21,745 58,465 (31,818) Rest of the World 5,003 46,069 6,092 8,433 (4,986) 1,151,392 1,151,392 663,656 1,959,486 (1,269,364) Investments in associates 41,180 - Unallocated assets/(liabilities) 235,954 (636,454) Total assets/(liabilities) 2,236,620 (1,905,818)

122 Jardine Lloyd Thompson Group plc Annual Report 2016

3. OPERATING PROFIT The following items have been (credited)/charged in arriving at operating profit: 2016 2015 £’000 £’000 Foreign exchange gains: - fees and commissions (5,841) (3,133) - other operating costs (10,838) (3,236) (16,679) (6,369)

Amortisation of other intangible assets: OVERVIEW - software costs 19,813 17,171 - other intangible assets 2,131 1,767 Depreciation on property, plant and equipment: - owned assets 12,291 11,316 - leased assets under finance leases 235 284 Impairment of goodwill (included in exceptional items below) 481 - Total depreciation, amortisation and impairment charges 34,951 30,538 Amortisation of other intangible assets: - employment contract payments (included in salaries and associated expenses) 14,952 12,372

(Gains)/losses on disposal of property, plant and equipment (10) 60 STRATEGIC REPORT Operating lease rentals payable: - minimum lease payments: - land and buildings 41,233 36,409 - furniture, equipment and motor vehicles 792 821 - computer equipment and software 543 364 - sub-leases receipts: - land and buildings (426) (376) 42,142 37,218 Available-for-sale financial assets: - fair value (gains)/losses (87) 41 CORPORATE GOVERNANCE - losses on sale 8 72 (79) 113 Exceptional items: Acquisition and integration costs of which: - included in salaries and associated expenses 228 13,274 - included in premises costs 70 1,736 - included in other operating costs 947 6,145 1,245 21,155 Restructuring costs of which: - included in salaries and associated expenses 9,355 9,314 - included in premises costs 1,689 233 - included in other operating costs 2,856 331 13,900 9,878 FINANCIAL STATEMENTS Net litigation costs: - included in salaries and associated expenses - 529 - included in premises costs - 346 - included in other operating costs 21,114 681 21,114 1,556 Costs associated with a regulatory review: - included in salaries and associated expenses - 274 - included in other operating costs 488 1,258 488 1,532 Net loss on disposal of businesses of which: SHAREHOLDER INFORMATION - included in salaries and associated expenses 116 - - included in premises costs 783 - - included in other operating costs 391 527 - included in depreciation, amortisation and impairment charges 370 - 1,660 527 Net gain on sale of associate - (18,595) Pension curtailment gain (127) (492) Release of contingent considerations (324) (456) Impairment of goodwill 111 - Total exceptional items included within operating profit 38,067 15,105 Profit on sale of associates' subsidiary - included in share of results of associates (378) - Total exceptional items 37,689 15,105

Jardine Lloyd Thompson Group plc Annual Report 2016 123 FINANCIAL STATEMENTS

4. INVESTMENT INCOME

2016 2015 £’000 £’000 Interest receivable - fiduciary funds 4,730 3,689 Prior year investment income 3,689 4,398 Effect of: - average cash balance variance (190) 127 - interest yield variance 799 (614) - foreign exchange variance 432 (222) 4,730 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

2016 2015 £’000 £’000 Interest receivable - own funds 1,938 1,503 Investment income from available for-sale financial assets 209 109 Interest expense: - bank and other borrowings (17,434) (16,733) - finance leases (57) (49) - interest in respect of liability discounting (1,862) (1,567) Pension financing: - expected return on post employment scheme assets 19,065 18,749 - interest on post employment scheme liabilities (23,937) (24,873) Net pension financing expense (4,872) (6,124) Finance costs - net (22,078) (22,861) Finance costs (24,225) (24,473) Finance income 2,147 1,612 Finance costs - net (22,078) (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.

124 Jardine Lloyd Thompson Group plc Annual Report 2016

6. EMPLOYEE INFORMATION 2016 2015 £’000 £’000 a) Salaries and associated expenses OVERVIEW Wages and salaries 619,422 573,723 Social security costs 51,881 49,448 Pension costs 41,385 40,185 Equity settled share-based payments: - incentive schemes (LTIP, SESS, ESOS) 25,174 19,991 - Sharesave Scheme - 84 25,174 20,075 Other staff costs 56,501 43,903 794,363 727,334 STRATEGIC REPORT 2016 2015 b) Analysis of employees Monthly average number of persons employed by the Group during the year Geographical segment: - UK 3,878 4,131 - Americas 1,813 1,679 - Australasia 1,130 1,133 - Asia 3,292 3,322 - Europe 253 234 - Rest of the world 133 105 10,499 10,604 CORPORATE GOVERNANCE Business segment: - Risk & Insurance 6,174 5,990 - Employee Benefits 3,475 3,778 - Head Office & Other 850 836 10,499 10,604

2016 2015 £’000 £’000 c) Key management compensation Salaries and short-term employee benefits 13,792 13,893 Post employment benefits 406 457 Other long-term benefits 333 448 FINANCIAL STATEMENTS Share-based payments 2,812 5,992 17,343 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.

JLT LONG TERM INCENTIVE PLAN (2013) SHAREHOLDER INFORMATION

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 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:

Black-Scholes model assumptions Exercise Share price Dividend Risk free Fair value of price Performance on grant date Volatility yield Maturity Interest rate one award pence period pence % % years % pence JLT Long Term Incentive Plan (2013)/ Senior Executive Share Scheme 2016 31 March - 2016 - 22 844.50 20.67 - 1 - 6 0.86 844.50 2016 23 September - 2016 - 21 1,013.00 21.87 - 1 - 5 0.21 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.

126 Jardine Lloyd Thompson Group plc Annual Report 2016

6. EMPLOYEE INFORMATION CONTINUED

Movement in number of options OVERVIEW Weighted Options Options average Options outstanding outstanding exercise exercisable Remaining at 1 Jan 16 Granted Lapsed Exercised at 31 Dec 16 (sale) at 31 Dec 16 contractual number number number number number price (p) number life years JLT Long Term Incentive Plan (2004/2013) 1,927,782 925,700 (492,737) (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 - (18,800) (46,000) - 963.70 - - Total 9,160,364 3,452,839 (640,095) (2,059,581) 9,913,527 882.78 681,113 8.05

Movement in number of options

Weighted STRATEGIC REPORT Options Options average Options outstanding outstanding exercise exercisable at Remaining at 1 Jan 15 Granted Lapsed Exercised at 31 Dec 15 (sale) 31 Dec 15 contractual number number number number number price (p) number life years JLT Long Term Incentive Plan (2004/2013) 2,178,744 762,100 (326,796) (686,266) 1,927,782 1,052.56 37,514 8.18 Senior Executive Share Scheme 7,006,456 2,784,511 (686,913) (1,936,272) 7,167,782 1,026.77 887,022 8.00 Executive Share Option Scheme 301,576 - - (236,776) 64,800 1,018.15 64,800 0.75 Sharesave Scheme 417,429 - (19,919) (397,510) - 1,010.94 - - Total 9,904,205 3,546,611 (1,033,628) (3,256,824) 9,160,364 1,029.65 989,336 7.98 CORPORATE GOVERNANCE 7. SERVICES PROVIDED BY THE COMPANY’S AUDITOR AND ITS ASSOCIATES During the year the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditor and its associates:

2016 2015 £’000 £’000 Fees payable to the Group’s auditor for the audit of the parent Company and consolidated financial statements 200 217 Fees payable to the Group’s auditor and its associates for other services: - the audit of the Company’s subsidiaries 2,449 2,436 - audit related assurance services 254 417 - tax compliance services 130 120 - tax advisory services 46 51

- other assurance services 190 131 FINANCIAL STATEMENTS - other non-audit services 135 23 3,404 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). SHAREHOLDER INFORMATION

Jardine Lloyd Thompson Group plc Annual Report 2016 127 FINANCIAL STATEMENTS

8. INCOME TAX EXPENSE 2016 2015 £’000 £’000 Current tax expense Current year 51,499 43,153 Adjustments in respect of prior years (7,129) (2,167) 44,370 40,986 Deferred tax (credit)/expense Origination and reversal of temporary differences (4,912) (1,515) Reduction in tax rate 240 655 Adjustments in respect of prior years 4,320 1,460 (352) 600 Total income tax expense 44,018 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:

2016 2015 £’000 £’000 Profit before taxation 134,880 155,027 Tax calculated at UK Corporation Tax rate of 20% (2015: 20.25%) 26,976 31,393 Non-deductible expenses 4,214 4,405 Non recognition of tax losses 4,538 5,037 Other* (595) (3,878) Adjustments in respect of prior years (2,809) (707) Effect of difference between UK and non-UK tax rates 11,725 5,801 Effect of reduction in tax rate 240 655 Tax on associates (271) (1,120) Total income tax expense 44,018 41,586

* Other includes the non-taxable gain on disposal of subsidiaries

128 Jardine Lloyd Thompson Group plc Annual Report 2016

9. EARNINGS PER SHARE 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 OVERVIEW 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. 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 STRATEGIC REPORT options carrying unconditional dividend equivalent rights. 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 2015 No. of shares No. of shares restated Weighted average number of shares 210,455,334 210,767,437

Effect of outstanding share options 5,210,752 4,172,293 CORPORATE GOVERNANCE Adjusted weighted average number of shares 215,666,086 214,939,730

2016 £’000 £’000 £’000 Pence Pence Adjusted earnings for basic Basic Diluted earnings per earnings earnings Earnings Adjustments2 share per share per share Underlying profit after taxation and non-controlling interests1 110,910 (175) 110,735 52.6 51.4 Exceptional items before tax (37,689) FINANCIAL STATEMENTS Taxation thereon 8,245 (29,444) 45 (29,399) (14.0) (13.6) Profit attributable to the owners of the parent 81,466 (130) 81,336 38.6 37.8

2015 £’000 £’000 £’000 Pence Pence Adjusted earnings Basic Diluted for basic earnings earnings earnings per per share per share Earnings Adjustments2 share restated restated SHAREHOLDER INFORMATION Underlying profit after taxation and non-controlling interests1 112,290 (782) 111,508 52.9 52.2 Exceptional items before tax (15,105) Taxation thereon 5,914 (9,191) 63 (9,128) (4.3) (4.2) Profit attributable to the owners of the parent 103,099 (719) 102,380 48.6 48.0

1 Underlying excludes exceptional items

2 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 FINANCIAL STATEMENTS

10. DIVIDENDS 2016 2015 £’000 £’000 Final dividend in respect of 2015 of 19.5p per share (2014: 18.3p) 42,713 40,141 Less: adjustment* (200) (164) 42,513 39,977 Interim dividend in respect of 2016 of 11.6p per share (2015: 11.1p) 25,449 24,507 67,962 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 Gross Impairment Net carrying amount losses amount £’000 £’000 £’000 At 31 December 2016 Opening net book amount 500,434 (4,268) 496,166 Exchange differences 47,380 (355) 47,025 Impairment - (481) (481) Acquisitions 17,854 - 17,854 Disposals (17,551) - (17,551) Closing net book amount 548,117 (5,104) 543,013 At 31 December 2015 Opening net book amount 480,176 (4,479) 475,697 Exchange differences (2,266) 211 (2,055) Acquisitions 23,239 - 23,239 Disposals (715) - (715) Closing net book amount 500,434 (4,268) 496,166

130 Jardine Lloyd Thompson Group plc Annual Report 2016

11. GOODWILL CONTINUED IMPAIRMENT TESTS FOR GOODWILL

Goodwill is allocated to the Group’s cash generating units (CGUs) identified according to country of operation and business segment. A summary OVERVIEW of the goodwill allocation is presented below.

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:

Key assumptions Net carrying Growth Discount amount rate (1) rate (2) £’000 % % At 31 December 2016 STRATEGIC REPORT JLT Re 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% At 31 December 2015 JLT Re 161,767 2.13% 7.36% CORPORATE GOVERNANCE 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%

1) Average growth rate used to extrapolate cash flows beyond five years. 2) Pre-tax discount rate applied to the cash flow projections. FINANCIAL STATEMENTS The key assumptions used in value-in-use calculations were: 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: 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. 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.

