Annual General Meeting. Notice of Annual General Meeting 2001 and Explanatory Notes. NRMA Insurance Group Limited ABN

Transcription

1 Annual General Meeting Notice of Annual General Meeting 2001 and Explanatory Notes NRMA Insurance Group Limited ABN

2 NRMA Insurance Group Limited ABN Notice of Annual General Meeting ( AGM ) Shareholders are advised that the 2001 Annual General Meeting of NRMA Insurance Group Limited ( the Company ) will be held on Friday 2 November 2001 at 2.30pm at the Tumbalong Auditorium, Sydney Convention and Exhibition Centre (South), Darling Harbour, Sydney. PLEASE READ EXPLANATORY NOTES NRMA Insurance Group Limited Ordinary Business (a) To Receive Financial Statements Receipt of the Company s financial statements for the year ended 30 June 2001, the directors statement and report and the auditor s report on the financial statements. (b) To Elect Five Directors Note: You may only vote in favour of a maximum of 5 of the 8 candidates listed in the resolutions below, as only 5 Board positions are available. In order to be elected, a candidate must receive more votes in favour of their appointment than against. If more than 5 candidates receive such a majority, the 5 candidates receiving the most votes in favour of their election will be elected as directors. Resolution 1 Mr Michael P Gallagher has nominated himself for election as a director. Resolution 2 The proposed Chief Executive Officer, Mr Michael Hawker, offers himself for election. Resolution 3 Mr Stephen D Mayne has nominated himself for election as a director. Resolution 4 The Chairman, Mr James Strong, offers himself for election. Resolution 5 Mr David Clark has nominated himself for election as a director. Resolution 6 In accordance with the ASX Listing Rules and Article 12 of the Company s Constitution, Ms Anne J Keating (currently a director) retires and offers herself for reelection. Resolution 7 In accordance with the ASX Listing Rules and Article 12 of the Company s Constitution, Ms Dominique G Fisher (currently a director) retires and offers herself for re-election. Resolution 8 In accordance with the ASX Listing Rules and Article 12 of the Company s Constitution, Mrs Mary Easson (currently a director) retires and offers herself for reelection. Special Business (a) Consider Change of Name of Listed Holding Company Resolution 9 To consider and, if thought fit, pass the following resolution as a special resolution: That NRMA Insurance Group Limited change its name to Insurance Australia Group Limited on or about 1 January 2002 and that the Company s Constitution be amended accordingly. 2/3

3 PLEASE READ EXPLANATORY NOTES (b) Require Non-Executive Directors to Receive at least 20%, and Allow them to Receive up to 90%, of their Fees in Shares Rather than in Cash Resolution 10 To consider and, if thought fit, pass the following resolution as an ordinary resolution: That approval be given, for the purposes of ASX Listing Rule 10.14, for the acquisition by each nonexecutive director in office after the end of the AGM, as part of their annual base fees, of an interest under and on the terms of the Non-Executive Directors Share Plan in ordinary shares in the Company to the value of at least 20%, but not in excess of 90%, of the non-executive director s annual base director s fees. (c) Allow the Proposed Chief Executive Officer to Participate in Share Plan Resolution 11 To consider and, if thought fit, pass the following resolution as an ordinary resolution: That approval be given, for the purposes of ASX Listing Rule 10.14, for the acquisition by the proposed Chief Executive Officer of the Company, Mr Michael Hawker, if elected pursuant to Resolution 2, of 1,000,000 Performance Share Rights over unissued shares in the Company under the Performance Share Rights Plan and the issue of up to a maximum of 1,000,000 ordinary shares in the Company upon the exercise of those rights (depending on the Company s performance), subject to the terms of that Plan, as part of his remuneration for his services as Chief Executive Officer. Notes (a) Proxies A shareholder who is entitled to attend and cast a vote at the meeting has a right to appoint a proxy to attend and vote instead of the shareholder. The proxy need not be a shareholder. A shareholder who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion and number of votes which each proxy is appointed to exercise. To be valid, all proxy forms must be received by the Company s Share Registrar, ASX Perpetual Registrars Limited, by 2.30pm on Wednesday 31 October 2001 ( Proxy Deadline ). Proxy forms may be submitted in either of the following ways: i) by post in the reply paid envelope provided. Please allow sufficient time so that it reaches ASX Perpetual Registrars Limited by the Proxy Deadline; or ii) by facsimile to ASX Perpetual Registrars Limited on (02) Any proxy form sent by facsimile must be received by the Proxy Deadline. (b) Corporate Representatives Any corporate shareholder wishing to appoint a person to act as its representative at the meeting may do so by providing that person with: i) a letter or certificate, executed in accordance with the company s constitution, authorising him or her as the company s representative; or ii) a copy of the resolution, certified by the secretary or director of the corporate shareholder, appointing the representative.

