A n n u al R ep o rt an d A
– To compete only where we can win. And to win where we compete.
A Personal Motor B� 'NTRDGNKC� C� /DQRNM@K�NSGDQ� D� �"NLLDQBH@K�/QNODQSX� E� �"NLLDQBH@K�,NSNQ� F Liability G� ,@QHMD�@MC�NSGDQ�
Five point improvement in our UK Commercial Net Promoter Score in 2014.
"@M@CH@M�/DQRNM@K� EãMHSX� & Direct business has a 20 point Net Promoter Score lead over the competitive benchmark.
Our products and services are built around our customers, adapting to different markets around the world. By anticipating their needs and using our expertise to innovate, we ensure the management of risk makes a difference to the lives of people all over the world.
Visit us online to see summary information and listen to our Group Chief Executive’s statement at: rsagroup.com
This Annual Report and Accounts contains ‘forward-looking statements’ with respect to certain of the &QNTO�R�OK@MR�@MC�HSR�BTQQDMS�FN@KR�@MC�DWODBS@SHNMR�QDK@SHMF�SN�HSR�ETSTQD�äM@MBH@K�BNMCHSHNM��ODQENQL@MBD�� results, strategic initiatives and objectives. For further details, reference should be made to the ‘important disclaimer’ on the inside back cover. Pages 2 to 47 constitute the Strategic Report of RSA and are incorporated by reference into the Directors’ and Corporate Governance Report set out on pages 48 to 106. The Directors’ and corporate governance report has been drawn up and presented in accordance with and in reliance upon applicable English company law and the liabilities of the Directors in connection with that report shall be subject to the limitations and restrictions provided by such law.
At the start of the year, in my capacity as Executive Chairman, I set out with two key objectives. Firstly, to develop a new strategy which would allow 12 �SN�QDSTQM�SN�RS@AHKHSX��OQNãS@AHKHSX� and health; and secondly, to recruit a new Group Chief Executive to lead the company and successfully execute our strategy.
In addition, we were delighted to welcome Enrico Cucchiani as a new Non-Executive Director during the year, following the retirement of Edward Lea and Malcolm le May after 11 and 10
“On behalf of the Board I would like to thank Martin for his contribution while acting as Executive Chairman during the challenging period at the end NE������@MC�D@QKX�������VGHBG� included the important step of commencing the strategic review of the Group.”
The strategy which Stephen laid out in %DAQT@QX�HR�BKD@Q�@MC�RHLOKD �.TQ�ãQRS� priority is to tighten the strategic focus of the group. Our geographic spread had become fragmented with too many positions in emerging markets, many NE�VGHBG�G@C�HMRTEãBHDMS�RB@KD�NQ�VD@J� market positions. RSA had neither the ãM@MBH@K�NQ�GTL@M�QDRNTQBDR�SN�L@M@FD� @BQNRR����BNTMSQHDR�@MC�@�RSQ@SDFHB� retrenchment was essential. During ������VD�G@UD�L@CD�L@SDQH@K�OQNFQDRR� in refocusing the business on our core markets in the UK and Ireland, Scandinavia, Canada and Latin America.
During the year we have maintained the level of management margin in reserves and have taken out reinsurance protection against adverse development of reserves. Against all of our key capital metrics, we ended �����HM�@M�HLOQNUDC�ONRHSHNM��@KSGNTFG� capital remains a key focus for the Board as we head towards the HLOKDLDMS@SHNM�NE�2NKUDMBX�((�HM�����
The Board considers these plans to be stretching but achievable. Although it will take some years to both fully implement the plans and realise their ADMDãSR��VD�@QD�BNMãCDMS�SG@S�VD�VHKK� meet the medium-term objectives set out in this report.
Finally, I would like to thank all of our shareholders for their continuing support. I would encourage shareholders to use this Annual Report to learn more about the progress we are making and I look forward to seeing many of you at our AGM in May.
PEACE OF MIND FOR INDIVIDUALS Every day we insure millions of customers’ families, cars, houses, and pets across the world. In doing so we provide our customers with the peace of mind that if the worst happens they will be able to rely on RSA to help.
Our products and services help to reduce risk and make communities safer places to live, work and travel. Motor insurance is a substantial part of our business and we have a clear commercial interest in making the world’s roads safer. From promoting telematics to running road safety campaigns, we provide incentives, advice and guidance to customers and the general public to promote safer motoring for all users.
OVERALL TRENDS The global economy continues to face RHFMHãB@MS�BG@KKDMFDR �'NVDUDQ��RHFMR� NE�DBNMNLHB�HLOQNUDLDMS�HM�������KDC� by developed economies, should drive continued modest premium growth in the global P&C market. It is estimated that the global P&C market grew by � �í�HM������@MC�HR�DWODBSDC�SN�FQNV� AX�� �í�HM������@MC�� �í�HM������ (source: Swiss Re Sigma).
(MRTQ@MBD�L@QJDS�BNMCHSHNMR�ENQ������ have remained challenging across our key markets. These markets range from highly concentrated to highly fragmented and from mature to developing. We have seen intense competition in most of our key business areas as our businesses compete for premium growth in a subdued economic environment.
%HM@KKX��@R�@�QDRTKS�NE�SGD�ãM@MBH@K�BQHRHR�� the industry continues to see increasing levels of regulatory scrutiny. This creates pressure on capital and resources. Solvency II, the new solvency framework being developed by the EU, is now OK@MMDC�ENQ�HLOKDLDMS@SHNM�NM��^)@MT@QX� ���� �4MSHK�SGDM��SGD�DUDMST@K�NTSBNLDR� for the sector continue to be uncertain.
CUSTOMERS Customer needs continue to evolve – both in terms of what they buy and how they buy it. Our customers are demanding more tailored products and increasing direct interaction with us. In addition, customers can now use the internet to compare products and prices easily. In response, we are further integrating our existing distribution channels with online channels.
In personal lines, the marketplace continues to be competitive, fuelled by overcapacity and low barriers to entry. Furthermore, new entrants are making substantial inroads into the market based on low cost and alternative business models.
Commercial insurance in the UK continues to be impacted by economic conditions and weakness in the Eurozone.
CANADA The long-term national economic outlook for Canada is relatively stable VHSG�&#/�FQNVSG�NE�� �í�HM�������@MC� HR�DWODBSDC�SN�FQNV�@S�� �í�HM������ (source: Bank of Canada). Industry premiums are expected to grow at low single-digit rates in line with GDP.
In personal property, we are seeing robust rate increases as the market continues to respond to the severe weather events of last year. However, Commercial lines continues to be impacted by increased capacity and competitive pressures.
Consolidation continues to be a key trend in the Canadian market among both insurers and brokers. This is driven by competitors looking to gain scale and competitive advantage through better C@S@�@M@KXSHBR�@MC�DEãBHDMBHDR �
SCANDINAVIA The Scandinavian economies are perceived to be generally stable and relatively safe. We expect low singleCHFHS �ONRHSHUD�&#/�FQNVSG�HM������ across the key countries we operate in (Denmark, Sweden and Norway) as a QDRTKS�NE�FQNVHMF�BNMRTLDQ�BNMãCDMBD� and improved domestic demand. The insurance market is relatively mature and is therefore expected to grow broadly in line with GDP.
LATIN AMERICA In Latin America, political and economic headwinds persist and economic FQNVSG�G@R�RKNVDC�VHSG������&#/� FQNVSG�NE�� �í�HM�!Q@YHK�@MC�� �í�HM�"GHKD�� @MC�BNMSQ@BSHNM�NE�� �í�HM� QFDMSHM@� (source: World Bank). GDP growth is ENQDB@RS�SN�QDBNUDQ�RKHFGSKX�HM������@R� the US economic recovery spills over to the region.
The insurance markets in Latin America remain attractive on a fundamental basis due to low insurance penetration and a growing middle class. However, they continue to face the challenges NE�GHFG�HMâ@SHNM��@MC�DWBG@MFD�Q@SD� volatility.
BRILLIANT SERVICE Delivering memorable service that inspires people to recommend us.
GETTING THE JOB DONE Delivering on our promises and cutting out unnecessary processes to make things simpler.
DOING THE RIGHT THING Using common sense when dealing with people, gaining their trust by treating them as they want to be treated.
BRIGHT IDEAS Continually combining our technical expertise with a deep understanding of customers’ needs to create and deliver solutions that people value.
PRUDENT INVESTMENTS Our business generates RHFMHãB@MS�@RRDSR�VGHBG�@QD� prudently invested to deliver returns for shareholders.
MANAGING CLAIMS AND SERVING OUR CUSTOMERS Our customers’ expectations are increasing. We aim to constantly improve the service we offer, and pay BK@HLR�PTHBJKX�@MC�DEãBHDMSKX
Access to ancillary services Increasingly our customers are looking for more than just claims payment. For instance, access to our supply chain to enable lower costs of ancillary services allied to the core insurance product or risk management to prevent claims occurring.
Enabling society to grow and develop By effectively enabling risk transfer across society, we encourage entrepreneurship and innovation in the societies we work in while ensuring that society is protected from extreme events.
Helping society recover from disasters When catastrophes strike, we help society get back on track quickly, through settling BK@HLR�E@HQKX�@MC�DEãBHDMSKX
Spreading best practice As markets evolve we can quickly export best practice from one country to another. This means that the best of RSA is available to all the societies we operate in.
Customers needs are central to our strategy. Staying close to our customers means communicating in a way that’s right for them. As technology evolves we are quick to respond, adapting our channels of communication to meet our customers’ needs.
Increasingly, digital channels are becoming the primary route for BTRSNLDQR�SN�ãMC��@MC�BG@MFD�� their insurance products. With this in mind, our digital team are constantly improving the conversations between our brands and their customers by utilising the latest tools and techniques. In this way we can ensure that all of our customers can interact with us easily, and in a way that suits their communication needs.
CANADIAN TRAVEL INSURER OF THE YEAR IN 2014, AWARDED BY THE INTERNATIONAL TRAVEL & HEALTH INSURANCE JOURNAL
CANADA RSABroker.ca Our Canadian platform, RSABroker.ca, provides all-round support to brokers. Drawing inspiration from our UK broker platform, the website makes it easier for brokers to transact, download product information or get news delivered straight to their in-box. The platform also showcases our recent brand refresh.
UK MORE TH>N Online remains a key channel for MORETH>N and this year we completed a major update to the MORETH>N website. The new site sits on a platform that enables us to rapidly build and test new features, so we can deliver the right online experiences and make sure that customers can interact with us easily on the device that suits them.
Alongside our site launch we have been building new products to better meet customer needs. In February, we launched Name Your Price for Home, which asks customers how much they would like to pay for their home insurance and then builds the level of BNUDQ�SN�L@SBG�SGDHQ�OQHBD �(M�)TKX��VD� launched M> Drive, an app that helps safer drivers get lower premiums by tracking and scoring their driving behaviour. September saw the launch of Smart Wheels, a telematics ‘black box’ monitoring solution that rewards safe young drivers with cashback.
RSA’s diversity helps protect our performance potential. However, like industry competitors and many other businesses, low interest rates, exchange rate moves and modest growth rates BQD@SD�RHFMHãB@MS�ODQENQL@MBD� headwinds. Strong price competition, HMSDMRHãDC�AX�SGHQC�O@QSX�B@OHS@K� seeking alternative outlets from stock and bond markets, has led to sharper price/volume trade-offs than before in a number of segments. As a result,
We have three interrelated priorities. Customers are our lifeblood; serving them well is our purpose. We need to NODQ@SD�VHSG�ãM@MBH@K�RSQDMFSG�@MC� transparency; and have the discipline to sustain it. Our shareholders own the Company; we are concentrating intensely on building strong, long-term performance to make RSA the best investment proposition we can achieve.
in each of our larger markets there are some competitors reporting falls in, or static like-for-like, premium income. Five-year bond yields are down a ETQSGDQ�� ��� �í�RHMBD�SGD�RS@QS�NE������ across our principal markets, impacting the outlook for investment returns. Around two-thirds of RSA’s premiums KHD�NTSRHCD�SGD�4* �)@MT@QX������ month-end spot exchange rates would HLOKX�@�B �í�QDCTBSHNM�HM�SGD�QDONQSDC� 2SDQKHMF�ãFTQDR�UDQRTR�SGD�OQDLHTLR� QDONQSDC�ENQ�������VHSG�SGD�HLO@BS� ADHMF�K@QFDQ�HM�OQNãS@AHKHSX�SDQLR
#HRONR@K�F@HMR�NE�`���L�VDQD�NEERDS�AX� the charges outlined above, albeit much of the latter being non-cash items.
PLANS FOR THE FUTURE RSA’s new and focused strategy was set out a year ago. We believe it is the right one. Our medium-term performance S@QFDSR�@QD�@KRN�TMBG@MFDC�������í� underlying return on net tangible @RRDSR�������í�S@MFHAKD�DPTHSX�MDS� premiums, though the latter is sensitive to Solvency II outcomes as well as market factors and may need to AD�TOC@SDC�@S�SGD�DMC�NE����� �
We said we would tighten the strategic focus of the Group so we can concentrate on performing sustainably well in core businesses.
We have focused the geographical footprint of our business onto our core operations in Scandinavia, Canada, UK and Ireland, and Latin America.
Baltics, Poland, Hong Kong, Singapore, China, Italy, India, and Thailand, and our brokerage business in Canada (Noraxis).
Still on our to-do list: ���!DMDãSR�EQNL� remaining disposals and future earnings
We said we would improve business performance and the Group’s ability to sustain it. This means underwriting, expense, technology and people actions.
IMPROVING BUSINESS PERFORMANCE The focus of our operating plans is about being better. In fact, aiming at being among the best at what we do. This is a multifaceted task. We have two core priorities in this regard: costs and revenues. To be competitive for customers, to invest in better capabilities and to properly deliver for shareholders we need to reduce costs. At the same time we have been developing many initiatives to invest in our business to improve customer RDQUHBD�@MC�DEãBHDMBX �.TQ�SDBGMNKNFX�
Determined action to improve the sustainability of our insurance portfolio and its expected loss ratios is another L@INQ�ED@STQD�NE�NTQ�VNQJ �#TQHMF������� we have repriced or trimmed business we cannot make sense of, and from this new sounder base we expect to grow again but with better underlying loss ratios.
We consider that the following nine key performance indicators are important in measuring the delivery of our strategic priorities.
Commentary Insurance companies manage a number of different capital metrics. The common theme of these metrics, is that they @KK�ADMDãS�EQNL�FQNVHMF�KDUDKR�NE�3- 5 � TNAV is also important because it is a measure of the underlying value of our business, although our TNAV is sensitive to external factors such as market movements.
Outlook Aim to continue to grow TNAV through a combination of retained earnings, and the completion of remaining disposals.
Commentary An important metric that is widely used by investors and other stakeholders in the insurance industry to compare companies within the sector. When used as a relative metric against peers, it provides an indication of relative capital strength, but should be judged in the context of the CHUDQRHãB@SHNM�@MC�FDNFQ@OGHB@K�ROQD@C�NE� the business. It underpins all of the capital metrics (IGD, ICA, ECA, rating agency) of the Group.
#DëMHSHNM A measure of underwriting performance – the ratio of underwriting costs (claims, commissions and expenses) expressed in relation to earned premiums.
Commentary An important ratio used across the insurance industry that measures underwriting costs as a proportion of revenue. It is often used as a relative LD@RTQD�NE�TMCDQVQHSHMF�DEãBHDMBX�VGDM� comparing against peers. The aim is to keep this ratio as low as possible without compromising the quality of reserves or becoming uncompetitive on price.
Outlook Improving combined ratios over time, initially targeting a return to levels in the mid-90s.
#DëMHSHNM Gross tonnes of carbon emissions (CO�) per full time equivalent (FTE) employee.
#DëMHSHNM We use key measures such as customer retention, net promoter score (NPS) and customer satisfaction.
Commentary We aim to put customers at the heart of everything we do and delivering for our customers is an important part of our strategy. Our customer KPIs are important in helping us keep on track to deliver on this commitment.
The current year underlying loss Q@SHN�V@R��� �í���������� �í��@MC�G@R� HLOQNUDC�HM�D@BG�PT@QSDQ�CTQHMF����� � Excluding Ireland the underlying BTQQDMS�XD@Q�KNRR�Q@SHN�V@R��� �í� VGHBG�HR���ONHMS�ADSSDQ�SG@M����� �
PREMIUMS �����MDS�VQHSSDM�OQDLHTLR�VDQD�CNVM� �í�EQNL������@S�BNMRS@MS�DWBG@MFD� Q@SDR�@MC�CNVM��í�NM�@M�TMCDQKXHMF� basis (excluding completed disposals, Motability and the adverse development reinsurance cover). Our premium base is smaller than last year due to portfolio restructuring, disposals and foreign exchange.
/QDLHTLR�HM�2B@MCHM@UH@�VDQD�TO��í�� with good focus on increasing rates across the book. Canadian premiums VDQD�CNVM��í�CQHUDM�AX�@��í�QDCTBSHNM� in Commercial premiums due to the underwriting actions we have been taking on the portfolio. UK premiums VDQD�CNVM��í��CNVM���í�HMBKTCHMF� ,NS@AHKHSX� �#TQHMF�������VD�G@UD�S@JDM� RHFMHãB@MS�ONQSENKHN�@BSHNMR�HM�SGD�4*�� with particular focus on UK Personal Motor where premiums were down ��í�@R�VD�QDL@HM�ENBTRDC�NM�@BGHDUHMF� our target returns. Ireland premiums VDQD�CNVM��í�ENKKNVHMF�RSQNMF�Q@SD� increases during the year in key lines requiring remediation, which affected retention rates. Latin American
Average book yield across the whole ONQSENKHN�EDKK�EQNL�� �í�SN�� �í�XD@Q� on year.
• -DS�F@HMR�NE�`���L�HMBKTCD�`���L� NE�ATRHMDRR�CHRONR@K�F@HMR��`��L�NE� gains in respect of the sale of equities L@HMKX�HM�)@MT@QX��`��L�QDK@SHMF�SN� the sale and leaseback of our Swedish GD@C�NEãBD��@MC�`��L�NE�TMQD@KHRDC� gains on property assets.
• -NM�QDBTQQHMF�BG@QFDR�NE�`���L� HMBKTCD�QDNQF@MHR@SHNM�BNRSR�NE�̀ ���L�� VHSGHM�VGHBG�VDQD�`��L�NE�FNNCVHKK� VQHSD�CNVMR��`��L�HM�(QDK@MC�@MC� `��L�HM�1TRRH@���`��L�HMS@MFHAKD�@RRDS� write downs mainly relating to software write downs in the UK, Ireland and Scandinavia; £110m of redundancy and restructuring costs �`��L�QDK@SHMF�SN�QDCTMC@MBX���@MC�@� ETQSGDQ�`��L�OQHL@QHKX�QDK@SHMF�SN�SGD� QDUHRHNM�NE�DRSHL@SDR �3GD�`��L�B@M� be further broken down as follows: the re-estimation of deferred acquisition costs and dilapidation provisions in respect of leasehold properties, resulted in charges of `��L�@MC�`�L�QDRODBSHUDKX��@�QDUHDV� of the Group’s reinsurance accounting
QDRTKSDC�HM�@�BG@QFD�NE�`��L��ãM@KKX�� as a result of a remediation process, better information has become available, which has resulted in revisions to certain accounting DRSHL@SDR�@MC�@�BG@QFD�NE�`��L�VGHBG� predominately relates to Ireland.
TAX The Group has recognised a tax charge of £199m for the year. Included in this is a deferred tax asset impairment charge NE�`��L��`��L�QDK@SHMF�SN�SGD�4*�@MC� `�L�QDK@SHMF�SN�(QDK@MC� �3GHR�ENKKNVR�SGD� conclusion that the carrying value of the deferred tax assets in the UK and Ireland are no long fully supportable following the resetting of the Group strategy in ������SNFDSGDQ�VHSG�SGD�HRRTDR�E@BDC�HM� Ireland. This accounting charge has no economic consequences as the tax losses remain available to us. The carrying value of the remaining deferred S@W�@RRDS�HM�SGD�4*�HR�`��L��@MC�HM� (QDK@MC�HR�`�L
CAPITAL The Group monitors a range of capital positions. Strategic actions taken during �����G@UD�CQHUDM�HLOQNUDLDMSR�@BQNRR� these capital measures.
A Fixed income B Cash C Equities D Property E Other
#HUDQRHãB@SHNM�OQNUHCDR�@�RHFMHãB@MS� ADMDãS�SN�12 �VHSGHM�NTQ�DBNMNLHB� capital model. We analyse our main modelled risks, including underwriting, catastrophe, reserve, market, credit and currency, pension and operational risks. .M�SGHR�A@RHR��SGD�KDUDK�NE�CHUDQRHãB@SHNM� generated within our capital model, resulting from the nature of the different types of business written, geographic spread of our business, and the non-correlation of risk events @EEDBSHMF�SGD�&QNTO��HR�@QNTMC���í�NE� SGD�TMCHUDQRHãDC�B@OHS@K�QDPTHQDLDMS
RATING AGENCIES S&P and Moody’s provide insurance ãM@MBH@K�RSQDMFSG�Q@SHMFR�ENQ�SGD�&QNTO� and its principal subsidiaries. The Group was upgraded by S&P to A ‘stable NTSKNNJ��HM�%DAQT@QX�������@MC�HR�Q@SDC� ���MDF@SHUD�NTSKNNJ��AX�,NNCX�R
At the most recent funding valuations @R�NE����,@QBG�������SGD�SGQDD�L@HM�4*� ETMCR�G@C�@M�@FFQDF@SD�ETMCHMF�CDãBHS� NE�`���L��DPTHU@KDMS�SN�@�ETMCHMF�KDUDK� NE���í �3GD�&QNTO�@MC�SGD�3QTRSDDR� agreed funding plans at that time to DKHLHM@SD�SGD�ETMCHMF�CDãBHSR�AX����� � The funding plans will be reviewed following the next triannual funding valuations, which will have an effective C@SD�NE����,@QBG����� �
The purchase of annuities would effectively result in full removal of all economic and demographic risks associated with provision of the liabilities. Alternatively, full removal of investment and economic risk on DWODBSDC�ADMDãS�O@XLDMSR�BNTKC�@KRN� be achieved through the use of a fully matched swaps based investment strategy. This effectively eliminates the @RRTLDC�QDSTQM�ADMDãSR�HM�SGD�ETMCHMF� basis of equity and credit investments that form part of the asset mix of the funds. The Trustee’s investment advisers have estimated that as at ���,@QBG�������SGHR�VNTKC�G@UD�QDRTKSDC� HM�@�RGNQSE@KK�NE�`� �AM �'NVDUDQ��TMCDQ� this approach the funds would remain exposed to longevity and other behavioural and demographic risks.
DIVIDEND We are pleased to recommence CHUHCDMC�O@XLDMSR�VHSG�@�ãM@K�CHUHCDMC� QDBNLLDMC@SHNM�NE��O�ODQ�NQCHM@QX� share. This is a modest absolute KDUDK�QDâDBSHMF������OQNãS@AHKHSX� as well as the work remaining on capital build. We reiterate a medium-term @LAHSHNM�NE������í�CHUHCDMC�O@XNTSR �
GROUP OUTLOOK (M�������VD�@HL�SN�RTARS@MSH@KKX� complete the Group’s strategic restructuring and related ‘inorganic’ capital improvements. Focus will continue on actions to improve core business performance on a sustainable basis.
.TQ�LDCHTL�SDQL������í�TMCDQKXHMF� return on tangible equity target remains in place. Foreign exchange and interest Q@SD�HLO@BSR�EQNL�SGD�O@RS����LNMSGR� RTFFDRS�HS�HR�LNQD�KHJDKX�SN�AD�LDS�HM������ SG@M�������CDROHSD�@�AQN@CKX�TMBG@MFDC� ambition for combined ratios.
Our business is split evenly between Personal and Commercial lines and is principally directly distributed with strong agent relationships, call centre capabilities and a growing bancassurance channel. We have particular strengths in Sweden through our Motor and Personal Accident businesses, and our Danish Commercial business, while our Norwegian business is developing.
FINANCIAL PERFORMANCE Our Scandinavian business performed RSQNMFKX�@S�@M�TMCDQKXHMF�KDUDK�HM����� � 4MCDQVQHSHMF�OQNãSR�VDQD�`���L� �������`���L��@MC�SGD�BNLAHMDC� Q@SHN�V@R��� �í���������� �í�
A Household B Personal motor C Personal accident and other D Commercial property E Commercial motor F Other
The Scandinavian underwriting result V@R�@�OQNãS�NE�`���L��������`���L�� VHSG�@�BTQQDMS�XD@Q�OQNãS�NE�`���L� �������`���L��@MC�@�OQHNQ�XD@Q�OQNãS� NE�`��L��������`���L� � ESDQ�HMBKTCHMF� investment returns net of discount TMVHMC�NE�`��L��������`��L��� SGD�HMRTQ@MBD�QDRTKS�V@R�`���L� �������`���L�
3GD�BNLAHMDC�Q@SHN�HM������V@R��� �í� ��������� �í� �6D@SGDQ�@MC�K@QFD�KNRR� experience was broadly in line with expectations. The weather ratio of � �í�HR�HM�KHMD�VHSG�SGD�ãUD�XD@Q�@UDQ@FD�� VGHKD�K@QFD�KNRRDR�NE�� �í�BNLO@QD�SN� @�KNMF�SDQL�@UDQ@FD�NE�� �í�@MC�HM�O@QS� ADMDãS�EQNL�@�BG@MFD�HM�TMCDQVQHSHMF� mix. The underlying current year loss Q@SHN�V@R�MNSHBD@AKX�HLOQNUDC�HM������ @S��� �í��� ��ONHMSR�ADSSDQ�SG@M������� and there were good improvements in both Sweden and Denmark. Prior XD@Q�BK@HLR�VDQD�� �í��RHFMHãB@MSKX� ADKNV������KDUDKR�ATS�MNV�LNQD� normalised for likely future outlook. Controllable expenses are in line VHSG�NTQ�DWODBS@SHNMR��@MC�HM������ VD�QDCTBDC�%3$�AX��í
TEACHING WATER SAFETY Trygg-Hansa’s ‘Baby buoy’ programme teaches small BGHKCQDM�GNV�SN�âN@S�HM�V@SDQ�� with the overall aim to reduce the number of drowning accidents. The Baby buoy was developed HM������@MC�DWSDMCDC�HM������ by Trygg-Hansa together with The Swedish Life Saving Society (SLS). It is an important part of Trygg-Hansa’s focus on water safety in the Swedish market, together with the sponsorship of outdoor summer swim schools and the initiative ‘swim school for everyone’ where people from other nationalities are trained to become swim school teachers, in order to train others in their native language.
