· The ultimate cost of Covid-19 BI claims. The estimated impact of the Supreme Court judgement on 15 January 2021 relating to BI policy wording for Covid-19 is included in the actuarial indication of ultimate losses. This judgement corroborated the Financial Conduct Authority (FCA) policy wording review conducted to provide clarity on the treatment of Covid-19 BI claims for selected policy wording. The heightened level of uncertainty persists as claims notifications evolve and are assessed and work continues to fully understand the various implications of this ruling. In addition, in estimating the ultimate cost of Covid-19 BI claims a number of key assumptions have been made in relation to: · Public behaviour, mobility and interaction prior to lockdown
· Level of evidence required to demonstrate the existence of Covid-19 on or in the vicinity of the insured premises
Current year attritional loss ratios frequency or severity assumptions +5% 135–145 125–135
Discount assumptions The total value of provisions for losses and loss adjustment expenses less related reinsurance recoveries before discounting is £8,302m (2019: £8,081m).
Claims on certain classes of business have been discounted as follows: Category
The impact of the reduction in the discount rate on long-term insurance liabilities in Denmark of £8m (2019: £15m) has been recognised in unwind of discount and change in economic assumptions in the consolidated income statement.
Gross insurance contract liabilities and the reinsurers’ share of insurance contract liabilities The Group accounting policies in respect of insurance contract liabilities are described in note 5. The gross insurance contract liabilities and the reinsurers’ (RI) share of insurance contract liabilities presented in the consolidated statement of financial position comprise the following: £m £m £m
Notes to the consolidated statement of financial position continued 39) Insurance contract liabilities continued Provision for unearned premiums, gross of acquisition costs 2020 £m 2019 £m
Provision for unearned premiums (gross of acquisition costs) at 31 December 3,860 3,812
Claims development tables The tables on the following pages present changes in the historical provisions for losses and loss adjustment expenses that were established in 2010 and prior, and the provisions for losses and loss adjustment expenses arising in each subsequent accident year. The tables are presented at current year average exchange rates on an undiscounted basis and have been adjusted for operations that have been disposed of.
The estimated provisions for ultimate incurred losses change as more information becomes known about the actual losses for which the initial provisions were set up and as the rates of exchange change.
At end of accident year 8,596 2,984 2,841 3,149 2,826 2,916 2,815 2,989 3,273 3,165 2,688
Current year provision before discounting 737 152 146 242 113 226 391 649 1,342 1,878 2,688 8,564
At end of accident year 7,465 2,519 2,583 2,829 2,485 2,433 2,235 2,279 2,432 2,230 2,048
Current year provision before discounting 799 114 147 233 241 265 461 574 948 1,193 2,048 7,023
© 2020 Friend Studio Ltd File name: Notes_30_to_end_NEW_v21 Modification Date: 9 March 2021 12:19 pm 40) Insurance and reinsurance liabilities £m £m
Total insurance and reinsurance liabilities 932 970 41) Post-employment benefits and obligations Defined contribution pension schemes Costs of £68m (2019: £65m) were recognised in respect of defined contribution schemes by the Group.
The Group’s Swedish subsidiaries are part of a multi-employer defined benefit scheme along with other financial institutions in Sweden. As it is not possible to determine the assets and liabilities in respect of any one employer under this scheme, it is included in these accounts as a defined contribution scheme. Contributions of £5m (2019: £5m) were paid to this scheme during 2020 and are included in the Group defined contribution costs shown above. The expected contributions in 2021 are £5m. Total estimated contributions to the scheme from all employers in 2020 were £56m (2019: £50m). The latest information regarding the funding of this scheme is taken from the interim report for the first half of 2020, when the scheme funding rate was 120% (2019: 118%).