4 PLEASE READ EXPLANATORY NOTES (c) Shareholders Eligible to Vote As determined by the Board of Directors, only persons who hold shares in the Company as at 4.30pm on Wednesday 31 October 2001 will be eligible to vote at the meeting. (d) Voting Exclusion Statement As required by the ASX Listing Rules, the Company will disregard any votes cast on Resolutions 10 and 11 by the directors and by any of the directors who may be elected pursuant to Resolutions 1, 2, 3 and 5 or their respective associates. The Company need not disregard a vote if it is cast by: (i) one of the directors or their associates as proxy for a person who is entitled to vote, if the vote is cast in accordance with the directions on the proxy form; or (ii) one of the directors if they are chairing the meeting and cast the vote as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides. The Chairman, Mr James Strong, has indicated his intention to vacate the chair of the meeting for such time as Resolutions 4 and 10 are being considered and voted upon by shareholders. Dated at Sydney on 7 September 2001 By order of the Board of Directors Gaye Morstyn Group Secretary NRMA Insurance Group Limited 4/5

5 NRMA Insurance Group Limited ABN Explanatory Notes These notes explain the resolutions set out in the Notice of AGM and should be read in conjunction with the Notice. Ordinary Business The Australian Stock Exchange ( ASX ) Listing Rules require the Company to hold an election of directors in each year. The Constitution of the Company requires one third of the directors to retire from office at each AGM. In relation to the election of directors, 8 candidates are standing for 5 Board positions. Only 5 candidates may be elected. In order to be elected, a candidate must receive more votes validly cast in favour than against. If more than 5 candidates receive such a majority, the 5 candidates receiving the most votes in favour of their election will be elected as directors. If you vote in favour of more than 5 candidates your vote will be invalid. The order in which the candidates names appear on the notice of AGM and proxy form has been determined by ballot conducted by the Company s auditor. Resolution 1 Election of a Director, Mr M P (Michael) Gallagher Mr Gallagher has nominated himself for election as a director, and has supplied the following statement: Mick Gallagher, BA, Dip T, RANR. We need a board of directors that can work honestly and cohesively together for the benefit of all stakeholders. This not only includes shareholders, but also NRMA staff and insurance customers. I would support: Secure investments within Australia Extreme caution with speculative overseas investments Australian shareholders holding a majority Providing adequate staffing Reviewing insurance premiums Rebates for long-term members Neighbourhood Watch and crime prevention programs Bonuses to members Careflight sponsorship I have held positions as Mayor, Chamber of Commerce executive, Director of community housing and am currently a Naval Reserve Officer and educationalist. I have membership with many associations. With my broad experience I would bring fresh ideas to the Board. Thank you.