OUTLOOK We expect the Scandinavian P&C markets to grow in line with local GDP growth, and we target top line performance broadly in line with the market. Our focus is on sustaining strong Personal lines results in Sweden and improving Commercial KHMDR�OQNãS@AHKHSX��@BGHDUHMF�RHFMHãB@MS� cost improvements in Denmark; @MC�ENBTRHMF�NM�OQNãS@AKD�FQNVSG� in Norway.
performance of our Canadian business remains supportive of improved future results.
/DQRNM@K�OQDLHTLR�VDQD�CNVM��í��VHSG� @��í�QDCTBSHNM�HM�,NSNQ�O@QSKX�NEERDS�AX� FQNVSG�NE��í�HM�'NTRDGNKC �'NTRDGNKC� premiums included double-digit rate increases (on renewal business) as the market responded to the weather events NE������@MC�D@QKX�������UNKTLDR�VDQD� CNVM��í �(M�,NSNQ��OQDLHTL�QDCTBSHNMR� QDâDBSDC�SGD�DWHS�NE�BDQS@HM�AQNJDQ� relationships, lower new business and rate in Ontario, and competitive conditions in Quebec.
Our survey found that almost every Canadian driver has witnessed other CQHUDQR�S@KJHMF�NM�SGD�OGNMD��@MC���í� have witnessed drivers texting. Yet NMKX���í�@CLHS�SN�S@KJHMF�@MC���í� admit to texting while behind the wheel. Despite public awareness campaigns, and in Ontario increased ãMDR�@MC�CDLDQHS�ONHMSR�ENQ�SGNRD� convicted, distracted driving is still a huge issue.
As a result, RSA Canada made SGDRD�ãMCHMFR�OTAKHB�@MC�HMHSH@SDC� a campaign of driver advice ahead NE�OTAKHB�GNKHC@XR�HM�,@X����� � The research and campaign was one of RSA Canada’s most successful in terms of media coverage, with DWONRTQD�HM�NUDQ�����OTAKHB@SHNMR�� the advice reaching a potential @TCHDMBD�NE����LHKKHNM�ODNOKD
In the UK, we have made good progress in 2014 with underwriting and portfolio actions as well as operational improvements. (M�(QDK@MC��HS�G@R�ADDM�@�ETQSGDQ�CHEäBTKS� year as we continue our recovery process.
OUR OPERATIONS IN UK AND IRELAND In the UK, we are the second largest Commercial insurer with key positions in Property, Motor, Liability, and Marine, and exposures across the SME, MidMarket and Global Specialty customer segments. We operate across the key UK market centres, as well as six European locations. We are a leading international Marine player through the London markets.
UK FINANCIAL PERFORMANCE In the UK, we have made progress with management action on pricing and underwriting that included both planned exits and focused growth. CUDQRD�VD@SGDQ�HM�SGD�ãQRS�PT@QSDQ� together with reserve additions in "NLLDQBH@K�G@UD�@EEDBSDC�OQNãS@AHKHSX � However, expenses are coming down and the good progress made with cost QDCTBSHNMR�HM�SGD�ãQRS�G@KE�G@R�BNMSHMTDC� into the second half, including a reduction NE�NUDQ�������í��%3$�CTQHMF�SGD�XD@Q
At a headline level, UK premiums of `�����L�VDQD�CNVM���í �'NVDUDQ�� premiums excluding Motability were CNVM��í�VHSG�/DQRNM@K�CNVM��í� @MC�"NLLDQBH@K�CNVM��í
Across Commercial we have maintained underwriting discipline in a competitive market and a soft rate environment. 1DONQSDC�OQDLHTLR�VDQD�CNVM���í�SN� `�����L��OQHL@QHKX�CQHUDM�AX�@�QDCTBSHNM�
in Motability premiums as a result of our new contract terms which took effect EQNL���.BSNADQ�������,NS@AHKHSX�MDS� VQHSSDM�OQDLHTLR�HM������VDQD�`��L� UDQRTR�`���L�HM�������@MC�@�QDCTBSHNM� in Marine mainly due to adjustments to prior year premiums after a change in accounting methodology. We ceased writing Specialty Lines business in Germany with effect from 1 October ������ATS�BNMSHMTD�SN�@BSHUDKX�VQHSD� and grow our Marine business there. SME, one of our areas of focused FQNVSG��FQDV��í�NUDQ�K@RS�XD@Q�@MC� targeted activity in Engineering CDKHUDQDC��í�FQNVSG
OUR STRATEGY In UK Commercial, our strategy HR�SN�FQNV�SGD�ATRHMDRR�OQNãS@AKX�� focusing on our revenue generating capabilities and expense reductions. In UK Personal we will continue to focus our business on our target RDFLDMSR�VGHKD�RHFMHãB@MSKX� reducing our cost base and improving our capabilities. In Ireland we have some important market positions upon which future success can be built, but we will need to invest to achieve marketleading capabilities in pricing and data, underpinned by RXRSDLR�RHLOKHãB@SHNM
(M�������SGHR�O@QSMDQRGHO�VNM�SGD� Chartered Insurance Institute Public Interest Awards, ‘Best corporate social responsibility initiative’.
3GD������VD@SGDQ�Q@SHN�NE�� �í�V@R� in line with long-term trends but marginally worse than plan, while SGD�K@QFD�KNRR�Q@SHN�NE�� �í�V@R� 1.1 points worse than trend.
Cost reduction plans are in place, and underwriting actions should improve current year underwriting performance SN�@�OQNãS�HM����� �1DRDQUHMF�@BSHNMR�@QD� now largely complete, although some �����HLO@BS�QDL@HMR�ONRRHAKD
IRELAND FINANCIAL PERFORMANCE (M�(QDK@MC��HS�G@R�ADDM�@�CHEãBTKS�XD@Q� for RSA in recognising further losses ENQ�DUDMSR�@MMNTMBDC�HM������@MC� beginning the recovery process. 3GD������TMCDQVQHSHMF�KNRR�V@R� £107m, recorded as a current year loss NE�`��L�@MC�@�OQHNQ�XD@Q�KNRR�NE�`��L
3GD�BTQQDMS�XD@Q�KNRR�NE�`��L�QDâDBSR� the ongoing impact of the issues HCDMSHãDC�HM�������HM�O@QSHBTK@Q� inadequate pricing on pre-remediation business that came through in earned premiums. Once claims reserving was LNQD�ETKKX�QDLDCH@SDC�CTQHMF�������HS� became apparent that in key portfolios
The UK Legacy underwriting result for �����V@R�@�KNRR�NE�`��L��������`��L� loss) and was primarily driven by a combination of asbestos, deafness and ‘abuse’ reserve additions. The asbestos additions are mainly due to revisions to estimates of reinsurance recoveries SN�QDâDBS�SGD�K@SDRS�DWODQHDMBD�NE� claims across accident years.
ASBESTOS Asbestos technical provisions �ADENQD�CHRBNTMSHMF��HMBKTCD�`���L� ����#DBDLADQ�������`���L��ENQ� @RADRSNR�HM�SGD�4*�BNLOQHRHMF�`���L� ����#DBDLADQ�������`���L��ENQ�4*�QHRJR� @MC�`��L�����#DBDLADQ�������`��L��ENQ� US risks written in the UK. As in previous years, and as a standard part of our reserving practices, these asbestos provisions have been reviewed by external consultants. These provisions can be analysed by survival ratio.
Our UK Legacy portfolio comprises exposure to asbestos and other long term liabilities. Our exposure to these claims arises from Employers and Public Liability policies written over the past 50 years. While these account for the majority of liabilities, the portfolio also includes a variety of London Market related legacy liabilities.
.TQ�ATRHMDRR�HR���í�/DQRNM@K�@MC� ��í�"NLLDQBH@K � QNTMC���í�NE�NTQ� business is distributed through brokers with the remainder predominantly SGQNTFG�@EãMHSX�O@QSMDQRGHOR �6D�@QD� @�KD@CHMF�@EãMHSX�HMRTQDQ�HM�SGD�QDFHNM� with a strong track record in the ãM@MBD��QDS@HK�@MC�LNSNQ�RDFLDMSR
There was strong growth in Argentina NE���í�CQHUDM�AX�SGD�GHFG�HMâ@SHNM� DMUHQNMLDMS��@MC�FQNVSG�NE���í� �NQ�`�L��HM�4QTFT@X �!Q@YHK�OQDLHTLR� VDQD�TO��í�HM�@�BNLODSHSHUD�L@QJDS � We have also taken action to restructure the business which includes the exit of Risk Managed Property, Construction and Engineering and Liability. In Chile OQDLHTLR�VDQD�â@S�CTD�SN�RNES�L@QJDS� conditions and actions taken on our Motor portfolio.
OUR FOOTPRINT IN LATIN AMERICA During the year we have restructured our business in Colombia. We have announced the exit of Personal and Commercial Motor, and intend to pursue OQNãS@AKD�FQNVSG�HM�MNM�,NSNQ� "NLLDQBH@K�KHMDR�@MC�@EãMHSX�RBGDLDR � R�@�QDRTKS��OQDLHTLR�VDQD�CNVM���í� in the year.
OUTLOOK In Latin America, the markets we operate in continue to be attractive on a fundamental basis, though competitive, driven by low insurance penetration and a growing middle class across the region. Given the softer economic outlook, we anticipate growth continuing at a more subdued pace than historical levels, with improving OQNãS@AHKHSX�S@QFDSDC
In 2014, we continued to put our strong levels of employee engagement to the test. Our people reacted quickly and rose to the challenges we faced by continuing to support our customers when they needed us.
Our people have continued to work hard to meet the challenging deadlines set following the business review HM�D@QKX����� �3GDX�G@UD�DLADCCDC� the necessary changes required and responded well to all the new policies we have implemented, while endeavouring to improve the customer experience and increase RG@QDGNKCDQ�BNMãCDMBD
3GD�HMHSH@SHUDR�VD�K@TMBGDC�HM������ to improve the diversity of our workforce – including our global female sponsorship programme, female networking events and mentoring programmes, enhanced âDWHAKD�VNQJHMF�NOONQSTMHSHDR�@MC� the increased intake of women on our global talent programmes – are starting to pay off and build foundations for the future.
DEVELOPMENT Despite the challenges and desire to reduce expenses, we have continued to focus on the development of our ODNOKD �(M�������VD�QDEQDRGDC�NTQ� leadership development programmes and now have world-class externally recognised programmes in place to support the development of our people globally at all levels: • 3GD�$WDBTSHUD�#DUDKNOLDMS� Programme (EDP) – focuses on increasing the leadership capabilities of senior employees regarded as having the potential to be among the future top leadership of the Group.
We have continued to use our long established and award-winning Technical Academy to develop and enhance our critical insurance skills across the Group. As a result we continue to have some of the strongest underwriting, pricing, actuarial and claims capability in our industry.
We have also focused on building our skills and expertise in new areas such as our Digital and Telematics Centres of Excellence. This is already yielding strong results.
We have introduced a new annual employee survey called Yoursay, which gives people an opportunity to ‘shout out’ about the things they want to improve or change. We have had over ��������RGNTS�NTS��UDQA@SHL�BNLLDMSR� and this will provide us with valuable insight for the year ahead and the improvements we can make.
We have introduced Yammer (an internal social enterprise network) within the UK as a place where people can connect openly and honestly to CDA@SD�HRRTDR�@MC�HCD@R �.UDQ���í� of people have registered and we have, on average, 10,000 comments posted every month. Our plans are to roll-out Yammer to all of our BNTMSQHDR�CTQHMF�����
We continue to embed our customer obsession and the expectations of our people that support this, by ensuring its integral to every aspect of the employee life cycle. Our obsession for customers guides our decision-making and this focus is underpinned by robust performance management processes. All employees are set clear annual goals – the what – as well as having to live up to our ‘expectations’ of employee behaviour – the how.
OUR RESPONSE We take action to support the transition to an environmentally sustainable world by helping our customers respond to changing risks and promoting new ways of working that save energy and resources and create less waste.
As a leading company in the business of risk and protection, we have a responsibility and a commercial imperative to help our customers’ and society as a whole, manage the implications of a changing climate and demographic, and social trends. This presents us with both opportunities and risks.
Our recovery plan has changed the shape of our business and challenged our ability to meet some of the long-term targets we set in 2013. We may therefore not make quite as much progress as we envisaged over the short term. We will reassess the appropriateness of our longterm targets at the end of 2015.
However, this does not change our commitment to addressing the fundamental issues that impact our customers and the communities we operate in. In 2014, we made RHFMHãB@MS�OQNFQDRR�SNV@QCR�LDDSHMF� our goals and making a positive difference. Highlights are included throughout this report and in this section.
OUR RESPONSE We use the experience of our staff to provide practical support in the development of employability skills among young people in our communities. We support the development of social enterprise through business mentoring and enable our staff to support causes they are passionate about, providing matched funds and time off for volunteering.
More of our volunteering hours this year were directed towards skillssharing opportunities, focused on education, employability and enterprise. We believe that sharing the skills that exist in the business will be more ADMDãBH@K�ENQ�ANSG�NTQ�ODNOKD�@MC�NTQ� communities. The feedback from staff who have participated in these activities has been positive; 90% of RSA volunteers ‘agreed’ or ‘strongly agreed’ they had developed their own skills following an employability workshop; 100% of RSA volunteers ‘agreed’ or ‘strongly agreed’ that they would recommend this type of volunteering opportunity to colleagues.
Scope 1: All direct GHG emissions. Scope 2: Indirect GHG emissions from consumption of purchased electricity, heat or steam. Scope 3: Other indirect emissions
RISK MANAGEMENT APPROACH We take a broad view of the scope of risk management, which is taken to include the risk of underperformance as well as adverse events and the failure of processes.
More detail on how we manage different types of risk is set out in pages 137 to 150.
This goes beyond identifying process failures and traces further back to identify the underlying internal management causes of RHFMHãB@MS�DUDMSR�RTBG�@R�BTKSTQD�� leadership behaviour and reporting lines. The major event root cause analysis process helps to embed learnings across the organisation to ensure that similar events do not reoccur.
OUR RISK MANAGEMENT IN PRACTICE: REVIEW OF INTERNAL CONTROL SYSTEM (M�������12 �ENTMC�ãM@MBH@K�@MC�BK@HLR� irregularities in its Irish business. Following these an independent review by PWC was commissioned to satisfy the Board and shareholders that the problems in Ireland were not to be found elsewhere in the Group.
Pension Risk — Cautious asset allocation and investment management policies within pension schemes
Reputational Risk: — Proactive management of reputational risk with key focus on Serving customers well 1. Tighten strategic focus of the Group 2. Reset the quality and quantity of capital strength 3. Improve business performance and capability to sustain it
Insurance Risk — Risk mix strategy clearly CDãMDC�@S�CDS@HKDC�ONQSENKHN� level with rigorous risk selection
— Retentions in 2015: £50m per Property risk, £15m for Marine, £50m/C$50m per Catastrophe ex UK, £75m for UK Catastrophe, subject to group aggregate cover with a £180m excess.
Financial Risks — Exposures remain within RODBHãDC�KHLHSR�ENQ�@KKNB@SHNM� by asset class, single counterparties, balance sheet FX exposure, asset-liability matching @MC�BQDCHS�OQNãKD
DISTRIBUTION OF QUANTIFIABLE RISKS Our internal model provides a PT@MSHãB@SHNM�NE�SGD�SNS@K�@LNTMS� of risk borne by the Group, expressed as the amount of capital required to enable it to meet all liabilities to @�BNMãCDMBD�KDUDK�BNMRHRSDMS�VHSG� the Group’s target ‘A’ rating.
!X�@M@KXRHMF�SGD�B@RGâNVR�HM�NTQ� model, we can assess the extent to which the overall level of risk is attributable to broad categories of risk.
����&DNFQ@OGHB�CHUDQRHãB@SHNM • High quality, low-risk investment strategy and portfolio • Pension de-risking actions taken, and ongoing
Trustee dialogue on future action • Tactical actions to mitigate reduction in yields • Defensive positioning to challenged Eurozone economies
Systemic failure in, or obsolescence of, pricing, underwriting and claims processes
(MRTEãBHDMS�B@OHS@K�FDMDQ@SHNM�NUDQ� medium term to support dividend and strategy or to cover any increase in capital requirement
• Delivery of UK strategy and other regions’ operational plans • Capital and risk reduction actions taken in Q1 2014 and ongoing business review including disposals • M&A moratorium • Achieving Internal Model approval
RSA fails to secure Solvency II internal model approval, all or in part, by Q4 2015, resulting in a requirement to enter SII regime on a Standard formula basis for a material additional capital requirement
• Remuneration committee governance • Review of remuneration system • Investor and media relations
• Robust strategic and operational planning processes • Delivery of operational plans • Robust management of underperforming businesses • Management of corporate governance requirements • Investor and media relations
• Internal dividend policy ����2HLOKHãB@SHNM�NE�DMSHSX�RSQTBSTQD��D F �2B@MCHM@UH@� • Regulatory dialogue (and clarity from PRA on UK targets)
• Programme is made up of small, incremental investments • Commenced uplift of regional capability and recruitment of new IT Leaders • Implemented a transparent governance and assurance model ����2ODBHãB�ENBTR�@MC�B@O@AHKHSX�TOKHES�NM�CDRHFM��
• Retention strategies targeted at key senior leaders and critical skill
• Engaging our people in the Group strategic narrative • People expectations roll-out as part of Brand refresh
• Board, Exco and BRC governance • Reinsurance recovery processes • Group-wide reinsurance placement management • Reinsurance Security controls and processes
We have further enhanced our governance structure globally to ensure consistency of oversight and reporting.
Enrico Cucchiani was appointed as an Independent Non-Executive Director on 1 December 2014. Enrico has extensive experience and JMNVKDCFD�HM�SGD�FKNA@K�ãM@MBH@K� services sector and the insurance sector including over 15 years at Allianz in a variety of international roles, and G@R�RHFMHãB@MS�!N@QC�DWODQHDMBD�VHSG� a number of publicly quoted companies. 6D�VDKBNLD�$MQHBN�SN�SGD�!N@QC� @MC�KNNJ�ENQV@QC�SN�ADMDãSHMF�EQNL� his experience.
There have also been some changes to the Executive Committee during the year with the introduction of the new QNKD�NE�"GHDE�.ODQ@SHMF�.EãBDQ��S@JDM� up by Paul Whittaker, formerly CEO of NTQ�$LDQFHMF�,@QJDSR�ATRHMDRR�@MC�SGD� CDO@QSTQDR�NE�,HJD�'NKKHC@X�6HKKH@LR�� Chief Executive, Scandinavia; Neil Lightbown, Group Global Specialty Lines Director; and Paul Donaldson, &QNTO�!QNJDQ�1DK@SHNMRGHO�@MC�2@KDR� Director. Subsequently, Patrick !DQF@MCDQ�V@R�@OONHMSDC�@R�"$.� Scandinavia; Darren Price as Group Chief (MENQL@SHNM�.EãBDQ�@MC�2SDOGDM�+DVHR� as CEO UK & Western Europe. In addition, Derek Walsh took on the role of Global !QNJDQ�1DK@SHNMRGHO�#HQDBSNQ �
OVERVIEW 3GQNTFGNTS�������SGD�!N@QC�ENBTRDC� on reviewing the Company’s business NAIDBSHUDR��SN�CDãMD�SGD�&QNTO�R� priorities and identify a clear recovery programme. A Global programme was commissioned by the Group Audit "NLLHSSDD�@MC�!N@QC�1HRJ�"NLLHSSDD� Chairs to enhance the effectiveness of the Internal Control system and increase scrutiny. We have made tremendous headway on our journey to recovery, but there is still a way to go.
In January 2014, the PWC Report made a number of recommendations which have been incorporated into a Global programme, commissioned by the &QNTO� TCHS�"NLLHSSDD�@MC�!N@QC� Risk Committee Chairs to enhance the effectiveness of the Internal Control RXRSDL �3GD�!N@QC�HR�BNMãCDMS�SG@S� the standards of corporate governance put in place globally and the solid governance framework in place enables DEãBHDMS�@MC�DEEDBSHUD�CDBHRHNM�L@JHMF� with clear responsibilities.
Our Remuneration Policy was approved AX�RG@QDGNKCDQR�@S�SGD������ &,�� following a review of our incentive programmes to simplify arrangements and improve transparency. The Policy is well aligned to our business strategy, incorporating stretching measures, QDâDBSHMF�NTQ�INTQMDX�SN�QDBNUDQX� and the long-term success of the business. Responding to shareholder feedback, we will, in 2015, additionally include TNAV:NWP into our incentive @QQ@MFDLDMSR �%TKK�CDS@HKR�@QD�RDS�NTS�HM� the Directors’ Remuneration Report on pages 80 to 106.
3GD�!N@QC�G@R�ADDM�SQ@MRO@QDMS�HM�HSR� reporting disclosure to keep the market informed of the strategic progress we have made in our recovery plan, with management reinforcing the messages through discussions with institutional shareholders and analysts. During the year, over 500 meetings have been held with institutional investors focusing on the outlook and strategic direction of the Group.
BOARD COMMITTEES R�"G@HQL@M�NE�SGD�!N@QC�@MC�"G@HQ�NE� the Group Nomination and Governance Committee, I am responsible for ensuring SG@S�SGD�!N@QC�@MC�HSR�"NLLHSSDDR� operate effectively, have the right balance of skills and experience required, and that these Committees ADMDãS�EQNL�U@QHDC�DWODQSHRD �3GD� composition of each of the Committees was reviewed in the light of Edward +D@�@MC�,@KBNKL�+D�,@X�R�CDO@QSTQDR � Johanna Waterous succeeded Edward Lea as Senior Independent Director. Kath Cates succeeded Edward as "G@HQ�NE�SGD�!N@QC�1HRJ�"NLLHSSDD� and became a member of the Group Remuneration Committee. Jos Streppel RTBBDDCDC�,@KBNKL�SN�ADBNLD�"G@HQ�NE� the Group Investment Committee and became a member of the Group Audit Committee. All have embraced their new roles and you will hear from Kath and Jos giving an overview of their Committee activity later in the report. Upon appointment, Enrico Cucchiani INHMDC�SGD�!N@QC�1HRJ�"NLLHSSDD�@MC� Group Remuneration Committee.
Role: Senior Independent Non-Executive Director Appointment date:�,@X����� Nationality: Canadian Skills and experience: Johanna’s previous roles include Chairman of Tate Enterprises and over 20 years with ,B*HMRDX�î�"NLO@MX��ONRHSHNMR�HMBKTCHMF� "N�KD@CDQ�NE�SGD�&KNA@K�,@QJDSHMF�@MC� Sales Practice and Leader of their UK Consumer Practice and the European Retail Practice, and Director of Shoppers #QTF�,@QS�"NQONQ@SHNM��@�BNLO@MX�KHRSDC� on the Toronto Stock Exchange). Johanna brings deep expertise on consumer behaviour, sales and marketing across multiple sectors.
External appointments: Non-Executive #HQDBSNQ�NE�6,�,NQQHRNM�2TODQL@QJDSR�OKB�� Non-Executive Director and Senior Independent #HQDBSNQ�NE�1DW@L�/+"��#HQDBSNQ�NE�1!&�*DV� Enterprises Limited and Chairman of Sandpiper CI.
External appointments: Director of Shell (MSDQM@SHNM@K�+HLHSDC��2GDKK�%NTMC@SHNM�@MC� Shell Aircraft Limited. Advisory roles held at 3GD�"DMSQD�ENQ� CU@MBDC�'TL@M�1DRNTQBDR� @S�"NQMDKK�4MHUDQRHSX� CUHRNQX�!N@QC��(,#� !TRHMDRR�2BGNNK� CUHRNQX�!N@QC��%DKKNV�NE� SGD�-@SHNM@K� B@CDLX�NE�'TL@M�1DRNTQBDR� (USA) and Independent Director of Edinburgh !TRHMDRR�2BGNNK �
Name:�).2$/'�231$//$+� Role: Independent Non-Executive Director Appointment date: October 2011 Nationality: Dutch Skills and experience: Jos has a comprehensive understanding of the insurance market globally, extensive ãM@MBH@K�RDQUHBDR�DWODQSHRD�@MC�@�FNNC� knowledge of international and emerging markets. Previous roles include Chief %HM@MBH@K�.EãBDQ�NE� DFNM�TMSHK����� � "G@HQL@M�NE�SGD�,NMHSNQHMF�"NLLHSSDD� of the Dutch Corporate Governance Code and Advisor to the Tilburg Centre NE�%HM@MBD
Name:�* 3'�" 3$2� Role: Independent Non-Executive Director Appointment date: September 2013 Nationality:�!QHSHRG Skills and experience: Kath has over ���XD@QR��DWODQHDMBD�HM�FKNA@K�ãM@MBH@K� services. She was previously Chief .ODQ@SHMF�.EãBDQ��6GNKDR@KD�!@MJHMF� ENQ�2S@MC@QC�"G@QSDQDC�!@MJ�@MC�RODMS� ���XD@QR�@S�4!2 �*@SG�G@R�F@HMDC�@�CDDO� knowledge of control, governance and risk management, working in emerging markets and across different sectors and cultures.
Name:�/ 31("*�!$1& -#$1 Role: CEO Scandinavia /@SQHBJ�!DQF@MCDQ�INHMDC�SGD�12 � Group’s Executive Committee in June 2014 following his appointment as CEO NE�12 �2B@MCHM@UH@ �/QDUHNTRKX�"%.�ENQ� Scandinavia, Patrick has been with the RSA Group since 2011. /@SQHBJ�G@R�GDKC�RDMHNQ�ãM@MBD�QNKDR� at Electrolux and If Skadeförsäkring.
Name: ROWAN SAUNDERS Role: President & CEO, RSA Canada Rowan is a member of the Canadian !N@QC�NE�#HQDBSNQR �2HMBD�INHMHMF� SGD�&QNTO�HM�������1NV@M�G@R�GDKC� progressive leadership positions in the areas of underwriting, marketing, sales @MC�ãM@MBD �'D�HR�@�LDLADQ�NE�SGD�!N@QC� NE�#HQDBSNQR�NE�SGD�(MRTQ@MBD�!TQD@T�NE� "@M@C@��(!"��@MC�V@R�SGD�(!"�R�O@RS�"G@HQ � Rowan is currently a Non-Executive Director at Equitable Group Inc., a publicly traded company on the Toronto Stock Exchange.
