– To be well capitalised; Achieving sustainable attractive returns. – Strong operational delivery. Transparent and easy to understand. – Enduring customer appeal. Winning for customers and winning for shareholders
– Market-leading positions – Recognised strong brands – Strong, award-winning products – Excellent broker relationships ��� AKD�SN�@SSQ@BS�KD@CHMF�@EäMHSX�O@QSMDQR – Strong and improving Net Promoter Scores – High and stable customer retention
Independent auditor’s report to the members of RSA Insurance Group plc 108
I am very pleased with the progress we have made against both of these objectives. I was delighted that we VDQD�@AKD�SN�BNMãQL�SGD�@OONHMSLDMS� of Stephen Hester as Group Chief Executive in February. Stephen brings a wealth of experience, both as a FTSE 100 CEO and as the engineer of business improvement across many sectors. He has also brought energy, rigour, fresh thinking and challenge to the Boardroom and across the business. He has completed a thorough review of all of our businesses, challenging each one to improve their performance and to be measured against a benchmark of the leading competitors in their local markets. Stephen has inherited an experienced management team which he has supplemented by the recruitment of key external hires during the year.
Richard Houghton, our Chief Financial .EãBDQ�RHMBD�������VHKK�RSDO�CNVM�EQNL� the Board at the AGM and will leave the company later this year. Both Stephen and I are grateful to Richard for his work at RSA and wish him well for the future.
In the long history of RSA, 2014 will be seen @R�@M�HLONQS@MS�@MC�GHFGKX�RHFMHäB@MS�XD@Q � Following the challenges at the end of 2013, your company has ended 2014 in a substantially improved position with a clear vision for a stable and healthy future.
Johanna Waterous RSA Senior Independent Director years’ service respectively. I would like to thank both Edward and Malcolm alongside all of our employees for their contribution to the business CTQHMF�����
.TQ�ãM@K�RSQ@SDFHB�NAIDBSHUD�HR�SN� improve the operational performance of the business. This started with a systematic review of our control environment in response to the issues SG@S�@QNRD�HM�(QDK@MC�HM�K@SD����� � Following comprehensive internal and external reviews, we found no evidence that the issues in Ireland were repeated anywhere else in the business. Despite SGHR��CTQHMF������VD�HMHSH@SDC�@�&QNTO� wide controls and governance review to ensure our internal control system is consistent and independent. The Board has been fully involved in this programme with Non-Executive Directors sitting on the operational steering group to ensure that we are R@SHRãDC�VHSG�ANSG�SGD�PT@KHSX�NE� thinking and the speed of execution. The programme has been making excellent progress.
Our operational improvement does not stop there. During the year we G@UD�HCDMSHãDC�NOONQSTMHSHDR�@BQNRR� the business to improve revenue B@O@AHKHSHDR��HMBQD@RD�DEãBHDMBX�@MC� reduce costs.
For hundreds of years insurance has played a critical role in enabling global trade, facilitating innovation and fuelling economic and social prosperity. At RSA, we are proud of our heritage as the oldest insurance company in the world. Looking forward, we expect to continue to play an important role in global society.
13 no. of countries in the RSA Group that ran major road safety B@LO@HFMR�HM�����
100m number of miles driven on our telematics motor products in the UK RHMBD�����
At its heart insurance is about the pooling of risk. By enabling groups of customers to share risks, we lower the costs of those risks for all concerned. To add value for customers it is vital that insurers have a thorough understanding of the risks being pooled. Premiums need to cover the costs of claims as well as the costs of selling and administering the policy, and the cost of cover needs to be attractive to customers by matching to their evaluation of risk.
As well as lowering costs, pooling risks also creates assets. This is due to the timing difference between the receipt of premiums and the payment of claims. Insurers can use these assets to invest in society.
INVESTING IN OUR SOCIETIES We hold our assets mainly in highPT @KHSX�ãWDC�HMBNLD�HMUDRSLDMSR � This conservative investment strategy provides a stable source of capital to governments and companies and enables them to focus on generating economic value for their constituents and customers.
Our businesses and services also promote environmental sustainability by helping our customers respond to changing risks and promoting new ways of working that save energy and resources. We are one of the world’s largest insurers of renewable energy, particularly in the offshore wind sector.
SUPPORTING COMMERCIAL TRADE Our commercial insurance products cover a wide range of business sectors from property, marine and motor through to utilities, telecoms, renewable energy, and construction and engineering. By reducing the costs of these risks to businesses, we enable our customers to deploy more capital on the creation of economic value. For example our marine insurance team facilitate international trade by lowering the risks and costs of transportation. We work with our large commercial customers to help them manage complex risks, reducing their premiums and our likely claims costs.
SUPPORTING THRIVING COMMUNITIES Our customers and our business do well when they are part of prosperous communities. Our products and services give individuals @MC�BNLO@MHDR�BNMãCDMBD�SN�HMUDRS� and grow. Through our Corporate Responsibility activity, we focus on the social challenges many of the countries in which we operate face, including youth unemployment and the need to develop enterprise and entrepreneurship vital to economic growth. We run education and employability programmes, including skills-sharing volunteering activities, internships and SME business mentoring.
43% of our volunteering support focused on education and employability programmes 6,691 no. of volunteering hours devoted during ����
The sustained low interest rate environment also poses a major challenge for the insurance sector and for RSA, given that the majority of our assets are invested in high-quality ãWDC�HMBNLD�HMRSQTLDMSR �+NVDQ� interest rates therefore means lower investment income, which in turn places increased emphasis on TMCDQVQHSHMF�OQNãS�@R�@M�HLONQS@MS� source of earnings.
Our aim is to ensure that our customers can service their policy wholly online so they can buy, change or make a claim on their policy with convenience. By the DMC�NE�������VD�HMSDMC�SN�NOSHLHRD�@KK�NE� our web journeys across the group for mobile devices, enabling our customers to browse, compare and purchase our products easily, using their smartphone or tablet. In the UK, we have made it possible for our insurance brokers to arrange SME (Small Medium Enterprise) insurance cover online. We also offer a webchat facility to help them through the process. Both of these make it quicker and easier for our brokers to do business with us.
The rapid advancement of technology and the increasing availability of data is opening the door to new ways of assessing and managing risk. This is particularly apparent in the UK personal motor sector where telematics is changing the way insurers underwrite @MC�OQHBD�QHRJ �(M�������VD�K@TMBGDC�SVN� telematics products in the UK, MORE TH>N DRIVE and MORE TH>N SMART WHEELS. As our marketplaces continue to evolve, we will continue to invest in our telematics offering and analytics capabilities.
UK AND IRELAND The UK and Ireland has outpaced the $TQNYNMD�VHSG������&#/�FQNVSG�NE� � �í�HM�SGD�4*�@MC�DRSHL@SDC�FQNVSG� NE�� �í�HM�(QDK@MC��RNTQBD��.-2�@MC�"!(� �
In Ireland, the economy has emerged strongly from the recession following the wide-ranging austerity measures @MC�HR�ENQDB@RS�SN�FQNV�AX�� �í�HM������ (source: CBI).
We are focused on the Northern developed markets of Scandinavia, Canada, the UK and Ireland, with a growing business in Latin America. Insurance conditions have remained challenging across these markets.
Despite the pick up in the economy, consumers remain price conscious. In both markets, insurance pricing conditions remain soft across most major product lines.
/QDLHTL�FQNVSG�HM������V@R� moderated by the Ontario auto price reductions announced last year, which form part of regulatory motor reforms designed to reduce auto insurance OQHBDR�ENQ�.MS@QHN�CQHUDQR�AX���í�AX� TFTRS����� �3GHR�L@QJDS�QDOQDRDMSR� around a quarter of the overall Canadian P&C market. It is expected that there will be commensurate claims cost reduction measures to support this, although the timing of implementation is uncertain.
Overall, the pricing environment in Scandinavia remains broadly stable. �����V@R�@�QDK@SHUDKX�ADMHFM�XD@Q� in terms of weather events which QDRTKSDC�HM�FNNC�NUDQ@KK�OQNãS@AHKHSX� in the market.
RSA is the third-largest insurer in the region. The region also has some structural differences from the rest of Europe in that the majority of insurance is distributed directly to the consumer.
Despite this, there is evidence that smaller competitors are gaining more share of the market. This highlights the importance for us of building and maintaining strong customer relationships.
We make a difference by protecting people and businesses against the risks they face in their daily lives. We provide unrivalled expertise through our global network of providers to cover everything from houses and pets, to skyscrapers and tankers, across the world.
POSITIVE PEOPLE Creating an environment where people want to do great work.
UNDERSTANDING AND PRICING RISK We are in the business of risk management. We strive hard to understand the risks our customers want us to insure and make sure that we price our products appropriately.
EFFECTIVE PRODUCT/ CUSTOMER DISTRIBUTION We distribute our products through many different BG@MMDKR �$EãBHDMS�@BBDRR� to customers is key if we are to continue to develop our business.
Ensuring shareholders are adequately rewarded for the capital they provide We aim to achieve acceptable returns by ensuring that underwriters understand the target price required to deliver target returns on capital.
The most effective way to grow premium income 6D�RSQHUD�SN�ãMC�SGD�KNVDRS�BNRS� route to the largest number of customers, tailoring our offering SN�LDDS�SGD�MDDCR�NE�RODBHãB� markets.
Additional income without putting capital at undue risk 2G@QDGNKCDQR�ADMDãS�EQNL�SGD� returns on our assets, in the knowledge that our prudent approach is unlikely to jeopardise their capital.
Enabling customers to manage their risk appetite We work with our customers to ensure that they can reduce their risks, reducing premiums for them and claims costs for us.
Accessing insurance products in the way customers want The way in which customers want to buy insurance is changing. We are at the forefront of these changes, anticipating customers’ evolving needs to provide easy access to our products.
Access to best practice innovation and multinational risk coverage We are always looking to share ideas and best practice across countries giving customers access to innovative products and services. We can provide multinational customers with global product coverage.
£7.5bn Net written premiums £2.9bn Tangible net asset value £14.2bn Investment assets c.80% Customer retention
INTERNATIONAL EXPERTISE AND DIVERSIFICATION As an international business we are seeking to maximise SGD�ADMDãSR�NE�NTQ�QD@BG� without losing touch with the differing needs of the many markets we operate in.
Lower claims costs and higher retention Generally, claims that are settled quicker, settle for less, meaning BK@HLR�Q@SHNR�E@KK �2@SHRãDC� customers will stay with us for longer, reducing acquisition costs.
Our decisions are data driven, personalising our content and services to meet our individual customer needs on their chosen channel of communication.
#HFHS@K�R�HMâTDMBD�VHKK�NMKX�HMBQD@RD�� and our aim is to anticipate future digital trends and create modular solutions that are ‘future friendly’ and ‘device agnostic’. This limits the impact of uncertainty and enhances RSA’s products, so that as our markets become increasingly connected, we’re there when our customers need us.
2HMBD�HSR�K@TMBG��SGDQD�G@R�ADDM�@���í� uplift in brokers transacting online. Newsletter sign-ups have increased AX����í��@MC�NUDQ@KK�UHRHSR�@QD�TO���í
SWEDEN TRYGG HANSA We are the third-largest insurer in Sweden, and our business there is one NE�SGD�LNRS�OQNãS@AKD�HM�SGD�FQNTO
Our Digital, Technology & Marketing teams have delivered on a number of key initiatives, including improvements to the online sales, customer service, @MC�BK@HLR�RSQ@SDFHDR �(M�%DAQT@QX������� we launched a customer self-service capability with great success, and this G@R�HMâTDMBDC�OQNIDBSR�HM�ANSG�SGD�4*� and Canada.
The redesign of the new motor customer journey involved simplifying the buying process. This comprised of reducing the number of web pages that a customer goes through from ãUD�SN�SGQDD�@MC�@KKNVHMF�@�PTNSD�SN� be started directly from the home page of the website. The responsive design provides a great customer experience regardless of the device the customer is using.
To ensure the changes to the experience were of the highest quality we undertook rigorous testing with our customers during development. All feedback was included in the ãM@K�OQNIDBS�ADENQD�ãM@KHR@SHNM
These changes have seen an early uplift in mobile purchases, with one in four sales now made through a device.
“DIGITAL CHANNELS ARE BECOMING THE PRIMARY ROUTE FOR CUSTOMERS TO MANAGE THEIR INSURANCE PRODUCTS.”
INDUSTRY CONDITIONS We operate in relatively mature, stable and consolidated markets. These continue to underpin our ambition of good and improving customer service – offering vital risk management and value for money. We see continued evolution as digital and other trends are harnessed to improve the scope of how we operate. Despite economic challenges, industry conditions also allow us to realistically target a cash generative business, returning greater than the cost of capital for shareholders.
STRATEGY AND FOCUS RSA is a leading international insurer. Our refocused business has leadership positions in Scandinavia, Canada, UK and Ireland, and parts of Latin America. Where we do business, we are determined to do it well and be known for our service and appeal to customers. In volatile and competitive markets, our balance of geography, customer, product and distribution channels are valuable and distinctive attributes.
2014 ACTIONS (�INHMDC�12 �HM�%DAQT@QX������VHSG� a mandate to lead the Company in three urgent tasks. These were: to thoroughly identify the sources of RSA’s performance weaknesses; to devise OK@MR�SN�ãW�SGDRD�@MC�@CCQDRR�HMSDQM@K� and external challenges to realising RSA’s potential; and then to implement SGNRD�OK@MR �3GD�ãQRS�SVN�S@RJR�@QD� largely done. The third is well in hand, but with much tough and disciplined work ahead to follow through.
As so often in corporate turnarounds, the cost of remediation has proven greater than we hoped, especially in the form of reserving and non-cash charges. But we have been able to pay for this through outperformance in divestment proceeds. We have refocused RSA on its most important businesses, with a well executed divestment programme already substantially completed.
Across our core business, determined action has set a course for improved underwriting results with current year loss ratios (ex-volatile items) improving UDQRTR�������NUDQ@KK�@MC�HM�LNRS�L@INQ� business units, and expected to do so @F@HM�HM����� � KNMFRHCD�SGHR�HR�@BSHUHSX� across our business to sustain and
12 �MDDCDC�@�RTARS@MSH@K�ãM@MBH@K� overhaul. This has focused on improving both the quality and the health of its A@K@MBD�RGDDS�@MC�OQNãSR �3GD�NMFNHMF� drag of costs below the underwriting line is also being addressed through reducing central overhead, interest and non-cash amortisation. Intangible assets and deferred acquisition costs have been written down where no longer well supported, with action on booked values of discounted liabilities @MC�CDEDQQDC�S@W�@RRDSR��SN�ADSSDQ�QDâDBS� current circumstances, though both are still potentially vulnerable to future economic conditions and business ODQENQL@MBD �6D�RSHKK�G@UD�RHFMHãB@MS� volatile accounting items in the form of unrealised bond gains as well as off-balance sheet pension liabilities (which are now reporting a surplus under IFRS for the UK, but with latent risk).
FINANCIAL RESULTS 'D@CKHMD�OQNãSR�@S�`���L�OQD�S@W� BNLO@QD�SN�@�`���L�OQD�S@W�KNRR� HM�������XDS�RSHKK�QDOQDRDMS�@�EQ@BSHNM� of what we seek to achieve as RSA improves performance in coming years.
Net tangible assets have improved by `� �AM����í��SN�`� �AM�HM�������EQNL���í� SN���í�NE�MDS�VQHSSDM�OQDLHTLR��@MC� now lie within our target range from a capital perspective, though still at the lower end. We are pleased to recommence dividend payments with @�ãM@K�CHUHCDMC�QDBNLLDMC@SHNM�NE� �O�ODQ�RG@QD �3GHR�HR�@�LNCDRS�KDUDK� QDâDBSHMF�SGD�VNQJ�QDL@HMHMF�NM� OQNãS�@MC�B@OHS@K�ATHKC �6D�QDHSDQ@SD� @�LDCHTL�SDQL�@LAHSHNM�NE������í� dividend payouts plus further capital distributions if excess capital arises.
/QDLHTL�HMBNLD�HR�CNVM��í�NM�@M� underlying level at constant exchange ��í�GD@CKHMD�HMBKTCHMF�BNLOKDSDC� disposals, Motability changes and the Group ADC). Scandinavia did VDKK��TO��í���4*�R@V�LNRS�ONQSENKHN� QDRSQTBSTQHMF��CNVM��í�TMCDQKXHMF�� VHSG�"@M@C@�@KRN�CNVM�@�KHSSKD���í� � At reported exchange rates premiums VDQD�CNVM���í
Current year core business underwriting OQNãS��DW�(QDK@MC��V@R�@�QDBNQC�`���L� ������`��L��QDâDBSHMF�@�NMD�ONHMS� improvement in underlying loss ratios, and after a relatively normal weather and large loss charge. The core business current year underlying loss ratio �DW�(QDK@MC��V@R��� �í���������� �í�� and has improved in each quarter CTQHMF�����
3NS@K�TMCDQVQHSHMF�OQNãS�V@R�`��L� ������`��L� �3GD�ãFTQD�V@R�CDOQDRRDC� AX�RHFMHãB@MS�QDRDQUD�RSQDMFSGDMHMF� VGHBG�HLO@BSDC�OQHNQ�XD@Q�OQNãSR� �OQHNQ�XD@Q�TMCDQVQHSHMF�OQNãS�DW� (QDK@MC�`��L��������`���L��@MC�@M�(QHRG� underwriting loss of £107m. The latter mainly relates to the development NE�HRRTDR�EQNL������@MC�OQHNQ �!NSG� items have proven more costly than was estimated at the start of the year. We expect them to improve sharply HM�����
improve the health of our customer franchise and to invest in technology, product and service initiatives. These efforts mitigated the customer impact NE�12 �R���������OQNAKDLR�@MC�@QD� expected to improve performance further in coming years, also returning us to moderate top-line growth.
The cost base is being tackled vigorously and investment plans to facilitate this and improve customer capabilities have been set out for the MDWS�ãUD�XD@QR �3NS@K�BNMSQNKK@AKD�BNRSR� @QD�CNVM���í�SN�`� �AM�UDQRTR������ �CNVM��í�HM�QD@K�SDQLR�DW�CHRONR@KR� @MC�%7� �.TQ������S@QFDS�NE�FQD@SDQ� SG@M�`���L�TMCDQKXHMF�BNRS�QDCTBSHNM� G@R�ADDM�Q@HRDC�SN�FQD@SDQ�SG@M�`���L� @MC�@�MDV�S@QFDS�NE�FQD@SDQ�SG@M�`���L� RDS�ENQ����� �.TQ�KHMJDC�@LAHSHNM�HR�SN� lift productivity measures (Premiums: DLOKNXDDR��AX������í�AX�SGD�DMC�NE� �����UDQRTR������MTLADQR
THANKS Managing major transformations is not easy. Sincere thanks and appreciation are due to all our stakeholders; customers and brokers for their support in the uncertainties NE�D@QKX�������RG@QDGNKCDQR�ENQ�RTOONQS� through disappointing past news and equity fundraising; and of equally vital importance, my RSA colleagues. The steadfast and dedicated service of our 19,000 staff towards customers and to improving our Company is hugely
@OOQDBH@SDC �3GDQD�G@UD�ADDM�RHFMHãB@MS� changes to our executive management team, and talented people have stepped up internally and have joined us from elsewhere. To all, I am grateful.
We know where we want to take RSA and how to do it. We will face challenges and setbacks. But we believe in this Company, in its place in our industry and its performance potential.
We target business where we can sustain leadership positions with customers while earning better than cost of capital for shareholders. We value diversity and balance provided it does not come at the expense of those core disciplines and provided our Group has the resources and capitalisation to properly succeed with the business we take on.
FOCUSING ON WHAT WE KNOW BEST At the heart of our strategic plans is the ambition that RSA will be operated with discipline and effectiveness to serve customers well, and build shareholder value from a strong capital platform across its main core businesses. These are in the UK and Ireland, Scandinavia, Canada, and Latin America. Our geographical spread outside this core FQNTO�G@R�@KQD@CX�QDCTBDC�RHFMHãB@MSKX�� and will continue to do so over the coming year. To date we have agreed the disposals of our businesses in the
We said we would reset the quantity and quality of capital the Group works with, and the disciplines that will sustain it.
BUILDING CAPITAL STRENGTH After the world’s economic shocks NE����������SGD�B@OHS@K�A@Q�HR�ADHMF� set higher, not just in banking but for insurance too. RSA needs a strong capital base from which it can achieve its objectives. Our customers, rating agencies and regulators demand this, as we must demand it of ourselves. Without such strength, and the discipline to sustain it, the company cannot succeed.
#TQHMF�������NTQ�B@OHS@K�@MC�A@K@MBD� sheet health has been decisively restored, along with new management disciplines to sustain the position. The rights issue and disposal gains have rebuilt tangible equity. There is no single capital measure that captures what we need to achieve. But across the various ratings, internal and regulatory measures, healthy levels of tangible net assets are crucial. We have set a target of building net S@MFHAKD�@RRDSR�SN������í�NE�OQDLHTL� HMBNLD �.TQ�ONRHSHNM�@S������XD@Q�DMC� V@R���í�@MC�VD�@HL�SN�ATHKC�EQNL� here into the upper end of the range.
We have rebuilt our tangible equity through a successfully negotiated rights issue and a series of disposals. 6D�G@UD�@KRN�BNLOKDSDC�RHFMHäB@MS� work towards strengthening our balance sheet.
Fundamental to our ability to improve is the human dimension; ensuring our people share the new Vision and Roadmap; and assembling a management team that can improve upon what we have done before. We have made good progress on SGHR�HM�������VHSG�JDX�@OONHMSLDMSR� in Scandinavia, the UK and Ireland, @MC�&QNTO�'D@C�.EãBD
needs to move forward as does the sophisticated use of data to make the best underwriting decisions, and for this we now have plans in place.
We have put a three-year plan in place. 2014 has been very much a foundation year, and that has meant assembling a new management team that will drive future change.
Still on our to-do list: • Implementation of cost and revenue targets
#DëMHSHNM Premiums in respect of policies written during the year, less any costs associated with purchasing reinsurance protection.
#DëMHSHNM Total shareholders’ funds, excluding goodwill, intangibles, and preference share capital.
#DëMHSHNM /QNãSR�FDMDQ@SDC�EQNL�TMCDQVQHSHMF� insurance business, plus the return from investments, less items such as central overheads, interest expense, amortisation and tax.
Commentary 'D@KSGX�@MC�FQNVHMF�KDUDKR�NE�OQNãS�@QD� important as they fund dividends and, when retained in the business, drive growth in TNAV and improve capital metrics.
#DëMHSHNM .ODQ@SHMF�OQNãS�@SSQHATS@AKD�SN�NQCHM@QX� shareholders less interest costs and underlying tax, expressed in relation to opening tangible shareholders’ funds (i.e. excluding goodwill and intangible assets).
Commentary A key measure of shareholder value and one that informs overall valuation in the insurance sector.
Commentary We understand the importance of managing our own environmental impact. Our operations in the UK, Ireland and Group Corporate Centre are carbon neutral, offsetting their equivalent emissions in renewable-energy projects in China, India and South America VGHBG�@QD�BDQSHãDC�SN�SGD�5NKTMS@QX� Carbon Standard.
#DëMHSHNM Insurance Groups Directive (IGD or ‘Solvency I’) and Economic Capital.
Commentary While there are several ways of measuring capital strength, Solvency I (IGD) is one of two key measures stipulated by our lead regulator – the PRA, alongside our own internal economic capital assessment model (ECA) that assesses the likely capital requirements of the Group in @M�DWSQDLD�RSQDRRDC�RBDM@QHN �(M������ we will move to Solvency II, the new European regulatory capital framework.
Outlook Further improvements towards appropriate surplus levels in excess of a range of regulatory and rating agency indicators.
OQDLHTLR�FQDV��í�@S�BNMRS@MS� DWBG@MFD�VHSG�HMâ@SHNM�KDC�FQNVSG� in Argentina partly offset by the impact of restructuring actions elsewhere in the region.
UNDERWRITING RESULT �����G@R�ADDM�@�XD@Q�SN�ATHKC�PT@KHSX� foundations from which our Action Plan can deliver future improvements. &QNTO�TMCDQVQHSHMF�OQNãS�NE�`��L� �������`��L��BNLOQHRDC�`���L�EQNL� BNQD�NODQ@SHNMR��@MC�@M�`��L�KNRR�EQNL� discontinued and non-core operations. Excluding Ireland, the core operations CDKHUDQDC�`���L�NE�TMCDQVQHSHMF�OQNãS
3GD�BTQQDMS�XD@Q�OQNãS�V@R�`���L�������� `��L���@MC�DWBKTCHMF�(QDK@MC�SGHR�V@R� TO���í�SN�`���L��������`��L� �3NS@K� VD@SGDQ�BNRSR�ENQ������VDQD�`���L� representing a weather loss ratio of � �í��������`���L�NQ�� �í��ãUD�XD@Q� @UDQ@FD��� �í� �3GD�K@QFD�KNRR�Q@SHN�NE� � �í��������� �í��V@R�KNVDQ�SG@M�SGD� ãUD�XD@Q�@UDQ@FD�NE�� �í��QDâDBSHMF� business mix improvements and relatively benign experience in Scandinavia, partly offset by the earthquake in Chile which impacted the Latin America and Group Re result.
The prior year result was a loss of `��L�CQHUDM�AX�@�OQHNQ�XD@Q�TMCDQVQHSHMF� KNRR�NE�`��L�HM�(QDK@MC��4*�/QNEDRRHNM@K� (MCDLMHSX�QDRDQUD�@CCHSHNMR�NE�`��L�� 4*�KDF@BX�QDRDQUD�@CCHSHNMR�NE�`��L�� @MC�`��L�ENQ�ETQSGDQ�4*������VD@SGDQ� claims and Marine premiums. We expect sustainable prior year releases to AD�FDMDQ@KKX�ADKNV��í�NE�OQDLHTLR�� but there is the potential for volatility given our commitment to transparent reserve margins.
INVESTMENT RESULT The investment result, which now includes investment expenses of `��L��OQDUHNTRKX�QDONQSDC�ADKNV� SGD�HMRTQ@MBD�QDRTKS���V@R�`���L� �������`���L� �
3GD�&QNTO�QDSTQMDC�SN�OQNäS�HM������VHSG�@�OQD� S@W�OQNäS�NE�`���L �3GD�TMCDQKXHMF�ODQENQL@MBD� of the business remains encouraging, and successful disposals produced strong gains. However, work to overhaul our balance sheet was expensive, and market headwinds, especially from exchange rate changes and KNV�HMSDQDRS�Q@SDR��QDL@HM�RHFMHäB@MS
(MUDRSLDMS�HMBNLD�NE�`���L�������� `���L��V@R�NEERDS�AX�HMUDRSLDMS� DWODMRDR�NE�`��L��������`��L�� and the liability discount unwind NE�`��L��������`��L� �3GD�KH@AHKHSX� discount unwind was lower than �����ENKKNVHMF�SGD�QDCTBSHNM�HM�4*� CHRBNTMS�Q@SDR�EQNL��í�SN��í�@S�%8����� � The discount unwind will fall further HM������ENKKNVHMF�SGD�QDCTBSHNM�HM� Scandinavian discount rates.
(MUDRSLDMS�HMBNLD�NE�`���L�HR�HM�KHMD� VHSG�NTQ�DWODBS@SHNMR�ATS�CNVM���í� NM�OQHNQ�XD@Q��OQHL@QHKX�QDâDBSHMF�SGD� continued impact of the low bond yield environment.
3GD�HMUDRSLDMS�ONQSENKHN�FQDV��í� CTQHMF������SN�`�� �AM � S����#DBDLADQ� ������GHFG�PT@KHSX�VHCDKX�CHUDQRHãDC� ãWDC�HMBNLD�RDBTQHSHDR�QDOQDRDMSDC� ��í�NE�SGD�ONQSENKHN�����#DBDLADQ������� ��í� �3GD�PT@KHSX�NE�SGD�ANMC�ONQSENKHN� QDL@HMR�UDQX�GHFG�VHSG���í�HMUDRSLDMS� FQ@CD�@MC���í�Q@SDC� �NQ�@ANUD � 6D�QDL@HM�VDKK�CHUDQRHãDC�AX�RDBSNQ� and geography.
TOTAL CONTROLLABLE COSTS Total Group controllable costs were CNVM���í�HM�������CNVM��í�@S�BNMRS@MS� DWBG@MFD��SN�`� �AM �"NQD�ATRHMDRR� BNMSQNKK@AKD�BNRSR�VDQD�CNVM��í� @S�BNMRS@MS�DWBG@MFD�SN�`� ��AM� �BNLOQHRHMF��í�BNRS�QDCTBSHNMR� NEERDS�AX��í�HMâ@SHNM�
3GD�L@INQHSX�NE�SGD������BNQD�ATRHMDRR� cost reduction has come from our UK business, with good progress in GD@CBNTMS�QDCTBSHNMR��������í���4*� full time equivalent (FTE) employee QDCTBSHNM�HM������ �%TQSGDQ�CDS@HKDC�BNRS� reduction plans are in place for our core ATRHMDRRDR �&QNTO�%3$�V@R�CNVM���í� HM������SN������������������������@MC� within our core businesses FTE was CNVM��í�SN����������������������
NON-OPERATING ITEMS -NM�NODQ@SHMF�HSDLR�HM������@LNTMSDC� to a charge of £90m and included the following.
• -NM�NODQ@SHMF�BG@QFDR�NE�`��L� BNLOQHRD�`��L�NE�BTRSNLDQ�KHRS� amortisation and £10m of pension net interest costs.
Notes: (M�������SGD�&QNTO�BG@MFDC�HSR�BNLAHMDC�Q@SHN�B@KBTK@SHNM�LDSGNCNKNFX �3GD�BNLAHMDC�Q@SHN�HR�MNV�OQDRDMSDC�NM�@M��D@QMDC��A@RHR��VGDQD�MDS�HMBTQQDC� claims, earned commissions and earned operating expenses are all expressed as a percentage of net earned premiums. All years shown above have been restated on this basis.
• 3GDQD�V@R�@KRN�@�`��L�BG@QFD�QDK@SHMF� to a change in the interest rate used to discount long-tail liabilities in Sweden and Denmark. The decline in market yields for the assets we hold backing these liabilities has required this adjustment. As a result, the discount rate has been lowered in Sweden and #DML@QJ �3GD�4*�CHRBNTMS�Q@SD�NE��í� �KNVDQDC�EQNL��í�@S�%8�������QDL@HMR� unchanged as this remains broadly matched by the yields on the assets backing these liabilities. The assumptions will be re-examined biannually going forward and necessary changes made.
