Notes to the consolidated
financial statements
continued
24 Share capital
31 December 2012 31 December 2011
Share Share
capital Number capital Number
Group £000 of shares £000 of shares
Authorised 40,000 800,000,000 30,000 600,000,000
Issued share capital 20,703 414,069,422 20,563 411,256,520
The amounts presented in the equity structure of the Group above relate to Hiscox Ltd, the legal parent Company.
Ordinary
share Share Contributed
capital premium surplus
Changes in Group share capital and contributed surplus Note £000 £000 £000
At 1 January 2011 20,297 15,800 245,005
Employee share option scheme – proceeds from shares issued 91 3,124 –
Scrip dividends to owners of the Company 32 175 13,162 –
At 31 December 2011 20,563 32,086 245,005
Employee share option scheme – proceeds from shares issued 52 1,649 –
Scrip dividends to owners of the Company 32 88 7,578 –
At 31 December 2012 20,703 41,313 245,005
Contributed surplus is a distributable reserve and arose on the reverse acquisition of Hiscox plc on 12 December 2006.
During the year, the Group offered its shareholders the option of receiving a scrip dividend alternative to the cash dividend. This resulted
in the Company paying the shareholders, who opted for a scrip dividend, in shares of equal value to the cash dividend at a specified date.
The full dividend was distributed from retained earnings and the new shares issued for the scrip dividend were reflected in share capital
and share premium.
Number of Number of
5p ordinary 5p ordinary
shares in issue shares in issue
(thousands) (thousands)
Equity structure of Hiscox Ltd Note 2012 2011
At 1 January 411,257 405,943
Employee share option scheme – ordinary shares issued 1,054 1,811
Scrip dividends to owners of the Company 32 1,758 3,503
At 31 December 414,069 411,257
All issued shares are fully paid.
Share options and performance share plan awards
Performance share plan awards are granted to Directors and to senior employees. Up until 2005, share options were also granted.
The exercise price of the granted options is equal to the closing mid-market price of the shares on the day before the date of the grant.
No exercise price is attached to performance plan awards, although their attainment is conditional on the employee completing three years’
service (the vesting period) and the Group achieving targeted levels of returns on equity. Share options are also conditional on the employees
completing three years’ service (the vesting period) or less under exceptional circumstances (death, disability, retirement or redundancy).
The options are exercisable starting three years from the grant date only if the Group achieves its targets of return on equity; the options
have a contractual option term of ten years. The Group has no legal or constructive obligation to repurchase or settle the options in cash.
In accordance with IFRS 2 the Group recognises an expense for the fair value of share option and performance share plan award instruments
issued to employees, over their vesting period through the income statement. The expense recognised in the consolidated income statement
during the year was £6,135,000 (2011: £8,677,000). This comprises charges of £5,793,000 (2011: £8,361,000) in respect of performance
share plan awards and £342,000 (2011: £316,000) in respect of share option awards. The Group has applied the principles outlined in the
Black-Scholes option pricing model when determining the fair value of each share option instrument, and discounted cash flow methodology
in respect of performance share plan awards.
90 Notes to the consolidated financial statements Hiscox Ltd Report and Accounts 2012