6 NRMA Insurance Group Limited Resolution 2 Election of a Director, Mr M (Michael) Hawker, BSc (Proposed Chief Executive Officer) The proposed Chief Executive Officer, Mr Hawker, offers himself for election as a director. Michael Hawker, aged 41, will be appointed as Chief Executive Officer of NRMA Insurance Group Limited effective on or about 3 December He has been Group Executive, Australian Business and Consumer Banking at Westpac Banking Corporation since His direct responsibilities include the retail and business bank in Australia, Westpac Trust in New Zealand and Westpac s operations in the Pacific Islands. Previously he was Global Head of Financial Markets at Westpac. From 1984 to 1995, Mr Hawker occupied a series of senior positions within the Citibank organisation, in Europe as Executive Director of Citibank International PLC and also as Deputy Managing Director of Citibank Australia. He has a Bachelor of Science Degree from Sydney University and had a distinguished sporting career including being a member of the Australian Rugby Union team (the Wallabies). Resolution 3 Election of a Director, Mr S D (Stephen) Mayne Mr Mayne has nominated himself for election as a director, and has supplied the following statement: Stephen D Mayne, age 32. Bcom (Melb). Mr Mayne is the publisher of an independent news website which campaigns for greater corporate ethics and accountability. He has been a business journalist for 12 years with a range of Australian papers including The Age, The Daily Telegraph, the Herald Sun and the Australian Financial Review. He won the Walkley Award for business journalism in 1999 for a series from the perspective of an active shareholder. Mr Mayne believes NIGL should become a more activist fund manager to help create a culture of shareholder pressure in Australia. Resolution 4 Election of a Director, Mr J A (James) Strong (Chairman) The Chairman, Mr Strong, offers himself for election as a director. Mr Strong was appointed to the Board on 2 August 2001 to fill a casual vacancy left by the resignation of Mr N R Whitlam, the former Chairman of the Company. Mr Strong, aged 57, was appointed a Director and Chairman of NRMA Insurance Group Limited on 2 August He is also Chairman of Woolworths Limited and the Australian Business Arts Foundation, a Director of the Australian Grand Prix Corporation and Opera Australia. He has been admitted as a barrister and solicitor. Mr Strong was Chief Executive and Managing Director of Qantas Airways Limited from October 1993 until March Previous roles include Group Chief Executive of DB Group Limited in New Zealand, National Managing Partner and later Chairman of Corrs Chambers Westgarth, an Australian law firm, Chief Executive of Trans Australian Airlines (later Australian Airlines) and Executive Director of the Australian Mining Industry Council. 6/7

7 Resolution 5 Election of a Director, Mr D (David) Clark Mr Clark has nominated himself for election as a director, and has supplied the following statement: David Clark, B.E, M.Eng.Sc M.E, Dip Urb Stud. Dip. Mgt, CIMC. For nine years I have been a management consultant operating my own business consultancy which advises organisations and businesses on strategic management initiatives and business system improvement. For twenty years I was a professional traffic engineer involved in the development of traffic management & control systems in Australia. In AWA I managed the installation of traffic signals in Hong Kong, China and in the Philippines liaising with senior government officials in those countries. My original qualification was engineering followed by research in traffic and transportation issues, community planning and business management. I am: Resolution 6 Election of a Director, Ms A J (Anne) Keating (currently a director) In accordance with the ASX Listing Rules, and under Article 12 of the Constitution of the Company, Ms Keating retires and offers herself for re-election. Ms Keating, aged 47, has been a Director of NRMA Insurance Group Limited since 19 June For the five years prior she served on the Board of NRMA Insurance Limited. Until 10 November 2000, she also served on the Board of NRMA Building Society Limited and was a member of the Company s Remuneration Committee. Ms Keating is currently on the Board of National Roads and Motorists Association Limited. Ms Keating recently resigned as General Manager, Australia for United Airlines, a position she held from She is a Director of the Singleton Group Limited and Macquarie Leisure Property Trust. Ms Keating is an inaugural board member of the Victor Chang Cardiac Research Institute and is a former board member of WorkCover Authority of Australia. past President of The Silverwater Club, a certified Management Consultant with the Institute of Management Consultants, member of the Warringah Chamber of Commerce former Federal Councillor of the Association of Professional Engineers, Scientists and Managers (APESMA). former President of the Roads and Traffic Authority Group of APESMA.