RESERVING We believe that the culture, methodologies and governance around the Group’s reserving process drive a prudent reserving policy and reserves QDL@HMR�RHFMHãB@MSKX�SN�SGD� right side of best estimate. Our own assessment of the margin in reserves for the core Group (the difference between our actuarial indication and SGD�ANNJDC�QDRDQUDR�HM�SGD�ãM@MBH@K� RS@SDLDMSR��HR�TMBG@MFDC�@S��í�NE� booked claims reserves, though there have been movements between regional businesses during the year.
(M�SDQLR�NE�@BBHCDMS�XD@Q�������@MC� �����QDRDQUDR�G@UD�RGNVM�E@UNTQ@AKD� development across most major lines in Scandinavia, UK Commercial Property, 4*�/DQRNM@K�KHMDR�@MC�"@M@C@ ������@MC� �����G@UD�ADDM�HLO@BSDC�AX�4*� Professional Indemnity strengthening. �����@MC�OQHNQ�HMBKTCDR�RSQDMFSGDMHMF� for UK Deafness reserves and also in UK Asbestos, relating to revisions to estimates of reinsurance recoveries to QDâDBS�SGD�K@SDRS�DWODQHDMBD�NE�BK@HLR� across accident years.
Tangible net assets have increased by ��í�SN�`� �AM�CTQHMF����� �3GD�LNRS� RHFMHãB@MS�CQHUDQ�NE�SGHR�V@R�SGD� OQNBDDCR�EQNL�SGD�QHFGSR�HRRTD��`���L� MDS�NE�BNRSR� �3GDQD�VDQD�@KRN�`���L� NE�ONRS�S@W�CHRONR@K�ADMDãS�@MC�`���L� of fair value gains on available-for-sale assets. Foreign exchange movements on the retranslation of the balance sheets of non-sterling denominated operations gave rise to foreign DWBG@MFD�KNRRDR�NE�`��L �
S����#DBDLADQ�������SGD�&QNTO�R� DRSHL@SDC�(&#�RTQOKTR�V@R�`� �AM� FHUHMF�BNUDQ@FD�NE�� ��SHLDR�SGD�B@OHS@K� QDPTHQDLDMS �3GD�`� �AM�HMBQD@RD�HM� SGD�RTQOKTR�CTQHMF������L@HMKX�QDâDBSR� the impact of the rights issue proceeds, capital generated (including disposal gains), the reversal of a hybrid debt restriction which took effect at the DMC�NE�������@MC�L@QJ�SN�L@QJDS� gains, partly offset by adverse foreign exchange movements.
capital requirement. The movement in the year was driven by capital generated including disposal gains and the rights issue proceeds, partly offset by the impact of lower yields, adverse foreign exchange movements, pension movements, and model calibrations.
PENSIONS The IAS 19 pension has improved during SGD�XD@Q�EQNL�@�CDãBHS�NE�`���L�SN�@� CDãBHS�NE�`��L �3GD�4*�ODMRHNM�ONRHSHNM� G@R�HLOQNUDC�AX�`��L�CTQHMF�SGD�XD@Q� SN�@�RTQOKTR�NE�`��L��CQHUDM�AX�FQD@SDQ� than expected returns on assets and contributions, partly offset by changes to actuarial assumptions (the pension HMâ@SHNM�Q@SD�EDKK�EQNL�� �í�SN�� �í�HM�SGD� year, whilst the discount rate fell from � �í�SN�� �í���DWODQHDMBD�KNRRDR�@MC� service costs. The overseas pension ONRHSHNM�CDSDQHNQ@SDC�EQNL�@�CDãBHS�NE� `��L�SN�@�CDãBHS�NE�`���L�CQHUDM� primarily by lower discount rates.
The Scheme Actuaries also carry out interim assessments on an annual basis @MC�@S�SGD�K@RS�TOC@SD�@R�@S����,@QBG� �����SGD�ETMCHMF�KDUDK�V@R�DRSHL@SDC�SN� G@UD�HMBQD@RDC�SN���í �3GHR�TOC@SD�HR� not formally agreed between the Group @MC�SGD�3QTRSDDR�ATS�QDâDBSR�BG@MFDR�HM� L@QJDS�BNMCHSHNMR�@MC�SGD�CDãBHS� contributions paid.
For completeness, in addition to calculating the funding valuation, the Scheme Actuaries also provide an estimate of the cost of full risk removal by purchasing annuities from an insurance company to meet the existing retirement obligations. This is a theoretical calculation and does not QDâDBS�VG@S�VD�DWODBS�SN�O@X�HMSN�SGD� schemes. In common with most UK CDãMDC�ADMDãS�@QQ@MFDLDMSR��SGD� KH@AHKHSHDR�@MC�GDMBD�CDãBHS�NM�SGHR�A@RHR� are materially higher than on an ongoing ETMCHMF�A@RHR�@MC�@R�@S����,@QBG������ there was estimated to be a shortfall NE�@OOQNWHL@SDKX�`� �AM �3GHR�HR�K@QFDKX� due to the use of more conservative assumptions in relation to future investment return and to a lesser extent, how long members will live. However, the cost of purchasing @MMTHSHDR�VHKK�@KRN�QDâDBS�HMRTQDQR�� reserving requirements, cost of B@OHS@K��OQNãS�L@QFHMR��@MC�RTOOKX� and demand dynamics.
Foreign exchange moves will continue to impact Sterling reported results. ,@QJDS�BNMCHSHNMR�ODQLHSSHMF��HM������� we target an end to the shrinkage of core business written premiums. Underlying loss ratios should improve again and costs continue to reduce. Weather and large loss items will remain unpredictable but volatility should be below that of extreme prior years due to reinsurance actions. We expect sustainable prior year releases to be ADKNV��í�NE�OQDLHTLR��ATS�ONSDMSH@KKX� volatile given our commitment to transparent reserve margins.
We hope to report combined ratios, on an underlying basis, closer to ‘market’ performance than in recent times. Investment income will trend CNVMV@QCR�QDâDBSHMF�L@QJDS� conditions. We anticipate disposal OQNãSR�EQNL�BNLOKDSHMF�MNM�BNQD� transactions, broadly offset by ongoing restructuring and cost programme expenses.
Our Scandinavian business performed strongly HM�������ANSG�HM�SDQLR�NE�OQNäS@AHKHSX�@MC�FQNVSG � Our focus remains on sustaining these strong results whilst driving continuous operational improvements.
OUR OPERATIONS IN SCANDINAVIA In Scandinavia we operate in Sweden as Trygg-Hansa and in Denmark and Norway as Codan. We are the third largest insurer in Sweden and Denmark, and the sixth largest in Norway, whilst we are third overall across the region. Importantly, RSA is the only multinational insurer operating with scale in Scandinavia.
/DQRNM@K�OQDLHTLR�VDQD�TO��í� VHSG�RSQNMF�FQNVSG�NE��í�HM�2VDCHRG� Personal driven by Household and Personal Accident due to a combination of good new business levels and rate increases. Danish Personal premiums £1.8bn Net written premiums
� ��#QHUHMF�BNMSHMTNTR�NODQ@SHNM@K� improvement through rigorous cost management and targeted systems and infrastructure investment.
2014 has been a challenging year for our Canadian business with adverse weather conditions. However, the underlying performance of our business remains supportive of improved future results.
Our portfolio is well balanced with /DQRNM@K�KHMDR�@BBNTMSHMF�ENQ�@QNTMC���í� @MC�"NLLDQBH@K�@QNTMC���í �6D�G@UD� KD@CHMF�ONRHSHNMR�HM� EãMHSX��3Q@UDK�@MC� Marine. Approximately half of our Personal business is directly distributed through brokers under the RSA brand, @MC�G@KE�HR�CHRSQHATSDC�SGQNTFG�@EãMHSX� O@QSMDQRGHOR�TMCDQ�SGD�)NGMRNM�AQ@MC
FINANCIAL PERFORMANCE After a record bad year for weather DUDMSR�HM�"@M@C@�HM�������@CUDQRD� weather conditions continued into the ãQRS�PT@QSDQ�NE����� � R�@�QDRTKS������� has been challenging for our Canadian business. However, the underlying £1.5bn Net written premiums
OUR STRATEGY In Canada our strategy is to drive RTRS@HM@AKD�OQNãS@AKD�FQNVSG� in our targeted segments. We focus on improving our revenue capabilities through enhanced pricing, risk selection and sales capabilities; investing in our technology capabilities and developing industry-leading digital customer offerings; and robust management of our cost base.
A Household B Personal motor C Commercial property D Liability E Other
OUTLOOK �����G@R�ADDM�@�BG@KKDMFHMF�XD@Q� for RSA in Canada. However, we anticipate the business returning to better performance patterns, subject to volatile items such as weather trends. Our focus will be on delivering operational improvement, particularly underwriting and claims HLOQNUDLDMSR��OQNBDRR�RHLOKHãB@SHNM� and modernisation of technology and infrastructure.
Net written premiums in Canada were CNVM��í�NM�@�BNMRS@MS�DWBG@MFD�Q@SD� A@RHR�SN�`�����L��������`�����L�@R� QDONQSDC��`�����L�@S�BNMRS@MS�DWBG@MFD�� VHSG��í�UNKTLD�QDCTBSHNMR�O@QSKX� NEERDS�AX��í�Q@SD�FQNVSG �
In Commercial, premiums were down �í�CQHUDM�L@HMKX�AX�SGD�@BSHNMR�VD�G@UD� been taking on the portfolio, particularly where we have been re-underwriting or exiting poorer performing accounts. /QNODQSX�QDCTBSHNMR�NE��í�@QD�L@HMKX� driven by underwriting actions taken in Quebec, and Liability reductions NE���í�@QD�CTD�SN�SGD�DWHS�NE�TMOQNãS@AKD� programmes and market-leading rating action.
4MCDQVQHSHMF�OQNãS�V@R�`��L�������� `��L�KNRR��VHSG�@�BTQQDMS�XD@Q�KNRR�NE� `�L�@MC�@�OQHNQ�XD@Q�OQNãS�NE�`��L �3GD� BNLAHMDC�Q@SHN�V@R��� �í����������� �í� � After including investment returns of `��L��������`��L���SGD�HMRTQ@MBD�QDRTKS� V@R�`���L��������`��L� �.MFNHMF� balance sheet work across the Group has included in Canada a more granular segmentation of the portfolio for reserving purposes. This has led to a reallocation of reserves (as reported in TFTRS��SN�ADSSDQ�QDâDBS�SGD�QHRJ�OQNãKD�NE� the book, and a £19m release of margin.
The level of weather losses, although KNVDQ�SG@M�������V@R�GHFGDQ�SG@M�SQDMC�� HLO@BSHMF�OQNãS@AHKHSX �3GD�VD@SGDQ�KNRR� Q@SHN�NE�� �í�ENQ�SGD�XD@Q�BNLO@QDR�SN�@� ãUD�XD@Q�@UDQ@FD�ENQ�NTQ�"@M@CH@M� ATRHMDRR�NE�� �í �/DQRNM@K�'NTRDGNKC�@MC� Motor were both affected by the weather, with Motor experiencing elevated claims frequency as a result of severe driving BNMCHSHNMR�HM�SGD�ãQRS�PT@QSDQ �
In Commercial, the reallocation of QDRDQUDR�HM�SGD�ãQRS�G@KE�QDRTKSDC�HM� an increase in Liability reserves and a release in Motor, impacting their QDRODBSHUD�QDRTKSR �/QNODQSX�OQNãS@AHKHSX� remains under pressure given a highly competitive market, with adverse weather and large loss experience impacting results. At a total Canadian KDUDK��SGD�K@QFD�KNRR�Q@SHN�V@R�� �í� HM������BNLO@QDC�SN�@�ãUD�XD@Q� @UDQ@FD�NE�� �í�@MC�@������Q@SHN�NE� � �í �3GD�BTQQDMS�XD@Q�TMCDQKXHMF� KNRR�Q@SHN�V@R��� �í���������� �í�
DRIVEN TO DISTRACTION Motoring research by RSA Canada showed that distracted drivers are three times more likely to be in an accident than attentive drivers and SG@S������í�NE�@KK�BNKKHRHNMR�HMUNKUD� driver distraction. We wanted people to think about what they are doing behind the wheel. So we surveyed drivers across the country, and despite increased attention on distracted driving in almost every province, drivers are simply not getting the message to pay attention to the road.
We also have strong positions in the UK Personal Household, Motor, and Pet markets. We have a direct insurance offering through our MORE TH>N brand, and a broker portfolio focused on OQNãS@AKD�RDFLDMSR �6D�@KRN�G@UD� @EãMHSX�QDK@SHNMRGHOR�VHSG�RNLD�NE� the major UK retailers.
We are a leading player in Ireland with particular strengths in Household insurance and in direct sales through NTQ���� HD�ATRHMDRR
A Household B Personal motor C Pet D Commercial property E Liability F Commercial motor G Marine and other 1 Excluding Legacy
3GD�4*�TMCDQVQHSHMF�QDRTKS�V@R�@�OQNãS� NE�`��L��������`��L� �3GD�BTQQDMS�XD@Q� OQNãS�NE�`��L�QDOQDRDMSR�NTQ�RSQNMFDRS� BTQQDMS�XD@Q�QDRTKS�HM�SGD�4*�RHMBD������� @MC�HMBKTCDR�@�/DQRNM@K�OQNãS�NE�`��L� and a Commercial loss of £9m. The prior XD@Q�KNRR�NE�`�L�HMBKTCDR�@�KNRR�NE� `��L�HM�"NLLDQBH@K�@MC�@�OQNãS� NE�`��L�HM�/DQRNM@K
SUPPORTING SOCIAL ENTERPRISE Our CSR strategy seeks to deliver BNLLDQBH@K�@MC�RNBHDS@K�ADMDãSR � To meet this objective and in line with our Commercial strategic focus on SMEs, we have established a unique partnership with School for Social Entrepreneurs (SSE) that’s delivering positive impacts for our business, our people, SSE, entrepreneurs and ultimately our communities.
OUTLOOK In the UK, continuing improvements in our core trading performance together with ongoing cost actions give us BNMãCDMBD�@R�VD�KNNJ�NTS�SN����� � 6D�S@QFDS�HLOQNUHMF�OQNãS@AHKHSX�@MC� a return to modest top line growth.
In Ireland, our goal remains to return the ATRHMDRR�SN�OQNãS@AHKHSX�HM������SGQNTFG� underwriting improvement and cost reduction, and from there to return to greater than cost of capital returns in the future.
3GD�OQHNQ�XD@Q�KNRR�NE�`��L�QDâDBSR� a combination of updated reserving ITCFDLDMSR�EQNL������DUDMSR�HM�KHFGS� of the latest development experience, @MC�RNLD�RODBHãB�E@BSNQR�HMBKTCHMF� SGD�QDLDCH@SHNM�NE�@�RODBHãB�CDKDF@SDC� authority scheme, changes to reinsurance retentions, and the impact of lower discount rates following a High Court ruling in December.
Our remediation work is ongoing, and VD�QDL@HM�BNMãCDMS�SG@S�SGD�@BSHNMR� we are taking will restore the business SN�OQNãS@AHKHSX �
On pricing we have applied strong Q@SD�HMBQD@RDR�CTQHMF������HM�JDX�KHMDR� requiring remediation, with year-onXD @Q�Q@SD�HMBQD@RDR�NE�B ��í�HM�,NSNQ� @MC�B ��í�HM�+H@AHKHSX � R�@�QDRTKS�NE�SGHR� focus, premiums for the year were CNVM��í�@S�BNMRS@MS�DWBG@MFD
#TQHMF�������VD�G@UD�TMCDQS@JDM�@M� impairment review of the carrying value of Irish goodwill and intangible assets. R�@�QDRTKS�VD�G@UD�VQHSSDM�CNVM�`��L� relating to goodwill and £17m relating to software and customer lists. This leaves `��L�NE�FNNCVHKK�@MC�HMS@MFHAKD�@RRDSR� in the Irish business. In addition to this we have also written down our Irish CDEDQQDC�S@W�@RRDS�AX�`�L�KD@UHMF� @�QDL@HMHMF�S@W�@RRDS�AX�`�L�KD@UHMF� @�QDL@HMHMF�S@W�@RRDS�NE�`�L
Household continued to perform RSQNMFKX�VHSG�@�`��L�OQNãS�CDROHSD� @CUDQRD�VD@SGDQ�HM�SGD�ãQRS�PT@QSDQ�� VGHKD�@�`�L�KNRR�HM�,NSNQ�QDâDBSDC� a highly competitive market but MDUDQSGDKDRR�@�RHFMHãB@MS�HLOQNUDLDMS� EQNL�SGD������KNRR�NE�`��L �/DS� OQNãS@AHKHSX�V@R�CHR@OONHMSHMF�CTD�SN� GHFGDQ�SG@M�DWODBSDC�BK@HLR�HMâ@SHNM�� for which we have implemented rating and indemnity actions to address.
The UK Commercial underwriting KNRR�NE�`��L�HR�CQHUDM�AX�SGD�@CUDQRD� development of the prior year /QNEDRRHNM@K�(MCDLMHSX�ANNJ��`��L�� which we reported on at both H1 @MC�0� �.TQ�/QNODQSX�ANNJ�RTEEDQDC� @M�TMCDQVQHSHMF�KNRR�NE�`�L�CQHUDM�AX� heavy weather losses following storms HM�)@MT@QX�%DAQT@QX�@MC�@KRN�HM�)TMD� in Europe, plus marginally elevated large losses. Commercial Motor produced @�RHFMHãB@MSKX�HLOQNUDC�".1�NE��� �í� QDâDBSHMF�ADSSDQ�ODQENQL@MBD� across the book.
3GD�4*�BNLAHMDC�Q@SHN�V@R��� �í� ��������� �í� �3GD�VD@SGDQ�Q@SHN�NE�� �í� V@R�� ��ONHMSR�GHFGDQ�SG@M������@MC�� �� ONHMSR�GHFGDQ�SG@M�SGD�ãUD�XD@Q�@UDQ@FD� for the UK business. The large loss ratio NE��� �í�V@R�� ��ONHMSR�KNVDQ�SG@M������ @MC�� ��ONHMSR�KNVDQ�SG@M�SGD�ãUD�XD@Q� average. The current year underlying KNRR�Q@SHN�HLOQNUDC�AX�� ��ONHMSR�@F@HMRS� SGD�R@LD�ODQHNC�K@RS�XD@Q�SN��� �í
No substantive new issues were ENTMC�HM�������GNVDUDQ�SGD�BNRS�NE� remediation, reserve strengthening and the level of required underwriting improvement has been greater than that expected at the start of the year.
Survival ratio is an industry standard measure of a company’s reserves, expressing the number of years that carried reserves will be available if the QDBDMS�XD@Q�O@XLDMS�NQ�MNSHãB@SHNM� levels continue. The table below outlines the asbestos provisions @R�@S����#DBDLADQ������@M@KXRDC� by risk and survival ratio.
One year average ratios are inherently more volatile and impacted by the size @MC�SHLHMF�NE�O@XLDMSR�NQ�MNSHãB@SHNMR� in the year, with the three-year average providing a more stable benchmark. For UK risks written in the UK, the paid survival ratios have remained stable, with the incurred survival ratio impacted by changes in the level NE�MNSHãB@SHNMR�EQNL�XD@Q�SN�XD@Q � 6D�BNMSHMTD�SN�LNMHSNQ�MNSHãB@SHNM� levels closely. For US risks written in the UK, the remaining reserves are relatively small in total and will therefore be particularly sensitive SN�BG@MFDR�HM�MNSHãB@SHNMR�NQ�SGD� size and timing of claims payments and settlements during the year.
In Latin America, the markets we operate in continue to be fundamentally attractive, driven by growing insurance penetration. Performance HM������QDãDBSDC�BNLODSHSHUD�BNMCHSHNMR�@MC�SGD� earthquake in Chile in April.
OUR OPERATIONS IN LATIN AMERICA RSA is a top 10 international insurer in Latin America. We are geographically CHUDQRHãDC�VHSG�KD@CHMF�ONRHSHNMR�HM� Chile (no. 1 market position), Argentina �MN �����@MC�4QTFT@X��MN ��� �6D�G@UD� a leading niche position in the Brazil Marine market, and businesses in Mexico and Colombia. Although economic growth in the region has slowed, the non-life insurance market continues to offer attractive growth prospects.
FINANCIAL PERFORMANCE Net written premiums in Latin America VDQD�TO��í�NM�@�BNMRS@MS�DWBG@MFD� Q@SD�A@RHR�SN�`���L��������`���L�@R� QDONQSDC��`���L�@S�BNMRS@MS�DWBG@MFD�� VHSG��í�UNKTLD�FQNVSG�@MC��í�Q@SD� growth. The impact of foreign exchange G@R�ADDM�RHFMHãB@MS��VHSG�OQDLHTLR� CNVM���í�@S�QDONQSDC�DWBG@MFD�Q@SDR
3GD�TMCDQVQHSHMF�KNRR�NE�`�L�HMBKTCDR� £10m in respect of the Chile earthquake HM� OQHK��@�ETQSGDQ�`�L�HR�HMBKTCDC�HM�SGD� Group Re result bringing the total event BNRS�SN�`��L��@MC�RDUDQ@K�NSGDQ�K@QFD� KNRRDR �3GD�K@QFD�KNRR�Q@SHN�NE�� �í� HR�� ��ONHMSR�GHFGDQ�SG@M�SGD�ãUD�XD@Q� average, whilst weather losses of � �í�@QD�ADSSDQ�SG@M�SGD�ãUD�XD@Q� @UDQ@FD�NE�� �í
OUR STRATEGY Our strategic aim is to become a sustainable player delivering attractive returns on capital in our chosen markets supported by initiatives across three key areas: 1. Developing our customer and distribution relationships; � ��,@HMS@HMHMF�SDBGMHB@K� underwriting discipline; and
� ��,@HMS@HMHMF�SHFGS�BNMSQNK� on costs across the region together with improvements to our technology capabilities.
OUR PEOPLE As a result of business disposals and actions to reduce our expense base, our permanent full-time equivalent (FTE) employees across the Group reduced AX�������SN����������@���í�QDCTBSHNM � Once we have completed our disposals we anticipate that FTE across the group will reduce to around 17,000.
We have also continued to work closely with our Union partners around the world and have consulted fully on all changes.
The Group has maintained its commitment to foster an environment where diversity is embraced and DMBNTQ@FDC �(M�������VD�BNLLHSSDC� to strengthening our pipeline of women in senior leadership positions.
• The Senior Talent Acceleration (STA) Programme – designed to enable high-potential leaders to make the transition to senior and executive leadership roles.
• The Fast Track Programme – is styled on a ‘Mini-MBA’ to support our emerging talent to accelerate their careers in RSA.
As a result of our commitment to developing our people, we have been able to retain our critical talent during what has been a period of change and uncertainty across the Group. During ������NTQ�FKNA@K��QDFQDSSDC�STQMNUDQ��
�VGHBG�VD�CDãMD�@R�SGD�QDRHFM@SHNMR�NE� either high performers or people with high growth or growth potential to CN�AHFFDQ�QNKDR��V@R�� �í���VDKK�ADKNV� SGD��í�DWSDQM@K�HMCTRSQX�ADMBGL@QJ �
OUR CULTURE At RSA, we have always encouraged an open and honest culture that fosters trust and respect between our employees and between us and our customers, brokers and partners. Given the business challenges we have faced, this year we have placed greater importance on creating an internal environment where people’s voices are heard, by introducing a number of new platforms for them to use.
We believe we can create competitive advantage by building and maintaining a customer-centric culture that is open and transparent, where high performance is recognised and rewarded, and appropriate actions are taken to address underperformance.
Our 2014 Fast Track cohort has seen 48% of its members secure promotion or moves into new roles within the Group.
Our Corporate Responsibility (CR) strategy addresses the company’s most material social and environmental issues. Our approach is based on our commitment to making a positive impact on society, with our customers, employees, and partners.
SUSTAINABLE FUTURE Globally we have seen more annual weather-related catastrophes in the past few years than in the previous 30 XD@QR �2BHDMSHãB�QDRD@QBG�HMCHB@SDR�SG@S� extreme weather events are expected to be more frequent and more severe in the future. Helping people, businesses and communities cope with extreme VD@SGDQ�RTBG�@R�âNNCR��CQNTFGSR�@MC� storms will be increasingly important to our business.
6D�@KRN�OK@X�@�RHFMHãB@MS�QNKD�HM�SGD� development of the renewable energy sector. We insure the manufacture of more than 25% of all wind turbines and provide cover to around 80% of the operational offshore wind farms. Around the world we work with industry and environmental groups to promote renewables as a critical part of the energy mix for a low-carbon future.
We have also made progress in reducing the environmental impact of our operations. The Group-wide focus on BNRSR�@MC�DEãBHDMBX�G@R�BNMSQHATSDC�SN� a lower carbon footprint in 2014, with a substantial reduction in business travel.
In 2013, we developed and HLOKDLDMSDC�@�MDV�ãUD�XD@Q� strategy for CR, with associated targets. The approach responds to SGD�RTRS@HM@AHKHSX�HRRTDR�HCDMSHãDC� as most material to our business, customers and other stakeholders, now and in the future. More detail on the issues and the materiality process can be found on the CR section of our website.
SAFE, SECURE WORLD Our products help make communities safer places to live, work and travel. Motor insurance is a substantial part of our business and we have a clear responsibility in making the world’s roads safer. The statistics are bleak; more than a million people are killed in SQ@EãB�@BBHCDMSR�D@BG�XD@Q�@MC���� million injured. Global road fatalities are forecast to triple by 2030.
On target: All countries in which RSA operates will be running at least one annual road-safety campaign
This year 13 countries ran major road-safety campaigns, with all of our Core countries participating. These campaigns provide road-safety advice to millions of people.
THRIVING COMMUNITIES Our customers and our businesses prosper when they are part of thriving communities. We look to create positive social impact wherever we do business. Through our CR activity we are concentrating on a double challenge common to many of our countries: youth unemployment, and the need to develop the enterprise skills vital for economic growth.
During 2014, we donated £1.1m to charitable causes and 6,691 employee volunteering hours.
For further detail regarding our Corporate Responsibility strategy, visit us online at: rsagroup.com/corporate-responsibility
Selected key social and environmental data for 2014 as indicated by the symbol has been independently assured by PwC under the ISAE 3000 standard. For further information, please refer to our reporting criteria and PwC’s assurance opinion which can found on our Corporate Responsibility pages at www.rsagroup.com/rsagroup/en/corporate-responsibility
GEOGRAPHICAL BREAKDOWN OF GREENHOUSE GAS EMISSIONS FOR 2014 (TONNES OF CO2e*)
Notes: This assessment has been carried out in accordance with the World Business Council for Sustainable Development and World Resources Institute’s (WBCSD/WRI) Greenhouse Gas Protocol; a Corporate Accounting and Reporting Standard, together with the latest emission factors from recognised public sources including, but not limited to, Defra, the International Energy Agency, the US Energy Information Association, the US Environmental Protection Agency and the Intergovernmental panel on Climate Change.
Our CR strategy is underpinned by our governance structure and policy framework. Ultimate responsibility rests with our Group Chief Executive and our CR Committee. Our CR policies cover Environment, Community and Charity, and Human Rights risks. They form part of our wider risk framework, with compliance reviewed by the Group Executive Committee and Group Board. Our CR policy positions can be read on the CR section of our website. Our key MNM�ãM@MBH@K�C@S@�HR�@RRTQDC�@MMT@KKX� by external auditors. More detail on how we report can be found on the CR section of our website.
3GHR�@OOQN@BG�HR�QDâDBSDC�HM�NTQ� risk appetite statement and key risk indicators, which cover all aspects of our strategic objectives. The risk appetite statement is updated annually in line with the strategic review. It is supported by more granular portfolio strategy statements for each of our underwriting portfolios, setting out our preferred segments and products as well as those that are outside the core appetite.
The Board is closely involved in risk management via the Board Risk Committee which meets quarterly (see pages 73 to 74). The quarterly risk reports monitor the status of all risks and forms an integral part of our ORSA process.
The Group Risk team use a cause – event risk map to identify the root causes of material risk events and learn the lessons from them.
The index is based around the levers that determine culture, including leadership, communication, and decision making. The index is brought to life through a quarterly process which involves senior HR, Audit and Risk leaders working together to discuss their assessments on the health of the culture and agree mitigating actions. Importantly, the index and process gives people the language to name the behaviours that they may intuitively feel, a permission SN�â@F�BNMBDQMR��@MC�@�EQ@LDVNQJ� for ensuring these conversations take place regularly.
In January 2014, the results of the PWC review were published. This described the Group System of Governance, which includes the Control Framework, as appropriate in terms of structure and design for an international insurance group of RSA’s size and complexity, and elements of its design compare favourably across the market. The effectiveness of the framework as it related to Ireland was weakened due to independent controls not operating effectively.
/6"�BNMãQLDC�SG@S�SGD�EQ@LDVNQJ� is built on the good market practice of three lines of defence, is designed to have multiple reinforcing layers with a comprehensive network of policies, clear accountability including through RDKE�BDQSHãB@SHNM��@�EQ@LDVNQJ� of business controls and a range of additional assurance processes.
This notwithstanding, the Group Audit Committee and Board Risk Committee Chairmen set up a Global programme, led by the Group Risk function, to enhance the effectiveness of the Internal Control System.
This programme has enhanced control and assurance processes across eight key functions in our business. This involved improving the clarity of our risk policies, as well as advancing the organisation’s understanding of the control framework and how the three lines of defence operate. We have made explicit the minimum requirements expected in each business with regard SN�BNMSQNKR�@MC�SGD�ãQRS�KHMD�BNMSQNK� checking that must take place. We have also strengthened our second line assurance processes that are HMCDODMCDMS�NE�ãQRS�KHMD�QDFHNM@K� management. We have restructured our Group and Regional Risk teams to make sure there is focus on both enterprise risk management and oversight of the internal control framework.
���+HLHSDC�DWONRTQD�SN�CDãMDC� segments of special high risk business (e.g. Terrorism, Nuclear, Inwards Re)
Market Risk: — Cautious asset allocation and investment management policies with limited exposure to higher volatility asset types (e.g. equities) or to balance sheet forex volatility
Credit Risk: — Cautious credit risk policies; with credit rating exposures laddered from AAA to A- and only limited exposure below
— Special High Risk business SN�AD�RODBHãB@KKX�KHBDMRDC�AX� Group Underwriting Director and Group COO and within set limits
— Per event catastrophe reinsurance limits to be set at no less than 1 in 200 year return period (e.g. £1.6bn for UK/Europe), supported by strong exposure control
ECONOMIC CAPITAL BY TYPE OF RISK A Insurance Risk B Investment Risk C Operational Risk D Pension Risk 1 in 200 years or <0.5% Probability 1 in 10 years or 10-33% Probability 1 in 3 years or 33-50% Probability 1 in 2 years or 50-95% Probability
6HSGHM�NTQ�CDãMDC�ADMDãS�ODMRHNM� schemes we have progressively reduced risk over a number of years SGQNTFG�@�RTBBDRRHNM�NE�RHFMHãB@MS� de-risking actions; however, due to the large size of the schemes relative to the business, they still present a material exposure, currently exacerbated by the economic environment producing a prolonged period of low real-yields.
