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The Group is committed to high standards
of corporate governance. It has carried out
a full review of the Group’s compliance
with the current Principles of Good
Governance and the Code of Best Practice
(together referred to as ‘the Combined
Code’) and is satisfied that the Company
complied with the Combined Code in
all respects throughout the year ended
31 December 2002. The Higgs and Smith Reports The Government commissioned review of the role and effectiveness of non-executive directors (the Higgs Report) and the report on audit committees (chaired by Sir Robert Smith) were both published in January 2003. The Financial Reporting Council is currently consulting on the consequential revisions to the Combined Code. In anticipation of such revisions, the Board is already reviewing the procedures and terms of reference of the Board and its Committees. The evolution in Committee and Board membership will also be influenced by the proposals in their final form. Directors The Board meets on a regular basis, holding ten main meetings in 2002 (2001: ten), of which two were special meetings to agree corporate transactions. The Board has specific matters reserved to it for decision and 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 they consider appropriate. Procedures have been adopted for directors to take independent professional advice, when necessary, at the Company’s expense. The Board comprised throughout the year the Chairman, the six other non-executive directors and the five executive directors as detailed here. All the non-executive directors are entirely independent of management and, other than in the case of Mr Joslin, the Board has determined that there are no relationships or circumstances which could affect any director’s independent judgement in the exercise of his duties. Until 31 December 2002 Mr Joslin was Vice Chairman of State Farm Mutual Automobile Insurance Company, which is a 12.7% shareholder in the Company and also continues to provide material Letter of Credit facilities to the Group (on commercial terms). Mr Joslin retired from State Farm on 31 December 2002 but, in view of his very recent connection, continues at present to be classified by the Board as non-independent. Mr Kemp 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. One Beacon no longer has a disclosable interest in Amlin’s shares. During the year the Board maintained its previous view that One Beacon’s shareholding was not sufficient to impair Mr Kemp’s independence, particularly as the holding is managed in an investment management department of which he is not a member. During 2002 Mr Kemp took up 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). As the position is a temporary secondment, and the arrangement with Amlin had been put in place before it commenced, the Board determined that it does not affect Mr Kemp’s independent judgement as a director of the Company or make him any less independent of Amlin management. However, if his secondment were to become longer term, this position would be reviewed. There is a division of responsibilities on the Board, in that the non-executive Chairman is responsible for running the Board and the Group Chief Executive has executive responsibility for running the Group’s business. The senior independent director, the Deputy Chairman Lord Stewartby, is designated as an appropriate director to whom shareholders’ concerns may be conveyed if shareholders would prefer to do so rather than convey them to the Chairman. There are three main Board Committees: Nomination, Audit and Remuneration, details of which are given below and in the Directors’ Remuneration Report which immediately follows this report. Copies of each of their terms of reference are available to shareholders on request. All directors are provided with written materials on their responsibilities as directors of a public company, and on other relevant matters. Induction and any appropriate training is provided to newly appointed directors, although there were no new directors during the year. The Articles of Association of the Company provide that no director serves in office in excess of three years before being required to submit himself or herself to shareholders for re-election. Nomination Committee The Nomination Committee considers appointments to the Board. This committee is chaired by the Chairman, who is non-executive, and its other members are the non-executive Deputy Chairman, the Vice Chairman, the Group Chief Executive and a third non-executive director, Mr Joslin. Its membership was unchanged during the year. All proposals for appointment, election or re-election to the Board, whether in a non-executive or executive capacity, are considered by the committee, which makes recommendations to the Board for decision. Re-nomination of directors to the relevant Annual General Meeting is considered on a case by case basis before recommendations are made. The committee’s terms of reference also include Board succession planning. Audit Committee The Audit Committee of the Board normally meets five times annually and comprises four of the non-executive directors, Lord Stewartby, who is chairman of the Committee, and Messrs Kennedy, Mylvaganam and Sanders. Its membership was unchanged during the year. The Chairman of the Company, the Group Chief Executive and the Finance Director also usually attend. The committee’s terms of reference enable it to take an independent view of the appropriateness of the Group’s accounting policies and practices. It also considers the appointment and fees of the external auditors, who have unrestricted access to it, in relation to both their audit and any material non-audit assignments, and monitors the Group’s compliance, internal control and risk management procedures. It meets on occasion with the external and internal auditors without any other executive management present. Directors’ remuneration A statement of the Group’s policies on directors’ and other employees’ remuneration, which follow the principles of the Combined Code, is included in the Directors’ Remuneration Report which immediately follows this report. That report also includes details of the Remuneration Committee. Relations with shareholders The Company is committed to a process of continuing dialogue with its shareholders and makes appropriate contact with institutional investors and their representative bodies as major issues or developments arise. The Company is also mindful of the needs of private investors and conducts a programme of briefings for private client advisers as well as operating a dedicated telephone line at the Company to answer enquiries. Details of the latter are given in ‘Shareholder Information’. Private investors are encouraged to attend the Annual General Meeting, when a presentation on the Group’s progress is made each year. At all its shareholder meetings the Company adopts the recommended practice of counting all proxy votes and announcing the result on each resolution after it has been dealt with on a show of hands. The Combined Code’s recommendation that shareholders be given at least 20 working days’ formal notice of the AGM is followed each year. 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. As referred to in the ‘Social Responsibility’ section of the Directors’ Report, this process now 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 2002 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:
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 the going concern basis. By Order of the Board C C T Pender Secretary 26 March 2003 |
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