Market Line

RSA Insurance Group plc

Company Profile

Publication Date: 10 Aug 2010

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Asia PacificAmericasEurope, Middle East & AfricaLevel 46245 5th Avenue119 Farringdon Road2 Park Street4th FloorLondonSydney, NSW 2000New York, NY 10016EC1R 3DAAustraliaUSAUnited Kingdom

t: +61 2 8705 6900t: +1 212 686 7400t: +44 20 7551 9000f: +61 2 8088 7405f: +1 212 686 2626f: +44 20 7551 9090e: [email protected]: [email protected]: [email protected]

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RSA Insurance Group plc Page 2© Datamonitor

RSA Insurance Group plc

TABLE OF CONTENTS

Company Overview..............................................................................................4

Key Facts...............................................................................................................4

Business Description...........................................................................................5

History...................................................................................................................6

Key Employees.....................................................................................................9

Key Employee Biographies................................................................................10

Major Products and Services............................................................................15

Revenue Analysis...............................................................................................16

SWOT Analysis...................................................................................................17

Top Competitors.................................................................................................22

Company View.....................................................................................................23

Locations and Subsidiaries...............................................................................25


RSA Insurance Group plcTABLE OF CONTENTS

COMPANY OVERVIEW

RSA insurance Group (RSA or ‘the group’), formerly known as Royal & Sun Alliance InsuranceGroup is a leading insurance group in the UK. The group also offers complementary businessessuch as risk management services including claims management and loss control services, whichsupport its insurance operations. The group operates in 28 countries and provides its services inover 130 countries. It is headquartered in London, the UK and employs 22,686 people.

The group recorded revenues of £7,458 million ($11,879.1 million) in the financial year (FY) endedDecember 2009, an increase of 4.4% over FY2008. The operating profit of the group was £554million ($882.4 million) in FY2009, a decrease of 27% over FY2008. The net profit was £418 million($665.8 million) in FY2009, a decrease of 27.2% over FY2008.

KEY FACTS

RSA Insurance Group plcHead OfficeRoyal & Sun Alliance Insurance Group9th FloorOne Plantation Place30 Fenchurch StreetLondon EC3M 3BDGBR

44 20 7111 7000Phone

44 20 7569 6639Fax

http://www.royalsunalliance.comWeb Address

7,458.0Revenue / turnover(GBP Mn)

DecemberFinancial Year End

22,686Employees

RSALondon Ticker


RSA Insurance Group plcCompany Overview

BUSINESS DESCRIPTION

RSA Group is one of the largest property and casualty insurance providers in the UK. The groupwas formed as result of the merger between Royal Insurance Holdings and Sun Alliance Group in1996. RSA offers a range of property and casualty insurance products to commercial and personalinsurance customers.The group also offers complementary businesses which support its insuranceoperations, such as risk management services including claims management and loss controlservices. The group primarily operates in the UK, the Scandinavia region and Canada. It operatesin over 28 countries and covering risks in over 130 countries. It markets its products through multiplechannels, including brokers, other intermediaries, corporate partnerships and affinity groups, as wellas directly to customers.

The group has organized its operations primarily on the basis of their geographical presence. It hasthree divisions: UK, International and Emerging markets.

The UK segment encompasses the group's commercial and personal insurance operations in theUK. The UK commercial business primarily writes property, motor, liability and selective specialtyproducts in the UK region.The group's UK personal insurance provides household, motor and travelinsurance.

The group's international business comprises operations in Scandinavia (Sweden, Denmark, Norwayand Finland), Canada, Ireland and Italy. RSA provides a range of personal insurance including:motor, household, personal accident and travel and commercial insurance such as property, marineand liability insurance.

The group’s emerging markets segment includes its operations in Latin America, Asia and the MiddleEast, and Central and Eastern Europe.


RSA Insurance Group plcBusiness Description

HISTORY

Royal & SunAlliance was created in 1996 with the merger of two of the UK's largest insurancecompanies, Royal Insurance and Sun Alliance.

RSA made three large acquisitions in 1999, Orion Capital in the US, Trygg-Hansa of Sweden andTyndall Asset Management in Australia.

RSA sold its Canadian life operations in the year 2000 to Maritime Life Assurance Company and itsinsurance intermediary, Swinton. In addition, the group sold its Spanish subsidiaries in 2001 toLiberty Mutual of Boston, based in the US.

The group established a partnership with AMP in the year 2001 for tapping the general insurancebusiness in New Zealand, which involved RSA purchasing AMP's New Zealand general insurancebusinesses, including GIO New Zealand and its share in the Automobile Association joint ventureAA Insurance.

In 2002, RSA sold its German subsidiary along with its subsidiaries Securitas Bremer AllgemeineVersicherungs and Securitas Gilde Lebensversicherung, to the Baoloise Group of Switzerland. Thegroup also sold its risk business to Canada Life.