Impact of negative long-term macroDBNMNLHB �SQDMCR��ãM@MBH@K�L@QJDS� volatility and/or persistent low yields, including impact on pension scheme position particularly of low real yields
• Granular MI on rating and claims trends • Underwriting strategy statements, licence and controls ����.MFNHMF�CDUDKNOLDMS�NE�ONQSENKHN�BK@RRHãB@SHNM�
and pricing tools • Quarterly Business Reviews and BRC governance • Accumulation management and large loss review actions
• Ongoing dialogue with regulators to resolve questions • Model governance and validation processes • Maintain core Solvency II programme • Continue to work with local teams to deliver
Failure to deliver on the IS transformation programme, including stability issues or business disruption during implementation
and benchmarked by advisors • Better alignment and joint ownership of execution with the business across all regions
Failure to create and sustain a culture and working environment that engages, attracts and retains diverse and talented staff with appropriate capabilities and experience to deliver the Group strategy
• Market mapping of key areas to develop talent and succession pipeline
Failure of reinsurance programme SN�CDKHUDQ�OK@MMDC�ADMDãSR�SGQNTFG�� e.g. counterparty failure, operational error or failed recovery processes
Our 2014 Strategic Report, from page 2 to page 47, has been reviewed and approved by the Board of directors on 25 February 2015
!DSVDDM���,@X�@MC���#DBDLADQ������� the Company had met the Davies Report requirement of 25% of women on the !N@QC �%NKKNVHMF�SGD�@OONHMSLDMS�NE� $MQHBN��SGD�BNLONRHSHNM�NE�SGD�!N@QC�HR� 78% male and 22% female but with DEEDBS�EQNL���,@X������SGD�BNLONRHSHNM� will again revert to 75% male and 25% female. We recognise the importance NE�CHUDQRHSX�ENQ�!N@QC�DEEDBSHUDMDRR� and remain committed to meeting the Davies Report requirement. All appointments are made on merit against the agreed selection criteria.
#@UHC�6DXLNTSG�VHKK�QDSHQD�HM�,@X������ and is currently handing over to William ,B#NMMDKK�VGN�G@R�ADDM�@OONHMSDC� @R�&QNTO�"GHDE�1HRJ�.EãBDQ�SN�QDOK@BD� him. In addition, Caroline Ramsay will retire from the Group in June 2015. 3GD�!N@QC�HR�BNMãCDMS�HM�SGD�PT@KHSX� of the Executive Committee and we look forward to working with them in the coming year.
1HBG@QC�'NTFGSNM�G@R�CDBHCDC�SN� leave the Group and will step down @R�@�CHQDBSNQ�NM���,@X������ATS�VHKK� continue his role until a leaving date is agreed. I would like to recognise his contribution to the Group over the past three years.
As reported last year, Edward Lea and ,@KBNKL�+D�,@X��VGN�G@C�RDQUDC�NM�SGD� !N@QC�ENQ����@MC����XD@QR�QDRODBSHUDKX�� retired as directors of the Company in ,@X����� �(M�@CCHSHNM�� CQH@M�!QNVM� resigned as a director of the Company in April 2014 after 25 years’ service. I would like to take this opportunity SN�SG@MJ�$CV@QC��,@KBNKL�@MC� CQH@M� for their services to the Company.
EFFECTIVENESS (�G@UD�JDOS�SGD�!N@QC�R�ODQENQL@MBD� under review with the aim of improving effectiveness. An external performance evaluation was undertaken during �����@MC�SGD�!N@QC�G@R�ADDM� working on actions arising from the recommendations. Progress against RODBHãB�HRRTDR�HCDMSHãDC�HR�RDS�NTS�HM� the Effectiveness section on pages 58 to 61 of this report. During 2014, an internal ODQENQL@MBD�DU@KT@SHNM�NE�SGD�!N@QC�� its Committees and individual directors was conducted. Details of the key focus areas are set out in the Effectiveness section. The review concluded that we QDL@HM�@M�DMF@FDC�@MC�DEEDBSHUD�!N@QC� who work well together, aligning risk management to strategy.
ACCOUNTABILITY As mentioned earlier in the Annual 1DONQS��SGD�!N@QC�HMHSH@SDC�@�&QNTO� wide review of governance and control RXRSDLR�HM����� �3GD�!N@QC�G@R�ADDM� fully involved in this programme with Non-Executive Directors participating in Steering Group meetings.
Throughout the year, the Company has complied with the Principles and Provisions of the 2012 UK Corporate Governance Code (2012 Code), with the exception of the period from ��)@MT@QX������SN���%DAQT@QX������� when I performed the role of Executive Chairman on an interim basis until 2SDOGDM�'DRSDQ�INHMDC�SGD�&QNTO � %TQSGDQ�HMENQL@SHNM�NM�BNLOKH@MBD� @F@HMRS�SGD�,@HM�/QHMBHOKDR�NE�SGD� 2012 Code is contained in this report, the Directors’ Remuneration Report and the Group Audit Committee Report as applicable.
The Company has familiarised itself with the updated 2014 UK Corporate Governance Code. 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 L@CD �%TQSGDQ�CDS@HKR�NE�SGD�+NMF�3DQL� Incentive Plan and Non-Executive Directors’ remuneration are detailed in the Directors’ Remuneration Report.
ENGAGEMENT Throughout the year, the management team have had open discussions with our stakeholders: including employees, investors, the regulators and rating agencies.
3GD�!N@QC�HR�BNLLHSSDC�SN�HLOQNUHMF� the experience of the customer and providing an exceptional service.
#TQHMF�SGD�XD@Q��SGD�2BGDCTKD�NE�,@SSDQR� 1DRDQUDC�ENQ�SGD�!N@QC�@MC�"NLLHSSDD� Terms of Reference have been reviewed AX�SGD�!N@QC�SN�DMRTQD�SGDX�QDL@HM� appropriate and, where necessary, changes have been made. The Terms of 1DEDQDMBD�NE�SGD�!N@QC�1HRJ�"NLLHSSDD� have been aligned to the three pillars of Solvency II. The role of the Group Nomination Committee has been expanded to include a review of Governance matters. In addition, a review of Committee membership has been undertaken to strengthen the ODQENQL@MBD�NE�D@BG�"NLLHSSDD �%NQ� example, the Chair of the Group Audit Committee is now a member of the !N@QC�1HRJ�"NLLHSSDD�@MC�SGD�!N@QC� Risk Committee Chair is a member of the Group Audit Committee.
CONCLUSION 3GD�!N@QC�HR�BNLLHSSDC�SN�CDKHUDQ�NTQ� key objectives, to demonstrate our resilience in these challenging times, and to re-emerge as a stronger Group. I would like to thank my fellow directors for the contribution and commitment they have made to this end.
Name:�, 13(-�2"("+4- � Role: Chairman Appointment date: January 2013 Nationality:�!QHSHRG Skills and experience:�,@QSHM�G@R� considerable knowledge and TMCDQRS@MCHMF�NE�SGD�ãM@MBH@K�RDQUHBDR� RDBSNQ�@MC�!N@QC�DWODQHDMBD �/QDUHNTR� roles include Non-Executive Director and Chairman of the Audit Committee @S�+KNXCR�!@MJHMF�&QNTO�OKB�����XD@QR�@S� Deloitte LLP, 26 years of which as Partner, "G@HQL@M�NE�#DKNHSSD�++/�EQNL������SN� 2007 and a Director, Deloitte Touche 3NGL@SRT�EQNL������SN����� � External appointments: Chairman of Great Portland Estates plc, Non-Executive Director and Chairman of the Audit Committee of 2GHO�,HCBN�+HLHSDC��SQ@CHMF�@R�6NQKCO@X� @MC�@�!N@QC�LDLADQ�NE�SGD�%HM@MBH@K� 2DQUHBDR�3Q@CD�@MC�(MUDRSLDMS�!N@QC
Name:�23$/'$-�'$23$1� Role: Group Chief Executive Appointment date:�%DAQT@QX����� Nationality:�!QHSHRG Skills and experience: Stephen was OQDUHNTRKX�"GHDE�$WDBTSHUD�.EãBDQ�� 3GD�1NX@K�!@MJ�NE�2BNSK@MC�&QNTO�OKB�� 2008-13, where he led the largest ever corporate restructuring and recovery programme. Prior to that he held ONRHSHNMR�@R�"GHDE�$WDBTSHUD��!QHSHRG�+@MC� plc from 2004 to 2008, Chief Operating .EãBDQ�� AADX�-@SHNM@K�OKB�@MC�@�MTLADQ� NE�RDMHNQ�QNKDR�@S�"QDCHS�2THRRD�%HQRS� !NRSNM�HM�+NMCNM�@MC�-DV�8NQJ �2SDOGDM� G@R�NUDQ����XD@QR��DWODQHDMBD�HM�ãM@MBH@K� RDQUHBDR�@MC�%32$����BNLO@MHDR� with expertise in transforming the performance of businesses. External appointments: Trustee of The Royal !NS@MHB�&@QCDMR��*DV�%NTMC@SHNM�@MC� ,DLADQ�NE�SGD�!N@QC�NE�SGD� RRNBH@SHNM� NE�!QHSHRG�(MRTQDQR
Name:�1("' 1#�'.4&'3.- � Role:�&QNTO�"GHDE�%HM@MBH@K�.EãBDQ Appointment date: June 2012 Nationality:�!QHSHRG Skills and experience: Richard’s previous QNKDR�HMBKTCD�&QNTO�"%.�NE� RODM� (MRTQ@MBD�'NKCHMFR�+HLHSDC��"..�@MC� "%.�@S�1!2�(MRTQ@MBD��%HM@MBD�#HQDBSNQ� NE�4KRSDQ�!@MJ��%HM@MBD�#HQDBSNQ�NE� Direct Line and Accountant at Deloitte î�3NTBGD �'D�HR�@�%DKKNV�NE�SGD�(MRSHSTSD� of Chartered Accountants in England and Wales.
Role: Independent Non-Executive Director Appointment date: October 2011 Nationality:�!QHSHRG Skills and experience: Alastair retired EQNL�*/,&�HM�,@QBG����� �(M�SGD�K@RS� 20 years of his 36 year career with the ãQL��HM�SGD�4*�@MC�NUDQRD@R��GD�KDC� SGDHQ�ãM@MBH@K�RDQUHBDR�SD@L�HM�2BNSK@MC� with a primary focus on insurance and investment management. Alastair has extensive experience in advising on @BBNTMSHMF�@MC�ãM@MBH@K�QDONQSHMF�� corporate governance and management HRRTDR�HM�SGD�ãM@MBH@K�RDBSNQ�@MC�HR�@� %DKKNV�NE�SGD�(MRSHSTSD�NE�"G@QSDQDC� Accountants in England and Wales.
External appointments: Non-Executive #HQDBSNQ�NE�/GNDMHW�&QNTO�'NKCHMFR��2S@MC@QC� Life European Private Equity Trust plc, Liontrust RRDS�,@M@FDLDMS�OKB��" 3"N�1DHMRTQ@MBD� .OONQSTMHSHDR�%TMC�+HLHSDC��3GD�!@MJ�NE�-
Name:�'4&'�,(3"'$++ Role: Independent Non-Executive Director Appointment date: September 2012 Nationality:�!QHSHRG Skills and experience:�'TFG�HR�SGD�"GHDE� 'TL@M�1DRNTQBDR�@MC�"NQONQ@SD�.EãBDQ� of Royal Dutch Shell plc and a member NE�SGD�2GDKK�$WDBTSHUD�"NLLHSSDD �'TFG� has considerable experience in advising NM�'1�@MC�QDLTMDQ@SHNM�L@SSDQR
External appointments: Chairman of KPN, Vice-Chairman of Van Lanschot, a Dutch private A@MJHMF�@MC�@RRDS�L@M@FDLDMS�ãQL��#HQDBSNQ� NE� QP�%NTMC@SHNM��"G@HQL@M�NE�#THRDMADQF� 2BGNNK�NE�%HM@MBD��"G@HQL@M�NE�SGD� CUHRNQX� !N@QC�NE�SGD�1NX@K�#TSBG�2NBHDSX�NE� BST@QHDR� and Vice-Counsel (Raad) Enterprise Chamber NE�SGD�'HFG�"NTQS�NE� LRSDQC@L
Name: DARREN PRICE Role:�&QNTO�"GHDE�(MENQL@SHNM�.EãBDQ Darren was appointed Group Chief (MENQL@SHNM�.EãBDQ�HM�)TMD������@MC� INHMDC�SGD�$WDBTSHUD�"NLLHSSDD�HM�,@X� ���� �'@UHMF�INHMDC�12 �HM������@R�"(.� ENQ�SGD�&QNTO�R�!@KSHB�NODQ@SHNMR��GD� went on to lead IT and Operations in RSA’s Central and Eastern Europe region @MC��RTARDPTDMSKX��HSR�$LDQFHMF�,@QJDSR� business. Prior to RSA, Darren held roles at Compaq, Unilever, GE Commercial %HM@MBD�@MC�&$�"@OHS@K�2NKTSHNMR
Name:�" 1.+(-$�1 ,2 8 Role: Group Chief Auditor Caroline joined the Group in 2007. Previous roles within the Group include 4*�%HM@MBD�#HQDBSNQ�@MC�&QNTO�%HM@MBH@K� Planning & Analysis Director. Prior to joining the Group, Caroline held a number NE�ãM@MBD�QNKDR�@S� UHU@�@MC�RODMS���� XD@QR�@S�*/,&
Name:�# 5(#�".4&'+ Role: Group Underwriting Director #@UHC�INHMDC�12 �HM�,@QBG������@R�&QNTO� ,NSNQ�/NQSENKHN�#HQDBSNQ�@MC�HM�%DAQT@QX� 2010 became Underwriting and Claims #HQDBSNQ��$LDQFHMF�,@QJDSR �/QHNQ�SN�12 �� #@UHC�V@R�@S�9TQHBG�%HM@MBH@K�2DQUHBDR� VGDQD�GD�V@R�'D@C�NE�/DQRNM@K�+HMDR� Underwriting and Chief Pricing Actuary for the Zurich Group. David has 25 years of insurance experience in underwriting, pricing and actuarial-related matters and HR�@�%DKKNV�NE�SGD�(MRSHSTSD�NE� BST@QHDR �
Name:�6(++( ,�,B#.--$++ Role:�&QNTO�"GHDE�1HRJ�.EãBDQ William was appointed Group Chief Risk .EãBDQ�NM���#DBDLADQ����� �2HMBD�INHMHMF� RSA in 2006, William has also held the roles of Group Risk Director and Group %HM@MBH@K�"NMSQNKKDQ �'D�G@R�DWSDMRHUD� risk management experience with a MTLADQ�NE�AKTD�BGHO�ãM@MBH@K�HMRSHSTSHNMR�� HMBKTCHMF�'2!"�(MUDRSLDMS�!@MJ��VGDQD� he was Insurance Capital Advisory #HQDBSNQ�� UHU@��SGD�%HM@MBH@K�2DQUHBDR� Authority and seven years at Deloitte.
Name:�# 5(#�6$8,.43' Role:�&QNTO�"GHDE�1HRJ�.EãBDQ David was appointed Group Chief Risk .EãBDQ�HM�-NUDLADQ����� �2HMBD�INHMHMF� the Group in June 2007, David has also held the post of Group Operations and 1HRJ�#HQDBSNQ �!DENQD�INHMHMF�12 ��#@UHC� spent two years consulting to blue-chip @MC�FNUDQMLDMS�NQF@MHR@SHNMR �'D�V@R� @KRN�"(.�@S�!@QBK@XR�@MC�@�LDLADQ�NE� SGD�&QNTO�$WDBTSHUD�"NLLHSSDD �'D�G@R� extensive non-executive experience and is currently a Non-Executive Director at the Royal London Group and at the %HM@MBH@K�2DQUHBDR�"NLODMR@SHNM�2BGDLD
Name:�/ 4+�6'(33 *$1 Role:�&QNTO�"GHDE�.ODQ@SHMF�.EãBDQ Paul joined the Group in 2003 and was "GHDE�$WDBTSHUD�NE�$LDQFHMF�,@QJDSR� EQNL�������� �'D�V@R�@OONHMSDC�&QNTO� "GHDE�.ODQ@SHMF�.EãBDQ�HM�,@X����� �/@TK� has over 20 years’ senior management DWODQHDMBD�HM�SGD�ãM@MBH@K�RDQUHBDR�RDBSNQ�� including three years at AXA and 10 years at GE Capital.
Name: VANESSA EVANS Role:�&QNTO�'TL@M�1DRNTQBDR�#HQDBSNQ 5@MDRR@�INHMDC�12 �HM������@R�'TL@M� 1DRNTQBDR�!TRHMDRR�/@QSMDQ�#HQDBSNQ�HM� the UK, and has worked in a variety of roles across the Group. In 2006 she was OQNLNSDC�SN�'TL@M�1DRNTQBDR�#HQDBSNQ� ENQ�SGD�$LDQFHMF�,@QJDSR�1DFHNM �(M������� Vanessa was promoted again to the role NE�4*�'TL@M�1DRNTQBDR�#HQDBSNQ�@MC� in September 2011 she was appointed &QNTO�'TL@M�1DRNTQBDR�#HQDBSNQ � Prior to working at RSA, Vanessa was '1�#HQDBSNQ���&KNA@K�1DS@HK�@S�+DFN� @MC�ADENQD�SG@S�'D@C�NE�'1�ENQ�&@O�� the international clothing retailer.
A 0 to 3 years B 3 to 6 years C 6 to 9 years
Stephen Hester was appointed as Group Chief Executive with effect from 5 February 2014. For the period from 1 January 2014 to 4 February 2014, Martin Scicluna performed the role of Executive Chairman on an interim basis until Stephen joined the Group, at which point the roles of Chairman and Group Chief Executive reverted to being separate and complementary with responsibilities clearly divided. Enrico Cucchiani was appointed as an Independent Non-Executive Director on 1 December 2014.
The Company’s Articles of Association give the directors power to appoint and replace directors as required. NonExecutive Directors are initially appointed for a three-year term with an expectation that they will continue for at least a further three years. The Group Nomination and Governance Committee make recommendations on director appointments or re-election to the Board. Directors stand for election or re-election annually at the Company’s Annual General Meeting (AGM) for approval by shareholders.
Committees’ performance • Performance of Board Committees and individual directors • Agreeing training and development plans for each director • Ensuring a tailored induction for new directors • Succession planning and Board composition based on the recommendations by the Group Nomination and Governance Committee
• Leadership of the Board in agreeing the Group’s strategic operating plans and budgets
• Ensuring relevant objectives are established for the Group Chief Executive and his management team
• Reviewing with the Group Chief Executive the overall performance of the Company and its senior management
Responsible for: • Developing targets and goals for the senior management of the Company • Developing, recommending and presenting to the Board, taking into account any threats or opportunities: - strategic plans - risk appetite for the business - risk exposure
• Liaising with the Chairman and Board on matters which are material to the performance of the Company.
Responsible for: • Providing support to the Chairman in the delivery of his responsibilities when required • Assisting in matters relating to Board evaluation • Chairing the Group Nomination and Governance
• Ensuring that the views of each of the Non-Executive Directors are given due consideration and facilitating communication between the Non-Executive Directors and the Chairman
• Holding meetings with the Non-Executive Directors without the Chairman being present to review the Chairman’s performance.
Committee selection is regularly reviewed by the Group Nomination and Governance Committee based on skills and experience
• Meeting with the Senior Independent Director without the Chairman being present to review the Chairman’s performance and other matters.
ROLE OF THE BOARD The primary responsibility of the Board is to provide effective leadership to ensure that it promotes the success of SGD�"NLO@MX�ENQ�SGD�ADMDãS�NE�HSR�LDLADQR�@R�@�VGNKD � The Board provides entrepreneurial leadership within a framework of prudent and effective controls.
The Board is accountable to stakeholders for the creation and delivery of strong sustainable performance and the creation of long-term shareholder value. The Board meets frequently and is responsible for organising and directing the affairs of the Group in a manner that will promote the success of the Company and is consistent with good corporate governance practice, ensuring that in carrying out its duties the Company and the Group meet legal and regulatory requirements.
The business of the Company is managed by the Board of Directors, who may exercise all the powers of the Company subject to the Articles of Association, relevant law and any directions as may be given by the Company at general meetings by ordinary shareholder resolution. The directors may delegate any of their powers or discretions to Committees.
The Board sets annual objectives for the business in line with the current Group strategy and monitors achievement of the Company’s objectives through regular reports which include updates from the Group Chief Executive and the Group Chief %HM@MBH@K�.EãBDQ�NM�@KK�L@SDQH@K�ATRHMDRR�L@SSDQR �
• Annual review of the effectiveness of the Group’s systems of risk management and internal control
Notes: 1. Adrian Brown ceased to be a director with effect from 16 April 2014. 2. Stephen Hester was appointed as a director with effect from 3. Edward Lea and Malcolm Le May ceased to be directors with effect from 4. Enrico Cucchiani was appointed as a director with effect from 5. Details of Board Committee attendance can be found in the individual
• Approval of business disposals • Key functional updates and developments • Review of regional strategies
• Solvency II: capital • Monitoring share price performance • Approval of the 2015-17 Operational Plan • Audit engagement and effectiveness • �2HFMHãB@MS�SQ@MR@BSHNMR�@MC�BNMSQ@BSR • Investment performance • External audit updates
Annual Report and Accounts, AGM • Review of Board and Committee evaluation • Succession planning
• Whistleblowing policy and training • Training and development • Regular Committee updates to the Board 2015 AND BEYOND The Board’s key business objectives are to: • improve the Group’s focus: become stronger and better AX�QDCDãMHMF�SGD�&QNTO�R�RSQ@SDFX�
In doing so, the Company aims to improve business performance to deliver a sustainable dividend into the future, delivering long-term value to shareholders.
EFFECTIVENESS EFFECTIVENESS OF THE BOARD The Board considers that the information provided to the Board and its Committees is supplied in a timely manner and is of an appropriate quality to enable it to discharge its duties. Where a director was not available to attend a meeting, their views, where possible, were canvassed by the Chairman prior to the relevant meeting and the Board informed of their opinions and observations. Formal minutes recording the decisions of all Board and Committee meetings are prepared and circulated to each director. If a director objects to a particular decision this is recorded in the minutes of the relevant meeting. When considering matters such as SGD�@OOQNU@K�NE�ãM@MBH@K�RS@SDLDMSR�@MC�K@QFD�NODQ@SHNM@K� contracts, the Board may delegate authority to a Committee SN�ãM@KHRD�@MC�@OOQNUD�@R�QDPTHQDC
6GDM�@OONHMSHMF�MDV�CHQDBSNQR��QDF@QC�HR�FHUDM�SN�SGD�RHYD� of the Board, the balance of Executive and Non-Executive #HQDBSNQR�@MC�SGD�ADMDãSR�NE�CHUDQRHSX��HMBKTCHMF�FDMCDQ � 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 Cucchiani in December 2014, 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. The Board recognises the importance of diversity for Board effectiveness.
Reports on the activities of the Board Committees throughout 2014 can be found on pages 69 to 106 and are incorporated into this report by reference.
INDUCTION, TRAINING AND DEVELOPMENT OF DIRECTORS Upon appointment to the Board and any Committee, directors undertake an induction programme, receiving a broad range of information about the Company which is tailored to their existing knowledge and experience. This includes information on the operational performance and business of the Group and details of Board procedures, Corporate Governance and directors’ responsibilities, along with a series of meetings with senior management covering all aspects of the business: regulatory compliance, claims, capital, reserving, internal audit, IT and e-business and HR. In addition, in line with recommendations from the 2013 external Board Effectiveness Review, the induction programme now includes attendance at each of the Board Committees at least once during their induction. The Group General Counsel and Company Secretary is responsible for assisting the Chairman in arranging the induction programme, training schedules and professional development for the directors and for bringing all governance matters to the attention of the Board.
CCHSHNM@KKX��SGD�!N@QC�QDBDHUDR�AQHDãMFR�NM�L@SSDQR�VGHBG� @QD�L@SDQH@K�SN�SGD�&QNTO�QDK@SHMF�SN�SGD�ãM@MBH@K�@MC� NODQ@SHNM@K�ODQENQL@MBD�NE�SGD�ATRHMDRR��AQHDãMFR�NM� legislative and regulatory changes and corporate governance matters affecting the Group.
DIRECTORS’ TRAINING Directors have attended training sessions and seminars during the course of the year to enhance their knowledge and keep their experience relevant. Training topics covered during 2014 include: • Developments for audit committees, audit reporting, auditor rotation and non-audit services
“ RSA is keen to make certain that, as directors we have available to us relevant resources to support and supplement our understanding of the industry and relevant matters so ensuring we can perform effectively in our roles. Each director has a training plan which is reviewed by the Chairman. This year I have participated in a number of targeted training sessions which have included CDUDKNOLDMSR�HM�SGD�äM@MBH@K�QDONQSHMF�@MC�FNUDQM@MBD� arenas and on Solvency II. Our Solvency II training programme, which is ongoing, is provided to the entire Board by our in-house Solvency II team, explaining the requirements for Solvency II and how these are being applied to the Company.”
Alastair Barbour Non-Executive Director and Chair of the Group Audit Committee
The process considered the Board and Board Committee composition, performance, oversight, knowledge and understanding. It also considered improvements to become LNQD�DEEDBSHUD��@MC�HCDMSHãDC�SGD�JDX�@QD@R�NE�ENBTR�ENQ�������
• Board and Committee agendas to be reviewed to have greater focus on major issues in addition to ‘Business As Usual’
• The Board to spend more time in the business, with increased interaction with senior management, customers, brokers, key shareholders and regulators, to strengthen the board’s direct insights into the business and its capabilities
The Senior Independent Director met independently with each of the Non-Executive Directors and the Group General Counsel and Company Secretary to evaluate the performance of the Chairman. The review concluded that the Board’s awareness of major issues has been enhanced through improved reporting, selective deep dives and formal training. In addition, the review concluded that the Chairman had led the Board in an effective way throughout the year. The Board especially appreciated the effective role Martin Scicluna undertook as Executive Chairman from 13 December 2013 to 4 February 2014.
A tt en d an ce a t outlining views to Board
A future Non-Executive Director added to the Board to G@UD�@M�HM�CDOSG�@MC�RODBHãB�DWODQHDMBD�NE�SGD�FDMDQ@K� insurance sector and an understanding of the fundamental changes taking place across platforms, geographies, clients and customers.
Enrico Cucchiani was appointed as a director in December ���� �$MQHBN�G@R�DWSDMRHUD�ãM@MBH@K�RDQUHBDR�@MC�HMRTQ@MBD� RDBSNQ�DWODQHDMBD�HMBKTCHMF�NUDQ����XD@QR�@S� KKH@MY�HM� a variety of international roles. Biographical details for Enrico are set out on page 51.
As part of the Business Review and the review of strategy, a full review of the risks facing the Group was undertaken. In addition HR and Group Risk have developed a Cultural Health Index which includes an index of positive and negative indicators to help senior leaders spot the early warning signs of cultural risk. The Index is reviewed quarterly by senior HR, Audit and Risk leaders and the results are monitored at the Board Risk Committee.
The Business Review has enabled the Board to consider the Group’s priorities and identify a clear recovery programme, giving visibility of the issues the Company faces. In addition, a review of the global governance structure and consistency of reporting globally has provided the Board with enhanced oversight.
Ensure Non-Executive Directors are aware of the work of the Board Committees, with overlap of membership and participation as members on several Committees. It was encouraged that new Non-Executive Directors, as part of their induction should attend each Board Committee at least once during their induction.
A full review of Committee composition by the Group Nomination and Governance Committee was carried out to achieve cross-Committee membership. The Chair of the Group Audit Committee is a member of the Board Risk Committee, the Board Risk Committee Chair is a member of the Group Audit Committee and the Chair of the Group Remuneration Committee is a member of the Board Risk Committee. In addition, the Non-Executive Director induction programme now includes attendance at each of the Board Committees to familiarise themselves of the matters discussed.
Alignment of performance and reward. Directors need a comprehensive understanding and further scrutiny of incentive systems throughout the Group.
ENGAGEMENT EMPLOYEES The high performance and strong expertise of the Group’s employees are key to the successful delivery of the business strategy.
In 2014, employees had the opportunity to share their views on the Company through the new global employee engagement survey, YOURSAY. Through YOURSAY, over 100,000 comments, ideas and suggestions were received from employees and the results were shared openly. Employees have been actively encouraged to take actions for improvement based on the survey results.
During the year, the Company implemented a number of actions to further strengthen its culture, including the launch of a new whistleblowing platform, Ethicspoints, and the launch of the RSA Cultural Health Index.
The Group is committed to diversity and the promotion of equal opportunities. Following the launch in 2013 of a new diversity and inclusion programme, the Group has continued to invest in strengthening our pipeline of female employees in senior leadership positions. We are committed, wherever possible, to employing and developing people who are disabled, or become disabled during their career with the Company.
Further details of the Company’s employment policy is set out in the Strategic Report on pages 2 to 47 and is incorporated into this report by reference.
CUSTOMER The Company’s founding purpose was to help to protect people through the protective and restorative power of insurance. This purpose still drives our business today, 304 years later. The regional businesses are empowered to make the best decisions for their customers locally, with support from the Group Corporate Centre. In many countries we operate in, the primary customer measure is the Net Promoter Score (NPS) which produces a customer’s satisfaction score based on a scale of 1 – 10. NPS is universally recognised and used across industries. NPS can be calculated at a technical level, prompted when a customer has interacted with the Company, and as an overall level of satisfaction at any given time. It allows us to make changes to the customer experience, however small, with the aim of making any interaction with the Company as easy as possible.
SHAREHOLDERS The Group is committed to proactive and constructive interaction with shareholders and other market participants. During 2014, the Company held over 500 meetings with institutional investors, and met with 18 of the top 20 shareholders on at least one occasion. The key themes
of these meetings centred on the outlook and strategic direction of the Group. The Group’s share register includes institutional investors predominantly from the UK, Europe and North America with a range of investment styles. During ������SGDQD�G@R�ADDM�@�RHYD@AKD�HMBQD@RD�HM�SGD�OQNONQSHNM� of shares held by non-UK shareholders, with the top 20 shareholders at 31 December 2014 including investors from the US, Scandinavia, Canada and Asia.
