SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
![]() | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2002.
OR
![]() | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ………… to …………
Commission File Number 333-13670
(Current S-8 Registration Number)
A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
Royal & SunAlliance 401(k) Account
9300 Arrowpoint Blvd.
Charlotte, North Carolina 28273
B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive officer: |
Royal and Sun Alliance Insurance Group plc
30 Berkeley Square
London W1J 6EW
England
Royal & SunAlliance 401(k) Account
Financial Statements and Supplemental Schedule
December 31, 2002 and 2001
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Royal & SunAlliance 401(k) Account Index to Financial Statements and Supplemental Schedule December 31, 2002 and 2001 |
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Report of Independent Auditors
To the Participants and Plan Administrator of the
Royal & SunAlliance 401(k) Account
In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Royal & SunAlliance 401(k) Account (the “Plan”) at December 31, 2002 and 2001, and the changes in net assets available for benefits for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule, Schedule H, line 4i – Schedule of Assets (Held at End of Year), is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
June 27, 2003
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Royal & SunAlliance 401(k) Account Statements of Net Assets Available for Benefits December 31, 2002 and 2001 |
2002 | 2001 | |||||
Assets | ||||||
Investments | ||||||
Interest-bearing cash | $84,227,526 | $89,788,584 | ||||
RSA stock fund (ADRs) | 2,856,877 | 1,283,691 | ||||
Interest in registered investment companies | 216,644,256 | 255,241,030 | ||||
Participant loans | 7,617,309 | 8,485,492 | ||||
Receivables | ||||||
Employer contributions | 342 | – | ||||
Participant contributions | 367 | – | ||||
Net assets available for plan benefits | $311,346,677 | $354,798,797 | ||||
The accompanying notes are an integral part of these financial statements.
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Royal & SunAlliance 401(k) Account Statement of Changes in Net Assets Available for Benefits December 31, 2002 |
Additions | |||||||
Additions (deductions) to net assets attributed to | |||||||
Investment income (loss) | |||||||
Net depreciation in fair value of investments | $(53,658,249 | ) | |||||
Distributions from registered investment companies | 5,679,117 | ||||||
Interest on participant loans | 526,442 | ||||||
Total investment loss | (47,452,690 | ) | |||||
Contributions | |||||||
Participant | 27,124,284 | ||||||
Employer | 13,869,299 | ||||||
Total contributions | 40,993,583 | ||||||
Total additions | (6,459,107 | ) | |||||
Deductions | |||||||
Deductions from net assets attributed to | |||||||
Benefits and withdrawals paid to participants | 36,988,958 | ||||||
Administrative fees | 4,055 | ||||||
Total deductions | 36,993,013 | ||||||
Net decrease | (43,452,120 | ) | |||||
Net assets available for plan benefits | |||||||
Beginning of year | 354,798,797 | ||||||
End of year | $311,346,677 | ||||||
The accompanying notes are an integral part of these financial statements.
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Royal & SunAlliance 401(k) Account Notes to Financial Statements December 31, 2002 and 2001 |
1. | Description of Plan |
The following brief description of the Royal & SunAlliance 401(k) Account (the “Plan”) is provided for general informational purposes only. Participants should refer to the Summary Plan Description or the Plan document for more complete information. The Plan is a qualified voluntary defined contribution plan sponsored by Royal Indemnity Company, a member of Royal & SunAlliance USA (“RSA”) and an indirect wholly-owned subsidiary of Royal & Sun Alliance Insurance Group, plc. Fidelity Management Trust Company is the Plan Trustee (the “Trustee”). The Plan is administered by the Pension and Benefits Committee (the “Plan Administrator”). The Plan applies to all employees of the Royal Indemnity Company and its affiliates (hereinafter collectively referred to as the “Company”). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). In July of 2001, Royal Indemnity Company subdivided the Royal & SunAlliance 401(k) Account into two components: (i) the Royal & SunAlliance 401(k) Account and (ii) the Royal & SunAlliance Savings and Investment Plan. Because the two components are identical, except for the Company matching contribution formula (as described below), the term “Plan” is used to refer to both components. The Company offered participants in the Plan on December 30, 2000, and still active on July 7, 2001, the option to choose which retirement program to participate in prospectively. Employees of the Company hired on or after August 1, 2000 are only eligible to participate in the Royal & SunAlliance 401(k) Account component and one component of the Company’s qualified defined benefit pension plan. Those employees electing to participate in the Royal & SunAlliance Savings and Investment Plan component are eligible to participate in a different component of the Company’s qualified defined benefit pension plans. Effective February 5, 2001, the net assets available for plan benefits of the Orion Capital Corporation Retirement Savings Plan for the Employees of Guaranty National Insurance Company (“GNIC Plan”) were merged into the Plan principally through an exchange of interests in similar investment options. Previously, Vanguard Fiduciary Trust Company was the trustee of the GNIC Plan. The plan merger was completed as a result of RSA’s acquisition of Orion Capital Corporation in November 1999. Vesting Contributions |