During 2003, the group focused on becoming a smaller and more focused general insurer.Subsequently RSA contracted operations in Australia, New Zealand, the UK and the US. RSA alsomade a deal during the year, with Travelers Indemnity, for the renewal rights on its standard personallines and the majority of its commercial lines business in the US.

Due to these changes, the group decided to change its internal structure by grouping all of itsbusinesses outside the UK, US and Scandinavia into a new international segment. The groupexpected the number of countries within the international segment to reduce as it refocused itsportfolio.

Meanwhile in Chile, RSA disposed La Construccion, its Chilean life insurance operation.

In 2004, the group made a series of divestments principally within its international segment. Theyear also saw the group sell its general and life insurance interests in Peru to Rimac InternationalCompania de Seguros y Reaseguros (Rimac). The group also sold its 14.6% stake in Rimac. Thetotal consideration was around £12 million.

RSA also sold its 40% shareholding in Federal Phoenix Assurance Company of the Philippines.Theshares were repurchased by Federal Phoenix. The group sold its UK life operations to ResolutionLife Group, for a consideration of £850 million, comprising of £750 million in cash and £100 millionin preference shares.


RSA Insurance Group plcHistory

Following that the group sold the life and pension operations of Codan, its 71.7% subsidiary, to SEBTrygg Liv. RSA's share of the consideration was approximately £173 million payable in cash. Thetransaction is in line with the group's strategy of focusing on general insurance and releasing capitalfrom its life businesses and is another step in its transformation program. Together with the disposalof its UK life operations, this completed the group's exit from the life industry. 2004 also saw RSAsell its Pakistan operations to International General Insurance Company of Pakistan. A month later,the group sold the business of its branch operations in Japan to American Home Assurance Companyand AIU Insurance Company, both member companies of American International Group (AIG).

In 2005, RSA continued to wind down its loss making US operations. In Hong Kong, RSA sold its20% interest in NM Rothschild to the Hong Kong-based trading house Jardine Matheson. In Canada,RSA through its subsidiary Johnson acquired the commercial rights to the business of MorgexInsurance Group, a leading insurance broker in Alberta, Canada.

The group also acquired Chile's leading general insurance business Compania de Seguros GeneralesCruz del Sur and its Argentinean sister company La Republica Companía Argentina de SegurosGeneralesin.The combination of Cruz del Sur and RSA created Chile's number one general insurancecompany with over 20% share in the regional market.

In 2006, it acquired Martello Underwriting Limited, a specialist provider of professional indemnityinsurance which is expected to generate premiums of around £40 million in 2007.The group acquiredWhite Label Holding and Duborgh Skadeforsikring in Norway. These gave the Group exposure tothe SME market in Norway and access to new customer segments in Scandinavia. In PersonalIntermediated, it signed 11 new distribution agreements, including Paymentshield, the UK's largestindependent supplier of mortgage related insurance. This deal is expected to generate premiumsof over £200 million in 2008. In line with its strategy of targeting specific segments, the group acquiredEGI Holdings Ltd in Ireland during the year. This established business, with strong positions inselected liability and motor lines, extends its range of expertise and product offerings. In 2006 itdisposed off its US operations to Arrowpoint Capital Corp.The disposal achieves the Group's objectiveof bringing certainty and finality to its exposure to the US operation. In 2007, Royal & Sun AllianceInsurance Group plc's subsidiary, RSA Overseas Holdings ("R&SA"), launched a voluntary conditionalpublic tender offer for the acquisition of all the outstanding issued shares in Codan A/S. R&SA nowholds 97% of the issued shares and of Codan excluding the 2,212,825 (4.89%) treasury sharesalready held by Codan.

RSA signed an agreement to acquire 50% of GD II - Global Direct Insurance Investments (GDI), ajoint venture between RSA and Direct Insurance Financial Investments (DIFI) in 2007.The acquisitionwould give RSA access to the fast growing Eastern European and Russian insurance markets.

RSA, has obtained permission to transfer its Chinese business into a subsidiary. The subsidiarylicense and subsequent branch approval will enable R&SA to build its capabilities, develop anationwide network and provide insurance solutions to local, joint venture and foreign clients in thesame year. In 2007, RSA acquired Canadian Northern Shield Insurance Company (CNS) forapproximately C$75m (£37m) to be paid in cash.



In the first quarter of 2008, RSA acquired Fyfe Group a UK retail and wholesale intermediaryspecializing in motor trade products for small businesses. Two months later, the group acquiredSertus Underwriting Limited in Ireland.

The group changed its name from Royal & Sun Alliance Insurance Group to RSA Insurance Groupfollowing shareholder approval at the annual general meeting in the second quarter of 2008.

In the fourth quarter of 2008, RSA's global renewable energy division launched 'Centres of Excellence'in UK, Canada and Denmark. The group entered into a sale and purchase agreement with DirectInsurance Financial Investments to acquire DIFI's 50% holding in Intouch Insurance Group for E70million in cash in March 2009.