8 NRMA Insurance Group Limited Resolution 7 Election of a Director, Ms D G (Dominique) Fisher, BA (Hons) (currently a director) In accordance with the ASX Listing Rules, and under Article 12 of the Constitution of the Company, Ms Fisher retires and offers herself for re-election. Ms Fisher, aged 44, has been a Director of NRMA Insurance Group Limited since 19 June 2000 and of NRMA Insurance Limited since 1996 and is Deputy Chair of that Board. Ms Fisher also serves on the Company s Compliance Committee and was a member of the Board of National Roads and Motorists Association Limited for five years and served as Deputy President during her term. She has 20 years experience in telecommunications and electronic commerce and has held CEO/Divisional head positions in various companies since Now operating her own company, EC Strategies Pty Ltd, principally in Australasia and the United States, she advises companies on their electronic commerce strategies and negotiates related transactions. She is a Director of the Prostate Cancer Research Foundation Victoria and a Director of the Playbox Theatre. She has previously been a Director of the Communications and Media Law Association, Chairman of the Management Committee, Royal Hospital for Women, Director of AIDS Fundraising Management Limited and Trustee of the Sydney Opera House Trust. Resolution 8 Election of a Director, Mrs M (Mary) Easson, MAICD (currently a director) In accordance with the ASX Listing Rules, and under Article 12 of the Constitution of the Company, Mrs Easson retires and offers herself for re-election. Mrs Easson, aged 46, has been a Director of the Company since 19 June 2000 and of NRMA Insurance Limited since Until 27 April 2001, Mrs Easson also served on the Board of the NRMA Building Society Limited and is a member of the Company s Audit and Risk Management and Remuneration Committees. Mrs Easson is currently on the Board of National Roads and Motorists Association Limited. Mrs Easson was National Government Relations Manager for Australian Consolidated Industries (ACI) until Mrs Easson was also a former Human Resources Executive with Ansett Transport Industries until She ran her own Public Relations Consultancy until March 1993 when she was elected to the House of Representatives. Mrs Easson is currently Managing Director of Probity International which gives strategic government/business advice to major listed corporations. Mrs Easson is married with two daughters. 8/9

9 Recommendation Resolutions 1 to 8 Although 8 candidates are standing for election to the office of director, a maximum of 5 candidates may be elected in accordance with the Company s Constitution. The Board seeks individuals with extensive business experience in the areas in which the Company operates. Special Business (a) Consider Change of Name of Listed Holding Company Resolution 9 Resolve, as a special resolution, that NRMA Insurance Group Limited change its name to Insurance Australia Group Limited on or about 1 January 2002 and that the Company s Constitution be amended accordingly. This change relates only to the name of the listed company on the Australian Stock Exchange, which is the holding company for the NRMA Insurance Group. It does not affect the continuing use of the NRMA Insurance brand in the normal business operations of the Group. It is time to ensure that the name of the Company (the listed holding company of the Group) reflects its strength, diversity and aspirations as it commences a new and exciting phase of its evolution. The Group has evolved into the largest general insurance provider in the Australia Pacific region. It is a major player in most regional markets, distributing its products and services directly to consumers and small businesses through premium regional brands and providing specialised products through brokers to the commercial and government sectors. The Company has grown in size, in geographic reach, in diversity of business and has acquired a portfolio of premier brands which it maintains and develops. The Company has further evolved through demutualisation and listing on the Australian Stock Exchange. It now emerges strong and financially secure, embracing plans to deliver profits and growth in earnings to its shareholders. The Company intends to continue trading through its portfolio of established brands in their regional markets such as the NRMA Insurance brand in New South Wales. However, the horizons of the Company have now expanded and will continue to expand beyond its regional heritage. Today the NRMA Insurance Group comprises a number of insurance and financial services businesses across Australia and New Zealand. The NRMA Insurance brand is the most well known brand used by the Group in New South Wales and the Australian Capital Territory. However, the Group operates under a number of other brands SGIO and SGIC in Western Australia and South Australia respectively. In New Zealand, the Group operates under the State Insurance and the Circle Insurance brands. Through its subsidiary, Insurance Manufacturers Australia Pty Ltd, the Group is involved in insurance operations in Victoria under the RACV Insurance brand. The Group also manufactures insurance products for a number of third party consumer brands and has commercial interests in Asia that are separately branded.

