RSA Annual Report and Accounts 2014RSA ANNUAL REPORT AND ACCOUNTS 2014 INTRODUCTION FINANCIAL SUMMARY OUR CORE BUSINESSES GROUP RESULTS DIVIDEND FOR THE YEAR (P) PROFIT BEFORE TAX

RSA Annual Report and Accounts 2014

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RSA ANNUAL REPORT AND ACCOUNTS 2014

INTRODUCTION

OUR AMBITION

– To be a leading international general insurer focused on Northern developed markets, plus a growing business in Latin America.

– To compete only where we can win. And to win where we compete.

– 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

OUR BUSINESS

A DirectB� !QNJDQ C� FDMS�@EãMHSX

RSA’s distribution channels

A� �2L@KK��@MC�LHC�RHYDC�BNLLDQBH@K�

B� �+@QFD�BNLLDQBH@K�C� ,HC�L@QJDS�D� .SGDQE Personal

A Personal Motor B� 'NTRDGNKC� C� /DQRNM@K�NSGDQ�D� �"NLLDQBH@K�/QNODQSX�E� �"NLLDQBH@K�,NSNQ�F Liability G� ,@QHMD�@MC�NSGDQ�

RSA’s customers

A� 4*B IrelandC CanadaD ScandinaviaE� +@SHM� LDQHB@

RSA product lines

RSA by geography

3GD�@ANUD�@QD�OQDRDMSDC�@R�RG@QD�NE��BNQD�ATRHMDRR�MDS�VQHSSDM�OQDLHTLR�NE�`� �AM

A 38% E 10%

C 22%

B 4%

D 26%

A 21%

B 24

%

F 9

%

E 9%

G 8%

C 10%

D 19%

A 26%

C 22%

B 52%

D 1%

A 9% B 16%

C 20%

E 54%

RSA at a glance

OUR CUSTOMER FRANCHISE

– 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

OUR CORE BUSINESSES

2013

2014

2013

2014

2013

2014

2013

2014

+5 pts

Five point improvement in our UK Commercial Net Promoter Score in 2014.

20 pt lead

"@M@CH@M�/DQRNM@K� EãMHSX�& Direct business has a 20 point Net Promoter Score lead over the competitive benchmark.

2nd

We are the second most recommended "@M@CH@M�HMRTQDQ�AX�Personal Lines brokers.

BUSINESS RETENTION RATES

CANADA

SCANDINAVIA

UK AND IRELAND

LATIN AMERICA

81%

80%

2013

2014

85%

82%

2013

2014

83%

83%2013

2014

74%

70%

2013

2014

Scandinavia Canada UK and Ireland Latin America


INTRODUCTION

FINANCIAL SUMMARY

OUR CORE BUSINESSES

GROUP RESULTS

DIVIDEND FOR THE YEAR (P)

PROFIT BEFORE TAX

£275m1

2010

2011

2012

2013

2014

454

586

448

(244)