RSA acquired Benchmark Underwriting Limited in Ireland, in April 2009. The group completed theacquisition of Intouch Insurance Group, in June 2009.

In January 2010, RSA acquired 80.8% of Sveland Sakförsäkring AB (Sveland P&C Ltd) in Sweden.In February 2010, the group announced the acquisition of Al Ahlia Insurance Company SAOC, thethird largest insurer in Oman in 2008. RSA announced the acquisition of 123 Money Limited (123.ie)in July 2010. 123 Money Limited is one of the leading and fastest growing direct distributors ofpersonal lines insurance products in Ireland.



KEY EMPLOYEES

CompensationBoardJob TitleName

2329000 GBPExecutive BoardChief Executive OfficerAndy Haste

1261000 GBPExecutive BoardChief Financial OfficerGeorge Culmer

1009000 GBPExecutive BoardChief Executive, InternationalBusinesses

Simon Lee

Executive BoardUK Chief ExecutiveAdrian Brown

400000 GBPNon Executive BoardChairmanJohn Napier

68000 GBPNon Executive BoardDirectorEdward Lea

57000 GBPNon Executive BoardDirectorNoel Harwerth

60000 GBPNon Executive BoardDirectorMalcolm Le May

60000 GBPNon Executive BoardDirectorJohn Maxwell

53000 GBPNon Executive BoardDirectorJohanna Waterous

Senior ManagementCEO of Emerging MarketsPaul Whittaker

Senior ManagementGeneral Counsel and GroupCompany Secretary

Mark Chambers

Senior ManagementHuman Resources DirectorOrlagh Hunt

Senior ManagementGroup Strategy, Marketing andCustomer Director

Clare Sheikh

Senior ManagementGroup Operations and IT DirectorDavid Weymouth

Senior ManagementGroup Underwriting and ClaimsDirector

Timothy Mitchell

Senior ManagementGroup Chief AuditorAnne Jæger


RSA Insurance Group plcKey Employees

KEY EMPLOYEE BIOGRAPHIES

Andy Haste

Board: Executive BoardJob Title: Chief Executive OfficerSince: 2003Age: 48

Mr. Haste has been the Group Chief Executive at RSA since 2003. He was previously the ChiefExecutive of AXA Sun Life and director of AXA UK (life and pensions). He is the former Presidentand Chief Executive Officer of Global Consumer Finance Europe at GE Capital UK, Western Europeand Eastern Europe (financial services), and is the former President of National Westminster Bank'sUS Consumer Credit Business.

George Culmer

Board: Executive BoardJob Title: Chief Financial OfficerSince: 2004Age: 47

Mr. Culmer has been the Chief Financial Officer and Group Director at RSA since 2004. He waspreviously Head of Capital Management at Zurich Financial Services and Chief Financial Officer ofits UK operation. Prior to that he was with Prudential for 10 years.

Simon Lee

Board: Executive BoardJob Title: Chief Executive, International BusinessesSince: 2003Age: 48

Mr. Lee has been a Director at RSA since 2007. He has been the Chief Executive of RSA'sInternational business since 2003. Previously he spent 17 years with the National Westminster BankGroup, in the UK and US including time as Chief Executive, NatWest Offshore and Head of USRetail Banking.

Adrian Brown

Board: Executive BoardJob Title: UK Chief Executive


RSA Insurance Group plcKey Employee Biographies

Since: 2008

Mr. Adrian Brown has been the UK Chief Executive of RSA since 2008. Between 2006 and 2008,he was the UK's Chief Operating Officer with responsibility for Claims, Sales and Service, IT andChange across both Personal and Commercial lines. Prior to this, he was UK Director of PersonalLines, led the launch of MORE TH>N and held a number of senior customer service and financeroles.

John Napier

Board: Non Executive BoardJob Title: ChairmanSince: 2003Age: 67

Mr. Napier has been the Chairman at RSA since 2003. He is also the Non Executive Chairman ofKelda Group (water utility), having previously been Executive Chairman and Chief Executive. Hisprevious executive roles include Chairman of Booker, Managing Director of Hays and ManagingDirector of AGB (market research and information services).

Edward Lea

Board: Non Executive BoardJob Title: DirectorSince: 2003Age: 68

Mr. Lea has been a Director at RSA since 2003, and is also Chairman of the Audit & ComplianceCommittee since 2003. His other executive roles include directorships for Redbourn Group (propertymanagement and investment), IDC Plugs Limited (electrical services), MacIntyre Care (charity). Hewas previously a Director of The British United Provident Association (BUPA).

