RSA: RSA Insurance Group Plc: Annual Financial Report

  RSA: RSA Insurance Group Plc: Annual Financial Report

UK Regulatory Announcement


                                                                  2 April 2013

                           RSA INSURANCE GROUP PLC

                               (THE “COMPANY”)


In accordance with Listing Rule 9.6 and Disclosure and Transparency Rule
(“DTR”) 4.1, the Company announces that the following documents have been
posted to shareholders and have today been submitted to the UK Listing
Authority via the National Storage Mechanism:

  *Annual Report and Accounts for the year ended 31 December 2012
  *Notice of the 2013 Annual General Meeting to be held on 15 May 2013
  *Proxy form for the 2013 Annual General Meeting

The above mentioned documents (except for the Proxy form) are available on our
website at and and will
shortly be made available for inspection at
Shareholders can obtain additional copies of the Proxy form from our
Registrar, Equiniti Limited at Aspect House, Spencer Road, Lancing, West
Sussex BN99 6DA or view online at

This announcement should be read in conjunction with the Company’s
announcement issued on 20 February 2013. Together these constitute the
material required by DTR 6.3 to be communicated to the media in full unedited
text through a Regulatory Information Service. This material is not a
substitute for reading the Company’s 2012 Annual Report and Accounts.

An indication of the important events that occurred in 2012 and their impact
on the condensed consolidated financial statements, the condensed consolidated
financial statements themselves and the responsibility statement were
announced to the London Stock Exchange on 20 February 2013, forming part of
the Preliminary Results announcement for the year ended 31 December 2012.
Additional content forming part of the management report is in the Appendix


John Mills
Deputy Group Company Secretary
RSA Insurance Group plc
Tel: +44 (0) 20 7111 7000

About RSA

With a 300-year heritage, RSA is one of the world's leading multinational
listed insurance groups. RSA has major operations in the UK, Scandinavia,
Canada, Ireland, Asia, Central & Eastern Europe, Middle East and Latin America
and has the capability to write business in around 140 countries. Focusing on
general insurance, RSA has around 23,000 employees and, in 2012, its net
written premiums stood at £8.353 million.


Visit for more information.

This press release (together with the Annual Report and Accounts referred to
herein) has been prepared in accordance with the requirements of English
company law and the liabilities of the directors in connection with this press
release (together with the Annual Report and Accounts referred to herein)
shall be subject to the limitations and restrictions provided by such law.
This press release may contain ‘forward-looking statements’ with respect to
certain of the Group’s plans and its current goals and expectations relating
to its future financial condition, performance, results, strategic initiatives
and objectives. Generally, words such as “may”, “could”, “will”, “expect”,
“intend”, “estimate”, “anticipate”, “aim”, “outlook”, “believe”, “plan”,
“seek”, “continue” or similar expressions identify forward-looking statements.
These forward-looking statements are not guarantees of future performance. 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, UK domestic and global
economic business conditions, market-related risks such as fluctuations in
interest rates and exchange rates, the policies and actions of regulatory
authorities (including changes related to capital and solvency requirements),
the impact of competition, inflation, deflation, the timing impact and other
uncertainties of future acquisitions or combinations within relevant
industries, as well as the impact of tax and other legislation or regulations
in the jurisdictions in which the Group and its affiliates operate. As a
result, the Group’s actual future financial condition, performance and results
may differ materially from the plans, goals and expectations set forth in the
Group’s forward-looking statements. The Group undertakes no obligation to
update any forward-looking statements, save in respect of any requirement
under applicable law or regulation. Nothing in this press release (together
with the Annual Report and Accounts referred to herein) should be construed as
a profit forecast.


References to page numbers and notes to the accounts made in this Appendix
refer to page numbers and notes to the accounts in the 2012 Annual Report and




We manage risk to minimise losses and take opportunities to invest
appropriately in profitable growth.

We operate under a common framework through which risk management and control
is embedded throughout the Group.