275

NET WRITTEN PREMIUMS

£7.5bn

COMBINED OPERATING RATIO (%)2

98.8%

2010

2011

2012

2013

2014

7,455

8,138

8,353

8,664

7,465

2010

2011

2012

2013

2014

96.7

95.4

95.7

99.4

98.8

2.0p2013: 10.2p3

1��.M�@M�(%12�A@RHR��OQD�S@W�OQNãS�NE�`��L�BNLOQHRDR� OQNãSR�EQNL�ANSG�BNMSHMTHMF�@MC�CHRBNMSHMTDC�NODQ@SHNMR

A PersonalB� "NLLDQBH@K

A 55%

B 45%

£1.8bn2014NWP

SCANDINAVIA

• -TLADQ��L@QJDS�ONRHSHNM�NUDQ@KK�@BQNRR�SGD�QDFHNM

• 12 �NMKX�LTKSHM@SHNM@K�HMRTQDQ�HM�SGD�QDFHNM

• ,@QJDS�@MC�12 �CHRSQHATSHNM�are principally direct


A 69%

B 31%

£1.5bn2014NWP

CANADA

• -@SHNM@K�HMRTQDQ�VHSG�RSQNMF�presence across Canada

• 3GHQC�K@QFDRS�HMRTQDQ�VHSG�AQN@C�LTKSHBG@MMDK�@MC�LTKSHCHRSQHATSHNM�B@O@AHKHSX

• !@K@MBDC�ONQSENKHN�VHSG�KD@CHMF�ONRHSHNMR�HM� EãMHSX��Travel and Marine


A 48%

B 52%

£2.9bn2014NWP

UK AND IRELAND

• 2DBNMC�K@QFDRS�4*�"NLLDQBH@K�HMRTQDQ

• %HESG�K@QFDRS�4*�/DQRNM@K�HMRTQDQ��HMBKTCHMF�SGD� RDBNMC�K@QFDRS�/DS�HMRTQDQ�

• Balanced product and CHRSQHATSHNM�LHW

• Top 3 insurer in IrelandA PersonalB� "NLLDQBH@K

A 38%

B 62%

£0.7bn2014NWP

LATIN AMERICA

• -TLADQ��HMSDQM@SHNM@K�HMRTQDQ�HM�+@SHM� LDQHB@

• Balanced country and CHRSQHATSHNM�LHW

• -TLADQ��HM�"GHKD��MTLADQ��HM�4QTFT@X��MTLADQ��HM� QFDMSHM@��KD@CHMF�MHBGD�position in Brazil. Operations HM�,DWHBN�@MC�"NKNLAH@

1

2 Restated on an ‘earned’ basis3 1DRS@SDC�ENQ�RG@QD�BNMRNKHC@SHNM

Contents

Introduction

Group results

At a glance

Strategic report

Chairman’s statement 02

Group Chief Executive’s statement 14

GCE follow up statement 18

Key performance indicators 24

Financial review 26

Our people 40

Corporate responsibility 42

Risk management 44

Directors’ and Corporate Governance Report

Chairman’s governance letter 48

Board of Directors 50

Executive Committee 52

Board Committees 69

Group Audit Committee Report 75

Directors’ Remuneration Report 80

Appendix: remuneration policy 99

Financial statements

Directors’ responsibilities 107

Independent auditor’s report to the members of RSA Insurance Group plc 108

Financial statements 115

Risk management 137

-NSDR�SN�SGD�äM@MBH@K� statements 151

Other information

Shareholder information 208

Financial calendar 211

Jargon buster 212

Good business simply starts with our customers

Our products and services are built around our customers, adapting to different markets around the world. By anticipating their needs and using our expertise to innovate, we ensure the management of risk makes a difference to the lives of people all over the world.

EXPLORE ONLINE

Visit us online to see summary information and listen to our Group Chief Executive’s statement at:

rsagroup.com

OUR BUSINESS AT A GLANCE

Explore our business, our customer franchise and our ambition.

This Annual Report and Accounts contains ‘forward-looking statements’ with respect to certain of the &QNTO�R�OK@MR�@MC�HSR�BTQQDMS�FN@KR�@MC�DWODBS@SHNMR�QDK@SHMF�SN�HSR�ETSTQD�äM@MBH@K�BNMCHSHNM��ODQENQL@MBD��results, strategic initiatives and objectives. For further details, reference should be made to the ‘important disclaimer’ on the inside back cover. Pages 2 to 47 constitute the Strategic Report of RSA and are incorporated by reference into the Directors’ and Corporate Governance Report set out on pages 48 to 106. The Directors’ and corporate governance report has been drawn up and presented in accordance with and in reliance upon applicable English company law and the liabilities of the Directors in connection with that report shall be subject to the limitations and restrictions provided by such law.

1

STRATEGIC REPORT

At the start of the year, in my capacity as Executive Chairman, I set out with two key objectives. Firstly, to develop a new strategy which would allow 12 �SN�QDSTQM�SN�RS@AHKHSX��OQNãS@AHKHSX�and health; and secondly, to recruit a new Group Chief Executive to lead the company and successfully execute our strategy.

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 addition, we were delighted to welcome Enrico Cucchiani as a new Non-Executive Director during the year, following the retirement of Edward Lea and Malcolm le May after 11 and 10

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.

Chairman’s statement

� 12 � --4 +�1$/.13� -#� "".4-32��

“On behalf of the Board I would like to thank Martin for his contribution while acting as Executive Chairman during the challenging period at the end NE��@MC�D@QKX��VGHBG�included the important step of commencing the strategic review of the Group.”

