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BOARD CORPORATE GOVERNANCE STATEMENT
Overview, basis of reporting and the New Combined Code
The Group is committed to high standards of corporate governance.
The principles and code applicable to the Company during 2003
were the June 1998 edition of The Principles of Good Governance
and the Code of Best Practice (together referred to as ‘the Applicable
Combined Code’). The Board is satisfied that the Company complied
with the Applicable Combined Code in all respects throughout the
year ended 31 December 2003.
The Board and its Committees have kept corporate governance issues
under review throughout 2003, as developments have flowed from
the publications in January 2003 of the Higgs Report on the role
and effectiveness of non-executive directors and the Smith Report on
audit committees. The resultant revised Combined Code on Corporate
Governance published in July 2003 (the New Combined Code) is
applicable to Amlin from 1 January 2004. Whilst this and the following
corporate governance statements therefore report on compliance with
the Applicable Combined Code, each report also makes reference to
changes made during 2003 where they relate to material new
provisions in the New Combined Code.
Following the publication of the New Combined Code, new Terms of
Reference of each of the Board’s Audit, Nomination and Remuneration
Committees were adopted prior to the year end. These fully reflect the
requirement of the New Combined Code and related recommendations,
both in terms of the scope, duties and powers of Committees, and in
terms of their membership. Other revised policies, procedures or
statements relating to areas covered in the New Combined Code have
been adopted by the Board as described below.
The new Committee Terms of Reference, a revised schedule of matters
reserved to the Board and a statement of the relationship between the
Company and its remuneration advisers are available on request from
the Secretary and under the corporate governance section of the Amlin website. Revised
non-executive director appointment letters are available for inspection
during normal business hours at the Company’s registered office,
alongside executive directors’ service agreements.
Board meetings
The Board meets on a regular basis, holding seven main Board
meetings in 2003 plus a planning and strategy meeting (2002:
eight). One special Board meeting was held at shorter than usual
notice (2002: two). The attendance record of each director during the
year, out of a possible maximum of eight meetings, was as follows:
Board attendance 2003
| Director |
Number of Board
meetings attended |
|
| B D Carpenter |
8 |
| R A Hextall |
8 |
| A W Holt |
7 |
| R S Joslin |
8 |
| K T Kemp |
6 |
| J M Kennedy |
8 |
| R W Mylvaganam |
8 |
| C E L Philipps |
8 |
| J R Sanders |
7 |
| J L Stace |
6 |
| Lord Stewartby |
8 |
| R J Taylor |
8 |
|
| Average % attendance |
94% |
|
In addition, all directors other than Mr Mylvaganam attended the two
day planning and strategy meeting referred to above.
The Board’s responsibilities and procedures
Both the previous schedule of matters reserved to the Board for its own,
and its committees’, decisions, and the revised one adopted since the
year end, provide that the Board’s primary obligation is to lead and
control the Company and its business, with exclusive decision making
powers over such matters as: overall strategy; investment strategy;
remuneration policies; accounting policies; and capital expenditure,
acquisitions and debt facilities over certain thresholds. Matters reserved
to the Board also include certain key Group policies, appointments and
categories of public announcements. The detailed implementation of all
these matters, and day-to-day business, are left to management.
The Board is supplied in a timely manner with the appropriate
information to enable it to discharge its duties. Further information is
obtained by the Board from the executive directors and other relevant
senior executives as the Board, particularly its non-executive
members, considers appropriate. Procedures are in place for directors
to take independent professional advice, when necessary, at the
Company’s expense.
There is a division of responsibilities on the Board between the
Chairman, who is responsible for running the Board and related
matters such as Board induction and evaluation, and the Group Chief
Executive, who has executive responsibility for running the Group’s
business. A statement re-affirming and detailing this division of
responsibilities was adopted by the Board in November 2003. The
Deputy Chairman, Lord Stewartby, is the senior independent director
and thus designated as an appropriate director to whom shareholders’
concerns may be conveyed if contact through the normal channels of
Chairman, Chief Executive or Finance Director has failed to resolve
them or is inappropriate.
The non-executive directors met during the year without executive
directors or other executive management present.