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 FINANCIAL STATEMENTS

12. OTHER INTANGIBLE ASSETS Capitalised employment Computer contract software payments Other Total £’000 £’000 £’000 £’000 At 31 December 2016 Opening net book amount 61,883 25,902 16,538 104,323 Exchange differences 1,234 1,157 1,783 4,174 Reclassification - (455) 455 - Additions 20,342 7,682 2,191 30,215 Companies acquired 3 - 3,921 3,924 Companies disposed (3,590) - (187) (3,777) Amortisation charge (19,813) (14,952) (2,131) (36,896) Closing net book value 60,059 19,334 22,570 101,963

At 31 December 2016 Cost 175,155 61,424 33,573 270,152 Accumulated amortisation and impairment (115,096) (42,090) (11,003) (168,189) Closing net book amount 60,059 19,334 22,570 101,963

At 31 December 2015 Opening net book amount 55,353 16,005 15,137 86,495 Exchange differences (231) 213 (152) (170) Additions 23,884 22,056 - 45,940 Companies acquired 48 - 3,320 3,368 Amortisation charge (17,171) (12,372) (1,767) (31,310) Closing net book value 61,883 25,902 16,538 104,323

At 31 December 2015 Cost 159,357 54,892 25,846 240,095 Accumulated amortisation and impairment (97,474) (28,990) (9,308) (135,772) Closing net book amount 61,883 25,902 16,538 104,323

At 31 December 2014 Cost 135,451 36,039 22,878 194,368 Accumulated amortisation and impairment (80,098) (20,034) (7,741) (107,873) Closing net book amount 55,353 16,005 15,137 86,495

Additions to computer software during 2016 include £18,097,000 of capitalised costs in respect of internal developments (2015: £20,523,000).

132 Jardine Lloyd Thompson Group plc Annual Report 2016

13. PROPERTY, PLANT AND EQUIPMENT

Land & Leasehold Furniture & Motor buildings improvements equipment vehicles Total

£’000 £’000 £’000 £’000 £’000 OVERVIEW At 31 December 2016 Opening net book amount 18 46,035 14,618 2,496 63,167 Exchange differences 2 3,094 2,112 359 5,567 Additions - 4,667 3,955 934 9,556 Companies acquired - 66 116 69 251 Companies disposed - (377) (121) (269) (767) Disposals - (168) (303) (447) (918) Depreciation charge - (6,161) (5,360) (1,005) (12,526) Closing net book amount 20 47,156 15,017 2,137 64,330 STRATEGIC REPORT

At 31 December 2016 Cost 74 93,572 95,805 5,936 195,387 Accumulated depreciation (54) (46,416) (80,788) (3,799) (131,057) Closing net book amount 20 47,156 15,017 2,137 64,330

At 31 December 2015 Opening net book amount 210 43,660 14,163 3,372 61,405 Exchange differences 2 (498) (574) (197) (1,267) Additions - 8,050 6,039 1,094 15,183

Companies acquired - 452 345 13 810 CORPORATE GOVERNANCE Companies disposed - - (22) - (22) Disposals (193) (166) (368) (615) (1,342) Depreciation charge (1) (5,463) (4,965) (1,171) (11,600) Closing net book amount 18 46,035 14,618 2,496 63,167

At 31 December 2015 Cost 63 88,093 88,076 5,769 182,001 Accumulated depreciation (45) (42,058) (73,458) (3,273) (118,834) Closing net book amount 18 46,035 14,618 2,496 63,167

At 31 December 2014

Cost 365 82,333 85,400 6,493 174,591 FINANCIAL STATEMENTS Accumulated depreciation (155) (38,673) (71,237) (3,121) (113,186) Closing net book amount 210 43,660 14,163 3,372 61,405

The net book amount of property, plant and equipment held under finance leases is as follows:

2016 2015 £’000 £’000 Furniture, equipment and motor vehicles 777 650 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 % of % of business/country of ownership ownership Nature of Measurement incorporation interest (2016) interest (2015) the relationship method

Milestone (Siaci Saint Honoré) France - - Note 1 Equity

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

Siaci 2016 2015 £’000 £’000 Revenue - 54,820 Depreciation and amortisation - (2,132) Interest income - 1,018 Interest expense - (73) Profit from continuing operations - 22,078 Income tax expense - (7,200) Profit after tax from continuing operations - 14,878 Other comprehensive income - - Total comprehensive income - 14,878

Reconciliation of summarised financial information Reconciliation of the summarised financial information presented to the carrying amount of its interest in associates.

Siaci Others Total 2016 2015 2016 2015 2016 2015 £’000 £’000 £’000 £’000 £’000 £’000 Opening net assets - 203,594 35,072 30,176 35,072 233,770 Disposal during the year - (208,416) - - - (208,416) Profit for the year - 14,878 1,330 6,671 1,330 21,549 Other comprehensive income - - - 167 - 167 Dividends - - (4,592) (2,306) (4,592) (2,306) Change in non-controlling interests - (491) - 90 - (401) Capital increase - - 2,854 1,677 2,854 1,677 Exchange differences - (9,565) 4,663 (1,403) 4,663 (10,968) Closing net assets - - 39,327 35,072 39,327 35,072 Carrying value - - 50,928 41,180 50,928 41,180

134 Jardine Lloyd Thompson Group plc Annual Report 2016

15. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Available-for-sale financial assets are categorised into one of two categories:

1. Investments and deposits, consist mainly of fixed term deposits, bonds and certificates of deposit. These investments are held at fair value OVERVIEW and are classified between current and non-current assets according to the maturity date.

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.

Other Investments investments & deposits Total £’000 £’000 £’000 At 1 January 2016 6,436 9,049 15,485 Exchange differences 984 10,983 11,967 Additions - 107,636 107,636 STRATEGIC REPORT Companies disposed 6,301 - 6,301 Disposals/maturities (311) (20) (331) Revaluation deficit (included within equity) - 11 11 Amounts to be written off (331) - (331) At 31 December 2016 13,079 127,659 140,738

Analysis of available-for-sale financial assets Current - 116,933 116,933 Non-current 13,079 10,726 23,805

At 31 December 2016 13,079 127,659 140,738 CORPORATE GOVERNANCE

Analysis of available-for-sale investments & deposits Fiduciary funds 127,358 Own funds 301 At 31 December 2016 127,659

At 1 January 2015 4,746 9,642 14,388 Exchange differences 194 (571) (377) Additions 1,964 5,081 7,045 Disposals/maturities (243) (5,099) (5,342) Revaluation gain/(deficit) (included within equity) (82) (4) (86) Amounts to be written off (143) - (143) FINANCIAL STATEMENTS At 31 December 2015 6,436 9,049 15,485

Analysis of available-for-sale financial assets Current - 19 19 Non-current 6,436 9,030 15,466 At 31 December 2015 6,436 9,049 15,485

Analysis of available-for-sale investments & deposits Fiduciary funds 8,894 Own funds 155 At 31 December 2015 9,049 SHAREHOLDER INFORMATION

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:

2016 2015 £’000 £’000 AA 49,621 4,133 AA/A 37,297 - A 19,932 4,916 BBB 20,809 - Total 127,659 9,049

Jardine Lloyd Thompson Group plc Annual Report 2016 135 FINANCIAL STATEMENTS

16. DERIVATIVE FINANCIAL INSTRUMENTS At 31 December 2016 At 31 December 2015 Assets Liabilities Assets Liabilities £’000 £’000 £’000 £’000 Interest rate swaps - fair value hedges 32,740 (3,477) 11,654 (5,490) Forward foreign exchange contracts - cash flow hedges 92,233 (69,674) 23,574 (11,725) Redemption liabilities - option contracts - (29,637) - (22,626) Total 124,973 (102,788) 35,228 (39,841) Current 7,930 (33,136) 1,544 (6,115) Non-current 117,043 (69,652) 33,684 (33,726) Total 124,973 (102,788) 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:

2016 2015 £’000 £’000 AA 73,169 16,419 AA/A 9,374 2,973 BBB 42,430 15,836 Total 124,973 35,228

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.

Less than Greater than 1 year 1 year At 31 December 2016 £’000 £’000 Forward foreign exchange contracts Outflow (477,260) (719,936) Inflow 443,578 755,747

Less than Greater than 1 year 1 year At 31 December 2015 £’000 £’000 Forward foreign exchange contracts Outflow (275,406) (442,156) Inflow 269,827 461,276

The Group’s treasury policies are approved by the Board outstanding as at 31 December 2016 will be released revenue, with a corresponding impact on trading profit and are implemented by a centralised treasury department. to the income statement at various dates up to: equal to approximately 70% of the revenue change. The treasury department operates within a framework of i) 47 months in respect of cash flow hedges on b) Interest rate swaps policies and procedures that establish specific guidelines currency denominated UK earnings. to manage currency risk, liquidity risk and interest rate risk The Group uses interest rate hedges, principally interest and the use of counterparties and financial instruments to ii) 13 years in respect of specific hedges on USD rate swaps, to mitigate the impact of changes in interest manage these risks. The treasury department is subject to denominated long-term debt drawn under the rates. The notional principal amount of outstanding periodic review by internal audit. Group’s USD private placement programme. cross currency interest rate swaps as at 31 December iii) 10 years in respect of interest rate hedges on 2016 was USD500,000,000 and £75,000,000 (2015: The Group uses various derivative instruments including USD500,000,000 and £75,000,000). A net gain of £29.3 forward foreign exchange contracts, interest rate swaps sterling denominated long-term debt drawn under the Group’s private placement programme. million (2015: net gain £6.2 million) on these instruments and, from time to time, foreign currency collars and options was offset by a fair value loss of £29.3 million (2015: loss to manage the risks arising from variations in currency No material amounts were transferred to the income £6.2 million) on the private placement loans, both of which and interest rates. Derivative instruments purchased are statement during the year in respect of the fair value were recognised in the income statement in the year. primarily denominated in the currencies of the Group’s of financial derivatives. main markets. c) Redemption liabilities Transactions maturing within 12 months of the balance Where forward foreign exchange contracts have been sheet date are classified in current maturities. Transactions The redemption liabilities represent the valuation of the entered into to manage currency risk, they are designated maturing in a period in excess of 12 months of the balance put options provided in the shareholders agreements as hedges of currency risk on specific future cash flows, sheet date are classified as non-current maturities. of JLT Specialty Insurance Services Inc., JLT Sigorta ve and qualify as highly probable transactions for which hedge Reasurans Brokerligi Ltd Sirketi and JLT SCK Corretora accounting is applied. The Group anticipates that hedge a) Forward foreign exchange contracts e Administradora de Seguros Ltda. Fair value of these accounting requirements will continue to be met on its The Group’s major currency transaction exposure arises liabilities resulted in an expense of £699,000 which foreign currency and interest rate hedging activities and that in USD and the Group continues to adopt a prudent was recognised in the income statement in the year. no material ineffectiveness will arise which will result in gains approach in actively managing this exposure. As at 31 d) Price risk or losses being recognised through the income statement. December 2016 the Group had outstanding foreign exchange contracts, principally in USD, amounting to a The Group does not have a material exposure The fair value of financial derivatives based upon market principal value of £1,199,325,000 (2015: £731,103,000). to commodity price risk. values as at 31 December 2016 and designated as effective cash flow hedges was a net asset of £22.6 million As a guide, each 1 cent movement in the achieved The maximum exposure to credit risk at the reporting and has been deferred in equity (2015: net asset of £11.8 rate (taking into account the hedges in place) currently date is the fair value of the derivatives in the balance sheet. million). Gains and losses arising on derivative instruments translates into a change of approximately £1.8 million in

136 Jardine Lloyd Thompson Group plc Annual Report 2016

17. TRADE AND OTHER RECEIVABLES 2016 2015 £’000 £’000

Trade receivables 440,941 368,215 OVERVIEW Less: provision for impairment of trade receivables (20,961) (15,018) Trade receivables - net 419,980 353,197 Other receivables 143,703 152,282 Prepayments 24,957 23,116 588,640 528,595

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 non- performance by trade counterparties that have not been provided for. STRATEGIC REPORT Movements on the Group provision for impairment of trade receivables are as follows:

2016 2015 £’000 £’000 At 1 January (15,018) (10,724) Currency translation adjustments (1,483) (26) Companies acquired (243) (28) Provisions for impairment of trade receivables (8,355) (9,849) Receivables written off during the year as uncollectible 2,980 2,499 Unused amounts reversed 1,158 3,110

At 31 December (20,961) (15,018) CORPORATE GOVERNANCE

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.