Johanna WaterousRSA 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��

The strategy which Stephen laid out in %DAQT@QX�HR�BKD@Q�@MC�RHLOKD �.TQ�ãQRS�priority is to tighten the strategic focus of the group. Our geographic spread had become fragmented with too many positions in emerging markets, many NE�VGHBG�G@C�HMRTEãBHDMS�RB@KD�NQ�VD@J�market positions. RSA had neither the ãM@MBH@K�NQ�GTL@M�QDRNTQBDR�SN�L@M@FD�@BQNRR��BNTMSQHDR�@MC�@�RSQ@SDFHB�retrenchment was essential. During ��VD�G@UD�L@CD�L@SDQH@K�OQNFQDRR�in refocusing the business on our core markets in the UK and Ireland, Scandinavia, Canada and Latin America.

Our second strategic challenge is to improve the quality and quantity of capital in the business. One of the Board’s main priorities for our shareholders is to ensure that the &QNTO�G@R�RTEãBHDMS�B@OHS@K�SN�LDDS�SGD�demands of regulators and customers.

3GD�RHFMHãB@MS�ãM@MBH@K�F@HMR�VD�G@UD�made in disposing of our non-core ATRHMDRRDR��SNFDSGDQ�VHSG�SGD�`��L� we received from shareholders from our rights issue in April, have helped to address this challenge.

During the year we have maintained the level of management margin in reserves and have taken out reinsurance protection against adverse development of reserves. Against all of our key capital metrics, we ended ��HM�@M�HLOQNUDC�ONRHSHNM��@KSGNTFG�capital remains a key focus for the Board as we head towards the HLOKDLDMS@SHNM�NE�2NKUDMBX�((�HM��

.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.

The Board considers these plans to be stretching but achievable. Although it will take some years to both fully implement the plans and realise their ADMDãSR��VD�@QD�BNMãCDMS�SG@S�VD�VHKK�meet the medium-term objectives set out in this report.

Finally, I would like to thank all of our shareholders for their continuing support. I would encourage shareholders to use this Annual Report to learn more about the progress we are making and I look forward to seeing many of you at our AGM in May.

MARTIN SCICLUNAChairman��%DAQT@QX��

�

Our role in a global society

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.

PEACE OF MIND FOR INDIVIDUALSEvery day we insure millions of customers’ families, cars, houses, and pets across the world. In doing so we provide our customers with the peace of mind that if the worst happens they will be able to rely on RSA to help.

Our products and services help to reduce risk and make communities safer places to live, work and travel. Motor insurance is a substantial part of our business and we have a clear commercial interest in making the world’s roads safer. From promoting telematics to running road safety campaigns, we provide incentives, advice and guidance to customers and the general public to promote safer motoring for all users.

£4.0bn of Personal net written premiums HM��

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.

Our investment strategy is constrained by duration, because of the need to maintain liquidity to pay claims and by risk, because of the need to be BNMãCDMS�HM�@RRDS�U@KTDR�VGDM�BK@HLR�become due. We hold capital to protect policyholders from the risks we take within our investment portfolio as well as to protect against volatility in our underwriting performance.

RSA ANNUAL REPORT AND ACCOUNTS 2014�

STRATEGIC REPORT

TAXI

INVESTING IN OUR SOCIETIESWe hold our assets mainly in high-PT@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.

25% of the world’s wind turbine manufacturing insured by RSA

80% of the world’s offshore wind farms insured by RSA

£14.2bn of investment assets

SUPPORTING COMMERCIAL TRADEOur 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.

£3.5bn of Commercial net written premiums HM��

£600m of Marine premiums VQHSSDM�HM��

70%1 expected construction output FQNVSG�AX��

SUPPORTING THRIVING COMMUNITIESOur 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 ��

£1.1m of charitable donations made CTQHMF��

1�&KNA@K�BNMRSQTBSHNM��AX�&KNA@K�"NMRSQTBSHNM�/DQRODBSHUDR�@MC�.WENQC�$BNMNLHBR

�

Market dynamics

OVERALL TRENDS The global economy continues to face RHFMHãB@MS�BG@KKDMFDR �'NVDUDQ��RHFMR� NE�DBNMNLHB�HLOQNUDLDMS�HM��KDC�by developed economies, should drive continued modest premium growth in the global P&C market. It is estimated that the global P&C market grew by � �í�HM��@MC�HR�DWODBSDC�SN�FQNV� AX�� í�HM��@MC�� í�HM�� (source: Swiss Re Sigma).