Defined benefit pension schemes and other post-employment benefits The amounts recognised in the consolidated statement of financial position are as follows: UK £m
Present value of unfunded obligations (6) (99) (105) (7) (92) (99)
Fair value of plan assets 9,355 500 9,855 8,549 467 9,016
Net IAS 19 surplus/(deficits) in the schemes 326 (51) 275 254 (60) 194
If actual experience differs from the assumptions used, the expected obligation could increase or decrease in future years. Due to the complexity of the valuation and its long-term nature, the defined benefit obligation is highly sensitive to changes in the assumptions. Assumptions are reviewed at each reporting date. As such, the IAS 19 valuation of the liability is highly sensitive to changes in bond rates.
The profile of the members of the two main UK schemes at 30 September 2020 (the latest date at which full information is available) is as follows: Deferred members – members no longer accruing and not yet receiving benefits 22,710
Accrued benefits are revalued up to retirement in accordance with government indices for inflation. A cap of 2.5% per annum applies to the revaluation of benefits accrued post March 2010 (a cap of 5% per annum applies for benefits which accrued prior to this date).
The Group is exposed to risks through its obligation to fund the schemes. These risks include market risk (assets not performing as well as expected), inflation risk and longevity risk over the lives of the members. The Group and the trustees of the schemes work together to reduce these risks through agreement of investment policy including the use of interest rate, inflation rate and longevity swaps.
During 2009 the Group entered into an arrangement that provides coverage against longevity risk for 55% of the retirement obligations relating to pensions in payment of the two largest UK schemes at that time (c.35% coverage based on current pensioner population). The arrangement provides for reimbursement of the covered pension obligations in return for the contractual return receivable on a portfolio of assets (made up of quoted government debt and swaps) held by the pension funds at the inception of the arrangement and which have continued to be held by the schemes. The swaps held are accounted for as a longevity swap, measured at fair value under IFRS by discounting all expected future cash flows using a discount rate consistent with the term of the relevant cash flow. The discount rate used is subject to a degree of judgment, due to the unique characteristics of the swap, and the rate is selected to most closely reflect the economic matching nature of the arrangement within a range of acceptable values obtained from external sources. The total value of the arrangement, including government debt measured at prices quoted in an active market, at 31 December 2020 is £1,596m (2019: £1,560m). Management do not believe that there is a significant risk of a material change to the balance in the consolidated statement of financial position net of the associated pension liabilities subject to the arrangement within the next financial year.
Each scheme is subject to triennial valuations, which are used to determine the future funding of the schemes by the Group including funding to repair any funding deficit. The funding valuations, which determine the level of cash contributions payable into the schemes and which must be agreed between the Trustees and the Group, are typically based on a prudent assessment of future experience with the discount rate reflecting a prudent expectation of returns based on actual investment strategy. This differs from IAS 19, which requires that future benefit cash flows are projected on the basis of best-estimate assumptions and discounted in line with high-quality corporate bond yields. The Trustees’ funding assumptions are updated only every three years, following completion of the triennial funding valuations. The effective date of the most recent valuations of the main UK funds is 31 March 2018.
At the most recent funding valuations, the main UK funds had an aggregate funding deficit of £468m, equivalent to a funding level of 95%. The Group and the Trustees have agreed funding plans to eliminate the funding deficits by 2026. Details of the deficit contributions paid in 2020 and that are due to be paid in 2021 under these plans are disclosed below. The funding plans will be reviewed again following the next triennial valuations which will have an effective date of 31 March 2021.
For the two main UK defined benefit schemes, the level of contributions in 2020 was £84m (2019: £96m) of which £75m (2019: £86m) were additional contributions to reduce funding deficits. Expected contributions to the two schemes for the year ending 31 December 2021 are approximately £84m including £75m of additional contributions to reduce the deficit.
Notes to the consolidated statement of financial position continued 41) Post-employment benefits and obligations continued All schemes The estimated discounted present values of the accumulated obligations are calculated in accordance with the advice of independent, qualified actuaries.
