Standard Life attacks RSA board of directors over its cut to final dividend

'Surprised and disappointed' investor says insurer is being 'too prudent'

One of Britain's largest institutional investors has launched an unexpected attack on RSA's board of directors. Standard Life Investments, a top 10 shareholder in the insurer, said it was "surprised and disappointed" by the company's decision to cut its final dividend by 33 per cent earlier this year.

Guy Jubb, head of governance and stewardship at SLI, claimed that communication of the decision had been "poor "and accused the group of exercising "excessive prudence" at its annual meeting in London yesterday.

He also said the company was "unwise" for switching its auditor from Deloitte to KPMG shortly after the arrival of a new chairman and finance director. SLI withheld its vote on the re-election of Alastair Barbour as chairman of RSA's audit committee because of an "unfortunate perception of conflict".

Mr Barbour spent 36 years at KPMG before retiring in 2011.

The comments came towards the end of a lively AGM in the City in which investors called for the company to adopt a riskier investment strategy. RSA currently holds about 91 per cent of its investments in bonds and some shareholders want more to be put into equities to improve returns.

Earlier at the AGM, Martin Scicluna, RSA's chairman, said the decision to cut the dividend was taken because of low interest rates and falling yields on government bonds, which hit the group's income in 2012.

He denied the 33 per cent cut was simply a way of funding executive bonuses amid discontent from some investors. He claimed it was in the group's "long-term interests" and said overall pay was down 30 per cent from £6m in 2011 to £4.3m last year.

"I understand that some, but not all, shareholders were disappointed by the board's decision to recommend a rebasing of the dividend," said Mr Scicluna. "The earnings not paid out as dividends have been retained in the business to grow the balance sheet and improve future returns. They have not been used to increase directors' pay."

Rumours of a revolt at yesterday's AGM had been rife since it emerged that RSA's chief executive, Simon Lee, was taking home a bonus of £480,000 as part of a £1.5m pay package.

In the end 91 per cent of investors backed the pay report, while all other resolutions were passed with big majorities.

Mr Scicluna said Mr Lee's remuneration package had been higher than in 2011 because it was his first full year at the helm of RSA: "His total remuneration for 2012 was under £2m compared with £4.2m paid to his predecessor [Andy Haste] in 2011."

Reflecting on the group's decision to appoint KPMG as auditors, he also defended the relationship between the "Big Four" accountancy firm and Mr Barbour. "He retired from the firm in 2011 and has had no financial or other ties with the firm since then," Mr Scicluna said.

Prudential is set to hold its AGM tomorrow, when questions are likely to be raised about the £8m package handed to its chief executive, Tidjane Thiam. This came just days after he was censured by the Financial Services Authority over the group's failed bid for AIA in 2010.