Trade Provision for Net trade receivables impairment receivables At 31 December 2016 £’000 £’000 £’000 Not overdue 324,227 - 324,227 Past due not more than three months 75,419 (805) 74,614

Past due more than three months and not more than six months 16,797 (2,377) 14,420 FINANCIAL STATEMENTS Past due more than six months and not more than one year 12,684 (5,965) 6,719 Past due more than one year 11,814 (11,814) - 440,941 (20,961) 419,980

Trade Provision for Net trade receivables impairment receivables At 31 December 2015 £’000 £’000 £’000 Not overdue 270,706 - 270,706 Past due not more than three months 60,212 (539) 59,673 Past due more than three months and not more than six months 19,002 (2,600) 16,402

Past due more than six months and not more than one year 8,512 (2,975) 5,537 SHAREHOLDER INFORMATION Past due more than one year 9,783 (8,904) 879 368,215 (15,018) 353,197

Jardine Lloyd Thompson Group plc Annual Report 2016 137 FINANCIAL STATEMENTS

18. CASH AND CASH EQUIVALENTS

2016 2015 £’000 £’000 Cash at bank and in hand 514,474 463,665 Short-term bank deposits 425,471 437,422 939,945 901,087

Fiduciary funds 748,628 737,676 Own funds 191,317 163,411 939,945 901,087

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:

2016 2015 £’000 £’000 AAA 10,685 12,237 AA 318,613 336,311 AA/A 125,247 112,869 A 146,111 107,744 BBB 322,953 327,567 Other 16,336 4,359 Total 939,945 901,087

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 2016 2015 £’000 £’000 Insurance payables 875,986 746,570 Social security and other taxes 18,735 17,161 Other payables 198,156 166,880 Accruals and deferred income 137,408 137,905 Deferred and contingent consideration 27,497 17,762 1,257,782 1,086,278

All payables are considered current as the non-current portion is not material.

138 Jardine Lloyd Thompson Group plc Annual Report 2016

20. FINANCIAL INSTRUMENTS BY CATEGORY The accounting policies for financial instruments have been applied to the line items below: Derivatives

Loans and used for Available- OVERVIEW At 31 December 2016 receivables hedging for-sale Total Assets per balance sheet £’000 £’000 £’000 £’000 Available-for-sale financial assets - - 140,738 140,738 Derivative financial instruments - 124,973 - 124,973 Trade and other receivables (a) 563,683 - - 563,683 Cash and cash equivalents 939,945 - - 939,945 Total 1,503,628 124,973 140,738 1,769,339

Derivatives Other

used for financial STRATEGIC REPORT hedging liabilities Total Liabilities per balance sheet £’000 £’000 £’000 Borrowings - (687,832) (687,832) Trade and other payables (b) - (1,120,374) (1,120,374) Redemption liabilities - option contracts (29,637) - (29,637) Derivative financial instruments (73,151) - (73,151) Total (102,788) (1,808,206) (1,910,994)

Derivatives Loans and used for Available- At 31 December 2015 receivables hedging for-sale Total CORPORATE GOVERNANCE Assets per balance sheet £’000 £’000 £’000 £’000 Available-for-sale financial assets - - 15,485 15,485 Derivative financial instruments - 35,228 - 35,228 Trade and other receivables (a) 505,479 - - 505,479 Cash and cash equivalents 901,087 - - 901,087 Total 1,406,566 35,228 15,485 1,457,279

Derivatives Other used for financial hedging liabilities Total Liabilities per balance sheet £’000 £’000 £’000

Borrowings - (603,582) (603,582) FINANCIAL STATEMENTS Trade and other payables (b) - (948,373) (948,373) Redemption liabilities - option contracts (22,626) - (22,626) Derivative financial instruments (17,215) - (17,215) Total (39,841) (1,551,955) (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. 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.

Level 1 Level 2 Level 3 Total At 31 December 2016 £’000 £’000 £’000 £’000 Assets Derivatives used for hedging - 124,973 - 124,973 Available-for-sale financial assets - equity securities - - 1,115 1,115 - debt investments - - 11,964 11,964 - fixed deposits 127,659 - - 127,659 Total 127,659 124,973 13,079 265,711

Liabilities Deferred and contingent consideration - - (27,497) (27,497) Redemption liabilities - option contracts - - (29,637) (29,637) Derivatives used for hedging - (73,151) - (73,151) Total - (73,151) (57,134) (130,285)

Level 1 Level 2 Level 3 Total At 31 December 2015 £’000 £’000 £’000 £’000 Assets Derivatives used for hedging - 35,228 - 35,228 Available-for-sale financial assets - equity securities 311 - 1,312 1,623 - debt investments - - 4,813 4,813 - fixed deposits 9,049 - - 9,049 Total 9,360 35,228 6,125 50,713

Liabilities Deferred and contingent consideration - - (17,762) (17,762) Redemption liabilities - option contracts - - (22,626) (22,626) Derivatives used for hedging - (17,215) - (17,215) Total - (17,215) (40,388) (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.

140 Jardine 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.

Instruments included in level 3 are financial instruments for which one or more of the significant inputs is not based on observable market data. OVERVIEW 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 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%.

A reconciliation of the movements in level 3 is provided below:

Assets Liabilities Level 3 Level 3 £’000 £’000 At 1 January 2016 6,125 (40,388) Exchange differences 984 (8,509) STRATEGIC REPORT Companies disposed 6,301 - Companies acquired - (12,686) Utilised in the year - 6,686 Charged to income statement (331) (2,237) At 31 December 2016 13,079 (57,134)

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 2016 2015 £’000 £’000 Current Bank overdraft 18,223 21,702 Unsecured loan notes 35,980 - Bank borrowings 243 418 Finance lease liabilities 283 218 54,729 22,338 Non Current Unsecured loan notes 471,975 419,394 Bank borrowing 160,629 161,435 Finance lease liabilities 499 415 633,103 581,244 Total borrowings 687,832 603,582

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 6-12 1-5 Over or less months years 5 years Fixed rate Total £’000 £’000 £’000 £’000 £’000 £’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:

2016 2015 £’000 £’000 Bank overdraft - - Unsecured loan notes - private placement 2.69% 2.84% Bank borrowings 1.34% 1.53% Finance lease liabilities 9.96% 8.14%

142 Jardine Lloyd Thompson Group plc Annual Report 2016

21. BORROWINGS CONTINUED Maturity of non-current borrowings (excluding finance lease liabilities): 2016 2015 £’000 £’000 OVERVIEW Between 1 and 2 years - 30,220 Between 2 and 3 years 2 6 Between 3 and 4 years 67,386 - Between 4 and 5 years 160,626 56,092 Over 5 years 404,590 494,511 632,604 580,829

Finance lease liabilities - minimum lease payments: STRATEGIC REPORT 2016 2015 £’000 £’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 Future finance charges on finance leases (106) (79)

Present value of finance lease liabilities 782 633 CORPORATE GOVERNANCE

The present value of finance lease liabilities is as follows:

2016 2015 £’000 £’000 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. 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:

2016 2015 £’000 £’000 Sterling 264,657 263,729 US Dollar 422,148 338,796 Other currencies 1,027 1,057 687,832 603,582

Borrowing facilities The Group has undrawn committed borrowing facilities of: 2016 2015 £’000 £’000 Floating rate - expiring beyond one year 337,000 336,000

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.

144 Jardine Lloyd Thompson Group plc Annual Report 2016

22. DEFERRED INCOME TAXES

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 OVERVIEW and when the deferred income taxes relate to the same fiscal authority.

The following amounts, determined after appropriate offsetting, are shown in the consolidated balance sheet.

Assets Liabilities Net 2016 2015 2016 2015 2016 2015 £’000 £’000 £’000 £’000 £’000 £’000 Property, plant and equipment 1,555 2,105 (554) (746) 1,001 1,359 Provisions 15,937 11,588 (5,273) (910) 10,664 10,678 Losses 1,858 2,986 - - 1,858 2,986 Deferred income 879 285 (5,386) (8,619) (4,507) (8,334) STRATEGIC REPORT Other intangibles 3,052 2,436 (616) (48) 2,436 2,388 Goodwill 298 237 (3,046) (6,024) (2,748) (5,787) Other 3,407 7,033 (1,826) (2,933) 1,581 4,100 Pensions 32,532 22,125 (131) (93) 32,401 22,032 Share based payments 4,858 6,554 - - 4,858 6,554 Fair values 11,166 - - (1,931) 11,166 (1,931) Tax assets/(liabilities) 75,542 55,349 (16,832) (21,304) 58,710 34,045 Set off of tax (5,454) (4,326) 5,454 4,326 - - Net tax assets/(liabilities) 70,088 51,023 (11,378) (16,978) 58,710 34,045

The majority of the deferred tax is not expected to reverse within 12 months. CORPORATE GOVERNANCE

At 1 Credit/ Credit/ Acquisitions/ At 31 January Exchange (charge) (charge) disposals December 2016 differences to income to equity of sub 2016 £’000 £’000 £’000 £’000 £’000 £’000 Accelerated tax depreciation 1,359 (204) (154) - - 1,001 Provisions 10,678 58 (79) - 7 10,664 Losses 2,986 44 (1,172) - - 1,858 Deferred income (8,334) 3,241 586 - - (4,507) Other intangibles 2,388 454 (102) - (304) 2,436 Goodwill (5,787) 3,446 (407) - - (2,748) Other 4,100 (4,534) 2,015 - - 1,581 FINANCIAL STATEMENTS Pensions 22,032 7 828 9,534 - 32,401 Share based payments 6,554 - (1,163) (533) - 4,858 Fair values (1,931) - - 13,097 - 11,166 Net tax assets 34,045 2,512 352 22,098 (297) 58,710

The total current and deferred income tax charged to equity during the year is as follows:

At 1 January Credit/(charge) At 31 December 2016 to equity 2016 £’000 £’000 £’000

Pensions 34,351 11,850 46,201 SHAREHOLDER INFORMATION Share based payments 12,033 (222) 11,811 Fair values: - foreign exchange (16) 13,196 13,180 - available-for-sale (30) 199 169 (46) 13,395 13,349 46,338 25,023 71,361

Jardine Lloyd Thompson Group plc Annual Report 2016 145 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 Litigation provisions provisions Other Total £’000 £’000 £’000 £’000 At 1 January 2016 1,300 18,223 114 19,637 Exchange differences 94 230 - 324 Utilised in the year (349) (16,328) - (16,677) Charged/(credited) to the income statement 1,984 5,326 (78) 7,232 Companies disposed (110) (9) - (119) At 31 December 2016 2,919 7,442 36 10,397

At 1 January 2015 4,881 5,570 362 10,813 Exchange differences 19 30 - 49 Reclassification from current liabilities 462 - - 462 Utilised in the year (3,372) (3,710) (8) (7,090) Credited/(charged) to the income statement (690) 16,333 (240) 15,403 At 31 December 2015 1,300 18,223 114 19,637

2016 2015 £’000 £’000 Analysis of total provisions Current - to be utilised within one year 8,826 18,594 Non-current - to be utilised in more than one year 1,571 1,043 10,397 19,637

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.

146 Jardine Lloyd Thompson Group plc Annual Report 2016

23. PROVISIONS FOR LIABILITIES AND CHARGES CONTINUED

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 OVERVIEW 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 Other provisions include provisions for clawback of commission which arises on certain types of Employee Benefits contracts.

24. SHARE CAPITAL AND PREMIUM

Ordinary Share STRATEGIC REPORT Number of shares premium Total shares £’000 £’000 £’000 Allotted, called up and fully paid At 1 January 2015 220,136,567 11,006 103,941 114,947 Issued during the year 34,440 2 133 135 At 31 December 2015 220,171,007 11,008 104,074 115,082 Issued during the year 10,000 - 37 37 At 31 December 2016 220,181,007 11,008 104,111 115,119

Ordinary shares carry rights to dividends, voting and proceeds on winding up and have a par value of £0.05.

During the year the Company issued 10,000 (2015: 34,440) ordinary shares for a consideration of £38,250 (2015: £134,532) following exercises CORPORATE GOVERNANCE by executives of options held under the Jardine Lloyd Thompson Group plc Executive Share Option Scheme.

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.

Set out below is the summarised financial information for PCS. FINANCIAL STATEMENTS

Summarised Balance Sheet 2016 2015 £’000 £’000 Current Assets 62,294 49,451 Liabilities (34,218) (28,535) Total 28,076 20,916 Non-current Assets 3,152 2,998 Liabilities (316) (312) SHAREHOLDER INFORMATION Total 2,836 2,686 Net assets 30,912 23,602

Jardine Lloyd Thompson Group plc Annual Report 2016 147 FINANCIAL STATEMENTS

25. NON-CONTROLLING INTERESTS CONTINUED Summarised Statement of Comprehensive Income 2016 2015 £’000 £’000 Revenue 64,018 55,357 Profit for the year 20,663 18,195 Other comprehensive income 550 95 Total comprehensive income for the year 21,213 18,290

Total comprehensive income attributable to non-controlling interests 5,166 4,575 Dividends paid to non-controlling interests 2,229 4,289

Summarised Statement of Cash Flows 2016 2015 £’000 £’000 Net cash generated from operating activities 19,897 34,522 Net cash used in investing activities (291) (1,403) Net cash used in financing activities (18,348) (17,340) Net increase in cash and cash equivalents 1,258 15,779

The information above is the amount before inter-company eliminations.