Noel Harwerth


Ms. Harwerth has been a Director at RSA since 2004. She is also a Director of Tube Lines Limited,Metronet Rail BCV Limited and Metronet SSL Limited, and Deputy Chairman of Sumitomo MitsuiBanking Corporation Europe Limited. She was also the Chief Operating Officer at CitibankInternational.



Malcolm Le May


Mr. May has been a Director at RSA since 2004, and is also the European President of JER PartnersLimited (property investment). Previous executive roles include Deputy Chief Executive of MorleyFund Management and Deputy Chief Executive Officer of ING-Barings.

John Maxwell


Mr. Maxwell has been a Director at RSA since 2003 and has been the Chairman of the RemunerationCommittee since October 2003. Previous roles include chairman of DX Services (trucking), Directorof Provident Financial and director of Homeserve (electric utilities). He is also governor of the RoyalBallet School and chairman of the Institute of Advanced Motorists. He was formerly executive directorof Prudential Group and was also the Director General of the AA.

Johanna Waterous


Ms. Waterous has been a Director at RSA since 2008. Previously, she spent over 20 years withMcKinsey & Company, with roles including Co-leader, Global Marketing and Sales Practice andLeader of their UK Consumer Practice and the European Retail Practice. Ms. Waterous is currentlya specialist advisor to Candover Partners, Chairman of Britt Lintner , a luxury fashion brand, and anOperating Executive with Tri-Artisan Partners, a privately led merchant bank. She is also a nonexecutive director of the Kew Foundation and trustee of the English National Opera. She waspreviously the Chairman of Tate Enterprises.

Paul Whittaker

Board: Senior ManagementJob Title: CEO of Emerging Markets



Mr. Whittaker has been the CEO of Emerging Markets since 2006. Prior to this appointment, he wasRSA's Group HR Director since 2003. He has over 15 years senior management experience in thefinancial services sector including three years at AXA and 10 years at GE Capital.

Mark Chambers

Board: Senior ManagementJob Title: General Counsel and Group Company SecretarySince: 2004

Mr. Chambers has been the General Counsel and Group Company Secretary at RSA since 2004.Prior to joining the Group, Mr. Chambers led the legal team at American Express for Europe, MiddleEast and Africa. Before that he worked for GE holding a number of senior positions with the consumerfinance and insurance businesses. He was Company Secretary of GE Capital Bank and GE's UKregulated insurance companies. Before moving in-house, Mr. Chambers worked for Slaughter andMay, a leading international law firm, in London and New York. Mr. Chambers is a non-executivedirector of the University of Westminster.

Orlagh Hunt

Board: Senior ManagementJob Title: Human Resources DirectorSince: 2006

Ms. Hunt has been the Group Human Resources Director at RSA since 2006. She joined the Groupas HR Director for International in 2003. Ms. Hunt was previously Head of Human Resources forAXA Sun Life and has previously worked at Walkers and Tesco in a variety of HR managementroles.

Clare Sheikh

Board: Senior ManagementJob Title: Group Strategy, Marketing and Customer DirectorSince: 2007

Ms. Sheikh has been the Group Strategy, Marketing and Customer Director of RSA since 2007.Previously she was Director of Marketing & Commercial Strategy at ITV Plc and a Member of theExecutive Management Board. Ms. Sheikh is also the former Managing Director of AA FinancialServices. She is also a Non-Executive Director of Alliance Trust plc.

David Weymouth

Board: Senior Management



Job Title: Group Operations and IT Director

Mr. Weymouth is the Group Operations and IT Director of RSA. He worked with the Barclays Groupfor 27 years. At Barclays, he held several senior positions including Chief Operating Officer forCorporate Banking and Group Chief Information Officer.

Timothy Mitchell

Board: Senior ManagementJob Title: Group Underwriting and Claims DirectorSince: 2007

Mr. Mitchell has been the Group Underwriting and Claims Director at RSA since 2007. Mr. Mitchellhas over thirty years experience in the insurance industry and joined RSA from Zurich FinancialServices where he held senior underwriting roles including three years as Global Chief UnderwritingOfficer for General Insurance. Mr. Mitchell has also held senior management roles at AIG andContinental Insurance.

Anne Jæger

Board: Senior ManagementJob Title: Group Chief AuditorSince: 2008

Ms. Anne has been the Group Chief Auditor of RSA since 2007. Prior to that she was Regional ChiefAuditor, International, based in Denmark. She was part of the Codan Group Executive leadershipteam and the International Central Leadership team.



MAJOR PRODUCTS AND SERVICES

Royal & Sun Alliance Insurance Group is one of the world's leading multinational insurance groups. Its focus is general (property and casualty) insurance.