The Executive Committee comprises the two Executive Directors whose biographies are on pages 50 to 51 and the following senior management: RSA ANNUAL REPORT AND ACCOUNTS 201452
Name:�23$/'$-�+$6(2 Role: CEO, UK & Western Europe Steve became CEO for UK & Western Europe on 1 January 2015, joining from Zurich where he was CEO, UK General (MRTQ@MBD�@MC�2G@QDC�2DQUHBDR�ENQ�ãUD� years. During his 25 year career at Zurich, Steve held a number of operational and ãM@MBH@K�QNKDR�HMBKTCHMF�&QNTO�%HM@MBD�� 'D@C�NE�&QNTO�.ODQ@SHNMR��/K@MMHMF�@MC� /DQENQL@MBD�,@M@FDLDMS����������� @MC�"NQONQ@SD��"GHDE�%HM@MBH@K�.EãBDQ� @MC�'D@C�NE�.ODQ@SHNMR��&"H$���������� � 2SDUD�HR�@�%DKKNV�NE�SGD�"G@QSDQDC� RRNBH@SHNM�NE�"DQSHãDC� BBNTMS@MSR�� G@UHMF�PT@KHãDC�HM�����
Name:�#$1$*�6 +2' Role: Group General Counsel and Company Secretary Derek joined the Group in July 2010. Derek has 20 years’ experience in the HMRTQ@MBD�HMCTRSQX �%QNL������GD�RDQUDC� @R�&QNTO�&DMDQ@K�"NTMRDK�@S�!DMãDKC� Group Limited, where he was responsible for the global legal, company secretarial and compliance teams. Prior to that, #DQDJ�GDKC�ONRHSHNMR�HM�K@V�ãQLR�/HMRDMS� "TQSHR��MNV�/HMRDMS�,@RNMR���,B*DMM@� î�"N��MNV�",2�"@LDQNM�,B*DMM@��@MC� Norton Rose. In June 2014, Derek took on the additional executive responsibility NE�&KNA@K�!QNJDQ�1DK@SHNMRGHO�#HQDBSNQ
LEADERSHIP DIRECTORS The names of the directors together with their biographical and Committee membership details are set out on pages 50 and 51. In addition, Edward Lea and Malcolm Le May served as directors until their retirement on 8 May 2014 and Adrian Brown until his resignation on 16 April 2014. Richard Houghton will step down as a director on 7 May 2015 but will continue his role until a leaving date is agreed.
A summary of the role statements for the Chairman, Group Chief Executive and Senior Independent Director are provided later in this report on page 55. No one individual has unfettered powers of decision making.
• Undertaking the role of ambassador for the Company, participating in the engagement and effective communication with the Company’s stakeholders
• Preparing detailed Business Plans for the Company and its major subsidiaries, monitoring the performance of the Group, ensuring that objectives are achieved and Business Plans are implemented within budget
• �.UDQRDDHMF��CHQDBSHMF�@MC�BNMSQNKKHMF�ãM@MBH@K�L@M@FDLDMS�� control standards and reporting processes of the Company and its main subsidiaries
• Reviewing the organisational framework to ensure that policies relating to management selection, performance review, development and change are appropriate
• Ensuring that management succession plans are in place • Identifying and executing acquisitions and disposals up to prescribed limits • Compliance with legal and regulatory requirements of the relevant regulatory bodies • Developing the Company’s communications strategy to meet the needs of, and engage with, all internal and external stakeholders
Responsible for: • Challenging and agreeing the Group’s strategy with senior management • Assessing the performance against Group Strategy • Participating in the activities of the Board Committees.
The Board reviews on an annual basis a Schedule of Matters Reserved for the Board which can only be amended by the Board itself, which is reviewed annually. Matters reserved to the Board include: • Approval of the Group’s long-term objectives and commercial strategy
There is a standing agenda of items for consideration by the Board that is continually refreshed.
The Board initiated a Group-wide review of governance and internal control systems during 2014 following the irregularities uncovered in Ireland. The programme is driving enhancements to the Internal Control system globally to ensure consistency of oversight and reporting is achieved VHSG�RTEãBHDMS�NAIDBSHUHSX�@MC�HMCDODMCDMBD �3GD�!N@QC� has been fully involved in this programme. Non-Executive Directors participate in Steering Group Meetings and the Board receives regular updates.
In addition to the Schedule of Matters Reserved for the Board, the Board has delegated authority to core Committees focusing on key specialised areas. Each of these Board Committees have VQHSSDM�3DQLR�NE�1DEDQDMBD�CDãMHMF�SGDHQ�QNKD�@MC�SGD�@TSGNQHSX� delegated to them. The Schedule of Matters Reserved for the Board and the Terms of Reference for each Board Committee were reviewed in the year and changes made where appropriate. The Terms of Reference are available on the Company’s website www.rsagroup.com/termsofreference. Upon the departure of Edward Lea and Malcolm Le May, a full review of Committee composition was undertaken to broaden the Committees’ experience and knowledge. Further details on the principal duties of each Board Committee can be found under the Board Committees section commencing on page 69, in the Group Audit Committee Report on pages 75 to 79 and the Directors’ Remuneration Report on pages 80 to 106.
The Chairman is responsible for leading the annual review of the effectiveness of the Board and its Committees. The Board, through the Group Remuneration Committee, determines the Remuneration Policy for the Executive Directors, the Chairman, Group General Counsel and Company Secretary, as well as for the members of the Executive Committee.
BOARD AND BOARD COMMITTEE ATTENDANCE The Board held nine scheduled meetings during the year and four additional meetings. In addition, Non-Executive Directors met privately without Executive Directors or senior management being present.
• Approval of the Group Risk Appetite • Monitoring material claims and reinsurance matters • Capital risk • Solvency II: risks • Conduct risk: customer, conduct, culture • Regulatory risk • Pension risk • FX risk
• Cultural Health Index • Review of strategic and operational plan risk OQNãKDR
Governance • Review of governance and control systems • MMT@K�#HQDBSNQR�@MC�.EãBDQR�/NKHBX�QDMDV@K�TOC@SD • Investor reaction, analyst consensus and market sentiment • Share consolidation • �2G@QDGNKCDQ�L@SDQH@K��ãM@MBH@K�QDRTKSR��BHQBTK@QR��
During 2014, the Board has made good progress in delivering against these objectives with a number of disposals through which the Group has strengthened its capital position, and as we move into 2015 the Board will continue to focus on these priorities. Details of the progress made are set out in the Strategic Report on pages 2 to 47.
In accordance with the 2012 Code recommendations, an internal performance evaluation process is undertaken annually to ensure the Board remains effective. At least once every three years, the evaluation process is carried out by an external party. This process is run by the Chairman, supported by the Senior Independent Director. The results of the performance evaluation are discussed by the Group Nomination and Governance Committee and the Board. Details of progress against the 2013 external performance evaluation and the key focus of the 2014 internal performance evaluation can be found on pages 60 to 61 later in this report.
COMPOSITION OF THE BOARD In accordance with the 2012 Code, the Board believes that it has the appropriate balance of skills, experience, independence and knowledge to enable it and its Committees to discharge their duties and responsibilities effectively. 3GD�!N@QC�HR�R@SHRãDC�SG@S�HS�HR�NE�@�RHYD�@OOQNOQH@SD�SN�SGD� needs of the business and that no individual or small group of directors can dominate the Board’s decision making. One of the key responsibilities of the Group Nomination and Governance Committee is to keep under review Board membership and succession planning to ensure the balance remains appropriate. This review was undertaken during the course of the year.
The Board considers the skills, experience, independence and knowledge already represented when making decisions on new appointments and ensures that succession planning processes are in place. The Group Nomination and Governance Committee recommend directors for appointment or re-election to the Board. Directors are proposed for annual election or re-election by shareholders at the Company’s AGM, if they wish to stand.
Details of current directors together with their biographical and Committee membership details are set out on pages 50 and 51.
COMMITMENT The letters of appointment for the Chairman and each of the Non-Executive Directors set out the anticipated time commitment, being an average of two days per week for the Chairman and 28-32 days per year for Non-Executive Directors. Non-Executive Directors are required to allocate RTEãBHDMS�SHLD�SN�LDDS�SGD�DWODBS@SHNMR�NE�SGD�QNKD��@MC� to attend Board and Committee meetings and the AGM. In addition, directors may be required from time to time SN�@SSDMC�@CCHSHNM@K�LDDSHMFR��SQ@HMHMF�@MC�AQHDãMFR �
3GQNTFGNTS�������#HQDBSNQR�G@UD�CDLNMRSQ@SDC�âDWHAHKHSX�@MC� commitment in attending additional, short notice Board and Committee meetings, and have made themselves available to meet with the regulators as required. During the period from 1 January to 4 February 2014, Martin Scicluna performed the role of Executive Chairman until Stephen Hester joined as Group Chief Executive. Upon his appointment as Executive "G@HQL@M�HM�#DBDLADQ�������SGD�!N@QC�BNMãQLDC�SG@S�CTD� SN�SGD�HMSDQHL�M@STQD�NE�SGD�@OONHMSLDMS��SGDX�VDQD�R@SHRãDC� that Martin Scicluna’s external commitments would not restrict him from effectively performing this role.
Martin Scicluna is also Chairman of Great Portland Estates plc, a director of Ship Midco Limited, trading as Worldpay, and a member of the Financial Services Trade and Investment !N@QC �3GD�!N@QC�HR�R@SHRãDC�SG@S�SGDRD�BNLLHSLDMSR�@QD� not a constraint on the Chairman’s time or his ability to carry out his duties.
Stephen Hester and Richard Houghton, Executive Directors of the Company, do not hold outside directorships of FTSE100 (or any other listed) companies but would be allowed to have one such appointment, subject to the approval of the Group Nomination and Governance Committee.
Each director has an individual training plan for the development and enhancement of their business knowledge which is subject to discussion with the Chairman. The directors have access to the services and advice of the Group General Counsel and Company Secretary, and in addition may take independent professional advice at the expense of the Company in the furtherance of their duties.
• Increased scrutiny of the near-term performance, including achievement of key milestones in line with the three-year strategic turnaround plan
• Review the pace and evidence of cultural change, in line with the new control and risk frameworks
The review took the form of a questionnaire and included interviews with all Board members. It concluded that the Board remains an engaged and effective Board, the members of which work well together, aligning risk management to strategy. The Board sets stretching performance targets and monitors performance against them. In addition, the Board and its Committees place the right focus on topical matters and the priorities for 2015 and beyond have been reinforced.
Allocate time to discuss the risks emerging from culture and strategy, and the activities and behaviour of individual leaders.
The Group Remuneration Committee has reviewed the Remuneration Policy. The Policy is well aligned to the business strategy incorporating stretching measures. TNAV:NWP is being included as an additional measure in 2015. The Business Review Scorecard in the PSP will be strengthened to include controllable expense targets. The Group Remuneration Committee has taken steps to include provisions to extend the Clawback Policy with effect from January 2015, to enable the Company to recover sums paid to Executives, in addition to withholding payments due to be made.
Increase attention on the role of executive succession planning throughout the Group. Regular discussions about people becoming a greater part of the Board’s agendas.
Members of the Board attend the Executive, senior and FastTrack Executive Development Programmes to support talent development and build relationships with key succession players.
The Board has discussed and shared thoughts on people, culture, cultural risk and employee engagement during the year.
As reported in the 2013 Annual Report and Accounts, an external performance evaluation was carried out during 2013 by Boardroom Review Limited (2013 Evaluation). Throughout the year, the Board has worked through the observations @MC�QDBNLLDMC@SHNMR�GHFGKHFGSDC�HM�SGD������$U@KT@SHNM �2ODBHãB@KKX�
Rigorous performance and talent management processes are in place across the Group to ensure an ongoing focus on high performance and the development and acquisition of talent. The Group runs a number of talent programmes for senior and emerging talent and has continued to focus on retaining talent, among our high performing and high potential populations. The Company also continues to be recognised in the insurance market for its deep technical expertise and the Technical Academy.
In addition to NPS, we track a range of metrics to ensure that the right decisions are made for our customers. These differ by product and region to ensure we are focusing on what HR�HLONQS@MS�ENQ�SGD�RODBHãB�BTRSNLDQ�RDS �3GDRD�HMBKTCD� retention, complaint levels, consideration of non-customers to take out a product, service levels, trust and internal product advocacy.
The focus on improving these metrics is driven by a keen intent to base decisions on real customer insight. Over the next few years we will continue to improve the Company’s customer satisfaction through the application of learning across the business from the areas of success we have HCDMSHãDC�SGQNTFG�QDONQSHMF �3GDQD�HR�@KRN�@�ENBTR�NM�QDCTBHMF� and preventing insurable risks before they even happen as well as providing great, personal customer support should the worst happen.
RATING AGENCIES The Group is rated on an interactive basis by Standard & Poors @MC�,NNCX�R �3GD�HMRTQ@MBD�ãM@MBH@K�RSQDMFSG�Q@SHMFR�@QD� currently A (stable outlook) and A2 (negative outlook) QDRODBSHUDKX �3GDRD�Q@SHMFR�VDQD�@EãQLDC�ENKKNVHMF�SGD������ year-end results, the rights issue and after discussions with both rating agencies. During 2014, there has been regular contact with both agencies including calls to discuss the half-year results. In addition, both agencies spent one day VHSG�RDMHNQ�L@M@FDLDMS�CHRBTRRHMF�&QNTO�RSQ@SDFX��ãM@MBH@K� plans, capital and risk management. The rating agencies both rated the bond issue in October 2014.
#TQHMF�������SGD�&QNTO�RHFMHãB@MSKX�HMBQD@RDC�@MC�DMG@MBDC� SGD�CHRBKNRTQD�NE�ãM@MBH@K�HMENQL@SHNM�SN�RG@QDGNKCDQR�@MC� other market participants. Examples of this include more detailed breakdowns of our underwriting performance, disclosure of our reserve margin, changing the methodology used to calculate our combined ratio to bring it more in line with peers, enhanced pension disclosures and details around SGD�&QNTO�R�B@OHS@K�CHUDQRHãB@SHNM�ADMDãS �3GD�&QNTO�HR� BNLLHSSDC�SN�SGD�NMFNHMF�QDUHDV�NE�ãM@MBH@K�CHRBKNRTQD� to ensure that it is relevant and appropriate.
The following table shows the holdings of major shareholders as disclosed to the Company in accordance with the Disclosure and Transparency Rules as at 31 December 2014 and at the date of this report. There are no shareholder agreements in place with the Company that may restrict transfer of securities or voting rights.
Ameriprise Financial, Inc, and its group2 188,902,771 5.13% Direct & Indirect & CFD
Artemis Investment Management LLP2 182,450,614 4.96% Direct & Indirect 182,450,614 4.96% Direct & Indirect
Franklin Mutual Advisers, LLC2 184,256,341 5.01% Direct & Indirect 184,256,341 5.01% Direct & Indirect
Standard Life Investments Ltd2 152,266,879 4.42% Direct & Indirect 152,266,879 4.42% Direct & Indirect
A UK B Europe C US and Canada D Rest of the World E Unanalysed
In March 2014, the Company announced a rights issue of three for eight 27.5p Ordinary Shares at a price of 56p per Ordinary Share. On 9 April 2014, 1,380,976,863 Ordinary Shares were issued ranking pari passu with those previously in issue. Following the rights issue and the passing of a shareholder resolution at the Company’s 2014 AGM, in May 2014 the Company took steps to subdivide its 27.5p Ordinary Share into one Ordinary Share of 20p carrying the same rights and restrictions as a 27.5p Ordinary Share, and one 7.5p Deferred Share (Deferred Share) with restricted rights. Immediately thereafter the 20p Ordinary Shares were consolidated on the A@RHR�NE�ãUD���O�.QCHM@QX�2G@QDR�HMSN�NMD�MDV�.QCHM@QX�2G@QD� of £1.00 carrying the same rights as a 20p Ordinary Share. In June 2014, the Deferred Shares were purchased for an aggregate payment of one penny and subsequently cancelled in accordance with the rights attaching to this share class. The capital equivalent of the cancelled 7.5p Deferred Shares is being held in a non-distributable capital redemption reserve. Further information on the Company’s share capital, together with details of the movements in the Company’s issued share capital during the year and rights attaching to the shares can be found in note 20 on page 177 of the Notes to the Financial Statements which is incorporated into this report by reference.
As at 31 December 2014, the Ordinary Shares and Preference Shares represented 89% and 11% respectively of the total issued share capital. Directors are limited as to the number of shares they can allot (save in respect of share schemes). Renewal of the directors’ authorities to allot shares will be sought at the 2015 AGM. In addition, directors are restricted by the limits set out by the Investment Association. During 2014, the directors exercised their authorities to allot shares only in respect of the employee share schemes.
During the year, the Company operated three employee ADMDãS�SQTRSR�SN�GNKC�.QCHM@QX�2G@QDR�HM�SGD�"NLO@MX�VGHBG� are used to satisfy grants under the Group’s share incentive schemes and Capita Trustees Limited was the Trustee of each trust. Two of these trusts were closed on 31 December 2014 and the assets of these trusts transferred to the remaining trust. In addition, a Share Incentive Plan (Sharebuild) Trust is operated of which Capita IRG Trustees is the Trustee. The Trustees may vote in respect of any shares held in the trusts but have no obligation to do so, and Trustees may have regard SN�SGD�ãM@MBH@K�HMSDQDRSR�NE�SGD�ADMDãBH@QHDR�HM�DWDQBHRHMF�SGDHQ� voting rights over the Company’s shares. Standard dividend waiver agreements are in place for the employee share trusts to receive dividends of 0.01 pence per share excluding the Voluntary Invested Deferred Shares.
The Company operates a sponsored American Depositary Receipts (ADR) programme which is managed by JP Morgan Chase NA. The programme allows shareholders to invest in the Company through US dollar denominated funds. As part of the subdivision and share consolidation programme, the Company changed its American Depositary Share (ADS) ratio for its ADR programme from one ADS representing ãUD�.QCHM@QX�2G@QDR�NE��� �O�D@BG�SN�NMD� #2�QDOQDRDMSHMF� one Ordinary Share of £1.00 each.
Dividends 3GD�#HQDBSNQR�QDBNLLDMC�@�ãM@K�CHUHCDMC�NE��O�ODQ�.QCHM@QX� Share to be paid on 15 May 2015 to holders of Ordinary Shares on the register at the close of business on 6 March 2015, subject to ordinary shareholder approval. No interim dividend was paid during 2014, so the total dividend for the year is 2p (2013: 10.2p restated post-consolidation). The Company will not AD�NEEDQHMF�@�2BQHO�#HUHCDMC�@KSDQM@SHUD�HM�QDRODBS�NE�SGD�ãM@K� dividend recommended.
The Company’s Preference Shares receive a dividend at the rate of 7.375% per annum paid in two instalments on, or as near as practicably possible to, 1 April and 1 October each year.
AGM The AGM will be held at 200 Aldersgate, St Paul’s, London EC1A 4HD on Friday, 8 May 2015 at 11.00am. A letter from the Chairman and the notice convening the AGM (Notice) is made available to all ordinary shareholders at least 20 working days before the meeting and can be found on the Company’s website at www.rsagroup.com/AGM2015. Presentations are given on the Company’s performance and activities during SGD�XD@Q�@MC�SGD�ãM@MBH@K�QDRTKSR�NE�SGD�"NLO@MX�OQHNQ�SN�SGD� formal business of the meeting. All directors attend the AGM if they are able to do so, with the Chairman and each Board Committee Chair making themselves available to take questions from ordinary shareholders.
Separate resolutions are proposed on each item of business. In accordance with the provisions of the Articles of Association, any proxy form sent by the Company to shareholders in relation to any general meeting must be returned to the Company, whether in written form or in electronic form, not less than 48 hours before the time for holding the meeting, excluding non-business days (or, in the case of a poll taken otherwise than at, or on, the same day as the meeting, not less than 24 hours before the time appointed for the taking of the poll). At any general meeting, every ordinary shareholder present shall have one vote on a show of hands and on a poll, every ordinary shareholder present in person or by proxy shall have one vote for each share of which he/she is the holder. Each resolution will be put to a poll at the AGM in 2015. The results of the vote on each resolution will be announced to the London Stock Exchange and will be available on the Company’s website, www. rsagroup.com/AGM2015.
Preference shareholders are only entitled to receive notice of, attend, speak and vote at general meetings if the dividend payable on the Preference Shares is in arrears at the date of the Notice, a resolution is proposed that affects the rights of the preference shareholders, a resolution is proposed to wind up the Company, a resolution is proposed to reduce the capital of the Company (other than a redemption or purchase of shares), or in such other circumstances as the Board shall determine. In any of these situations the preference shareholders may only vote on the relevant resolution and not on all the business of the general meeting.
At the 2014 AGM, an average of 69.17% of the total issued share capital was voted across all resolutions, with an average of 98.29% voting in favour of all resolutions.
CORPORATE RESPONSIBILITY The Group’s Corporate Responsibility programme supports the communities in which we operate with direct corporate donations to registered charities and through supporting our people to volunteer and fundraise. The strategy focuses on helping to create ‘Thriving Communities’ by targeting two RODBHãB�HRRTDR��$CTB@SHNM�@MC�$LOKNX@AHKHSX��@MC�$MSDQOQHRD� and Entrepreneurship. More detail can be found in the Strategic Report on pages 2 to 47.
Public Affairs The Group contributes to public policy debate on issues relevant to the business, either individually or through industry bodies such as the Association of British Insurers and the Confederation of British Industry. This can include issues RTBG�@R�âNNCHMF��LNSNQ�HMRTQ@MBD��@RADRSNR��QDMDV@AKD� DMDQFX�@MC�ãM@MBH@K�RDQUHBDR�QDFTK@SHNM �3GD�"NLO@MX� engages with policymakers to improve understanding of the role the insurance industry plays in society and the economy.
Employees apply the principles of openness, transparency, honesty and integrity to all of their activity with policymakers. The Company adheres to principles of best practice, declaring the interests which it represents and ensuring that, to the best of its knowledge, information provided is unbiased, complete, up to date and not misleading.
Annual Greenhouse Gas Emissions In accordance with Part 7 of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, certain disclosures are required in respect of greenhouse F@R�DLHRRHNMR �3GD�HMENQL@SHNM�SN�ETKãK�SGHR�QDPTHQDLDMS�B@M� be found in the Corporate Responsibility section on pages 42 to 43 and is incorporated into this report by reference.
A balanced and understandable assessment of the Group’s position and prospects, and an explanation of its strategy for delivering the objectives of the Company are contained in the Strategic Report on pages 2 to 47 which includes: • 4RD�NE�ãM@MBH@K�HMRSQTLDMSR�AX�SGD�"NLO@MX��CDS@HKR�NE� ãM@MBH@K�QHRJ�L@M@FDLDMS�NAIDBSHUDR�@MC�ONKHBHDR�NE�SGD� Company, including the policy for hedging each major type of forecasted transaction for which hedge accounting is used
Details of the Group’s principal subsidiaries is detailed in note 31 on page 196. A full list of Group subsidiaries will be attached to the Company’s next Annual Return and be available from Companies House.
The directors are responsible for preparing the Annual Report and Accounts and consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy. Further explanation on the assurances undertaken by the Group Audit Committee on behalf of the Board are set out in the Group Audit Committee Report on pages 75 to 79.
A report from the external auditor can be found on pages 108 to 114.
This is important as effective management of Delegated Authority enables the business to: • Ensure that all employees execute their responsibilities VHSGHM�@�BKD@QKX�CDãMDC�RDS�NE�KHLHSR�@MC�RTAIDBS�SN�RODBHãDC� terms and conditions appropriate to their role, competence, experience and technical capability so as to mitigate the risk of the Group being exposed or committed to material ãM@MBH@K��NODQ@SHNM@K��KDF@K��QDOTS@SHNM@K�@MC�NQ�QDFTK@SNQX� risk and/or loss
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE The UK Corporate Governance Code sets out standards and expectations on corporate governance matters for UK companies. The Financial Reporting Council are responsible for the publication and periodic review of the Code. The latest published version of the 2014 Code can be found at https:// www.frc.org.uk/Our-Work/Publications/CorporateGovernance /UK-Corporate-Governance-Code-2014.pdf.
Throughout the year, the Company has complied with the 2012 Code, with the exception of the period from 1 January 2014 to 4 February 2014 when Martin Scicluna performed the role of Executive Chairman on an interim basis until Stephen Hester joined the Group as Group Chief Executive.
The Company has familiarised itself with the 2014 UK Corporate Governance Code (2014 Code). The changes were reviewed by the Group Nomination and Governance Committee upon publication. The Group Remuneration Committee has taken steps to include provisions to extend the Clawback Policy into its Remuneration Policy with effect from January 2015, to enable the Company to recover sums paid to Executives, in addition to withholding payments due to be made. Further details on the Performance Share Plan can be found in the Directors’ Remuneration Report on pages 80 to 106.
3GD�!N@QC�BNMãQLR�SG@S�HS�G@R�QDUHDVDC�SGD�RBGDCTKD�NE� CHQDBSNQR��BNMâHBSR�NE�HMSDQDRS�CTQHMF�SGD�XD@Q�@MC�SG@S�SGD� procedure in place operated effectively in 2014. None of the directors had any interest in any other contract with the Company or any of its subsidiaries during 2014 apart from those disclosed in the Related Party Transactions note 33 on pages 197 to 198.
(M�@CCHSHNM��SGD�"NLO@MX�G@R�HMCDLMHãDC�SGD�CHQDBSNQR� of SAL Pension Fund Limited, a majority owned subsidiary of the Group, in relation to its role as Trustee of an occupational pension scheme. This indemnity constitutes a qualifying indemnity provision under section 235 of the Companies Act 2006.
BORROWING POWERS Article 98 of the Articles of Association sets out the restrictions on the borrowings of the Company. The aggregate amount, for the time being, remaining borrowed by the Group must not, without the previous sanction of an ordinary resolution of the Company, be more than one and a half times the aggregate of: (i) The amount paid up on the issued share capital of the Company
DIRECTORS RESPONSIBILITY STATEMENT The Directors’ Responsibility Statement appears on page 107 and is incorporated by reference into this report.