Return on scheme assets less amounts in interest income – 950 – 950
Other (including annuity contracts, infrastructure and growth alternatives) 362 28 390 456 23 479
Value of asset and longevity swaps (3,447) – (3,447) (2,791) – (2,791)
Total assets in the schemes 9,355 500 9,855 8,549 467 9,016
The scheme assets analysed by those that have a quoted market price in active markets and unquoted are as follows: Total Quoted £m
· Provided by an independent surveyor (in the case of direct property)
· Taken at the mark to market valuation used for collateral purposes in the case of derivative contracts
Notes to the consolidated statement of financial position continued 41) Post-employment benefits and obligations continued Assumptions The weighted average principal actuarial assumptions used are: UK Other
Assumptions used in calculation of pension net interest costs for the year: 1. For the UK the annual rate of increase in pensions shown is the rate that applies to pensions that increase at RPI subject to a cap of 5%.
Reductions in future mortality rates are allowed for by using the CMI 2019 tables (2019: CMI 2018 tables) with a long term improvement rate of 1.25% (2019: 1.25%). The weighted average assumptions imply that a current pensioner aged 60 has an expected future lifetime of 27.0 (2019: 27.0) years for males and 28.5 (2019: 28.5) years for females and a future pensioner aged 60 in 15 years’ time has a future expected lifetime from age 60 of 28.0 (2019: 28.0) years for males and 29.7 (2019: 29.7) years for females.
Reorganisation provisions include £27m (2019: £11m) relating to redundancy costs for plans which were announced to employees before 31 December 2020 and are expected to be settled before 31 December 2021.
Other provisions includes £13m (2019: £14m) held relating to property dilapidations and refurbishments, the costs relating to which will be borne across the period over which the leases expire, which is up to 20 years.
Notes to the consolidated statement of financial position continued 44) Leases Leases as a lessee The Group leases land and buildings and other assets such as vehicles, IT equipment, servers and mainframes (reported as other) to operate its business in each of its core regions. The remaining lease terms for the main office premises range from 1 to 18 years.
The Group also leases office equipment such as laptops and printers and for which certain leases are short term (1 year or less) and/or for low value items. The Group has elected to apply recognition exemptions as permitted by IFRS 16 for these leases (see Appendix A for accounting policy).
Impairment assessment In response to Covid-19 substantially all of the Group’s employees temporarily moved from office to home working. Some territories have returned to the office however a large proportion of the Group’s leased office space is not currently being fully utilised. Further to the success of home working and in conjunction with the UK restructuring programme, a review of the future working locations of employees and required office space usage has been undertaken. These factors were considered to be impairment indicators and therefore impairment assessments of property and equipment including right-of-use assets has been undertaken. Subsequently, impairments of £15m of right-of-use assets have been recognised in underwriting and policy acquisition costs (£8m: £6m UK&I and £2m Scandinavia) and other operating expenses (£7m: all UK&I) mainly relating to office floor space which is not expected to be utilised in the future.
· The likelihood of activating future break clauses on remaining leases where office space is still utilised have been assessed and assets remeasured (together with associated lease liabilities) where it is likely that clauses will be invoked.
The key judgements and assumptions used in measuring the recoverable amounts of the impaired right of use assets are not deemed materially sensitive. An adverse extreme change in all key judgements and assumptions included in the calculation of the recoverable amount would result in additional impairment of £4m.
© 2020 Friend Studio Ltd File name: Notes_30_to_end_NEW_v21 Modification Date: 9 March 2021 12:19 pm 44) Leases continued Two properties in Canada have lease terms ending January 2028 and December 2033 with the option to extend the leases for two further consecutive periods of five years each. The extension options have not been included in the determination of the lease term and therefore the measurement of the lease liabilities.
Amortisation and impairment of intangible assets and goodwill 23 100 84
Notes to the consolidated statement of cash flows 44) Leases continued Operating leases The Group leases out its investment property and has classified these leases as operating leases because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets.
During 2020, the Group recognised £18m of rental income within its net investment return (2019: £19m).