Cevian Capital II G. P. Limited 133,068,287 13.12% Indirect 133,068,287 13.12% Indirect
The Capital Group Companies Inc2 260,447,169 5.14% Indirect 260,447,169 5.14% Indirect
A Unit trust/Mutual funds B Private/Retail C Pension funds D Other E Insurance
Share Capital The Company is listed on the London Stock Exchange under the ticker symbol RSA. The Company has two classes of shares: Ordinary Shares of £1.00 each and Preference Shares of £1.00 each.
The average total daily trading volume during 2014 was approximately 4.1m Ordinary Shares. The closing market price of an Ordinary Share on 2 January 2014 was 92p (equivalent post-consolidation price of 409.23p) and the closing market price on 31 December 2014 was 435p. The highest daily closing price of an Ordinary Share was 497p on 19 June 2014 and the lowest daily closing price was 87p on 3 January 2014 (equivalent post-consolidation price of 409.01p) (source: datastream).
3GDQD�@QD�MN�RODBHãB�QDRSQHBSHNMR�NM�SGD�RHYD�NE�@�RG@QDGNKCHMF� nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and legislation. The directors are not aware of any agreements between the Company’s shareholders that may result in restrictions on the transfer of securities or on voting rights. The Company may purchase any of its own shares (including any redeemable shares). An authority from ordinary shareholders for the Company to purchase up to 73,644,360 (on a post-consolidation basis) of its own Ordinary Shares (representing 10% of its issued share capital as at 3 March 2014) was passed at the 2014 AGM. This authority will expire at the conclusion of the 2015 AGM. During the year, the only shares repurchased by the Company were 5,068,926,055 Deferred Shares, which represented 100% of the non- voting share class, for a total aggregate value of one penny following the share consolidation. These shares were subsequently cancelled.
The greenhouse gas emission reporting covers its core businesses of UK, Ireland, Scandinavia, Canada and Latin America, together with its non-core businesses, including wholly owned subsidiaries, leased premises and joint ventures. All material emissions sources reported on are ones deemed to be the responsibility of the Company. The sources @KHFM�SN�NODQ@SHNM@K�@MC�ãM@MBH@K�BNMSQNK�ANTMC@QHDR �6GDQD� data is not provided by the operating entity, estimates have been provided based on relative calculations against other businesses within the Company. The greenhouse gas emissions data and estimations are subject to external assurance by PWC. For a full methodology statement and scope visit www.rsagroup.com/corporate-responsibility.
ACCOUNTABILITY STATEMENT BY DIRECTORS Section 414A of the Companies Act 2006 requires the directors to present a Strategic Report of the Company ENQ�SGD�ãM@MBH@K�XD@Q�DMCDC����#DBDLADQ����� �3GD� HMENQL@SHNM�SG@S�ETKãKR�SGD�QDPTHQDLDMSR�RDS�NTS�HM�2DBSHNM� 414C can be found on pages 2 to 47, and is incorporated by reference into this report.
So far as each director of the Board is aware, there is no QDKDU@MS�@TCHS�HMENQL@SHNM��@R�CDãMDC�HM�RDBSHNM�������� of the Companies Act 2006) of which the Company’s external auditor is unaware, and each director has taken all steps necessary as a director in order to make himself/ herself aware of, and to establish that the external auditor is aware of, any relevant audit information.
• The Company’s exposure to price risk, credit risk, insurance QHRJ��KHPTHCHSX�QHRJ�@MC�B@RG�âNV�QHRJ
Details of events which have occurred after the reporting period are set out on note 35 on page 199.
GOING CONCERN In considering the appropriateness of the going concern A@RHR��SGD�!N@QC�G@R�QDUHDVDC�SGD�&QNTO�R�NMFNHMF�ãM@MBH@K� commitments for the next 12 months and beyond. The Board’s review included the Group’s strategic plans and updated forecasts, capital position, liquidity and credit facilities and investment portfolio. The Group maintains close and regular dialogue with its regulators throughout the journey to internal model approval and the directors @QD�BNMãCDMS�SG@S�SGD�&QNTO�VHKK�BNMSHMTD�SN�LDDS�@KK� future regulatory capital requirements. As a result of this QDUHDV��SGD�CHQDBSNQR�G@UD�R@SHRãDC�SGDLRDKUDR�SG@S�HS�HR� @OOQNOQH@SD�SN�OQDO@QD�SGDRD�ãM@MBH@K�RS@SDLDMSR�NM�@� going concern basis.
DELEGATED AUTHORITY AND CORPORATE GOVERNANCE FRAMEWORK The purpose of the Corporate Governance Framework is to determine how the Group meets its legislative and regulatory FNUDQM@MBD�QDPTHQDLDMSR��DM@AKHMF�DEEDBSHUD�@MC�DEãBHDMS� CDBHRHNM�L@JHMF�AX�SGD�!N@QC�@MC�HSR�"NLLHSSDDR �(S�CDãMDR� BKD@Q�QDRONMRHAHKHSHDR�@MC�CDãMDR�GNV�SGD�&QNTO�HR�CHQDBSDC� and managed.
3GD�#DKDF@SDC� TSGNQHSX�%Q@LDVNQJ�RODBHãDR�GNV�DWDBTSHUD� authority is delegated from the Board to the Group Chief Executive and onward delegation to senior management in the Group. The Group Chief Executive and senior management across the Group receive an executive licence setting out SGDHQ�RODBHãB�KHLHSR�NE�@TSGNQHSX�HM�SDQLR�NE�VGDM�DMSDQHMF�HMSN� ãM@MBH@K��TMCDQVQHSHMF��BK@HLR�@MC�NSGDQ�ATRHMDRR�BNLLHSLDMSR � Each executive is responsible for ensuring a similar process of delegation is in place within his or her area of responsibility.
• Ensure consistency is applied. Separate policies have been written covering operational and technical matters aligning all matters
• Ensure that the risks associated with managing and delegating authorities are mitigated through the use of appropriate preventative and detective controls, and remain within the Risk Appetite
The Delegated Authority Framework is applied across the Group’s Businesses where individuals must operate and/or authorise within limits delegated by the Group Chief Executive, his direct reports and/or governing bodies, and ensures consistency between each of the subsidiaries within the Group. The powers of the Board, and the extent to which these powers may be delegated or must be retained, are set out in detail in the Schedule of Matters Reserved for the Board or Terms of Reference for the Board Committees.
%NKKNVHMF�@�QDUHDV�AX�/6"�HMSN�SGD�ãM@MBH@K�@MC�QDFTK@SNQX� reporting processes and controls within the Irish business and Group oversight and controls of the Irish business, PWC described the Group’s System of Governance and Control Framework as appropriate in terms of structure and design ENQ�@M�HMSDQM@SHNM@K�HMRTQ@MBD�FQNTO�NE�SGHR�RHYD�@MC� complexity, and noted that elements of the Framework’s design compared favourably across the market. The PWC review concluded that there were no obvious indicators QDK@SHMF�SN�SGD�HRRTDR�HCDMSHãDC�HM�SGD�(QHRG�ATRHMDRR�SG@S�VDQD� ignored, at either Regional or Group level, and neither external audit or an independent reserve review during 2013 and prior XD@QR�HCDMSHãDC�SGD�RODBHãB�HRRTDR�SG@S�KDC�SN�SGD�QDONQSDC� losses in the Irish business. In January 2014, the PWC Report made a number of recommendations which have been incorporated into a Global programme, commissioned by the Group Audit Committee and Board Risk Committee chairs to enhance the effectiveness of the Internal Control system.
This report together with the Strategic Report, the Group Audit Committee Report and the Directors’ Remuneration Report demonstrates how the Principles and Provisions of the 2012 UK Code have been applied.
DIRECTORS’ INDEMNITY Article 140 of the Articles of Association provides that, among other things and insofar as permitted by law, the Company may indemnify its directors against any liability and may purchase and maintain insurance against any liability. The Company has granted an indemnity to each of the directors pursuant to the power conferred by Article 140 of the Articles of Association. The indemnities granted constitute qualifying SGHQC�O@QSX�HMCDLMHSX�OQNUHRHNMR��@R�CDãMDC�AX�RDBSHNM����� of the Companies Act 2006.
The Company believes that it promotes the success of the Company to provide this indemnity to its directors in order to ensure that the Group attracts and retains high calibre directors through competitive terms of employment in KHMD�VHSG�L@QJDS�RS@MC@QCR �3GD�CHQDBSNQR�@MC�NEãBDQR� NE�SGD�"NLO@MX�@MC�HSR�RTARHCH@QHDR�@KRN�G@UD�SGD�ADMDãS� of insurance which provides suitable cover in respect of legal actions brought against them.
ARTICLES OF ASSOCIATION The Company’s Articles of Association may be amended by special resolution of the Company’s ordinary shareholders. The current Articles of Association were adopted at the 2014 AGM and are available on the Company’s website at www.rsagroup.com/articles.
DISCLOSURES REQUIRED UNDER LISTING RULE 9.8.4R The following table sets out where in the Annual Report and Accounts information required to be disclosed to meet the requirements of Listing Rule 9.8.4R, where applicable, to the Company, can be located: Information required Location in Annual Report and Accounts
BOARD COMMITTEES The following pages report on the activities of the Board Committees in 2014. These reports are incorporated into the Directors’ and Corporate Governance Report by reference.
BOARD COMMITTEE AUTHORITY AND MEMBERSHIP The Board delegates certain duties to its Committees so that matters receive detailed consideration. The Terms of Reference set out the authority delegated from the Board. These have been reviewed and approved for each Committee by the Board during the year and are available on the Company’s website at www.rsagroup.com/termsofreference.
As Chairman of the Group Nomination and Governance Committee, the purpose of this report is to update shareholders on the activities of this Committee throughout 2014.
I am supported on the Committee by Alastair Barbour, Hugh Mitchell and Johanna Waterous. Edward Lea was a member of the Committee until his retirement on 8 May 2014 and I would like to thank him for his participation. Attendance at Committee meetings is shown in the table below.
Notes: 1. Edward Lea ceased to be a member of the Group Nomination and
• Consideration and recommendation of the directors’ appointments at the 2014 AGM
• Consideration of applicants and recommendation of Enrico Cucchiani’s appointment as director and Committee member
• Review of Group Nomination and Governance Committee responsibilities and effectiveness
SUCCESSION PLANNING, DIVERSITY, SKILLS AND EXPERIENCE The Committee manages the process of identifying potential Board appointees and recommending candidates for assessment and appointment by the Board as a whole. During the year the Committee continued to focus on ensuring that the right balance of skills, experience, JMNVKDCFD��HMCDODMCDMBD�@MC�SGD�ADMDãSR�NE�CHUDQRHSX�� including gender was represented on the Board. The Committee ensures the future balance of skills is sustained. (M�CNHMF�RN��SGD�"NLLHSSDD�HCDMSHãDC�$MQHBN�"TBBGH@MH�@R� a new appointee and made a recommendation to the Board regarding his appointment as a Director and Committee member. I am delighted to welcome Enrico Cucchiani as an Independent Non-Executive Director, who was appointed to the Group Board and as a member of the Group Remuneration Committee and Board Risk Committee VHSG�DEEDBS�EQNL��^#DBDLADQ����� �$MQHBN�G@R�DWSDMRHUD� DWODQHDMBD�@MC�JMNVKDCFD�HM�SGD�FKNA@K�ãM@MBH@K�RDQUHBDR� @MC�HMRTQ@MBD�RDBSNQ��@MC�G@R�RHFMHãB@MS�!N@QC�DWODQHDMBD� with a number of publicly quoted companies. It had been HCDMSHãDC�CTQHMF�SGD�DWSDQM@K�ODQENQL@MBD�DU@KT@SHNM� TMCDQS@JDM�HM�������SG@S�SGD�!N@QC�VNTKC�ADMDãS�EQNL� someone with insurance experience. I look forward to the insights and ideas Enrico will bring to the Group Board.
MWM Consulting Limited, an external search agency, were engaged during the year by the Committee to assist the Company in recruiting Enrico Cucchiani as a Non-Executive Director. A description of the role and the capabilities required for the appointment were provided to the agency. Reports on potential appointees were provided to the Committee members who, after careful consideration, made a recommendation to the Board. MWM Consulting Limited is independent and has no other relationship with the Company.
COMMITTEE COMPOSITION I took over as Chair of the Group Investment Committee when Malcolm Le May resigned on 8 May 2014. I would like to thank Malcolm for his contribution as Chairman of the Committee.
Committee with effect from 8 May 2014. 3. Jos Streppel was appointed as Chair of the Committee with effect from 8 May 2014.
INVESTMENT PORTFOLIO The prolonged low growth and low interest rate environment has continued to dominate the performance of investment markets. Interest rates and bond yields remain at extremely low levels in the major economies in which the Group operates, placing downward pressure on investment income.
Details of the Group’s investments are contained in the Financial Review on pages 26 to 29.
BOARD RISK COMMITTEE As Chairman of the Board Risk Committee, I am pleased to present the Committee’s report for 2014 to shareholders.
Regular attendees also include the Group Risk Director, Group Chief Auditor, Director of Underwriting and the Group Regulatory Compliance Director. Regional risk, underwriting NEãBDQR�@MC�NSGDQ�DLOKNXDDR�NQ�@CUHRDQR�L@X�@SSDMC�@S�SGD� invitation of the Committee. The external auditor also attends meetings by invitation. Attendance at Committee meetings during 2014 is shown in the table below. In addition, private meetings are held ahead of each Committee meeting.
Notes: 1. Hugh Mitchell became a member of the Committee with effect from 1 July 2014. 2. Malcolm Le May ceased to be a member of the Committee with effect from 8 May 2014.
ROLE AND RESPONSIBILITIES A review of the Committee’s Terms of Reference was undertaken during 2014 to align the responsibilities of the Committee to the requirements under Solvency II.
The Committee is authorised by the Board to advise on risk management issues, recommend the Group framework of risk limits and risk appetite to the Board for approval and oversee the risk management arrangements of the Company and the Group generally. The Committee ensures that the L@SDQH@K�QHRJR�E@BHMF�SGD�&QNTO�G@UD�ADDM�HCDMSHãDC�@MC�SG@S� appropriate arrangements are in place to manage and mitigate those risks effectively.
The Committee has four scheduled meetings a year, which are planned to allow reporting from the business to the Committee on a quarterly basis and for the Committee to report any areas of concern or interest to the Board. Additional meetings may be called if required. The Committee reports to the Board on the outcome of meetings and refers matters to the Board as required.
The Committee has considered and monitored progress of the Global Programme which was commissioned by the Group Audit Committee and Board Risk Committee chairs to enhance the effectiveness of the Internal Control system. This programme has been set up to ensure that the design and implementation of the system of governance provides the Board with appropriate assurance, supported by robust lines of defence, and that this is demonstrable to the Board and regulators.
CAPITAL The Committee’s review of capital included trends, drivers and sensitivities across different measures and consideration of a new capital appetite structure and forecasting.
Outputs of the internal model were used by the Committee as an integral part of its decision making on matters from setting risk appetite and adjusting investment exposure and hedges, to reinsurance strategy, insurance portfolio risk assessment, or assessing key strategic decisions such as disposals. The Committee also oversaw the selection and outputs of a programme of stress and scenario testing, including a focus on capital fungibility within the Group. Regular updates were provided to the Committee by management on the strategic direction of the Group’s response to Solvency II, along with regular reviews of validation of the internal capital model and progress towards securing regulatory approval for the model.
Own Risk and Solvency Assessment During the year, the Committee considered a range of activities carried out at different times as part of the ORSA. �ãM@K�QDONQS�OQDRDMSDC�SN�SGD�"NLLHSSDD�@MC�SGD�!N@QC� in September summarised papers and associated decisions taken during the period to demonstrate that the issues have been dealt with in a coherent and consistent manner.
In June, an IT risk update presented to the Committee provided clarity of the framework and responsibilities of the Information Security Risk and Control Environment, HMBKTCHMF�BNMRHCDQ@SHNMR�NE�QHRJR�@MC�@BSHNMR�EQNL�RODBHãB� highlighted weaknesses in a range of IT controls following recent internal and external audit activity, some of which had been recurring. This arose from the Committee’s regular oversight of the overall status of compliance with each of the Group’s internal policies.
The Board Risk Committee continued to receive regular TOC@SDR�NM�ODNOKD�QHRJ�@MC�RHMBD�SGD������TOC@SD��RHFMHãB@MS� progress has been made on the Cultural Health Index, which was initiated early in 2014. The Committee places customers high on its agenda and regularly considers customer and conduct metrics and risks. In addition to the quarterly regulatory risk update, the Board Risk Committee requested Regulatory Compliance to provide an update on how we meet conduct regulation globally and how this aligns with our Conduct Risk Appetite.
3GD�DLDQFHMF�QHRJR�OQNãKD�V@R�QDEQDRGDC�HM�KH@HRNM�VHSG� external agencies, building on participation with the CRO Forum Emerging Risks Working Group. This included a focus on the potential impact of global weather trends with a presentation by external experts. There has been a rotating focus on individual regions, with regional presentations from @KK�QDFHNM@K�QHRJ�NEãBDQR�NUDQ�SGD�K@RS����LNMSGR
Performance Evaluation During the year, the Committee undertook an internal review of its effectiveness and the outcomes of this review were considered by the Board.
• Overseeing the external audit plan, progress and reporting by KPMG
• Group and regional Internal Audit Reports and plan for 2015
A primary focus for the Committee has been reviewing all scheduled results announcements; the 2013 Annual Report and Accounts with particular emphasis on their fair presentation; the reasonableness of judgements made; valuation of assets and liability balances and the @OOQNOQH@SDMDRR�NE�RHFMHãB@MS�@BBNTMSHMF�ONKHBHDR�TRDC� in their preparation, together with the application of those policies.
3GD�"NLLHSSDD�G@R�QDUHDVDC�SGD�&QNTO�R�ãM@MBH@K� reporting, internal control and risk management systems. The Committee has overseen, through regular reporting, the Group-wide project launched to review and, where appropriate, codify or enhance, risk policies and control processes following from events in Ireland at the end of 2013.
The Committee has unrestricted access to management, information and external advisers as required in order to ETKãK�HSR�CTSHDR��@MC�HR�R@SHRãDC�SG@S�HS�G@R�QDBDHUDC�RTEãBHDMS�� reliable and timely information during 2014, in order to discharge those duties.
The Group Chief Executive, the Group CFO, the Group Chief Auditor, the Group Regulatory Compliance Director and representatives of the external auditor, KPMG, are regular attendees at Committee meetings by invitation. The Chairman attended Committee meetings in February and August, when full-year and half-year results were considered. Other members of management and external advisers may attend at the invitation of the Committee.
Details of membership and attendance at Committee meetings are shown in the table below.
2. Jos Streppel became a member of the Group Audit Committee with effect from 8 May 2014.
Whistleblowing The Group has a whistleblowing policy, the effectiveness of which is reviewed annually by the Committee. The aim of SGD�ONKHBX�HR�SN�OQNUHCD�DLOKNXDDR�VHSG�@�BNMãCDMSH@K�ENQTL� to raise concerns in good faith where they either do not feel comfortable raising the matter with local management or @QD�MNS�R@SHRãDC�VHSG�SGD�KNB@K�L@M@FDLDMS�QDRONMRD � A summary of all whistleblowing incidents, underlying investigations and actions undertaken is provided to the Committee on an annual basis.
• Consideration of their observations on controls and processes as reported to management and follow up VHSG�QDKDU@MS�L@M@FDLDMS�SN�AD�R@SHRãDC�SG@S�SGD� observations are being appropriately actioned.
The main matters and primary areas of judgement addressed and concluded on by the Committee were as follows: Irish accounts and balance sheet substantiation • Following the discovery of the accounting irregularities in Ireland in late 2013, actions continued throughout 2014 to investigate and substantiate balances in the Irish balance sheet with a comprehensive review of business plans also being undertaken. The Committee received detailed information on this review and, after discussion and challenge, concurred with management’s view that further impairment of goodwill and intangibles was appropriate.
Valuation of investment assets • In order to satisfy the Committee that the investment assets are fairly stated, the Committee receives and reviews quarterly updates detailing the valuation together with the movement in the value of the investment portfolio. The Committee also reviews the quarterly Financial Control Framework Report, which details the effectiveness of controls over investment accounting. The Committee MNSDC�SG@S�MN�RHFMHãB@MS�HRRTDR�G@UD�@QHRDM
Valuation of insurance liabilities • The Committee has ensured that management exercised appropriate judgement in estimating insurance contract liabilities including assessing the impact of claims trends @MC�NSGDQ�HMâTDMBHMF�E@BSNQR�BNMRHRSDMS�VHSG�SGD�OQHNQ� year. This year the Committee again examined the appropriateness of discount rates on certain long-tail liabilities particularly in light of falling bonds yields: RSA ANNUAL REPORT AND ACCOUNTS 201476
• The Committee discussed and considered with management the basis for setting the rates used to discount long-tail liabilities and after review concluded that the basis be LNCHãDC�SN�LNQD�BKNRDKX�QDâDBS�@�L@QJDS�XHDKC�@OOQN@BG�� the revised basis continuing to be in line with accounting standards. The main impact of the change has been to reduce discount rates for disability in Scandinavia from 3.7% to 1.3%.
• The Committee received and considered detailed written and verbal reporting from the external auditor setting out their observations and conclusions in respect of the recorded insurance contract liabilities based on their audit procedures as further described in their report on pages 108 to 114.
Valuation of goodwill and other intangibles assets • At the year end a comprehensive review of goodwill and intangibles was presented to the Committee, which detailed the main assumptions used to support the recoverability of each asset, together with sensitivities to key assumptions. As an integral part of the consideration of the carrying value of goodwill and intangible assets, the Committee discussed with KPMG their audit procedures and their views on any proposed adjustments and the @CDPT@BX�NE�CHRBKNRTQDR�HM�SGD�MNSDR�SN�SGD�ãM@MBH@K� statements. The Committee considered in detail management’s proposal to impair the goodwill in both Ireland and Russia and after discussion and challenge, accepted management’s judgement on the impairment.
Valuation of deferred tax assets • The Committee reviewed the key assumptions and ãM@MBH@K�OQNIDBSHNMR�RTOONQSHMF�SGD�4*�CDEDQQDC�S@W� asset. The Committee assessed the forecasts presented by management and in particular, the longer-term OQNIDBSHNMR�NE�OQNãS@AHKHSX�HM�KHFGS�NE�SGD�BG@MFDR�SN� business plans as a result of the strategic review, revisions to restructuring activities and other management actions in progress or contemplated. After discussion and challenge, the Committee concluded that management’s proposed assessment as to the recoverable deferred tax was reasonable.
During 2014, the Committee received updates from the Chief (MENQL@SHNM�.EãBDQ�NM�SGD�OQNFQDRR�SN�DMG@MBD�(3�FDMDQ@K� controls, the oversight of IT testing processes, staff training and improvements in documentation and standards. The "NLLHSSDD�HR�R@SHRãDC�SG@S�FNNC�OQNFQDRR�HR�ADHMF�L@CD�HM� these areas. Business managers across the Group complete @�PT@QSDQKX�RDKE�BDQSHãB@SHNM�OQNBDRR�VGHBG�QDPTHQDR�SGDL� SN�BNMãQL�SGD�@CDPT@BX�NE�BNMSQNKR�@MC�SGDHQ�BNLOKH@MBD� with Company policies, local laws, rules and regulations.
EXTERNAL AUDITOR In 2014, the Board recommended to shareholders the appointment of KPMG LLP as external auditor to the Company. KPMG was appointed as the Group’s auditor in 2013 following a formal tender process. A resolution was put to shareholders and passed at the 2014 AGM.
The Group has an embedded non-audit services policy to assist with maintaining the independence of the external @TCHSNQ�@MC�HSR�ODQRNMMDK �3GD�ONKHBX�ODQLHSR�NMKX�RODBHãB@KKX� CDãMDC�RDQUHBDR�BNMRHCDQDC�SN�AD�@TCHS�QDK@SDC�SN�AD� performed by the auditor, and that all non-audit services must be approved by the Committee. A limit in value of non-audit fees incurred by the auditor, of 25% of total audit EDDR�ENQ�@�ãM@MBH@K�XD@Q��G@R�ADDM�HMSQNCTBDC �(M�DWBDOSHNM@K� circumstances the auditor could be considered for additional services where there is an overwhelming business rationale, but only with full Board approval. A summary of the policy is available on the Company’s website at www.rsagroup.com/ termsofreference.
The Committee receives and reviews a report on the non-audit services and spend quarterly, together with information on fees agreed and billed by the other major @BBNTMSHMF�ãQLR �#TQHMF�SGD�XD@Q�*/,&�OQNUHCDC�MNM�@TCHS� services totalling £1.6 million (2013 £2.2 million) of which £0.8 million related to the work carried out on the rights issue. The additional work on the rights issue was approved by the Board in line with policy.
There are no contractual obligations restricting the Company’s choice of external auditor and there is no limitation of liability in the terms of the appointment of KPMG LLP as auditor to the Company.
LINKING REMUNERATION WITH PERFORMANCE In 2014, considerable progress has been made on business restructuring, most notably a strengthened capital position, expense reduction and a more focused portfolio of core businesses. Financial performance fell short of our ambition, driven mainly by prior year events. The key performance HMCHB@SNQR�TMCDQOHMMHMF�SGD�ATRHMDRR�ãM@MBH@KR�@QD�CDS@HKDC� NM�O@FDR����SN��� �3GD�&QNTO�QDONQSDC�@�QDSTQM�SN�OQNãS@AHKHSX� VHSG�@�OQD�S@W�OQNãS�NE�`���L �"NLAHMDC�.ODQ@SHMF�1@SHN� V@R��� �í��-DS�6QHSSDM�/QDLHTL�V@R�`� �AM�@MC�&QNTO� TMCDQKXHMF�1.3$�V@R�� �í
A careful assessment of performance has been made, S@JHMF�@BBNTMS�NE�ãM@MBH@K��!TRHMDRR�1DUHDV�@MC�ODQRNM@K� achievment, as well as input from a risk perspective. 3GHR�G@R�DMRTQDC�SG@S�DWDBTSHUD�QDLTMDQ@SHNM�QDâDBSR� RSA’s underlying performance. The Committee has been mindful of the need to be balanced, taking into account SGD�ãM@MBH@K�QDRTKSR�@MC�ENBTR�NM�DWODMRD�R@UHMF�@BQNRR� the Group, whilst also wanting to acknowledge and encourage the progress made towards achieving strategic and business goals.
Consequently, I can advise that: • 2@K@QHDR�VHKK�AD�TMBG@MFDC�ENQ������ENQ�SGD�$WDBTSHUD� Directors, this follows a salary freeze in 2014
• Bonuses were awarded at 68% and 13% of the maxiumum for Stephen Hester and Richard Houghton respectively for 2014 performance, with half being deferred into shares for three years
Remuneration Committee 83 � � 3NS@K�QDLTMDQ@SHNM��������RHMFKD�ãFTQD��S@AKDR� �� � � "NLONMDMSR�NE�$WDBTSHUD�#HQDBSNQR��QDLTMDQ@SHNM� �� 5. Directors’ shareholding 90 � � /@XLDMSR�SN�#HQDBSNQR�ENQ�KNRR�NE�NEãBD� �� � � /@XLDMSR�SN�ENQLDQ�#HQDBSNQR� �� 8. Historical TSR performance and executive remuneration 94 9. Percentage change in remuneration 94 10. Relative importance of spend on pay 94 11. Implementation of Remuneration Policy in 2015 95 �� �2S@SDLDMS�NE�UNSHMF�@S�&DMDQ@K�,DDSHMF� ��
A new long-term incentive plan was approved at the 2014 &, �3GD�BNMCHSHNM@K�ODQENQL@MBD�RG@QDR�RTARDPTDMSKX� FQ@MSDC�SN�$WDBTSHUD�#HQDBSNQR�VHKK�UDRS�@ESDQ�SGQDD�XD@QR�� RTAIDBS�SN�SGD�@BGHDUDLDMS�NE�RSQDSBGHMF�ODQENQL@MBD� BNMCHSHNMR�@MC�@QD�RTAIDBS�SN�@�SVN�XD@Q�QDSDMSHNM�ODQHNC �
Details of the implementation of the Group’s remuneration approach in 2014 are set out on pages 85 to 94.
Details of the Policy are given on pages 99 to 106 for information, and the full Policy Report is in the 2013 Directors’ Remuneration Report, available in the Investor Relations section of www.rsagroup.com.
• /DQENQL@MBD�2G@QDR�FQ@MSDC�HM�SGD���������BXBKD�VHKK�UDRS� RTAIDBS�SN�SGD�@BGHDUDLDMS�NE�RSQDSBGHMF�ODQENQL@MBD� conditions, which will continue to be structured around the turnaround and include: – Relative TSR, which will be measured against an unweighted index of insurers, as in the 2014-16 cycle
– UDQ@FD�&QNTO�TMCDQKXHMF�1.3$�NE������í�NUDQ�SGQDD� XD@QR �3N�QDâDBS�SGD�M@STQD�NE�@�STQM@QNTMC�VGDQD�1.3$� performance is targeted to improve over the three year @UDQ@FHMF�ODQHNC��SGD�1.3$��NM�S@QFDS��UDRSHMF�VHKK�AD�RDS� at less than the mid-point of the range, taking account of the operating plan. The precise target is considered by the directors to be commercially sensitive but will be disclosed retrospectively. The Committee retains discretion to reduce the level of vesting should the 1.3$�NTSBNLD�ENQ������E@KK�RGNQS�NE�SGD�LDCHTL�SDQL� performance targets set out in the Strategic Report NM�O@FD��� �
• In recognition of Stephen Hester’s criticality to the transformation of the Company over the next few years, his performance share grant in 2015 will be at 300% of salary at maximum vesting. His future LTIP grants will be made at no more than 230% of salary, which is the &QNTO�R�TRT@K�KDUDK�NE�@V@QC�ENQ�$WDBTSHUD�#HQDBSNQR �
• The incentive framework will apply to other senior leaders across the Group except those in risk, audit and compliance where bonus arrangements are tailored to maintain their independence.
• New clawback provisions will apply to both cash bonuses awarded for 2015 performance, and performance shares granted from 2015, as detailed on page 89.
DIRECTOR CHANGES �MTLADQ�NE�$WDBTSHUD�#HQDBSNQ�BG@MFDR�SNNJ�OK@BD�HM�SGD� year. Stephen Hester’s appointment terms were set out in last XD@Q�R�QDONQS � CQH@M�!QNVM��"GHDE�$WDBTSHUD�4*�@MC�6DRSDQM� $TQNOD��QDRHFMDC�EQNL�SGD�!N@QC�NM���� OQHK������@MC�KDES�SGD� "NLO@MX�NM���� TFTRS����� �,Q�!QNVM�VHKK�MNS�QDBDHUD�@� bonus for 2014 and his unvested LTIP awards have lapsed.