The composition of each Committee is recommended by the Group Nomination and Governance Committee to the Board for approval. This is reviewed on an annual basis or more frequently if appropriate. When reviewing Committee membership, consideration is given to each individual’s expertise and experience. To enhance the Committee role and effectiveness, each director is a member of multiple Committees to ensure a good exchange of information between the Committees at all times.
CORPORATE GOVERNANCE FRAMEWORK – STRUCTURE OF BOARD AND COMMITTEES AS AT 31 DECEMBER 2014 *In addition the Group Continuous Disclosure team meet as required. †Regional Risk Committees comprise of Latin America, Asia, Middle East and Russia.
ROLE AND RESPONSIBILITIES The principal role of the Committee is to manage the process, to advise and make recommendations to the Board on matters relating to the Board’s membership, Committee membership and related appointments. During 2014, the purpose of the Group Nomination and Governance Committee expanded to formalise its responsibility for governance matters. The name of the Committee now QDâDBSR�SGHR�@CCHSHNM@K�QNKD � R�O@QS�NE�SGHR�DWO@MCDC�QNKD� the Committee monitors compliance against the UK Corporate Governance Code, Board and Committee responsibilities and membership, and the evaluation of Board members’ performance.
The key areas of focus for the Committee during 2014 are shown in the table below: Group Nomination and Governance Committee focus during 2014
• Expansion of the responsibilities of the Committee to include governance matters
• Review feedback from the Board meeting held with the PRA
A Insurance Industry B Financial Services C Strategic Management D Sales and Marketing
Between 9 May and 1 December 2014, the Company had met the Davies Report requirement of 25% of women on the Board. Following the appointment of Enrico, the composition of the Board is 78% male and 22% female directors but with effect from 7 May 2015 the composition will again revert to 75% male and 25% female directors. We recognise the importance of diversity for Board effectiveness and remain committed to meeting the Davies Report requirements that a minimum of 25% of the Board will be women. All appointments are ultimately made on merit against the agreed selection criteria.
The skills and experience of the Board are varied, with a third of the Board having longevity of service and 67% of the Board having joined over the past three years bringing fresh ideas and experience to the table.
The Committee ensures that an internal Board evaluation process is carried out annually and at least once every three years the evaluation process is carried out by an external party in line with the 2012 Code recommendations.
MARTIN SCICLUNA Chairman of the Board and Chairman of the Group Nomination and Governance Committee
Membership of the Committee comprises myself as Chairman, Alastair Barbour, Martin Scicluna, Stephen Hester and Richard Houghton. The Group Investments Director attends all meetings of the Committee to provide an update on the economic and market background and outlook affecting the Group, the investment activities taken since the Committee last met and any portfolio actions which require the Committee’s approval.
Martin Scicluna 2/2 * Chair of Committee Notes: 1. Stephen Hester became a member of the Committee with effect from 5 February 2014.
2. Malcolm Le May ceased to be the Chair and member of the
Despite the low yields in bond markets, the Group has maintained its disciplined approach to investment strategy with its focus on maintaining a core high quality, low risk portfolio structure. Over the course of the year the geographical disposition of the portfolio was impacted by both the rights issue and the sale of a number of our overseas subsidiaries. Proceeds from these actions were primarily invested into high quality bonds, maintaining the strong overall credit quality of the Group’s portfolios. #TQHMF�SGD�ãQRS�G@KE�NE�SGD�XD@Q�NTQ�QHRJ�ONRHSHNM�V@R�ETQSGDQ� reduced through the sale of approximately £300m of equities to improve the capital position of the Group. The proceeds from these sales were again invested into high quality bonds or retained as cash.
The Group has continued to examine alternative strategies to enhance the income generated by its investment portfolios. This has included further modest allocations to funds investing in loans backed by property. All strategies reviewed and approved were consistent with maintaining the Group’s prudent risk framework and the Committee monitored asset disposition to ensure implementation remained in line with expectations.
JOSEPH STREPPEL Non-Executive Director and Chairman of the Group Investment Committee
During 2014, a review of Committee membership was undertaken. To achieve increased oversight and challenge, the membership of the Committee was updated in September 2014 to comprise Non-Executive Directors only, with myself as Chair, Martin Scicluna, Alastair Barbour, Hugh Mitchell and Enrico Cucchiani as members. The Group Chief $WDBTSHUD��&QNTO�"GHDE�%HM@MBH@K�.EãBDQ�@MC�&QNTO�"GHDE�1HRJ� .EãBDQ�@QD�DWODBSDC�SN�@SSDMC�AX�HMUHS@SHNM
3. Edward Lea ceased to be Chair and a member of the Committee with effect from 8 May 2014.
4. Enrico Cucchiani became a member of the Committee with effect from 5. Kath Cates was appointed Chair of the Committee with effect from 8 May 2014. 6. The Terms of Reference for the Committee were amended at the
AREAS OF FOCUS The key areas of focus for the Committee are shown in the table below, with further detail provided in the report that follows.
In addition to those areas of focus, certain risk matters were referred to the Board for discussion, including the risks QDK@SHMF�SN�SGD�&QNTO�R�CDãMDC�ADMDãS�ODMRHNM�RBGDLD �
(M�@CCHSHNM��RHFMHãB@MS�QHRJ�DUDMSR�@MC�AQD@BGDR��VHSG�@MX� evident or emerging trends, were the subject of ongoing analysis by management and consideration by the Committee. The Group Risk team has developed a major event root cause analysis process which helps to embed learnings across the organisation to ensure that similar events do not reoccur.
Enterprise Risk Management The Business Risk Review presented at each meeting to the Committee covered insurance risk, including remediation OQNFQDRR�NM�RODBHãB�QHRJ�ONQSENKHNR��ãM@MBH@K�QHRJ��QDHMRTQ@MBD� risk and strategy.
The Group’s Remuneration Policy is reviewed by the Committee at least annually, to ensure that risk is properly considered in the overall setting of the policy for the Group and the remuneration of executive directors and other senior management.
During the year the Group’s Risk Appetite was reviewed by the Committee. We have developed a new Risk Appetite architecture, enhancing the existing approach. This ensures 2NKUDMBX�((�BNLOKH@MBD�@MC�QDâDBSR�SGD�CDUDKNOHMF�HMCTRSQX� thinking on Risk Appetite. Key Risk Indicators (KRIs) have @KRN�ADDM�QDUHRDC�@MC�RHLOKHãDC �
The risk department undertook an independent analysis of the Group’s operating plan from a risk perspective which was reviewed and challenged by the Committee and outcomes communicated to management.
3GD�"NLLHSSDD�BNMRHCDQDC�RHFMHãB@MS�BG@MFDR�HM�SGD� QHRJ�OQNãKD�@MC�QHRJ�@OODSHSD�CTQHMF�SGD�XD@Q�HMBKTCHMF� the rights issue, a programme of disposals of non-core businesses, a reduction in equity exposures in the investment portfolio and further enhancements to the reinsurance programme structure.
KATH CATES Non-Executive Director and Chair of the Board Risk Committee
GROUP AUDIT COMMITTEE REPORT I am pleased to present to shareholders the Group Audit Committee Report for 2014, which sets out the responsibilities and the key activities of the Committee, recognising its role in the governance of the Company. I would like to welcome Jos Streppel, who joined the Committee on 8 May 2014. As an introduction to the report, the principal areas of focus for the Committee are shown in the table below, with further detail provided in the report that follows.
During the year, the Committee was internally evaluated as part of the wider review of the Board and its Committees, the outcome of which can be found on pages 60 to 61.
ROLE AND RESPONSIBILITIES The purpose of the Committee is to assist the Board in discharging its responsibilities for the integrity of the Annual Report and Financial Statements, for the effectiveness NE�SGD�RXRSDLR�NE�HMSDQM@K�BNMSQNK�@MC�ãM@MBH@K�@MC� regulatory risk management systems, and for monitoring the effectiveness and objectivity of the internal and external auditors.
The Committee acknowledges the importance of keeping skills current and relevant. To that end, it receives training EQNL�OQNEDRRHNM@K�RDQUHBDR�ãQLR�@MC�EQNL�L@M@FDLDMS �3GD� Committee members review and identify training needs on both a collective and individual basis, and training is arranged as appropriate.
MEETINGS 3GD�"NLLHSSDD�GDKC�ãUD�RBGDCTKDC�LDDSHMFR�CTQHMF�SGD� XD@Q��ENTQ�VDQD�SHLDC�SN�@KKNV�BNMRHCDQ@SHNM�NE�SGD�ãM@MBH@K� information being presented to the market in respect of the Group’s full-year and half-year results and to consider key ãM@MBH@K�L@SSDQR�RTOONQSHMF�SGD�SVN�HMSDQHL�L@M@FDLDMS� RS@SDLDMSR �3GD�ãM@K�LDDSHMF�HM�#DBDLADQ�BNMRHCDQDC�@MC� approved the Group Internal Audit and Regulatory Risk and Compliance plans for 2015, and considered matters which VDQD�@MSHBHO@SDC�VNTKC�HLO@BS�SGD������XD@Q�DMC�ãM@MBH@K� reporting processes. A further special meeting was held HM�D@QKX�%DAQT@QX������SN�BNMRHCDQ������XD@Q�DMC�ãM@MBH@K� reporting matters including impairment testing of goodwill balances and the carrying value of intangible assets.
The Committee has been assisted in carrying out its duties by the Group Disclosure Committee which meets quarterly, and is responsible for considering and identifying any disclosure matters in connection with the preparation NE�PT@QSDQKX�L@QJDS�QDKD@RDR�BNMS@HMHMF�L@SDQH@K�ãM@MBH@K� information. The Group Disclosure Committee is chaired by the Group General Counsel and Company Secretary and comprises members of senior management from Finance, Legal, Investor Relations, Company Secretarial and Risk.
The Committee considered, as part of the annual effectiveness review, changes made to the policy in response SN�DUDMSR�HM�(QDK@MC�HM������@MC�R@SHRãDC�HSRDKE�SG@S�SGD�ONKHBX� continues to be readily accessible, communicated to, and understood by, employees across the Group. Training on the revised policy and updated procedures has been rolled out to all members of staff and to directors.
%HM@MBH@K�QDONQSHMF�@MC�RHFMHëB@MS�ëM@MBH@K�HRRTDR The Committee attaches great importance to the work, NOHMHNMR�@MC�ãMCHMFR�NE�SGD�DWSDQM@K�@TCHSNQ��*/,& � The auditor participates in all Committee meetings and met privately with the Committee on two occasions. During the year the Committee’s principal interactions with the auditor were: • Consideration of the strategy and plan for the audit of the ãM@MBH@K�RS@SDLDMSR�HMBKTCHMF��CHRBTRRHNM�@MC�BG@KKDMFD� in relation to materiality levels set; the scope of proposed audit coverage by business unit; determination and approach to the audit of key areas of risk; understanding the oversight by the group audit team of subsidiary business unit audit teams and visits by the group team to business units.
• At the half-year and year end, detailed discussion and BNMRHCDQ@SHNM�NE�SGDHQ�ãMCHMFR�@MC�NOHMHNMR�HM�QDK@SHNM� to the key risk areas, judgements made, any changes to the plan and to materiality and discussion of the underlying reasons.
• The Committee received and reviewed actuarial reserving reports which described the basis for judgement in valuing HMRTQ@MBD�KH@AHKHSHDR �3GD�"NLLHSSDD�R@SHRãDC�HSRDKE�SG@S� L@M@FDLDMS�QDâDBSDC�@U@HK@AKD�@MC�QDKH@AKD�HMENQL@SHNM� when setting the reserves and that an appropriate margin was maintained.
• The Committee considered the results of an external review of the Group’s reserving practices and governance in respect of setting and monitoring reserves together with reports from the Group-wide project undertaken to review and enhance control processes and concluded that the processes in place are appropriate.
Valuation of assets and liabilities held for sale and discontinued operations • As part of the restructuring programme the Group has made a number of disposals throughout 2014. Progress on the disposal programme has been reported to the Committee on a quarterly basis and the Committee has focused on the accounting consequences of classifying businesses as ‘held for sale’ as well as considering whether they met the requirements for presentation as discontinued operations. This was assessed both for the announced upcoming disposals of China, Singapore, Hong Kong and Italy, together with the accounting on the completed disposals of Poland, Latvia, Lithuania, Estonia and Noraxis (the broker business in Canada). The Committee has R@SHRãDC�HSRDKE�SG@S�SGD�CHRONR@KR�@BSHUHSHDR�G@UD�ADDM� @OOQNOQH@SDKX�QDâDBSDC�HM�SGD�ãM@MBH@K�RS@SDLDMSR
The Committee also supported management’s judgement on the assessment of other goodwill balances carried by the Group. The Committee further considered the carrying value of software in Scandinavia and in view NE�BG@MFDR�SN�DWODBS@SHNMR�NE�ETSTQD�ADMDãSR��@R�@�QDRTKS� of the business review and ongoing restructuring, agreed that a further write down of certain capitalised software was appropriate.
$LOKNXDD�ADMDãSR�@MC�QDSHQDLDMS�NAKHF@SHNMR • During 2014, the Committee received reports on the valuation of the pension schemes. As the pension schemes are sensitive to changes in key assumptions, management completed an assessment as to the appropriateness of SGD�@RRTLOSHNMR�TRDC�@MC�QDONQSDC�SGDHQ�ãMCHMFR�SN�SGD� Committee. The Committee supported the conclusion that the assumptions used were appropriate and in line with other companies with similar schemes. In addition, any non-standard changes in assumptions and judgements are reviewed by the Committee: management reviewed the methodology used to assess the fair value of the longevity arrangements and recommended a change SN�SGD�A@RHR�NM�VGHBG�TMCDQKXHMF�B@RG�âNVR�@QD�U@KTDC � Following discussion and challenge the Committee agreed with management’s assessment. During 2014, the Committee also discussed the buy-out value of the pension schemes’ liabilities and agreed with management that it was appropriate to include information in respect of the buy-out values in the Annual Report and Accounts.
Assessment of the Annual Report and Accounts • At the request of the Board, the Committee considered whether the 2014 Annual Report and Accounts were fair, balanced and understandable and whether the disclosures were appropriate. To ensure that new accounting standards VDQD�TMCDQRSNNC�@MC�@OOQNOQH@SDKX�QDâDBSDC�HM�SGD� ãM@MBH@K�RS@SDLDMSR��SGD�"NLLHSSDD�QDBDHUDC�PT@QSDQKX� updates of all relevant accounting standards that could HLO@BS�SGD�ãM@MBH@K�RS@SDLDMSR �3GD�&QNTO�G@R�MNS�L@CD� @MX�RHFMHãB@MS�BG@MFDR�SN�HSR�@BBNTMSHMF�ONKHBHDR�CTQHMF� 2014 and has complied with new IFRS’ as required during SGD�XD@Q �3@JDM�@R�@�VGNKD��SGD�"NLLHSSDD�HR�R@SHRãDC�SG@S� the Annual Report and Accounts is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.
FINANCIAL CONTROL FRAMEWORK The Financial Control Framework aims to deliver a consistent @OOQN@BG�SN�ãM@MBD�QDK@SDC�BNMSQNKR�@BQNRR�SGD�&QNTO � 3GD�EQ@LDVNQJ�DMRTQDR�SG@S�BNMSQNKR�@QD�ãS�ENQ�OTQONRD� in all regions. Embedding a control culture that strengthens SGD�&QNTO�R�ãM@MBH@K�BNMSQNK�DMUHQNMLDMS�@MC�DMRTQDR� ãM@MBH@K�OQNBDRRDR�@QD�L@M@FDC�DEEDBSHUDKX�HM�NQCDQ�SN� LHSHF@SD�SGD�QHRJ�NE�ãM@MBH@K�LHRRS@SDLDMS �3GD�OQNBDRR� involves documenting and testing the operation of key ãM@MBH@K�BNMSQNKR��SGDQDAX�OQNUHCHMF�@M�@BBDOS@AKD�CDFQDD� NE�@RRTQ@MBD�@QNTMC�SGD�ãM@MBH@K�BNMSQNK�DMUHQNMLDMS �
During the year the Committee received quarterly updates on the assessment and testing of controls including breaches and the action taken as a result. The Committee considered @MC�CHRBTRRDC�VHSG�L@M@FDLDMS�QDBSHãB@SHNM�NE�@MX� CDãBHDMBHDR�HM�BNMSQNKR�@MC�ETQSGDQ�@BSHNM�SN�AD�S@JDM�@R� appropriate. The Financial Control framework is subject to regular effectiveness assessments by an independent team at Group Corporate Centre and the results of this work were reported to the Committee both as part of the regular reporting and at a separate meeting held to consider SGD�PT@KHSX�NE�SGD�NUDQ@KK�ãM@MBH@K�BNMSQNK�DMUHQNMLDMS� across the Group.
The Committee reviews the performance of internal control systems quarterly, with an annual review undertaken by the !N@QC �3GHR�RXRSDL�HMBKTCDR�FNUDQM@MBD��ãM@MBH@K�BNMSQNKR�� the risk management framework and processes to deliver regulatory and compliance requirements. In addition, the Board, through the Board Risk Committee, considers reports from risk specialists across the Group and reviews Grouplevel risk management information. The systems are designed to identify and mitigate, rather than eliminate, the potential risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against L@SDQH@K�ãM@MBH@K�LHRRS@SDLDMS�NQ�KNRR
In February 2015, the Committee on behalf of the Board reviewed the systems of internal control in operation during 2014. The conclusion reached by the Board in conjunction with management on the basis of the reviews, and the work undertaken as part of the project to review and enhance control processes, as described on pages 44 to 47, was that NUDQ@KK�MN�RHFMHãB@MS�E@HKHMFR�NQ�VD@JMDRRDR�HM�SGD�&QNTO�R� BNMSQNK�DMUHQNMLDMS�CTQHMF������VDQD�HCDMSHãDC
The Committee received regular reports from the Group Chief Auditor on the integrity of the control environment, and from the external auditor based on its audit work. Findings and recommendations arising from internal and external audit work were discussed by the Committee together with any control improvements recommended.
GROUP INTERNAL AUDIT The Committee oversees and reviews the activities and effectiveness of Group Internal Audit (GIA) who assist in accomplishing the Group’s objectives by evaluating the Group’s risk management, control and governance processes, and assist with improving their effectiveness. Their primary role is to help the Board and Executive Management to protect the assets, reputation and sustainability of the organisation. The scope of GIA is unrestricted.
The Committee has provided clear guidance to KPMG on the Committee’s expectations of them as part of their roles as auditor; that the Committee, not management, is their client; that they are expected to challenge appropriately; that they are expected to raise issues and concerns with the Committee as soon as is appropriate; and on material matters they are expected to indicate their agreement to the position taken by management, or to explain why they do not, and the implications.
It is the intention of the Committee that the Company will adhere to the 2012 Code requirement of tendering for the external auditor at least every 10 years.
The Committee undertakes a thorough review of the effectiveness of the external auditor on an annual basis, usually during completion of the year-end audit. The review has covered the perceived quality, effectiveness, objectivity and independence of the external auditor together with their compliance of the Committee’s guidance referred to above. It was conducted by seeking the views of the Committee, senior management and members of the Group Financial Reporting team, and asking for opinions against set criteria and the performance of the external auditor against those BQHSDQH@ �.M�SGD�A@RHR�NE�SGD�QDUHDV��SGD�"NLLHSSDD�HR�R@SHRãDC� with the work of KPMG and that they are objective and independent. Accordingly, the Committee has recommended to the Board that a resolution be put to the 2015 AGM for the reappointment of KPMG LLP as external auditor, and the Board has accepted this recommendation.
ALASTAIR WS BARBOUR FCA Non-Executive Director and Chairman of the Group Audit Committee
As Chairman of the Group Remuneration Committee of the Board, I am pleased to present this Report covering the year to 31 December 2014 for your approval.
2HFMHãB@MS�GD@CV@X�@F@HMRS�SGD�!TRHMDRR�1DUHDV�NAIDBSHUDR� has been made, with the successful completion of the Rights Issue and over delivery against the disposal programme. Substantial advances have also been seen in portfolio management optimisation, improving organisational DEãBHDMBX�@MC�DWODMRD�QDCTBSHNM �(M�@CCHSHNM�L@M@FDLDMS� has continued to place emphasis on the implementation and embedding of internal controls as well as identifying additional revenue opportunities to support future growth.
The Business Review Scorecard indicators include IGD 2TQOKTR�@S�`� �AM��$" �2TQOKTR�@S�`� �AM�@MC�SGD�2î/�BQDCHS� Q@SHMF�QD�DRS@AKHRGDC�@S� �RS@AKD��RGNVHMF�RHFMHãB@MS�RSDOR� ENQV@QC�@F@HMRS�HM�XD@Q�@MC�LTKSH�XD@Q�NAIDBSHUDR�SG@S� management was tasked to deliver.
In 2015, the Policy will be implemented in the following ways: • 3GD�$WDBTSHUD�#HQDBSNQ�R�HMBDMSHUD�OK@MR�VHKK�BNMSHMTD� to align management and shareholders’ interests by LD@RTQHMF�ODQENQL@MBD�@F@HMRS�OQNãS��TMCDQVQHSHMF� performance, shareholder returns, balance sheet strength, capital strength, expense goals and management actions which include a focus on risk.
SHAREHOLDER ENGAGEMENT In early 2014, the Committee engaged with the Group’s largest shareholders and the ABI, NAPF and ISS on the remuneration structure. Following shareholder approval NE�SGD�1DLTMDQ@SHNM�/NKHBX�HM�,@X�������SGD�"NLLHSSDD� has continued this dialogue. It has shared information and taken on board feedback in respect of the incentive plan performance measures for the 2015 cycle.
I remain committed to ensuring our remuneration decisions E@HQKX�QDâDBS�ODQENQL@MBD�@MC�NTQ�CTSX�SN�RG@QDGNKCDQR � (�GNOD�XNT�ãMC�SGHR�QDONQS�TRDETK�@MC�SGD�!N@QC�KNNJR� ENQV@QC�SN�XNTQ�RTOONQS�ENQ�HS�@S�SGD� &,
• Bonuses awarded at 68% and 13% of the maximum for Stephen Hester and Richard Houghton respectively.
Long-term Incentive Plan • Performance shares granted annually VGHBG�UDRS�RTAIDBS�SN�ODQENQL@MBD� conditions measured over three years.
• 4O�SN����í�NE�R@K@QX�@S�L@WHLTL • For recruitment purposes, or in highly exceptional circumstances, such as for retention, an award may be made up to an additional ���í�NE�R@K@QX
Awards granted (2014-16 cycle) • Conditional grants for Group Chief $WDBTSHUD�@MC�&QNTO�"%.�����í� and 230% of salary respectively).
Awards granted (2015-17 cycle) • Conditional grant for Group Chief $WDBTSHUD�����í�NE�R@K@QX�� in view of his criticality to company turnaround).
Strategic Priorities: Key Performance Indicators Annual Bonus Plan 2014 Long-term incentive cycle 2014-16 Business Review: - Strategic Focus, - Capital and Balance Sheet Strength, – Performance Improvement
WHAT REMUNERATION DID THE EXECUTIVE DIRECTORS RECEIVE IN 2014? (details on page 85)
Previously, tax had been included based on date paid. � � ������R@K@QX�ãFTQDR�@QD�OQN�Q@SDC�ENQ�SHLD�RDQUDC�@R�CHQDBSNQR�CTQHMF�SGD�XD@Q �
Notes: 1. Attended meetings from January to September 2014. 2. Attended meetings from September to December 2014.
1. INTRODUCTION This section of the Directors’ Remuneration Report describes the way in which remuneration decisions have been carried NTS�HM�SGD�ãM@MBH@K�XD@Q�DMCDC����#DBDLADQ����� �3GDQD� is a statement on how the Group intends to implement HSR�1DLTMDQ@SHNM�/NKHBX�HM������NM�O@FDR����SN��� � Any information contained in this section of the report SG@S�HR�RTAIDBS�SN�@TCHS�HR�GHFGKHFGSDC
The Committee determines the remuneration and contractual SDQLR�ENQ�SGD�$WDBTSHUD�#HQDBSNQR�@MC�SGD�$WDBTSHUD� "NLLHSSDD��VGNRD�OQNãKDR�@QD�BNMS@HMDC�NM�O@FDR����SN���� � It also approves the fee and contractual terms of the "G@HQL@M��VGNRD�OQNãKD�HR�NM�O@FD����
COMMITTEE ADVISORS PricewaterhouseCoopers (PwC) was formally appointed by the Committee as its independent advisor in September 2012. It was selected following a market tender exercise. During 2014, PwC also provided wide-ranging advice and consultancy services across the Group globally on matters including business processes, IT, internal audit, corporate social responsibility, direct and indirect tax, and governance. PwC is a member of the Remuneration Consultants’ Group and a signatory to its "NCD�NE�"NMCTBS �(M�@CCHSHNM��SGD�"NLLHSSDD�G@R�R@SHRãDC�HSRDKE�SG@S�SGD�@CUHBD�HS�QDBDHUDR�HR�NAIDBSHUD�@MC�HMCDODMCDMS� @R�SGD�ãQL�G@R�BNMãQLDC�SGDQD�@QD�MN�BNMâHBSR�NE�HMSDQDRSR�@QHRHMF�ADSVDDM�HS��HSR�@CUHRNQR�@MC�12 �3GD�EDD�O@HC�ENQ�RDQUHBDR� SN�SGD�"NLLHSSDD�HM�SGD�XD@Q�V@R�`�������DWBKTCHMF�5 3��A@RDC�NM�@�ãWDC�EDD�ENQ�@�CDãMDC�RBNOD�NE�VNQJ��@MC�GNTQKX�Q@SDR� ENQ�RODBHãB�OQNIDBSR
January • Review of 2014 incentive performance conditions • Appointment terms of SGD�&QNTO�"GHDE�$WDBTSHUD
• Review of directors’ base salaries and approval to maintain current salaries from 1 April 2014
• Testing of the performance conditions underpinning the Annual Bonus Plan 2013 and the LTIP cycle 2011-13; approval of the level of directors’ awards
Fees Taxable ADMDãSR1 2 Total $MQHBN�"TBBGH@MH12 6 – - – 6 –
� � �+3(/�������ODQENQL@MBD�A@RDC�@V@QCR�FQ@MSDC�TMCDQ�SGD���������+3(/�BXBKD�VHKK�K@ORD�HM�ETKK�NM����,@X����� �!X�DWBDOSHNM��1HBG@QC�'NTFGSNM�R�@V@QC�� which was awarded following his appointment as a director effective 12 June 2012, will lapse in full on 15 June 2015.