The Board is responsible for the Group’s Risk Management System and for
defining the Group’s risk appetite.

Executive management is responsible for implementing systems and controls that
manage our risk exposures in line with our risk appetite. Each Group business
is required to follow a consistent process to identify, measure, manage,
monitor and report its risks.

The Board Risk Committee ensures that material risks are identified and that
appropriate arrangements are in place to manage and mitigate those risks
effectively in line with risk appetite.


The Group risk appetite is set and monitored at a Group, regional and business
level, is reviewed annually, approved by the Board Risk Committee and signed
off at the Group Board. It sets business volumes for certain higher risk
insurance classes, stipulates loss retention limits, reinsurance protection,
targets for credit rating and solvency margins.


The Group operates a ‘three lines of defence’ model for the oversight and
management of risk as follows:

1st line – Management

  *Delivering the business plan within risk appetite
  *Accountable for implementing and using the Risk Management System
  *Embedding an appropriate risk culture.

2nd line – Risk oversight

  *Development and maintenance of a Risk Management System within which the
    Group policies and minimum standards are set
  *Oversight and challenge across the Group.

3rd line – Independent assurance

  *Providing independent and objective assurance of the effectiveness of the
    Group’s systems of internal control established by the first and second
    lines of defence.


Our policy statements set out the minimum standards to be maintained by the
Group’s operations to manage their risks in a way that is consistent with the
risk appetite.


Risks are viewed under categories that broadly correspond to those used in the
Financial Services Authority’s Prudential Sourcebook for Insurers (INSPRU) and
Senior Management Arrangements, Systems and Controls (SYSC). Additional
information is provided in the Risk Management section on page 92. Some of the
key current practices and tools for each risk category are set out overleaf
alongside our risks and uncertainties.

                                                                                                                        • Create
                                                                                                                        value for all

                                                                                                                        • Focus on
Simple                                                                                                                  insurance in
objectives                                                        our selected

                                                                                                                        • Commitment
                                                                                                                        and operating

                                                                                                                        • Strong
Clear risk                                                                                                              environment
                                                                                                                        • Tight

                                                                                                                        • Protecting
                                                                                                                        and managing
                                                                                                                        the Group’s
                                                                                                                        and controls

                                                                                                                        • Clear
Robust                                                                                                                  delegation of
governance,                                                                                                             authorities
control and                                                      
reporting                                                                                                               • Robust
                                                                                                                        lines of

                                                                                                                        • Regular and
                                                                                                                        reporting and
                                                                                                                        • Board set
                                                                                                                        ‘tone from
                                                                                                                        the top’ of

Strong                                                                                                                  engagement
                                                                                                                        • Putting the
                                                                                                                        customer at
                                                                                                                        the centre of
                                                                                                                        what we do

                                                                                                                        • High
                                                                                                                        quality and
                                                                                                                        engaged staff


During the year we have maintained our focus on risk management, strengthening
and developing our processes, controls and capabilities across the Group
through the following activities:

Organisation and Culture

  *Establishment of sub Risk Committees, strengthening our 1st Line ownership
    of risk management principles and practices and further supporting our
    Regional Risk Committees and Board Risk Committee
  *Risk management in the Group strengthened by the appointment of a Group
    Chief Risk Officer to the Executive Committee
  *Continued to promote risk informed decision making, with more explicit
    consideration of risk and reward
  *A continued evolution of our Risk Management System to ensure compliance
    with Solvency II regulatory environment.

Systems & Process

  *Continued development of the validation process across the Group, to
    provide assurance of the results, design and workings of the Internal
    Model and the adequate reflection of the Group’s risk profile
  *Extended Stress and Scenario Testing programme across all EEA legal
    entities, enabling the Group to identify potential risks and their impact,
    calibrate risk appetite, help to validate the Internal Model
  *Delivery of an Emerging Risk profile to the Board Risk Committee that
    included key themes such as:
  *Eurozone Crisis
  *Slow down of global growth engines

- Changing attitudes of regulators to harmonisation of financial services


  *We shared the strength of our risk experts around the business to develop
    excellence across the Group
  *We continue to invest in our people, in particular continuing to
    strengthen our capabilities for insurance and financial risk management
    through training, recruitment and transfer of skilled staff.