10 NRMA Insurance Group Limited The Company is the holding company (the owner) of the subsidiaries in the Group which operate those brands. In view of this, the Board believes it is appropriate to change the name of the listed Company to one which acknowledges the diversity of trading brands of the Group and that encapsulates its size, diversity and aspirations. The Board recommends that shareholders vote in favour of the resolution for the following reasons: 1 Preserving Group brands the current name, whilst very strong in the New South Wales and Australian Capital Territory markets as a product and a brand, means very little in other states of Australia, in New Zealand or elsewhere overseas. If anything, there is a risk that the NRMA Insurance brand is viewed negatively in other Australian regions as it competes against local established brands. Other brands within the Group are powerful in their own heritage, and the same approach will be followed in preserving the huge value of the NRMA name by continuing to offer NRMA Insurance products and services in New South Wales and the Australian Capital Territory. 2 Signalling change and momentum the Group is entering an exciting new era as a leading insurance force in this part of the world. A new name will depict and signal change and momentum in concert with the appointment of a new Chairman and Chief Executive Officer and other initiatives. 3 Two NRMA company names the proposed change of name will also assist in distinguishing the Group from the road service mutual, National Roads and Motorists Association Limited (which changed its name at its last annual general meeting from NRMA Limited). The products and services of the road service mutual are differently branded ( NRMA Member Services ) and unmistakable from the Group s insurance and financial services products. However, the company names are sometimes mistaken in the press. 4 NSW & ACT centric the current name no longer accurately describes the Group s business in terms of size, range of products, and geographical coverage. While its close link with the motoring heritage of the NRMA brand in New South Wales and the Australian Capital Territory is a key strength, it has the potential to undermine the present value and future potential of the Group in other places. Approval of the change of name requires a special resolution ie it must be passed by at least 75% of votes validly cast on the resolution by shareholders entitled to vote on it. If the resolution is passed, the Company also proposes to alter its internet domain name and its ASX code to be consistent with that change. The Company will continue to operate the internet domain names it currently uses for its brands in the various regional marketplaces. Recommendation The directors recommend that shareholders vote in favour of the resolution. 10/11

11 (b) Require Non-Executive Directors to Receive at least 20%, and Allow them to Receive up to 90%, of their Fees in Shares Rather than in Cash Resolution 10 That approval be given, for the purposes of ASX Listing Rule 10.14, for the acquisition by each non-executive director in office after the end of the AGM, as part of their annual base fees, of an interest under and on the terms of the Non-Executive Directors Share Plan in ordinary shares in the Company to the value of at least 20%, but not in excess of 90%, of the non-executive director s annual base director s fees. This is not an additional benefit for directors. It is a method of enabling the Company to provide part of the fees for services as a director in the form of shares. The purpose is to further align the interests of directors with those of all shareholders in terms of the future performance of the Group. This practice is becoming more popular as a means of showing the commitment of directors to the Group, to shareholders and to future success. The shares are provided as part of the non-executive directors annual base fees, and are not an addition to those fees. The Resolution will ensure consistency with the directors remuneration philosophy for non-executive directors who held office at the time of the last AGM. The fundamental concept underlying this philosophy is the mandatory provision of part of directors annual base fees by way of shares. The key addition this year is that the Company will be permitted to provide a greater proportion of the non-executive directors annual base fees in the form of shares. This seeks to align more closely the interests of non-executive directors with the interests of shareholders. The Board has proposed that the Company require all non-executive directors to take at least 20%, but have the flexibility to provide them with up to 90%, of their annual base fees by way of shares. This Resolution has been proposed so that shareholders may consider, and if thought fit, approve for the purposes of ASX Listing Rule 10.14, the acquisition by each non-executive director in office after the end of the AGM of an interest in ordinary shares in the Company under the Non-Executive Directors Share Plan, as part of their annual base fees. This will enable at least 20%, (but not more than 90%) of the non-executive directors annual base fees for services as a director (not including committee fees) to be provided by the Company in the form of ordinary shares in the Company, on the terms and conditions of the Plan. Shareholders approved at the previous AGM, held in November 2000, the grant to non-executive directors then holding office of an interest in ordinary shares of the Company to the value of 20% of those nonexecutive directors annual base fees. Plan Outline Shares will be acquired by the Trustee of the Plan by way of on-market purchase or by way of issue by the Company of new shares, at no cost to the nonexecutive directors. The shares allocated to each nonexecutive director by the Trustee will be held on trust by the Trustee for that non-executive director.