Sharebuild matching shares granted during the year (detailed on page 91). These other items in the nature of remuneration are available to all qualifying 4*�DLOKNXDDR�@MC�@QD�MNM�S@W@AKD
8. Adrian Brown resigned from the Board effective 16 April 2014 and his employment ended effective 31 August 2014. The salary shown in the table is the pro-rated amount for the time he was a director, i.e. 1 January – 16 April 2014. Further details are given on page 93.
� � �2SDOGDM�'DRSDQ�V@R�@OONHMSDC�@R�@�CHQDBSNQ�DEEDBSHUD���%DAQT@QX������NM�@M�@MMT@K�R@K@QX�NE�`������� �3GD�R@K@QX�U@KTD�RGNVM�HM�SGD�S@AKD�ENQ� 2014 is the pro-rated amount based on his appointment date.
10. Simon Lee resigned from the Board and his employment ended on 12 December 2013. The salary value shown in the table for 2013 is the pro-rated @LNTMS �/@X�HM�KHDT�NE�MNSHBD�HR�MNS�HMBKTCDC�HM�SGHR�S@AKD��@MC�V@R�CHRBKNRDC�HM�K@RS�XD@Q�R�1DONQS�NM�O@FD�����TMCDQ�/@XLDMSR�ENQ�+NRR�NE�.EãBD
3GD�$WDBTSHUD�#HQDBSNQR��R@K@QHDR�QDL@HMDC�TMBG@MFDC�ENQ�SGD��� OQHK������QDUHDV��@R�RS@SDC�HM�SGD�S@AKD�ADKNV �3GD�R@K@QHDR� of Stephen Hester and Richard Houghton effective from 1 April 2015 will be unchanged, as also noted on page 96.
EMPLOYMENT BENEFITS 3GD�$WDBTSHUD�#HQDBSNQR�QDBDHUDC�@�Q@MFD�NE�DLOKNXLDMS�ADMDãSR�CTQHMF�������HMBKTCHMF�B@Q�@MC�LDCHB@K�ADMDãSR�� and the value of these is noted in the table on page 85.
• CQH@M�!QNVM�QDBDHUDC�@�S@W@AKD�B@RG�@KKNV@MBD�NE��� �í�NE�A@RD�R@K@QX�ENQ�SGD�ODQHNC�GD�V@R�DLOKNXDC�CTQHMF����� • Stephen Hester received a taxable cash allowance of 30% of base salary following his appointment effective 5 February 2014. • Richard Houghton was a member of the Stakeholder Pension Plan until April 2014 and received an employer pension BNMSQHATSHNM�NE��í�NE�A@RD�R@K@QX�@MC�@�S@W@AKD�B@RG�@KKNV@MBD�NE�� ��í�NE�A@RD�R@K@QX �'D�QDBDHUDC�@�S@W@AKD�B@RG�@KKNV@MBD� NE��� ��í�NE�A@RD�R@K@QX�EQNL� OQHK������NMV@QCR �3GD�SNS@K�S@W@AKD�B@RG�@KKNV@MBD�CTQHMF�SGD�XD@Q�V@R�`�������@MC�SGD�SNS@K� DLOKNXDQ�ODMRHNM�BNMSQHATSHNM�V@R�`������ �
Financial performance (40% weighting – achieved 13%) 4MCDQKXHMF�LDSQHBR�ENQ�ANMTR�OTQONRDR�DWBKTCDC�MDS�F@HMR��QDNQF@MHR@SHNM�BNRSR��SQ@MR@BSHNM�BNRSR�@MC�NMD�NEE�KNRRDR�QDK@SHMF� SN�OQHNQ�XD@Q�HRRTDR�HM�(QDK@MC � R�RGNVM�HM�SGD�S@AKD��ãM@MBH@K�ODQENQL@MBD�V@R�ADKNV�SGD�S@QFDS�KDUDK�ENQ�D@BG�LDSQHB�KD@CHMF� to an outcome of 13% against a possible maximum of 40%.
Substantial outperformance was seen in the disposal programme and good execution of the portfolio exits within the ATRHMDRR �3GD�ATRHMDRR�G@R�ADDM�QDB@OHS@KHRDC�@GD@C�NE�S@QFDSR �$WODMRDR�VDQD�QDCTBDC�@GD@C�NE�/K@M�VHSG�QDCTBSHNM�S@QFDSR� exceeded as a result of additional actions developed. The Committee was of the view that overall a strong platform has been created for the business turnaround.
Overview of bonus outcomes The following table summarises the 2014 annual bonus outcome for Stephen Hester.
� � ��(&#�@MC�$" �ONRHSHNMR�@QD�CDS@HKDC�HM�SGD�B@OHS@K�CHRBKNRTQD�NM�O@FD�����SN���� 3. Stephen Hester was appointed as a director effective 5 February 2014. His bonus has been determined by the Committee relative to his gross annual A@RHB�R@K@QX�NE�`��������@MC�OQN�Q@SDC�EQNL�SGHR�C@SD�TMSHK����#DBDLADQ�����
3GD�UDRSHMF�NE�SGDRD�@V@QCR�V@R�BNMSHMFDMS�NM�12 �@BGHDUHMF�S@QFDSR�ENQ�&QNTO�TMCDQKXHMF�1DSTQM�NM�$PTHSX��1.$��@MC�QDK@SHUD� Total Shareholder Return (TSR), measured over a three-year performance period. The outcome of the 2012–14 cycle has been SDRSDC�AX�SGD�"NLLHSSDD�@MC�HMCDODMCDMSKX�UDQHãDC � R�@�QDRTKS��/DQENQL@MBD�@MC�,@SBGHMF�RG@QD�@V@QCR�FQ@MSDC�TMCDQ�SGD� 2012–14 cycle will not vest as neither of the performance conditions was achieved. The tables below show the outcome of SGD�ODQENQL@MBD�LD@RTQDR�@MC�SGD�QDRTKSHMF�KDUDK�NE�UDRSHMF�ENQ�$WDBTSHUD�#HQDBSNQR��@V@QCR�
Notes: � � �1DK@SHUD�321�S@QFDS�HR�ADSVDDM�LDCH@M�@MC�TOODQ�PTHMSHKD�VHSGHM�@�ODDQ�FQNTO�NE�� DFNM�� KKH@MY�� UHU@�� 7 ��!@KNHRD��&DMDQ@KH��+DF@K�î�&DMDQ@K��,TMHBG� 1D��0!$��2VHRR�1D�@MC�9TQHBG �
LONG-TERM INCENTIVES – AWARDS GRANTED IN 2014 (AUDITED) "NMCHSHNM@K�KNMF�SDQL�HMBDMSHUD�@V@QCR�VDQD�L@CD�SN�SGD�$WDBTSHUD�#HQDBSNQR�NM����,@X������TMCDQ�SGD�/DQENQL@MBD�2G@QD� /K@M��/2/���VGHBG�V@R�@OOQNUDC�AX�RG@QDGNKCDQR�NM���,@X����� �3GDRD�/DQENQL@MBD�2G@QD�@V@QCR�VHKK�UDRS�HM�������RTAIDBS� SN�SGD�R@SHRE@BSHNM�NE�SGD�OK@M�R�ODQENQL@MBD�BNMCHSHNMR�A@RDC�NM�&QNTO�TMCDQKXHMF�1.3$��QDK@SHUD�321�@MC�@�!TRHMDRR�1DUHDV� Scorecard comprising growth in Tangible Net Asset Value per Share (TNAV), cumulative earnings and a range of capital strength metrics.
The targets for the performance measures are shown in the following table. Achievement against the Business Review Scorecard will be evaluated using a performance framework whereby each metric will be reviewed against its target, @MC�ITCFDLDMS�HM�SGD�QNTMC�TRDC�SN�CDSDQLHMD�SGD�KDUDK�NE�UDRSHMF �3GD�RODBHãB�S@QFDSR�B@MMNS�AD�CHRBKNRDC�OQNRODBSHUDKX� for reason of price sensitivity, particularly regarding the capital metrics. A performance narrative will be given to summarise the level of vesting on the Business Review Scorecard once the performance conditions have been tested.
Relative TSR1, 3 RSA’s TSR is equal to the unweighted index of comparators
Notes: � � �3GD�ODQENQL@MBD�LD@RTQDR�@QD�&QNTO�TMCDQKXHMF�1.3$��QDK@SHUD�321�@MC�@�!TRHMDRR�1DUHDV�2BNQDB@QC������VDHFGSHMF�D@BG� 2. The performance period is three years and ends on 31 December 2016. By exception, the relative TSR metric which will be targeted against a ODQENQL@MBD�ODQHNC�BNLLDMBHMF�ENTQ�VDDJR�ADENQD�SGD�FQ@MS�C@SD�@MC�DMCHMF�NM����,@QBG�������SGHR�HR�SN�DMRTQD�SG@S�SGD�LD@RTQDLDMS�ODQHNC� does not begin during a time when shareholders were not in possession of the full information on RSA’s performance and strategy.
CLAWBACK POLICY A Clawback Policy was introduced in 2013 regarding variable remuneration and is reviewed annually, as set out in the Remuneration Policy on page 100 to 102.
related to the legacy Long-term Incentive Plan 2006, and shares acquired through RSA’s all-employee plan, Sharebuild. � � �3GD�U@KT@SHNM�HR�@F@HMRS�SGD�LHC�L@QJDS�BKNRHMF�OQHBD�NE�@M�12 �NQCHM@QX�RG@QD�@R�@S����#DBDLADQ������NE�`� ���ODQ�RG@QD 3. The gross annual base salary as at 31 December 2014.
in the table above. They are disclosed on page 92. � � �$MQHBN�"TBBGH@MH�V@R�@OONHMSDC�@R�@�CHQDBSNQ�DEEDBSHUD���#DBDLADQ����� �3GD�S@AKD�@ANUD�RGNVR�GHR�RG@QDGNKCHMF�NM�SGD�C@SD�NE�GHR�@OONHMSLDMS�
SCHEME INTERESTS HELD #DS@HKR�NE�$WDBTSHUD�#HQDBSNQR��DWHRSHMF�@V@QCR�HM�SGD�&QNTO�R�HMBDMSHUD�RBGDLDR�@MC�@KK�DLOKNXDD�RG@QD�OK@MR�ENQ�SGD�ãM@MBH@K� year are set out below. Full details of all directors’ shareholdings and options to subscribe for shares are recorded in the &QNTO�R�1DFHRSDQ�NE�#HQDBSNQR��(MSDQDRSR�VGHBG�HR�NODM�SN�HMRODBSHNM�AX�RG@QDGNKCDQR�@S�SGD� &,�@MC�@S�SGD�"NLO@MX�R� QDFHRSDQDC�NEãBD�CTQHMF�RS@MC@QC�ATRHMDRR�GNTQR
Outstanding options 4MDWOHQDC�NOSHNMR�GDKC�CTQHMF������HM�QDRODBS�NE�SGD�NQCHM@QX�RG@QDR�NE�SGD�"NLO@MX�@R�@�QDRTKS�NE�2G@QDR@UD�RG@QD�NOSHNM� schemes are shown below. All options were granted for nil consideration. None of the terms or conditions of any of the existing options over shares of the Group were varied during the year.
Sharebuild The Directors’ interests in Sharebuild shares during 2014 were as follows: Sharebuild Shares held at 1 January 20141
TSR (30% weighting). 11. The date by which performance and other conditions for LTIP awards must be met is as follows: 2011 awards by 31 December 2013, 2012 awards by 31 December 2014 and 2013 awards by 31 December 2015. 12. No other directors of the Company held long-term incentive scheme interests in the LTIP Plan during 2014.
6. PAYMENTS TO DIRECTORS FOR LOSS OF OFFICE (audited) CQH@M�!QNVM��"GHDE�$WDBTSHUD�4*�@MC�6DRSDQM�$TQNOD�� resigned from the Board effective 16 April 2014 and his employment ended on 31 August 2014. He continued to QDBDHUD�GHR�BNMSQ@BST@K�R@K@QX�@MC�ADMDãSR�ENQ�SGD�SHLD� he remained an employee up to 31 August 2014 and was then treated in line with the leaver treatment in the Group’s Remuneration Policy.
He will continue to receive his contractual salary and ADMDãSR�ENQ�RN�KNMF�@R�GD�QDL@HMR�@M�DLOKNXDD��@ESDQ� which he will be treated in line with the Leaver Treatment outlined in the Group’s Remuneration Policy.
,Q�'NTFGSNM�G@R�@����LNMSG�BNMSQ@BST@K�MNSHBD�ODQHNC� which will commence on 26 February 2015 and expire at midnight on 25 February 2016, at the latest. Whilst an DLOKNXDD�,Q�'NTFGSNM�VHKK�QDBDHUD�GHR�BNMSQ@BST@K�R@K@QX� NE�`�������ODQ�LNMSG��@�ODMRHNM�@KKNV@MBD�NE�`������ ODQ�LNMSG�@MC�ADMDãSR�VGHBG�HMBKTCD�@�B@Q�@KKNV@MBD� NE�`������ODQ�LNMSG�@R�VDKK�@R�/,(�@MC�KHED�HMRTQ@MBD �
,Q�'NTFGSNM�R�TMUDRSDC���������/DQENQL@MBD�@MC�,@SBGHMF� share awards in the Long-term Incentive Plan 2006 and Performance Share Plan 2014 will vest in line with the normal vesting timetable. Time pro-ration will be applied, such that based on his employment ending effective 25 February 2016, a maximum of 510,499 awards can vest. Additional pro-rating will be applied if the performance conditions attached to these awards are not met in full, or if his employment ends at an earlier date.
In addition, his unvested 16,220 Compulsory Deferred Shares awarded as part of his bonus for 2012 will vest in line with SGDHQ�MNQL@K�UDRSHMF�SHLDS@AKD �3GDRD�VDQD�U@KTDC�@S�`������� A@RDC�NM�@�RG@QD�OQHBD�NE�`� ����@R�@S����%DAQT@QX����� � He will retain his 9,442 Voluntarily Invested Deferred Shares that were purchased using part of his net bonus awards for 2012, in accordance with the Plan rules. These were U@KTDC�@S�`�������A@RDC�NM�@�RG@QD�OQHBD�NE�`� ��� � ,Q�'NTFGSNM�VHKK�MNS�QDBDHUD�@M�+3(/�@V@QC�HM�����
7. PAYMENTS TO FORMER DIRECTORS (audited) There were no payments made to former directors during 2014, other than those disclosed in the Payments for Loss NE�.EãBD�RDBSHNM
8. HISTORICAL TSR PERFORMANCE AND EXECUTIVE REMUNERATION The graph shows the TSR of the Group with reference to SGD�%32$�����(MCDW�@MC�SGD�QDK@SHUD�321�ODDQ�FQNTO�TRDC� as an LTIP performance measure for the 2014–16 cycle, the constituents of which are noted on page 88.
RSA’s TSR performance relative to the indices is shown over the six years from 31 December 2008 to 31 December 2014. 3GD�FQ@OG�QDâDBSR�SGD�BG@MFD�HM�U@KTD�NE�NQCHM@QX�RG@QDR�HM� @�BNLO@MX�NUDQ�SHLD��@R�QDOQDRDMSDC�AX�@�GXONSGDSHB@K�`���� holding in the shares. Any distribution of dividends is included. Data was provided by Datastream.
Notes: � � �2SDOGDM�'DRSDQ�V@R�@OONHMSDC�&QNTO�"GHDE�$WDBTSHUD�DEEDBSHUD� ��%DAQT@QX����� �3GD�RHMFKD�ãFTQD�NE�SNS@K�QDLTMDQ@SHNM�ENQ������ above is pro-rated for his time in the position. He did not have any long-term incentives in the 2012-14 cycle.
� � �,@QSHM�2BHBKTM@�V@R�@OONHMSDC�$WDBTSHUD�"G@HQL@M�DEEDBSHUD� ���#DBDLADQ�������TMSHK���%DAQT@QX����� �3GD�RHMFKD�ãFTQDR�NE�SNS@K� remuneration for 2013 and 2014 above are pro-rated for his time in the position.
9. PERCENTAGE CHANGE IN REMUNERATION The table below sets out the percentage change in salary, ADMDãSR�@MC�ANMTR�ENQ�SGD�HMCHUHCT@K�TMCDQS@JHMF�SGD�LNRS� RDMHNQ�$WDBTSHUD�#HQDBSNQ�QNKD�HM�SGD�"NLO@MX�BNLO@QDC�VHSG� 4*�DLOKNXDDR�NM�@UDQ@FD�ADSVDDM������@MC����� �3GD�4*� population was selected for this comparison because pay BG@MFDR�VHSGHM�12 �U@QX�RHFMHãB@MSKX��@BBNQCHMF�SN�KNB@K� L@QJDS�E@BSNQR �3GD�&QNTO�"GHDE�$WDBTSHUD�R�QNKD�G@R�@� &QNTO�VHCD�QDLHS��ATS�HR�KNB@SDC�HM�SGD�4*
% difference from prior year 3NS@K�2ODMC�NM�$LOKNXDD�/@X1 1,215 1,101 -9.4% Total Distributions to Shareholders2 232 9 -96.1%
RSA has a pay-for-performance culture, whereby remuneration is closely linked to the performance of both the business and the individual. The Committee’s aim is that superior levels of remuneration will only be paid in return for delivering superior KDUDKR�NE�ODQENQL@MBD �3GD�BG@QS�ADKNV�RGNVR�GNV�LTBG�SGD�&QNTO�"GHDE�$WDBTSHUD�BNTKC�D@QM�ENQ�SGD������ãM@MBH@K�XD@Q� based on the application of the Remuneration Policy (detailed on pages 99 to 106). His remuneration potential changes according to varying levels of performance.
Notes: 1. The ‘below threshold’ scenario shows the minimum remuneration receivable. It includes the value of annual base salary and pension as at 1 January ������@MC�SGD�U@KTD�NE�ADMDãSR�A@RDC�NM�SGD�RHMFKD�SNS@K�ãFTQD�NE�QDLTMDQ@SHNM�ENQ����� �-N�ANMTR�HR�@V@QCDC�@MC�MN�+3(/�UDRSHMF�NBBTQR
2. The ‘on-target’ scenario shows the remuneration receivable with a bonus award at half of the maximum opportunity (i.e. 80% of salary) and LTIP vesting at 62.5% (i.e. half-way between threshold (25% vesting) and maximum (100% vesting)). The LTIP maximum award level is taken to be 300% NE�R@K@QX��VGHBG�QDâDBSR�2SDOGDM�'DRSDQ�R�@V@QC�ENQ�SGD������FQ@MS
3. The ‘maximum’ scenario shows the remuneration receivable with both the Annual Bonus Plan and the LTIP paying out in full (i.e. 160% of salary and 300% of salary, respectively).
ANNUAL BONUS PLAN 2015 As noted in the Committee Chairman’s letter on pages 80 to 81, the Annual Bonus Plan will follow a similar design to 2014. (SR�ODQENQL@MBD�LD@RTQDR�@QD�@KHFMDC�VHSG�SGD�BNQD�OQHNQHSHDR�ENQ�ENBTR�HM����� �3GD�&QNTO�"GHDE�$WDBTSHUD�VHKK�AD�DWODBSDC� to deliver against stretching targets which are geared towards making continued performance improvement.
3GD�"NLLHSSDD�VHKK�@RRDRR�ODQENQL@MBD�ENQ������NMBD�SGD�ãM@MBH@K�XD@Q�G@R�DMCDC � KK�NE�SGD�ANMTR�S@QFDSR�@QD�BNMRHCDQDC�SN� be commercially sensitive because they signal the Group’s forward plan for the year, and therefore they are not provided in this document. Disclosure will be provided in the 2015 Directors’ Remuneration Report, to the extent that the targets do not remain commercially sensitive.
LONG-TERM INCENTIVE PLAN 2015-17 �MDV�KNMF�SDQL�HMBDMSHUD�OK@M��B@KKDC�SGD�12 �/DQENQL@MBD�2G@QD�/K@M��/2/���V@R�@OOQNUDC�AX�RG@QDGNKCDQR�@S�SGD� &,�NM� ��,@X����� �3GD�OK@M�CHQDBSKX�RTOONQSR�SGD�ATHKCHMF�NE�RG@QDGNKCDQ�U@KTD�AX�S@QFDSHMF�&QNTO�TMCDQKXHMF�1DSTQM�NM�3@MFHAKD� $PTHSX��1.3$���QDK@SHUD�3NS@K�2G@QDGNKCDQ�1DSTQM��321��@MC�@�!TRHMDRR�1DUHDV�2BNQDB@QC�VGHBG�BNLOQHRDR��FQNVSG�HM�3@MFHAKD� Net Asset Value per Share (TNAV), cumulative earnings, controllable expenses and a range of capital strength metrics including the ratio of TNAV:NWP.
The Business Review Scorecard will be strengthened taking into account progress made in 2014, and include additionally TNAV:NWP and controllable expense targets. Achievement will be evaluated using a performance framework whereby each metric will be reviewed against its target, together with any other aspects connected to the business turnaround and ITCFDLDMS�HM�SGD�QNTMC�TRDC�AX�SGD�"NLLHSSDD�SN�CDSDQLHMD�SGD�KDUDK�NE�UDRSHMF �3GD�RODBHãB�S@QFDSR�B@MMNS�AD�CHRBKNRDC� prospectively for reason of price sensitivity. A performance narrative will be given to summarise the level of vesting on the Business Review Scorecard once the performance conditions have been tested.
Relative TSR1 RSA’s TSR is equal to the unweighted index of comparators
� � ��&QNTO�TMCDQKXHMF�1.3$�VHKK�AD�B@KBTK@SDC�NM�@�SGQDD�XD@Q�@UDQ@FD�A@RHR � �RSQ@HFGS�KHMD�B@KBTK@SHNM�HR�@OOKHDC�SN�CDSDQLHMD�SGD�ONQSHNM�NE�@V@QCR�SG@S� vest for performance between threshold and on-target, and between on-target and maximum. The average required for on-target vesting (62.5% vesting) is less than the mid-point of the 11-16% range and is considered commercially sensitive because it is set in line with, and therefore signals, the Group’s forward plan for the period. Disclosure will be provided retrospectively following the end of the performance period.
NON-EXECUTIVE DIRECTORS’ FEES 4MCDQ�12 �R� QSHBKDR��SGD�-NM�$WDBTSHUD�#HQDBSNQR��QDLTMDQ@SHNM�HR�CDSDQLHMDC�AX�SGD�!N@QC��VHSGHM�KHLHSR�RDS�AX�RG@QDGNKCDQR � �3GD�AHNFQ@OGHDR�NE�SGD�-NM�$WDBTSHUD�#HQDBSNQR�@QD�BNMS@HMDC�NM�O@FDR����SN���� �3GD�NMKX�DWBDOSHNM�HR�HM�QDRODBS�NE�SGD� Chairman, whose terms fall within the remit of the Group Remuneration Committee. The Chairman and Board (minus the -NM�$WDBTSHUD�#HQDBSNQR��CHRBG@QFDR�HSR�@BBNTMS@AHKHSX�ENQ�RDSSHMF�@MC�L@M@FHMF�-NM�$WDBTSHUDR�#HQDBSNQR��QDLTMDQ@SHNM�� it will do this when their contractual terms or fee structure are under consideration, which is typically once a year, as noted on pages 104 to 105.
12. STATEMENT OF VOTING AT GENERAL MEETING 3GD�ENKKNVHMF�UNSHMF�V@R�QDBNQCDC�@S�SGD� &,�NM���,@X������QDF@QCHMF�SGD�QDRNKTSHNMR�SN�@OOQNUD�SGD�#HQDBSNQR�� Remuneration Policy and the Annual Report on Remuneration: Resolution Votes For Votes Against Total Votes Cast Votes Witheld1
14. EXTERNAL DIRECTORSHIPS 2SDOGDM�'DRSDQ�@MC�1HBG@QC�'NTFGSNM�CN�MNS�GNKC�NTSRHCD�CHQDBSNQRGHOR�NE�%32$������NQ�@MX�NSGDQ�KHRSDC��BNLO@MHDR� ATS�VNTKC�AD�@KKNVDC�SN�G@UD�NMD�RTBG�@OONHMSLDMS��RTAIDBS�SN�SGD�@OOQNU@K�NE�SGD�&QNTO�-NLHM@SHNM�@MC�&NUDQM@MBD� Committee. In accordance with the Remuneration Policy, they would be permitted to retain any fees or expenses arising from such an appointment.
Kath Cates 1 September 2013 1 September 2016 $MQHBN�"TBBGH@MH 1 December 2014 ��#DBDLADQ�����
INTRODUCTION The Remuneration Policy was approved by shareholders on ��,@X�������@MC�V@R�DEEDBSHUD�EQNL�SGHR�C@SD �-N�BG@MFDR� to the Policy are proposed this year.
For ease of reference, the elements of the Policy referenced in Committee activity during 2014 are re-presented on the following pages 99 to 106, including the policy tables and information on directors’ contractual terms. The full Policy Report is contained in the 2013 Annual Report and Accounts �O@FDR����SN������VGHBG�HR�@U@HK@AKD�@S�VVV QR@FQNTO BNL� in the Investor Relations section.
• /DQENQL@MBD�HR�LD@RTQDC�NUDQ�NMD�ãM@MBH@K�XD@Q��@BBNQCHMF�SN�@�Q@MFD�NE�LDSQHBR��RNLD�NE�VGHBG�B@M�AD�@RRDRRDC�NM�@�RBNQDB@QC�A@RHR�� SXOHB@KKX�HMBKTCHMF��FQNVSG�HM�D@QMHMFR�@MC�OQNãS@AHKHSX��TMCDQVQHSHMF�ODQENQL@MBD��QHRJ�L@M@FDLDMS��DWODMRD�Q@SHN�@MC�BNRS�R@UHMFR�� B@OHS@K�RSQDMFSG��A@K@MBD�RGDDS�RSQDMFSG��BTRSNLDQ�@MC�DLOKNXDD�DMF@FDLDMS��@MC�NAIDBSHUDR�VGHBG�@QD�ODQRNM@K�SN�SGD�DWDBTSHUD � KK�LD@RTQDR�NODQ@SD�HMCDODMCDMSKX � QNTMC���í�NE�SGD� MMT@K�!NMTR�/K@M�HR�VDHFGSDC�@BBNQCHMF�SN�ãM@MBH@K�LDSQHBR �3GD�ODQENQL@MBD� BNMCHSHNMR�@MC�S@QFDSR�VGHBG�VDQD�TRDC�SN�HMENQL�SGD������ANMTR�@V@QCR�@QD�CDS@HKDC�NM�O@FDR����SN���
!DMDëSR �ëWDC�QDLTMDQ@SHNM� $LOKNXLDMS�ADMDãSR�@QD� provided to support the executive and form part of a market competitive package.
