– To be a leading international general insurer focused on Northern developed markets, plus a growing business in Latin America.
A� 4* B Ireland C Canada D Scandinavia E� +@SHM� LDQHB@
Our second strategic challenge is to improve the quality and quantity of capital in the business. One of the Board’s main priorities for our shareholders is to ensure that the &QNTO�G@R�RTEãBHDMS�B@OHS@K�SN�LDDS�SGD� demands of regulators and customers.
3GD�RHFMHãB@MS�ãM@MBH@K�F@HMR�VD�G@UD� made in disposing of our non-core ATRHMDRRDR��SNFDSGDQ�VHSG�SGD�`���L� we received from shareholders from our rights issue in April, have helped to address this challenge.
Our investment strategy is constrained by duration, because of the need to maintain liquidity to pay claims and by risk, because of the need to be BNMãCDMS�HM�@RRDS�U@KTDR�VGDM�BK@HLR� become due. We hold capital to protect policyholders from the risks we take within our investment portfolio as well as to protect against volatility in our underwriting performance.
"NMëCDMBD�SG@S� a claim will be paid Our substantial reserves are invested in low volatility assets. This means that customers can be BNMãCDMS�SG@S�VD�VHKK�O@X�BK@HLR� when they are due.
6D�Q@HRDC�`���L�HM�,@X�SG@MJR�SN� shareholder support via a rights issue @MC�@�ETQSGDQ�`���L�NE�OQNBDDCR�EQNL� announced divestments to date (of VGHBG�`���L�@KQD@CX�BNLOKDSDC��@S� prices well above tangible book value. 6D�@KRN�RTBBDRRETKKX�QDãM@MBDC�`���L� of long-term subordinated debt and saw credit ratings restored.
Commentary NWP is an important metric for RSA, ensuring an appropriate growth rate that matches the footprint of the Group and its capacity for growth. Premiums EDKK�HM������CTD�SN�ATRHMDRR�CHRONR@KR� and the remediation of portfolios in our core businesses.
(M�/DQRNM@K��TMCDQVQHSHMF�OQNãSR� VDQD�`���L�VHSG�@�BNLAHMDC�Q@SHN� NE��� �í �3GHR�L@HMKX�QDâDBSR�@�RSQNMF� performance in Swedish Personal Accident following product enhancements and rate actions. 2B@MCHM@UH@�"NLLDQBH@K�L@CD�@������ TMCDQVQHSHMF�OQNãS�NE�`��L�@MC�@� BNLAHMDC�Q@SHN�NE��� �í��VHSG�FNNC� underlying performances across our Danish business and in Swedish Liability and Motor.
OUR STRATEGY Our strategy in Scandinavia is ENBTRDC�NM�RTRS@HM@AKD�OQNãS@AKD� returns with three key levers. These are: � � �#QHUHMF�OQNãS@AKD�FQNVSG� through business targeting, expansion of distribution channels and improving our brand offering; � ��#DUDKNOHMF�L@QJDS�KD@CHMF� claims and underwriting capabilities; and
'NTRDGNKC�OQDLHTLR�VDQD�CNVM��í� QDâDBSHMF�BNLODSHSHUD�BNMCHSHNMR�@MC�@� softening rate environment. In Personal ,NSNQ��OQDLHTLR�VDQD�CNVM���í�@R�@� result of our portfolio actions and pricing discipline, although the steep CDBKHMDR�RDDM�HM�SGD�ãQRS�G@KE�G@UD�MNV� begun to slow. Excluding planned exits, LNSNQ�OQDLHTLR�VDQD�CNVM���í �(M� ������VD�K@TMBGDC�NTQ�,.1$�3'�-� Smart Wheels ‘black box’ telematics product aimed at young drivers, and MORE TH>N Drive, an app that allows drivers to track their driving behaviour, which are showing promising growth. /DS�OQDLHTLR�VDQD�TO���í�@KSGNTFG�SGD� underlying movement after removing prior period accounting premium @CITRSLDMSR�V@R��í��L@HMKX�CQHUDM� by rate increases.
