Directors' Report, Corporate Governance & Remuneration Report
Directors' Report
The directors of Royal & Sun Alliance Insurance Group plc present their report and the audited financial statements of the Company for the year ended 31 December 2005.
Principal activity
The Company is the holding company of the Royal & SunAlliance Group of companies (the Group) whose principal activity is the transaction of personal and commercial general insurance business. The Group operates in 27 countries.
Review of the year and future developments
These are outlined in the Chairman's Statement, Group CEO's Review, the Operating Review and Group consolidated financial statements.
Dividends
The directors recommend a final dividend of 3.05p per share which, if approved, will be due for payment on 2 June 2006 to holders of ordinary shares on the register at the close of business on 17 March 2006. This, together with the interim dividend of 1.69p per share, will make a total dividend for the year of 4.74p per share.
The preferential dividend at the rate of 3.6875% for the period from 1 October 2005 to 31 March 2006 is to be paid on 3 April 2006 to holders of preference shares on the register at the close of business on 17 March 2006.
TopEmployment policy
The Group's employment policy reflects our belief that motivated and skilled employees are critical to our success.
We promote equal opportunities and diversity across the Group. This involves recruiting, retaining, rewarding and developing people solely on the grounds of ability to do the job, and establishing and promoting a working environment which is free from discrimination.
The Group is committed to preventing discrimination on the grounds of disability. This includes ensuring that all job applicants, including those with a disability, are considered solely on the basis of ability to do the job, and making reasonable adjustments to working environment, working arrangements and working conditions to support disabled employees. We are committed, wherever possible, to supporting the rehabilitation and return to work of employees who become disabled during their career with us.
The Group is committed to fostering a constructive dialogue with independent trade unions wherever they are recognised, ensuring a regular and constructive dialogue on business issues and early consultation on changes affecting the workforce. In the UK, Amicus is formally recognised through a partnership agreement which covers collective consultation and bargaining on behalf of non management employees. The Management Association (TMA) represents managerial employees under a separate consultative agreement. In June 2005, 19 elected delegates from our European businesses attended the annual European Consultative Forum (ECF), which is a cross European body created to enable information sharing and consultation on transnational issues with the European workforce. In 2005, an amended ECF constitution was agreed which introduced streamlined consultation arrangements.
The Group continues to focus on the development of employees in order that they can deliver high levels of performance. In 2005 a particular focus has been the further development of the Executive Development Programme (EDP), a global programme which aims to accelerate the development of our in house executive talent. The EDP has been designed to support those who have the potential to take on Executive Team or direct report to Executive Team roles in the future, thus ensuring that we build a pipeline of strategic leadership capability within the business.
The web based Global Employee Survey was run for the first time in 2004 and repeated in 2005. In 2005, 91% of eligible employees took the opportunity to contribute. Our aim is to consistently seek feedback on the environment we are creating as an employer and to work constructively towards our objective of becoming an employer of choice. Our intention is to repeat this survey annually, to ensure we have a current picture of employees' views and also to track year on year movement in particular areas of priority. In this way, by asking our employees, we measure how the culture of our business is changing. For example, in 2005 we have seen a significant improvement in the proportion of employees who responded positively to the statement 'The better my performance, the better my pay will be'. We believe we can create real competitive advantage by building and maintaining a high performance culture across the Group. As in 2004, we have used the 2005 results to build a Groupwide action plan which requires every manager to identify and work on areas of particular importance to their team.
Our policy is to encourage employee share ownership. Employees from the majority of our global businesses are encouraged to participate in the International Sharesave Plan which is an Inland Revenue approved all employee sharesave scheme.
Employees are kept well informed of the performance and objectives of the Group.
The Group actively encourages employees to become involved in supporting their local communities. Further details are provided in the Corporate Responsibility section of this report.
Environmental policy
Details of our environmental policy can be found on our website.
Corporate governance
A report on corporate governance is included in the next section.
Supplier payment policy
It is the Group's policy to agree appropriate terms and conditions in advance with its suppliers and to make payment in accordance with those terms and conditions, provided that the supplier has complied with them. In most cases, agreements for the supply of goods or services are made under standard terms of contract that lay down payment terms. In the UK these are available on request from UK Purchasing, Leadenhall Court, 1 Leadenhall Street, London EC3V 1PP.
The Company's outstanding indebtedness to trade creditors on 31 December 2005 amounted to £2,719,448 corresponding to 12 days' payment when averaged over the year.
Share capital
During the year, 2,137,513 ordinary shares of 27.5p each were issued in satisfaction of the exercise of employee share options for a total consideration of £2m, and 20,661,210 ordinary shares of 27.5p each were issued under the Company's scrip dividend scheme for a total consideration of £20m. An authority from the shareholders for the Company to purchase up to 291,236,359 of its own ordinary shares (representing 10% of its issued share capital as at 9 March 2005) remained in force at 31 December 2005.
Substantial share interests
As at 8 March 2006, Brandes Investment Partners LLC and Legal & General Group plc had declared an interest in ordinary shares of 27.5p each in the Company representing 6.7% and 3.2% respectively of the issued ordinary share capital, in accordance with Part VI of the Companies Act 1985.
Directors
Members of the Board of Directors are listed in this report.
David Paige was appointed to the Board on 16 February 2005. Bridget McIntyre was appointed to the Board on 2 November 2005.
At the 2006 Annual General Meeting Bridget McIntyre will be eligible for reappointment under Article 110. John Napier and Andy Haste will retire by rotation under Article 106 and, being eligible, offer themselves
for re-election.
Related party transactions
Related party transactions are set out in note 34.
Charitable and political contributions
The Company and its subsidiaries worldwide made charitable donations of £744,412 during the year. The largest donation of £250,000 was made to the Samaritans Partnership. The Group did not make any donations to European Union (EU) political parties, nor to political parties outside the EU during 2005, and it is not the Group's policy to do so.
Annual General Meeting
The Annual General Meeting will be held at the Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE on Monday 22 May 2006 at 11.00 am.
Enclosed with this report is a letter from the Chairman to shareholders. Attached to the letter is the Notice convening the meeting which will include items of ordinary and special business that are explained in the letter.
Auditors
PricewaterhouseCoopers LLP have confirmed their willingness to continue in office as auditors of the Company and a resolution for their reappointment will be proposed at the Annual General Meeting.
By order of the directors
Mark R Chambers
General Counsel and Group Company Secretary
London
8 March 2006