12 NRMA Insurance Group Limited The number of shares to be provided to non-executive directors will be determined on the basis of the weighted average trading price of shares in the Company in a 1 week period preceding the date of allocation by the Trustee, the annual base fees of that director and the proportion of the director s remuneration to be provided in the form of shares. Shares allocated under the Plan will be forfeited if the participant ceases to be a director for serious misconduct involving dishonesty. Shares allocated under the Plan will also be forfeited on a pro-rata basis if the participant ceases to be a director prior to 12 months from the date of allocation to the Trustee. The proportion of shares forfeited will equal that proportion of the 12 month period in respect of which the participant ceased to be a director. The shares cannot be dealt with until the expiry of the restriction period. The restriction period ends at the earliest of: (a) a fixed number of years determined by the Trustee at the time of allocation (1-10 years); (b) the date the non-executive director ceases to be a director of the Company; or (c) notification following specified events, which include a takeover bid for the Company or similar transaction. A participating non-executive director is entitled to receive all cash dividends on shares, all bonus shares and other rights accruing in respect of shares held on their behalf, and is entitled to receive notice of and to vote at any meeting of shareholders. A participating non-executive director is also entitled to the income of the trust that is attributable to the shares held on their behalf. Impact The number of shares which may be acquired by nonexecutive directors under the Plan depends on the annual base fees payable to the relevant director, the proportion of their remuneration which each particular director receives as shares and the price at which shares are acquired (see above). The maximum number of shares that would be acquired by each nonexecutive director prior to next year s AGM under the Non-Executive Directors Share Plan will range from 30,000 for the Chairman and 10,000 for each other non-executive director if each of them is provided only 20% of their annual base fees as shares, to 135,000 for the Chairman and 45,000 for each other nonexecutive director if each of them is provided 90% of their annual base fees as shares, without further shareholder approval being obtained. The actual number of shares acquired is likely to be substantially less than this, at current share prices. If elected as a director, Mr Michael Hawker will not be eligible to participate in the Plan. 12/13

13 Securities Granted Under the Plan The following shares have been granted to directors or their associates under the Non-Executive Directors Share Plan since the last AGM (at which the grant of shares under the Plan was approved). Recipients of shares Number of Acquisition price shares received for each share 1 Nicholas Whitlam 1,584 2 $ John Astbury 4,817 $ Maree Callaghan 4,817 $ Dominique Fisher 4,817 $ Geoffrey Cousins 4,817 $ Mary Easson 4,817 $ Neil Hamilton 4,817 $ Anne Keating 4,817 $ Rowan Ross 4,817 $ Ian Stanwell 4,817 $ Being the volume weighted average price of NIGL shares traded on ASX during the 1 week period ended 9 March 2001, and the amount of the annual base fees represented by each share. The Trustee acquired the shares at market price on the date of the acquisition. 2 Nicholas Whitlam was allocated 14,452 shares, but as he ceased to be a director of the Company in April 2001, he forfeited a proportion of the shares allocated to him, based on his actual period of service as a director after the allocation date. Mr Whitlam received only 1,584 shares under the terms of the Plan. Recommendation As the resolution relates directly to the non-executive directors, the directors will not make a recommendation. (c) Allow the Proposed Chief Executive Officer to Participate in Share Plan Resolution 11 That approval be given, for the purposes of ASX Listing Rule 10.14, for the acquisition by the proposed Chief Executive Officer of the Company, Mr Michael Hawker, if elected pursuant to Resolution 2, of 1,000,000 Performance Share Rights over unissued shares in the Company under the Performance Share Rights Plan and the issue of up to a maximum of 1,000,000 ordinary shares in the Company upon the exercise of those rights (depending on the Company s performance), subject to the terms of that Plan, as part of his remuneration for services as Chief Executive Officer. As described in the explanatory notes for last year s notice of AGM, the Company has adopted a number of employee incentive schemes designed to motivate and provide incentives to employees and executives, and to enable the Company to attract and retain employees and executives of a high calibre. Resolution 11 has been proposed so that shareholders may consider, and if thought fit, approve for the purposes of ASX Listing Rule the possible grant of rights and shares to the proposed Chief Executive Officer of the Company ( CEO ), as part of his remuneration package should he be elected pursuant to Resolution 2.