• "NLLHSSDD�B@M�@LDMC�@MX�ADMDãS�NQ�HMSQNCTBD�MDV�NMDR�SN�DMRTQD�SGD�QDLTMDQ@SHNM�O@BJ@FD�QDL@HMR�L@QJDS� competitive or to respond to regulatory, legal or best practice changes. Internal appointees to the Board may QDS@HM�@MX�KDF@BX�ADMDãSR�SGDX�QDBDHUD��@S�SGD�"NLLHSSDD�R�CHRBQDSHNM��NQ�@�ATX�NTS�L@X�AD�L@CD�CDODMCHMF� NM�SGD�ADMDãS�SXOD�@MC�BHQBTLRS@MBD
• Fifty per cent of the bonus will be awarded in cash and the remainder will be deferred into a share award for a period of three years. Dividends or equivalents accrue on the deferred shares, and are awarded at the end of the deferral period. The deferred bonus shares are granted under the rules of the LTIP as a conditional award.
• 4MCDQ�12 �R�"K@VA@BJ�/NKHBX��B@RG�@MC�CDEDQQDC�RG@QD�@V@QCR�@QHRHMF�EQNL�SGD� MMT@K�!NMTR�/K@M�B@M�AD� reduced or forfeited prior to receipt under a range of circumstances and other sanctions can apply. The policy is noted in detail on page 89. The Committee reviews the policy annually and may amend or update it, as required.
• Committee can exercise discretion to change the bonus measures, how they are weighted, calculated and targeted. It can also change the Directors’ bonus awards (both upwards and downwards) once the measures have been tested, provided this is appropriate and in shareholders’ interests. The Committee can make such amendments as are necessary to respond to regulatory, legal or accounting requirements. Shareholders will AD�MNSHãDC�HE�SGHR�G@R�ADDM�B@QQHDC�NTS�AX�CHRBKNRTQD�HM�SGD�QDKDU@MS�#HQDBSNQR��1DLTMDQ@SHNM�1DONQS �
• The LTIP is intended to support the delivery of the business strategy over a three-year time horizon, and it will therefore include at least SVN�LDSQHBR�VGHBG��SXOHB@KKX��VHKK�AD�CHQDBSKX�KHMJDC�SN�U@KTD�BQD@SHNM�SGQNTFG�ODQENQL@MBD�NE�SGD�&QNTO�R�RG@QD�OQHBD��D@QMHMFR�OQNãS@AHKHSX�� capital strength and balance-sheet strength. The measures can be assessed on an absolute and/or a relative basis. The metrics can be @RRDRRDC�SGQNTFG�@�RBNQDB@QC �3GD�ODQENQL@MBD�BNMCHSHNMR�@QD�MNS�RTAIDBS�SN�QD�SDRSHMF
Required shareholding $MRTQDR�@KHFMLDMS� with shareholders’ interests and enables the Director to build a stake in the business.
• $WDBTSHUDR�G@UD�ãUD�XD@QR�HM�VGHBG�SN�ATHKC�TO�SGDHQ�GNKCHMF��BNLLDMBHMF�EQNL�SGD�ãQRS�C@SD�@M�TMBNMCHSHNM@K� share award is made to them as a Director. No shares are to be sold until the holding level is reached, except where required to cover statutory deductions.
Purpose and Strategic Link Policy for 2014 onwards Opportunity and performance conditions
• Performance conditions are reviewed annually. Dividends or equivalents accrue during the performance period and are added to the shares that vest.
• �SVN�XD@Q�QDSDMSHNM�ODQHNC�VHKK�@OOKX�SN�SGD�$WDBTSHUD�#HQDBSNQR��UDRSDC�RG@QDR�OQNGHAHSHMF�SGDHQ�R@KD��DWBKTCHMF� any sold to satisfy statutory deductions). This policy will cover performance-based awards granted through the +3(/�@MC�HS�VHKK�ãQRS�AD�HLOKDLDMSDC�ENQ�RG@QDR�UDRSHMF�HM�������H D �SGD������FQ@MS� �3GD�QDSDMSHNM�ODQHNC�NMKX� applies while the Director remains in employment.
• Committee can act within the parameters of the Plan’s rules as approved by shareholders and its performance conditions, covering matters such as the measures, calculation methods, performance period, eligibility rules, and general Plan mechanics. The purpose of discretion is to enable the LTIP to be appropriately administered under both normal and exceptional circumstances, e.g. corporate or capital events affecting the Group or a RHFMHãB@MS�MTLADQ�NE�DLOKNXDDR �(M�@CCHSHNM��SGD�"NLLHSSDD�B@M�L@JD�RTBG�@LDMCLDMSR�@R�L@X�AD�MDBDRR@QX� to respond to legal, accounting or regulatory changes. Awards can be reduced or otherwise amended, provided SGD�@BSHNM�HR�E@HQ�@MC�ITRSHã@AKD��ENQ�DW@LOKD��SN�FT@QC�@F@HMRS�@�VHMCE@KK�@V@QC�NQ�SGD�BNMUDQRD�FDMDQ@SDC�AX�@M� @BBNTMSHMF�SQD@SLDMS��SN�OTS�DLOKNXDDR�HM�@�MDTSQ@K�ONRHSHNM�ENKKNVHMF�@�B@OHS@K�DUDMS �2ODBHãB@KKX��TMCDQ�@� change of control, performance conditions are tested and awards can vest earlier than scheduled, pro-rated for time and performance, however, the Committee can determine whether a pro-ration for time is applied to NSGDQ�ENQLR�NE�@V@QC�MNS�RTAIDBS�SN�ODQENQL@MBD�BNMCHSHNMR �
• Normal threshold LTIP opportunity is 58% of salary, rising to 144% of salary for on-target performance and 230% of salary at maximum.
• Shareholders will be consulted if changes to the measures are proposed by the Committee.
• /DQENQL@MBD�BNMCHSHNMR�ENQ�@MX�NTSRS@MCHMF�@V@QCR�@QD�&QNTO�TMCDQKXHMF�1DSTQM�NM�$PTHSX�@MC�QDK@SHUD�3NS@K�2G@QDGNKCDQ�1DSTQM�@R�MNSDC� in the Directors’ Remuneration Report for 2013 and in this Report on page 92. There is no re-testing of the performance conditions.
• The shareholding levels were determined with reference to the practice across the benchmark peer groups.
• Appointment salaries are set using the same approach as for the Directors’ salary reviews, as noted on pages 100 to 101 above. The Committee can exercise discretion on the timing and level of salary reviews for newly @OONHMSDC�#HQDBSNQR�QDâDBSHMF�SGD�HMCHUHCT@K�R�CDUDKNOLDMS�@MC�ODQENQL@MBD�HM�SGD�QNKD
• No Director will be appointed on a notice period exceeding 12 months.
• Where the Director is an internal promotion within the Group, he/she may be permitted to retain any legacy ADMDãSR�NQ�SDQLR�@S�SGD�"NLLHSSDD�R�CHRBQDSHNM �"NMSHMTHSX�NE�RDQUHBD�VHSG�SGD�&QNTO�VHKK�AD�L@HMS@HMDC
• (E�SGD�#HQDBSNQ�HR�DMSDQDC�HMSN�@M�12 �+3(/�@MC�L@CD�@M�@V@QC�NE�ODQENQL@MBD�RG@QDR��SGDRD�VHKK�AD�RTAIDBS�SN�SGD�R@LD�ODQENQL@MBD� conditions and vesting date as applies to other plan participants.
• 1DRSQHBSDC�RG@QDR�L@X�AD�HRRTDC�@MC��HE�RN��SGDRD�VHKK�MNS�B@QQX�@MX�ãM@MBH@K�ODQENQL@MBD�BNMCHSHNMR��NMKX�BNMSHMTDC�RDQUHBD�VHSG�SGD� &QNTO�NQ�RTBG�NSGDQ�BNMCHSHNMR�@R�SGD�"NLLHSSDD�L@X�@FQDD �1DRSQHBSDC�RG@QDR�VHKK�NMKX�AD�@V@QCDC�SN�@M�$WDBTSHUD�#HQDBSNQ�HM�SGD� case of compensation for loss upon recruitment.
Note to table: The policy is largely consistent with the approach taken on recruitment remuneration for senior executives across the Group.
• Base fees (including the Chairman’s fee) will be kept within the aggregate limit stated in the Group’s Articles of Association.
Appointment treatment $MRTQDR�@�BNMRHRSDMS�@MC� transparent approach is taken when appointing executives to the Board, in line with best practice.
• 6GDQD�SGD�#HQDBSNQ�HR�@M�DWSDQM@K�@OONHMSLDMS��SGD�"NLLHSSDD�L@X�@FQDD�SN�@�BNLODMR@SNQX�O@BJ@FD�QDâDBSHMF� HMBDMSHUDR�NQ�ADMDãSR�ENQEDHSDC�TONM�QDRHFM@SHNM �3GHR�VHKK�NMKX�AD�ODQLHSSDC�NM�QDBDHOS�NE�QD@RNM@AKD�DUHCDMBD� of loss. There will be no cash sign-on payments where there is no loss.
• 4MCDQ�MNQL@K�BHQBTLRS@MBDR��@�MDV�$WDBTSHUD�#HQDBSNQ�VHKK�AD�DKHFHAKD�ENQ�HMBDMSHUD�@V@QCR�HM�KHMD�VHSG�SGD�TRT@K�ONKHBX�VGHBG�OQNUHCDR� for a maximum bonus of 160% of salary and LTIP award of 230% of salary. However, in exceptional circumstances, a higher bonus opportunity of up to 200% of salary may be agreed and a performance-related LTIP award may be approved by the Committee in the #HQDBSNQ�R�ãQRS�XD@Q�NE�RDQUHBD�TO�SN�SGD�KHLHS�NE����í�NE�R@K@QX �
• Good leavers, at the Committee’s discretion, and normally including such circumstances as planned retirement, death, disability/medical severance, transfers outside of the Group and redundancy, would be eligible for an annual bonus for the proportion of the bonus year served. Deferred bonus shares will normally vest in line with SGD�MNQL@K�SHLDS@AKD��@MC�+3(/R�UDRS�RTAIDBS�SN�ODQENQL@MBD�@MC�SHLD�OQNQ@SHMF �3GD�"NLLHSSDD�VHKK�L@JD� QD@RNM@AKD�ITCFDLDMS�NM�CDSDQLHMHMF�VGDSGDQ�@�#HQDBSNQ�PT@KHãDR�ENQ�FNNC�KD@UDQ�RS@STR�AX�QD@RNM�NE� retirement, by understanding the individual’s intentions post employment termination and taking account of the BNMSDWS�NE�GHR�GDQ�CDO@QSTQD�EQNL�SGD�&QNTO �3GD�"NLLHSSDD�G@R�SGD�CHRBQDSHNM�SN�L@JD�SGD�ãM@K�ANMTR�@V@QC� in cash and therefore waive compulsory deferral.
Fees $MRTQDR�BNLODSHSHUD� remuneration is paid to attract high calibre non-executives and recognise their time commitment on the Board.
• 6HSG�DWBDOSHNM�SN�SGD�"G@HQL@M��@KK�-NM�$WDBTSHUD�#HQDBSNQR�QDBDHUD�@�A@RD�EDD��ETQSGDQ�EDDR�@QD�SGDM�O@HC�SN�QDâDBS�LDLADQRGHO�NE�LNQD� than one committee and for chairing a committee. A separate fee is paid to the Senior Independent Director. The Chairman receives a fee for his role and this is set by the Committee.
Executive Directors $@BG�NE�SGD�$WDBTSHUD�#HQDBSNQR�HR�DLOKNXDC�TMCDQ�@�RDQUHBD� agreement, which contains a variety of contractual terms and conditions. Their employment can be terminated by the Company or the individual, by the serving of 12 months’ notice. In the case of summary dismissal, no notice will be served by the Company and no compensation will be paid in lieu of it. Notice periods are approved by the Committee @MC��@S�HSR�CHRBQDSHNM��B@M�AD�QDCTBDC�HM�SGD�DUDMS�@M�$WDBTSHUD� Director resigns and wishes to leave prior to the end of his contractual notice period.
R�VHSG�@MX�12 �DLOKNXDD��SGD�$WDBTSHUD�#HQDBSNQR�L@X� be suspended from their duties in the event of their misconduct or during an investigation which might result in their dismissal.
$WDBTSHUD�#HQDBSNQR�L@X�GNKC�NMD�DWSDQM@K�MNM�DWDBTSHUD� ONRHSHNM�NE�@�%32$�����BNLO@MX�OQNUHCDC�SGHR�CNDR�MNS�FHUD� QHRD�SN�@MX�BNMâHBS�NE�HMSDQDRS��VHSG�SGD�@OOQNU@K�NE�SGD� Nomination Committee. If there is any remuneration arising from this role, the individual can retain it.
3GD�C@SD�VGDM�D@BG�$WDBTSHUD�#HQDBSNQ�V@R�@OONHMSDC� to the Board is shown in the table on page 98. Contracts are available for inspection by shareholders at the "NLO@MX�R�QDFHRSDQDC�NEãBD
-NM�$WDBTSHUD�#HQDBSNQR�@QD�DWODBSDC�SN�CHRBKNRD�@MX� BNMâHBSR�NE�HMSDQDRS�OQHNQ�SN��@MC�CTQHMF��SGD�BNTQRD�NE�SGDHQ� tenure. They will not participate in making a decision if any BNMâHBS�HR�BNMRHCDQDC�SN�HLO@BS�SGDHQ�HMCDODMCDMBD�NQ�KHLHS� their ability to discharge their duties to shareholders. Since -NM�$WDBTSHUD�#HQDBSNQR�@MC�SGD�"G@HQL@M�QDBDHUD�NMKX�EDDR� @MC�DWODMRDR��MN�HMCHUHCT@K�B@M�G@UD�@�KNRR�NE�NEãBD�O@XLDMS�� although payment in lieu of notice can be made.
The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable laws and QDFTK@SHNMR �"NLO@MX�K@V�QDPTHQDR�SGD�#HQDBSNQR�SN�OQDO@QD�RTBG�ãM@MBH@K�RS@SDLDMSR�ENQ�D@BG�ãM@MBH@K�XD@Q �4MCDQ�SG@S� K@V�SGD�#HQDBSNQR�@QD�QDPTHQDC�SN�OQDO@QD�&QNTO�ãM@MBH@K�RS@SDLDMSR�HM�@BBNQC@MBD�VHSG�(MSDQM@SHNM@K�%HM@MBH@K�1DONQSHMF� 2S@MC@QCR��(%12��@R�@CNOSDC�AX�SGD�$4�@MC� QSHBKD���NE�SGD�( 2�1DFTK@SHNM�@MC�G@UD�@KRN�BGNRDM�SN�OQDO@QD�SGD�/@QDMS�"NLO@MX� ãM@MBH@K�RS@SDLDMSR�TMCDQ�(%12�@R�@CNOSDC�AX�SGD�$TQNOD@M�4MHNM �4MCDQ�BNLO@MX�K@V�SGD�#HQDBSNQR�LTRS�MNS�@OOQNUD�SGD� @BBNTMSR�TMKDRR�SGDX�@QD�R@SHRãDC�SG@S�SGDX�FHUD�@�SQTD�@MC�E@HQ�UHDV�NE�SGD�RS@SD�NE�@EE@HQR�NE�SGD�&QNTO�@MC�/@QDMS�"NLO@MX� @MC�NE�SGDHQ�OQNãS�NQ�KNRR�ENQ�SG@S�ODQHNC �(M�OQDO@QHMF�SGDRD�ãM@MBH@K�RS@SDLDMSR��(MSDQM@SHNM@K� BBNTMSHMF�2S@MC@QC���QDPTHQDR� that Directors: • Properly select and apply accounting policies; • /QDRDMS�HMENQL@SHNM��HMBKTCHMF�@BBNTMSHMF�ONKHBHDR��HM�@�L@MMDQ�SG@S�OQNUHCDR�QDKDU@MS��QDKH@AKD��BNLO@Q@AKD�@MC� understandable information; • /QNUHCD�@CCHSHNM@K�CHRBKNRTQDR�VGDM�BNLOKH@MBD�VHSG�SGD�RODBHãB�QDPTHQDLDMSR�HM�(%12�HR�HMRTEãBHDMS�SN�DM@AKD�SGD�TRDQR�SN� TMCDQRS@MC�SGD�HLO@BS�NE�O@QSHBTK@Q�SQ@MR@BSHNMR��NSGDQ�DUDMSR�@MC�BNMCHSHNMR�NM�SGD�DMSHSX�R�ãM@MBH@K�ONRHSHNM�@MC�ãM@MBH@K� performance and; • Make an assessment of the Group and Parent Company’s ability to continue as a going concern.
3N�BNMCTBS�NTQ�QHRJ�@RRDRRLDMS��VD�BNMRHCDQDC�SGD�HMGDQDMS�QHRJR�E@BHMF�SGD�&QNTO�@MC�SGD�O@QDMS�BNLO@MX��HMBKTCHMF� SGNRD�@QHRHMF�EQNL�SGD�QDRODBSHUD�ATRHMDRR�LNCDKR��@MC�GNV�SGD�&QNTO�BNMSQNKR�SGNRD�QHRJR �.TQ�QHRJ�@RRDRRLDMS�SGDQDENQD� BNMRHCDQDC�SGD�DWSDQM@K�DMUHQNMLDMS�HM�VGHBG�SGD�&QNTO�R�ATRHMDRRDR�NODQ@SD�HM��HMBKTCHMF�ANSG�VHCDQ�DBNMNLHB�E@BSNQR� @MC�ED@STQDR�RODBHãB�SN�SGD�QDKDU@MS�HMRTQ@MBD�L@QJDS��RTBG�@R�BNLODSHSHNM��CHRSQHATSHNM�LNCDKR��SQDMCR�HM�BK@HLR�DWODQHDMBD� @MC�SGD�HLO@BS�NE�QDFTK@SNQX�BNLOKH@MBD �6D�SGDM�@RRDRRDC�GNV�RTBG�E@BSNQR�HLO@BS�SGD�&QNTO�R�ATRHMDRR�LNCDKR��@MC�GNV� QHRJR�@QHRHMF�ANSG�DWSDQM@KKX�@MC�HMSDQM@KKX�@QD�BNMSQNKKDC �(M�CNHMF�RN��VD�BNMRHCDQDC�@�MTLADQ�NE�E@BSNQR�HMBKTCHMF��SGD�QHRJ� NE�EQ@TC��SGD�CDRHFM�@MC�HLOKDLDMS@SHNM�NE�SGD�&QNTO�R�BNMSQNK�DMUHQNMLDMS��@MC�SGD�QHRJ�NE�L@M@FDLDMS�NUDQQHCD�NE� JDX�BNMSQNKR �6D�TOC@SDC�NTQ�QHRJ�@RRDRRLDMS�@ESDQ�SDRSHMF�SGD�NODQ@SHMF�DEEDBSHUDMDRR�NE�@�MTLADQ�NE�SGD�&QNTO�R�JDX�BNMSQNKR� HMBKTCHMF�HMSDQM@K�BNMSQNKR�NUDQ�ãM@MBH@K�QDONQSHMF�@MC�RODBHãB�@MSH�EQ@TC�BNMSQNKR�@R�VDKK�@R�SDRSHMF�SGD�A@RHR�NE�SGD�FNHMF� concern assumption.
The risk Our response 3GD�&QNTO�G@R�RHFMHãB@MS�HMRTQ@MBD�KH@AHKHSHDR�QDOQDRDMSHMF���í� NE�SNS@K�KH@AHKHSHDR �3GD�U@KT@SHNM�NE�HMRTQ@MBD�KH@AHKHSHDR�HR�NMD�NE� the key judgemental areas that our audit is concentrated on due SN�SGD�KDUDK�NE�RTAIDBSHUHSX�HMGDQDMS�HM�DRSHL@SHMF�SGD�HLO@BS�NE� BK@HLR�DUDMSR�SG@S�G@UD�NBBTQQDC�ATS�ENQ�VGHBG�SGD�DUDMST@K� NTSBNLD�QDL@HMR�TMBDQS@HM �/@QSHBTK@Q�ITCFDLDMS�@QHRDR�NUDQ� SGD�DRSHL@SHNM�NE�SGD�U@KTD�NE�@LNTMSR�SG@S�RGNTKC�AD�OQNUHCDC� ENQ�BK@HLR�SG@S�G@UD�ADDM�HMBTQQDC�@S�SGD�QDONQSHMF�C@SD�ATS� G@UD�MNS�XDS�ADDM�QDONQSDC�SN�SGD�&QNTO �
We were assisted by our own actuarial specialists to understand @MC�BG@KKDMFD�SGD�&QNTO�R�QDRDQUHMF�OQ@BSHBDR�@MC�PT@MSTL� NE�OQNUHRHNMR�DRS@AKHRGDC�SGQNTFGNTS�NTQ�@TCHS�OQNBDCTQDR� in this area.
6D�DU@KT@SDC�SGD�FNUDQM@MBD�@QNTMC�SGD�NUDQ@KK�QDRDQUHMF� OQNBDRR�HMBKTCHMF�RBQTSHMX�@OOKHDC�AX�KNB@K��QDFHNM@K�@MC� &QNTO�QDRDQUHMF�BNLLHSSDDR�@MC�&QNTO�KDUDK�@BST@QH@K�QDUHDVR� �@R�CDRBQHADC�NM�O@FD������SGQNTFG�DU@KT@SHMF�VGDSGDQ�SGNRD� QDRONMRHAKD�G@C�@OOQNOQH@SD�PT@KHãB@SHNMR�@MC�DWODQHDMBD�� DW@LHMHMF�SGD�NTSOTS�SN�@RRDRR�SGD�RBNOD�@MC�CDOSG�NE�SGDRD� OQNBDRRDR�@MC�DEEDBSHUDKX�QDODQENQLHMF�SGHR�QDUHDV�ENQ�SGD� LNRS�RHFMHãB@MS�@MC�RTAIDBSHUD�HMRTQ@MBD�KH@AHKHSHDR�@MC�SGD� key assumptions applied.
(M�UHDV�NE�SGD�HRRTDR�HCDMSHãDC�HM�SGD�(QHRG�ATRHMDRR�HM�SGD�OQHNQ� year around the amount and timing of recognition of case QDRDQUDR��VD�BNMSHMTD�SN�ODQENQL�NTQ�NVM�HMCDODMCDMS� reprojections of the insurance liabilities in that business in order to conclude on the reasonableness of the estimates made by L@M@FDLDMS �(M�@CCHSHNM�SN�SGDRD�@QD@R�VD�HMBQD@RDC�SGD�DWSDMS� NE�NTQ�SDRSHMF�HM�"@M@C@�HM�NQCDQ�SN�DU@KT@SD�SGD�@OOQNOQH@SDMDRR� NE�SGD�BG@MFDR�L@CD�SN�SGD�QDRDQUHMF�@OOQN@BG�VHSGHM�SGHR� ATRHMDRR��VGHBG�VDQD�L@CD�HM�NQCDQ�SN�@KKNV�ENQ�@�LNQD�FQ@MTK@Q� @OOKHB@SHNM�NE�SGD�&QNTO�R�QDRDQUHMF�ONKHBX �
Independent Auditor’s Report to the Members of RSA Insurance Group plc only continued
Goodwill is tested for impairment annually and the most RHFMHãB@MS�ITCFDLDMSR�@QHRD�NUDQ�SGD�CHRBNTMS�Q@SD�@OOKHDC�HM�SGD� QDBNUDQ@AKD�@LNTMS�B@KBTK@SHNM�@MC�SGD�@RRTLOSHNMR�RTOONQSHMF� SGD�TMCDQKXHMF�ENQDB@RS�B@RGâNVR��HM�O@QSHBTK@Q�SGD�SDQLHM@K� FQNVSG�Q@SD��ENQDB@RS�FQNVSG�Q@SDR�HM�SGD�OQNIDBSHNM�ODQHNC�@MC� the combined operating ratio. Our focus has been on goodwill HM�ATRHMDRRDR�SG@S�@QD�LNRS�RDMRHSHUD�SN�SGD�@RRTLOSHNMR� TMCDQKXHMF�SGD�U@KT@SHNMR �6D�G@UD�@KRN�ENBTRDC�NTQ�OQNBDCTQDR� NM�SGD�A@RHR�ENQ�HLO@HQLDMSR�SG@S�G@UD�ADDM�QDBNFMHRDC� in respect of the Group’s businesses in Ireland and Russia.
!@RDC�NM�NTQ�TMCDQRS@MCHMF�NE�SGD�ATRHMDRR�@MC�HSR�NODQ@SHNMR�� VD�G@UD�@RRDRRDC�VGDSGDQ�SGDQD�VDQD�@MX�HMCHB@SHNMR�SG@S� capitalised software intangible assets may be impaired. Where HLO@HQLDMS�HMCHB@SNQR�VDQD�HCDMSHãDC��ENQ�DW@LOKD�CTD�SN� KNVDQ�DWODBS@SHNMR�NE�SGD�ADMDãSR�SN�AD�QDBDHUDC�NQ�GHFGDQ�SG@M� DWODBSDC�RODMC�NM�(3�RXRSDLR��VD�BNLO@QDC�SGD�&QNTO�R�UHDV� NE�SGD�DWODBSDC�ETSTQD�ADMDãSR�SN�NTQ�NVM �(M�@RRDRRHMF�SGHR�� we compared the assumptions underlying the estimated future ADMDãSR�SN�NTQ�TMCDQRS@MCHMF�NE�SGD�ATRHMDRR�@MC�QDKDU@MS� DBNMNLHB�@MC�HMCTRSQX�E@BSNQR��HMBKTCHMF�SGD�HLO@BS�NE�QDUHRDC� operating plan assumptions.
The risk Our response 2HFMHãB@MS�ITCFDLDMSR�@QD�L@CD�HM�U@KTHMF�SGD�&QNTO�R� ONRS�QDSHQDLDMS�CDãMDC�ADMDãS�RBGDLDR�@MC�RL@KK�BG@MFDR� HM�@RRTLOSHNMR�@MC�DRSHL@SDR�TRDC�SN�U@KTD�SGD�&QNTO�R�MDS� ODMRHNM�CDãBHS�VNTKC�G@UD�@�RHFMHãB@MS�DEEDBS�NM�SGD�ãM@MBH@K� position of the Group.