26. OTHER RESERVES Share Fair value Exchange premium and hedging reserves Total £’000 £’000 £’000 £’000 At 1 January 2016 104,074 (12,827) (17,280) 73,967 Fair value gains/(losses) net of tax: - available-for-sale - 42 - 42 - available-for-sale reclassified to the income statement - (181) - (181) - cash flow hedges - (41,487) - (41,487) Currency translation differences - - 100,841 100,841 Net (losses)/gains recognised directly in equity - (41,626) 100,841 59,215 Issue of share capital 37 - - 37 At 31 December 2016 104,111 (54,453) 83,561 133,219

Share Fair value and Exchange premium hedging reserves Total £’000 £’000 £’000 £’000 At 1 January 2015 103,941 (234) (5,033) 98,674 Fair value (losses)/gains net of tax: - available-for-sale - (34) - (34) - available-for-sale reclassified to the income statement - 10 - 10 - cash flow hedges - (12,569) - (12,569) Currency translation differences - - (12,247) (12,247) Net losses recognised directly in equity - (12,593) (12,247) (24,840) Issue of share capital 133 - - 133 At 31 December 2015 104,074 (12,827) (17,280) 73,967

148 Jardine 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 2016 2015 £’000 £’000 Profit before taxation 134,880 155,027 Investment and finance income (6,877) (5,301) Interest payable on bank loans and finance leases 17,491 16,782

Fair value (gains)/losses on available-for-sale financial assets (87) 41 STRATEGIC REPORT Net pension financing expenses 4,872 6,124 Unwinding of liability discounting 1,862 1,567 Depreciation 12,526 11,600 Amortisation of other intangible assets 36,896 31,310 Amortisation of share based payments 24,892 20,075 Share of results of associates’ undertakings (1,353) (5,531) Non cash exceptional items 5,294 21,959 Losses on disposal of businesses 1,660 527 (Gains)/losses on disposal of property, plant and equipment (10) 60 Losses on disposal of available-for-sale financial assets 8 72 Gain on sale of associates - (19,142) CORPORATE GOVERNANCE Increase in trade and other receivables (67,160) (23,475) Increase in trade and other payables - excluding insurance broking balances 24,788 22,539 Decrease in provisions for liabilities and charges (12,440) (7,833) Decrease in retirement benefit obligations (10,530) (11,021) Net cash inflow from operations 166,712 215,380 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.

Change in estimated consideration Consideration impacting Consideration Paid during at 31 Dec 15 goodwill at 31 Dec 2016 the year Revisions to contingent consideration during the year £'000 £'000 £'000 £'000 Ingham Holdings Limited 1,577 (1,577) - - Keenan Insurances (Ireland) 46 (46) - - 1,623 (1,623) - -

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.

Provisional fair value Revised fair reported at Change in fair value acquired 31 Dec 2015 value £'000 £'000 £'000 Close Brothers Asset Management (Close brothers) 491 580 (89) Pierre Leblanc & Associés SAS (PL&A) 1,127 990 137 1,618 1,570 48

These changes in fair value affected the following balance sheet classes: Provisional fair value Revised fair reported at Change in value acquired 31 Dec 2015 fair value £’000 £’000 £’000 Property, plant and equipment 43 4 39 Other intangible assets 1,068 1,068 - Trade and other receivables 713 713 - Cash and cash equivalents - own cash 511 511 - - fiduciary cash 2,218 2,218 - Insurance payables (2,218) (2,218) - Trade and other payables (793) (704) (89) Current taxation 76 (22) 98 1,618 1,570 48

At At 31 Dec 2016 31 Dec 2015 Change Goodwill calculation £’000 £’000 £’000 Purchase consideration - cash paid 6,030 6,030 - - contingent consideration 717 717 - - deferred consideration 248 248 - Total purchase consideration 6,995 6,995 - Less: fair value of net assets acquired 1,618 1,570 48 Goodwill 5,377 5,425 (48)

150 Jardine Lloyd Thompson Group plc Annual Report 2016

29. BUSINESS COMBINATIONS CONTINUED

At At OVERVIEW 31 Dec 2016 31 Dec 2015 Change £’000 £’000 £’000 Purchase consideration settled in cash 6,030 6,030 - Cash and cash equivalents - own cash in subsidiaries acquired (511) (511) - 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 -

Current year acquisitions

During the year the following new business acquisitions and additional investments were completed: STRATEGIC REPORT Percentage Acquisition voting rights Cost Notes date acquired £’000 Broderick Piller Pty Ltd (Workwise) i May 2016 100% 7,135 Stonehill Reinsurance Partners, LLC (Stonehill) ii Dec 2016 100% 8,790 Acquisition of other new businesses completed during the year iii Jan - Dec 2016 various 9,392 Additional investments in existing businesses iv Jan - Dec 2016 various 5,489 30,806

i) Acquisition of Broderick Piller Pty Ltd (Workwise) CORPORATE GOVERNANCE 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.

Goodwill calculation £’000 Purchase consideration - cash paid 4,415 - contingent consideration 2,720 Total purchase consideration 7,135

Less: fair value of net assets acquired 1,258 FINANCIAL STATEMENTS Goodwill 5,877

The assets and liabilities arising from the acquisition were as follows: Acquiree’s carrying amount Fair value £’000 £’000 Property, plant and equipment 59 59 Other intangible assets 3 606 Trade and other receivables 277 277 Cash and cash equivalents

- own cash 497 497 SHAREHOLDER INFORMATION Deferred taxation (181) (181) 655 1,258

£’000 Purchase consideration settled in cash 4,415 Cash and cash equivalents - own cash in subsidiary acquired (497) Cash outflow on acquisition 3,918

Jardine Lloyd Thompson Group plc Annual Report 2016 151 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 £’000 Purchase consideration - cash paid 2,657 - contingent consideration 6,133 Total purchase consideration 8,790 Less: fair value of net assets acquired 2,085 Goodwill 6,705

The assets and liabilities arising from the acquisition were as follows: Acquiree’s carrying Fair value amount £’000 Property, plant and equipment 141 141 Other intangible assets - 1,626 Trade and other receivables 243 243 Cash and cash equivalents - own cash 1,015 1,015 - fiduciary cash 1,098 1,098 Insurance creditors (1,098) (1,098) Trade and other payables (940) (940) 459 2,085

£’000 Purchase consideration settled in cash 2,657 Cash and cash equivalents - own cash in subsidiary acquired (1,015) 1,642 Cash and cash equivalents - fiduciary cash in subsidiary acquired (1,098) Cash outflow on acquisition 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.

152 Jardine Lloyd Thompson Group plc Annual Report 2016

29. BUSINESS COMBINATIONS CONTINUED

iii) Other acquisitions and additional investments OVERVIEW

Goodwill calculation £’000 Purchase consideration - cash paid 9,315 - contingent consideration 4,641 - deferred consideration 815 - cancellation of loans 110 Total purchase consideration 14,881 Less fair value of net assets acquired 3,608 STRATEGIC REPORT Less equity movement on transactions with non-controlling interests 4,330 Goodwill 6,943

The assets and liabilities arising from acquisitions were as follows: Acquiree’s carrying Fair value amount £’000 Property, plant and equipment 12 12 Other intangible assets - 1,692 Trade and other receivables 846 846 Cash and cash equivalents CORPORATE GOVERNANCE - own cash 106 106 - fiduciary cash 290 290 Insurance payables (290) (290) Trade and other payables (64) (64) Current taxation (27) (27) Deferred taxation (116) (116) Non-controlling interests 1,159 1,159 1,916 3,608

£’000 Purchase consideration settled in cash 9,315

Cash and cash equivalents - own cash in subsidiary acquired (106) FINANCIAL STATEMENTS 9,209 Cash and cash equivalents - fiduciary cash in subsidiary acquired (290) Cash outflow on acquisition 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. 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: Workwise Stonehill Others Total £'000 £'000 £'000 £'000 Purchase consideration: - cash paid 4,415 2,657 9,315 16,387 - contingent consideration 2,720 6,133 4,641 13,494 - deferred consideration - - 815 815 - cancellation of loans - - 110 110 Total purchase consideration 7,135 8,790 14,881 30,806 Less fair value of net assets acquired 1,258 2,085 3,608 6,951 Less equity movement on transactions with non-controlling interests - - 4,330 4,330 Goodwill on acquisitions occurring during the year 5,877 6,705 6,943 19,525 Impact of revisions to deferred consideration (1,623) Impact of revision to fair value adjustment in relation to acquisitions completed in 2015 (48) Net increase in goodwill 17,854 Impact of additional investments 4,330 Net decrease in equity 4,330

Group summary of cash flows

Workwise Stonehill Others Total £'000 £'000 £'000 £'000 Purchase consideration settled in cash 4,415 2,657 9,315 16,387 Cash and cash equivalents - own cash in subsidiary acquired (497) (1,015) (106) (1,618) 3,918 1,642 9,209 14,769 Cash and cash equivalents - fiduciary cash in subsidiary acquired - (1,098) (290) (1,388) Total purchase consideration 3,918 544 8,919 13,381

154 Jardine Lloyd Thompson Group plc Annual Report 2016

30. BUSINESS DISPOSALS On 30 December 2016, the Group disposed of 100% of its shareholdings in Thistle Insurance Services Limited.

Net assets and proceeds of disposal OVERVIEW Fair value £’000 Goodwill 15,846 Property, plant and equipment 591 Other intangible assets 3,553 Trade and other receivables 13,410 Cash and cash equivalents - own cash 8,548 - fiduciary cash 9,196

Insurance payables (9,196) STRATEGIC REPORT Trade and other payables (2,202) Provisions for liabilities and charges (119) Net assets at disposal 39,627 Gain on disposal 3,438 Proceeds on disposal 43,065

Total £’000 Deferred proceeds 10,570 CORPORATE GOVERNANCE Cash inflow on disposal during the year 32,495 Total consideration 43,065

Total £’000 Disposal consideration settled in cash 32,495 Cash and cash equivalents - own cash in subsidiaries disposed - own cash in subsidiary sold (8,548) - fiduciary cash in subsidiary sold (9,196) Cash inflow on disposal during the year 14,751

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 FINANCIAL STATEMENTS 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. 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 1,705 Property, plant and equipment 176 Other intangible assets 224 Trade and other receivables 366 Cash and cash equivalents - own cash 494 - fiduciary cash 286 Insurance payables (286) Trade and other payables (894) Current taxation 90 Non-controlling interests (31) Net assets at disposal 2,130 Exchange gains recycled from exchange reserves 325 Equity movement on transactions with non-controlling interests 32 Loss on disposal (770) Proceeds on disposal 1,717

Total £’000 Deferred proceeds 547 Cash inflow on disposal during the year 1,170 Total consideration 1,717

Total £’000 Disposal consideration settled in cash 1,170 Cash and cash equivalents - own cash in subsidiaries disposed - own cash in subsidiary sold (494) - fiduciary cash in subsidiary sold (286) Cash inflow on disposal during the year 390

Including the cost on disposal of £844,000, the net loss is £1,614,000. Group summary of cash flows

Thistle Others Total £’000 £’000 £’000 Disposal consideration settled in cash 32,495 1,170 33,665 Cash and cash equivalents - own cash in subsidiaries disposed - own cash in subsidiary sold (8,548) (494) (9,042) - fiduciary cash in subsidiary sold (9,196) (286) (9,482) Cash inflow on disposal during the year 14,751 390 15,141

156 Jardine Lloyd Thompson Group plc Annual Report 2016

31. RETIREMENT BENEFIT OBLIGATIONS

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 OVERVIEW the Jardine Lloyd Thompson Ireland Limited Pension Fund. The pension service costs accrued for the year are as follows:

UK Schemes Overseas Schemes Total 2016 2015 2016 2015 2016 2015 £’000 £’000 £’000 £’000 £’000 £’000 Defined benefit schemes - - 487 2,630 487 2,630 Defined contribution schemes 20,824 21,265 19,254 15,723 40,078 36,988 20,824 21,265 19,741 18,353 40,565 39,618 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. 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. The principal overseas schemes are: 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 CORPORATE GOVERNANCE to an IRS maximum each year USD6,000 in 2016. 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. 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 FINANCIAL STATEMENTS on curtailment was recognised in 2016. 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. 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. SHAREHOLDER INFORMATION 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. 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 FINANCIAL STATEMENTS

31. RETIREMENT BENEFIT OBLIGATIONS CONTINUED

The principal actuarial assumptions used were as follows:

UK US Canadian Irish US Stable At 31 December 2016 Scheme Scheme Scheme Scheme Value Plan Rate of increase in salaries n/a n/a 3.25% n/a n/a Rate of increase of pensions in payment (a) 3.24% n/a 3.25% 3.00% n/a Discount rate (b) 2.80% 4.00% 3.90% 1.90% 3.35-3.40% Inflation rate 3.34% 2.00% 2.25% 1.50% 2.00% Revaluation rate for deferred pensioners 2.34% n/a n/a 1.50% n/a Mortality - life expectancy at age 65 for male members: (c) Aged 65 at 31 December (years) 21.8 21.3 22.0 22.8 21.3

UK US Canadian Irish US Stable At 31 December 2015 Scheme Scheme Scheme Scheme Value Plan Rate of increase in salaries n/a n/a 2.50% n/a n/a Rate of increase of pensions in payment (a) 2.82% n/a 3.25% 3.00% n/a Discount rate (b) 3.86% 4.20% 4.00% 2.50% 3.50-3.55% Inflation rate 2.92% 2.00% 2.25% 1.75% 2.00% Revaluation rate for deferred pensioners 1.92% n/a n/a 1.75% n/a Mortality - life expectancy at age 65 for male members: (c) Aged 65 at 31 December (years) 21.7 21.7 22.0 22.8 21.7 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 CPM- B1D2014. Mortality assumptions for the Irish Scheme, assume that deaths after retirement will be in accordance with standard mortality tables 90% 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:

Impact on defined benefit obligation Change in Change to assumptions obligation Discount rate decrease of 0.1% increase of 2.0% Inflation rate increase of 0.1% increase of 1.0% Life expectancy 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.