14 NRMA Insurance Group Limited Reasonable Remuneration Independent expert advice has been obtained on the proposed performance arrangement for the CEO, having regard to comparable performance incentives applying to Chief Executive Officers of other major Australian listed companies. As a result of such expert advice, the directors (the CEO not participating) consider that the proposed grant of rights and shares for which approval is sought are reasonable having regard to the Company s circumstances, and the responsibilities involved in the office of CEO, and the importance of successful management and growth of the Company s business. Rights Proposed The rights proposed to be granted, and for which shareholder approval is sought, are 1,000,000 performance share rights over unissued ordinary shares in the Company under the Performance Share Rights Plan, and the issue of up to 1,000,000 shares upon the exercise of those rights (depending on the Company s performance). A summary of the key terms for issue of rights to the CEO under the Plan is set out below. A summary of the terms of the Plan was included in the material sent to shareholders for last year s AGM. The terms upon which the Performance Share Rights are proposed to be offered differ from those offered to the previous Chief Executive Officer. The Performance Hurdle has been altered. The new Performance Hurdle measures the performance of the Company from the date of the announcement of Mr Michael Hawker as CEO ( Announcement Date ) relative to the performance of a comparative group of companies in the S&P/ASX100 Index ( S&P/ASX100 ). The Board considers this relative hurdle reflects market practice in relation to performance hurdles. The Company seeks to align the interests of the CEO with the interests of the shareholders with the objective of improving the return to shareholders on their investment. The purpose of the Plan is to enable the Company to provide to executives (including the CEO of the Company) a long term incentive in the form of rights over unissued shares. A copy of the Plan can be obtained on request by calling It is proposed that the CEO will be invited to participate in the Plan, and if elected as a director pursuant to Resolution 2, this will be subject to shareholder approval. Number of Performance Share Rights The CEO will be invited to acquire 1,000,000 Performance Share Rights over unissued shares in the Company. This is the maximum number of Performance Share Rights that the CEO will be invited to acquire without further shareholder approval. Each Performance Share Right is an option over one unissued ordinary share in the Company, so the maximum number of shares that may be issued to the CEO by exercise of these Performance Share Rights is 1,000,000 ordinary shares (depending on the Company s performance). The Performance Share Rights become exercisable depending on the performance of the Company (based on Total Shareholder Return) relative to the performance of companies comprising the S&P/ASX100. The Performance Share Rights may also become exercisable if certain specified events occur. This is discussed in more detail below. 14/15