(MRTQ@MBD�L@QJDS�BNMCHSHNMR�ENQ��have remained challenging across our key markets. These markets range from highly concentrated to highly fragmented and from mature to developing. We have seen intense competition in most of our key business areas as our businesses compete for premium growth in a subdued economic environment.

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.

%HM@KKX��@R�@�QDRTKS�NE�SGD�ãM@MBH@K�BQHRHR��the industry continues to see increasing levels of regulatory scrutiny. This creates pressure on capital and resources. Solvency II, the new solvency framework being developed by the EU, is now OK@MMDC�ENQ�HLOKDLDMS@SHNM�NM��^)@MT@QX�� 4MSHK�SGDM��SGD�DUDMST@K�NTSBNLDR�for the sector continue to be uncertain.

CUSTOMERSCustomer needs continue to evolve – both in terms of what they buy and how they buy it. Our customers are demanding more tailored products and increasing direct interaction with us. In addition, customers can now use the internet to compare products and prices easily. In response, we are further integrating our existing distribution channels with online channels.

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.


STRATEGIC REPORT

Despite the pick up in the economy, consumers remain price conscious. In both markets, insurance pricing conditions remain soft across most major product lines.

In personal lines, the marketplace continues to be competitive, fuelled by overcapacity and low barriers to entry. Furthermore, new entrants are making substantial inroads into the market based on low cost and alternative business models.

Commercial insurance in the UK continues to be impacted by economic conditions and weakness in the Eurozone.

CANADAThe long-term national economic outlook for Canada is relatively stable VHSG�&#/�FQNVSG�NE�� í�HM��@MC� HR�DWODBSDC�SN�FQNV�@S�� í�HM��(source: Bank of Canada). Industry premiums are expected to grow at low single-digit rates in line with GDP.

/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.

In personal property, we are seeing robust rate increases as the market continues to respond to the severe weather events of last year. However, Commercial lines continues to be impacted by increased capacity and competitive pressures.

Consolidation continues to be a key trend in the Canadian market among both insurers and brokers. This is driven by competitors looking to gain scale and competitive advantage through better C@S@�@M@KXSHBR�@MC�DEãBHDMBHDR �

SCANDINAVIAThe Scandinavian economies are perceived to be generally stable and relatively safe. We expect low single-CHFHS�ONRHSHUD�&#/�FQNVSG�HM�� across the key countries we operate in (Denmark, Sweden and Norway) as a QDRTKS�NE�FQNVHMF�BNMRTLDQ�BNMãCDMBD�and improved domestic demand. The insurance market is relatively mature and is therefore expected to grow broadly in line with GDP.

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.

LATIN AMERICAIn Latin America, political and economic headwinds persist and economic FQNVSG�G@R�RKNVDC�VHSG��&#/�FQNVSG�NE�� í�HM�!Q@YHK�@MC�� í�HM�"GHKD��@MC�BNMSQ@BSHNM�NE�� í�HM� QFDMSHM@�(source: World Bank). GDP growth is ENQDB@RS�SN�QDBNUDQ�RKHFGSKX�HM��@R�the US economic recovery spills over to the region.

The insurance markets in Latin America remain attractive on a fundamental basis due to low insurance penetration and a growing middle class. However, they continue to face the challenges NE�GHFG�HMâ@SHNM��@MC�DWBG@MFD�Q@SD�volatility.

+2.5%&KNA@K�/î"�L@QJDS�FQNVSG�HM��

+2.8%Expected Global P&C market growth HM��

7

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.

How we create value

INPUTS

FINANCIAL AND OPERATIONAL

STRATEGIC

• Our brands

• Our strategic priorities

• Our corporate responsibility programme

• Our governance and risk management frameworks

4Core regions

£5.2bnCapital employed

19Thousand employees

OUR CULTURE AND VALUES

BRILLIANT SERVICEDelivering memorable service that inspires people to recommend us.

GETTING THE JOB DONE Delivering on our promises and cutting out unnecessary processes to make things simpler.

DOING THE RIGHT THINGUsing common sense when dealing with people, gaining their trust by treating them as they want to be treated.

BRIGHT IDEASContinually combining our technical expertise with a deep understanding of customers’ needs to create and deliver solutions that people value.

POSITIVE PEOPLECreating an environment where people want to do great work.