158 Jardine Lloyd Thompson Group plc Annual Report 2016

31. RETIREMENT BENEFIT OBLIGATIONS CONTINUED Defined benefit obligation UK Schemes Overseas Schemes Total OVERVIEW 2016 2015 2016 2015 2016 2015 £’000 £’000 £’000 £’000 £’000 £’000 Present value of funded obligations (674,029) (576,343) (72,315) (61,940) (746,344) (638,283) Fair value of plan assets 489,533 457,396 58,399 50,500 547,932 507,896 Net liability recognised in the balance sheet (184,496) (118,947) (13,916) (11,440) (198,412) (130,387)

Reconciliation of defined benefit liability UK Schemes Overseas Schemes Total 2016 2015 2016 2015 2016 2015 £’000 £’000 £’000 £’000 £’000 £’000 STRATEGIC REPORT Opening defined benefit liability (118,947) (162,620) (11,440) (16,415) (130,387) (179,035) Exchange differences - - (2,169) (396) (2,169) (396) Pension expense (4,778) (5,902) (1,274) (2,421) (6,052) (8,323) Employer contributions 10,952 11,117 886 3,101 11,838 14,218 Total (loss)/gain recognised in reserves (71,723) 38,458 81 4,691 (71,642) 43,149 Net liability recognised in the balance sheet (184,496) (118,947) (13,916) (11,440) (198,412) (130,387)

Reconciliation of defined benefit obligation UK Schemes Overseas Schemes Total 2016 2015 2016 2015 2016 2015 £’000 £’000 £’000 £’000 £’000 £’000 CORPORATE GOVERNANCE Opening defined benefit obligation (576,343) (641,759) (61,940) (78,044) (638,283) (719,803) Exchange differences - - (11,626) (870) (11,626) (870) Service cost - - (487) (2,630) (487) (2,630) Interest cost (21,435) (22,366) (2,502) (2,507) (23,937) (24,873) Curtailment gain - - 127 998 127 998 Settlement amount - - 1,315 5,773 1,315 5,773 (Loss)/gain on defined benefit obligation (121,841) 50,051 (1,120) 5,453 (122,961) 55,504 Actual benefit payments 45,590 37,731 3,918 9,887 49,508 47,618 Closing defined benefit obligation (674,029) (576,343) (72,315) (61,940) (746,344) (638,283)

Reconciliation of fair value of assets FINANCIAL STATEMENTS UK Schemes Overseas Schemes Total 2016 2015 2016 2015 2016 2015 £’000 £’000 £’000 £’000 £’000 £’000 Opening value of assets 457,396 479,139 50,500 61,629 507,896 540,768 Exchange differences - - 9,457 474 9,457 474 Expected return on assets 17,034 16,722 2,031 2,027 19,065 18,749 Actuarial gain/(loss) 50,118 (11,593) 1,201 (762) 51,319 (12,355) Employer contributions 10,952 11,117 886 3,101 11,838 14,218 Actual benefit payments (45,590) (37,731) (3,918) (9,887) (49,508) (47,618) Settlement amount - - (1,315) (5,773) (1,315) (5,773) Expenses (377) (258) (443) (309) (820) (567) SHAREHOLDER INFORMATION Closing value of assets 489,533 457,396 58,399 50,500 547,932 507,896

Jardine Lloyd Thompson Group plc Annual Report 2016 159 FINANCIAL STATEMENTS

31. RETIREMENT BENEFIT OBLIGATIONS CONTINUED

The analysis of the fair value of the scheme assets is as follows: UK Schemes Overseas Schemes Value Value Value Value At 31 December 2016 £’000 % £’000 % Equities 186,674 38% 34,795 60% Bonds - - 10,454 18% Investment funds 95,360 19% - - Qualifying insurance policies 205,719 42% - - Other assets - - 3,827 6% Cash 1,780 1% 9,323 16% Total market value 489,533 100% 58,399 100%

UK Schemes Overseas Schemes Value Value Value Value At 31 December 2015 £’000 % £’000 % Equities 174,843 38% 32,395 64% Bonds - - 14,848 30% Investment funds 99,079 22% - - Qualifying insurance policies 176,996 39% - - Other assets - - 2,656 5% Cash 6,478 1% 601 1% Total market value 457,396 100% 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 UK Schemes Overseas Schemes Total 2016 2015 2016 2015 2016 2015 £’000 £’000 £’000 £’000 £’000 £’000 Expected return on assets 17,034 16,722 2,031 2,027 19,065 18,749 Actuarial gain/(loss) 50,118 (11,593) 1,201 (762) 51,319 (12,355) Actual return on assets 67,152 5,129 3,232 1,265 70,384 6,394

The amounts recognised in the consolidated income statement are as follows:

UK Schemes Overseas Schemes Total 2016 2015 2016 2015 2016 2015 £’000 £’000 £’000 £’000 £’000 £’000

Service cost - - (487) (2,630) (487) (2,630) Settlement and curtailment gain - - 127 998 127 998 Expenses (377) (258) (443) (309) (820) (567) Total (included within salaries and associated expenses) (377) (258) (803) (1,941) (1,180) (2,199) Interest cost (21,435) (22,366) (2,502) (2,507) (23,937) (24,873) Expected return on assets 17,034 16,722 2,031 2,027 19,065 18,749 Total (included within finance costs) (4,401) (5,644) (471) (480) (4,872) (6,124) Expenses before taxation (4,778) (5,902) (1,274) (2,421) (6,052) (8,323)

160 Jardine Lloyd Thompson Group plc Annual Report 2016

31. RETIREMENT BENEFIT OBLIGATIONS CONTINUED

The amounts included in the consolidated statement of comprehensive income are as follows:

UK Schemes Overseas Schemes Total OVERVIEW 2016 2015 2016 2015 2016 2015 £’000 £’000 £’000 £’000 £’000 £’000 (Loss)/gain on defined benefit obligation (121,841) 50,051 (1,120) 5,453 (122,961) 55,504 Actuarial gain/(loss) 50,118 (11,593) 1,201 (762) 51,319 (12,355) Total actuarial (loss)/gain recognised (71,723) 38,458 81 4,691 (71,642) 43,149 Cumulative actuarial loss recognised (277,162) (205,439) (32,756) (32,837) (309,918) (238,276)

The five year history of experience adjustments is as follows:

UK Schemes STRATEGIC REPORT 2012 2016 2015 2014 2013 £’000 £’000 £’000 £’000 £’000 restated Defined benefit obligation at end of year (674,029) (576,343) (641,759) (583,745) (574,360) Fair value of plan assets 489,533 457,396 479,139 458,727 463,621 Deficit in the schemes (184,496) (118,947) (162,620) (125,018) (110,739)

Difference between the actual and expected return on plan assets - amount (£’000) 50,118 (11,593) 16,437 (22,217) 32,889

- expressed as a percentage of the plan assets 10.24% (2.53%) 3.43% (4.84%) 7.09% CORPORATE GOVERNANCE

Experience (gain)/loss on plan liabilities - amount (£’000) (7,009) (8,840) 1,592 1,364 11,890 - expressed as a percentage of the present value of the plan liabilities 1.04% 1.53% (0.25%) (0.23%) (2.07%)

Overseas Schemes 2012 2016 2015 2014 2013 £’000 £’000 £’000 £’000 £’000 restated Defined benefit obligation at end of year (72,315) (61,940) (78,044) (60,566) (68,937) Fair value of plan assets 58,399 50,500 61,629 54,957 48,285 Deficit in the schemes (13,916) (11,440) (16,415) (5,609) (20,652) FINANCIAL STATEMENTS

Difference between the actual and expected return on plan assets - amount (£’000) 1,201 (762) 2,450 6,863 3,034 - expressed as a percentage of the plan assets 2.06% (1.51%) 3.98% 12.49% 6.28%

Experience (gain)/loss on plan liabilities - amount (£’000) (4,450) (1,427) 1,265 377 (3,925) - expressed as a percentage of the present value of the plan liabilities 6.15% 2.30% (1.62%) (0.62%) 5.69% SHAREHOLDER INFORMATION The expected employer contributions in respect of the year ending 31 December 2017 are as follows: Defined benefit £’000 UK Scheme 15,500 Irish Scheme 892 Total expected contributions 16,392

Jardine Lloyd Thompson Group plc Annual Report 2016 161 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: 2016 2015 JMG JMA Total JMG JMA Total £’000 £’000 £’000 £’000 £’000 £’000 Income Fees and commissions 3,999 1,941 5,940 3,472 1,794 5,266 Expenditure Administrative expenses 1,598 - 1,598 1,729 - 1,729

Year-end balances arising from these transactions: Trade and other receivables 962 642 1,604 522 253 775 Trade and other payables (82) - (82) (58) (1) (59) 880 642 1,522 464 252 716

Transactions with associates The following transactions were carried out with associates during the year:

2016 2015 £’000 £’000 Income Fees and commissions 3,238 5,994

Finance income Interest receivable - own funds 8 194

Expenditure Administrative expenses 19 67

Year-end balances arising from these transactions: Trade and other receivables 4,966 5,115 Trade and other payables (1) (140) 4,965 4,975

Transactions with key management

The related-party disclosure regarding key management is detailed in note 6 on page 125.

162 Jardine Lloyd Thompson Group plc Annual Report 2016

33. COMMITMENTS Capital commitments

Capital expenditure contracted for 2016 at the balance sheet date amounts to £1,293,000. In 2015 there was no significant capital OVERVIEW 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 2015 £’000 £’000 No later than 1 year 42,981 24,987 Later than 1 year and no later than 5 years 146,090 121,441 Later than 5 years 300,912 264,356 489,983 410,784 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.

Sub-leases

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: 2016 2015 £’000 £’000 CORPORATE GOVERNANCE No later than 1 year 151 143 Later than 1 year and no later than 5 years 231 370 382 513

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. 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 FINANCIAL STATEMENTS 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. 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.

34. SUBSEQUENT EVENTS SHAREHOLDER INFORMATION

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 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.