© 2020 Friend Studio Ltd File name: Notes_30_to_end_NEW_v21 Modification Date: 9 March 2021 12:19 pm 46) Reconciliation of movements of liabilities arising from financing activities The table below details changes in liabilities arising from the Group’s financing activities.
Total changes from financing cash flows 309 (26) (50) 43 276
The effect of changes in foreign exchange rates – – (3) (4) (7)
© 2020 Friend Studio Ltd File name: Notes_30_to_end_NEW_v21 Modification Date: 9 March 2021 12:19 pm 47) Other commitments Capital commitments The Group’s significant capital commitments in respect of investment property, property and equipment and intangible assets are detailed in the table below: 2020 £m 2019 £m
The Group receives liability claims and becomes involved in actual or threatened litigation during the ordinary course of its business operations. The Group reviews and, in the opinion of the directors, maintains sufficient provisions, capital and reserves in respect of such claims.
In addition, the Group has given guarantees, indemnities and warranties in relation to the disposals of its businesses and business interests to external parties. These are kept under review and, in the opinion of the directors, no material loss will arise in respect of these guarantees, indemnities and warranties.
· The ability to use its power over the subsidiary to affect its returns
The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of acquisition.
The Group’s share of its associates’ profits or losses are recognised in the consolidated income statement and its share of comprehensive income is recognised in the consolidated statement of comprehensive income. The cumulative post acquisition movements are adjusted in the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
Adjustments are made on consolidation, where necessary, to the accounting policies of associates to ensure consistency with the policies adopted by the Group.
· All resulting exchange differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income within the foreign currency translation reserve. Further information can be found in note 22. When a foreign entity is sold, the cumulative exchange differences relating to that foreign entity are recognised in the consolidated income statement as part of the gain or loss on disposal.
Foreign currency transactions Foreign currency transactions are translated into the functional currency of the Group’s business operations using the exchange rates prevailing at the time of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated income statement.
Internal loans Where non-Sterling loans are provided by RSA Insurance Group plc to its subsidiaries, the settlement of which is neither planned nor likely to occur in the foreseeable future, they are treated as part of its net investment in subsidiary in the consolidated financial statements which results in foreign exchange gains and losses being recognised in revaluation reserves.
Hedge of a net investment in a foreign operation Where a foreign exchange derivative is designated as a hedging instrument against a net investment in foreign operations, the effective portion of the hedge is recognised in other comprehensive income; the gain or loss relating to the ineffective portion is recognised immediately in the consolidated income statement. At the point at which the net investment in the foreign operation is derecognised, the gains and losses accumulated in other comprehensive income are transferred to the consolidated income statement.
All other equipment is stated at cost less accumulated depreciation and accumulated impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset only when it is probable that the expenditure will result directly in future economic benefits to the Group, and the cost can be measured reliably.
Appendix A: Other accounting policies continued The useful economic life and residual value are reviewed on an annual basis. Where the carrying value of an asset is deemed to be greater than its recoverable amount the asset is impaired. Impairment losses on non-revalued assets are recognised in the consolidated income statement. Impairment losses on revalued assets are recognised in other comprehensive income to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. Impairment losses may be subsequently reversed if there is a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If this is the case, the increased carrying amount of an asset shall not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are recognised in the consolidated income statement except for reversals of impairment losses on revalued assets which are recognised in other comprehensive income similarly to the initially recorded impairment loss.
Gains and losses on disposal are recognised based on the carrying amount of the asset. On disposal of buildings, any associated revaluation surplus is transferred to retained earnings.
Policy acquisition costs Policy acquisition costs incurred in acquiring insurance contracts include commissions and premium levies directly related to the writing or renewal of insurance policies. These acquisition costs are deducted from unearned premiums and recognised in the consolidated income statement on the same basis as the unearned premiums.
· Introductory commission income is received from third parties for introducing business to them and is recognised when the introduction is made.