loss ratios were higher than expected and loss patterns have remained volatile as data is cleansed and new patterns established. Pricing and underwriting @BSHNM�S@JDM�HM������RGNTKC�D@QM� SGQNTFG�HMSN�RHFMHãB@MS�ETQSGDQ�KNRR� Q@SHN�HLOQNUDLDMS�HM�����
OUR RESPONSE We work to protect millions of people around the world every day, helping them to live safer, more secure lives.
Our conservative investment strategy means that investment risk forms a relatively small proportion of our overall risk compared with the industry. This HMCHB@SDR�DWONRTQD�SN�ãM@MBH@K�L@QJDS� QHRJR�@QHRHMF�EQNL�TMGDCFDC�HMâ@SHNM�� and currency and other exposures in our insurance operations.
Name:�$-1(".�"4""'( -(� Role: Independent Non-Executive Director Appointment date: December 2014 Nationality: Italian Skills and experience: Enrico has over 35 years’ global executive and nonDWDBTSHUD �DWODQHDMBD�@BQNRR�ãM@MBH@K� services including banking and insurance @MC�@�MTLADQ�NE�AKTD�BGHO�AQ@MCR �'D� spent over 15 years at Allianz in a variety NE�HMSDQM@SHNM@K�QNKDR��HMBKTCHMF�'D@C�NE� &KNA@K�/î"�@MC�'D@C�NE�LNRS�NE�$TQNOD�� Latin America and Africa. External appointments: Partner of Think Global Investments LLP.
Details of the directors’ service contracts and terms of appointment, together with their interests in the Company’s shares, are shown in the Directors’ Remuneration Report on pages 80 to 106 and are incorporated into this report by reference.
Responsible for: • Leadership of the Board, promoting a culture of openness and debate • Effectiveness of the Board • Ensuring provision of timely, accurate and clear information • Effectiveness and structure of the Board’s Committees • Leading the annual evaluation of the Board and its
Committee when considering matters relating to the Chairman of the Board
• Internal controls in the regional businesses • Internal Audit updates
• Review of Board and Committee membership, Schedule of Matters Reserved for the Board and Board Committee Terms of Reference
Service agreements and letters of appointment for the Chairman, Executive and Non-Executive Directors, are available for inspection at the Company’s registered NEãBD�@MC�VHKK�AD�@U@HK@AKD�ENQ�HMRODBSHNM�@S�SGD� &,
During the year, an internal evaluation of the effectiveness of the Board, its Committees and individual directors was led by the Chairman with the support of the Senior (MCDODMCDMS�#HQDBSNQ �3GD�QDUHDV�QDâDBSDC�NM�SGD�QDRTKSR� from the governance and controls review and the key strategic objectives to be achieved in the short term.
• Additional informal meetings of the Chairman, NonExecutive and Executive Directors to discuss issues beyond the normal Board meeting agendas.
B o ar d to ag re e ac ti on s
The Directors’ Responsibility Statement appears on page 107 and is incorporated by reference into this report.
ESSENTIAL CONTRACTS AND CHANGE OF CONTROL The Company does not consider that it, or any of its RTARHCH@QHDR��G@R�@MX�RHFMHãB@MS�@FQDDLDMSR�SN�VGHBG�SGD� Company is a party that take effect, alter or terminate upon a change of control of the Company following a takeover bid that are required to be disclosed pursuant to paragraph 13(2) �H��NE�2BGDCTKD���NE�SGD�+@QFD�@MC�,DCHTL�2HYDC�"NLO@MHDR� and Groups (Accounts and Reports) Regulations 2008 (as amended), other than as disclosed below: 4MCDQ�SGD�"NLO@MX�R�`���L�ãUD�XD@Q�RDMHNQ�BNLLHSSDC� debt facility, if a change of control occurs, the facility can be cancelled with immediate effect and all outstanding loans, together with accrued interest, become due and payable, if the majority of lenders require.