(M�SGHR�@QD@�NTQ�@TCHS�OQNBDCTQDR�HMBKTCDC��@LNMF�NSGDQR�� challenging the key assumptions applied to determine the FQNTO�R�MDS�CDãBHS��ADHMF�SGD�CHRBNTMS�Q@SD��HMâ@SHNM�Q@SD�@MC� LNQS@KHSX�KHED�DWODBS@MBX �(M�SGHR��VD�VDQD�RTOONQSDC�AX�NTQ� own pension specialists. As part of our audit procedures we BNLO@QDC�JDX�@RRTLOSHNMR�@F@HMRS�DWSDQM@KKX�CDQHUDC�C@S@ � We also considered the adequacy of the group’s disclosures in QDRODBS�NE�SGD�RDMRHSHUHSX�NE�SGD�CDãBHSR�SN�SGDRD�@RRTLOSHNMR
(M�SGHR�@QD@�NTQ�@TCHS�OQNBDCTQDR�HMBKTCDC��@LNMF�NSGDQR�� testing general IT controls around system access and change L@M@FDLDMS�@MC�SDRSHMF�BNMSQNKR�NUDQ�BNLOTSDQ�NODQ@SHNMR� VHSGHM�RODBHãB�@OOKHB@SHNMR�VGHBG�@QD�QDPTHQDC�SN�AD�NODQ@SHMF� BNQQDBSKX�SN�LHSHF@SD�SGD�QHRJ�NE�LHRRS@SDLDMS�HM�SGD�ãM@MBH@K� RS@SDLDMSR �6HSG�SGD�RTOONQS�NE�NTQ�NVM�(3�RODBH@KHRSR��VD� SDRSDC�SGDRD�BNMSQNKR�SGQNTFG�DW@LHMHMF�VGDSGDQ�BG@MFDR� L@CD�SN�SGD�RXRSDLR�VDQD�@OOQNOQH@SDKX�@OOQNUDC��@MC� assessing whether appropriate restrictions were placed on access to core systems through testing the permissions @MC�QDRONMRHAHKHSHDR�NE�SGNRD�FHUDM�SG@S�@BBDRR
`�L�3GQDRGNKC�,HRRS@SDLDMSR� reported to the Audit Committee £7,000m 3GD�&QNTO�G@R�HMRTQ@MBD�NODQ@SHNMR�HM����BNTMSQHDR�SG@S�ENQ�@TCHS�OTQONRDR�BNLOQHRD����BNLONMDMSR �3GD�.ODQ@SHMF�2DFLDMS� CHRBKNRTQDR�HM�MNSD���RDS�NTS�SGD�HMCHUHCT@K�RHFMHãB@MBD�NE�SGD�L@INQ�FDNFQ@OGHB@K�QDFHNMR �
The different components accounted for the following percentages of the group’s results: GROUP NET WRITTEN PREMIUM
"G@MFD�HM�OQNUHRHNM�ENQ�TMD@QMDC�OQDLHTLR ��� ���� Net earned premiums ����� ����� -DS�HMUDRSLDMS�QDSTQM � 521 ��� Other operating income � 188 ��� 3NS@K�HMBNLD ����� ����� $WODMRDR
Balance at ��)@MT@QX����� ��� 717 ��� ��� ��� 8 ��� ����� ����� ��� ������
�� ���� – – – – – ����� ����� ���� �����
"G@MFDR�HM� RG@QDGNKCDQR¼� HMSDQDRSR�HM� RTARHCH@QHDR – – – – – – – ��� ��� 1 ��� 3NS@K�SQ@MR@BSHNMR� VHSG�NVMDQR�NE� SGD�"NLO@MX �� ���� – – – – – ����� ����� ���� �����
3NS@K�BNLOQDGDMRHUD�HMBNLD /QNãS�ENQ�SGD�XD@Q – – – – – – – �� �� 7 ��� Other BNLOQDGDMRHUD� HMBNLD��MNSD���� – – – – ��� – (112) (8) ��� – ����
RG@QDGNKCDQR¼� HMSDQDRSR�HM� RTARHCH@QHDR – – – – – – – – – (14) (14) 3NS@K�SQ@MR@BSHNMR� VHSG�NVMDQR�NE� SGD�"NLO@MX 3 371 – – – 381 – (1) 754 ���� 734 !@K@MBD�@S����
"@RGêNVR�EQNL�BNMSHMTHMF�NODQ@SHNMR �� 33 ��� 3@W�O@HC (82) ����� #HUHCDMC�HMBNLD 23 �� Interest income 374 ��� .SGDQ�HMUDRSLDMS�HMBNLD �� �� Interest paid ����� ����� /DMRHNM�CDãBHS�ETMCHMF ���� ���� -DS�B@RGêNVR�EQNL�NODQ@SHMF�@BSHUHSHDR�¹�BNMSHMTHMF�NODQ@SHNMR ��� ��� -DS�B@RGêNVR�EQNL�NODQ@SHMF�@BSHUHSHDR�¹�CHRBNMSHMTDC�NODQ@SHNMR 43 �� 3NS@K�MDS�B@RGêNVR�EQNL�NODQ@SHMF�@BSHUHSHDR 233 ��� Proceeds from sales or maturities of: %HM@MBH@K�@RRDSR ����� ����� (MUDRSLDMS�OQNODQSX 3 �� Property and equipment 32 � (MUDRSLDMSR�HM�RTARHCH@QHDR��MDS�NE�B@RG�CHRONRDC�NE� 373 �
-DS�B@RGêNVR�TRDC�HM�HMUDRSHMF�@BSHUHSHDR�¹�BNMSHMTHMF�NODQ@SHNMR (1,143) ����� -DS�B@RGêNVR�EQNL�HMUDRSHMF�@BSHUHSHDR�¹�CHRBNMSHMTDC�NODQ@SHNMR 272 ���� 3NS@K�MDS�B@RGêNVR�EQNL�HMUDRSHMF�@BSHUHSHDR (871) ����� Proceeds from issue of share capital �� 753 7 2@KD�NE�RG@QDR�SN�-NM�BNMSQNKKHMF�HMSDQDRSR – � /TQBG@RD�NE�RG@QDR�EQNL�-NM�BNMSQNKKHMF�HMSDQDRSR – ��� #HUHCDMCR�O@HC�SN�NQCHM@QX�RG@QDGNKCDQR – ����� #HUHCDMCR�O@HC�SN�OQDEDQDMBD�RG@QDGNKCDQR ��� ��� #HUHCDMCR�O@HC�SN�-NM�BNMSQNKKHMF�HMSDQDRSR ��� ���� Redemption of long term borrowings ����� – Receipt of long term borrowings ��� – -DS�LNUDLDMS�HM�NSGDQ�ANQQNVHMFR (2) � -DS�B@RGêNVR�EQNL�ëM@MBHMF�@BSHUHSHDR�¹�BNMSHMTHMF�NODQ@SHNMR ��� ����� -DS�B@RGêNVR�EQNL�ëM@MBHMF�@BSHUHSHDR�¹�CHRBNMSHMTDC�NODQ@SHNMR – – 3NS@K�MDS�B@RGêNVR�EQNL�ëM@MBHMF�@BSHUHSHDR ��� ����� -DS�HMBQD@RD��CDBQD@RD��HM�B@RG�@MC�B@RG�DPTHU@KDMSR 34 ����� "@RG�@MC�B@RG�DPTHU@KDMSR�@S�ADFHMMHMF�NE�SGD�XD@Q ����� ����� $EEDBS�NE�DWBG@MFD�Q@SD�BG@MFDR�NM�B@RG�@MC�B@RG�DPTHU@KDMSR ���� ���� "@RG�@MC�B@RG�DPTHU@KDMSR�@S�DMC�NE�SGD�XD@Q 18 1,135 �����
1DSHQDLDMS�ADMDëS�NAKHF@SHNMR 3GD�&QNTO�DWDQBHRDR�ITCFDLDMS�HM�L@JHMF�@RRTLOSHNMR�VGDM�U@KTHMF�ODMRHNM�@MC�NSGDQ�ONRS�QDSHQDLDMS�ADMDãSR�@BBQTDC� by its current and former employees. These assumptions include the estimation of the future mortality of its current and ENQLDQ�DLOKNXDDR��SGD�U@KTD�NE�SGD�ETSTQD�ADMDãSR�SG@S�G@UD�ADDM�@BBQTDC��@MC�SGD�@OOQNOQH@SD�CHRBNTMS�Q@SD�TRDC�SN�U@KTD� SGD�NAKHF@SHNMR �3GDRD�@RRTLOSHNMR�@MC�SGD�RDMRHSHUHSX�NE�SGDRD�@RRTLOSHNMR�@QD�CHRBKNRDC�HM�MNSD����SN�SGD�BNMRNKHC@SDC� ãM@MBH@K�RS@SDLDMSR �
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.
&NNCVHKK &NNCVHKK��ADHMF�SGD�CHEEDQDMBD�ADSVDDM�SGD�BNRS�NE�@�ATRHMDRR�@BPTHRHSHNM�@MC�SGD�&QNTO�R�HMSDQDRS�HM�SGD�MDS�E@HQ�U@KTD�NE�SGD� HCDMSHã@AKD�@RRDSR��KH@AHKHSHDR�@MC�BNMSHMFDMS�KH@AHKHSHDR�@BPTHQDC��HR�HMHSH@KKX�B@OHS@KHRDC�HM�SGD�BNMRNKHC@SDC�RS@SDLDMS�NE�ãM@MBH@K� position at cost and is subsequently recognised at cost less accumulated impairment losses. The cost of the acquisition is the @LNTMS�NE�B@RG�O@HC�@MC�SGD�E@HQ�U@KTD�NE�NSGDQ�OTQBG@RD�BNMRHCDQ@SHNM
KK�NSGDQ�BK@RRDR�@QD�RS@SDC�@S�BNRS�KDRR�@BBTLTK@SDC�CDOQDBH@SHNM�@MC�@BBTLTK@SDC�HLO@HQLDMS�KNRR �"NRS�HMBKTCDR�DWODMCHSTQD� that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset only when it is probable SG@S�ETSTQD�DBNMNLHB�ADMDãSR�@RRNBH@SDC�SN�SGD�HSDL�VHKK�âNV�SN�SGD�&QNTO�@MC�SGD�BNRS�B@M�AD�LD@RTQDC�QDKH@AKX
Land is not depreciated. Depreciation on all other items is calculated on the straight line method to write down the cost of such @RRDSR�SN�SGDHQ�QDRHCT@K�U@KTD�NUDQ�SGDHQ�DRSHL@SDC�TRDETK�KHUDR�@R�ENKKNVR�
'DCFD�NE�@�MDS�HMUDRSLDMS�HM�@�ENQDHFM�NODQ@SHNM 6GDQD�@�ENQDHFM�DWBG@MFD�CDQHU@SHUD�HR�CDRHFM@SDC�@R�@�GDCFHMF�HMRSQTLDMS�@F@HMRS�SGD�MDS�HMUDRSLDMS�HM�ENQDHFM�DMSHSHDR�� SGD�DEEDBSHUD�ONQSHNM�NE�SGD�GDCFD�HR�QDBNFMHRDC�HM�NSGDQ�BNLOQDGDMRHUD�HMBNLD��SGD�F@HM�NQ�KNRR�QDK@SHMF�SN�SGD�HMDEEDBSHUD� portion is recognised immediately in the consolidated income statement.
1DBNFMHSHNM�NE�HMBNLD Premiums written are accounted for in the period in which the contract is entered into and include estimates where the @LNTMSR�@QD�MNS�CDSDQLHMDC�@S�SGD�DMC�NE�SGD�QDONQSHMF�ODQHNC �/QDLHTLR�VQHSSDM�DWBKTCD�S@WDR �#TSHDR�KDUHDC�NM�OQDLHTLR� @MC�CHQDBSKX�QDK@SDC�DWODMRDR��D F �BNLLHRRHNMR�@QD�QDBNFMHRDC�@R�@M�DWODMRD �/QDLHTLR�@QD�D@QMDC�@R�QDUDMTD�NUDQ�SGD� period of the contract and are calculated principally on a daily pro rata basis.
S�SGD�DMC�NE�D@BG�QDONQSHMF�ODQHNC�KH@AHKHSX�@CDPT@BX�SDRSR�@QD�ODQENQLDC�SN�DMRTQD�SGD�@CDPT@BX�NE�SGD�OQNUHRHNM�ENQ� TMD@QMDC�OQDLHTL�MDS�NE�QDK@SDC�# "�@RRDSR �(M�ODQENQLHMF�SGDRD�SDRSR�ADRS�DRSHL@SDR�NE�ETSTQD�BNMSQ@BST@K�B@RGâNVR�� BK@HLR�G@MCKHMF�@MC�@CLHMHRSQ@SHUD�DWODMRDR�@R�VDKK�@R�HMUDRSLDMS�HMBNLD�NM�@RRDSR�A@BJHMF�RTBG�KH@AHKHSHDR�@QD�TRDC � MX�CDãBHDMBX�HR�BG@QFDC�SN�SGD�HMBNLD�RS@SDLDMS�HLLDCH@SDKX�AX�DRS@AKHRGHMF�@�OQNUHRHNM�ENQ�KH@AHKHSX�@CDPT@BX��SGD�TMDWOHQDC� QHRJ�OQNUHRHNM� �3GD�TMDWOHQDC�QHRJ�OQNUHRHNM�HR�@RRDRRDC�HM�@FFQDF@SD�ENQ�ATRHMDRR�BK@RRDR�VGHBG��HM�SGD�NOHMHNM�NE�SGD�#HQDBSNQR�� are managed together.
.SGDQ�NODQ@SHMF�HMBNLD CLHMHRSQ@SHNM�EDD�HMBNLD�HR�BG@QFDC�SN�ONKHBXGNKCDQR�VGDM�LHC�SDQL�@CITRSLDMSR�@QD�L@CD�SN�SGD�BNUDQ�OQNUHCDC�@MC� recognised in full on the date that the change is made.
EMPLOYEE BENEFITS &QNTO�BNLO@MHDR�NODQ@SD�U@QHNTR�ODMRHNM�RBGDLDR �3GD�RBGDLDR�@QD�FDMDQ@KKX�ETMCDC�SGQNTFG�O@XLDMSR�SN�SQTRSDD� @CLHMHRSDQDC�ETMCR �3GD�&QNTO�G@R�ANSG�CDãMDC�BNMSQHATSHNM�@MC�CDãMDC�ADMDãS�RBGDLDR � �CDãMDC�BNMSQHATSHNM�RBGDLD� HR�@�ODMRHNM�RBGDLD�TMCDQ�VGHBG�SGD�&QNTO�O@XR�ãWDC�BNMSQHATSHNMR�HMSN�@�RDO@Q@SD�DMSHSX � �CDãMDC�ADMDãS�RBGDLD�HR�@� ODMRHNM�RBGDLD�SG@S�CDãMDR�@M�@LNTMS�NE�ODMRHNM�ADMDãS�SG@S�@M�DLOKNXDD�VHKK�QDBDHUD�NM�QDSHQDLDMS��TRT@KKX�CDODMCDMS� NM�NMD�NQ�LNQD�E@BSNQR�RTBG�@R�@FD��XD@QR�NE�RDQUHBD�@MC�R@K@QX
2G@QD�A@RDC�O@XLDMSR 3GD�U@KTD�NE�SGD�DLOKNXDD�RG@QD�NOSHNMR�@MC�NSGDQ�DPTHSX�RDSSKDC�RG@QD�A@RDC�O@XLDMSR�HR�B@KBTK@SDC�@S�E@HQ�U@KTD�@S�SGD� grant date using appropriate and recognised option pricing models.
6GDQD�SGDQD�@QD�@�MTLADQ�NE�RHLHK@Q�NAKHF@SHNMR��SGD�KHJDKHGNNC�SG@S�@M�NTSâNV�VHKK�AD�QDPTHQDC�HM�RDSSKDLDMS�HR�CDSDQLHMDC� AX�BNMRHCDQHMF�SGD�BK@RR�NE�NAKHF@SHNMR�@R�@�VGNKD � �OQNUHRHNM�HR�QDBNFMHRDC�DUDM�HE�SGD�KHJDKHGNNC�NE�@M�NTSâNV�VHSG�QDRODBS� to any one item included in the same class of obligations may be small.
ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS RRDSR�@QD�BK@RRHãDC�@R�GDKC�ENQ�R@KD�HE�SGDHQ�B@QQXHMF�@LNTMS�HR�SN�AD�QDBNUDQDC�OQHMBHO@KKX�SGQNTFG�@�R@KD�SQ@MR@BSHNM��VGHBG� GHFGKX�OQNA@AKD�@MC�VHKK�AD�BNLOKDSDC�VHSGHM�NMD�XD@Q�EQNL�SGD�C@SD�NE�BK@RRHãB@SHNM��Q@SGDQ�SG@M�SGQNTFG�BNMSHMTHMF�TRD � 6GDQD�SGD�@RRDS�BNLOQHRDR�@�RDO@Q@SD�ATRHMDRR�NODQ@SHNM��D F �@�RTARHCH@QX��@M�@RRNBH@SD�NQ�@�AQ@MBG���SGD�@RRDSR��HMBKTCHMF�@MX� FNNCVHKK�@KKNB@SDC�SN�SGD�ATRHMDRR��@MC�SGD�KH@AHKHSHDR�NE�SGD�ATRHMDRR�@QD�BNMRHCDQDC�SNFDSGDQ�@MC�BK@RRHãDC�@R�@�CHRONR@K�FQNTO� 2TBG�@RRDSR�@QD�LD@RTQDC�@S�SGD�KNVDQ�NE�B@QQXHMF�@LNTMS�@MC�E@HQ�U@KTD�KDRR�BNRSR�SN�RDKK�@MC�@QD�BK@RRHãDC�RDO@Q@SDKX�EQNL� NSGDQ�@RRDSR�HM�SGD�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM � RRDSR�@MC�KH@AHKHSHDR�NE�@�CHRONR@K�FQNTO�@QD�MNS�MDSSDC �(M�SGD�ODQHNC�VGDQD� @�MNM�BTQQDMS�@RRDS�NQ�CHRONR@K�FQNTO�HR�QDBNFMHRDC�ENQ�SGD�ãQRS�SHLD��SGD�BNMRNKHC@SDC�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM�ENQ�SGD� BNLO@Q@SHUD�OQHNQ�ODQHNC�OQDRDMSDC�HR�MNS�QDRS@SDC
(M�@CCHSHNM��SGD�&QNTO�TRDR�NSGDQ�LDSGNCR�RTBG�@R�SGD�!NQMGTDSSDQ�%DQFTRNM�LDSGNC��VGHBG�BNLAHMDR�ED@STQDR�NE�SGD�@ANUD� LDSGNCR �3GD�&QNTO�@KRN�TRDR�ADRONJD�LDSGNCR�ENQ�RODBH@KHRS�BK@RRDR�NE�ATRHMDRR �(M�RDKDBSHMF�HSR�DRSHL@SD��SGD�&QNTO� BNMRHCDQR�SGD�@OOQNOQH@SDMDRR�NE�SGD�LDSGNCR�@MC�A@RDR�SN�SGD�HMCHUHCT@K�BHQBTLRS@MBDR�NE�SGD�OQNUHRHNM�BK@RR�@MC� TMCDQVQHSHMF�XD@Q �3GD�OQNBDRRDR�KD@C�SN�SGD�CDSDQLHM@SHNM�NE�SGD�@BST@QH@K�HMCHB@SHNM�NE�SGD�OQNUHRHNM �3GD�@BST@QH@K�HMCHB@SHNM� @KKNVR�ENQ�BQXRS@KKHRDC�QHRJ��HS�CNDR�MNS�@KKNV�ENQ�TMBQXRS@KKHRDC�QHRJR�RTBG�SGD�ONSDMSH@K�BG@MFD�HM�CHRBNTMS�Q@SD�ENQ�KTLO�RTL� damages awards described below.
PENSIONS 3GD�ODMRHNM�@RRDSR�@MC�ONRS�QDSHQDLDMS�KH@AHKHSHDR�@QD�B@KBTK@SDC�HM�@BBNQC@MBD�VHSG�(MSDQM@SHNM@K� BBNTMSHMF�2S@MC@QC���� �( 2���� �3GD�@RRDSR��KH@AHKHSHDR�@MC�HMBNLD�RS@SDLDMS�BG@QFD��B@KBTK@SDC�HM�@BBNQC@MBD�VHSG�( 2�����@QD�RDMRHSHUD�SN�SGD� @RRTLOSHNMR�L@CD�EQNL�SHLD�SN�SHLD��HMBKTCHMF�HMâ@SHNM��HMSDQDRS�Q@SD�@MC�LNQS@KHSX �( 2����BNLO@QDR��@S�@�FHUDM�C@SD�� SGD�BTQQDMS�L@QJDS�U@KTD�NE�@�ODMRHNM�ETMC�R�@RRDSR�VHSG�HSR�KNMF�SDQL�KH@AHKHSHDR��VGHBG�@QD�B@KBTK@SDC�TRHMF�@�CHRBNTMS� Q@SD�HM�KHMD�VHSG�XHDKCR�NM�� ��Q@SDC�ANMCR�NE�RTHS@AKD�CTQ@SHNM�@MC�BTQQDMBX � R�RTBG��SGD�ãM@MBH@K�ONRHSHNM�NE�@�ODMRHNM� ETMC�NM�SGHR�A@RHR�HR�GHFGKX�RDMRHSHUD�SN�BG@MFDR�HM�ANMC�Q@SDR�@MC�VHKK�@KRN�AD�HLO@BSDC�AX�BG@MFDR�HM�DPTHSX�L@QJDSR
ACQUISITIONS AND DISPOSALS The Group makes acquisitions and disposals of businesses as part of its normal operations. All acquisitions are made after CTD�CHKHFDMBD��VGHBG�VHKK�HMBKTCD��@LNMFRS�NSGDQ�L@SSDQR��@RRDRRLDMS�NE�SGD�@CDPT@BX�NE�BK@HLR�QDRDQUDR��@RRDRRLDMS�NE� SGD�QDBNUDQ@AHKHSX�NE�QDHMRTQ@MBD�A@K@MBDR��HMPTHQHDR�VHSG�QDF@QC�SN�NTSRS@MCHMF�KHSHF@SHNM�@MC�HMPTHQHDR�NE�KNB@K�QDFTK@SNQR� @MC�S@W@SHNM�@TSGNQHSHDR �"NMRHCDQ@SHNM�HR�@KRN�FHUDM�SN�ONSDMSH@K�BNRSR��QHRJR�@MC�HRRTDR�HM�QDK@SHNM�SN�SGD�HMSDFQ@SHNM�NE�@MX� OQNONRDC�@BPTHRHSHNMR�VHSG�DWHRSHMF�&QNTO�NODQ@SHNMR �3GD�&QNTO�VHKK�RDDJ�SN�QDBDHUD�SGD�ADMDãS�NE�@OOQNOQH@SD�BNMSQ@BST@K� QDOQDRDMS@SHNMR�@MC�V@QQ@MSHDR�HM�BNMMDBSHNM�VHSG�@MX�@BPTHRHSHNM�@MC��VGDQD�MDBDRR@QX��@CCHSHNM@K�HMCDLMHãB@SHNMR�HM� QDK@SHNM�SN�RODBHãB�QHRJR�@KSGNTFG�SGDQD�B@M�AD�MN�FT@Q@MSDD�SG@S�SGDRD�OQNBDRRDR�@MC�@MX�RTBG�OQNSDBSHNM�VHKK�AD�@CDPT@SD� HM�@KK�BHQBTLRS@MBDR �3GD�&QNTO�L@X�@KRN�OQNUHCD�QDKDU@MS�QDOQDRDMS@SHNMR��V@QQ@MSHDR�@MC�HMCDLMHSHDR�SN�BNTMSDQO@QSHDR� NM�@MX�CHRONR@K �%TQSGDQ�CDS@HKR�NE�SGD�CHRONR@KR�HM�SGD�XD@Q�@QD�FHUDM�HM�MNSD��
REINSURANCE 3GD�&QNTO�HR�DWONRDC�SN�CHROTSDR�NM��@MC�CDEDBSR�HM��BNMSQ@BSR�VHSG�HSR�QDHMRTQDQR�@MC�SGD�ONRRHAHKHSX�NE�CDE@TKS�AX�HSR�QDHMRTQDQR � 3GD�&QNTO�HR�@KRN�DWONRDC�SN�SGD�BQDCHS�QHRJ�@RRTLDC�HM�EQNMSHMF�@QQ@MFDLDMSR�@MC�SN�ONSDMSH@K�QDHMRTQ@MBD�B@O@BHSX� constraints. In selecting the reinsurers with whom the Group conducts business its strategy is to seek reinsurers with the @OOQNOQH@SD�BNLAHM@SHNM�NE�ãM@MBH@K�RSQDMFSG��OQHBD�@MC�B@O@BHSX �3GD�&QNTO�"NQONQ@SD�"DMSQD�OTAKHRGDR�HMSDQM@KKX�@�KHRS� of authorised reinsurers who pass the Group’s selection process and which its operations may use for new transactions.
INVESTMENT RISK 3GD�&QNTO�HR�DWONRDC�SN�L@QJDS�QHRJ�@MC�BQDCHS�QHRJ�NM�HSR�HMUDRSDC�@RRDSR �,@QJDS�QHRJ�HMBKTCDR�SGD�QHRJ�NE�ONSDMSH@K�KNRRDR�EQNL� @CUDQRD�LNUDLDMSR�HM�L@QJDS�Q@SDR�@MC�OQHBDR�HMBKTCHMF�HMSDQDRS�Q@SDR��DPTHSX�OQHBDR��OQNODQSX�OQHBDR�@MC�ENQDHFM�DWBG@MFD� Q@SDR �3GD�&QNTO�R�DWONRTQD�SN�L@QJDS�QHRJR�HR�BNMSQNKKDC�AX�SGD�RDSSHMF�NE�HMUDRSLDMS�KHLHSR�HM�KHMD�VHSG�SGD�&QNTO�R�QHRJ� @OODSHSD �%QNL�SHLD�SN�SHLD�SGD�&QNTO�@KRN�L@JDR�TRD�NE�CDQHU@SHUD�ãM@MBH@K�HMRSQTLDMSR�SN�QDCTBD�DWONRTQD�SN�@CUDQRD� âTBST@SHNMR�HM�ENQDHFM�DWBG@MFD�Q@SDR�@MC�DPTHSX�L@QJDSR �3GD�&QNTO�G@R�RSQHBS�BNMSQNKR�NUDQ�SGD�TRD�NE�CDQHU@SHUD�HMRSQTLDMSR
R�@M�HMRTQ@MBD�BNLO@MX��SGD�&QNTO�HR�HM�SGD�ATRHMDRR�NE�@BSHUDKX�RDDJHMF�QHRJ�VHSG�@�UHDV�SN�@CCHMF�U@KTD�AX�L@M@FHMF�HS � This section summarises the key risks to the Group and the steps taken to manage them.