· Reinsurance commissions are recognised over the same period in which relevant expenses are recognised.
Dilution levels for all schemes are held strictly within limits set by the Investment Association.
The lease liability is recognised at the inception of a lease as the present value of the fixed and certain variable lease payments, plus any guaranteed residual values, any termination penalties if the lease term assumes termination options will be exercised, and the purchase option value if it is reasonably certain that it will be exercised.
Interest is accrued on the lease liability based on the discount rate at commencement of the lease, and is accounted for in finance costs. The discount rate is the rate implicit in the lease, except where this rate cannot be readily determined, in which case the Group’s incremental borrowing rate is used. Subsequent payments are deducted from the lease liability.
Amounts due from lessees under finance leases are recognised as receivables within Other debtors at the amount of the Group’s net investment in the lease. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.
Roins Financial Services Limited 18 York Street, Suite 800, Toronto ON M5J 2T8, Canada Common
Roins Financial Services Limited4 18 York Street, Suite 800, Toronto ON M5J 2T8, Canada Preference
Royal & Sun Alliance Insurance Company of Canada4 18 York Street, Suite 800, Toronto ON M5J 2T8, Canada Class A
Coast Underwriters Limited4 208-4940 No. 3 Road, Richmond BC V6X 3A5, Canada
MRM Solutions Limited4 208-4940 No. 3 Road, Richmond BC V6X 3A5, Canada
Quebec Assurance Company 2475 Laurier Blvd., Quebec City, Québec G1T 1C4, Canada
Unifund Claims Inc. Fort William Building, 10 Factory Lane, St. John’s Newfoundland A1C 6H5, Canada 10122033 Canada Inc.
95 Mural Street, Suite 400, Richmond Hill ON L4B 3G2, Canada Common 10122033 Canada Inc.4 95 Mural Street, Suite 400, Richmond Hill ON L4B 3G2, Canada
Class A Preferred 2029974 Ontario Inc.7 95 Mural Street, Suite 400, Richmond Hill ON L4B 3G2, Canada
Class A Common 2029974 Ontario Inc.7 95 Mural Street, Suite 400, Richmond Hill ON L4B 3G2, Canada
Class E Special 2029974 Ontario Inc.4 95 Mural Street, Suite 400, Richmond Hill ON L4B 3G2, Canada
Class S Special 2029974 Ontario Inc.7 95 Mural Street, Suite 400, Richmond Hill ON L4B 3G2, Canada
Deeks Investments Inc.4 95 Mural Street, Suite 400, Richmond Hill ON L4B 3G2, Canada
95 Mural Street, Suite 400, Richmond Hill ON L4B 3G2, Canada
Deeks Investments Inc.4 95 Mural Street, Suite 400, Richmond Hill ON L4B 3G2, Canada Common
Ireland 123 Money Limited4, 8 RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16, Ireland B1 Ordinary 123 Money Limited4, 8 RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16, Ireland B2 Ordinary 123 Money Limited4, 8 RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16, Ireland B3 Ordinary 123 Money Limited4, 8 RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16, Ireland B4 Ordinary 123 Money Limited4, 8 RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16, Ireland B5 Ordinary 123 Money Limited4, 8 RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16, Ireland C Ordinary 123 Money Limited8 RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16, Ireland 123 Money Limited8 RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16, Ireland shares
IDIP Direct Insurance B.V.8 20 Fenchurch Street, London, EC3M 3AU, United Kingdom
Intouch Insurance Group B.V.8 20 Fenchurch Street, London, EC3M 3AU, United Kingdom
Punchbowl Park Management Limited3, 5 10 Buckingham Gate, London, SW1E 6LA, United Kingdom
Polaris U.K. Limited3 New London House, 6 London Street, London, EC3R 7LP, United Kingdom 25.38
St Mark’s Court, Chart Way, Horsham, West Sussex, RH12 1XL, United Kingdom
Wall Street Plaza, 88 Pine Street, New York, NY 10005, United States 1. Directly owned by the Parent Company RSA Insurance Group plc. 2. No subsidiary holds a disclosable interest in the shares of RSA Insurance
8. Indicates companies within the Group that apply IFRS 9 and disclose relevant information in their own published financial statements in addition to that already included in these consolidated financial statements.