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Royal & SunAlliance 401(k) Account Notes to Financial Statements December 31, 2002 and 2001 |
For the Royal & SunAlliance 401(k) Account component, the Company will match 100% of the first 5% of eligible pay contributed on a before tax basis. For the Royal & SunAlliance Savings and Investment Plan component, the Company will match 100% of the first 4% of eligible pay contributed on a before tax basis. The Company’s matching contributions were contributed to the Plan biweekly beginning in July 1999. Allocation of the Company’s matching contributions to participants’ accounts is based on the participants’ eligible contributions. If the Company does not announce a new matching percentage, then the percentage remains the same as the previous year. Beginning in July 2001, 20% of the Company matching contribution is automatically invested in the RSA Stock Fund, which primarily invests in the American Depositary Receipts (“ADRs”) of Royal & Sun Alliance Insurance Group plc. The Company match must remain in the RSA Stock Fund until the January 1 following the date the contribution was allocated, thereafter participants may reallocate such investment into alternate investment vehicles offered under the Plan. The remaining 80% of the Company matching contribution is made in cash and is invested according to each participant’s investment elections. Participant Accounts Benefits and Withdrawals In the event of disability or death before retirement, a participant’s entire interest in the Plan, from the Company’s matching contributions and the participant’s own contributions, is payable to the participant or the participant’s designated beneficiary, regardless of the number of years of participation. A participant is eligible to receive payment in the event of disability, if the participant qualifies for disability benefits under the Company’s Long-Term Disability Plan. In the event of a financial hardship, a participant may be allowed to withdraw all or part of their interest in the Plan attributable to the participant’s contributions. In the event of such withdrawal, the participant’s right to make further contributions to the Plan is suspended for six months. |
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Royal & SunAlliance 401(k) Account Notes to Financial Statements December 31, 2002 and 2001 |
Inactive participants who terminated employment on or before December 31, 2000 are subject to the vesting schedule in place at the time of their separation from service. For such individuals, distribution of prior contributions by the Company and related earnings and appreciation are limited to the vested portion, in accordance with the following table: |
Years of service on or before December 31, 2000 following the Termination of Employment | Vesting Percentages of Interest Attributable to Company’s Contributions and Related Earnings and Appreciation | |
Less than one year | 0% | |
One year, less than two years | 20% | |
Two years, less than three years | 40% | |
Three years, less than four years | 60% | |
Four years, less than five years | 80% | |
Five years or more | 100% |
Forfeitures Loans to Participants | |
2. | Summary of Significant Accounting Policies |
Basis of Presentation |
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Royal & SunAlliance 401(k) Account Notes to Financial Statements December 31, 2002 and 2001 |
Investments Purchases and sales of securities are recorded on trade-dates. Interest income is recorded on an accrual basis. Distributions from registered investment companies are recorded on the ex-dividend date. Net Appreciation (Depreciation) Administrative and Investment Expenses Benefits Use of Estimates Risks and Uncertainties | |
3. | Plan Termination |
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. |
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Royal & SunAlliance 401(k) Account Notes to Financial Statements December 31, 2002 and 2001 |
4. | Investments |
The following table presents the fair value of investments. Investments that represent 5% or more of the Plan’s net assets are separately identified by *: |
2002 | 2001 | |||||
Interest-bearing cash | ||||||
Fidelity Retirement Money Market Fund | $84,227,526 | * | $89,788,584 | * | ||
Employer related investment securities | ||||||
RSA Stock Fund | 2,856,877 | 1,283,691 | ||||
Interest in registered investment companies | ||||||
Pimco Total Return – Administrative Class | 30,965,119 | * | 25,802,727 | * | ||
Baron Asset Fund | 4,419,599 | 3,836,898 | ||||
Templeton Foreign A | 5,546,432 | 5,531,059 | ||||
Janus Balanced Fund | 19,405,846 | * | 20,422,888 | * | ||