The group offers the following products and services:

Personal Products:

VehicleHouseholdTravelPetHealthLiabilityPropertyProfessional Financial

Commercial insurance:

Small BusinessCorporate Marine Engineering Motability Liability Property Professional Financial

Investment products:

Individual products Pooled products ISAS

Brands:

Trygg-HansaMORE TH>NJohnsons


RSA Insurance Group plcMajor Products and Services

REVENUE ANALYSIS

The group recorded revenues of £7,458 million ($11,879.1 million) in the financial year (FY) endedDecember 2009, an increase of 4.4% over FY2008. For FY2009, the UK, the group's largestgeographic market, accounted for 39.1% of the total revenues.

RSA generates revenues through three business divisions: international (43.7% of the total revenuesin FY2009), the UK (35.4%) and emerging markets (11.2%).

Revenue by Division

In FY2009, international division recorded revenues of £3,249 million ($5,175 million), an increaseof 8.4% over FY2008.

The UK division recorded revenues of £2,632 million ($4,192.2 million) in FY2009, a decrease of2.9% over FY2008.

The emerging markets division recorded revenues of £833 million ($1,326.8 million) in FY2009, anincrease of 12.9% over FY2008.

Revenues by Geography

The UK, RSA's largest geographical market, accounted for 39.1% of the total revenues in FY2009.Revenues from the UK reached £2,632 million ($4,192.2 million) in FY2009, a decrease of 2.9%over FY2009.

Scandinavia accounted for 24.8% of the total revenues in FY2009. Revenues from Scandinaviareached £1,669 million ($2,658.4 million) in FY2009, an increase of 4.2% over FY2009.

Canada accounted for 15.2% of the total revenues in FY2009. Revenues from Canada reached£1,021 million ($1,626.2 million) in FY2009, an increase of 15.5% over FY2009.

Other accounted for 12.7% of the total revenues in FY2009. Revenues from Other reached £856million ($1,363.4 million) in FY2009, an increase of 13.7% over FY2009.

Other Europe accounted for 8.3% of the total revenues in FY2009. Revenues from Other Europereached £559 million ($890.4 million) in FY2009, an increase of 9.2% over FY2009.


RSA Insurance Group plcRevenue Analysis

SWOT ANALYSIS

RSA has a strong market position in its core market, the UK. RSA is the largest commercial insurerin the UK. The group writes property, motor, liability and marine insurance. The group’s propertyinsurance business insures about 80% of FTSE 100 retailers and is one of the leading carriers ofprofessional and financial and marine risks outside of Lloyd’s of London. RSA’s personal businessis ranked third largest in the UK. The group’s strong market position in the UK gives it significantbargaining power. However, the group is threatened by weakening economic prospects, risinginsurance frauds in the UK, and increasing competition which could increase RSA’s claim losses,and pull down its profit margins.

WeaknessesStrengths

Property-casualty cycle concernsLeading market positions across keymarkets Weakening combined ratio in some key

segmentsStrong capital surplus and liquidityInvestments in high rated securitiesensuring lesser volatility in returns

ThreatsOpportunities

Increasing incidence of natural disastersmay increase premiums paid to reinsurers

Global Renewable Energy business wouldincrease revenues

Mounting insurance frauds would dentprofitability

Growth opportunities in Russia and EasternEurope

Solvency II adoption likely to increasecompetition for capital

Growing commercial general insurancemarket in UK

Strengths

Leading market positions across key markets

RSA owns leading market positions across its key markets. It is the number 1 in Chile, and thelargest private insurer in Uruguay.The group owns 100% of Intouch, the leading Direct Motor insurerin Poland, the Czech Republic and Russia. It is a leading provider of Household insurance, coveringone in every five Irish homes. RSA is a leading Marine insurer in Brazil. The group is the number 1general insurer across the Baltic. It is the 2nd largest Commercial and the 4th largest Personalinsurer in the UK. RSA is the 3rd largest insurer in Denmark and Sweden through Codan andTrygg-Hansa respectively. In Canada, it is 5th largest overall, the largest Marine insurer and, throughits Johnson operation, a leading direct insurer. The group's leading market positions across keymarkets sustain its business momentum.


RSA Insurance Group plcSWOT Analysis

Strong capital surplus and liquidity

RSA’s capital surplus and liquidity positions have improved over the years. The group’s capitalsurplus rose to 2.4 times the mandatory levels in 2009 from 1.3 times the mandatory levels in 2006.RSA holds significant regulatory and economic capital surpluses, as well as sufficient capital tosustain its growth momentum. At end 2009, the group’s shareholders’ funds were £3.5 billion,compared to £3.8 billion at end 2008. However, adjusted shareholders’ funds rose to nearly £3.8billion at end 2009, compared to £3.5 billion at end 2008.The group’s financing and liquidity positionalso remains strong. The next call on any external financing is on the £450 million subordinatedguaranteed perpetual bonds in December 2014 and its committed £455 million senior facility remainsundrawn. New subordinated guaranteed Sterling dated notes were issued on 20 May 2009. RSA’smore than adequate capital surplus and liquidity should help it sustain its business at least in thenear to medium term.