% Holding (if less than Company 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 BDO LLP, 55 Baker Street, London, W1U 7EU, England Limited 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 3 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 The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England

JLT Colombia Wholesale Limited 91.87 The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England 3 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

164 Jardine Lloyd Thompson Group plc Annual Report 2016

35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED

% Holding (if less than Company 100%) Registered Office address Notes

OVERVIEW JLT EB Services Limited 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 The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England

JLT LATAM (Southern Cone) Wholesale Limited 51.00 The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England

JLT Latin American Holdings Limited The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England

JLT Management Services Limited The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England STRATEGIC REPORT 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

JLT Peru Reinsurance Solutions Limited 80.07 The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England

JLT Peru Retail Limited The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England

JLT Peru Wholesale Limited The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England CORPORATE GOVERNANCE 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 FINANCIAL STATEMENTS

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

M.P. Bolshaw and Company Limited The St Botolph Building, 138 Houndsditch, London, EC3A 7AW, England

Marine, Aviation & General (London) Limited 25.00 10 Eastcheap, London, EC3M 1AJ, England

P3 Corporate Pensions Software Limited 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 SHAREHOLDER INFORMATION 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 FINANCIAL STATEMENTS

35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED

% Holding (if less than Company 100%) Registered Office address Notes

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

Angola

Jardines PF (Angola) Lda Rua Lucrecia Paim 9, PO Box 239, Luanda, Republica de Angola

Anguilla JLT Towner Insurance Management (Anguilla) Babrow's Commercial Complex, The Valley, AI-2640, Anguilla Limited 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

Barbados

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

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 Crawford House, 50 Cedar Avenue, Hamilton, HM11, Bermuda

Isosceles Insurance Ltd 98.36 Crawford House, 50 Cedar Avenue, Hamilton, HM11, Bermuda 3 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

166 Jardine Lloyd Thompson Group plc Annual Report 2016

35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED

% Holding (if less than Company 100%) Registered Office address Notes

OVERVIEW JLT Re Limited Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda

Brazil

JLT Brasil Holdings Participacoes Ltd 78.57 Avenida Beira Mar no. 200, 8º andar (parte), Centro, Rio de Janeiro, Brazil

JLT do Brasil Corretagem de Seguros Ltda 78.57 Rua Sete de Abril, 230 - 2 andar, cep-01044-000 Sao Paulo, Brazil JLT RE Brasil, Administracao e Corretagem de 78.57 Avenida Beira Mar no. 200, 8º andar (parte), Centro, Rio de Janeiro, Brazil Resseguros Ltda JLT SCK Affinity Administracao e Corretora de Ave. Presidente Wilson, 231, 74.107.483/0001-64, Centro, Rio de Janeiro, 58.92 Seguros Ltda. Brazil 1 Ave. Presidente Wilson, 231, 74.107.483/0001-64, Centro, Rio de Janeiro, JLT SCK Corretora e Administradora de Seguros 58.92 Brazil STRATEGIC REPORT Canada

Jardine Lloyd Thompson Canada Inc Suite 2900, 550 Burrard Street Vancouver BC V6C 0A3, Canada

Cayman Islands Maples Corporate Services Ltd, Ugland House , PO Box 309, Grand Colombian Insurance Broking Wholesale Limited 74.50 Cayman, KY1 1104, Cayman Islands Chile

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 CORPORATE GOVERNANCE

JLT Chile Holdings SpA Miraflores 222 piso 28 Santiago, Chile

JLT-Orbital Corredores de Seguros Limitada 50.10 Costanera Sur 2730, Piso 14, Las Condes, Santiago, Chile

China The Pinnacle, 17 Zhu Jiang Road West, Tianhe District, Guangzhou 510623, JLT Insurance Brokers Co., Limited China Colombia

JLT Affinity Colombia Solutions SAS 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 91.87 Calle 742 No. 10-51 PH, Bogota, Colombia Reaseguros FINANCIAL STATEMENTS Jardine Lloyd Thompson Valencia y Iragorri 68.00 Calle 72 N° 10 – 07 Of. 1004. Bogota, Colombia Corredores de Seguros SA Denmark

JLT Specialty Insurance Broker A/S Hellerupgardvej 18, 2900 Hellerup, Denmark

France

JLT France Holdings 24/26 Rue de la Pepiniere, 75008, Paris, France

JLT Energy (France) SAS 35.40 18 Rue de Courcelles, 75008, Paris, France

JLT PLA 24/26 Rue de la Pépinière, 75008, Paris, France 4 Germany SHAREHOLDER INFORMATION JLT Reinsurance Brokers GmbH 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, JLT Agencies Limited Hong Kong 25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay, JLT Essential Holdings Limited 51.00 Hong Kong

Jardine Lloyd Thompson Group plc Annual Report 2016 167 FINANCIAL STATEMENTS

35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED

% Holding (if less than Company 100%) Registered Office address Notes

25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay, Jardine ShunTak Insurance Brokers Limited 50.00 Hong Kong 20th Floor, Cityplaza Four, 12 Taikoo Wan Road, Taikoo Shing, Island East, Jardine Lloyd Thompson PCS Limited 75.00 Hong Kong 25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay, JLT Agency Services Limited Hong Kong 25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay, Jardine Lloyd Thompson Limited Hong Kong 25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay, Lambert Brothers Holdings Limited Hong Kong Lambert Brothers Insurance Brokers (Employee 25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay, Benefits) Ltd Hong Kong Lambert Brothers Insurance Brokers (Hong Kong) 25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay, Ltd Hong Kong 25th Floor Devon House, Taikoo Place, 979 King's Road, Quarry Bay, JLT Insurance Agencies Limited Hong Kong India Peninsula Corporate Park, Ganpat Rao Kadam Marg, Off, Senapati Bapat JLT Independent Insurance Brokers Private Limited 49.00 Marg, Mumbai, 400013, India Jardine Lloyd Thompson Insurance Consultants E-2/16, 2nd Floor, White House, Ansari Road, Darya Ganj, New Dehli, 92.61 Limited 110002, India 1001-A, Supreme Business Park, Supreme City, Hiranandani Gardens, Jardine Lloyd Thompson India Private Limited Powai, Mumbai, Maharashtra, 400076, India Indonesia World Trade Center, Jl. Jendral Sudirman Kav. 29-31, Jakarta 12920, PT Jardine Lloyd Thompson 80.00 Indonesia Antam Office Park Tower B, JI Letjen TB Simatupang No.1 RT 010 RW 004 PT Nexus Asia Pacific Kel. Tanjung Barat Kec. Jagakarsa Selatan, Indonesia 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 Faber Imperial Court, 21A Jalan Sultan Ismail, 50250, Kuala Lumpur, Echelon Claims Consultants Sdn Bhd Malaysia

168 Jardine Lloyd Thompson Group plc Annual Report 2016

35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED

% Holding (if less than Company 100%) Registered Office address Notes

OVERVIEW JLT Asia Shared Services Sdn Bhd Menara Shell, No 211 Jalan Tun Sambathan 50470 Kuala Lumpur, Malaysia Saguking Commercial Building, Jalan Patau-Patau 87000 Labuan FT, JLT Re Labuan Limited Malaysia Jardine Lloyd Thompson Sdn Bhd 49.00 Faber Imperial Court, 21A Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia

Malta

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

Mauritius STRATEGIC REPORT c/o International Management (Mauritius) Ltd, Les Cascades, JI Holdings Limited 92.61 Edith Cavell Street, Port Louis, Republic of Mauritius Mexico JLT Mexico, Intermediario de Reaseguro, S.A. de Avenida Insurgentes Sur 1898, Piso 19, Colonia Florida, CP 01030 C.V. México City Sterling Re Intermediario de Reaseguro, SA de CV 35.50 Insurgentes, Colonia, Torre 01030, Mexico DF

Netherlands

JLT Netherlands BV 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 CORPORATE GOVERNANCE

New Zealand

Alpha Consultants (2002) Limited Level 5, Tower Centre, 45 Queen Street, Auckland, New Zealand

Client Provide Limited 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

Norway

JLT Norway AS Strandveien 35, 1324 Lysaker, P.O.BOX 142, Norway FINANCIAL STATEMENTS Peru

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 111 Paseo de Roxas Building, Legaspi Village, Makati City 1229, Philippines Brokers, Inc. Russian Federation

Jardine IBR Limited Office 226, Building 14, 39 Leningradskiy Prospect, Moscow, Russia SHAREHOLDER INFORMATION 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 FINANCIAL STATEMENTS

35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED

% Holding (if less than Company 100%) Registered Office address Notes

JLT Specialty Pte Ltd 239 Alexandra Road, Singapore 159930

JLT Singapore Holdings Pte Ltd 239 Alexandra Road, Singapore 159930

South Africa Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191, Eikos Risk Applications (Pty) Ltd South Africa Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191, JLT Employee Benefits SA (Pty) Ltd South Africa Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191, Jardine Lloyd Thompson (Proprietary) Limited 63.00 South Africa Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191, JLT Benefit Solutions SA (Pty) Ltd South Africa Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191, JLT Employee Benefits Holding Company (Pty) LTD South Africa Block D, Nicol Main Office Park, 2 Burton Road, Bryanston, 2191, JLT SA IB Holding Company (Proprietary) Limited South Africa Spain March-JLT, Correduria de Seguros y Reaseguros, 25.00 Calle de Lagasca 88, Madrid, Spain S.A. Sweden

JLT Re (Northern Europe) AB Jakobsbergsgatan 7, 11144 Stockholm, Sweden

JLT Risk Solutions AB 65.00 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 The 9th Towers, 31st Floor, Rama 9 Road, Huay Khwang, Bangkok, 10310, Jardine Lloyd Thompson Limited 49.00 Thailand The 9th Towers, 31st Floor, Rama 9 Road, Huay Khwang, Bangkok, 10310, JLT Life Assurance Brokers Limited Thailand Turkey Kavak Sok, Smart Plaza, No: 31/1 B Blok Kat: 4, 34805 Beykoz, Instanbul, JLT Sigorta ve Reasürans Brokerliği A.Ş. 75.20 Turkey United Arab Emirates Burj Al Salam , World Trade Centre Roundabout, Sheikh Zayed Road, Dubai, Insure Direct (Brokers) LLC 49.00 P.O.BOX 57006, UAE Insure Direct - Jardine Lloyd Thompson Limited 61.30 P.O. Box 9731, Dubai, UAE Gate Precinct Building 5, Dubai International Financial Centre, Dubai, Jardine Lloyd Thompson PCS (Dubai) Limited 75.00 PO BOX 507288, UAE United States Corporation Service Company, 2711 Centerville Road, Suite 400, 1763 Enterprises LLC Wilmington, Delaware, 19808 Charter Risk Management Services LLC 35.70 141 Weston Street #1981, Hartford, Connecticut 06144 Corporation Service Company, 2711 Centerville Road, Suite 400, Core Risks Ltd. LLC Wilmington, Delaware, 19808 CSC Lawyers Indorporating Service, 2710 Gateway Oaks Drive, Suite 150N, GCube Insurance Services Inc Sacramento, CA95833 Corporation Service Company, 2711 Centerville Road, Suite 400, Jardine Lloyd Thompson Capital Markets Inc. Wilmington, Delaware, 19808 Corporation Service Company, 2711 Centerville Road, Suite 400, Jardine Lloyd Thompson Insurance Services, Inc Wilmington, Delaware, 19808

170 Jardine Lloyd Thompson Group plc Annual Report 2016

35. SUBSIDIARIES AND ASSOCIATED COMPANIES CONTINUED

% Holding (if less than Company 100%) Registered Office address Notes

OVERVIEW Corporation Service Company, 2711 Centerville Road, Suite 400, JLT Facilities, Inc. Wilmington, Delaware, 19808 Corporation Service Company, 2711 Centerville Road, Suite 400, JLT Aerospace (North America) Inc Wilmington, Delaware, 19808 Corporation Service Company, 2711 Centerville Road, Suite 400, JLT Holdings Inc Wilmington, Delaware, 19808 JLT Re Consultants Inc Corporation Service Company, 1201 Hays Street, Tallahassee, FL 32301 Corporation Service Company, 2711 Centerville Road, Suite 400, JLT Re (North America) Inc Wilmington, Delaware, 19808 Corporation Service Company, 2711 Centerville Road, Suite 400, JLT Re Solutions Inc

Wilmington, Delaware, 19808 STRATEGIC REPORT Corporation Service Company, 2711 Centerville Road, Suite 400, JLT Specialty Insurance Services Inc 91.30 Wilmington, Delaware, 19808 JLT Towner Insurance Management (USA) LLC 70.00 100 Main Street, Suite 2, Barre, VT 0541 Corporation Service Company, 2711 Centerville Road, Suite 400, Weston Preference LLC Wilmington, Delaware, 19808 CSC Lawyers Indorporating Service, 2710 Gateway Oaks Drive, Suite 150N, Worldlink Specialty Insurance Services Inc Sacramento, CA95833 Vietnam 5th Floor, CJ Building, 6 Le Thanh Ton Street, District 1, Ho Chi Minh City, Jardine Lloyd Thompson Limited Vietnam

Virgin Islands, British CORPORATE GOVERNANCE

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 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 Independent Auditors’ Report 177 Notes to the Company Financial Statements 174 Income Statement a) Finance income and expense 174 Balance Sheet b) Income tax 175 Statement of Changes in Equity c) Investment in subsidiaries 176 Significant Accounting Policies d) Trade and other receivables e) Creditors f) Accounting for the Employee Share Trust