Fair value gains net of tax – – – – 508 – – – 508
Dividends – paid (note 8) – – – – – – (242) – (242)
Shares issued for cash (note 12) 1 3 – – – – – – 4
Share-based payments (note 7) 4 – – – – – 6 – 10
Loss for the year net of tax – – – – – – (19) – (19)
Shares issued for cash (note 12) 1 5 – – – – – – 6
© 2020 Friend Studio Ltd File name: Notes_30_to_end_NEW_v21 Modification Date: 9 March 2021 12:19 pm
Parent Company statement of financial position As at 31 December 2020
The Parent Company financial statements were approved on 25 February 2021 by the Board of Directors and are signed on its behalf by: Charlotte Jones Group Chief Financial Officer
© 2020 Friend Studio Ltd File name: Notes_30_to_end_NEW_v21 Modification Date: 9 March 2021 12:19 pm 2020 £m 2019 £m
Cash and cash equivalents at the end of the year 3 5
Parent Company statement of cash flows For the year ended 31 December 2020
These Parent Company financial statements have been prepared on a going concern basis and in accordance with International Accounting Standards (IAS) in conformity with the requirements of the Companies Act 2006.
In accordance with section 408 of the Companies Act 2006, the Company’s income statement and related notes have not been presented in these Parent Company financial statements.
2) Significant accounting estimates and judgements In preparing these Parent Company financial statements, management has made judgements in determining estimates in accordance with the Group’s accounting policies. Estimates are based on management’s best knowledge of current circumstances and expectation of future events and actions, which may subsequently differ from those used in determining the accounting estimates.
The most significant estimate is in connection with fair valuing the investment in subsidiaries, details of which can be found in note 9.
Investments in debt securities Investments in debt securities are valued at FVOCI on the basis that their contractual cash flows are solely principal and interest and the Company’s business model’s objective is to hold such investments to collect their contractual cash flows and for sale.
Notes to the Parent Company financial statements continued 5) Risk and capital management The Company’s key risks are considered to be the same as those faced by the Group. Details of the key risks to the Group and the steps taken to manage them are disclosed in the risk and capital management section (note 6) of the consolidated financial statements.
6) Related party transactions The following transactions were carried out with related parties: RSA Insurance Group plc provides services and benefits to its subsidiary companies operating within the UK and overseas as follows: · Provision of technical support in relation to risk management, information technology and reinsurance services. Services are charged for annually on a cost plus basis, allowing for a margin of 7% (2019: 6%).
· Issue of share options and share awards to employees of subsidiaries. Costs are charged for annually, based on the underlying value of the awards granted calculated in accordance with the guidance set out within IFRS 2.
Other transactions Interest is receivable on interest bearing loans to subsidiaries, which are repayable on 24 hours written notice. The rates of interest charged during the period are at three months LIBOR plus margins ranging from 0.60% to 2.50%.
Royal & Sun Alliance Insurance plc (RSAI), a subsidiary of the Company, has provided guarantees to the Company’s creditors for amounts arising from its issued debt agreements (as set out in note 37 to the consolidated financial statements) and for amounts arising from its committed credit facilities (as set out in note 38 to the consolidated financial statements). The guarantees relating to the issued debt agreements are subordinated to all other creditors of RSAI.
Payable to related parties: Payable to subsidiaries, interest bearing loans 189 36
The directors believe that the methodology used supports the inclusion of the investments in subsidiaries in the statement of financial position, at the fair values ascribed to them. The market value of the Company’s ordinary shares at 31 December 2020 was 677.40p. A movement of 5% in the share price would have an impact of £351m on the fair value.