1HBG@QC�'NTFGSNM��&QNTO�"GHDE�%HM@MBH@K�.EãBDQ��VHKK�RSDO� CNVM�EQNL�SGD�!N@QC�NM���,@X������@MC�KD@UD�SGD�&QNTO�NMBD� a successor is appointed. He will not receive an LTIP grant or a bonus for the 2015 year. His unvested long-term incentive awards will vest on the normal schedule, pro-rated for time and achievement of their performance conditions.
Remuneration Snapshot HOW IS RSA IMPLEMENTING ITS APPROVED REMUNERATION POLICY FOR EXECUTIVE DIRECTORS?
• �.SGDQ�SG@M�DWBDOSHNM@K� circumstances such as a role change, salary increases will not exceed the level of increases applied to other RSA employees.
Annual Bonus Plan • �%HM@MBH@K�@MC�MNM�ãM@MBH@K�S@QFDSR • Fifty per cent of the bonus deferred into shares for three years. • 2TAIDBS�SN�12 �R�"K@VA@BJ�/NKHBX�
• 80% of salary on-target and 160% of salary for maximum performance.
• Performance conditions: Relative 321��&QNTO�TMCDQKXHMF�1.3$� and Business Review Scorecard (to also include TNAV:NWP and controllable expenses).
Annual Bonus Plan 2014 Performance measures Actual performance Weighting (% total bonus) Stephen Hester (% of max) &QNTO�TMCDQKXHMF�1.3$��/!3��".1 Performance targets, results and narrative on O@FDR����SN���
Long-term incentive cycle 2012-14 Performance measures Actual performance Vesting (% of maximum)
3N�DM@AKD�SGD�"NLLHSSDD�SN�ETKãK�HSR�@BBNTMS@AHKHSHDR�SN� shareholders, it meets as often as is required and at least twice a year. It operates within an agreed set of terms, which the Committee reviews annually. A copy of these terms of reference can be viewed on the Group’s website at: www.rsagroup.com or alternatively a paper copy can be requested in writing from the Group Company Secretary.
Notes: * Chair of Committee � � �*@SG�"@SDR�V@R�@OONHMSDC�SN�SGD�"NLLHSSDD�DEEDBSHUD���,@X����� � � �$MQHBN�"TBBGH@MH�V@R�@OONHMSDC�SN�SGD�"NLLHSSDD�DEEDBSHUD�
2. INFORMATION ABOUT THE GROUP REMUNERATION COMMITTEE PURPOSE OF THE COMMITTEE The Group Remuneration Committee (the Committee) is a formal committee of the Board, accountable to shareholders through its policies and actions. It updates shareholders via the publication of the Directors’ Remuneration Report. S�SGD� &,�NM���,@X�������SGD� MMT@K�1DONQS�RDBSHNM�NM� these pages, 83 to 98, together with the Committee Chairman’s letter on pages 80 to 81, will be put to an advisory vote. The Remuneration Policy was approved by shareholders @S�SGD� &,�NM���,@X�������@MC�V@R�DEEDBSHUD�EQNL�SGHR�C@SD � 3GD�/NKHBX�HR�MNS�RTAIDBS�SN�@�UNSD�SGHR�XD@Q��ATS�HR�CDS@HKDC� on pages 99 to 106 for ease of reference.
,@X • Approval of the terms of the LTIP grant 2014 and directors’ associated conditional share awards
September • Review of the 2014 LTIP grant and an update on dilution levels
• Approval for a supplementary grant of conditional LTIP awards in November 2014 for non-Board employees
3. TOTAL REMUNERATION 2014: ‘SINGLE FIGURE’ TABLES (AUDITED) 3GD�S@AKDR�ADKNV�RDS�NTS�SGD�CHQDBSNQR��SNS@K�QDLTMDQ@SHNM�RHMFKD�ãFTQD�ENQ�SGD�ãM@MBH@K�XD@Q�DMCDC����#DBDLADQ����� �%NQ� BNLO@Q@SHUD�OTQONRDR�������ãFTQDR�@QD�@KRN�OQNUHCDC �3GD�BNLONMDMSR�NE�SGD�$WDBTSHUD�#HQDBSNQR��QDLTMDQ@SHNM�@QD�CDS@HKDC� NM�O@FDR����SN��� �3GD�EDD�RSQTBSTQD�@OOKHB@AKD�SN�-NM�$WDBTSHUD�#HQDBSNQR�HR�CDS@HKDC�NM�O@FD��� �-NM�$WDBTSHUD�#HQDBSNQR�CN� not participate in any of the Group’s incentive plans.
� � �+3(/�������SGD�ODQENQL@MBD�A@RDC�@V@QCR�FQ@MSDC�TMCDQ�SGD���������+3(/�BXBKD�K@ORDC�HM�ETKK�NM��� OQHK����� � � �/DMRHNM�QDK@SDC�ADMDãSR��SGDRD�ADMDãSR�@QD�CDS@HKDC�NM�O@FD��� � � �.SGDQ�QDLTMDQ@SHNM��HMBKTCDR�F@HMR�L@CD�EQNL�12 �R�',1"�@OOQNUDC�@KK�DLOKNXDD�RG@QD�OK@MR��H D �F@HMR�NM�L@STQHMF�2G@QDR@UD�NOSHNMR�@MC�
4. COMPONENTS OF EXECUTIVE DIRECTORS’ REMUNERATION BASE SALARY 3GD�"NLLHSSDD�QDUHDVDC�SGD�$WDBTSHUD�#HQDBSNQR��R@K@QHDR�CTQHMF�������@MC�CHC�RN�QDEDQDMBHMF�@�Q@MFD�NE�HMENQL@SHNM�HMBKTCHMF� L@QJDS�C@S@�EQNL�SVN�ADMBGL@QJHMF�ODDQ�FQNTOR�NE�KHRSDC�HMSDQM@SHNM@K�HMRTQDQR�@MC�%32$�BNLO@MHDR�NE�@�AQN@CKX�BNLO@Q@AKD� market capitalisation to RSA, excluding banks and heavy industries. It took into account the average reviews applied elsewhere HM�SGD�&QNTO��HMBKTCHMF�SGNRD�ENQ�DLOKNXDDR�RTAIDBS�SN�BNKKDBSHUD�A@QF@HMHMF�@FQDDLDMSR��@MC�4*�HMâ@SHNM�ãFTQDR �
ALL-EMPLOYEE SHARE PLANS $WDBTSHUD�#HQDBSNQR�VDQD�DKHFHAKD�SN�O@QSHBHO@SD�HM�12 �R�@KK�DLOKNXDD�RG@QD�OK@MR��2G@QDR@UD�@MC�2G@QDATHKC��CTQHMF�SGD�XD@Q � Details of their share interests in these plans to 31 December 2014 are noted in the tables on page 91.
ANNUAL BONUS PLAN (audited) %NQ������ãM@MBH@K�XD@Q��SGD�&QNTO�"GHDE�$WDBTSHUD�@MC�&QNTO�"GHDE�%HM@MBH@K�.EãBDQ�R� MMT@K�!NMTR�/K@M�BNMRHRSDC�NE� RSQDSBGHMF�S@QFDSR�@KHFMDC�SN�&QNTO�TMCDQKXHMF�1DSTQM�NM�3@MFHAKD�$PTHSX��1.3$���&QNTO�TMCDQKXHMF�/QNãS�ADENQD�3@W��/!3��� &QNTO�"NLAHMDC�.ODQ@SHMF�1@SHN��".1���@�!TRHMDRR�1DUHDV�2BNQDB@QC�@MC�NODQ@SHNM@K�NAIDBSHUDR�RODBHãB�SN�SGDHQ�QNKDR� which were assessed against a performance scorecard.
In determining bonus awards, the Committee considered how goals had been met, ensuring that performance took account of key risk factors.
Business Review performance (30% weighting – achieved 25%) 3GD�!TRHMDRR�1DUHDV�2BNQDB@QC�NEEDQDC�@M�NOONQSTMHSX�NE�TO�SN���í�NE�SGD�NUDQ@KK�@V@QC �3GD�"NLLHSSDD�ITCFDC�ODQENQL@MBD� taking into account capital, expenses and disposal metrics, together with the actions aimed at delivering the business turnaround targets.
As a result the Committee assessed an outcome of 25% out of a possible score of 30% in this category.
Taking all of the above into account the Committee determined that Stephen Hester would receive an award of 30% out of 30% for this element.
–Capital metrics: (&#�BNUDQ@FD�Q@SHN� � ���SHLDR�� $" �BNUDQ@FD�Q@SHN� � ���SHLDR�� 2î/�BQDCHS�Q@SHMF� ��RS@AKD� –Group expense ratio: 16.3%1; –Group expenses: `�����L� –Portfolio actions: See narrative.
–Capital metrics: IGD coverage ratio >2.2 times2, $" �BNUDQ@FD�Q@SHN��� ��SHLDR2, 2î/�BQDCHS�Q@SHMF� �RS@AKD� –Group expense ratio: 16.0%1; –Group expenses: `�����L� –Portfolio actions: See narrative.
� � �'@KE�NE�SGD�ANMTR�RGNVM�HR�@V@QCDC�HM�#DEDQQDC�!NMTR�2G@QDR �3GD�RG@QDR�UDRS�SGQDD�XD@QR�EQNL�SGD�C@SD�NE�FQ@MS��@MC�@QD�RTAIDBS�SN�L@KTR�@CITRSLDMS� under the Group’s Clawback Policy detailed on page 89.
LONG-TERM INCENTIVES – AWARDS VESTING FROM 2012–14 CYCLE (AUDITED) "NMCHSHNM@K�KNMF�SDQL�HMBDMSHUD�@V@QCR�VDQD�L@CD�SN�$WDBTSHUD�#HQDBSNQR�HM�SGD���������BXBKD�HM�SGD�ENQL�NE�/DQENQL@MBD� 2G@QDR �4MCDQ�SGD�+3(/�@QQ@MFDLDMSR�NODQ@SDC�@S�SG@S�SHLD��$WDBTSHUD�#HQDBSNQR�BNTKC�@KRN�QDBDHUD�,@SBGHMF�2G@QDR�ENQ�D@BG� share deferred through the 2011 annual bonus plan, via both compulsory and voluntary deferral.
LTIP performance measures 2012-14 Threshold target: 25% vesting ,@WHLTL�S@QFDS�����í�UDRSHMF Actual performance Vesting (% of maximum)
Granted Vested Value Granted Vested Value Granted Vested Value Granted Vested Value
� � �&QNTO�TMCDQKXHMF�1.$�S@QFDS�HR�@�SGQDD�XD@Q�@UDQ@FD�LD@RTQDC�NUDQ�SGD�ODQENQL@MBD�ODQHNC � 3. A straight-line calculation is applied to determine the portion of awards that vest for performance between the threshold and maximum targets. 4. The table shows that no performance-based awards arising from this cycle will vest. Richard Houghton’s award will lapse in full on 15 June 2015. � � �3GD�/DQENQL@MBD�2G@QDR�@MC�"NLOTKRNQX�#DEDQQDC�,@SBGHMF�2G@QDR�VDQD�VDHFGSDC���í�NM�SGD�1.$�ODQENQL@MBD�LD@RTQD��@MC���í�NM�1DK@SHUD�321 � � � �3GD�5NKTMS@QHKX�(MUDRSDC�#DEDQQDC�,@SBGHMF�2G@QDR�VDQD�VDHFGSDC����í�NM�SGD�1.$�ODQENQL@MBD�LD@RTQD � � � CQH@M�!QNVM�R�@V@QCR�RGNVM�@ANUD�K@ORDC�VGDM�GHR�DLOKNXLDMS�DMCDC�NM���� TFTRS����� � 8. The Directors’ Compulsory Deferred Shares and the Voluntarily Invested Deferred Shares for the 2012-14 cycle are noted in the table on page 92. � � �3GD�MTLADQ�NE�RG@QDR�NQHFHM@KKX�FQ@MSDC�G@R�ADDM�@CITRSDC�ENQ�SGD�1HFGSR�(RRTD��@MC�RTACHUHRHNM�@MC�BNMRNKHC@SHNM�NE�NQCHM@QX�RG@QDR�TMCDQS@JDM�
RSA’s TSR outperforms the unweighted index NE�BNLO@Q@SNQR�AX�@S�KD@RS��í�ODQ�@MMTL���� �í� compound over three years) or exceeds the TSR of the highest performing company in the index
Notes: � � �1DK@SHUD�321�HMCDW�NE�BNLO@Q@SNQR�HMBKTCDR�� "$�� CLHQ@K�� KKH@MY�� LKHM�� UHU@��"@SKHM��#HQDBS�+HMD��&IDMRHCHFD�%NQRHJQHMF��'HRBNW��(MS@BS��,@OEQD�� 0!$��3NOC@ML@QJ��3QXF�@MC�9TQHBG �
� � �&QNTO�TMCDQKXHMF�1.3$�S@QFDS�HR�@�SGQDD�XD@Q�@UDQ@FD�NUDQ�������� � 3. A straight-line calculation is applied to determine the portion of awards that vest for performance between the threshold and maximum targets.
3. If threshold performance is achieved, 25% of the number of shares shown will vest. 4. Face value of awards are calculated as the maximum number of shares that would vest if all performance measures and targets are met, multiplied AX�SGD�LHC�L@QJDS�BKNRHMF�OQHBD�NE�@M�12 �NQCHM@QX�RG@QD�@UDQ@FDC�NUDQ�SGD�ãUD�ATRHMDRR�C@XR�OQDBDCHMF�SGD�C@SD�NE�FQ@MS�����,@X��������NE�`� ����
� � �2SDOGDM�'DRSDQ�V@R�@OONHMSDC�@R�@�CHQDBSNQ�DEEDBSHUD���%DAQT@QX����� � R�CHRBKNRDC�HM�SGD�OQDUHNTR�#HQDBSNQR��1DLTMDQ@SHNM�1DONQS��,Q�'DRSDQ�V@R� granted 300% of salary in conditional performance shares in 2014.
In summary, for awards issued in 2014 onwards, the Committee may reduce or forfeit awards that have yet to be paid or vest HM�SGD�B@RD�NE�RG@QDR��SN�CDK@X�SGD�O@XLDMS�NQ�UDRSHMF�C@SD�NQ�SN�@LDMC�@MNSGDQ�ENQL�NE�@V@QC�NQ�ADMDãS�VGHBG�G@R�XDS�SN�AD� QDBDHUDC��L@KTR�@CITRSLDMS� �
For cash bonuses awarded for 2015 performance onwards, and long-term incentive awards granted from 2015 onwards, SGD�"NLLHSSDD�L@X�@KRN�QDBNUDQ�RTLR�@KQD@CX�O@HC�SN�$WDBTSHUD�"NLLHSSDD�LDLADQR�HE�HS�BNMRHCDQR�HS�@OOQNOQH@SD�SN�CN�RN� (clawback). This can be applied during a two-year period after receipt (in the case of cash bonuses) or vesting (in the case of long-term incentives).
• ,@SDQH@K�ãM@MBH@K�KNRR�NE�@�ATRHMDRR�TMHS� as a result of circumstances that should reasonably have been risk-managed by the individual
• $QQNQ�NQ�L@SDQH@K�LHRRS@SDLDMS�KD@CHMF�SN�@M�NUDQO@XLDMS • ,@SDQH@K�DQQNQ�NQ�ãM@MBH@K�LHRRS@SDLDMS� of results which has resulted in an overpayment
5. DIRECTORS’ SHAREHOLDING (audited) EXECUTIVE DIRECTORS’ REQUIRED SHAREHOLDING 2014 12 �ADKHDUDR�HS�HR�HM�RG@QDGNKCDQR��HMSDQDRSR�ENQ�HSR�DWDBTSHUDR�SN�GNKC�RG@QDR�HM�SGD�"NLO@MX �4MCDQ�SGD�FTHCDKHMDR�@OOKHB@AKD� CTQHMF�������DWDBTSHUDR�@QD�DWODBSDC�SN�QDS@HM�UDRSDC�RG@QDR�@MC�RN�ATHKC�TO�@�LHMHLTL�GNKCHMF�NUDQ�@�ãUD�XD@Q�ODQHNC�@MC� maintain it thereafter. No shares are to be sold until the holding level is reached, except where required to cover statutory deductions. The required shareholding levels that applied during 2014 are shown below.
3. Adrian Brown resigned from the Board effective 16 April 2014. His share interests are shown as at that date and not 31 December 2014. 4. Stephen Hester was appointed as a director effective 5 February 2014. The table above shows his shareholding on the date of his appointment and not 1 January 2014.
� � � CITRSLDMSR�L@CD�@R�@�QDRTKS�NE�SGD���ENQ���1HFGSR�(RRTD�@MMNTMBDC�NM����,@QBG����� � � 3GD�@FFQDF@SD�FQNRR�F@HM�L@CD�AX�CHQDBSNQR�CTQHMF�SGD�XD@Q�NM�SGD�DWDQBHRD�NE�RG@QD�NOSHNMR�@LNTMSDC�SN�`� 4. Adrian Brown resigned from the Board effective 16 April 2014 and his employment ended on 31 August 2014. � � 2G@QDR@UD�HR�@�UNKTMS@QX�',1"�@OOQNUDC�2 8$�RBGDLD�TMCDQ�VGHBG�NOSHNMR�@QD�MNS�RTAIDBS�SN�ODQENQL@MBD�BNMCHSHNMR��ATS�RDQUHBD�BNMCHSHNMR�@OOKX � � �3GD�NEãBH@K�BKNRHMF�LHCCKD�L@QJDS�OQHBD�@S�HSR�GHFGDRS�CTQHMF�SGD�XD@Q�V@R�`� ����ODQ�RG@QD�@MC�@S�HSR�KNVDRS�V@R�`� �����ODQ�RG@QD��S@JHMF�HMSN�@BBNTMS� SGD�RG@QD�BNMRNKHC@SHNM �.M�SGD�K@RS�CD@KHMF�C@X�NE�SGD�XD@Q�HS�V@R�`� ���ODQ�RG@QD
Notes: � � �3GD�MTLADQ�NE�RG@QD�@V@QCR�GDKC�@R�@S���)@MT@QX������G@R�ADDM�QDRS@SDC�SN�QDâDBS�SGD�HLO@BS�NE�SGD�RTACHUHRHNM�@MC�����BNMRNKHC@SHNM�NE�NQCHM@QX�RG@QDR� NE��� �O�D@BG�HMSN�NQCHM@QX�RG@QDR�NE�`� ���D@BG�VGHBG�ADB@LD�DEEDBSHUD�NM����,@X����� �3GD�MTLADQ�NE�RG@QDR�RGNVM�@ANUD�CNDR�MNS�HMBKTCD�SGD� shares acquired as a result of taking up rights in the Rights Issue as these shares were transferred to the director and are included in the Shareholdings table on page 90.
2. Adrian Brown resigned from the Board effective 16 April 2014 and his employment ended on 31 August 2014, and he received his Partnership Shares, UDRSDC�,@SBGHMF�2G@QDR�@MC�#HUHCDMC�2G@QDR�@R�@S�SG@S�C@SD�HM�@BBNQC@MBD�VHSG�SGD�QTKDR�NE�SGD�2G@QDATHKC�/K@M � �SNS@K�NE�����TMUDRSDC�,@SBGHMF�2G@QDR� in the Scheme were forfeited upon his resignation.
Long-term Incentive Plan 2006 (LTIP) The directors’ interests in the LTIP were as follows: Share awards held at 1 January
Voluntarily Invested Deferred Shares6 ����� ����� 0 0 0 9,442 5NKTMS@QHKX�(MUDRSDC�#DEDQQDC�,@SBGHMF�2G@QDR8 28,613 15,553 0 0 0 44,166
RG@QDR�NE��� �O�D@BG�HMSN�NQCHM@QX�RG@QDR�NE�`� ���D@BG�VGHBG�ADB@LD�DEEDBSHUD�NM����,@X����� � � �(MBKTCDR�SGD�HLO@BS�NE�@CITRSLDMSR�L@CD�@R�@�QDRTKS�NE�SGD���ENQ���1HFGSR�(RRTD�@MMNTMBDC�NM����,@QBG����� 3. No long-term incentive plan interests were granted under the LTIP during 2014. � � �(M�QDRODBS�NE�SGD�@V@QCR�L@CD�SN� CQH@M�!QNVM�HM������VGHBG�UDRSDC�HM�������SGD�L@QJDS�OQHBD�NM�SGD�C@SD�NE�FQ@MS�NE�@V@QCR���� OQHK�������V@R�
Invested Deferred Shares, which are shown in the table above, are not included in this value. 6. Voluntarily Invested Deferred Shares were purchased by Capita Trustees Limited on behalf of each participant using part of the net annual bonus paid to them and are held in trust for three years. These deferred shares are not at risk of forfeiture and may be withdrawn from the Trust at any SHLD�ATS�@MX�@RRNBH@SDC�,@SBGHMF�2G@QDR�K@ORD�HE�SGHR�NBBTQR �
Performance Share Plan 2014 (PSP) 3GD�MDV�KNMF�SDQL�HMBDMSHUD�OK@M��SGD�/2/��V@R�@OOQNUDC�AX�RG@QDGNKCDQR�@S�SGD�"NLO@MX�R������ &, �3GD�CHQDBSNQR��HMSDQDRSR� in this plan were as follows: Share awards held at
Business Review Scorecard (1/3 weighting). 4. The date by which performance and other conditions for PSP awards granted in 2014 must be met is 31 December 2016 (except the relative TSR BNMCHSHNM��SGD�ODQENQL@MBD�ODQHNC�ENQ�VGHBG�ADF@M�ENTQ�VDDJR�OQHNQ�SN�SGD�FQ@MS�C@SD�@MC�VHKK�DMC�NM����,@QBG������@R�CHRBKNRDC�NM�O@FD����
5. No other directors of the Company held long-term incentive scheme interests in the PSP Plan during the year.
�SNS@K�NE���������RG@QDR�FQ@MSDC�SN�,Q�!QNVM�TMCDQ�SGD� 2006 Long-term Incentive Plan lapsed on his employment termination date. This included all outstanding LTIP awards. ,Q�!QNVM�G@C�MN�@V@QCR�TMCDQ�SGD������/DQENQL@MBD� 2G@QD�/K@M �,Q�!QNVM�R�O@QSHBHO@SHNM�HM�12 �R�UNKTMS@QX� all-employee share plans were treated in accordance with the rules of these plans for employees who resign, and a total of 818 Sharebuild matching shares and 2,282 Sharesave options lapsed.
Following his employment ending, any unexpired period NE�MNSHBD�VHKK�AD�O@HC�HM�KHDT�@S�`�������ODQ�LNMSG��BNUDQHMF� ANSG�R@K@QX�@MC�ADMDãSR �,Q�'NTFGSNM�R�O@X�HM�KHDT�NE�MNSHBD� VHKK�AD�RTAIDBS�SN�LHSHF@SHNM�NQ�O@QSH@K�LHSHF@SHNM��RGNTKC� he take up a new role before 25 February 2016.
In accordance with the Remuneration Policy, the Committee has agreed good leaver status for Richard Houghton. Half NE�GHR�ANMTR�@V@QC�ENQ�������CDS@HKDC�NM�O@FD�����VHKK�AD� CDEDQQDC�HM�RG@QDR�ENQ�SGQDD�XD@QR�@MC�RTAIDBS�SN�L@KTR� @CITRSLDMS �'D�VHKK�MNS�AD�DKHFHAKD�SN�QDBDHUD�@�ANMTR�ENQ� the 2015 performance year.
� � �2HLNM�+DD�QDRHFMDC�@R�&QNTO�"GHDE�$WDBTSHUD�@MC�GHR�DLOKNXLDMS� ended on 12 December 2013. He did not receive a bonus in respect NE�SGD������ãM@MBH@K�XD@Q��@MC�GHR�@V@QCR�HM�SGD���������+3(/�BXBKD� lapsed on that date.
� � � MCX�'@RSD�QDRHFMDC�@R�&QNTO�"GHDE�$WDBTSHUD�DEEDBSHUD����.BSNADQ� �����@MC�GHR�DLOKNXLDMS�DMCDC����#DBDLADQ����� �3GD�RHMFKD�ãFTQD� of total remuneration above is pro-rated for his time in the position.
Notes: 1. The calculation for 2014 includes Stephen Hester from the date of GHR�@OONHMSLDMS�@R�&QNTO�"GHDE�$WDBTSHUD����%DAQT@QX�������@MC� ,@QSHM�2BHBKTM@�ENQ�SGD�ODQHNC�GD�V@R�$WDBTSHUD�"G@HQL@M����)@MT@QX� to 4 February 2014).
10. RELATIVE IMPORTANCE OF SPEND ON PAY The table below shows the all-employee pay spend and returns to shareholders by way of dividends for 2014. Figures from 2013 are provided for comparison. The employee pay data covers the Group’s employees globally, and therefore includes the impact of exchange rate changes. Levels NE�HMâ@SHNM�U@QX�@BQNRR�SGD�CHEEDQDMS�BNTMSQHDR�HM�VGHBG� the Group operates and, therefore, salary changes will AD�QDâDBSHUD�NE�KNB@K�L@QJDS�BNMCHSHNMR
Notes: 1. Includes salaries, social security costs, pension costs and share-based payments as shown in the notes to the Financial Statements on page 161.
11. IMPLEMENTATION OF REMUNERATION POLICY IN 2015 3GHR�RDBSHNM�NTSKHMDR�CDBHRHNMR�S@JDM�AX�SGD�"NLLHSSDD�HM�QDRODBS�NE�SGD������ãM@MBH@K�XD@Q��@MC�GNV�SGD�"NLLHSSDD�HMSDMCR� to implement the Directors’ Remuneration Policy during 2015.
The remuneration structure is intended to promote the long-term interests of the Company and its shareholders. The table ADKNV�RGNVR�VGDM�D@BG�BNLONMDMS�NE�SGD�$WDBTSHUD�#HQDBSNQR��QDLTMDQ@SHNM�O@BJ@FD��@R�MNSDC�HM�SGD�BG@QSR�@ANUD��VNTKC� be delivered to them once any performance conditions or other restrictions have ended (as noted by the shading). These each QDK@SD�SN�SGD������ãM@MBH@K�XD@Q�@MC��HM�SGD�B@RD�NE�SGD�+3(/��ENQ�@V@QCR�UDRSHMF�HM�����
HOW WILL INCENTIVES BE ALIGNED TO THE BUSINESS STRATEGY IN 2015? 3GD�S@AKD�ADKNV�RGNVR�GNV�SGD�ATRHMDRR�RSQ@SDFX��@MC�SGD�*DX�/DQENQL@MBD�(MCHB@SNQR�VGHBG�TMCDQOHM�HS��@QD�QDâDBSDC�HM�SGD� MMT@K�!NMTR�/K@M�@MC�KNMF�SDQL�HMBDMSHUD�ODQENQL@MBD�LD@RTQDR�ENQ�$WDBTSHUD�#HQDBSNQR�HM�������
The Business Review Scorecard component has been strengthened taking into account the progress made in 2014, and includes capital strength metrics and management actions required to deliver the turnaround. An additional capital metric, the ratio of Tangible Net Asset Value to Net Written Premium (TNAV:NWP), will be added to the Scorecard as a measure of capital strength and the organisation’s sustainability.
&QNTO�TMCDQKXHMF�1.3$�HR�CDãMDC�HM�SGD�*DX�/DQENQL@MBD�(MCHB@SNQ�RDBSHNM�NM�O@FD��� �(S�VHKK�AD�LD@RTQDC�NM�@�RHLOKD�@UDQ@FD� basis over the three-year performance period, using a target range of 11-16%.
In recognition of his criticality to the transformation of the Company, Stephen Hester’s maximum LTIP opportunity in the 2015 grant will, by exception, be 300% of salary at maximum vesting. His future LTIP grants will made at no more than 230% NE�R@K@QX��VGHBG�HR�SGD�&QNTO�R�TRT@K�KDUDK�NE�@V@QC�ENQ�$WDBTSHUD�#HQDBSNQR �$WDBTSHUD�#HQDBSNQR�LTRS�QDS@HM�@KK�UDRSDC�RG@QDR� arising from this incentive plan for two years post-vesting (except those sold to cover statutory deductions), and they are RTAIDBS�SN�SGD�&QNTO�R�"K@VA@BJ�/NKHBX �3GD�S@AKD�ADKNV�RTLL@QHRDR�SGD�+3(/�R�RSQTBSTQD
RSA’s TSR outperforms the unweighted index NE�BNLO@Q@SNQR�AX�@S�KD@RS��í�ODQ�@MMTL� (22.5% compound over three years) or exceeds the TSR of the highest performing company in the index
Notes: � � �3GD�321�HMCDW�NE�BNLO@Q@SNQR�ENQ�SGHR�BXBKD�HMBKTCDR�� "$�� CLHQ@K�� KKH@MY�� LKHM�� UHU@��"@SKHM��#HQDBS�+HMD��&IDMRHCHFD�%NQRHJQHMF��'HRBNW��(MS@BS��,@OEQD�� 0!$��3NOC@ML@QJ��3QXF�@MC�9TQHBG � �RSQ@HFGS�KHMD�B@KBTK@SHNM�HR�@OOKHDC�SN�CDSDQLHMD�SGD�ONQSHNM�NE�@V@QCR�SG@S�UDRS�ENQ�ODQENQL@MBD�ADSVDDM�SGD� threshold and maximum targets.
3GD�S@AKD�ADKNV�RGNVR�SGD�-NM�$WDBTSHUD�#HQDBSNQ�EDD�RSQTBSTQD �3GD�"G@HQL@M�QDBDHUDR�@�EDD�NE�`��������ODQ�@MMTL� which, under the terms of his appointment is not scheduled to be reviewed until January 2016. The Company reviewed SGD�-NM�$WDBTSHUD�#HQDBSNQR��EDDR�CTQHMF������HM�@BBNQC@MBD�VHSG�SGD�1DLTMDQ@SHNM�/NKHBX��@MC�CHC�RN�QDEDQDMBHMF�@�Q@MFD� NE�HMENQL@SHNM�HMBKTCHMF�L@QJDS�C@S@�NM�EDDR�S@JDM�EQNL�SGD�R@LD�ODDQ�FQNTOR�TRDC�SN�ADMBGL@QJ�SGD�$WDBTSHUD�#HQDBSNQR�� R@K@QHDR��4*�HMâ@SHNM�ãFTQDR�@MC�SGD�@UDQ@FD�QDUHDVR�@OOKHDC�DKRDVGDQD�HM�SGD�&QNTO �3GD�EDDR�DEEDBSHUD�EQNL���)TKX������ will continue to apply in 2015.