172 Jardine Lloyd Thompson Group plc Annual Report 2016

INDEPENDENT AUDITORS’ REPORT

REPORT ON THE FINANCIAL course of the audit, we are required to What an audit of financial statements report if we have identified any material involves STATEMENTS misstatements in the Strategic Report We conducted our audit in accordance and the Directors’ Report. We have Our opinion with ISAs (UK & Ireland). An audit involves nothing to report in this respect. obtaining evidence about the amounts OVERVIEW In our opinion, Jardine Lloyd Thompson and disclosures in the financial statements Group plc’s financial statements (the sufficient to give reasonable assurance “financial statements”): OTHER MATTERS ON WHICH that the financial statements are free from • give a true and fair view of the state WE ARE REQUIRED TO REPORT material misstatement, whether caused of the company’s affairs as at 31 by fraud or error. This includes an December 2016 and of its profit for BY EXCEPTION assessment of: the year then ended; Adequacy of accounting records and • whether the accounting policies • have been properly prepared in information and explanations received are appropriate to the company’s accordance with United Kingdom Under the Companies Act 2006 we are circumstances and have been Generally Accepted Accounting required to report to you if, in our opinion: consistently applied and adequately Practice; and disclosed; STRATEGIC REPORT • have been prepared in accordance • we have not received all the information • the reasonableness of significant with the requirements of the and explanations we require for our accounting estimates made by Companies Act 2006. audit; or the directors; and • adequate accounting records have What we have audited • the overall presentation of the not been kept, or returns adequate for financial statements. The financial statements, included within our audit have not been received from the Annual Report, comprise: branches not visited by us; or We primarily focus our work in these areas by assessing the directors’ judgements • the Balance Sheet as at 31 December • the financial statements are not in against available evidence, forming our own 2016; agreement with the accounting records judgements, and evaluating the disclosures and returns. • the Income Statement for the year in the financial statements. then ended; We have no exceptions to report arising from this responsibility. We test and examine information, using • the Statement of changes in Equity CORPORATE GOVERNANCE sampling and other auditing techniques, for the year then ended; Directors’ remuneration to the extent we consider necessary to • the accounting policies; and provide a reasonable basis for us to draw Under the Companies Act 2006 we conclusions. We obtain audit evidence • the notes to the financial statements, are required to report to you if, in our through testing the effectiveness of controls, which include other explanatory opinion, certain disclosures of directors’ substantive procedures or a combination information. remuneration specified by law are not made. of both. The financial reporting framework that We have no exceptions to report arising has been applied in the preparation of the from this responsibility. In addition, we read all the financial and financial statements is United Kingdom non-financial information in the Annual Accounting Standards, comprising FRS Report to identify material inconsistencies 101 “Reduced Disclosure Framework”, and RESPONSIBILITIES FOR THE with the audited financial statements and applicable law (United Kingdom Generally FINANCIAL STATEMENTS AND to identify any information that is apparently Accepted Accounting Practice). THE AUDIT materially incorrect based on, or materially inconsistent with, the knowledge acquired In applying the financial reporting FINANCIAL STATEMENTS by us in the course of performing the framework, the directors have made Our responsibilities and those of audit. If we become aware of any apparent a number of subjective judgements, for the directors material misstatements or inconsistencies example in respect of significant accounting As explained more fully in the Directors’ we consider the implications for our report. estimates. In making such estimates, they Responsibilities Statement, the directors With respect to the Strategic Report and have made assumptions and considered are responsible for the preparation of the Directors’ Report, we consider whether future events. financial statements and for being satisfied that they give a true and fair view. those reports include the disclosures required by applicable legal requirements. OPINIONS ON OTHER Our responsibility is to audit and express MATTERS PRESCRIBED BY THE an opinion on the financial statements OTHER MATTER in accordance with applicable law and COMPANIES ACT 2006 International Standards on Auditing (UK We have reported separately on group financial statements of Jardine Lloyd

and Ireland) (“ISAs (UK & Ireland)”). Those SHAREHOLDER INFORMATION In our opinion, based on the work Thompson Group plc for the year ended undertaken in the course of the audit: standards require us to comply with the Auditing Practices Board’s Ethical Standards 31 December 2016. • the information given in the Strategic for Auditors. Report and the Directors’ Report for the financial year for which the financial This report, including the opinions, has been statements are prepared is consistent prepared for and only for the company’s with the financial statements; and members as a body in accordance with Chapter 3 of Part 16 of the Companies Act • the Strategic Report and the Directors’ Nick Wilks (Senior Statutory Auditor) Report have been prepared in 2006 and for no other purpose. We do not, in giving these opinions, accept or assume for and on behalf of PricewaterhouseCoopers accordance with applicable legal LLP Chartered Accountants and Statutory requirements. responsibility for any other purpose or to any other person to whom this report is Auditors • In addition, in light of the knowledge shown or into whose hands it may come London and understanding of the company save where expressly agreed by our prior 28 February 2017 and its environment obtained in the consent in writing.

Jardine Lloyd Thompson Group plc Annual Report 2016 173 FINANCIAL STATEMENTS

INCOME STATEMENT for the year ended 31 December 2016

2016 2015 Notes £’000 £’000 Administrative expenses (9,765) (55,911) Other (expense)/income (3) 4 Operating profit (9,768) (55,907)

Income from subsidiary 88,000 106,000 Profit on ordinary activities before interest and taxation 78,232 50,093 Finance income a 9,085 7,746 Finance costs a (5,547) (5,375) Finance income - net a 3,538 2,371 Profit on ordinary activities before income tax 81,770 52,464 Income tax (expense)/credit on ordinary activities b (5,112) 3,934 Profit for the year 76,658 56,398

BALANCE SHEET as at 31 December 2016 2016 2015 £’000 £’000 Notes restated Fixed assets Investment in subsidiaries c 68,995 68,916 68,995 68,916 Current assets Trade and other receivables d 387,548 475,836 Cash and cash equivalents 561 432 388,109 476,268 Creditors e (219,001) (323,179) Net current assets 169,108 153,089 Net assets 238,103 222,005

Equity Ordinary shares 11,008 11,008 Share premium 104,111 104,074 Merger reserve 9,604 9,604 Retained earnings 113,380 97,319 Total shareholders’ funds 238,103 222,005

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

174 Jardine Lloyd Thompson Group plc Annual Report 2016

STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2016 OVERVIEW

Ordinary Share Merger Retained shares premium reserve earnings Total £’000 £’000 £’000 £’000 £’000 Balance at 1 January 2016 11,008 104,074 9,604 97,319 222,005 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 Amounts in respect of share based payments: STRATEGIC REPORT - capital contribution to subsidiaries - - - 25,174 25,174 - shares acquired - - - (17,809) (17,809) Balance at 31 December 2016 11,008 104,111 9,604 113,380 238,103

Ordinary Share Merger Retained shares premium reserve earnings Total £’000 £’000 £’000 £’000 £’000 Balance at 1January 2015 (restated) 11,006 103,941 9,604 110,511 235,062 Profit for the year - - - 56,398 56,398

Total comprehensive income for the year - - - 56,398 56,398 CORPORATE GOVERNANCE 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) Balance at 31 December 2015 (restated) 11,008 104,074 9,604 97,319 222,005

The restatement is detailed in note f. 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 Foreign currency translation statements are set out below. These policies have been consistently applied Foreign currency transactions are translated into sterling using the exchange to all the years presented, unless otherwise stated. rates prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated into sterling at rates of Basis of preparation exchange ruling at the balance sheet date. Foreign exchange gains and These financial statements have been prepared in accordance with Financial losses resulting from the settlement of such transactions and from the Reporting Standard 101, ‘Reduced Disclosure Framework’ (FRS 101). translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, The preparation of financial statements in conformity with FRS 101 requires except when deferred in other comprehensive income as qualifying cash the use of certain critical accounting estimates. It also requires management flow hedges. All other foreign exchange gains and losses are presented to exercise its judgement in the process of applying the company's in the income statement within ‘Other operating income’. accounting policies. These separate entity level accounts have been produced on a going concern Investment in subsidiaries basis under the historical cost convention and in accordance with the Investments in subsidiaries are held at cost less accumulated impairment Companies Act 2006 and applicable accounting standards. losses. A list of subsidiaries is set out in note 35 on page 164. The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance with FRS 101: Trade and other receivables 1. IFRS 7 “Financial Instruments disclosures” as the equivalent disclosures Trade and other receivables includes amounts due from Group undertakings. are included in the consolidated financial statements of the Group, They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for 2. Paragraphs 91 to 99 of IFRS 13 “Fair value measurement” in respect impairment. of disclosure of valuation techniques and inputs used for fair value measurement of assets and liabilities, Cash and cash equivalents 3. Paragraph 30 and 31 of IAS 8 “Accounting policies, changes in accounting Cash and cash equivalents includes cash in hand, deposits held at call with estimates and errors” in respect of the requirement for the disclosure of banks, other short-term highly liquid investments with original maturities of information when an entity has not applied a new IFRS that has been three months or less and bank overdrafts. issued but is not yet effective, 4. IAS 24 “Related party disclosures” in respect of the disclosure of related Creditors party transactions entered into between two or more members of a Group Creditors are obligations to pay for goods or services that have been acquired 5. IAS 7 “Statement of cash flows” in respect of the preparation of a in the ordinary course of business from suppliers and include amounts due statement of cash flow to Group undertakings. Creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. 6. The following paragraphs of IAS 1 “Presentation of financial statements”: Income taxes 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 Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly ii. Paragraph 10(d) in respect of the disclosure of Statement of cash flows in shareholders’ funds. In this case, the tax is also recognised in other iii. Paragraph 10(f) in respect of the Balance Sheet as at the beginning comprehensive income or directly in shareholders’ funds, respectively. of the preceding period when an entity applies an accounting policy The current income tax charge is calculated on the basis of the tax laws retrospectively or makes a retrospective restatement of items in enacted or substantively enacted at the balance sheet date in the countries its financial statements, or when it reclassifies items in its financial where the company operates and generates taxable income. Management statements periodically evaluates positions taken in tax returns with respect to situations iv. Paragraph 16 in respect of the statement of compliance with all IFRS, in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid v. Paragraph 38A in respect of the requirement for minimum of two primary to the tax authorities. statements, including cash flow statements, vi. Paragraph 40A-D in respect of the requirement for a third balance Interest income sheet when an accounting policy is applied retrospectively or makes Interest income is recognised using the effective interest method. When a a retrospective restatement of items in its financial statements or loan and receivable is impaired, the company reduces the carrying amount reclassifies items in its financial statements, to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding vii. Paragraph 111 in respect of cash flow information which provides users the discount as interest income. Interest income on impaired loan and of financial statements with a basis to assess the ability of the entity to receivables is recognised using the original effective interest rate. generate cash and cash equivalents and the needs of the entity to utilise those cash flows and Dividend income viii. Paragraph 134-136 in respect of capital management disclosures. Dividend income is recognised when the right to receive payment is established. Consolidated financial statements Consolidated financial statements have been prepared and are presented Dividend distribution on pages 108 to 171. These financial statements are separate financial Dividends proposed or declared after the balance sheet dates are not statements. 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 Employee Share Trust financial statements in the period in which the dividends are approved by The Employee Share Trust (EST) has been subject to a review in 2016. the company’s shareholders. The accounting adopted in respect of the EST is discussed in note f.

176 Jardine Lloyd Thompson Group plc Annual Report 2016

NOTES TO THE COMPANY FINANCIAL STATEMENTS for the year ended 31 December 2016 OVERVIEW a. Finance income and expense

2016 2015 Finance income £’000 £’000 Interest on amounts due from Group undertakings 9,085 7,746

2016 2015 Finance expense £’000 £’000

Interest on amounts due to Group undertakings (5,547) (5,375) STRATEGIC REPORT

2016 2015 £’000 £’000 Finance income 9,085 7,746 Finance expense (5,547) (5,375) Finance income - net 3,538 2,371 b. Income tax

2016 2015 CORPORATE GOVERNANCE £’000 £’000 Current tax (credit)/expense: - UK Corporation tax on profits for the year (5,729) (10,841) - Adjustment in respect of prior year 10,841 6,907 Total income tax expense/(credit) 5,112 (3,934)

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:

2016 2015 £’000 £’000 Profit before taxation 81,770 52,464 FINANCIAL STATEMENTS Tax calculated at UK Corporation Tax rate of 20% (2015: 20.25%) 16,354 10,624 Adjustments in respect of prior years 10,841 6,907 Non taxable income (22,083) (21,465) Total income tax expense/(credit) 5,112 (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 timing differences are expected to reverse. SHAREHOLDER INFORMATION

Jardine Lloyd Thompson Group plc Annual Report 2016 177 FINANCIAL STATEMENTS

c. Investment in subsidiaries 2016 2015 £’000 £’000 restated At 1 January 68,916 72,666 Increase/(decrease) 79 (3,750) At 31 December 68,995 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

2016 2015 £’000 £’000 Amounts due from Group undertakings 383,018 466,194 Corporation tax 4,530 9,642 387,548 475,836

Amounts due from Group undertakings are unsecured, have no fixed date of repayment and are repayable on demand. e. Creditors 2016 2015 £’000 £’000 restated Amounts due to Group undertakings 213,834 319,675 Dividends payable 4,794 3,220 Other creditors 373 284 219,001 323,179

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.