All directors are provided with written materials on their
responsibilities as directors of a public company, and on other
relevant matters. Update sessions on technical and/or industry
matters are periodically included as part of Board meetings and
Board induction is available for non-executive directors. During the
year the Board agreed a more structured approach both to updating
directors’ knowledge and skills and to Board induction for future
newly appointed directors. The Board has also agreed an outline
process for formal Board evaluation to take place during 2004.
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Board membership and independence
The Articles of Association of the Company have provided for some years
that no director serves in office in excess of three years before being
required to submit himself or herself to shareholders for re-election.
The Board comprised throughout the year: the Chairman, the six other
non-executive directors and the five executive directors shown here.
Details regarding the directors to be submitted for
re-election at the 2004 Annual General Meeting are also contained
in the separate Notice of Meeting.
The Chairman was independent, in terms of both the Applicable
Combined Code and the New Combined Code, on his appointment in
1998 and continued to be determined by the Board as independent
during the year. In November 2003 the Board received an updated
statement of his other significant commitments and is satisfied that he
continues to have more than sufficient time available to devote to his
duties as non-executive Chairman of Amlin. In respect of 2004, he
has made a minimum time commitment to Amlin of 75 days per year.
Each of the other non-executive directors have also made minimum
time commitments for 2004 as follows:
|
| Deputy Chairman (also Chairman of
the Audit Committee and a member of
the Remuneration and Nomination Committees): |
35 days |
| Chairman of the Remuneration Committee
(also a member of the Audit Committee): |
30 days |
Other non-executive directors:
(plus an extra 5 days if a member of both the
Remuneration and Audit Committees) |
20 days |
|
Apart from Mr Joslin, all the non-executive directors during the year
were determined by the Board as being independent in character and
judgement with (in the words of the New Combined Code) “no
relationships or circumstances which may appear relevant” to such
determination. Until 31 December 2002 Mr Joslin was Vice Chairman
of State Farm Mutual Automobile Insurance Company (State Farm),
which is a 10.1% shareholder in the Company and provides material
Letter of Credit facilities to the Group (on commercial terms). In the
light of this, he was classified as a non-independent director
throughout 2003. However, with effect from 1 January 2004,
Mr Joslin is now classified as independent, notwithstanding provision
A.3.1 of the New Combined Code which suggests that a three year
period must elapse following such relationship. The Board considers
that an exception to this provision is justified from the current year as
neither State Farm nor the Board consider him as any form of conduit
of information between them, he has no continuing personal interests
in State Farm and, most importantly, his previous directorship of
State Farm does not, in practice, affect his independent judgement
as an Amlin director. On this basis, Mr Joslin has joined the Audit
Committee from 1 January 2004, bringing his considerable, relevant
and recent financial and insurance experience to its deliberations.
Mr Kemp was classified as independent throughout 2003. He is a
director of a company in the same group as One Beacon Insurance
Company, which had an interest in over 3% of the Company’s shares
until February 2003, but the Board maintained its previous view that
the shareholding was not sufficient to impair Mr Kemp’s independence.
Since June 2002 Mr Kemp has held a temporary position as Chief
Financial Officer of Montpelier Re Holdings Limited, with which the
Group’s managed syndicate already had a qualifying quota share
arrangement (on commercial terms) prior to his appointment. As the
position remained a temporary secondment, and the arrangement with
Amlin had been put in place before it commenced, the Board also did
not consider that this should alter his independent status. However, for
commercial reasons as part of its 2004 reinsurance programme, the
syndicate entered into more substantive reinsurance arrangements with
Montpelier Re. As a result of this, the business relationship has become
sufficiently material, with effect from January 2004, for it to be no
longer appropriate for Mr Kemp’s independent classification to continue.
Accordingly, he left the Remuneration Committee in January 2004.
The Board notes that Messrs Kennedy and Sanders have both served on
the Board since October 1993 and, as the Board continues to classify
each of them as independent, the New Combined Code accordingly
requires the Board to state its reasons for doing so notwithstanding their
length of service. The Board is mindful that the merger of the Company
with Murray Lawrence in September 1998 so transformed the size
and scope of the Group’s business as to render the earlier service of
questionable relevance to such considerations. Furthermore the Board
has recently reaffirmed its view that each of them remain, in practice,
robustly independent in character and judgement. Notwithstanding
provision A.3.1 of the New Combined Code, the Board accordingly
continues to classify them as independent.