The movement in the net deferred tax assets recognised by the Company was as follows: 2020 £m 2019 £m
Net deferred tax assets of £4m (2019: £5m) that relate to tax jurisdictions in which the Company has suffered a loss in either the current or preceding period, have been recognised on the basis that future taxable profits will be available against which these can be utilised. The evidence for the future taxable profits is a forecast consistent with the three year operational plans prepared by the relevant businesses, which are subject to internal review and challenge. Where relevant, the forecast includes extrapolations of the operational plans using assumptions consistent with those used in the plans.
Prepayments and accrued income - to be settled within 12 months 5 5
Total other debtors and other assets 5 5 12) Share capital Full details of the share capital of the Company are set out in note 34 to the consolidated financial statements.
Alternative performance measures Alternative performance measures (APMs) are complementary to measures defined within International Financial Reporting Standards (IFRS) and are used by management to explain the Group’s business performance and financial position. They include common insurance industry metrics, as well as measures that management and the Board consider are useful to enhance the understanding of its performance and allow meaningful comparisons between periods and business segments. The APMs reported are monitored consistently across the Group to manage performance on a monthly basis. They are reviewed across various functions and undergo rigorous internal quality assurance.
Attritional Loss Ratio This is the claims ratio (net incurred claims and claims handling expense as a proportion of net earned premium) of our business prior to volatile impacts from weather, large losses and prior-year reserve developments.
Claims Severity Average cost of claims incurred over the period. Combined Operating Ratio (COR)
The profit or loss earned from business for which insurance cover has been provided during the current financial period. This does not include performance impacts recognised in the current reporting period relating to prior accident years.
A measure of current year underwriting result performance calculated as per the combined operating ratio.
Expense Ratio Underwriting and policy expenses expressed as a percentage of net earned premium. ◊ 1 X Exposure A measurement of risk we are exposed to through the premiums we have written.
Reinsurance purchased by the Group to protect against a catastrophic event, usually a large number of losses accumulating over a short period of time. Losses can arise worldwide from either natural peril, for example hurricane, windstorm, flood and earthquake, or from man-made perils, for example explosion, fire. Individual losses are aggregated and, when the respective Catastrophe retention is exceeded, a reinsurance recovery is made.
Other charges represents items that are excluded to arrive at business operating result and underlying profit measures.
To allow meaningful assessment of segmental performance where similar internally generated assets are not capitalised.
To allow assessment of performance excluding the impact of changes in the discount rate on long-term insurance liabilities.
To remove the impact of market volatility and investment rebalancing activity.
Policies in Force The number of active insurance policies for which the Group is providing cover. Prior Year Underwriting Result
Pull to Par The movement of a bond’s price toward its face value as it approaches its maturity date. Rate The price of a unit of insurance based on a standard risk for one year. Actual premium charged to the policyholder may differ from the rate due to individual risk characteristics and marketing discounts.
‘Record’ refers to the highest underwriting result and lowest COR this century when comparing performance on a like for like basis (with central costs consistently allocated to the underwriting result pre 2013 back to 2000).
Return on Tangible Equity Profit attributable to ordinary shareholders (profit after tax excluding non-controlling interests, coupon on tier 1 notes and preference dividend) expressed in relation to opening tangible net asset value.
Solvency II/Coverage Ratio Capital adequacy regime for the European insurance industry which commenced in 2016 and is based on a set of EU wide capital requirements and risk management standards. The coverage ratio represents total eligible capital as a proportion of the Solvency Capital Requirement (SCR) under Solvency II.
Tangible net asset value, divided by the number of shares in issue at the end of the period. ◊ 3 F
Underlying Profit after Tax Profit after tax, less the proportion that is attributable to non-controlling interests, preference shareholders and tier 1 note holders, plus the add back of all other charges except finance costs (reasons for exclusion above) before an adjustment for the tax difference between effective and underlying rate.