178 Jardine 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:

Balance at

Balance at 31 Dec 2015 Balance at OVERVIEW Balance at Impact of 1 Jan 2015 as previously Impact of 31 Dec 2015 1 Jan 2015 restatement restated reported restatement restated £'000 £'000 £'000 £'000 £'000 £'000 Fixed assets Investment in subsidiaries 71,002 1,664 72,666 70,944 (2,028) 68,916 71,002 1,664 72,666 70,944 (2,028) 68,916 Current assets Trade & other receivables 419,037 - 419,037 475,836 - 475,836 Available-for-sale financial assets - 460 460 - - -

Cash & cash equivalents 715 - 715 432 - 432 STRATEGIC REPORT 419,752 460 420,212 476,268 - 476,268 Creditors (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 11,006 - 11,006 11,008 - 11,008 Share premium 103,941 - 103,941 104,074 - 104,074 Merger reserve 9,604 - 9,604 9,604 - 9,604 Retained earnings 155,824 (45,313) 110,511 147,738 (50,419) 97,319

Total shareholders' funds 280,375 (45,313) 235,062 272,424 (50,419) 222,005 CORPORATE GOVERNANCE

The following table summarises the adjustments made to the statement of changes in equity as a result of recognising the EST: Total Ordinary Share Merger Retained shareholders' share capital premium reserve earnings funds £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2015 11,006 103,941 9,604 155,824 280,375 EST restatement - - - (45,313) (45,313) Restated balance at 1 January 2015 11,006 103,941 9,604 110,511 235,062 Profit for the year - - - 56,398 56,398 Total comprehensive income for the year - - - 56,398 56,398 FINANCIAL STATEMENTS Dividends - - - (64,484) (64,484) Issue of share capital 2 133 - - 135 EST restatement (a) - - - (5,106) (5,106) Balance at 31 December 2015 11,008 104,074 9,604 97,319 222,005

Total Retained shareholders' earnings funds £'000 £'000 a) the movement of the restatement is detailed as follows: Amounts in respect of share based payments:

- capital contribution to subsidiaries 20,950 20,950 SHAREHOLDER INFORMATION - shares acquired (26,056) (26,056) Total movement (5,106) (5,106)

Jardine Lloyd Thompson Group plc Annual Report 2016 179 OTHER SHAREHOLDER INFORMATION

ADVISORS & SHAREHOLDER INFORMATION

181 Group Five Year Review 182 Advisors & Shareholder Information 183 Principal JLT Offices

180 Jardine Lloyd Thompson Group plc Annual Report 2016

GROUP OVERVIEW FIVE YEAR REVIEW

2012 2013 2014 2015 2016 £’000 £’000 £’000 £’000 £’000 1 restated STRATEGIC REPORT Fees and commissions 874,320 974,623 1,099,728 1,151,392 1,256,556 Investment income 5,744 4,529 4,398 3,689 4,730 Total revenue 880,064 979,152 1,104,126 1,155,081 1,261,286 Salaries and associated expenses (519,119) (580,968) (671,758) (727,334) (794,363) Premises (44,408) (53,638) (57,927) (61,167) (66,849) Other operating costs (140,179) (157,386) (172,426) (163,685) (209,518) Depreciation, amortisation and impairment charges (21,037) (24,667) (28,139) (30,538) (34,951) Operating profit 155,321 162,493 173,876 172,357 155,605 Finance costs - net (12,051) (16,035) (21,446) (22,861) (22,078) CORPORATE GOVERNANCE Share of results of associates 8,271 8,106 7,306 5,531 1,353 Profit before taxation 151,541 154,564 159,736 155,027 134,880 Income tax expense (39,814) (41,789) (42,072) (41,586) (44,018) Profit for the year 111,727 112,775 117,664 113,441 90,862

Non-controlling interests (9,574) (10,815) (12,373) (10,342) (9,396) Profit attributable to the owners of the parent 102,153 101,960 105,291 103,099 81,466 restated2 restated2 restated2 restated2 Diluted earnings per share 47.0p 46.8p 48.7p 48.0p 37.8p Underlying diluted earnings per share 48.8p 55.0p 57.1p 52.2p 51.4p Dividends per share 25.5p 27.2p 28.9p 30.6p 32.2p FINANCIAL STATEMENTS 1The 2012 income statement has been restated to reflect the impact of IAS19 (Revised).

2The earnings per share has been restated to reflect the changes following the review of the calculation in 2016. SHAREHOLDER INFORMATION

Jardine Lloyd Thompson Group plc Annual Report 2016 181 OTHER SHAREHOLDER INFORMATION

ADVISORS & SHAREHOLDER INFORMATION

SHAREHOLDER ENQUIRIES SHARE PRICE INFORMATION * Calls cost 12p per minute plus your Any shareholder with enquiries relating The information on the Company’s share phone company’s access charge. to their shareholding should in the first price is available from the investor pages Lines are open between 09:00 - 17:30, instance contact Capita our registrars via jlt.com Monday to Friday excluding public using the address on this page. holidays in England and Wales. FINANCIAL CALENDAR Email: [email protected] ELECTRONIC SHAREHOLDER Financial Year-end COMMUNICATIONS 31 December 2016 AUDITORS Shareholders who would prefer to view PricewaterhouseCoopers LLP documentation electronically can elect Ex Dividend Date to receive automatic notification by 7 More London Riverside 30 March 2017 email each time the company distributes London SE1 2RT documents instead of receiving paper Record Date Tel: +44 (0) 20 7583 5000 versions of such documents. Registering 31 March 2017 for electronic communications can be BROKERS done via capitashareportal.com Annual General Meeting JPMorgan Securities plc 27 April 2017 25 Bank Street, There is no fee for using this service London E14 5JP and you will be advised that your request Final Dividend Payable Tel: +44 (0) 20 7742 4900 has been registered. Should you wish 4 May 2017 to change your mind or request a paper Numis Securities Limited version of any documents in the future, Interim Results Announced you can do this by contacting the 26 July 2017 10 Paternoster Square Registrar by email or by post. London EC4M 7LT Interim Dividend Payable Tel: +44 (0) 20 7260 1000 DIVIDEND MANDATES 3 October 2017 COMPANY SECRETARY Shareholders who would like their Q3 Interim Management Statement AND REGISTERED OFFICE dividends to be paid directly to a bank 7 November 2017 Jonathan Lloyd account should contact Capita Registrars Jardine Lloyd Thompson Group plc either online via capitashareportal.com (all future dates are indicative and subject The St Botolph Building or by returning the dividend mandate to change) 138 Houndsditch form attached to the dividend cheque. London EC3A 7AW INVESTOR RELATIONS Tel: +44 (0) 20 7528 4690 SHAREGIFT Email: jlt.com If you have a small holding that is [email protected] uneconomical to sell you may wish to jlt.com/contact-us Registered Number: 01679424 consider donating it to ShareGift. The London Stock Exchange Orr Mackintosh Foundation operates this REGISTRARS FTSE 250 charity share donation scheme. Details of Capita Asset Services Symbol: JLT the scheme are available via ShareGift at: The Registry ISIN: GB0005203376 34 Beckenham Road sharegift.org Kent BR3 4TU Tel: +44 (0) 20 7930 3737 Tel*: 0871 664 0300 Tel: + 44 (0) 20 8639 3399 capitaassetservices.com

182 Jardine Lloyd Thompson Group plc Annual Report 2016

PRINCIPAL JLT OFFICES OVERVIEW

HEAD OFFICE UK LATIN AMERICA JLT Specialty Limited UK +44 20 7528 4444 Argentina Jardine Lloyd Thompson Group plc JLT Re Argentina JLT Reinsurance Brokers Limited +44 20 7528 4444 +54 (11) 5280 3550 +44 20 7466 1300 Brazil JLT Employee Benefits STRATEGIC REPORT EUROPE +44 20 7528 4000 JLT do Brasil Corretagem de Seguros Ltda Denmark Germany +55 11 3156 3900 JLT Specialty Insurance Broker A/S JLT Risk Solutions AB JLT Re Brasil Administracao e +45 2424 2214 +35 810 322 9909 Corretagem de Reasseguros Ltda Finland Guernsey + 55 21 2220 2970 JLT Risk Solutions AB JLT Insurance Management Chile +46 8442 5730 (Guernsey) UK Orbital-JLT Corredores de Seguros +44 1481 737 120 France Limitada CORPORATE GOVERNANCE JLT Reinsurance Brokers Limited +56 (2) 2232 7776 (Paris Branch) CANADA JLT Chile Corredores de Reaseguros +33 1 4022 8770 Limitada Jardine Lloyd Thompson Canada Inc +56 (2) 2338 9290 Ireland +1 416 941 9551 JLT Insurance Brokers Ireland Limited Colombia +35 31 20 26 000 CARIBBEAN Jardine Lloyd Thompson Valencia y Netherlands Iragorri Corredores de Seguros SA Barbados +571 326 6100 JLT Netherlands BV

+31 104400555 JLT Insurance Management (Barbados) JLT Re Colombia, Corredores FINANCIAL STATEMENTS Limited Colombianos de Reaseguros SA Norway +1 246 432 4000 +571 326 6100 JLT Norway AS +47 4000 2111 Peru OTHER Mariategui JLT Corredores de Seguros Sweden SA Bermuda JLT Risk Solutions AB +511 610 9900 +46 8 442 5730 JLT Insurance Management (Bermuda) +1 441 292 4364 JLT Corredores de Reaseguros SA Switzerland +511 610 9900 SHAREHOLDER INFORMATION JLT Reinsurance Brokers Limited (Basel Branch) +41 61 461 0253

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 Indonesia Thailand PT Jardine Lloyd Thompson Jardine Lloyd Thompson Limited JLT Re (North America) Inc. +6221 2995 2500 +662 626 5600 +1 212 510 1800 Japan Vietnam JLT Specialty Insurance Services Inc. JLT Risk Services Japan Limited Jardine Lloyd Thompson Limited +1 720 501 2800 +813 6730 3500 +848 3822 2340

AFRICA/MIDDLE EAST South Korea Jardine Lloyd Thompson Korea Limited AUSTRALIA & NZ South Africa +82 2 397 8100 Australia Jardine Lloyd Thompson (Proprietary) Macau Jardine Lloyd Thompson Australia Limited Jardine Lloyd Thompson Limited Pty Limited +27 11 3610000 +853 2875 5743 +612 9290 8000 Bahrain Jardine ShunTak Insurance Brokers JLT Re Ltd Insure Direct (Brokers) LLC Limited +61 2 9290 8000 +973 1782 2622 +852 2864 5524 New Zealand Turkey Malaysia Jardine Lloyd Thompson Limited JLT Turkey Jardine Lloyd Thompson Sdn Bhd +649 379 5376 +90 444 9558 +60 3 2723 3388

UAE (Dubai) Myanmar JLT Specialty Limited Jardine Lloyd Thompson Limited +971 4 10 46666 +959 43110001

Philippines ASIA Jardine Lloyd Thompson Insurance Brokers Inc China +632 706 8500 JLT Insurance Brokers Co Limited +8620 6681 4888 Singapore Jardine Lloyd Thompson Pte Limited Hong Kong +65 6333 6311 Jardine Lloyd Thompson Limited +852 2864 5333 JLT Risk Solutions Asia Pte Limited +65 6333 6006 India JLT Specialty Pte Limited Jardine Lloyd Thompson India +65 6333 6006 Pvt. Limited +91 22 4068 7500 JLT Re Asia +65 6333 6006 JLT Independent Insurance Brokers Pvt. Limited Taiwan +91 22 4340 1313 Jardine Lloyd Thompson Limited +886 2 2356 1155

184 Jardine Lloyd Thompson Group plc Annual Report 2016 OVERVIEW

GLOBAL OVERVIEW SPECIALISTS

Focusing and growing in specialist areas where we offer distinctive products, services and independent choice, such as: STRATEGIC REPORT CORPORATE GOVERNANCE

AEROSPACE ENERGY CONSTRUCTION FINANCIAL LINES LIFE SCIENCE EMPLOYEE FINANCIAL STATEMENTS BENEFITS more than of £ £ the 39% 30% 100bn 14bn 6 top10 UK's No.1

JLT represents 39% of the JLT handles in excess JLT's London construction Our Financial Lines Group Our Specialty, Property JLT is the UK's largest SHAREHOLDER INFORMATION world's large airline operators, of 30% of the world's team arranged coverage for placed M&A insurance on & Casualty team provides administrator of private with individual fleet values mobile drilling rig fleet projects globally with a total transactions with a total services to 6 of the top sector pensions in excess of USD50m value of £100bn value of £14.4bn in 2016 10 global pharmaceutical companies

2 Jardine Lloyd Thompson Group plc Annual Report 2016 Jardine Lloyd Thompson Group plc Annual Report 2016 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 Beijing Metro: during 2016 JLT China was appointed by 138 Houndsditch the Beijing Metro Construction Administration Corporation London EC3A 7AW to provide Construction related insurance services. Tel +44 (0)20 7528 4444 This business win was only made possible through the jlt.com close collaboration between JLT China and the Group’s Company registration No. 1679424 market leading global Construction specialty team.