How we will get there RSA’s strategy is to: ∙ Concentrate on the complementary regional insurance markets where we are strongest
How the Board engages We know that Boards can set and drive corporate culture, and the Board agreed that enhanced direct engagement with the workforce would help create meaningful and regular dialogue. With this in mind: · Members of the Board have attended ‘town hall’ meetings remotely in Canada and the UK so they can hear directly from employees.
The Board continues to have constructive engagement with our regulators, ensuring that they gain a comprehensive view of the Group’s financial soundness, strategic and operational priorities, governance and culture, and that we understand the issues of interest to them.
During the Covid-19 pandemic, our Claims Supply Chain team worked closely with those suppliers that are embedded in the claims process to ensure that they could continue to offer services safely. In the UK, we provided internal guidance for working with suppliers and monitored the impact of the pandemic through an internal survey, and we also took a similar approach in Canada and Scandinavia.
Covid-19 relief During the year, the ABI (including representatives from the Group) met to discuss a Covid-19 relief fund that could support customers and society more broadly. The Board encouraged management to continue discussions regarding the creation of a fund with the PRA and their counterparts at other UK general insurance firms. The Board approved a contribution to the fund when it was launched as the Covid-19 Support Fund designed to raise money for charities supporting those impacted by the crisis. The Board has also been updated on RSA customer initiatives such as a MORE TH>N initiative that gave NHS workers priority service, free courtesy cars and extended cover for home emergencies.
In Scandinavia, we supported both customers and suppliers by applying our policies and processes with discretion. For example, we paid suppliers early to support their cash flow, were flexible when paying Travel claims to give customers some relief on the cost of their holidays and covered claims related to injuries incurred when home-schooling.
In 2020, we published our 2019 Corporate Responsibility Report setting out progress achieved in the first year of implementing our Confident Futures strategy and the Board received an update on the highlights of 2019 and the priorities for 2020.
The Climate Change and Low Carbon Policy position approved by the Board came into effect on 1 January 2020. This was widely communicated internally through intranet articles, FAQs and team cascades, and was positively received. The policy sets a clear position for investments in and underwriting of energy exploration, extraction and production in the Arctic or Antarctic region, coal mining, power generation from thermal coal, oil sands and shales, Directors and Officers cover for the fossil fuels industry, and a clear commitment to supporting renewable energy. Since the policy came into effect, referrals that have fallen outside the policy have been declined.
· We have sufficient reinsurance to limit our exposure to severe weather events, as well as promoting prevention and investing in cross-industry risk-pooling schemes.
Commentary The COR is used as a measure of underwriting effectiveness across the industry. The aim is to achieve a COR as sustainably low as possible – that is, without uncompetitive pricing or compromising reserves.
Tax strategy and contribution Our tax strategy supports our commitment to responsible business and delivering long term value to our environment and society. Our overall strategic aim is to manage our tax affairs in a responsible and proactive manner. We also recognise the important contribution that paying tax makes to society and so we disclose this information annually.
In the UK, RSA is a leading insurer, operating in both Personal and Commercial Lines. Personal Lines accounts for 46% of our business and Commercial Lines 54% of our business. In our International business, Europe is wholly Commercial, while Ireland and the Middle East offer both Personal and Commercial insurance through a variety of brands.
Risk culture – culture of accountability and openness We consider the foundation of an effective risk management framework to be the cultivation of a risk culture that promotes accountability and openness (a willingness to admit mistakes and learn from the past). At RSA, the senior management team has been instrumental in setting the right ‘tone from the top’, and we gain insights from Group-wide quarterly culture health reviews and periodic workforce surveys.
· Control effectiveness is monitored through formal Validation and Assurance. · Customer Committees in all regions oversaw decisions for example the provision of financial relief to vulnerable customers during Covid-19. · IT and data risks remain a key focus, especially cyber threat.