Investments in high rated securities ensuring lesser volatility in returns

RSA’s investment portfolio is conservative. At the end of 2009, 80% of its investments were in bonds,7% each were in cash and equities, 3% each in property and other assets. Credit quality of thegroup’s bond portfolio is also strong. 64% of the group’s bond portfolio is AAA rated, while another16% each were rated AA and A. Below investment grade accounted for just 1%. Consequently, thegroup’s insurer financial strength is rated A by S&P, and AM Best. Due to its conservative investmentportfolio, volatility in RSA’s investment returns has been lower than most of its peers. Conservativeinvestment portfolio is thus contributing to its financial strength and performance.

Weaknesses

Property-casualty cycle concerns

RSA began to focus purely on property-casualty after the sale of its life business in the early 2000s.However, it appears that this structural change might prove a costly miss in the short to mediumterm for the group. In the UK, the old age population is rapidly growing and has more than trebledas a percentage of the total population over the last century. Long-term healthcare spending in theUK is likely to rise by around 315% in real terms between 2000 and 2051, to meet demographicpressures. This would result in higher spending by the older population in the UK. Since the grouphas no presence in the life and pensions segment, it might lose out completely on this opportunity,whereas its competitors such as Aviva and Allianz which are much more diversified can takeadvantage of the situation.

Weakening combined ratio in some key segments

RSA’s combined ratio has been deteriorating at some of its markets for the last few years. Combinedratio is the sum of two ratios, expense ratio and loss ratio. Loss ratio is calculated by dividing incurredlosses plus loss adjustment expenses by earned premiums, and expense ratio is calculated by



dividing all other expenses by written premiums. A combined ratio below 100% is indicative of anunderwriting profit. On the other hand a COR above 100% indicates an underwriting loss. In UK,the group’s combined ratio deteriorated from 92.3% in 2006 to 98% in 2009. In Emerging markets,the group’s combined ratio deteriorated from 93.3% in 2006 to 94.6% in 2009. Combined ratio ofinternational markets segment also developed unfavorably in 2009. Continued weakening in combinedratio metric is an indication of weak underwriting profit management.

Opportunities

Global Renewable Energy business would increase revenues

RSA has launched a global renewable energy division to provide global insurance solutions for therenewable energy market in May 2007. RSA has been one of the leaders in the renewables sectorfor over 25 years providing solutions for wind energy, solar, hydro, biomass and waste to energybusinesses and projects.The renewable energy sector has become an attractive investment avenueas many Governments are focusing on setting big targets to combat greenhouse gas emissions.This has reinstated the importance of renewable energy as a viable source of the world's power.Wind energy was the first product being launched through the new unit. RSA has over 25 yearsspecific wind energy experience and provides cover for a broad range of clients includingmanufacturers, developers, contractors, operators and finance companies.The company offers bothon-shore and off-shore cover and is the largest insurer of wind turbines in Scandinavia as well ashaving the fastest growing wind energy insurance offering in the Canadian market. The groupenhanced the global renewable energy division by launching 'Centres of Excellence' in the UK,Canada and Denmark, which will support 20 renewable energy teams around the world. Acting asglobal hubs to regional development teams, the centres provide underwriting, claims and riskmanagement support and provide a one-stop insurance solution for clients. The European Unionhas set targets for 20% of the EU's total energy supply to come from renewables by 2020, up from6.5% in 2006. RSA can leverage this opportunity as the insurance market for wind energy expectedto be worth over £1billion by 2015.

Growth opportunities in Russia and Eastern Europe

There exist opportunities for growth across emerging markets. RSA signed an agreement, in June2007, to acquire 50% of GD II - Global Direct Insurance Investments (GDI), to access the fast growingEastern European and Russian insurance markets.The joint venture will accelerate delivery of directpersonal lines products in the emerging markets of Russia and Eastern Europe. RSA intends toleverage GDI's experience in Poland. GDI's main operation Link4, Poland's leading direct motorinsurer, has grown rapidly writing motor and household business by phone and internet since itsestablishment in 2003. In 2007, Link4 recorded a 38% growth in its premiums reaching £47m, wellahead of the market. The joint venture intends to replicate this successful Polish direct model inother attractive markets in Russia and Eastern Europe. GDI recently launched DIRECT Pojistovna,a direct insurance operation in the Czech Republic and expects to start writing direct business inRussia in 2008. This joint venture provided RSA a strong platform to lead the development of theEastern European direct market. In consistent with RSA's emerging markets' strategy RSA is planning



to replicate Link4's successful model in Russia and the Czech Republic. The GDI acquisition givesRSA a strong platform to tap opportunities in the Eastern European direct market.