The Company does not have agreements with any director or DLOKNXDD�SG@S�VNTKC�OQNUHCD�BNLODMR@SHNM�ENQ�KNRR�NE�NEãBD� or employment resulting from a takeover except that provisions of the Company’s share schemes and plans may cause some options and awards granted to employees under such schemes and plans to vest in such circumstances.
The Committee keeps under review the capabilities required by the Board, considers the leadership needs of the Group and reviews succession planning for the Board. The Committee makes recommendations to the Board in relation to the appointment of any new Executive and Non-Executive Directors and the re-appointment of directors on an annual basis with a view to ensuring the continued ability of the Company to compete effectively in the marketplace and attract and retain key people. An assessment of the time BNLLHSLDMS�QDPTHQDC�SN�@CDPT@SDKX�ETKãK�D@BG�QNKD�HR� considered by the Committee and consideration is given to approval of additional commitments of Non-Executive Directors during their tenure, especially where such commitment might affect the time the director is able to devote to their role.
ROLE AND RESPONSIBILITIES The Group Investment Committee is authorised by the Board to manage all aspects of investment policy and strategy for the Group and provide oversight of the operation of the Group’s investment portfolios within established strategy and risk frameworks. The key areas of focus for the Committee during 2014 are shown in the table below.
• Investment updates including: – Economic and market development – Activity, disposition and performance – Economic and market outlook – Investment strategy
A Cash B Fixed income C Property – Investment D Equities E Alternatives and other
• Business Risk review - Insurance risk - Financial risk - Reinsurance risk - Operational risk - Emerging risks - Pension risk - FX risk
COMMITTEE COMPOSITION, SKILLS AND EXPERIENCE The Committee is comprised of four independent NonExecutive Directors. With effect from 8 May 2014, Jos Streppel V@R�@OONHMSDC�SN�SGD�"NLLHSSDD��AQHMFHMF�RHFMHãB@MS�ãM@MBH@K� reporting and international insurance management DWODQHDMBD �3GD�!N@QC�HR�R@SHRãDC�SG@S�SGD�"NLLHSSDD� G@R�QDBDMS�@MC�QDKDU@MS�ãM@MBH@K�DWODQHDMBD�@R�QDPTHQDC�AX� SGD������"NCD��VHSG�@KK�LDLADQR�AQHMFHMF�CHUDQRD�ãM@MBH@K�� overseas and industry experience which, together with their varied tenure at the Company, enables the members collectively to act as an effective Committee. In addition, two of the four Committee members are also members of the Board Risk Committee, facilitating close working and ready exchange of information between the two Committees.
• Consideration of their wider comments on governance, ãM@MBH@K�QDONQSHMF�OQNBDRRDR�@MC�DEãBHDMBHDR�@MC� information systems and controls, with particular focus on general IT controls.
A comprehensive, risk-based audit plan is prepared by GIA on an annual basis, taking into consideration the key strategic and emerging risks facing the Group. Regular updates were provided to the Committee on the progress of the 2014 plan, and in December the 2015 Audit plan was reviewed, challenged and approved by the Committee. The Committee received quarterly reports from GIA on their assessment of the internal control environment of the Group and management were required to present to the Committee SGDHQ�UHDVR�NM�SGD�JDX�QHRJR�@MC�HRRTDR�HCDMSHãDC�AX�&( �� along with the related remediation plans.
ALIGNING REMUNERATION AND STRATEGY IN 2015 The Group’s Remuneration Policy was approved by RG@QDGNKCDQR�@S�SGD� &,�NM���,@X����� �3GD�"NLLHSSDD� considers that the Policy remains aligned to the business strategy, the long-term interests of the Company and its shareholders, and so no changes are proposed to it this year.