In 2019 our climate-related stress testing focussed on the PRA’s general insurance tests (GIST) which consisted of three hypothetical scenarios – ranging from 2°C to 5°C increases in temperature at different future points in time (2022, 2050 and 2100) and with different transition scenarios. The results of this analysis show an increase in weather-related annual losses due to an increase in physical risks associated with more severe and frequent extreme weather events in the UK and the US. RSA’s ability to adjust pricing, reserving, and underwriting in response to adverse weather impacts is an important risk mitigant.
Remuneration Executive remuneration remains an important topic in the UK and is evaluated by the Board and the Remuneration Committee. Further information on the work of the Remuneration Committee, including consideration of the events of 2020, can be found on pages 56 and 57. A summary of the remuneration policy approved at the AGM in 2020 can be found on pages 77 to 84.
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The Chairman is responsible for the leadership and effectiveness of the Board and its governance. He promotes a culture of openness and debate, and facilitates constructive Board relations and the effective contribution of all directors to support effective decision-making. He regularly meets with the non-executive directors, without management present, in advance of Board meetings to discuss the upcoming agenda and provide the opportunity for open dialogue.
The Executive Committee comprises Stephen Hester, Scott Egan and Charlotte Jones, executive directors of the Group Board, as well as the Chief Executive Officers of the Canadian and Scandinavian regional businesses and senior management in key functional roles: Read more on page 49
Taking into consideration the directors’ time commitment and performance on the Board and its committees, the Board concluded that all the directors continued to be effective, devoted sufficient time to discharging their duties and made valuable contributions to the Board.
Revised paper templates were trialled by the Board Risk Committee during the year and new paper templates have since been rolled out to the other Board committees and the Group Board.
Overall, the Committee was satisfied that the forecasts used in the deferred tax asset valuation model were reasonable when taking into account the levels of contingency included, and that the judgment regarding the carrying value was consistent with that applied at the previous year end.
© 2020 Friend Studio Ltd File name: Gov_XCommitteeXReports_v36 Modification Date: 4 March 2021 1:48 pm mortality assumptions and the assumed gap between future Retail Price Index (RPI) and Customer Price Index (CPI) inflation were appropriate and the assumptions used overall were deemed reasonable and within acceptable benchmark ranges.
· Significant improvement in the attritional loss ratio across all regions (both including and excluding the estimated impacts of Covid-19), demonstrating continued underlying progress on improving business fundamentals.
2. Estimate includes the vesting 299,780 Performance Shares valued at £1,749,103 (of which none is attributable to share price appreciation), and accrued dividend equivalents valued at £145,813 that will be added to the awards that vest. Valued as in note 1.
Notes: 1. The performance period is three years and ends on 31 December 2022. Performance measures are Group underlying ROTE, Relative TSR and a Business Scorecard
Charlotte Jones commenced her role as Group CFO in July 2019 and is building her Shareholding to the target level shown below within the targeted five-year period.
For ease of reference, elements of the Policy are re-presented on the following pages 77 to 84, including the policy tables and information on Directors’ contractual terms. The full Policy Report is contained in the 2019 Annual Report and Accounts (pages 76 to 84), which is available at www.rsagroup.com/ investors/reports.
3. RSA’s remuneration principles The remuneration philosophy and strategy is aligned to the long-term interests of the Company, its business strategy and performance. The remuneration framework is designed to promote sound and effective risk management in line with the Company’s risk profile. The remuneration principles, applied consistently across the Group, that the Committee follows are: Competitiveness and cost effectiveness · Competitive remuneration packages are offered in order to attract, retain and reward the levels of high calibre talent which are essential to RSA’s success in today’s competitive global insurance market.
Expenses can be claimed according to RSA’s business and travel policies, including tax thereon where such expenses do not qualify for tax relief.
The measures and targets for the 2020–22 cycle are detailed in the Annual Report on Remuneration.
Parent participation in a placing by a listed subsidiary Not applicable
The table below sets out where the required reporting on the provisions can be located.
Provision 2: The annual report should explain the board’s activities and any action taken in relation to monitoring and assessing culture. In addition, it should include an explanation of the company’s approach to investing in and rewarding its workforce.