Growing commercial general insurance market in UK

The commercial insurance market in the UK is expected to grow in the short to medium term. Thetotal commercial market will grow at a steady pace driven largely by the commercial liability sector,while group accident and health and commercial pecuniary loss are set to see steadier growth. Thecommercial liability market and the commercial pecuniary loss market are forecast to see the fastestgrowth between 2006 and 2011.The total commercial general insurance market is expected to growfrom £15.1 billion in 2006 to £20.4 billion in 2011, representing a compound annual growth of 6.2%.Leading this growth will be the general liability sector that is forecast to grow by 9.1% year on acompound basis.The commercial pecuniary loss sector is also forecast to experience strong growth.The group accident and health market is expected to achieve a compound annual growth rate of4.8% between 2006 and 2011. Growth is expected to be slower in 2008, but will gradually increaseto around 5% by 2010. In liability market conditions are expected to improve in 2008, with premiumincreases of between 10% and 15% forecast. A similar positive rating environment is forecast for2009 and 2010, in line with historical trends for the length of the recovery period following a periodof decreases. In compound annual growth rate terms, general liability GWP is forecast to increaseby 9.1% between 2006 and 2011. The commercial property market is seeing price competition,however it is expected to turn in 2008 and reach a value of £5.5 billion by 2011. The commercialpecuniary loss market is expected to grow by 10% between 2006 and 2011 on a compound annualbasis. Given this growth rate, the market would be worth £1.7 billion in 2011. RSA can capitalize onthis trend and record a robust top-line growth in the UK.

Threats

Increasing incidence of natural disasters may increase premiums paid to reinsurers

The first half of 2010 was marked by an exceptionally large number of natural catastrophes and thescale of the losses they caused. From January until the end of June, 440 events were registered,the second highest figure for this period since 2000, and overall losses of $70 billion were recorded.This figure already exceeds the total for 2009 as a whole and is well above the first-half average forthe past ten years. Insured losses were $22 billion, more than double the first-half average since2000 and even higher than the figure for 2008, when the previous record for first-half losses wasset.There is general consensus that major climate changes are likely to occur in the coming decadesand insurance companies face a trend towards higher losses as population densities continue togrow in catastrophe-prone areas. Increasing incidence of natural disasters may lead to an increasein premiums paid to reinsurers, and thus affect underwriting profitability.

Mounting insurance frauds would dent profitability



Insurance frauds are on a rise in the UK.The insurance fraud, on an average costs the UK economyan estimated £14 billion - £20 billion each year, and the numbers have been showing a rising trend.These costs are further recouped from customers. The companies across the world have not beenable to combat the problem of exaggerated claims and other kinds of insurance frauds, which in turnare adding inflating costs for the ordinary policyholders. Frauds cost the industry £1.5 billion in 2005as per Association of British Insurers (ABI) estimates. The Insurance Fraud Bureau (IFB) has notedthat 'bogus and inflated claims' cost the industry over £1.5 billion each year. This translates into a5% increase on the premiums paid by all policyholders. Considering RSA's scale of operations inproperty and casualty insurance, the mounting trends of insurance fraud could increase its claimlosses and pull down its profit margins.

Solvency II adoption likely to increase competition for capital

In May 2009, the European Parliament adopted the Solvency II framework Directive. The Directivewill improve risk management in the insurance industry, since it is based on economic principlesthat more accurately reflect the risks borne by insurers and reinsurers than did the old, statutoryframework. Solvency II is expected to become fully operational by October 2012. Solvency II mayimpact the competitive landscape, because of its capital level requirements. In the wake of thefinancial crisis, required capital levels for Solvency II are much higher than previous versions, whichmay place additional strain on affected insurers. If Solvency II’s currently high level of capitalrequirements does remain intact, then European insurers may find it costly to comply with SolvencyII.



TOP COMPETITORS

The following companies are the major competitors of RSA Insurance Group plc

Berkshire Hathaway, Inc.Aviva PlcING Groep N.V.Prudential plcMillea Holdings, IncAllstate CorporationAllianz AGCIGNA CorporationSun Life Financial Inc.AEGON N.V.Zurich Financial Services


RSA Insurance Group plcTop Competitors

COMPANY VIEW

A statement by, John Napier, the Chairman of RSA Insurance Group is given below. The statementhas been taken from the group’s 2009 annual report.

A challenging year

In 2009, we have experienced an unprecedented market environment where the impact of failuresin the finance and banking markets have fuelled recession. In 2010, we will be celebrating 300 yearsof existence providing sustainable insurance services that, by pooling individual and business risks,benefit the economy and society as a whole. A key skill throughout has been our ability to measureand price risk. Some of the failures in banks have been caused by neglect of that capacity and apattern over a period of years where a significant number of individuals have been able to takeunsustainable personal benefits from short term business practices, producing consequencesdetrimental to society as a whole.The trading environment in 2009 was very challenging. Our strategycontinued to have two major themes, firstly focusing on: Excellence in our core technical competenciesof underwriting and pricing Improving the effectiveness of our operations and standards of service,and Ensuring that we run a sustainable business through the economic cycle.