Underlying Return on Equity Underlying profit after tax expressed in relation to opening ordinary shareholders’ funds (equity attributable to owners of the Parent Company less tier 1 notes and preference share capital).
Underlying profit after tax divided by the weighted average number of shares in issue during the period.
Investment income 258 D 258 Realised gains on investments 6 6 Gains on exchange derivatives 9 9 Unrealised losses on investments (24) (24) Investment impairments (32) (32) Net investment return 217 Other insurance income 129 E 129 Pension net interest and administration costs 1 1 Other operating income 130 Total income 6,546 Expenses Gross claims incurred (4,521) (4,521) Less: claims recoveries from reinsurers 631 631 Net claims, analysed as (3,890) F (3,890)
Alternative performance measures reconciliations continued 1. IFRS reconciliation to management P&L continued For the 12 months ended 31 December 2019 £m IFRS
Interest costs (25) (25) Interest on lease liabilities (7) (7) Finance costs (32) O (32) Acquisitions and disposals (14) (14) Net share of profit after tax of associates 1 1
Alternative performance measures reconciliations continued 2. Metric calculations 2020 £m 2019 £m
Opening equity attributable to owners of the Parent Company 4,169 4,083
Comprised of: Volume change including portfolio actions and reinsurance (551) (373)
APM Rec 2 G Underlying profit after tax attributable to ordinary shareholders 486
Further information and help The Company’s corporate website provides a range of information about the Group’s heritage, social and environmental responsibilities and investor information such as the Group’s financial statements, current and historic share prices, Annual General Meeting (AGM) materials, events, governance information and answers to frequently asked questions in respect of shareholder matters, including the cash offer from Intact and Tryg. Visit the investor website at www.rsagroup.com/investors for further information.
The Company’s share register is maintained by Equiniti Limited (Equiniti). Any administrative enquiries relating to shareholdings, such as dividend payment instructions or a change of address, should be notified to: · Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
When contacting Equiniti, please quote your shareholder reference number which can be found on your share certificate or dividend documents.
Equiniti offers a telephone and internet dealing service. Commission is 1.5% (rate quoted as at 22 February 2021 and may be subject to change) on amounts up to £50,000 and 0.25% on the excess thereafter, with a minimum charge of £60 for telephone dealing and £45 for internet dealing. For telephone sales, call +44(0) 345 6037 037. Lines are open 8.30am to 5.30pm (UK time), Monday to Friday, excluding public holidays in England and Wales. For internet sales log on to www.shareview.co.uk/dealing. Please quote your shareholder reference number.
A letter from the Chairman and the notice convening the AGM (Notice) will be made available to all ordinary shareholders at least 20 working days before the meeting and will be available on the Company’s website at www.rsagroup.com.
More information on protecting your investment can be found at www.fca.org. uk/consumers. If you do receive a fraudulent approach, please advise the FCA using the share fraud reporting form at www.fca.org.uk/ scams or call the FCA Consumer Helpline on 0800 111 6768.
· Consider holding your shares electronically in a CREST account via a nominee account or in the Corporate Sponsored Nominee.
IMPORTANT DISCLAIMER This document contains ‘forward-looking statements’ with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition, performance, results, strategic initiatives and objectives. Generally, words such as ‘may’, ‘could’, ‘will’, ‘expect’, ‘intend’, ‘estimate’, ‘anticipate’, ‘aim’, ‘outlook’, ‘believe’, ‘plan’, ‘seek’, ‘continue’, ‘potential’, ‘target’, ‘reasonably possible’ or similar expressions, are intended to identify forward-looking statements.
The Group’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in such forward-looking statements and, as a result, these forward-looking statements are not guarantees of future performance of the Group and undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. The Group undertakes no obligation to update any forward-looking statements, save in respect of any requirement under applicable law or regulation. Neither the content of RSA’s website nor the content of any other website accessible from hyperlinks on RSA’s website is incorporated into, or forms part of, this document.
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