The directors and officers of the Company and its subsidiaries also have the benefit of Directors & Officers insurance which provides suitable cover in respect of legal actions brought against them. In addition, the Company also maintains a pension trustee liability insurance policy for the directors of SAL Pension Fund Limited and Royal & Sun Alliance Pension Trustee Limited, subsidiaries of the Group, in relation to such person’s role as a trustee of an occupational pension scheme. This insurance constitutes a qualifying pension scheme indemnity provision under section 235 of the Companies Act 2006. These insurances were in force during the year ended 31 December 2020 and remain in force as at the date of this report.
The directors have determined that an initial three year period is an appropriate basis to provide its viability statement as the operational planning process focuses on this period and is aligned to the short-tail nature of insurance contracts that the business underwrites.
Based on the results of these reviews, the directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three year period of their assessment.
Greenhouse gas emission reporting Methodology We have reported on all sources of greenhouse gas (GHG) emissions as required by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 and the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.
Gross tonnes CO2e per FTE MB 0.89 N/A N/A N/A N/A
· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation to the extent applicable.
We identified fraud risks related to the valuation of insurance liabilities, the valuation of deferred tax assets and the valuation of intangible assets, in response to the level of estimation and judgement in these balances and possible pressures to meet profit targets. We also identified fraud risks in respect of the historic debtor reconciliation issues identified in Sweden. Further detail in respect of these areas is set out in the key audit matter disclosures in section 2 of this report.
We performed procedures including: · Identifying journal entries to test for all full scope components, based on risk criteria and comparing the identified entries to supporting documentation. These included those posted by senior finance management and those posted to unusual accounts.
Changes in shareholders’ interests in subsidiaries – – – – – – – – – – (8) (8)
Total transactions with owners of the Group 3 5 – – – – – – (91) (83) (21) (104)
· Measurement and impairment of goodwill and intangible assets: key assumptions applied in the valuation of the recoverable amount and the estimation of useful economic life. The value in use calculations are based on management’s latest operational plans, which include the expected future impact of Covid-19. The proposed takeover of RSA has increased the level of uncertainty in forecast profits although possible impacts have not been included within value in use calculations as there is no certainty over what actions or decisions the purchaser may take if the acquisition completes. Due to increased uncertainty caused by Covid-19 and the offer to buy RSA, a range of downside scenarios to the plan have been considered. Refer to note 23 for additional information.
The standard has not yet been endorsed for use in the UK and the Group is monitoring this process closely.
IFRS 9 ‘Financial Instruments’ IFRS 9 has been issued to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’ (IAS 39). IFRS 4 permits an insurance company that meets the criteria a temporary exemption from applying IFRS 9 and continue to apply IAS 39. As mentioned above, the exemption has been extended by two years to annual periods beginning before 1 January 2023.
Other standards There are a number of amendments to IFRS that have been issued by the IASB that become mandatory in subsequent accounting periods. The Group has evaluated these changes and none are expected to have a significant impact on the consolidated financial statements.
The amounts charged (or credited where relevant) in the consolidated income statement relating to post-employment defined benefit schemes are as follows: · The current service cost: this is the present value of additional benefits payable for employees’ services provided during the reporting period.
· The estimated impact of the Supreme Court judgement on 15 January 2021 relating to BI policy wording for Covid-19 is included in the actuarial indication of ultimate losses. Given the timing, the actuarial indication is based on initial interpretations of the judgement and modelling of expected numbers and value of eligible claims within the insured population. Work to fully understand the various implications will continue in future months as claims profiles mature, and regulatory and legal interpretations develop.
The Group undertakes a number of strategies to manage these risks including the use of derivative financial instruments for the purpose of reducing its exposure to adverse fluctuations in interest rates, foreign exchange rates and long term inflation. The Group does not use derivatives to leverage its exposure to markets and does not hold or issue derivative financial instruments for speculative purposes. The policy on use of derivatives is approved by the Board Risk Committee (BRC).
Interest on bonds and notes 27 27 27 27 17 2 – 127 1. Maturity profile shown on an undiscounted basis.
Interest on bonds and notes 27 27 27 27 27 19 – 154 1. Maturity profile shown on an undiscounted basis.