• 3GD� MMT@K�!NMTR�/K@M�ENQ������VHKK�HMBKTCD�ãM@MBH@K� measures, Business Review and personal targets. The ratio of TNAV to Net Written Premium (TNAV:NWP) will be included in the Business Review Scorecard as a measure of capital strength and the organisation’s sustainability.
3GD�!N@QC�1HRJ�"NLLHSSDD�"G@HQL@M��*@SG�"@SDR��INHMDC� SGD�1DLTMDQ@SHNM�"NLLHSSDD�HM�,@X�������VGHBG�SNFDSGDQ� with my membership of the Board Risk Committee ensures we have integrated decision making.
COMMITTEE MEMBERS The Committee comprises a number of independent -NM�$WDBTSHUD�#HQDBSNQR�VGN�@QD�B@KKDC�TONM�SN�DWDQBHRD� ITCFDLDMS�NM�SGD�RDSSHMF�@MC�L@M@FDLDMS�NE�DWDBTSHUD� remuneration. The Committee’s members in 2014 are detailed in the table below. The number of meetings each Director attended is shown as a proportion of the total number of meetings held during the period of the year in which they were a Committee member.
COMMITTEE ATTENDEES 3GD�"G@HQL@M��&QNTO�"GHDE�$WDBTSHUD�@MC�NSGDQ�RDMHNQ� executives attend Committee meetings by invitation to advise on Group strategy, performance, HR and remuneration policies and practices. However, none of these executives have a right to attend and are not present if their own remuneration is being discussed. The table below notes the Committee attendees during 2014.
�� � �*@SG�"@SDR�V@R�@OONHMSDC�@R�@�-NM�$WDBTSHUD�#HQDBSNQ�DEEDBSHUD���2DOSDLADQ����� � �� � $MQHBN�"TBBGH@MH�V@R�@OONHMSDC�@R�@�-NM�$WDBTSHUD�#HQDBSNQ�DEEDBSHUD���#DBDLADQ����� �� � �-NDK�'@QVDQSG�@MC�)NGM�,@WVDKK�QDRHFMDC�@R�-NM�$WDBTSHUD�#HQDBSNQR�VHSG�DEEDBS�EQNL����,@QBG����� � �� � �$CV@QC�+D@�@MC�,@KBNKL�+D�,@X�QDRHFMDC�@R�-NM�$WDBTSHUD�#HQDBSNQR�VHSG�DEEDBS�EQNL���,@X����� �� � �,@QSHM�2BHBKTM@�V@R�@OONHMSDC�@R�"G@HQL@M�NM���)@MT@QX����� �'D�V@R�@OONHMSDC�SN�SGD�QNKD�NE�$WDBTSHUD�"G@HQL@M�EQNL����#DBDLADQ������SN�
Personal Element (30% weighting – achieved 30%) This element focuses on personal performance versus the highest priorities set by the Board for Stephen Hester in 2014, namely efforts driving company recapitalisation, new strategy and operational plans, stakeholder engagement, operational CDKHUDQX�NE�BNMSQNKK@AKD�HSDLR�@MC�$WDBTSHUD�SD@L�CDUDKNOLDMS �
4. Adrian Brown resigned from the Board effective 16 April 2014. His shareholding is shown as at that date, and valued using his gross annual base salary @MC�SGD�LHC�L@QJDS�BKNRHMF�OQHBD�NE�@M�12 �NQCHM@QX�RG@QD�@S�SG@S�C@SD�NE�`� ����S@JHMF�HMSN�@BBNTMS�SGD�RG@QD�BNMRNKHC@SHNM�
1HBG@QC�'NTFGSNM��&QNTO�"GHDE�%HM@MBH@K�.EãBDQ��VHKK�RSDO� CNVM�EQNL�SGD�!N@QC�NM���,@X������@MC�KD@UD�SGD�&QNTO� later in the year once a successor has been appointed.