Risks                     Primary activities      Key tools for managing
                                                    • Portfolio
                                                    classification that
                                                    tracks trends and
                                                    performance of individual
                                                    insurance portfolios
                           • Pricing, acceptance
                           and management of        • Regional and Group
INSURANCE RISK             risks arising from our   Reserving Committees held
                           contracts with           to determine a
Our insurance risk         customers                recommended level of
strategy has enabled us                           outstanding claims and
to continue delivering     • Claims management      aggregate outstanding
strong insurance results   and reserving            claims reserves
through our diversified
portfolio.                 • Exposure and           • Scenario modelling that
                           accumulation             is appropriate for the
                           management.              size and complexity of
                                                    our portfolios

                                                    • Investigation of
                                                    potential emerging
                                                    insurance risks.
                                                    • Group Reinsurance
                                                    policy aligned

                                                    with strategy and
                           • Reinsurance strategy
                           and appetite             • Various modelling tools
REINSURANCE RISK           recommended to the       used to determine
                           Board by the Board       retention strategies and
Our reinsurance buying     Risk Committee           analyse the effectiveness
and management expertise                            of major treaty purchases
has allowed us to manage  • Purchase of the      
our insurance exposure     worldwide programme of   • Monitoring and control
and losses such as those   global and local         of the Group’s
arising from natural       treaties
catastrophes during 2011                            reinsurance activity
and 2012.                  • Reinsurance
                           counterparty             • Monitoring of the
                           management.              reinsurance markets

                                                    • Reinsurance
                                                    counterparties approved
                                                    by the Group Reinsurance
                                                    Credit Committee.
                                                    • Risk and control

                           • Effective and          • Key risk indicators to
                           reliable operation of    assess and manage
OPERATIONAL RISK                                    operational risk
                           • Business continuity
We have completed          and disaster recovery    • Scenario analyses to
various                                           assess operational
                           • Information security
Group-wide assessments     management               events that have occurred
to strengthen our                                   elsewhere and
operations.                • Monitoring and
                           control to prevent       potential exposure to the
                           fraud and human error.   Group

                                                    • Incident management,
                                                    near misses and loss
                           • Investment strategy    • Controls to ensure that
                           and portfolio            exposure

                           management               is managed within risk
                           • Risk analysis using
CREDIT , MARKET            a range of techniques    • Monitoring of exposure
                                                    against limits set out in
& LIQUIDITY RISK           • Treasury activities    the investment limits
                           such as Group            framework
We continue to            liquidity and hedge    
proactively manage our     effectiveness            • Portfolio analytics
financial risks during
the challenging economic   • Scenario and Stress    • Requirements to
climate.                   Testing                  maintain a minimum

                           • Group Financial Risk   level of cash or highly
                           policies aligned with    liquid assets
                           strategy and appetite
                                                    • Committees overseeing
                           • Counterparty credit    the Group’s investment
                           assessments.             strategy and risk limits.
                                                    • Active engagement with
                           • Ensuring compliance    regulators
                           in all geographical
                           locations, with          • Close monitoring of
REGULATORY RISK            diverse regulatory       regulatory requirements
Responding to demanding                             • Compliance framework
and more intrusive        • Response to           with consistent
regulatory environment     regulatory changes.
across the Group to                                 monitoring methodology
ensure compliance and      • Continued
safeguard our business.    preparations for the     • Monthly reporting of
                           implementation of        significant regulatory
                           Solvency II.             developments and
                                                    mitigation of emerging