Vanguard Explorer | 12,088,193 | 15,157,717 | ||||
Vanguard Primecap | 29,418,938 | * | 39,382,983 | * | ||
Fidelity Equity Incorporated | 14,738,973 | 17,271,202 | ||||
Fidelity Blue Chip | 70,848,301 | * | 97,100,998 | * | ||
Fidelity Diversified Intl | 957,420 | 523,522 | ||||
Spartan Intl Index | 3,898,111 | 4,942,819 | ||||
Spartan US Equity Index | 18,194,128 | * | 23,157,842 | * | ||
Fidelity US Bond Index | 6,163,196 | 2,110,375 | ||||
$303,728,659 | $346,313,305 | |||||
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Royal & SunAlliance 401(k) Account Notes to Financial Statements December 31, 2002 and 2001 |
The net appreciation (depreciation) in fair value of investments is as follows: | |||||
2002 | |||||
Employer related investment securities | |||||
RSA Stock Fund | $(1,815,260 | ) | |||
Interest in registered investment companies | |||||
Pimco Total Return – Administrative Class | 484,391 | ||||
Baron Asset Fund | (1,178,496 | ) | |||
Templeton Foreign A | (656,890 | ) | |||
Janus Balanced Fund | (1,875,120 | ) | |||
Vanguard Explorer | (4,015,020 | ) | |||
Vanguard Primecap | (10,039,028 | ) | |||
Fidelity Equity Incorporated | (3,432,625 | ) | |||
Fidelity Blue Chip | (24,861,820 | ) | |||
Fidelity Diversified Intl | (109,801 | ) | |||
Spartan Intl Index | (825,842 | ) | |||
Spartan US Equity Index | (5,481,127 | ) | |||
Fidelity US Bond Index | 148,369 | ||||
$(53,658,269 | ) | ||||
5. | Tax Status |
The Internal Revenue Service has determined and informed the Company by letter dated December 10, 2002, that the Plan is qualified and that the trust established under the Plan is tax exempt under the appropriate sections of the Internal Revenue Code (the “Code”). The Plan has been amended since receiving the determination letter. The Plan Administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Code. Therefore, they believe that the Plan will continue to be qualified and that the related trust will continue to be tax exempt. | |
6. | Related Party Transactions |
The Plan currently provides for investment in ADRs of the Royal & Sun Alliance Insurance Group, plc. Twenty percent of the Company matching contributions is allocated to the ADR investment option. As an individual account plan, the holding of such assets is permissible as an exemption from prohibited transaction requirements under the Employee Retirement Income Security Act and the Internal Revenue Code. The Plan sponsor currently pays all expenses of operating and administering the Plan. Certain Plan investments are shares of mutual funds managed by the Trustee; therefore, these transactions qualify as party-in-interest transactions. | |
7. | Reconciliation of Financial Statements to Form 5500 |
There are no differences between the accompanying financial statements and the Plan’s IRS Form 5500. |
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Royal & SunAlliance 401(k) Account Schedule H, line 4i – Schedule of Assets (Held at End of Year) December 31, 2002 |
Identity of Issue | Description of Investment | Current Value | ||||
Fidelity Retirement Money Market Fund | Interest-bearing cash | $84,227,526 | ||||
* RSA Stock Fund | Employer related investment securities | 2,856,877 | ||||
Pimco Total Return – Administrative Class | Interest in registered investment companies | 30,965,119 | ||||
Baron Asset Fund | Interest in registered investment companies | 4,419,599 | ||||
Templeton Foreign A | Interest in registered investment companies | 5,546,432 | ||||
Janus Balanced Fund | Interest in registered investment companies | 19,405,846 | ||||
Vanguard Explorer | Interest in registered investment companies | 12,088,193 | ||||
Vanguard Primecap | Interest in registered investment companies | 29,418,938 | ||||
Fidelity Equity Incorporated | Interest in registered investment companies | 14,738,973 | ||||
Fidelity Blue Chip | Interest in registered investment companies | 70,848,301 | ||||
Fidelity Diversified Intl | Interest in registered investment companies | 957,420 | ||||
Spartan Intl Index | Interest in registered investment companies | 3,898,111 | ||||
Spartan US Equity Index | Interest in registered investment companies | 18,194,128 | ||||
Fidelity US Bond Index | Interest in registered investment companies | 6,163,196 | ||||
Total interest in investment companies | 216,644,256 | |||||
Participant Loans | Notes receivable from participants | 7,617,309 | ||||
Total assets held for investment purposes | $311,345,967 | |||||
* Party in interest to the Plan |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Royal Indemnity Company Pension and Benefits Committee which administers the Royal & SunAlliance 401(k) Account on behalf of Royal Indemnity Company, the Plan Administrator, has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
Royal & SunAlliance 401(k) Account | |
Date: June 30, 2003 | |
By: /s/ Laura S. Lawrence | |
Name: Laura S. Lawrence | |
A member of the Royal Indemnity Company Pension and Benefits Committee |
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EXHIBIT INDEX
Exhibit | Description | Page |
23 | Consent of Independent Accountant | 17 |
99 | Certification Pursuant to 18 U.S.C. Section 1350 | 18 |
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