15 The Performance Share Rights are issued at no cost. The CEO must pay a nominal exercise price to exercise the Performance Share Rights. The total exercise price payable on the exercise of any Performance Share Rights on a particular day will be $1.00 (irrespective of the number of rights exercised on that day). Preconditions for the Exercise of Performance Share Rights The Performance Share Rights will become exercisable depending on the performance (based on Total Shareholder Return) of the Company from the Announcement Date relative to a specified Performance Hurdle in the Performance Period (each of these concepts is described below). The rights may become exercisable on a progressive basis over the Performance Period. All of the Performance Share Rights may also be exercisable if certain specified events occur before the end of the Performance Period, such as a takeover bid for the Company. Performance Hurdle The Performance Hurdle is based on the performance of the Company in comparison with a comparative group of other listed companies comprised in the S&P/ASX100 from the Announcement Date. The number of Performance Share Rights which become exercisable depends on the Company s ranking relative to companies comprised in the S&P/ASX100 on Total Shareholder Return in the Performance Period. Total Shareholder Return seeks to measure the pre-tax return a shareholder would obtain from holding the shares in a defined period taking into account, amongst other things, changes in market value of the shares and dividends on the shares. The Total Shareholder Return is calculated from the Announcement Date based on the market value of the shares of the Company and other companies in the S&P/ASX100 at that time. The market value of a share for the purposes of: determining the base price for Total Shareholder Return is calculated using the weighted average price in which shares are traded in the one week preceding and including the Announcement Date; and subsequently monitoring the Total Shareholder Return is based upon the value of a share in the Company and in each of the other companies in the S&P/ASX100 in the 30 day period preceding and including the relevant day. The Company s ranking in the comparative group is monitored on the last trading day of each calendar month in the Performance Period and at such other times in the Performance Period as the Board may nominate ( Test Dates ), with the Company s performance given a percentile ranking in the comparative group in comparison with the performance of the comparative group of companies (the highest ranking company being ranked at the 100th percentile). The rights may become exercisable on a progressive basis depending on the Company s rank on the Test Dates during the Performance Period. If the Company s ranking does not reach the 50th percentile during the Performance Period the rights do not become exercisable. Fifty percent of the rights

16 NRMA Insurance Group Limited become exercisable when the Company s rank on a Test Date reaches the 50th percentile. All the rights become exercisable if the Company s rank on a Test Date reaches the 75th percentile. The percentage of rights which become exercisable increase proportionately if the Company ranks between the 50th percentile and the 75th percentile on a Test Date. Performance Period In general, the Performance Period will be the period between year three and year five following the date [name] commences as CEO ( Commencement Date ). If the CEO ceases to be an employee in circumstances in which his Performance Share Rights do not lapse, the Performance Period will be shorter, generally being the period beginning at year three and ending on the later of four years from the Commencement Date or 12 months after the CEO ceases to be an employee. Exercise Period In general, Performance Share Rights which have become exercisable may be exercised by the CEO in the period up to the end of 10 years from the Commencement Date. If the CEO ceases to be an employee and the Performance Share Rights do not lapse, Performance Share Rights which have become exercisable may be exercised by the CEO before the later of 90 days after the date on which the CEO ceased to be an employee or 90 days after the date on which the Performance Period ends (but in any case not beyond 10 years from the Commencement Date). Lapse of Rights If the CEO ceases to be an employee at any time prior to the Performance Share Rights becoming exercisable, Performance Share Rights will lapse unless he ceases to be an employee for any of the following reasons death, permanent disablement, retirement, redundancy, or with the consent of the Board. Performance Share Rights will also lapse if the CEO ceases to be an employee at any time for serious misconduct involving dishonesty, or if they do not become exercisable before the end of the Performance Period. Performance Share Rights Issued Since Last AGM Since the last AGM, the Company has issued approximately 5,683,320 Performance Share Rights to employees and executives. These Performance Share Rights were issued on terms which differ from those set out above. The Performance Hurdle for those Performance Share Rights was not based on the performance of the Company relative to the performance of a comparative group of companies. Of these, Mr Eric Dodd, the former Chief Executive Officer of the Company, received 275,000 Performance Share Rights, which have not yet lapsed. None of these rights have yet become exercisable by Mr Dodd. No other directors, or their associates, have been issued Performance Share Rights under the Plan. Recommendation In order to attract and retain a CEO of an appropriate calibre and to align the interests of the CEO with the interests of shareholders, with the objective of improving the return to shareholders on their investment, the directors recommend that shareholders vote in favour of Resolution