Risks               Potential impact         Mitigation
                                               • Action taken to mitigate
                                               falling yields include
                                               increasing holdings in non
                                               government bonds, property
                                               exposures and bond duration
                     • Impact on investment
                     portfolio and             • Retain focus on high
                     investment income due     quality, low risk investment
PROLONGED ECONOMIC  to lower interest rates  strategy
DOWN TURN            and market volatility
                                               • Asset Liability Matching
                     • Insufficient capital    and cash flow management
                                               • Delivery of key operational

                                               • Internal and external
                                               dividend policy.
                                               • Diversified portfolio

                                               • Each portfolio has a rate
                                               plan which is regularly
                     • Inability to charge
                     adequate rates places     • Focus on underwriting and
RATING ENVIRONMENT  downward pressure on     profitable growth
                     operating results.
                                               • Actively shift capacity to
                                               where we see the best returns

                                               • Continue to invest in
                                               technical skills, sales and
                                               marketing capabilities.
                                               • Underwriting strategy set
                                               to ensure risks written are
                                               well diversified and within
                                               risk appetite

                                               • Regular portfolio reviews
                                               to monitor underwriting

                     • Catastrophic losses     • Emerging trends in large
                     arising from insurance    losses, frequency and
                     events                    severity are investigated and
                                               corrective action taken
ADVERSE LOSS        • Increasing frequency  
EXPERIENCE           and severity of large     • Reinsurance programmes
                     losses                    limit net losses

                     • Deterioration in long   • Conservative reserving
                     tail reserves.            policy ensuring that claims
                                               reserves will be more likely
                                               than not to result in
                                               positive prior year

                                               • Exposure and accumulation
                                               management tools to monitor
                                               and control exposures in
                                               higher risk areas.
                                               • The Group operates under a
                                               clear risk appetite set by
                                               the Board which is monitored
                                               at Group and regional level

                                               • Underwriters are licensed
                                               only to write risks within
                                               specified limits based on
                                               their own experience

                                               • Reviews assess each
                                               portfolio against key
INSURANCE RISKS      • Adverse impact on       performance and risk
OUTSIDE GROUP’S     operating results due    indicators. Portfolios that
RISK APPETITE        to increased volatility   trigger key risk indicators
                                               are investigated. Corrective
                                               measures are implemented
                                               where required

                                               • Diversified portfolio
                                               providing exposure to markets
                                               at different levels of
                                               development and insurance

                                               • Maintain focus on
                                               underwriting discipline and
                                               targeted profitable growth.



RSA Insurance Group plc (incorporated in England and Wales) is the ultimate
Parent Company of the RSA Group of companies.

The following transactions were carried out with related parties:

Provision of services and benefits

RSA Insurance Group plc provides services and benefits to its subsidiary
companies operating within the UK and overseas as follows:

  *Provision of technical support in relation to risk management, information
    technology and reinsurance services. Services are charged for annually on
    a cost plus basis, allowing for a margin of 5% (2011: 5%)
  *Issue of share options and share awards to employees of subsidiaries.
    Costs are charged for annually, based on the underlying value of the
    awards granted calculated in accordance with the guidance set out within
    IFRS 2.

                                                                2012      2011
                                                              £m        £m
Salaries and
other short                                                                                                          6              7
term employee
Bonus                                                                                                                3              3
Pension                                                                                                              1              1
based                                                          (1)       2
Total                                                          9         13

There are no employees with employment contracts with the Company. All
employees are employed by subsidiary companies.

A number of the Directors, other key managers, their close families and
entities under their control have general insurance policies with subsidiary
companies of the Group. Such policies are on normal and commercial terms
except that executive directors and key managers are entitled to special rates
which are also available to other members of staff.

As at 31 December 2012, there are interest free loans totalling £5,000 (2011:
£10,000) outstanding to members of the key management team under standard
terms of the Group’s UK Car Ownership Scheme, which is open to all UK managers
within a qualifying salary band.


RSA Insurance Group Plc
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