UNDERSTANDING AND PRICING RISKWe 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 DISTRIBUTIONWe distribute our products through many different BG@MMDKR �$EãBHDMS�@BBDRR� to customers is key if we are to continue to develop our business.

INTERNATIONAL EXPERTISE AND DIVERSIFICATIONAs 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.

PRUDENT INVESTMENTSOur business generates RHFMHãB@MS�@RRDSR�VGHBG�@QD�prudently invested to deliver returns for shareholders.

MANAGING CLAIMS AND SERVING OUR CUSTOMERSOur customers’ expectations are increasing. We aim to constantly improve the service we offer, and pay BK@HLR�PTHBJKX�@MC�DEãBHDMSKX

VALUE FOR OUR SHAREHOLDERS

Ensuring shareholders are adequately rewarded for the capital they provideWe 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 income6D�RSQHUD�SN�ãMC�SGD�KNVDRS�BNRS�route to the largest number of customers, tailoring our offering SN�LDDS�SGD�MDDCR�NE�RODBHãB�markets.

Lower volatility of earnings and lower capital requirementsThe diversity of our business enables us to hold capital DEãBHDMSKX �.TQ�FDNFQ@OGHB@K�ENNSOQHMS�CHUDQRHãDR�NTQ�DWONRTQD�to catastrophe events leading to lower volatility of earnings.

Additional income without putting capital at undue risk2G@QDGNKCDQR�ADMDãS�EQNL�SGD�returns on our assets, in the knowledge that our prudent approach is unlikely to jeopardise their capital.

Lower claims costs and higher retentionGenerally, 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.

VALUE FOR OUR CUSTOMERS

Enabling customers to manage their risk appetiteWe 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 wantThe 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 coverageWe 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.

"NMëCDMBD�SG@S� a claim will be paidOur substantial reserves are invested in low volatility assets.This means that customers can be BNMãCDMS�SG@S�VD�VHKK�O@X�BK@HLR�when they are due.

Access to ancillary servicesIncreasingly our customers are looking for more than just claims payment. For instance, access to our supply chain to enable lower costs of ancillary services allied to the core insurance product or risk management to prevent claims occurring.

VALUE FOR SOCIETY

Enabling society to grow and developBy effectively enabling risk transfer across society, we encourage entrepreneurship and innovation in the societies we work in while ensuring that society is protected from extreme events.

Playing our part in the digital worldAs more business is transacted online, we are investing to improve our customers’ online experience and encouraging customers to embrace digital distribution.

Spreading best practiceAs markets evolve we can quickly export best practice from one country to another. This means that the best of RSA is available to all the societies we operate in.

Enabling growth and providing capital We invest in all the countries we operate in, providing capital to governments and companies to enable economic growth.

Helping society recover from disastersWhen catastrophes strike, we help society get back on track quickly, through settling BK@HLR�E@HQKX�@MC�DEãBHDMSKX


STRATEGIC REPORT

OUTPUTS

£7.5bnNet written premiums

£2.9bnTangible net asset value

£14.2bnInvestment assets

c.80%Customer retention

12-15%Target underlying return on tangible equity

INTERNATIONAL EXPERTISE AND DIVERSIFICATIONAs 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.

PRUDENT INVESTMENTSOur business generates RHFMHãB@MS�@RRDSR�VGHBG�@QD�prudently invested to deliver returns for shareholders.

MANAGING CLAIMS AND SERVING OUR CUSTOMERSOur customers’ expectations are increasing. We aim to constantly improve the service we offer, and pay BK@HLR�PTHBJKX�@MC�DEãBHDMSKX

Lower volatility of earnings and lower capital requirementsThe diversity of our business enables us to hold capital DEãBHDMSKX �.TQ�FDNFQ@OGHB@K�ENNSOQHMS�CHUDQRHãDR�NTQ�DWONRTQD�to catastrophe events leading to lower volatility of earnings.

Additional income without putting capital at undue risk2G@QDGNKCDQR�ADMDãS�EQNL�SGD�returns on our assets, in the knowledge that our prudent approach is unlikely to jeopardise their capital.

Lower claims costs and higher retentionGenerally, 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.

Access to best practice innovation and multinational risk coverageWe 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.

"NMëCDMBD�SG@S� a claim will be paidOur substantial reserves are invested in low volatility assets.This means that customers can be BNMãCDMS�SG@S�VD�VHKK�O@X�BK@HLR�when they are due.