Mr Stace, who served as executive Vice Chairman throughout the year,
accepted the Board’s invitation to remain on the Board as non-executive
Vice Chairman until the expiry of his current term of office at the 2004
AGM. He will then leave the Board. He is classified as a non-independent
non-executive for these final few months of his service as a director.
Relations with shareholders
The Company has been committed for many years to a process
of continuing dialogue with its shareholders. In addition to usual
briefings on financial results, the Company made appropriate contact
during the year with institutional investors and their representative
bodies as issues or developments arose. Directors also accepted
invitations to speak at investment seminars and the Company held
its own seminar for an investment audience which was attended by
non-executive directors and covered details of the Group’s business
and the markets in which it operates.
Regular reports are given to the Board on shareholder attitudes to
the Company. An independently conducted survey of institutional
shareholders’ investment criteria, and their perceptions of the
Company, its management and its investor communications, was
conducted during the year, with the results presented to the Board.
The Company also conducts a programme of briefings for private
client advisers through investor relations consultants. A dedicated
telephone line is provided at the Company to answer shareholder
and investor enquiries.
Shareholders are encouraged to attend the Annual General Meeting,
when a presentation on the Group’s progress is made each year. At all
its shareholder general meetings the Company announces the totals
of proxy votes on each resolution after it has been dealt with on
a show of hands.
Reports from Board Committees
Details of the membership and activities of each of the Board’s
Nomination and Audit Committees are contained in their separate
corporate governance reports immediately following this. Similar
details of the Remuneration Committee, including the number of
its meetings and individual directors’ attendance, are contained in
the Directors’ remuneration report.
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Accountability and internal control
The Company has an ongoing process for identifying, evaluating
and managing its significant risks. This process has been in place
throughout the year and up to the date of approval of the Annual
Report. The process and its findings are regularly reviewed by the
Audit Committee, which reports on the matter to the Board, and
accords with the guidance in the document ‘Internal Control:
Guidance for Directors on the Combined Code’ published by the
Institute of Chartered Accountants in England and Wales. This
process explicitly includes the risks, and opportunities to enhance
value, arising from social, environmental and ethical matters.
The directors are responsible for the Company’s systems of internal
control and in respect of the year ended 31 December 2003 the
directors have reviewed the effectiveness of these systems which are
designed to provide reasonable, but not absolute, assurance against
material avoidable loss or misstatement of financial information. They
are also designed to manage rather than eliminate the risk of failure
to achieve business objectives.
Where areas for internal control improvements are identified, action
is taken. The Board has put in place a management structure with
defined lines of responsibility and delegation of authority. The Group
also operates a financial performance monitoring process involving
detailed reporting against budgets and the preparation of longer term
projections. In addition there is reporting to the Board in the ordinary
course of business on key risk management processes.
The Board receives regular reports from the Audit Committee which
reviews the following main processes established by the Company
to review the effectiveness of internal control:
- Regular reporting by each division and central function on the
main risks to the achievement of Group objectives and on the
nature and effectiveness of the controls and other management
processes to manage these risks. Significant risks and the actions
taken to manage those risks are regularly reviewed by the Group’s
Risk Committee which comprises senior executives and is chaired
by the head of Audit and Compliance. The Risk Committee reports
regularly to the Audit Committee.
- A self-certification process whereby senior managers report on
those parts of the systems for which each of them is responsible.
- Internal audit and compliance monitoring work carried out by the Group’s Audit and Compliance function, which also provides
compliance advice. The head of Audit and Compliance reports to the Group Chief Executive and to the Audit Committee. The Group
has established a continuous Audit and Compliance programme for reviewing and evaluating the internal controls and compliance
procedures used in the management of risk.
Going concern
The Board has satisfied itself that the Group has adequate resources
to continue in operation for the foreseeable future. The Group
financial statements therefore continue to be prepared on a going
concern basis.
By Order of the Board
C C T Pender Secretary
9 March 2004
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