13. DILUTION RSA monitors its dilution levels on a regular basis to ensure that they remain within the headroom limits set by the Investment Association (IA). As at 31 December 2014, the dilution levels were as follows: Limit RSA dilution %
5% over 10 years for discretionary schemes, including long-term incentives 2.98%
RSA’S REMUNERATION PHILOSOPHY AND STRATEGY RSA’s remuneration philosophy and strategy are directly informed by the business strategy, which is set out in the 2SQ@SDFHB�1DONQS�NM�O@FDR���SN����NE�SGHR�1DONQS �
• �RHFMHãB@MS�OQNONQSHNM�NE�SGD�NUDQ@KK�QDLTMDQ@SHNM� package takes the form of variable pay, giving focus to RSQDSBGHMF�RGNQS�@MC�KNMF�SDQL�NAIDBSHUDR�VGHBG�CHQDBSKX� support the achievement of strategic priorities and are aligned to shareholders’ interests
• $WDBTSHUD�#HQDBSNQR�@MC�NSGDQ�DWDBTSHUDR�@QD�QDPTHQDC� SN�GNKC�@�RHFMHãB@MS�MTLADQ�NE�RG@QDR�HM�SGD�"NLO@MX�� they are encouraged to act in shareholders’ best interests by having a personal investment in RSA
The tables on the following pages describe how these remuneration principles are applied in practice.
• Benchmarked referencing competitive practice within two peer groups of listed international insurers @MC�%32$�KHRSDC�BNLO@MHDR�NE�AQN@CKX�BNLO@Q@AKD�L@QJDS�B@OHS@KHR@SHNM�SN�12 ��DWBKTCHMF�A@MJR�@MC� ‘heavy’ industries.
Annual Bonus Plan (variable remuneration) Supports RSA’s shortSDQL �NAIDBSHUDR �3@QFDSR� are directly linked to the operational plan and QDâDBS�12 �R�OQHNQHSX�SN� create shareholder value through sustained growth @MC�OQNãS@AHKHSX��A@RDC�NM� HSR�QHRJ�OQNãKDR �#DEDQQ@K� into shares creates shareholder alignment.
• .UDQ@KK�ANMTR�NOONQSTMHSX�HR�RDS�@S�@�KDUDK�SN�AD�L@QJDS�BNLODSHSHUD � V@QCR�@QD�B@KBTK@SDC�@F@HMRS�RSQDSBGHMF� @MMT@K�ãM@MBH@K�@MC�MNM�ãM@MBH@K�S@QFDSR��@R�VDKK�@R�SGD�ODQENQL@MBD�NE�SGD�HMCHUHCT@K�DWDBTSHUD �.MKX�RTODQHNQ� performance will result in a bonus award which is above target.
• Targets are set with reference to the Group’s operational plan.
• No additional performance conditions apply to the deferred bonus shares once they are granted.
Base salary �ëWDC�QDLTMDQ@SHNM� Salaries are aligned to market competitive levels. This is to attract and retain high calibre executives, essential for ensuring RSA’s ongoing success.
Pension �ëWDC�QDLTMDQ@SHNM� /DMRHNM�ADMDãS�ENQLR�@� part of a market competitive package and enables executives to save for retirement.
• "NLLHSSDD�B@M�@CITRS�SGD�DLOKNXDQ�ODMRHNM�BNMSQHATSHNM�NQ�B@RG�@KKNV@MBD�KDUDKR�SN�DMRTQD�SGDRD�QDL@HM� appropriate and market competitive. It can also agree changes to the terms of the Directors’ pension plan(s), as appropriate.
• &QNTO�$WDBTSHUDR�@QD�S@QFDSDC�@F@HMRS�ODQENQL@MBD�NE�SGD�DMSHQD�&QNTO �$WDBTSHUD�#HQDBSNQR�VGN�G@UD�@�QDFHNM@K�@BBNTMS@AHKHSX�VHKK� be targeted against the performance of both the Group and their business areas.
Long-term Incentive Plan (LTIP) (variable remuneration) Supports RSA’s long-term RSQ@SDFX �3@QFDSR�QDâDBS� RSA’s priority to create shareholder value through sustained earnings and share price growth.
• +3(/�FQ@MSR�@QD�L@CD�@MMT@KKX�SN�@�Q@MFD�NE�RDMHNQ�DLOKNXDDR�@BQNRR�SGD�&QNTO �%NQ�$WDBTSHUD�#HQDBSNQR��@V@QCR� @QD�L@CD�HM�SGD�ENQL�NE�ODQENQL@MBD�RG@QDR�VGHBG�UDRS�RTAIDBS�SN�ODQENQL@MBD�BNMCHSHNMR �3GD�+3(/�HR�@KRN� TRDC�@R�@�UDGHBKD�ENQ�FQ@MSHMF�QDRSQHBSDC�RG@QDR�VGHBG��ENQ�@M�$WDBTSHUD�#HQDBSNQ�VNTKC�NMKX�AD�TRDC�SN�R@SHREX� a buy-out upon appointment and shares awarded through compulsory bonus deferral.
• 4MCDQ�12 �R�"K@VA@BJ�/NKHBX��TMUDRSDC�RG@QD�@V@QCR�FQ@MSDC�EQNL������NMV@QCR�B@M�AD�RTAIDBS�SN�ENQEDHSTQD� (partial or full) covering 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.
• The Committee can exercise discretion to temporarily waive or reduce the holding requirement or allow RG@QDR�SN�AD�RNKC�HM�DWBDOSHNM@K�ATRHMDRR�NQ�ODQRNM@K�BHQBTLRS@MBDR��D F �HKK�GD@KSG��CHUNQBD��ãM@MBH@K�G@QCRGHO� �
• For recruitment purposes, or in highly exceptional circumstances, such as for retention, the Committee may agree to a conditional ODQENQL@MBD�QDK@SDC�@V@QC�ADHMF�L@CD�TO�SN�@M�@CCHSHNM@K����í�NE�R@K@QX �3GHR�VNTKC�AD�BNMRHCDQDC�@��NMD�NEE��@V@QC �6GDQD�@M� exceptional award is made, full disclosure will be given on the rationale.
• The performance period will normally be at least three years for all measures. By exception, the relative TSR metric will be assessed over circa 34 months for the 2014 grant only.
• The shares which count towards the holding are those held either in their own right or that of immediate family members, and any awarded by RSA which cease to be bound by any performance or service conditions. Vested LTIP shares form part of the holding during the two-year retention period.
• With effect from 1 January 2014, the shareholding levels to be reached are: � &QNTO�"GHDE�$WDBTSHUD�� ���í�NE�R@K@QX
• Typically, the form of award that is being forfeited (e.g. cash or shares) will be replaced by the same form NE�@V@QC�@S�12 �2G@QD�@V@QCR��HE�SGDX�@QD�RTAIDBS�SN�ODQENQL@MBD�BNMCHSHNMR��VHKK�FDMDQ@KKX�AD�BNLODMR@SDC� by performance share grants in the LTIP. A fair value approach will be applied to determine the value of any compensatory share awards.
• 3GDQD�@QD�MN�OQD�CDSDQLHMDC�RODBH@K�OQNUHRHNMR�ENQ�#HQDBSNQR�VHSG�QDF@QC�SN�BNLODMR@SHNM�ENQ�KNRR�NE�NEãBD �"NLODMR@SHNM�HR�A@RDC� NM�VG@S�VNTKC�AD�D@QMDC�AX�V@X�NE�R@K@QX�@MC�NSGDQ�BNMSQ@BST@K�ADMDãSR�HMBKTCHMF�ODMRHNM��NUDQ�SGD�MNSHBD�ODQHNC �(M�SGD�MNQL@K� course of events, reasonable professional fees may be paid in relation to a Director’s employment termination.
• R�SGD�-NM�$WDBTSHUD�#HQDBSNQR�@QD�MNS�DLOKNXDC�AX�SGD�"NLO@MX��SGDX�@QD�MNS�DKHFHAKD�SN�QDBDHUD�@�ANMTR� award or participate in any of RSA’s share plans.
• The Committee may agree to reduce the value of the compensatory award below the anticipated or actual loss value if the compensation is paid at an advanced date (i.e. early settlement).
• (E�@�KNRR�NE�NEãBD�VDQD�SN�NBBTQ�FHUHMF�QHRD�SN�@�QDCTMC@MBX�O@XLDMS�TMCDQ�OQDU@HKHMF�DLOKNXLDMS�KDFHRK@SHNM�� the payment will be calculated taking account of the Director’s length of service with the Group and his annual FQNRR�A@RHB�R@K@QX�@R�@S�GHR�DLOKNXLDMS�SDQLHM@SHNM�C@SD �!DMDãSR�BNMSHMTD�TMSHK�SGD�DLOKNXLDMS�SDQLHM@SHNM� date or the date the contractual notice period expires, whichever is the latter; they can be settled as payments.
3GD�"NLO@MX�G@R�SGD�BNMSQ@BST@K�QHFGS�SN�OK@BD�SGD�$WDBTSHUD� Directors on garden leave for part, or all, of their notice ODQHNC �2@K@QX��ADMDãSR�@MC�ODMRHNM�BNMSQHATSHNMR�BNMSHMTD� during garden leave, but this time will not count towards the calculation of any annual bonus award that may subsequently AD�CTD �$WDBTSHUD�#HQDBSNQR�CN�MNS�G@UD�SDQLR�VGHBG�OQNUHCD� additional rights or payments to them in the event of a change of control, reconstruction or amalgamation of the Company. Restrictive covenants are in place to help protect RSA’s interests should the individual leave the Company for any reason.
3GD�C@SDR�VGDM�D@BG�-NM�$WDBTSHUD�#HQDBSNQ�V@R�@OONHMSDC� to the Board and the expiry dates of their current terms of NEãBD�@QD�RGNVM�HM�SGD�S@AKD�NM�O@FD��� �#DS@HKR�NE�SGD� -NM�$WDBTSHUD�#HQDBSNQR��EDDR�@QD�MNSDC�NM�O@FD��� � Appointment letters are available for inspection by RG@QDGNKCDQR�@S�SGD�"NLO@MX�R�QDFHRSDQDC�NEãBD �
3GD�#HQDBSNQR�@QD�QDRONMRHAKD�ENQ�JDDOHMF�OQNODQ�@BBNTMSHMF�QDBNQCR�SG@S�@QD�RTEãBHDMS�SN�RGNV�@MC�DWOK@HM�SGD�&QNTO�@MC� /@QDMS�"NLO@MX�R�SQ@MR@BSHNMR�@MC�CHRBKNRD�VHSG�QD@RNM@AKD�@BBTQ@BX�@S�@MX�SHLD�SGD�ãM@MBH@K�ONRHSHNM�NE�SGD�&QNTO�@MC� /@QDMS�"NLO@MX�@MC�DM@AKD�SGDL�SN�DMRTQD�SG@S�SGD�ãM@MBH@K�RS@SDLDMSR�BNLOKX�VHSG�SGD�"NLO@MHDR� BS����� �3GDX�@QD� also responsible for safeguarding the assets of the Group and Parent Company and hence for taking reasonable steps for the OQDUDMSHNM�@MC�CDSDBSHNM�NE�EQ@TC�@MC�NSGDQ�HQQDFTK@QHSHDR
Independent Auditor’s Report to the Members of RSA Insurance Group plc only
R�@�QDRTKS�NE�SGHR�@RRDRRLDMS��HM�@QQHUHMF�@S�NTQ�@TCHS�NOHMHNM�@ANUD�NM�SGD�ãM@MBH@K�RS@SDLDMSR�SGD�QHRJR�NE�L@SDQH@K� misstatement that had the greatest effect on our audit were as follows:
.TQ�@TCHS�OQNBDCTQDR�HMBKTCDC��@LNMF�NSGDQR��DU@KT@SHMF�@MC� SDRSHMF�SGD�JDX�BNMSQNKR�@QNTMC�SGD�QDRDQUHMF�OQNBDRR��HMBKTCHMF� BNMSQNKR�NUDQ�SGD�BNLOKDSDMDRR�@MC�@BBTQ@BX�NE�SGD�C@S@�SG@S� RTOONQS�JDX�QDRDQUHMF�B@KBTK@SHNMR�@MC�BNMSQNKR�NUDQ�SGD� U@KT@SHNM�NE�HMCHUHCT@K�BK@HLR�QDRDQUDR��RTBG�@R�K@QFD�KNRR�QDUHDV� BNMSQNKR�@MC�HMSDQM@K�ODDQ�QDUHDVR��VGDQDAX�RDBNMC�QDUHDVDQR� DW@LHMD�CNBTLDMS@SHNM�RTOONQSHMF�BK@HLR�B@RD�QDRDQUDR�@MC� BNMRHCDQ�HE�SGD�@LNTMS�QDBNQCDC�HM�SGD�ãM@MBH@K�RS@SDLDMSR�HR� U@KTDC�@OOQNOQH@SDKX� �(M�BDQS@HM�BNLONMDMSR��@R�CDSDQLHMDC� AX�SGD�M@STQD�NE�SGD�ONQSENKHNR�@MC�QDRDQUHMF�LDSGNCNKNFHDR�� VD�G@UD�B@QQHDC�NTS�NTQ�NVM�QDOQNIDBSHNMR�NE�HMRTQ@MBD� liabilities for certain classes of business in order to assess the reasonableness of estimates made by management.
6D�@RRDRRDC�JDX�QDRDQUHMF�@RRTLOSHNMR�HMBKTCHMF�KNRR�Q@SHNR�� EQDPTDMBX�@MC�RDUDQHSX�NE�BK@HLR��@MC�VGDQD�@OOQNOQH@SD��SGD� discount rates for longer tail classes of business by territory and KHMD�NE�ATRHMDRR��@MC�NUDQ�SHLD��BNLO@QHMF�SGDL�SN�DWODBS@SHNMR� A@RDC�NM�SGD�&QNTO�R�GHRSNQHB@K�DWODQHDMBD��BTQQDMS�SQDMCR�@MC� NTQ�NVM�HMCTRSQX�JMNVKDCFD �6D�DU@KT@SDC�VGDSGDQ�@OOQNOQH@SD� OQTCDMBD�G@C�ADDM�@OOKHDC�HM�SGHR�BNMSDWS�@MC�VGDSGDQ� QDRDQUHMF�V@R�BNMRHRSDMS�HM�@OOQN@BG��VHSG�RTEãBHDMS�ITRSHãB@SHNM� for changes in assumptions. We used our industry knowledge to ADMBGL@QJ�SGD�&QNTO�R�QDRDQUHMF�LDSGNCNKNFHDR�@MC�DRSHL@SDR� of losses. Our audit focused particularly on lines of business with SGD�LNRS�HMGDQDMS�TMBDQS@HMSX �3GDRD�HMBKTCD�SGD�KNMFDQ�S@HKDC� QHRJR�RTBG�@R� RADRSNR�@MC�#D@EMDRR�BK@RRDR��SGD�#@MHRG�6NQJDQR� "NLODMR@SHNM�BK@RR��SGD�2VDCHRG�/DQRNM@K� BBHCDMS�BK@RRDR��SGD� Canadian General Liability class and classes of business affected by emerging industry issues such as the impact of Periodic /@XLDMS�.QCDQR�NM�4*�LNSNQ�ATRHMDRR �
The risk Our response 3GD�U@KT@SHNM�NE�HMS@MFHAKD�@RRDSR�@MC�FNNCVHKK�HR�BNLOKDW� @MC�SXOHB@KKX�QDPTHQDR�@�GHFG�KDUDK�NE�ITCFDLDMS��O@QSHBTK@QKX� HM�BNTMSQHDR�VGDQD�SGDQD�HR�HMBQD@RDC�TMBDQS@HMSX�NUDQ�SGD� DBNMNLHB�OQNRODBSR��FQNVSG�Q@SDR�NQ�ETSTQD�ATRHMDRR�OQNRODBSR�� such as Argentina and Russia. Additional judgement arises where QDRSQTBSTQHMF�NE�ATRHMDRRDR��RTBG�@R�HM�(QDK@MC��HMBQD@RDR�SGD� uncertainty inherent in predicting future performance.
(M�@CCHSHNM��SGD�&QNTO�GNKCR�@�RHFMHãB@MS�@LNTMS�NE�B@OHS@KHRDC� RNESV@QD�HMS@MFHAKD�@RRDSR��SGD�L@INQHSX�NE�VGHBG�@QD�HM�SGD� 4*�@MC�2B@MCHM@UH@M�ATRHMDRRDR �)TCFDLDMS�@QHRDR�NUDQ� VGDSGDQ�SGD�RNESV@QD�VHKK�FDMDQ@SD�RTEãBHDMS�DBNMNLHB� ADMDãSR��ENQ�DW@LOKD�HM�SGD�ENQL�NE�BNRS�R@UHMFR�NQ�DMG@MBDC� QDUDMTD�FDMDQ@SHMF�B@O@AHKHSX���SN�RTOONQS�HSR�U@KTD��SGD�ODQHNC� ADMDãSR�VHKK�AD�QD@KHRDC�NUDQ��SGD�DWSDMS�SN�VGHBG�ADMDãSR� @QD�CDQHUDC�EQNL�SGD�TRD�NE�SGD�RNESV@QD�@MC�SGD�@LNTMS� of any impairments that are recognised.
(M�SGHR�@QD@�NTQ�@TCHS�OQNBDCTQDR�HMBKTCDC��@LNMF�NSGDQR�� BNLO@QHMF�ENQDB@RSR�SN�ATRHMDRR�OK@MR�@MC�@KRN�OQDUHNTR� forecasts to actual results to assess the performance of the business and the accuracy of forecasting. We compared the FQNTO�R�@RRTLOSHNMR�SN�DWSDQM@KKX�CDQHUDC�C@S@�@R�VDKK�@R�NTQ� own assessments in relation to key inputs such as projected DBNMNLHB�FQNVSG��ENQDB@RS�KNRR�Q@SHNR��BNRS�HMâ@SHNM�@MC� CHRBNTMS�Q@SDR�@MC�@OOKHDC�RDMRHSHUHSHDR�HM�DU@KT@SHMF�SGD�&QNTO�R� @RRDRRLDMS �.TQ�NVM�U@KT@SHNM�RODBH@KHRSR�G@UD�@RRHRSDC�TR� HM�DU@KT@SHMF�SGD�@RRTLOSHNMR�@MC�LDSGNCNKNFHDR�TRDC�AX� SGD�&QNTO��HM�O@QSHBTK@Q�SGNRD�QDK@SHMF�SN�SGD�CHRBNTMS�Q@SD� @MC�FQNVSG�Q@SDR�@MC�HM�DU@KT@SHMF�SGDRD�@RRTLOSHNMR�VHSG� QDEDQDMBD�SN�U@KT@SHNMR�NE�RHLHK@Q�BNLO@MHDR � �
The risk Our response 2HFMHãB@MS�ITCFDLDMS�HR�QDPTHQDC�NUDQ�SGD�QDBNUDQ@AHKHSX�NE� CDEDQQDC�S@W�@RRDSR�ADB@TRD�SGD�QD@KHR@SHNM�NE�S@W�ADMDãSR�HR� NESDM�CDODMCDMS�NM�ETSTQD�S@W@AKD�OQNãSR�@MC�SGDQD�@QD�HMGDQDMS� TMBDQS@HMSHDR�HMUNKUDC�HM�ENQDB@RSHMF��VGHBG�HR�SGD�A@RHR�NE�SGD� @RRDRRLDMS�NE�QDBNUDQ@AHKHSX �3GD�CDEDQQDC�S@W�@RRDS�HM�SGD�4*� HR�O@QSHBTK@QKX�RTAIDBSHUD�FHUDM�HSR�RDMRHSHUHSX�SN�DWODBS@SHNMR� @ANTS�SGD�OQNãS@AHKHSX�NE�SGD�4*�ATRHMDRR��VGHBG�HM�STQM�CDODMC� NM�SGD�@BGHDUDLDMS�NE�QDUHRDC�NODQ@SHMF�OK@MR �
(M�SGHR�@QD@�NTQ�@TCHS�OQNBDCTQDR�HMBKTCDC��@LNMF�NSGDQR�� BG@KKDMFHMF�SGD�JDX�@RRTLOSHNMR�NE�SGD�FQNVSG�Q@SDR�@MC�OQNãS� L@QFHMR�VGHBG�CQHUD�SGD�DLDQFDMBD�NE�ETSTQD�OQNãS�OQNIDBSHNMR�� O@QSHBTK@QKX�HM�SGD�4*�ATRHMDRR�SN�VGHBG�SGD�K@QFDRS�DKDLDMS�NE� SGD�CDEDQQDC�S@W�@RRDS�QDK@SDR �.TQ�@TCHS�OQNBDCTQDR�NUDQ�SGD� ETSTQD�OQNIDBSHNMR�HMBKTCDC�BNLO@QHMF�SGD�DWODBSDC�FQNVSG� Q@SDR�SN�SGD�&QNTO�R�@OOQNUDC�NODQ@SHMF�OK@M��@RRDRRHMF�SGD� @BBTQ@BX�NE�SG@S�ENQDB@RSHMF�OQNBDRR�HM�SGD�O@RS��@MC�BNMRHCDQHMF� VGDSGDQ�OQNIDBSDC�L@QFHMR�@QD�@BGHDU@AKD�VHSG�QDEDQDMBD�SN�SGD� ATRHMDRR�R�QDBDMS�ODQENQL@MBD�@MC�QDUHRDC�NODQ@SHMF�OK@MR�@MC� NTQ�NVM�HMCTRSQX�JMNVKDCFD �6D�G@UD�@KRN�BNMRHCDQDC�SGD� RDMRHSHUHSX�NE�SGD�ENQDB@RS�S@W@AKD�OQNãSR�SN�JDX�@RRTLOSHNMR� RTBG�@R�SGD�"NLAHMDC�.ODQ@SHMF�1@SHN �.TQ�NVM�S@W�RODBH@KHRSR� VDQD�HMUNKUDC�HM�BNMRHCDQHMF�SGD�DWSDMS�SN�VGHBG�OQNIDBSDC� OQNãSR�VDQD�S@W@AKD �6D�G@UD�@KRN�DU@KT@SDC�SGD�@CDPT@BX� of the Group’s disclosures in respect of the assumptions RTOONQSHMF�SGD�CDEDQQDC�S@W�@RRDS�U@KT@SHNM�@MC�QDBNFMHSHNM �
,@MX�ãM@MBH@K�QDONQSHMF�BNMSQNKR�CDODMC�NM�SGD�BNQQDBS� ETMBSHNMHMF�NE�QDK@SDC�DKDLDMSR�NE�NODQ@SHNM@K�@MC�ãM@MBH@K� (3�RXRSDLR��ENQ�DW@LOKD�HMSDQE@BDR�ADSVDDM�ONKHBX� @CLHMHRSQ@SHNM�@MC�ãM@MBH@K�QDONQSHMF�RXRSDLR�NQ�@TSNL@SDC� BNMSQNKR�VGHBG�@QD�CDRHFMDC�SN�OQDUDMS�NQ�CDSDBS�HM@BBTQ@SD� NQ�HMBNLOKDSD�SQ@MREDQR�NE�ãM@MBH@K�HMENQL@SHNM �3GHR�HR�@M� @QD@�NE�RHFMHãB@MS�QHRJ�HM�NTQ�@TCHS�CTD�SN�SGD�BNLOKDWHSX� NE�SGD�(3�HMEQ@RSQTBSTQD��O@QSHBTK@QKX�HM�SGD�4*��VGDQD�SGDQD� are legacy systems which require increased manual inputs.
6GDQD�FDMDQ@K�(3�BNMSQNKR�VDQD�MNS�NODQ@SHMF�DEEDBSHUDKX�@MC� we were therefore unable to rely on the related automated (3�BNMSQNKR��VD�@CCQDRRDC�SGD�HMBQD@RDC�QHRJ�SG@S�ãM@MBH@K� HMENQL@SHNM�V@R�@EEDBSDC�AX�DWSDMCHMF�SGD�RBNOD�NE�NTQ� VNQJ��HMBKTCHMF�SDRSHMF�L@MT@K�BNLODMR@SHMF�BNMSQNKR�� such as reconciliations between systems and other information RNTQBDR��@MC�ODQENQLHMF�@CCHSHNM@K�RTARS@MSHUD�SDRSHMF�� RTBG�@R�TRHMF�DWSDMCDC�R@LOKD�RHYDR�@MC�ODQENQLHMF�C@S@� @M@KXRHR�QNTSHMDR�NUDQ�SGD�ETKK�ONOTK@SHNM�NE�SQ@MR@BSHNMR
3GD�&QNTO�@TCHS�SD@L�UHRHSDC���BNLONMDMS�KNB@SHNMR��ADHMF�SGD�4*��(QDK@MC��"@M@C@��2VDCDM��#DML@QJ��"GHKD�� QFDMSHM@� @MC�SGD�4 $��HMBKTCHMF�SN�@RRDRR�SGD�@TCHS�QHRJ�@MC�RSQ@SDFX �3DKDOGNMD�BNMEDQDMBD�LDDSHMFR�VDQD�@KRN�GDKC�VHSG�SGDRD� BNLONMDMS�@TCHSNQR�@MC�NSGDQR�SG@S�VDQD�MNS�OGXRHB@KKX�UHRHSDC � S�SGDRD�UHRHSR�@MC�LDDSHMFR��SGD�ãMCHMFR�QDONQSDC�SN� SGD�&QNTO�@TCHS�SD@L�VDQD�CHRBTRRDC�HM�LNQD�CDS@HK��@MC�@MX�ETQSGDQ�VNQJ�QDPTHQDC�AX�SGD�&QNTO�@TCHS�SD@L�V@R�SGDM� performed by the component auditor.
� �.TQ�NOHMHNM�NM�NSGDQ�L@SSDQR�OQDRBQHADC�AX�SGD�"NLO@MHDR� BS������HR�TMLNCHëDC In our opinion: • the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies BS�������@MC
• SGD�O@QDMS�BNLO@MX�ãM@MBH@K�RS@SDLDMSR�@MC�SGD�O@QS�NE�SGD�#HQDBSNQR��1DLTMDQ@SHNM�1DONQS�SN�AD�@TCHSDC�@QD�MNS� in agreement with the accounting records and returns; or
Scope of report and responsibilities R�DWOK@HMDC�LNQD�ETKKX�HM�SGD�#HQDBSNQR��1DRONMRHAHKHSHDR�2S@SDLDMS�RDS�NTS�NM�O@FD������SGD�CHQDBSNQR�@QD�QDRONMRHAKD�ENQ� SGD�OQDO@Q@SHNM�NE�SGD�&QNTO�ãM@MBH@K�RS@SDLDMSR�@MC�ENQ�ADHMF�R@SHRãDC�SG@S�SGDX�FHUD�@�SQTD�@MC�E@HQ�UHDV � �CDRBQHOSHNM� NE�SGD�RBNOD�NE�@M�@TCHS�NE�ãM@MBH@K�RS@SDLDMSR�HR�OQNUHCDC�NM�SGD�%HM@MBH@K�1DONQSHMF�"NTMBHK�R�VDARHSD�@S�VVV EQB NQF TJ� @TCHSRBNODTJOQHU@SD �3GHR�QDONQS�HR�L@CD�RNKDKX�SN�SGD�"NLO@MX�R�LDLADQR�@R�@�ANCX�@MC�HR�RTAIDBS�SN�HLONQS@MS�DWOK@M@SHNMR� @MC�CHRBK@HLDQR�QDF@QCHMF�NTQ�QDRONMRHAHKHSHDR��OTAKHRGDC�NM�NTQ�VDARHSD�@S�VVV JOLF BNL�TJ�@TCHSRBNODTJBN����@��VGHBG� @QD�HMBNQONQ@SDC�HMSN�SGHR�QDONQS�@R�HE�RDS�NTS�HM�ETKK�@MC�RGNTKC�AD�QD@C�SN�OQNUHCD�@M�TMCDQRS@MCHMF�NE�SGD�OTQONRD�NE�SGHR� QDONQS��SGD�VNQJ�VD�G@UD�TMCDQS@JDM�@MC�SGD�A@RHR�NE�NTQ�NOHMHNMR
STUART CRISP Senior Statutory Auditor ENQ�@MC�NM�ADG@KE�NE�*/,&�++/��2S@STSNQX� TCHSNQ� Chartered Accountants London ���%DAQT@QX�����
(MBNLD Gross written premiums ����� ����� Less: reinsurance premiums ������� ������� Net written premiums ����� ����� "G@MFD�HM�SGD�FQNRR�OQNUHRHNM�ENQ�TMD@QMDC�OQDLHTLR 41 ����� +DRR��BG@MFD�HM�OQNUHRHNM�ENQ�TMD@QMDC�OQDLHTLR��QDHMRTQDQR��RG@QD 353 ��
Net claims � ������� ������� 4MCDQVQHSHMF�@MC�ONKHBX�@BPTHRHSHNM�BNRSR ������� ������� 4MVHMC�NE�CHRBNTMS ����� ����� .SGDQ�NODQ@SHMF�DWODMRDR � (425) ����� 3NS@K�DWODMRDR ������� ������� %HM@MBD�BNRSR � (123) ����� Gains on disposals of businesses �C ��� – -DS�RG@QD�NE�KNRR�@ESDQ�S@W�NE�@RRNBH@SDR �� (5) ��� /QNëS��KNRR��ADENQD�S@W �� ����� (MBNLD�S@W�DWODMRD � (182) ���� +NRR�@ESDQ�S@W�EQNL�BNMSHMTHMF�NODQ@SHNMR (122) ����� /QNëS��KNRR��EQNL�CHRBNMSHMTDC�NODQ@SHNMR �@ ��� ���� /QNëS��KNRR��ENQ�SGD�XD@Q �� ����� Attributable to: Equity holders of the Parent Company from continuing operations ����� ����� Equity holders of the Parent Company from discontinued operations ��� ����
$@QMHMFR�ODQ�RG@QD�NM�OQNãS��KNRR��@SSQHATS@AKD�SN�SGD�NQCHM@QX�RG@QDGNKCDQR�NE�SGD�/@QDMS�"NLO@MX !@RHB %QNL�BNMSHMTHMF�NODQ@SHNMR 7 (14.4)p ��� ��O %QNL�CHRBNMSHMTDC�NODQ@SHNMR 7 �� �O �� ��O
#HKTSDC %QNL�BNMSHMTHMF�NODQ@SHNMR 7 (14.4)p ��� ��O %QNL�CHRBNMSHMTDC�NODQ@SHNMR 7 �� �O �� ��O
.QCHM@QX�CHUHCDMCR�O@HC�@MC�OQNONRDC�ENQ�SGD�XD@Q (MSDQHL�CHUHCDMC�O@HC��ODQ�RG@QD� 8 �MHK� �� �O %HM@K�CHUHCDMC�OQNONRDC��ODQ�RG@QD� 8 � � �MHK�
– – – – ����� – ����� ����� ����� � �����
3Q@MR@BSHNMR�VHSG�NVMDQR�NE�SGD�"NLO@MX "NMSQHATSHNM�@MC�CHRSQHATSHNM #HUHCDMCR��MNSD��� – – – – – – – ����� ����� ���� ����� Shares issued by scrip 18 ���� – – – – – �� �� – ��� Shares issued ENQ�B@RG��MNSD���� � � – – – – – – 7 – 7 Share based O@XLDMSR��MNSD���� � – – – – – – � � – ��
Purchase of: %HM@MBH@K�@RRDSR ������� ������� (MUDRSLDMS�OQNODQSX (22) ���� Property and equipment ���� ���� Intangible assets (78) ����� (MUDRSLDMSR�HM�RTARHCH@QHDR��MDS�NE�B@RG�@BPTHQDC� – ���� (MUDRSLDMSR�HM�@RRNBH@SDR – ���
1DRS@SDLDMS 3GD�&QNTO�TMCDQSNNJ�@�RSQ@SDFHB�QDUHDV�NE�HSR�ATRHMDRRDR�CTQHMF����� �&NHMF�ENQV@QC�SGD�&QNTO�G@R�QD@QQ@MFDC�SGD�NODQ@SHNM@K� RSQTBSTQD�NE�@�MTLADQ�NE�HSR�NUDQRD@R�NODQ@SHNMR�@MC�G@R�QDUHRDC�HSR�QDONQSHMF�RSQTBSTQD�SN�QDâDBS�SGD�MDV�NODQ@SHNM@K� RSQTBSTQD �3GD�A@RHR�NE�QDONQSHMF�SGD�QDRTKSR�NE�HSR�NODQ@SHNMR�HMSDQM@KKX�G@R�ADDM�QDUHRDC�SN�QDâDBS�SGD�MDV�NODQ@SHMF�RSQTBSTQD � (M�@CCHSHNM�SGD�&QNTO�G@R�L@CD�RNLD�BG@MFDR�SN�SGD�A@RHR�NE�B@KBTK@SHMF�SGD�NODQ@SHMF�QDRTKS��L@M@FDLDMS�A@RHR� �%TQSGDQ� HMENQL@SHNM�NM�SGDRD�BG@MFDR�@QD�OQDRDMSDC�HM�MNSD���SN�SGD�ãM@MBH@K�RS@SDLDMSR �3GD�BNLO@Q@SHUD�QDRTKSR�HM�MNSD���G@UD�ADDM� QDRS@SDC�NM�SGD�QDUHRDC�A@RHR
3GD�BNLO@Q@SHUD�QDRTKS�ENQ�SGD�D@QMHMFR�ODQ�RG@QD�NM�OQNãS��KNRR��@SSQHATS@AKD�SN�SGD�NQCHM@QX�RG@QDGNKCDQR�NE�SGD�/@QDMS� "NLO@MX�G@R�ADDM�QDRS@SDC�SN�QDâDBS�SGD�BG@MFDR�SN�SGD�MTLADQ�NE�NQCHM@QX�RG@QDR�HM�HRRTD�CTQHMF����� �3GD�BG@MFDR�@QHRD� EQNL�SGD�QHFGSR�HRRTD�@MC�SGD�RG@QD�BNMRNKHC@SHNM �-NSD����SN�SGD�ãM@MBH@K�RS@SDLDMSR�OQNUHCDR�ETQSGDQ�HMENQL@SHNM�NM�SGD� changes to the number of ordinary shares in issue.
