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May 15 (Bloomberg) -- RSA Insurance Group Plc received a public rebuke from Standard Life Plc, one of its largest shareholders, for cutting its dividend 33 percent and failing to communicate clearly enough with investors.

“Regarding the dividend cut, we were both surprised and disappointed by the decision,” Guy Jubb, head of corporate governance at Standard Life, said at RSA’s annual general meeting in London today. “Excessive prudence was brought to bear in determining the scale of the cut.”

RSA, which insures cars, homes and ships in the U.K., Scandinavia and emerging markets, surprised investors with the dividend cut on Feb. 20, citing a “prolonged low bond yield environment” that had cost it 200 million pounds ($305 million) in pretax earnings since 2008. The shares dropped as much as 16 percent that day and the stock is the worst performer in the 10-member FTSE ASX Nonlife Insurance Index this year.

All resolutions at the meeting were approved by shareholders and about 91 percent of investors supported its remuneration report.

Standard Life typically prefers to communicate concerns privately with companies’ boards and reserves public rebukes for its more serious corporate governance issues. The investor, RSA’s eighth biggest shareholder according to data compiled by Bloomberg, said the firm’s communication of the dividend cut was “poor.”

Decision Defended

Chairman Martin Scicluna defended the decision to cut the dividend, saying that at its former level, the payout would have required RSA to distribute 98 percent of its earnings to shareholders. That would be “imprudent and unsustainable,” he said at the meeting.

The new dividend pays out 65 percent of earnings and will allow “progression in the years ahead,” he said. He also pledged to improve communication with shareholders.

Aviva Plc, the U.K.’s second-biggest insurer by market value, also trimmed its dividend this year although CEO Mark Wilson blamed lower earnings from Europe rather than low investment returns. Competitors Prudential Plc, Legal & General Group Plc and Standard Life Plc increased their 2012 payouts.

RSA’s stock climbed 0.4 percent to 113.5 pence in London trading, valuing the insurer at about 4.1 billion pounds.

Standard Life also criticized RSA for appointing KPMG LLP as its auditor, citing a perceived conflict of interest because Alastair Barbour, chairman of the insurer’s audit committee, spent 36 years working at the accounting firm. Barbour told shareholders that he retired as a partner of KPMG in 2008 and acted independently as chairman of RSA’s audit committee.

The insurer replaced Deloitte LLP as its auditor when it invited the firm to apply for consultancy work, an invitation which should not have been given, according to Standard Life.

“We will only allow auditors to carry out certain prescribed services with a maximum limit of 25 percent of the audit fee,” Barbour said. “If the firm steps outside these guidelines it will need the approval of the whole of the board.”

Mark Hamilton, a spokesman for KPMG, said the firm is “satisfied” it is independent. Deloitte said in an e-mailed statement that while it expressed a preference to remain as RSA’s auditor and forgo the consulting work, the insurer decided otherwise and so the accounting firm didn’t seek reappointment as auditor.

To contact the reporter on this story: Kevin Crowley in London at

To contact the editor responsible for this story: Edward Evans at

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