The bonus opportunity remains unchanged at 80% of salary for on-target achievement, rising to a maximum of 160% of salary. Threshold performance represents 16% of salary (i.e. 10% of the maximum opportunity). Half of the total bonus will be awarded HM�B@RG�VGDQD�BK@VA@BJ�B@M�@OOKX��SGD�A@K@MBD�HR�CDEDQQDC�HMSN�RG@QDR�ENQ�@�SGQDD�XD@Q�ODQHNC�VHSG�L@KTR�@CITRSLDMS �
• 4*�A@RDC�$WDBTSHUD�#HQDBSNQR�B@M�O@QSHBHO@SD�HM�12 �R�âDWHAKD�ADMDãSR�OQNFQ@LLD�@MC�@BPTHQD�RG@QDR�SGQNTFG� UNKTMS@QX�',1"�@OOQNUDC�RG@QD�OK@MR��2G@QDR@UD�@MC�2G@QDATHKC� �3GDX�B@M�@KRN�BK@HL�DWODMRDR�@BBNQCHMF� to RSA’s business and travel policies.
• #HQDBSNQR�QDBDHUD�@�U@QHDSX�NE�ADMDãSR��RNLD�NE�VGHBG�@QD�CDKHUDQDC�@R�S@W@AKD�B@RG�HM�KHDT�@KKNV@MBDR � !DMDãSR�BNUDQ�SGD�@QD@R�NE��GD@KSG�@MC�VDKK�ADHMF��KD@UD�NE�@ARDMBD��B@Q�@MC�ATRHMDRR�SQ@UDK��RHBJMDRR�ADMDãS�� insurances, professional subscriptions, external advice and employee discounts on certain insurance products. Home to work travel may be covered where appropriate. Tax changes are not compensated.
• 3GD�$WDBTSHUD�#HQDBSNQR�VHKK�BNMSHMTD�SN�QDS@HM�@MX�@V@QCR�FQ@MSDC�TMCDQ�12 �R������+NMF�SDQL�(MBDMSHUD� Plan including deferred share awards. No further grants will be made under the 2006 Plan. The Committee can exercise the same discretion as noted in the LTIP section above, as appropriate.
Computer software and other intangible assets are carried at cost less accumulated amortisation and less any accumulated impairment losses. Amortisation on computer software and other intangible assets is calculated using the straight line method SN�@KKNB@SD�SGD�BNRS�NUDQ�SGDHQ�DRSHL@SDC�TRDETK�KHUDR��VGHBG�HR�MNQL@KKX�DRSHL@SDC�SN�AD�ADSVDDM���@MC����XD@QR
CASH AND CASH EQUIVALENTS "@RG�@MC�B@RG�DPTHU@KDMSR�@QD�RGNQS�SDQL��GHFGKX�KHPTHC�HMUDRSLDMSR�SG@S�@QD�RTAIDBS�SN�HMRHFMHãB@MS�BG@MFDR�HM�U@KTD�@MC�@QD� QD@CHKX�BNMUDQSHAKD�HMSN�JMNVM�@LNTMSR�NE�B@RG �"@RG�DPTHU@KDMSR�OQHMBHO@KKX�BNLOQHRD�ãM@MBH@K�@RRDSR�VHSG�KDRR�SG@M�SGQDD� months’ maturity from the date of acquisition.
Interest on perpetual bonds and notes �� �� 82 �� �� ��� 18 ���
.MD�XD@Q�K@SDQ ������ ����� ����� ����� ����� ����� ����� ����� ����� �����
Total other debtors and other assets 10 10 4. SHARE CAPITAL %TKK�CDS@HKR�NE�SGD�RG@QD�B@OHS@K�NE�SGD�"NLO@MX�@QD�RDS�NTS�HM�MNSD����SN�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR
Solvency II • New capital adequacy regime for the European insurance industry. Establishes a revised set of EU wide capital requirements and risk management standards.