SELECTION OF ACCOUNTING POLICIES, CRITICAL JUDGEMENTS AND USE OF ESTIMATES 3GD�&QNTO�DWDQBHRDR�ITCFDLDMS�HM�RDKDBSHMF�D@BG�&QNTO�@BBNTMSHMF�ONKHBX �3GD�@BBNTMSHMF�ONKHBHDR�NE�SGD�&QNTO�@QD�RDKDBSDC� AX�SGD�CHQDBSNQR�SN�OQDRDMS�ãM@MBH@K�RS@SDLDMSR�SG@S�SGDX�BNMRHCDQ�OQNUHCD�SGD�LNRS�QDKDU@MS�HMENQL@SHNM �
,D@RTQDLDMS�NE�SGD�U@KTD�NE�FNNCVHKK�@MC�NSGDQ�HMS@MFHAKD�@RRDSR 3GD�&QNTO�ODQENQLR�@M�HLO@HQLDMS�QDUHDV�NM�D@BG�HSDL�NE�FNNCVHKK�@MMT@KKX�@MC�NSGDQ�HMS@MFHAKD�@RRDSR�VGDM�SGDQD�HR�@M� HMCHB@SHNM�NE�HLO@HQLDMS�NE�SGD�U@KTD�NE�SGD�@RRDS �3GHR�QDPTHQDR�SGD�TRD�NE�ITCFDLDMSR�HM�SGD�LNCDKR�TRDC�SN�U@KTD�SGD�@RRDSR� and the use of assumptions on the future performance of the Group businesses. Details of the methodology and assumptions @QD�HMBKTCDC�HM�MNSD���SN�SGD�ãM@MBH@K�RS@SDLDMSR
Changes in the ownership interests of a subsidiary between shareholders of the Group and shareholders holding a MNM�BNMSQNKKHMF�HMSDQDRS�@QD�@BBNTMSDC�ENQ�@R�SQ@MR@BSHNMR�ADSVDDM�DPTHSX�GNKCDQR�NE�SGD�&QNTO � MX�CHEEDQDMBD�ADSVDDM� SGD�E@HQ�U@KTD�NE�SGD�BNMRHCDQ@SHNM�FHUDM�AX�SGD�SQ@MREDQDD�@MC�SGD�B@QQXHMF�U@KTD�NE�SGD�NVMDQRGHO�HMSDQDRS�SQ@MREDQQDC� is recognised directly in equity.
(MSDQBNLO@MX�SQ@MR@BSHNMR��A@K@MBDR�@MC�TMQD@KHRDC�F@HMR�NM�SQ@MR@BSHNMR�ADSVDDM�&QNTO�BNLO@MHDR�@QD�DKHLHM@SDC � 4MQD@KHRDC�KNRRDR�@QD�@KRN�DKHLHM@SDC�TMKDRR�SGD�SQ@MR@BSHNM�OQNUHCDR�DUHCDMBD�NE�@M�HLO@HQLDMS�NE�SGD�@RRDS�SQ@MREDQQDC � Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group.
.M�BNMRNKHC@SHNM��DWBG@MFD�CHEEDQDMBDR�@QHRHMF�EQNL�SGD�SQ@MRK@SHNM�NE�SGD�MDS�HMUDRSLDMS�HM�ENQDHFM�DMSHSHDR��@MC�NE�ANQQNVHMFR� @MC�NSGDQ�BTQQDMBX�HMRSQTLDMSR�CDRHFM@SDC�@R�GDCFDR�NE�RTBG�HMUDRSLDMSR��@QD�QDBNFMHRDC�HM�NSGDQ�BNLOQDGDMRHUD�HMBNLD� VHSGHM�SGD�ENQDHFM�BTQQDMBX�SQ@MRK@SHNM�QDRDQUD �6GDM�@�ENQDHFM�DMSHSX�HR�RNKC��SGD�BTLTK@SHUD�DWBG@MFD�CHEEDQDMBDR�QDK@SHMF� to that foreign entity are recognised in the consolidated income statement as part of the gain or loss on sale.
Goodwill is allocated to cash generating units for the purpose of impairment testing. Goodwill is subject to an impairment QDUHDV�@S�KD@RS�@MMT@KKX � M�HLO@HQLDMS�QDUHDV�HR�@KRN�B@QQHDC�NTS�VGDMDUDQ�SGDQD�HR�@M�HMCHB@SHNM�SG@S�FNNCVHKK�HR�HLO@HQDC � 6GDQD�SGD�B@QQXHMF�@LNTMS�HR�LNQD�SG@M�SGD�QDBNUDQ@AKD�@LNTMS��HLO@HQLDMS�HR�QDBNFMHRDC�HM�SGD�BNMRNKHC@SDC�HMBNLD� RS@SDLDMS � M�HLO@HQLDMS�KNRR�QDBNFMHRDC�ENQ�FNNCVHKK�HR�MNS�QDUDQRDC�HM�@�RTARDPTDMS�ODQHNC
6GDM�U@KTHMF�HMRTQ@MBD�KH@AHKHSHDR�HM�@�ATRHMDRR�BNLAHM@SHNM��OQNUHRHNMR�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR�@QD�CHRBNTMSDC� SN�OQDRDMS�U@KTD �%NKKNVHMF�SGD�@BPTHRHSHNM��SGD�@BPTHQDC�OQNUHRHNMR�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR�@QD��VGDQD� @OOKHB@AKD��U@KTDC�HM�@BBNQC@MBD�VHSG�&QNTO�@BBNTMSHMF�ONKHBHDR�@S�ETKK�MNLHM@K�U@KTD �3GHR�HMBQD@RD�HM�HMRTQ@MBD�KH@AHKHSHDR�HR� L@SBGDC�AX�SGD�QDBNFMHSHNM�NE�@M�HMS@MFHAKD�@RRDS�@QHRHMF�EQNL�@BPTHQDC�OQNUHRHNMR�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR�� QDOQDRDMSHMF�SGD�OQDRDMS�U@KTD�NE�ETSTQD�HMUDRSLDMS�HMBNLD�HLOKHBHS�HM�SGD�BK@HLR�CHRBNTMS �3GD�HMS@MFHAKD�@RRDS�HR�@LNQSHRDC� NUDQ�SGD�DWODBSDC�QTM�NEE�ODQHNC�@MC�HR�SDRSDC�VHSGHM�SGD�KH@AHKHSX�@CDPT@BX�SDRS�NE�HMRTQ@MBD�BNMSQ@BS�KH@AHKHSHDR�VGDQD�SGD� balances of intangible assets associated with insurance contracts are deducted from the carrying amount of the insurance BNMSQ@BS�KH@AHKHSHDR �3GD�DWODBSDC�QTM�NEE�ODQHNC�HR�ADSVDDM���@MC���XD@QR
FINANCIAL ASSETS �ãM@MBH@K�@RRDS�HR�HMHSH@KKX�QDBNFMHRDC�NM�SGD�C@SD�SGD�&QNTO�BNLLHSR�SN�OTQBG@RD�SGD�@RRDS�@S�E@HQ�U@KTD�OKTR��HM�SGD�B@RD�NE�@KK� ãM@MBH@K�@RRDSR�MNS�BK@RRHãDC�@R�@S�E@HQ�U@KTD�SGQNTFG�SGD�BNMRNKHC@SDC�HMBNLD�RS@SDLDMS��SQ@MR@BSHNM�BNRSR�SG@S�@QD�CHQDBSKX� @SSQHATS@AKD�SN�HSR�@BPTHRHSHNM � �ãM@MBH@K�@RRDS�HR�CDQDBNFMHRDC�VGDM�SGD�QHFGSR�SN�QDBDHUD�B@RGâNVR�EQNL�SGD�HMUDRSLDMS� G@UD�DWOHQDC�NQ�G@UD�ADDM�SQ@MREDQQDC�@MC�VGDM�SGD�&QNTO�G@R�RTARS@MSH@KKX�SQ@MREDQQDC�SGD�QHRJR�@MC�QDV@QCR�NE�NVMDQRGHO� of the asset.
DERIVATIVE FINANCIAL INSTRUMENTS #DQHU@SHUDR�@QD�QDBNFMHRDC�HM�SGD�BNMRNKHC@SDC�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM�NM�@�SQ@CD�C@SD�A@RHR�@MC�@QD�B@QQHDC�@S�E@HQ� U@KTD �#DQHU@SHUDR�@QD�B@QQHDC�@R�@RRDSR�VGDM�E@HQ�U@KTD�HR�ONRHSHUD�@MC�@R�KH@AHKHSHDR�VGDM�E@HQ�U@KTD�HR�MDF@SHUD �3GD�LDSGNC�NE� QDBNFMHRHMF�SGD�QDRTKSHMF�F@HM�NQ�KNRR�CDODMCR�NM�VGDSGDQ�SGD�CDQHU@SHUD�HR�CDRHFM@SDC�@R�@�GDCFHMF�HMRSQTLDMS�@MC�SGD�M@STQD� NE�SGD�HSDL�ADHMF�GDCFDC �6GDQD�@�CDQHU@SHUD�HR�MNS�CDRHFM@SDC�@R�@�GDCFHMF�HMRSQTLDMS��BG@MFDR�HM�HSR�E@HQ�U@KTD�@QD�QDBNFMHRDC� in the consolidated income statement.
ESTIMATION OF THE FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES 3GD�LDSGNCR�@MC�@RRTLOSHNMR�TRDC�AX�SGD�&QNTO�HM�DRSHL@SHMF�SGD�E@HQ�U@KTD�NE�ãM@MBH@K�@RRDSR�@MC�KH@AHKHSHDR�@QD�
Acquisition costs comprise the direct and indirect costs of obtaining and processing new insurance business. These costs are QDBNFMHRDC�@R�CDEDQQDC�@BPTHRHSHNM�BNRSR�@MC�@QD�CDCTBSDC�EQNL�SGD�OQNUHRHNM�ENQ�TMD@QMDC�OQDLHTL �#DEDQQDC�@BPTHRHSHNM� BNRSR��# "��@QD�@LNQSHRDC�NM�SGD�R@LD�A@RHR�@R�SGD�QDK@SDC�TMD@QMDC�OQDLHTLR�@QD�D@QMDC
Differences between the estimated cost and subsequent settlement of claims are recognised in the income statement HM�SGD�XD@Q�HM�VGHBG�SGDX�@QD�RDSSKDC�NQ�HM�VGHBG�SGD�OQNUHRHNMR�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR�@QD�QD�DRSHL@SDC
�QDHMRTQ@MBD�@RRDS��QDHMRTQDQR��RG@QD�NE�HMRTQ@MBD�BNMSQ@BS�KH@AHKHSHDR��HR�QDBNFMHRDC�SN�QDâDBS�SGD�@LNTMS�DRSHL@SDC�SN�AD� QDBNUDQ@AKD�TMCDQ�SGD�QDHMRTQ@MBD�BNMSQ@BSR�HM�QDRODBS�NE�SGD�OQNUHRHNMR�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR�QDONQSDC� TMCDQ�HMRTQ@MBD�BNMSQ@BS�KH@AHKHSHDR �3GD�@LNTMS�QDBNUDQ@AKD�EQNL�QDHMRTQDQR�HR�HMHSH@KKX�U@KTDC�NM�SGD�R@LD�A@RHR�@R�SGD� TMCDQKXHMF�OQNUHRHNMR�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR �3GD�@LNTMS�QDBNUDQ@AKD�HR�QDCTBDC�VGDM�SGDQD�HR�@M�DUDMS� @QHRHMF�@ESDQ�SGD�HMHSH@K�QDBNFMHSHNM�SG@S�OQNUHCDR�NAIDBSHUD�DUHCDMBD�SG@S�SGD�&QNTO�L@X�MNS�QDBDHUD�@KK�@LNTMSR�CTD�TMCDQ� SGD�QDHMRTQ@MBD�BNMSQ@BS�@MC�SGD�DUDMS�G@R�@�QDKH@AKX�LD@RTQ@AKD�HLO@BS�NM�SGD�DWODBSDC�@LNTMS�SG@S�VHKK�AD�QDBNUDQDC� from the reinsurer.
Annuities purchased by the Group to make payments under structured settlement arrangements are accounted for as QDHMRTQ@MBD�BDCDC�HE�SGD�&QNTO�QDL@HMR�KH@AKD�ENQ�SGD�RDSSKDLDMS�HM�SGD�DUDMS�NE�CDE@TKS�AX�SGD�@MMTHSX�OQNUHCDQ � MX�F@HM� or loss arising on the purchase of an annuity is recognised in the consolidated income statement at the date of purchase.
Premium instalment policy fee income is charged to policyholders when premium is paid in instalments and is recognised NUDQ�SGD�ODQHNC�SG@S�SGD�HMRS@KLDMSR�@QD�ADHMF�L@CD
Engineering inspection fees are charged for the inspection of plant and machinery and are recognised in full in the month in which the inspection is performed.
#DEDQQDC�S@W�HR�OQNUHCDC�HM�ETKK�TRHMF�SGD�KH@AHKHSX�LDSGNC�NM�SDLONQ@QX�CHEEDQDMBDR�@QHRHMF�ADSVDDM�SGD�S@W�A@RDR�NE�@RRDSR�@MC� KH@AHKHSHDR�@MC�SGD�B@QQXHMF�@LNTMSR�HM�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR �'NVDUDQ��HE�SGD�CDEDQQDC�S@W�@QHRDR�EQNL�HMHSH@K� recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects MDHSGDQ�@BBNTMSHMF��MNQ�S@W@AKD�OQNãS�NQ�KNRR��HS�HR�MNS�@BBNTMSDC�ENQ �#DEDQQDC�S@W�HR�CDSDQLHMDC�TRHMF�S@W�Q@SDR��@MC�K@VR��SG@S� G@UD�ADDM�DM@BSDC�NQ�RTARS@MSHUDKX�DM@BSDC�AX�SGD�DMC�NE�SGD�QDONQSHMF�ODQHNC�@MC�@QD�DWODBSDC�SN�@OOKX�VGDM�SGD�QDK@SDC� CDEDQQDC�S@W�@RRDS�HR�QD@KHRDC�NQ�SGD�QDK@SDC�CDEDQQDC�S@W�KH@AHKHSX�HR�RDSSKDC
5DRSHMF�BNMCHSHNMR��VGHBG�BNLOQHRD�RDQUHBD�BNMCHSHNMR�@MC�ODQENQL@MBD�BNMCHSHNMR��NSGDQ�SG@M�SGNRD�A@RDC�TONM�L@QJDS� BNMCHSHNMR��@QD�MNS�S@JDM�HMSN�@BBNTMS�VGDM�DRSHL@SHMF�SGD�E@HQ�U@KTD�NE�RTBG�@V@QCR�ATS�@QD�S@JDM�HMSN�@BBNTMS�AX�@CITRSHMF� SGD�MTLADQ�NE�DPTHSX�HMRSQTLDMSR�HMBKTCDC�HM�SGD�TKSHL@SD�LD@RTQDLDMS�NE�SGD�SQ@MR@BSHNM�@LNTMS �3GD�U@KTD�NE�SGD�@V@QCR� HR�QDBNFMHRDC�@R�@M�DWODMRD�NM�@�RXRSDL@SHB�A@RHR�NUDQ�SGD�ODQHNC�CTQHMF�VGHBG�SGD�DLOKNXLDMS�RDQUHBDR�@QD�OQNUHCDC � 6GDQD�@M�@V@QC�NE�NOSHNMR�HR�B@MBDKKDC�AX�@M�DLOKNXDD��SGD�ETKK�U@KTD�NE�SGD�@V@QC��KDRR�@MX�U@KTD�OQDUHNTRKX�QDBNFMHRDC�� is recognised at the cancellation date.
%NKKNVHMF�SGD�BNMBKTRHNM�NE�@�RSQ@SDFHB�QDUHDV�NE�ATRHMDRR�BNMCTBSDC�HM������SGD�!N@QC�NE�#HQDBSNQR�MNV�ENBTR�NM�SGD�&QNTO�R� BNQD�NODQ@SHNMR�HM�SGD�4*�@MC�(QDK@MC��"@M@C@��2B@MCHM@UH@�@MC�+@SHM� LDQHB@�VGHBG�ENQL�SGD�A@RHR�NE�HSR�@RRDRRLDMS�NE� business performance and decisions on the allocation of capital and resources going forward. The remainder of the ongoing ATRHMDRR�HR�BNMRHCDQDC�MNM�BNQD
Discontinued operations are presented on the face of the income statement as a single amount comprising the total of the MDS�OQNãS�NQ�KNRR�NE�CHRBNMSHMTDC�NODQ@SHNMR�@MC�SGD�@ESDQ�S@W�F@HM�NQ�KNRR�QDBNFMHRDC�NM�SGD�R@KD�NQ�SGD�LD@RTQDLDMS�SN� E@HQ�U@KTD�KDRR�BNRSR�SN�RDKK�NE�SGD�MDS�@RRDSR�BNMRSHSTSHMF�SGD�CHRBNMSHMTDC�NODQ@SHNMR �(M�SGD�ODQHNC�VGDQD�@M�NODQ@SHNM� HR�OQDRDMSDC�ENQ�SGD�ãQRS�SHLD�@R�CHRBNMSHMTDC��SGD�BNMRNKHC@SDC�HMBNLD�RS@SDLDMS�ENQ�SGD�BNLO@Q@SHUD�OQHNQ�ODQHNC� presented is restated to present that operation as discontinued.
CURRENT AND NON CURRENT DISTINCTION RRDSR�@QD�BK@RRHãDC�@R�BTQQDMS�VGDM�DWODBSDC�SN�AD�QD@KHRDC�VHSGHM�SGD�&QNTO�R�MNQL@K�NODQ@SHMF�BXBKD�NE�NMD�XD@Q �+H@AHKHSHDR� @QD�BK@RRHãDC�@R�BTQQDMS�VGDM�DWODBSDC�SN�AD�RDSSKDC�VHSGHM�SGD�&QNTO�R�MNQL@K�NODQ@SHMF�BXBKD�NE�NMD�XD@Q � KK�NSGDQ�@RRDSR� @MC�KH@AHKHSHDR�@QD�BK@RRHãDC�@R�MNM�BTQQDMS
3GD�HMRTQ@MBD�BNMSQ@BS�KH@AHKHSHDR�NE�@M�HMRTQ@MBD�BNLO@MX�HMBKTCD�SGD�OQNUHRHNM�ENQ�TMD@QMDC�OQDLHTLR�@MC�TMDWOHQDC�QHRJR� @MC�SGD�OQNUHRHNM�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR �4MD@QMDC�OQDLHTLR�@MC�TMDWOHQDC�QHRJR�QDOQDRDMS�SGD�@LNTMS� NE�HMBNLD�RDS�@RHCD�AX�SGD�BNLO@MX�SN�BNUDQ�SGD�BNRS�NE�BK@HLR�SG@S�L@X�@QHRD�CTQHMF�SGD�TMDWOHQDC�ODQHNC�NE�QHRJ�NE�HMRTQ@MBD� policies in force at the end of the reporting period. Outstanding claims represent the company’s estimate of the cost NE�RDSSKDLDMS�NE�BK@HLR�SG@S�G@UD�NBBTQQDC�AX�SGD�DMC�NE�SGD�QDONQSHMF�ODQHNC�ATS�G@UD�MNS�XDS�ADDM�ãM@KKX�RDSSKDC
3GD�CDFQDD�NE�TMBDQS@HMSX�VHKK�U@QX�AX�ONKHBX�BK@RR�@BBNQCHMF�SN�SGD�BG@Q@BSDQHRSHBR�NE�SGD�HMRTQDC�QHRJR�@MC�SGD�BNRS�NE�@�BK@HL� will be determined by the actual loss suffered by the policyholder.
3GD�DRS@AKHRGLDMS�NE�HMRTQ@MBD�BNMSQ@BS�KH@AHKHSHDR�HR�@M�HMGDQDMSKX�TMBDQS@HM�OQNBDRR�@MC��@R�@�BNMRDPTDMBD�NE�SGHR�TMBDQS@HMSX�� SGD�DUDMST@K�BNRS�NE�RDSSKDLDMS�NE�NTSRS@MCHMF�BK@HLR�@MC�TMDWOHQDC�QHRJR�B@M�U@QX�RTARS@MSH@KKX�EQNL�SGD�HMHSH@K�DRSHL@SDR�� particularly for the Group’s long tail lines of business.
3GD�&QNTO�G@R�DWONRTQDR�SN�QHRJR�HM�D@BG�BK@RR�NE�ATRHMDRR�VHSGHM�D@BG�NODQ@SHMF�RDFLDMS�SG@S�L@X�CDUDKNO�@MC�SG@S�BNTKC� G@UD�@�L@SDQH@K�HLO@BS�TONM�SGD�&QNTO�R�ãM@MBH@K�ONRHSHNM �3GD�FDNFQ@OGHB�@MC�HMRTQ@MBD�QHRJ�CHUDQRHSX�VHSGHM�SGD�&QNTO�R� ONQSENKHN�NE�HRRTDC�HMRTQ@MBD�ONKHBHDR�LD@M�HS�HR�MNS�ONRRHAKD�SN�OQDCHBS�VGDSGDQ�L@SDQH@K�CDUDKNOLDMS�VHKK�NBBTQ�@MC��HE�HS�CNDR� NBBTQ��SGD�KNB@SHNM�@MC�SGD�SHLHMF�NE�RTBG�@M�NBBTQQDMBD �3GD�DRSHL@SHNM�NE�HMRTQ@MBD�BNMSQ@BS�KH@AHKHSHDR�HMUNKUDR�SGD�TRD�NE� ITCFDLDMSR�@MC�@RRTLOSHNMR�SG@S�@QD�RODBHãB�SN�SGD�HMRTQ@MBD�QHRJR�VHSGHM�D@BG�SDQQHSNQX�@MC�SGD�O@QSHBTK@Q�SXOD�NE�HMRTQ@MBD� QHRJ�BNUDQDC �3GD�CHUDQRHSX�NE�SGD�HMRTQ@MBD�QHRJR�QDRTKSR�HM�HS�MNS�ADHMF�ONRRHAKD�SN�HCDMSHEX�HMCHUHCT@K�ITCFDLDMSR�@MC� @RRTLOSHNMR�SG@S�@QD�LNQD�KHJDKX�SG@M�NSGDQR�SN�G@UD�@�L@SDQH@K�HLO@BS�NM�SGD�ETSTQD�CDUDKNOLDMS�NE�SGD�HMRTQ@MBD�BNMSQ@BS� liabilities.
ASBESTOS AND ENVIRONMENTAL CLAIMS 3GD�DRSHL@SHNM�NE�SGD�OQNUHRHNMR�ENQ�SGD�TKSHL@SD�BNRS�NE�BK@HLR�ENQ�@RADRSNR�@MC�DMUHQNMLDMS@K�ONKKTSHNM�HR�RTAIDBS�SN�@�Q@MFD� of uncertainties that is generally greater than those encountered for other classes of insurance business. As a result it is MNS�ONRRHAKD�SN�CDSDQLHMD�SGD�ETSTQD�CDUDKNOLDMS�NE�@RADRSNR�@MC�DMUHQNMLDMS@K�BK@HLR�VHSG�SGD�R@LD�CDFQDD�NE�QDKH@AHKHSX� @R�VHSG�NSGDQ�SXODR�NE�BK@HLR��O@QSHBTK@QKX�HM�ODQHNCR�VGDM�SGDNQHDR�NE�K@V�@QD�HM�âTW �"NMRDPTDMSKX��SQ@CHSHNM@K�SDBGMHPTDR� ENQ�DRSHL@SHMF�OQNUHRHNMR�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR�B@MMNS�VGNKKX�AD�QDKHDC�TONM�@MC�SGD�&QNTO�DLOKNXR� RODBH@KHRDC�SDBGMHPTDR�SN�CDSDQLHMD�OQNUHRHNMR�TRHMF�SGD�DWSDMRHUD�JMNVKDCFD�NE�ANSG�HMSDQM@K�@RADRSNR�@MC�DMUHQNMLDMS@K� ONKKTSHNM�DWODQSR�@MC�DWSDQM@K�KDF@K�@MC�OQNEDRRHNM@K�@CUHRNQR
• Issues of allocation of responsibility among potentially responsible parties and insurers
POTENTIAL CHANGE IN DISCOUNT RATE FOR LUMP SUM DAMAGES AWARDS +DFHRK@SHUD�BG@MFDR�L@X�@EEDBS�SGD�&QNTO�R�KH@AHKHSX�HM�QDRODBS�NE�TMRDSSKDC�BK@HLR�HM�SGD�TRD�NE�OQDCDSDQLHMDC�E@BSNQR�TRDC�AX� BNTQSR�SN�B@KBTK@SD�BNLODMR@SHNM�BK@HLR �%NQ�DW@LOKD��HM�SGD�4*��RS@MC@QC�ENQLTK@D�@QD�TRDC�@R�@M�@BST@QH@K�LD@RTQD�AX�SGD� courts to assess lump sum damages awards for future losses (typically loss of earnings arising from personal injuries and fatal @BBHCDMSR� �3GD�B@KHAQ@SHNM�NE�SGDRD�RS@MC@QC�ENQLTK@D�B@M�AD�TOC@SDC�AX�SGD�4*�&NUDQMLDMS�@MC�SGD�+NQC�"G@MBDKKNQ�L@X� QDUHDV�SGD�LDSGNCNKNFX�SN�AD�@OOKHDC�HM�CDSDQLHMHMF�SGD�CHRBNTMS�Q@SD�SN�B@KBTK@SD�SGD�@OOQNOQH@SD�RDSSKDLDMSR��NQ�SGD� CHRBNTMS�Q@SD�HSRDKE��HM�CTD�BNTQRD � �QDCTBSHNM�HM�SGD�OQDRBQHADC�CHRBNTMS�Q@SD�VNTKC�HMBQD@RD�SGD�U@KTD�NE�ETSTQD�BK@HLR� settlements.
POTENTIAL CREDIT RISK FOR STRUCTURED SETTLEMENTS (M�"@M@C@�SGD�&QNTO�G@R�OTQBG@RDC�@MMTHSHDR�EQNL�QDFTK@SDC�"@M@CH@M�KHED�HMRTQDQR�HM�NQCDQ�SN�O@X�ãWDC�@MC�QDBTQQHMF� O@XLDMSR�SN�BDQS@HM�BK@HL@MSR �3GHR�@QQ@MFDLDMS�DWONRDR�SGD�FQNTO�SN�@�BQDCHS�QHRJ�HM�SGD�DUDMS�SG@S�SGD�KHED�HMRTQDQR�@QD� TM@AKD�SN�L@JD�SGDRD�O@XLDMSR�VGHBG�HR�LHSHF@SDC�AX�@M�HMCTRSQX�BNLODMR@SHNM�RBGDLD�VGHBG�HM�SG@S�DUDMS�VNTKC�@RRTLD� @�RHFMHãB@MS�L@INQHSX�NE�SGD�QDL@HMHMF�NTSRS@MCHMF�NAKHF@SHNMR �3GD�KHJDKHGNNC�NE�ANSG�@�"@M@CH@M�QDFTK@SDC�KHED�HMRTQDQ�@MC�SGD� HMCTRSQX�BNLODMR@SHNM�RBGDLD�ADHMF�TM@AKD�SN�O@X�SGDHQ�NAKHF@SHNMR�HR�BNMRHCDQDC�UDQX�QDLNSD�@MC�RN�MN�OQNUHRHNM�G@R�ADDM� recognised in respect of this risk.