The second theme is to focus on growth opportunities, particularly where we have leading marketpositions and in emerging markets. We also continue to benefit from a combination of rigorousstandards of management and specialisation in our core product sectors and our geographic footprintacross the world. One of the consequences of the monetary effects of the bank rescue has been toreduce the returns available from long term secure investments, particularly Government bonds,which we require to match and balance our long term liabilities. Our overriding policy is to keep thatbalance but it has had the predicted impact on our year-on-year results. The management of ourfunds continues to have significant Board oversight.

Despite the challenges of the 2009 markets your Company has performed strongly. In summary wehave achieved: A 4% increase in net written premiums A combined operating ratio (COR) of 94.6%An operating result of £777m, and Maintained a strong balance sheet and robust capital position.We continue to invest in processes and technologies to improve service standards and reduce costs.We have also maintained our focus on management development and over recent years, the numberof top 100 appointments made from within has increased significantly. The Board and shareholdersare particularly well served by a dedicated team of management and staff, led by our Chief ExecutiveAndy Haste. I thank them all on our shareholders' behalf.

The regulatory environment 2009 has also seen a number of Government policy and regulatorychanges and a significant number of advisory reports and initiatives related to board processes andeffectiveness. There have been tensions between the more specific needs of problem sectors likebanks and those of the insurance sector. Attempts to deliver a ‘one size fits all' approach areinappropriate.


RSA Insurance Group plcCompany View

As a policy, your Board actively and positively engages with regulators, currently adopting a chosenapproach of an intensive and detailed regulation of risk activities. We keep reminding those who willlisten that we are not a bank, that risk is our business and regulatory measures should beproportionate and not incur onerous costs or unnecessary increases in capital requirements becauseof over-negativity and fear.While we welcome impending European regulatory changes, particularlyrelating to solvency, when linked with an over-cautious regulatory response, in-country “gold plating”and variations in interpretation these may create distortions in regulatory capital needs and createcompetitive disadvantages by country. The relocation pressure caused by variations in tax regimesmay be superseded by unwelcome new pressures caused by changes in regulatory environments.

There has also been a lot of comment and discussion and draft recommendations on changes toplc boards, the current combined code of governance and related matters. Many recommendationsseem not to analyse what the real differences between effective and non-effective boards are. Thegreater underlying issue was that too much faith was placed in global competition as an effectiveregulator in itself. In these circumstances the average citizen has a right to feel that he has been letdown and is now paying the consequences.

On the question of the annual election of the Chairman and/or boards, it could have the result thata Chairman appointed before an AGM could face two votes in 15 months or even less. If we comparewhat takes place within government, the combined Chair and Chief Executive of UK plc face electionsat his or her choosing. For reasons of continuity and an opportunity to address difficult problemswhich take time to resolve, there would be opposition to even three-year re-elections. In publiccompanies, we face lesser but similar issues. Maybe leaving company Chairmen to be re-electedevery two years and Non-Executives every three would be a reasonable compromise, unless thoseadvocating such change within, or at least at the behest of Government, feel the benefits are sogreat they would be prepared to apply the same principles to their own areas of responsibility, be itin UK plc or the great Ministries of State whose annual reporting standards are well below those ofpublic companies. If certain public companies “cannot be allowed to fail” their board processes willneed different controls than the great majority who don't enjoy that protection. Heavyweightbanking-related regulatory competence should be more targeted and not thinly spread.


RSA Insurance Group plcCompany View

LOCATIONS AND SUBSIDIARIESHead Office

RSA Insurance Group plcRoyal & Sun Alliance Insurance Group9th FloorOne Plantation Place30 Fenchurch StreetLondon EC3M 3BDGBRP:44 20 7111 7000F:44 20 7569 6639http://www.royalsunalliance.com

Other Locations and Subsidiaries

RSA BrazilRSAAvenida das Nacoes Unidas 12995St Mark's Court4 andarChart WayBrooklin NovoHorshamSao PauloWest Sussex04578 000RH12 1XLBRAGBR

Royal & Sun Alliance GlobalSun Alliance Insurance (China) Limited17 square Edouard VII10th Floor75009 ParisChina Fortune TowerFRA1568 Century Avenue

Pudong New AreaShanghai 200122CHN

RSA InsuranceRoyal Sundaram Alliance InsuranceCompany Limited Dundrum Town CentreSundaram Towers Sandyford Road45 46 Whites Road Dundrum600 014 Chennai Dublin 16IND IRL


RSA Insurance Group plcLocations and Subsidiaries

Royal & SunAlliance DubaiAl Alamiya InsuranceSuite 2041st Floor Obekan BuildingOffice CourtPrince Sultan StreetOud Metha RoadJeddah28648Al Zahra DistrictDubaiSAUARE


RSA Insurance Group plcLocations and Subsidiaries

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