KK�NE�SGD�&QNTO�R�TMCDQVQHSDQR�G@UD�RODBHãB�KHBDMBDR�SG@S�RDS�BKD@Q�O@Q@LDSDQR�ENQ�SGD�ATRHMDRR�SGDX�B@M�TMCDQVQHSD��A@RDC� NM�SGD�DWODQHDMBD�NE�SGD�HMCHUHCT@K�TMCDQVQHSDQ � CCHSHNM@KKX��SGD�&QNTO�G@R�@�BDMSQ@KKX�L@M@FDC�ENQTL�KNNJHMF�@S�&QNTO� TMCDQVQHSHMF�HRRTDR��QDUHDVHMF�@MC�@FQDDHMF�TMCDQVQHSHMF�CHQDBSHNM�@MC�RDSSHMF�ONKHBX�@MC�CHQDBSHUDR�VGDQD�@OOQNOQH@SD � 3GD�&QNTO�G@R�@�PT@QSDQKX�ONQSENKHN�L@M@FDLDMS�OQNBDRR�@BQNRR�@KK�HSR�ATRHMDRR�TMHSR��VGHBG�OQNUHCDR�@�BNMRHRSDMS�@RRDRRLDMS� NE�D@BG�ONQSENKHN�ODQENQL@MBD�@F@HMRS�@�RDS�NE�JDX�ODQENQL@MBD�HMCHB@SNQR �4MCDQ�SGD�ONQSENKHN�L@M@FDLDMS�RXRSDL��JDX�QHRJ� HMCHB@SNQR�@QD�SQ@BJDC�SN�LNMHSNQ�DLDQFHMF�SQDMCR��NOONQSTMHSHDR�@MC�QHRJR�@MC��NM�@M�@MMT@K�A@RHR��@�QDUHDV�ENQTL�NE�ATRHMDRR� @MC�TMCDQVQHSHMF�KD@CDQR�TMCDQS@JD�@�CDS@HKDC�QDUHDV�NE�D@BG�ONQSENKHN�TSHKHRHMF�C@S@�EQNL�SGD�PT@QSDQKX�QDUHDVR
1DHMRTQ@MBD�@QQ@MFDLDMSR�HM�OK@BD�HMBKTCD�OQNONQSHNM@K��DWBDRR�NE�KNRR��RSNO�KNRR�@MC�B@S@RSQNOGD�BNUDQ@FD �3GD�DEEDBS�NE�RTBG� reinsurance arrangements is that the Group should not suffer total net insurance losses beyond the Group’s risk appetite in any one year.
3GD�&QNTO�G@R�@�&QNTO�1DRDQUHMF�"NLLHSSDD�BG@HQDC�AX�SGD�&QNTO�"GHDE�%HM@MBH@K�.EãBDQ�@MC�BNMRHRSHMF�NE�SGD�&QNTO�"GHDE� $WDBTSHUD��&QNTO�4MCDQVQHSHMF�#HQDBSNQ��&QNTO�"GHDE� BST@QX�@MC�&QNTO�"GHDE�1HRJ�.EãBDQ � �RHLHK@Q�BNLLHSSDD�G@R�ADDM� DRS@AKHRGDC�HM�D@BG�NE�SGD�&QNTO�R�L@INQ�NODQ@SHMF�RDFLDMSR �3GD�&QNTO�1DRDQUHMF�"NLLHSSDD�LNMHSNQR�SGD�CDBHRHNMR�@MC� ITCFDLDMSR�L@CD�AX�SGD�ATRHMDRR�TMHSR�@R�SN�SGD�KDUDK�NE�QDRDQUDR�SN�AD�GDKC�@MC�QDBNLLDMCR�SN�SGD�&QNTO�"GHDE�$WDBTSHUD� @MC�&QNTO�"GHDE�%HM@MBH@K�.EãBDQ�VGN�QDBNLLDMC�SN�SGD�&QNTO�!N@QC�UH@�SGD�&QNTO� TCHS�"NLLHSSDD�ENQ�SGD�ãM@K�CDBHRHNM� NM�SGD�KDUDK�NE�QDRDQUDR�SN�AD�HMBKTCDC�VHSGHM�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR �(M�ENQLHMF�HSR�BNKKDBSHUD�ITCFDLDMS�� the Committee considers the following information: • M�@BST@QH@K�HMCHB@SHNM�NE�TKSHL@SD�KNRRDR�SNFDSGDQ�VHSG�@M�@RRDRRLDMS�NE�QHRJR�@MC�ONRRHAKD�E@UNTQ@AKD�NQ�@CUDQRD� CDUDKNOLDMSR�SG@S�L@X�MNS�G@UD�ADDM�ETKKX�QDâDBSDC�HM�B@KBTK@SHMF�SGDRD�HMCHB@SHNMR � S�SGD�DMC�NE������SGDRD�QHRJR�@MC� CDUDKNOLDMSR�HMBKTCD��SGD�ONRRHAHKHSX�NE�ETSTQD�KDFHRK@SHUD�BG@MFD�G@UHMF�QDSQNRODBSHUD�DEEDBS�NM�NODM�BK@HLR��BG@MFDR�HM� BK@HLR�RDSSKDLDMS�OQNBDCTQDR�ONSDMSH@KKX�KD@CHMF�SN�ETSTQD�BK@HLR�O@XLDMS�O@SSDQMR�CHEEDQHMF�EQNL�GHRSNQHB@K�DWODQHDMBD�� SGD�ONRRHAHKHSX�NE�MDV�SXODR�NE�BK@HL��RTBG�@R�CHRD@RD�BK@HLR��DLDQFHMF�EQNL�ATRHMDRR�VQHSSDM�RDUDQ@K�XD@QR�@FN��FDMDQ@K� TMBDQS@HMSX�HM�SGD�BK@HLR�DMUHQNMLDMS��SGD�DLDQFDMBD�NE�K@SDMS�DWONRTQDR�RTBG�@R�@RADRSNR��SGD�NTSBNLD�NE�KHSHF@SHNM� NM�BK@HLR�QDBDHUDC��E@HKTQD�SN�QDBNUDQ�QDHMRTQ@MBD�@MC�TM@MSHBHO@SDC�BG@MFDR�HM�BK@HLR�HMâ@SHNM
CREDIT RISK Credit risk is the risk of loss of due to counterparties failing to meet all or part of their obligations. The Board Risk Committee �!1"��HR�QDRONMRHAKD�ENQ�DMRTQHMF�SG@S�SGD�!N@QC�@OOQNUDC�&QNTO�BQDCHS�QHRJ�@OODSHSD�HR�MNS�DWBDDCDC �3GHR�HR�CNMD�SGQNTFG� SGD�RDSSHMF�@MC�HLONRHSHNM�NE�&QNTO�ONKHBHDR��OQNBDCTQDR�@MC�KHLHSR �(M�CDãMHMF�HSR�@OODSHSD�ENQ�BQDCHS�QHRJ�SGD�&QNTO�KNNJR� @S�DWONRTQDR�@S�ANSG�@M�@FFQDF@SD�@MC�ATRHMDRR�TMHS�KDUDK�CHRSHMFTHRGHMF�ADSVDDM�BQDCHS�QHRJR�HMBTQQDC�@R�@�QDRTKS�NE�NEERDSSHMF� HMRTQ@MBD�QHRJR�NQ�NODQ@SHMF�HM�SGD�HMRTQ@MBD�L@QJDS��D F �QDHMRTQ@MBD�BQDCHS�QHRJR�@MC�QHRJR�SN�QDBDHUHMF�OQDLHTLR�CTD� EQNL�ONKHBXGNKCDQR�@MC�HMSDQLDCH@QHDR��@MC�BQDCHS�QHRJR�HMBTQQDC�ENQ�SGD�OTQONRDR�NE�FDMDQ@SHMF�@�QDSTQM��D F �HMUDRSDC� @RRDSR�BQDCHS�QHRJ�
+HLHSR�@QD�RDS�@S�ANSG�@�ONQSENKHN�@MC�BNTMSDQO@QSX�KDUDK�A@RDC�NM�KHJDKHGNNC�NE�CDE@TKS��CDQHUDC�EQNL�SGD�Q@SHMF�NE�SGD� BNTMSDQO@QSX��SN�DMRTQD�SG@S�SGD�&QNTO�R�NUDQ@KK�BQDCHS�OQNãKD�@MC�RODBHãB�BNMBDMSQ@SHNMR�@QD�L@M@FDC�@MC�BNMSQNKKDC�VHSGHM� QHRJ�@OODSHSD �%HM@MBH@K�@RRDSR�@QD�FQ@CDC�@BBNQCHMF�SN�BNLO@MX�RS@MC@QCR � �HR�SGD�GHFGDRS�ONRRHAKD�Q@SHMF �(MUDRSLDMS�FQ@CD� ãM@MBH@K�@RRDSR�@QD�BK@RRHãDC�VHSGHM�SGD�Q@MFD�NE� �SN�!!!�Q@SHMFR �%NQ�HMUDRSDC�@RRDSR��QDRSQHBSHNMR�@QD�OK@BDC�NM�D@BG� NE�SGD�&QNTO�R�HMUDRSLDMS�L@M@FDQR�@R�SN�SGD�KDUDK�NE�DWONRTQD�SN�U@QHNTR�Q@SHMF�B@SDFNQHDR�HMBKTCHMF�TMQ@SDC�RDBTQHSHDR
Local operations are responsible for assessing and monitoring the creditworthiness of their counterparties (e.g. brokers and ONKHBXGNKCDQR� �+NB@K�BQDCHS�BNLLHSSDDR�@QD�QDRONMRHAKD�ENQ�DMRTQHMF�SGDRD�DWONRTQDR�@QD�VHSGHM�SGD�QHRJ�@OODSHSD�NE�SGD�KNB@K� NODQ@SHNMR �$WONRTQD�LNMHSNQHMF�@MC�QDONQSHMF�HR�DLADCCDC�SGQNTFGNTS�SGD�NQF@MHR@SHNM�VHSG�@FFQDF@SD�BQDCHS�ONRHSHNMR� QDONQSDC�@MC�LNMHSNQDC�@S�&QNTO�KDUDK �
Reinsurers’ share of insurance contract liabilities – ��� ����� ��� �� 1 ����� – �����
Insurance and reinsurance debtors ��� �� ��� ��� ��� ����� ����� – �����
Other debtors – – – – – ��� ��� – ���
3GD�&QNTO�QDFTK@QKX�LNMHSNQR�HSR�@FFQDF@SD�DWONRTQDR�AX�QDHMRTQDQ�FQNTO�@F@HMRS�OQDCDSDQLHMDC�QDHMRTQDQ�FQNTO�KHLHSR��HM� @BBNQC@MBD�VHSG�SGD�LDSGNCNKNFX�@FQDDC�AX�SGD�!1" �3GD�&QNTO�R�K@QFDRS�QDHMRTQ@MBD�DWONRTQDR�SN�@BSHUD�QDHMRTQ@MBD�FQNTOR� @QD�+KNXC�R��2VHRR�1D�@MC�!DQRJGHQD�'@SG@V@X�(MB � S����#DBDLADQ������SGD�QDHMRTQ@MBD�@RRDS�QDBNUDQ@AKD�EQNL�SGDRD�FQNTOR� CNDR�MNS�DWBDDC�7%�NE�SGD�&QNTO�R�SNS@K�ãM@MBH@K�@RRDSR �2SQDRR�SDRSR�@QD�ODQENQLDC�AX�QDHMRTQDQ�BNTMSDQO@QSX�@MC�SGD�KHLHSR� @QD�RDS�RTBG�SG@S�HM�@�B@S@RSQNOGHB�DUDMS��SGD�DWONRTQD�SN�@�RHMFKD�QDHMRTQDQ�HR�DRSHL@SDC�MNS�SN�DWBDDC�4% of the Group’s total ãM@MBH@K�@RRDSR �"DQS@HM�NE�SGD�&QNTO�R�RTARHCH@QHDR�@QD�LDLADQR�NE�FNUDQMLDMS�L@MC@SDC�ONNKR�HM�U@QHNTR�O@QSR�NE�SGD� VNQKC � R�NE����#DBDLADQ������SGD�K@QFDRS�ONNK��AX�OQDLHTL�UNKTLD��HR�/NNK�1D�NODQ@SDC�AX�SGD�4*�&NUDQMLDMS�SN�OQNUHCD� SDQQNQHRL�BNUDQ
3GD�&QNTO�DMSDQR�HMSN�CDQHU@SHUD�SQ@MR@BSHNMR�TMCDQ�(MSDQM@SHNM@K�2V@OR�@MC�#DQHU@SHUDR� RRNBH@SHNM��(2# ��L@RSDQ�MDSSHMF� @QQ@MFDLDMSR �(M�FDMDQ@K��TMCDQ�RTBG�@FQDDLDMSR�SGD�@LNTMSR�NVMDC�AX�D@BG�BNTMSDQO@QSX�NM�@�RHMFKD�C@X�HM�QDRODBS�NE�@KK� transactions outstanding in the same currency are aggregated into a single net amount that is payable by one counterparty to SGD�NSGDQ �(M�BDQS@HM�BHQBTLRS@MBDR��RTBG�@R�@�BQDCHS�CDE@TKS��@KK�NTSRS@MCHMF�SQ@MR@BSHNMR�TMCDQ�SGD�@FQDDLDMS�@QD�SDQLHM@SDC�� SGD�SDQLHM@SHNM�U@KTD�HR�@RRDRRDC�@MC�NMKX�@�RHMFKD�MDS�@LNTMS�HR�O@X@AKD�HM�RDSSKDLDMS�NE�@KK�SQ@MR@BSHNMR
Effect of offsetting in statement of ãM@MBH@K�ONRHSHNM Related items not offset
2G@QDGNKCDQR¼�DPTHSX�@S����#DBDLADQ����� ����� 415 ��� ��� 731 3,825 2G@QDGNKCDQR��DPTHSX�@S����#DBDLADQ����� ��� ��� ��� ��� ��� �����
2G@QDGNKCDQR��DPTHSX�HR�RS@SDC�@ESDQ�S@JHMF�@BBNTMS�NE�SGD�DEEDBS�NE�BTQQDMBX�ENQV@QC�BNMSQ@BSR�@MC�ENQDHFM�DWBG@MFD�NOSHNMR � .M�SGHR�A@RHR��@���í�BG@MFD�HM�2SDQKHMF�@F@HMRS�#@MHRG�*QNMD�$TQN��"@M@CH@M�#NKK@Q�NQ�2VDCHRG�*QNM@�VNTKC�G@UD�SGD�ENKKNVHMF� impact on shareholders’ equity: ��í� strengthening in Pounds Sterling against Danish *QNMD�$TQN
Liability – – – – �� RDD�ADKNV see below 3GD�TRD�NE�CDQHU@SHUDR�B@M�QDRTKS�HM�@BBNTMSHMF�LHRL@SBGDR�VGDM�F@HMR�@MC�KNRRDR�@QHRHMF�NM�SGD�CDQHU@SHUDR�@QD�OQDRDMSDC� in the income statement in accordance with the Group’s accounting policies and corresponding losses and gains on the risks being mitigated are not included in the income statement. In such circumstances the Group may apply hedge accounting HM�@BBNQC@MBD�VHSG�(%12�@MC�SGD�&QNTO�@BBNTMSHMF�ONKHBX�NM�GDCFHMF �
Reinsurance creditors 484 ��� 41 – – – – ��� ���
#DONRHSR�QDBDHUDC�EQNL�QDHMRTQDQR 25 – – – – – – 25 25 3NS@K ����� ����� ����� ��� ����� 1,234 ����� ������ ������
Subordinated guaranteed perpetual notes ��� – – – – – – ��� ���
Reinsurance creditors ��� � 1 – – – – ��� ���
3GD�CTQ@SHNM�@M@KXRHR�@ANUD�HR�OQDRDMSDC�NM�@M�TMCHRBNTMSDC�A@RHR �3GD�B@QQXHMF�U@KTDR�HM�SGD�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM� are discounted where appropriate in accordance with Group accounting policy.
.VM�1HRJ�@MC�2NKUDMBX� RRDRRLDMS��.12 � 3GD�2NKUDMBX�((�CHQDBSHUD�HMSQNCTBDR�@�QDPTHQDLDMS�ENQ�TMCDQS@JHMFR�SN�BNMCTBS�@M�.12 �(M�@MSHBHO@SHNM�NE�SGHR�QDPTHQDLDMS�� the Group has updated its risk and capital management processes.
• The quantity and quality of the risks which it seeks to assume
3GD�DBNMNLHB�B@OHS@K�@M@KXRHR�BNLO@QDR�@U@HK@AKD�B@OHS@K�VHSG�SGD�DBNMNLHB�B@OHS@K�@RRDRRLDMS��$" � � U@HK@AKD�B@OHS@K�HR� SGD�B@OHS@K��NUDQ�@MC�@ANUD�SGD�(%12�HMRTQ@MBD�KH@AHKHSHDR��SG@S�HR�@U@HK@AKD�SN�@ARNQA�KNRRDR �(S�HMBKTCDR�RTANQCHM@SDC�CDAS�� ATS�DWBKTCDR�HSDLR�RTBG�@R�FNNCVHKK�@MC�NSGDQ�HMS@MFHAKD�@RRDSR��CDEDQQDC�S@W�HSDLR�@MC�ODMRHNM�RBGDLD�RTQOKTRDR�@MC� CDãBHSR �$" �HR�SGD�B@OHS@K�QDPTHQDC�SN�LDDS�KH@AHKHSHDR�@S�@�BNMãCDMBD�KDUDK�DPTHU@KDMS�SN�2S@MC@QC�î�/NNQ�R�KNMF�SDQL� �Q@SDC�ANMC�CDE@TKS�BTQUD
3GD�&QNTO�QDBDHUDC�HSR�K@SDRS�(MCHUHCT@K�"@OHS@K�&THC@MBD��A@RDC�NM�HSR�(" �RTALHRRHNM��EQNL�SGD�/1 �HM�D@QKX������@MC�@S� SGD�QDPTDRS�NE�SGD�/1 �QDL@HMR�BNMãCDMSH@K �3GD�(" �HR�@�ENQV@QC�KNNJHMF��DBNMNLHB�@RRDRRLDMS�NE�SGD�B@OHS@K�QDPTHQDLDMSR� NE�SGD�&QNTO�A@RDC�NM�HSR�@RRDRRLDMS�NE�SGD�QHRJR�SN�VGHBG�HS�HR�DWONRDC �3GD�LNCDKR�TRDC�SN�CDSDQLHMD�SGD�(" �G@UD�ADDM� integrated into the Group’s business processes and are used to enhance the management of the Group.
/DMRHNM�MDS�HMSDQDRS�@MC� @CLHMHRSQ@SHNM�BNRSR (10) – (10) 2NKUDMBX�((�BNRSR (25) – (25) 1DNQF@MHR@SHNM�BNRSR� (106) (4) (110) (LO@HQLDMS�NE�FNNCVHKK�@MC� HMS@MFHAKD�@RRDSR (99) – (99) $BNMNLHB�@RRTLOSHNM� BG@MFDR (98) – (98) -NM�QDBTQQHMF�BG@QFDR (67) – (67) BPTHRHSHNMR�@MC�CHRONR@KR 203 174 377 3Q@MR@BSHNM�BNRSR� (6) – (6) /QNãS�ADENQD�S@W 60 215 275 3@W�NM�BNMSHMTHMF� NODQ@SHNMR (182) – (182) 3@W�NM�CHRBNMSHMTDC� NODQ@SHNMR – (15) (15) 3@W�NM�CHRONR@KR�NE� CHRBNMSHMTDC�NODQ@SHNMR – (2) (2)
"NLAHMDC�NODQ@SHMF�Q@SHN��í� 89.4 98.0 99.5 132.3 100.3 126.4 98.5 94.3 98.8 .SGDQ�RDFLDMS�HSDLR� HMBKTCDC�HM�SGD�HMBNLD� RS@SDLDMS�
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Cash and cash equivalents at end of the year 10 3 3GD�@SS@BGDC�MNSDR�ENQL�@M�HMSDFQ@K�O@QS�NE�SGDRD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR
3GD�HMUDRSLDMSR�HM�RTARHCH@QHDR�@QD�QDBNFMHRDC�HM�SGD�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM�@S�E@HQ�U@KTD�LD@RTQDC�HM�@BBNQC@MBD�VHSG� SGD�"NLO@MX�R�@BBNTMSHMF�ONKHBHDR �3GD�"NLO@MX�R�HMUDRSLDMSR�@QD�BK@RRHãDC�@R�KDUDK���ãM@MBH@K�@RRDSR �%@HQ�U@KTD�NE�SGD� "NLO@MX�R�RHFMHãB@MS�RTARHCH@QX�HR�CDSDQLHMDC�AX�QDEDQDMBD�SN�SGD�L@QJDS�U@KTD��CDQHUDC�EQNL�QDKDU@MS�HMCHBDR��NE�SGD� "NLO@MX�R�NQCHM@QX�RG@QDR�@MC�KN@M�B@OHS@K�HMRSQTLDMSR�@S�SGD�DMC�NE�SGD�QDONQSHMF�ODQHNC��ADHMF�SGD�LNRS�SQ@MRO@QDMS� HMCDODMCDMS�@U@HK@AKD�HMCHB@SNQ �3GD�L@QJDS�U@KTD�HR�@CITRSDC�ENQ�SGD�E@HQ�U@KTD�NE�SGD�"NLO@MX�R�OQDEDQDMBD�RG@QDR��@RRDSR�@MC� KH@AHKHSHDR��DWBKTCHMF�CHQDBSKX�NVMDC�RTARHCH@QHDR �3GD�@CITRSHMF�HSDLR�G@UD�ADDM�E@HQ�U@KTDC�AX�CDSDQLHMHMF�SGD�OQDRDMS�U@KTD�NE� ETSTQD�B@RGâNV�OQNIDBSHNMR��TRHMF�@M�@OOQNOQH@SD�@QL�R�KDMFSG�CHRBNTMS�Q@SD �3GD�QDL@HMHMF�RTARHCH@QHDR�@QD�GDKC�@S�E@HQ�U@KTD� VGHBG�G@R�ADDM�CDSDQLHMDC�SN�AD�MDS�@RRDS�U@KTD
REGISTRAR The Company’s share register is maintained by Equiniti Limited. Any administrative enquiries relating to shareholdings, RTBG�@R�CHUHCDMC�O@XLDMS�HMRSQTBSHNMR�NQ�@�BG@MFD�NE�@CCQDRR��RGNTKC�AD�MNSHãDC�SN�$PTHMHSH�@S�SGD�ENKKNVHMF�@CCQDRR�
ELECTRONIC COMMUNICATIONS Receiving the Company’s communications electronically allows the Company to communicate with its shareholders in a more environmentally friendly, cost effective and timely manner.
DIVIDENDS Shareholders are encouraged to have their dividends paid directly into their bank account. It is a more secure and faster way to receive the dividend payment with cleared funds available to shareholders on the dividend payment date. Shareholders who have their dividends paid directly into their bank receive a consolidated tax voucher once a year, showing payments received in the respective tax year. Alternatively, individual tax vouchers are available upon request. To take advantage of this convenient method of payment visit www.shareview.co.uk or contact Equiniti. Details of 2015 dividend dates can be found in the Financial Calendar on page 211.
The Scrip Dividend Scheme Terms and Conditions were updated in February 2015 and these are available on the shareholder services area of the Company’s website or from Equiniti. Shareholders with a scrip dividend mandate in place need take MN�ETQSGDQ�@BSHNM�@R�XNTQ�L@MC@SD�QDL@HMR�DEEDBSHUD�TMSHK�MNSHãDC�SN�SGD�1DFHRSQ@Q�HM�VQHSHMF �%NQ�CHUHCDMCR�VGDQD�@�RBQHO� alternative is offered, shareholders wishing to receive a scrip dividend instead of a cash dividend should contact Equiniti for details or visit the shareholder services area of the Company’s website.
The Company operates a sponsored American Depositary Receipts (‘ADR’) programme which is managed by JPMorgan Chase NA. The programme allows shareholders to invest in the Company through US dollar denominated funds. Any enquiry relating to the sponsored ADR programme should be addressed to: JPMorgan Chase & Co PO Box 64504 St Paul MN 55164-0504 USA
• Be aware of dividend payment dates and contact Equiniti if you do not receive your dividend cheque, or better still, make arrangements to have the dividend paid directly into your bank account
THURSDAY 13 AUGUST 2015* Ex dividend date for the ordinary interim dividend and the second preference dividend for 2015.
WEDNESDAY 1 OCTOBER 2015* Payment date for the second preference dividend for 2015.
IGD Capital Requirement • Insurance Groups Directive capital is the capital the Group is required to hold based on standard calculations CDãMDC�AX�SGD�%2 �TMCDQ�SGD�$4�2NKUDMBX���CHQDBSHUD
Insurance Result • This is a measure of how well we have done, including both our underwriting result and investment performance.
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Underlying loss ratio • Claims incurred during the period expressed as a percentage of earned premiums, including claims handling expenses but excluding claims incurred in respect of large losses, weather events and subsidence losses.
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Important disclaimer This document contains ‘forward-looking statements’ with respect to certain of the Group’s plans @MC�HSR�BTQQDMS�FN@KR�@MC�DWODBS@SHNMR�QDK@SHMF�SN�HSR�ETSTQD�äM@MBH@K�BNMCHSHNM��ODQENQL@MBD��QDRTKSR�� strategic initiatives and objectives. Generally, words such as ‘may’, ‘could’, ‘will’, ‘expect’, ‘intend’, ‘estimate’, ‘anticipate’, ‘aim’, ‘outlook’, ‘believe’, ‘plan’, ‘seek’, ‘continue’, ‘potential’ or similar expressions, identify forward-looking statements.
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