CONTRACTS WITH THIRD PARTIES The Group enters into outsourcing contracts and distribution arrangements with third parties in the normal course of its business and is reliant upon those third parties being willing and able to perform their obligations in accordance with the terms and conditions of the contracts.
LITIGATION, DISPUTES AND INVESTIGATIONS 3GD�&QNTO��HM�BNLLNM�VHSG�SGD�HMRTQ@MBD�HMCTRSQX�HM�FDMDQ@K��HR�RTAIDBS�SN�KHSHF@SHNM��LDCH@SHNM�@MC�@QAHSQ@SHNM��@MC�QDFTK@SNQX�� FNUDQMLDMS@K�@MC�NSGDQ�RDBSNQ@K�HMPTHQHDR�@MC�HMUDRSHF@SHNMR�HM�SGD�MNQL@K�BNTQRD�NE�HSR�ATRHMDRR �(M�@CCHSHNM��SGD�&QNTO�HR� DWONRDC�SN�SGD�QHRJ�NE�KHSHF@SHNM�HM�BNMMDBSHNM�VHSG�HSR�ENQLDQ�NVMDQRGHO�NE�SGD�42�NODQ@SHNM �!@RDC�NM�BTQQDMS�HMENQL@SHNM� SGD�CHQDBSNQR�CN�MNS�ADKHDUD�SG@S�@MX�BTQQDMS�LDCH@SHNM��@QAHSQ@SHNM��QDFTK@SNQX��FNUDQMLDMS@K�NQ�RDBSNQ@K�HMPTHQHDR�@MC� HMUDRSHF@SHNMR�@MC�ODMCHMF�NQ�SGQD@SDMDC�KHSHF@SHNM�NQ�CHROTSD�VHKK�G@UD�@�L@SDQH@K�@CUDQRD�DEEDBS�NM�SGD�&QNTO�R�ãM@MBH@K� ONRHSHNM��@KSGNTFG�SGDQD�B@M�AD�MN�@RRTQ@MBD�SG@S�KNRRDR�NQ�ãM@MBH@K�ODM@KSHDR�QDRTKSHMF�EQNL�@MX�BTQQDMS�LDCH@SHNM��@QAHSQ@SHNM�� QDFTK@SNQX��FNUDQMLDMS@K�NQ�RDBSNQ@K�HMPTHQHDR�@MC�HMUDRSHF@SHNMR�@MC�ODMCHMF�NQ�SGQD@SDMDC�KHSHF@SHNM�NQ�CHROTSD�VHKK�MNS� L@SDQH@KKX�@EEDBS�SGD�&QNTO�R�ãM@MBH@K�ONRHSHNM�NQ�B@RGâNVR�ENQ�@MX�ODQHNC
RATING ENVIRONMENT The ability of the Group to write certain types of insurance business is dependent on the maintenance of the appropriate credit Q@SHMFR�EQNL�SGD�Q@SHMF�@FDMBHDR �3GD�&QNTO�G@R�SGD�NAIDBSHUD�NE�L@HMS@HMHMF��@S�@�LHMHLTL��RHMFKD�� ��Q@SHMFR � S�SGD�OQDRDMS� SHLD�SGD�Q@SHMFR�@QD�� ���RS@AKD�NTSKNNJ��EQNL�2î/�@MC�� ����MDF@SHUD�NTSKNNJ��EQNL�,NNCX�R � �VNQRDMHMF�HM�SGD�Q@SHMFR��ADKNV� NAIDBSHUD��BNTKC�G@UD�@M�@CUDQRD�HLO@BS�NM�SGD�@AHKHSX�NE�SGD�&QNTO�SN�VQHSD�BDQS@HM�SXODR�NE�FDMDQ@K�HMRTQ@MBD�ATRHMDRR
3GD�&QNTO��@MC�HSR�L@HM�$TQNOD@M�HMRTQ@MBD�DMSHSHDR��VHKK�AD�RDDJHMF�QDFTK@SNQX�@OOQNU@K�SN�TRD�@M�HMSDQM@K�LNCDK�SN�B@KBTK@SD� SGD�2NKUDMBX�"@OHS@K�1DPTHQDLDMS��2"1� �3GDQD�HR�@�QHRJ�SG@S�NMD�NQ�LNQD�QDFTK@SNQR�L@X�DKDBS�MNS�SN�FHUD�@OOQNU@K�ENQ�SGD� VGNKD��NQ�O@QSR�NE��SGD�LNCDK �3GHR�L@X�LD@M�SG@S�SGD�&QNTO�VNTKC�MDDC�SN�TRD�DKDLDMSR�NE�SGD�RS@MC@QC�ENQLTK@�ENQ� B@KBTK@SHMF�SGD�2"1��VGHBG�L@X�AD�L@SDQH@KKX�CHEEDQDMS�SN�SGD�2"1�B@KBTK@SDC�TRHMF�SGD�HMSDQM@K�LNCDK �3GD�&QNTO�L@HMS@HMR� BKNRD�@MC�QDFTK@Q�CH@KNFTD�VHSG�HSR�QDFTK@SNQR�SGQNTFGNTS�SGD�INTQMDX�SN�HMSDQM@K�LNCDK�@OOQNU@K�@MC�SGD�#HQDBSNQR�@QD� BNMãCDMS�SG@S�SGD�&QNTO�VHKK�BNMSHMTD�SN�LDDS�@KK�ETSTQD�QDFTK@SNQX�B@OHS@K�QDPTHQDLDMSR �3GD�&QNTO�HMSDMCR�SN�L@JD�HSR� HMSDQM@K�LNCDK�@OOQNU@K�@OOKHB@SHNM�HM�,@X�����
4MCDQVQHSHMF�KHLHSR�@QD�HM�OK@BD�SN�DMENQBD�@OOQNOQH@SD�QHRJ�RDKDBSHNM�BQHSDQH@ �3GD�&QNTO�FDMDQ@KKX�G@R�SGD�QHFGS�MNS�SN�QDMDV� HMCHUHCT@K�ONKHBHDR��HS�B@M�HLONRD�CDCTBSHAKDR�@MC�HS�G@R�SGD�QHFGS�SN�QDIDBS�SGD�O@XLDMS�NE�@�EQ@TCTKDMS�BK@HL �(M�BDQS@HM� SDQQHSNQHDR��KDFHRK@SHNM�HLONRDR�@�LHMHLTL�@LNTMS�ENQ�VGHBG�DLOKNXDQR�B@M�AD�KH@AKD�ENQ�BK@HLR�ENQ�BNLODMR@SHNM�EQNL� DLOKNXDDR�HMITQDC�@S�VNQJ �3GDRD�KH@AHKHSHDR�@QD�TRT@KKX�HMRTQDC�TMCDQ�@M�DLOKNXDQ�R�KH@AHKHSX��NQ�RHLHK@Q��HMRTQ@MBD�ONKHBX � All policies issued by the Group comply with minimum statutory requirements.
Risk management continued 1DRDQUD�QHRJ 3GD�&QNTO�DRS@AKHRGDR�KNRR�QDRDQUDR�SN�@BBNTMS�ENQ�SGD�@MSHBHO@SDC�TKSHL@SD�BNRSR�NE�@KK�KNRRDR�@MC�QDK@SDC�KNRR�@CITRSLDMS� DWODMRDR��+ $��NM�KNRRDR�SG@S�G@UD�@KQD@CX�NBBTQQDC �3GD�&QNTO�DRS@AKHRGDR�QDRDQUDR�ENQ�QDONQSDC�KNRRDR�@MC�+ $��@R�VDKK� @R�ENQ�HMBTQQDC�ATS�MNS�XDS�QDONQSDC��(!-1��KNRRDR�@MC�TM@KKNB@SDC�KNRR�@CITRSLDMS�DWODMRDR��4+ $� �+NRR�QDRDQUD�DRSHL@SDR� @QD�A@RDC�NM�JMNVM�E@BSR�@MC�NM�HMSDQOQDS@SHNM�NE�BHQBTLRS@MBDR�HMBKTCHMF�SGD�&QNTO�R�DWODQHDMBD�VHSG�RHLHK@Q�B@RDR�@MC� GHRSNQHB@K�BK@HLR�O@XLDMS�SQDMCR �3GD�&QNTO�@KRN�BNMRHCDQR�SGD�CDUDKNOLDMS�NE�KNRR�O@XLDMS�SQDMCR��KDUDKR�NE�TMO@HC�BK@HLR�� judicial decisions and economic conditions.
All of the Group’s operations are required to purchase reinsurance within agreed local reinsurance appetite parameters. The Group Corporate Centre authorises the operations’ proposed treaty purchases to check that they at least meet the &QNTO�R�@OODSHSD��ENQ�DW@LOKD�SGD����HM�����XD@Q��RS@MC@QC�ENQ�B@S@RSQNOGD�DUDMSR �&QNTO�"NQONQ@SD�"DMSQD�@KRN�BGDBJR�SN�RDD� SG@S�SNS@K�&QNTO�DWONRTQDR�@QD�VHSGHM�SGD�KHLHSR�RDS�NTS�@ANUD�@MC�@KRN�@QD�BNMRHRSDMS�VHSG�SGD�QDPTHQDC�QHRJ�A@RDC�B@OHS@K � (M�@CCHSHNM��KNB@K�E@BTKS@SHUD�@QQ@MFDLDMSR�L@X�AD�OTQBG@RDC�VGDQD�CDDLDC�@OOQNOQH@SD
Reinsurers’ share of insurance contract liabilities – 447 1,313 172 �� 33 ����� ����� �����
Debt securities ����� ����� ����� ��� �� ��� ������ – ������
6HSG�SGD�DWBDOSHNM�NE� �Q@SDC�FNUDQMLDMS�CDAS�RDBTQHSHDR��SGD�K@QFDRS�@FFQDF@SD�BQDCHS�DWONRTQD�CNDR�MNS�DWBDDC�3% NE�SGD�&QNTO�R�SNS@K�ãM@MBH@K�@RRDSR �'NKCHMFR�NE�FNUDQMLDMS�ANMCR�HM�&QDDBD��(S@KX��(QDK@MC��2O@HM�@MC�/NQSTF@K�@QD�£129m @S����#DBDLADQ������@MC�BNLOQHRD�@QNTMC�1%�NE�SGD�SNS@K�ANMC�ONQSENKHN��������@QNTMC��í� �(M�@CCHSHNM�SN�SGHR�SGD�&QNTO� holds £164m of senior and subordinated bank debt and £111m of other corporate holdings in these countries.
Risk management continued 3GD�&QNTO�HR�DWONRDC�SN�BQDCHS�@MC�BNMBDMSQ@SHNMR�NE�QHRJ�VHSG�HMCHUHCT@K�QDHMRTQDQR��CTD�SN�SGD�M@STQD�NE�SGD�QDHMRTQ@MBD� L@QJDS�@MC�SGD�QDRSQHBSDC�Q@MFD�NE�QDHMRTQDQR�SG@S�G@UD�@BBDOS@AKD�BQDCHS�Q@SHMFR �3GD�QDHMRTQ@MBD�RSQ@SDFX�HR�SN�OTQBG@RD� QDHMRTQ@MBD�HM�SGD�LNRS�DEEDBSHUD�L@MMDQ�EQNL�QDHMRTQDQR�VGN�LDDS�SGD�&QNTO�R�RDBTQHSX�RS@MC@QCR �1DHMRTQ@MBD� counterparties are subject to a rigorous internal assessment process on an ongoing basis to ensure that their creditworthiness continues to be satisfactory and the potential impact from reinsurer default is measured regularly and managed accordingly. 3GD�&QNTO�1DHMRTQ@MBD�"QDCHS�"NLLHSSDD�NUDQRDDR�SGD�L@M@FDLDMS�NE�SGDRD�QHRJR �&QNTO�RS@MC@QCR�@QD�RDS�RTBG�SG@S� QDHMRTQDQR�SG@S�G@UD�@�ãM@MBH@K�RSQDMFSG�Q@SHMF�NE�KDRR�SG@M�� ���VHSG�2S@MC@QC�î�/NNQ�R��NQ�@�BNLO@Q@AKD�Q@SHMF��@QD�QDLNUDC� EQNL�SGD�&QNTO�R�@TSGNQHRDC�KHRS�NE�@OOQNUDC�QDHMRTQDQR�TMKDRR�SGD�&QNTO�R�HMSDQM@K�QDUHDV�CHRBNUDQR�DWBDOSHNM@K�BHQBTLRS@MBDR� HM�E@UNTQ�NE�SGD�QDHMRTQDQ �"NKK@SDQ@K�HR�S@JDM�SN�LHSHF@SD�DWONRTQDR��VGDQD�@OOQNOQH@SD��SN�@BBDOS@AKD�KDUDKR�NQ�SGD�RHYD�NQ�BQDCHS� PT@KHSX�NE�SGD�DWONRTQD � S����#DBDLADQ������SGD�&QNTO�GDKC�BNKK@SDQ@K�@F@HMRS�£165m��������`���L��NE�QDHMRTQDQR��RG@QD�NE� insurance contract liabilities.
Reinsurers’ share of insurance contract liabilities ����� – – – – 5 ����� (3)
Insurance and reinsurance debtors ����� ��� �� �� 17 – 3,174 (11)
Reinsurers’ share of insurance contract liabilities ����� – – – – � ����� ���
Insurance and reinsurance debtors ����� �� �� �� �� 1 ����� ���
S����#DBDLADQ�������SGD�&QNTO�G@C�OKDCFDC�£769m��������`���L��NE�ãM@MBH@K�@RRDSR�@R�BNKK@SDQ@K�ENQ�KH@AHKHSHDR�NQ�BNMSHMFDMS� KH@AHKHSHDR �3GD�M@STQD�NE�SGD�@RRDSR�OKDCFDC�@R�BNKK@SDQ@K�BNLOQHRDR�FNUDQMLDMS�RDBTQHSHDR�NE�£711m��������`���L���B@RG�@MC� B@RG�DPTHU@KDMSR�NE�£26m��������`��L��@MC�CDAS�RDBTQHSHDR�NE�£32m��������`��L� �3GD�SDQLR�@MC�BNMCHSHNMR�NE�SGD�BNKK@SDQ@K� pledged are market standard in relation to letter of credit facilities.
Repurchase arrangements and other similar secured borrowing ��� – ��� ����� – –
Commercial mortgage backed securities Mainly commercial mortgages in Canada �� – ��
Collateralised debt obligations Structured debt security backed by bonds ��� – ���
Cash Money Market funds Short term cash deposits ��� – ���
3GD�&QNTO�(MUDRSLDMS�"NLLHSSDD��&("���NM�ADG@KE�NE�SGD�&QNTO�!N@QC��HR�QDRONMRHAKD�ENQ�QDUHDVHMF�@MC�@OOQNUHMF�SGD� HMUDRSLDMS�RSQ@SDFX�ENQ�SGD�&QNTO�R�HMUDRSLDMS�ONQSENKHNR �(S�OQNUHCDR�@OOQNU@K�ENQ�@KK�L@INQ�BG@MFDR�NE�SGD�&QNTO�R�HMUDRSLDMS� RSQ@SDFX�@MC��HM�O@QSHBTK@Q��@OOQNUDR�@MX�RTARS@MSHUD�BG@MFDR�SN�SGD�A@K@MBD�NE�SGD�&QNTO�R�ETMCR�ADSVDDM�SGD�L@INQ�@RRDS� BK@RRDR �(LONQS@MSKX�SGD�&("�@KRN�@OOQNUDR�SGD�SDQLR�NE�QDEDQDMBD�NE�SGD�&QNTO�R�L@HM�NODQ@SHNM@K�HMUDRSLDMS�BNLLHSSDD�� SGD�&QNTO� RRDS�,@M@FDLDMS�"NLLHSSDD��& ,"� �3GD�!1"�HRRTDR�& ,"�VHSG�HMUDRSLDMS�QHRJ�KHLHSR
A number of the Group’s property holdings are Group occupied and therefore are reported within property and equipment.
3GD�&QNTO�@KRN�@OOKHDR�GDCFD�@BBNTMSHMF�SN�RODBHãDC�ãWDC�HMSDQDRS�@RRDSR�HM�HSR�HMUDRSLDMS�ONQSENKHN �#TQHMF�������SGD�&QNTO� HMUDRSDC�HM�@�ONQSENKHN�NE�GHFG�HMUDRSLDMS�FQ@CD�BNQONQ@SD�ANMCR�CDMNLHM@SDC�HM�42�CNKK@QR�SN�@KKNV�HS�SN�HMUDRS�HM�@�LNQD� CHUDQRHãDC�Q@MFD�NE�HRRTDQR �3GDRD�HMUDRSLDMSR�@QD�TRDC�SN�BNUDQ�SGD�HMRTQ@MBD�KH@AHKHSHDR�HM�SGD�4*�ATRHMDRR��(M�NQCDQ�SN�QDLNUD� DWBG@MFD�QHRJ�EQNL�SGHR�ONQSENKHN�NE�HMUDRSLDMSR�SGD�&QNTO�@KRN�@BPTHQDC�BQNRR�BTQQDMBX�HMSDQDRS�Q@SD�RV@OR�SN�RV@O�SGD� B@RGâNVR�EQNL�SGD�ONQSENKHN�HMSN�B@RGâNVR�CDMNLHM@SDC�HM�ONTMCR�RSDQKHMF �3GD�&QNTO�@OOKHDR�E@HQ�U@KTD�GDCFD�@BBNTMSHMF� VGDM�TRHMF��ãWDC�SN�âN@SHMF��HMSDQDRS�Q@SD�RV@OR�@MC�B@RGâNV�GDCFD�@BBNTMSHMF�VGDM�TRHMF��ãWDC�SN�ãWDC��HMSDQDRS�Q@SD� RV@OR �3GD�HMSDQDRS�Q@SD�RV@OR�DW@BSKX�NEERDS�SGD�SHLHMF�@MC�@LNTMSR�DWODBSDC�SN�AD�QDBDHUDC�NM�SGD�TMCDQKXHMF�HMUDRSLDMSR � 3GD�HMUDRSLDMSR�G@UD�@�QDL@HMHMF�SDQL�NE�ADSVDDM�SVN�@MC�DHFGS�XD@QR �3GDQD�G@UD�ADDM�MN�CDE@TKS�@MC�MN�CDE@TKSR�@QD� DWODBSDC�NM�SGD�GDCFDC�HMUDRSLDMSR �
3GD�SNS@K�KNRRDR�NM�SGD�E@HQ�U@KTD�GDCFD�HMRSQTLDMSR�CTQHMF������@MC�SGD�NEERDSSHMF�F@HMR�NM�SGD�GDCFDC�HMUDRSLDMSR�QDK@SDC� to the hedged risk that were recognised in the income statement totalled £11m and £8m�QDRODBSHUDKX
2DMRHSHUHSX�@M@KXRHR 3GD�&QNTO�TRDR�@�MTLADQ�NE�RDMRHSHUHSX�NQ�RSQDRR�SDRS�A@RDC�QHRJ�L@M@FDLDMS�SNNKR�SN�TMCDQRS@MC�SGD�HLO@BS�NE�SGD�@ANUD� QHRJR�NM�D@QMHMFR�@MC�B@OHS@K�HM�ANSG�MNQL@K�@MC�RSQDRRDC�BNMCHSHNMR �3GDRD�RSQDRR�SDRSR�BNLAHMD�CDSDQLHMHRSHB�RGNBJR�� analysis of historical scenarios and stochastic modelling using the internal capital model to inform the Group’s decision L@JHMF�@MC�OK@MMHMF�OQNBDRR�@MC�@KRN�ENQ�HCDMSHãB@SHNM�@MC�L@M@FDLDMS�NE�QHRJR�VHSGHM�SGD�ATRHMDRR�TMHSR
Changes in the income statement and equity: (MBQD@RD��CDBQD@RD�� in income statement
LIQUIDITY RISK +HPTHCHSX�QHRJ�HR�SGD�QHRJ�SG@S�SGD�&QNTO�L@X�AD�TM@AKD�SN�O@X�NAKHF@SHNMR�VGDM�CTD�@R�@�QDRTKS�NE�@RRDSR�MNS�ADHMF�@U@HK@AKD�HM� @�ENQL�SG@S�B@M�HLLDCH@SDKX�AD�BNMUDQSDC�HMSN�B@RG �3GD�HMUDRSLDMS�QHRJ�KHLHSR�RDS�AX�SGD�!1"�DMRTQD�SG@S�@�K@QFD�O@QS�NE�SGD� &QNTO�R�ONQSENKHN�HR�JDOS�HM�GHFGKX�KHPTHC�L@QJDS@AKD�RDBTQHSHDR�RTEãBHDMS�SN�LDDS�HSR�KH@AHKHSHDR�@R�SGDX�E@KK�CTD�A@RDC�NM�@BST@QH@K� @RRDRRLDMS�@MC�@KKNVHMF�ENQ�BNMSHMFDMBHDR �3GD�KHLHSR�@QD�LNMHSNQDC�@S�@�&QNTO�KDUDK�@R�O@QS�NE�SGD�&QNTO�1HRJ�DWONRTQD� monitoring and BRC reporting process.
Perpetual guaranteed subordinated capital securities – – 375 – – – – 375 ���
Guaranteed subordinated notes CTD����� – – – – – – ��� ��� ���
Guaranteed subordinated RSDO�TO�MNSDR�CTD����� – – – – ��� – – ��� ���
/QNUHRHNMR�ENQ�KNRRDR�@MC�KNRR� @CITRSLDMS�DWODMRDR 3,755 ����� ����� ��� ��� ����� ����� ������ �����
position 2TANQCHM@SDC�FT@Q@MSDDC�42ì�ANMCR – – – – – – �� �� ��
Guaranteed subordinated RSDO�TO�MNSDR�CTD����� – – – – – ��� – ��� ���
/QNUHRHNMR�ENQ�KNRRDR�@MC�KNRR� @CITRSLDMS�DWODMRDR ����� ����� ����� ��� ��� ����� ����� ������ ������
Direct insurance creditors ��� 1 – – – – – ��� ���
Interest on perpetual bonds and notes ��� �� �� �� �� �� 7 ���
OPERATIONAL RISK .ODQ@SHNM@K�QHRJ�HR�SGD�QHRJ�NE�CHQDBS�NQ�HMCHQDBS�KNRRDR�QDRTKSHMF�EQNL�GTL@M�E@BSNQR��DWSDQM@K�DUDMSR�@MC�HM@CDPT@SD�NQ�E@HKDC� internal processes and systems. Operational risks are inherent in the Group’s operations and are typical of any large enterprise. ,@INQ�RNTQBDR�NE�NODQ@SHNM@K�QHRJ�B@M�HMBKTCD�NODQ@SHNM@K�OQNBDRR�QDKH@AHKHSX��HMENQL@SHNM�RDBTQHSX��NTSRNTQBHMF�NE�NODQ@SHNMR�� CDODMCDMBD�NM�JDX�RTOOKHDQR��HLOKDLDMS@SHNM�NE�RSQ@SDFHB�@MC�NODQ@SHNM@K�BG@MFD��HMSDFQ@SHNM�NE�@BPTHRHSHNMR��EQ@TC��GTL@M� DQQNQ��BTRSNLDQ�RDQUHBD�PT@KHSX��HM@CDPT@BX�NE�ATRHMDRR�BNMSHMTHSX�@QQ@MFDLDMSR��QDBQTHSLDMS��SQ@HMHMF�@MC�QDSDMSHNM�NE�RS@EE�� @MC�RNBH@K�@MC�DMUHQNMLDMS@K�HLO@BSR
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REGISTERED OFFICE AND GROUP CORPORATE CENTRE 20 Fenchurch Street, London EC3M 3AU. Telephone: +44(0) 20 7111 7000. Registered in England and Wales No. 2339826.
GROUP WEBSITE The Company’s corporate website provides shareholders with a broad range of information about the Company’s heritage, RNBH@K�@MC�DMUHQNMLDMS@K�QDRONMRHAHKHSHDR�@MC�HMUDRSNQ�HMENQL@SHNM�RTBG�@R�SGD�&QNTO�R�ãM@MBH@K�RS@SDLDMSR��BTQQDMS�@MC� historic share prices, Annual General Meeting (AGM) materials, events, governance information and answers to frequently asked questions in respect of shareholder matters. Visit the investor website at www.rsagroup.com/investorrelations for further information.
6GDM�BNMS@BSHMF�$PTHMHSH��OKD@RD�PTNSD�XNTQ�RG@QDGNKCDQ�QDEDQDMBD�MTLADQ�VGHBG�B@M�AD�ENTMC�NM�XNTQ�RG@QD�BDQSHãB@SD�NQ� dividend tax voucher. Calls cost 8p per minute plus network extras. Telephone lines are open from 8.30am to 5.30pm Monday to Friday. Overseas callers should use +44(0) 121 415 7064. Shareholders with a text phone facility should use +44(0) 871 384 2255 or alternatively use the Text Relay service by dialling 18001 0121 415 7064 directly from the text phone. To securely email Equiniti with an enquiry visit
ANNUAL GENERAL MEETING Holders of the Company’s Ordinary Shares are invited to attend the Company’s 2015 AGM, which will be held at 200 Aldersgate, St Paul’s, London EC1A 4HD at 11.00am on Friday 8 May 2015.
MANAGING YOUR SHAREHOLDING (MENQL@SHNM�NM�GNV�SN�L@M@FD�XNTQ�RG@QDGNKCHMF�B@M�AD�ENTMC�@S�GSSO���GDKO RG@QDUHDV BN TJ �(E�XNT�CN�MNS�ãMC�SGD� information you require, you can send your enquiry via secure email from these pages. You will be asked to complete a form providing your name, address and shareholder reference number. If you require an email response, you will need to provide your email address.
AMALGAMATION OF ACCOUNTS Shareholders who receive duplicate sets of Company mailings owing to multiple accounts in their name may contact Equiniti to request that their accounts be amalgamated.
8NT�B@M�DKDBS�SN�QDBDHUD�DL@HK�MNSHãB@SHNMR�NE�RG@QDGNKCDQ�BNLLTMHB@SHNMR�AX�QDFHRSDQHMF�@S�VVV RG@QDUHDV BN TJ�VGDQD� you can also set up a bank mandate to receive dividends directly to your bank account and submit proxy votes for shareholder meetings. Shareholders may elect to receive a printed copy of the Annual Report and Accounts at any time by contacting Equiniti.
SCRIP DIVIDEND SCHEME The Company renewed its authority to offer a Scrip Dividend Scheme to shareholders at the 2014 AGM. The Company will MNS�AD�NEEDQHMF�@�2BQHO�#HUHCDMC�@KSDQM@SHUD�HM�QDRODBS�NE�SGD�ãM@K������.QCHM@QX�CHUHCDMC
LOW COST SHARE DEALING FACILITIES Shareholders may purchase or sell their RSA Ordinary Shares through their stockbroker, a high street bank or one of the providers detailed below: Equiniti offer a telephone and internet dealing service. Commission is currently 1.5% with a minimum charge of £50 for telephone dealing and currently 1.5% with a minimum charge of £45 for internet dealing. For telephone sales call +44(0) 845 6037 037 between 8.30am and 4.30pm, Monday to Friday. For internet sales log on to www.shareview.co.uk/ dealing. Please quote your shareholder reference number.
Stocktrade also offer a telephone dealing service. Commission is currently 0.5% on amounts up to £10,000 and 0.2% on the excess thereafter, all of which are subject to a minimum charge of £25.00. For telephone sales call +44(0) 131 240 0400 between 8.00am and 4.30pm, Monday to Friday. Please quote reference: ‘RSA Group dial and deal service’. Alternatively visit their website, www.stocktrade.co.uk.
Please note that rates quoted are as at February 2015 and may be subject to change. Please contact either provider for further guidance on their full terms and conditions.
TIPS ON PROTECTING YOUR SHARES • Keep any documentation that contains your shareholder reference number in a safe place and destroy any documentation you no longer require by shredding it
FRIDAY 14 AUGUST 2015* Record date for the ordinary interim dividend and the second preference dividend for 2015.
FRIDAY 20 NOVEMBER 2015* Payment of the ordinary interim dividend for 2015.
EãMHSX • Selling insurance through a partner’s distribution network, usually to a group of similar customers, e.g. store card holders, alumni groups, unions and utility company customers.
Claims Handling Expenses • The administrative cost of processing a claim (salary costs, costs of running claims centres, etc. and allocated RG@QD�NE�SGD�BNRSR�NE�GD@C�NEãBD�TMHSR� �-NS�SGD�BNRS�NE�SGD�BK@HL�HSRDKE
• The sum of the Claims Ratio, Expense Ratio and Commission Ratio. • Measures how much we pay out in claims and expenses for each unit of net premium received. ��� �".1�NE�KDRR�SG@M����í�HMCHB@SDR�SG@S�VD�@QD�VQHSHMF�OQNãS@AKD�ATRHMDRR • Calculated as: Net Incurred Claims + Expenses + Commissions %
Commission • An amount paid to an intermediary such as a broker for generating business.
Commission Ratio • Ratio of net commission costs to Net Earned Premiums.
• A reserve for accidents or incidents (which we have provided cover for) that have occurred but which have not yet been reported to us.
Large losses • Single claims or events with a net cost of £500k or higher.
Net Incurred Claims (NIC) • The total claims cost incurred in the period less any share to be paid by reinsurers. It includes both claims payments and movements in claims reserves in the period, as well as claims handling expenses.
• The regulatory authority with responsibility for the prudential regulation and supervision NE�SGD�4*�ãM@MBH@K�RDQUHBDR�HMCTRSQX
By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the Group’s control, including amongst other things, 4*�CNLDRSHB��$TQNYNMD�@MC�FKNA@K�DBNMNLHB�ATRHMDRR�BNMCHSHNMR��L@QJDS�QDK@SDC�QHRJR�RTBG�@R�ãTBST@SHNMR� in interest rates and exchange rates, the policies and actions of governments, central banks and regulatory authorities (including changes related to capital and solvency requirements whether in the UK, Eurozone NQ�FKNA@KKX���SGD�HLO@BS�NE�BNLODSHSHNM��HMã@SHNM��CDã@SHNM��SGD�SHLHMF�HLO@BS�@MC�NSGDQ�TMBDQS@HMSHDR�NE� future acquisitions or combinations within relevant industries, as well as the impact of tax and other KDFHRK@SHNM�NQ�QDFTK@SHNMR�HM�SGD�ITQHRCHBSHNMR�HM�VGHBG�SGD�&QNTO�@MC�HSR�@EäKH@SDR�NODQ@SD �
3GD�&QNTO�R�@BST@K�ETSTQD�äM@MBH@K�BNMCHSHNM��ODQENQL@MBD�@MC�QDRTKSR�L@X�CHEEDQ�L@SDQH@KKX�EQNL�SGD� plans, goals and expectations set forth in the Group’s 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. 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.