· The actions it will take to achieve and maintain the desired levels of risk and capital
Each operating segment is managed by a member of the Group Executive Committee who is directly accountable to the Group Chief Executive and Board of Directors, who together are considered to be the chief operating decision maker in respect of the operating activities of the Group. The UK is the Group’s country of domicile and one of its principal markets.
Notes to the consolidated income statement, consolidated statement of comprehensive income and dividends continued 17) Auditor’s remuneration £m £m
Profit for the calculation of earnings per share (£m) 320 336
Weighted average number of ordinary shares in issue (thousands) 1,034,037 1,030,648
Pension – remeasurement of net defined benefit asset/liability net of tax – – – – – (25) (25) – (25)
Financial assets measured at fair value 15 11,069 – 11,084 2,152 8,932
Repurchase arrangements and other similar secured borrowing 121 – 121 (121) – –
For level 1 and level 2 investments, the Group uses prices received from external providers who calculate these prices from quotes available at the reporting date for the particular investment being valued. For investments that are actively traded, the Group determines whether the prices meet the criteria for classification as a level 1 valuation. The price provided is classified as a level 1 valuation when it represents the price at which the investment traded at the reporting date, taking into account the frequency and volume of trading of the individual investment, together with the spread of prices that are quoted at the reporting date for such trades. Typically investments in frequently traded government debt would meet the criteria for classification in the level 1 category. Where the prices provided do not meet the criteria for classification in the level 1 category, the prices are classified in the level 2 category.
The Group is exposed to the risks of the underlying investments of the investment vehicles. The investment return from the structured entities is expected to reflect the returns from the underlying investments of the entity.
The current tax liability largely relates to Canada. Corporation tax in Canada is payable during the year in instalments based on the tax payable in the previous year, with a balancing payment due after year end. The taxable profits in Canada in 2020 were significantly higher than in 2019 which results in a large final tax payment in 2021.
Deferred tax Asset Liability 2020 £m 2019 £m 2020 £m 2019 £m
2020 £m 2019 £m 1% increase in combined operating ratio across all 7 years (16) (15)
The Group’s holding in British Aviation Insurance Company Limited was sold in 2020.
Provisions for losses and loss adjustment expenses at 1 January 9,141 10,072
Non-UK schemes The Group also operates defined benefits schemes in other countries. The most significant of these schemes are in Canada and Ireland.
The Group also provides post-employment healthcare benefits to certain current and retired Canadian employees. The benefits are not prefunded. Life insurance benefits, which provide varying levels of coverage, are provided at no cost to retirees. Healthcare benefits, which also provide varying levels of coverage, require retiree contributions in certain instances and benefits are generally payable for life. Certain healthcare benefits have been discontinued for active employees retiring after 1 November 2021, resulting in a £14m plan curtailment gain recognised in 2019.
Assumptions used in calculation of retirement benefit obligations: Annual rate of inflation (RPI) 2.92 2.96 – –
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Total cash outflow for leases primarily relates to finance leases, with the principal and interest portion recognised separately within financing activities in the consolidated statement of cash flows. It also includes short term lease payment, payments for leases of low value assets and variable lease payments which are reported within operating activities.
Royal & Sun Alliance Insurance plc - Escritório de Representação no Brasil Ltda.
Coast Underwriters Limited 208-4940 No. 3 Road, Richmond BC V6X 3A5, Canada Class A 85.42
Class D Special 2029974 Ontario Inc.4 95 Mural Street, Suite 400, Richmond Hill ON L4B 3G2, Canada
Related party balances Year end balances with related parties are set out below: 2020 £m 2019 £m
For example, in motor insurance one vehicle insured for one year is one unit of exposure.
Alternative performance measures reconciliations 1. IFRS reconciliation to management P&L For the 12 months ended 31 December 2020 £m IFRS
Income tax expense (119) Z AA AB AC AD Profit for the year 364 C+J+L+N P (7) PY Underwriting Z – P Q 509 CY Underwriting 502
Note 34 C Shares in issue at the period end 1,035 1,032
Managing your shareholding Information on how to manage your shareholding can be found at www.shareview.co.uk.