Access to ancillary servicesIncreasingly our customers are looking for more than just claims payment. For instance, access to our supply chain to enable lower costs of ancillary services allied to the core insurance product or risk management to prevent claims occurring.

Spreading best practiceAs markets evolve we can quickly export best practice from one country to another. This means that the best of RSA is available to all the societies we operate in.

Enabling growth and providing capital We invest in all the countries we operate in, providing capital to governments and companies to enable economic growth.

Helping society recover from disastersWhen catastrophes strike, we help society get back on track quickly, through settling BK@HLR�E@HQKX�@MC�DEãBHDMSKX

9

Making it easier for our customers to interact with us

CONTINUING CUSTOMER FOCUS

Customers needs are central to our strategy. Staying close to our customers means communicating in a way that’s right for them. As technology evolves we are quick to respond, adapting our channels of communication to meet our customers’ needs.

Increasingly, digital channels are becoming the primary route for BTRSNLDQR�SN�ãMC��@MC�BG@MFD�� their insurance products. With this in mind, our digital team are constantly improving the conversations between our brands and their customers by utilising the latest tools and techniques. In this way we can ensure that all of our customers can interact with us easily, and in a way that suits their communication needs.

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.


STRATEGIC REPORT

WINNER BEST UK PET INSURER

2014 AT THE PERSONAL FINANCE AWARDS

CANADIAN TRAVEL INSURER OF THE YEAR IN 2014, AWARDED BY THE INTERNATIONAL TRAVEL & HEALTH INSURANCE JOURNAL

BEST DANISH DIGITAL INSURANCE COMPANY IN 2014, AWARDED BY MYRESEARCH

BEST OVERALL INSURANCE PROVIDER AT THE WHAT MORTGAGE AWARDS 2014

11

CANADARSABroker.caOur Canadian platform, RSABroker.ca, provides all-round support to brokers. Drawing inspiration from our UK broker platform, the website makes it easier for brokers to transact, download product information or get news delivered straight to their in-box. The platform also showcases our recent brand refresh.

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

UKMORE TH>NOnline remains a key channel for MORETH>N and this year we completed a major update to the MORETH>N website. The new site sits on a platform that enables us to rapidly build and test new features, so we can deliver the right online experiences and make sure that customers can interact with us easily on the device that suits them.

Alongside our site launch we have been building new products to better meet customer needs. In February, we launched Name Your Price for Home, which asks customers how much they would like to pay for their home insurance and then builds the level of BNUDQ�SN�L@SBG�SGDHQ�OQHBD �(M�)TKX��VD�launched M> Drive, an app that helps safer drivers get lower premiums by tracking and scoring their driving behaviour. September saw the launch of Smart Wheels, a telematics ‘black box’ monitoring solution that rewards safe young drivers with cashback.

CONTINUING CUSTOMER FOCUS

RSA ANNUAL REPORT AND ACCOUNTS 2014��

STRATEGIC REPORT

��

SWEDENTRYGG HANSAWe 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.”

16%increase in Canadian brokers transacting online with RSA

2014 2015 2016 2017

Strategic focus• Core/review portfolio

• First wave of disposals• Complete disposal

programme

Capital and balance sheet strengthening

• Rights issue, disposals and earnings

• Balance sheet ‘clean up’Ã�2TA�CDAS�QDëM@MBHMF

• Further disposals and earnings

• Restart dividend

• Preparation for Solvency II

Performance improvement

• Plan design

• Management strengthening

• Implementation starts: – Cost base – Underwriting actions

Optimise procurement

Improve underwriting capabilities

FTE reductions

Simplify products and processes

Revenue initiatives

Upgrade technology

STEPHEN HESTERGroup Chief Executive


STRATEGIC REPORT

2014 was an important year for RSA. The Company made good progress in the face of some tough realities. We can look to the coming years with LTBG�RNTMCDQ�RSQ@SDFHB�@MC�äM@MBH@K�ENTMC@SHNMR �We have created far reaching and detailed plans for operational improvement. Actions are VDKK�TMCDQV@X�@MC�ADFHMMHMF�SN�ADMDäS�ANSG� the underlying potential and performance of our businesses.

Group Chief Executive’s statement

INDUSTRY CONDITIONSWe 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.

RSA’s diversity helps protect our performance potential. However, like industry competitors and many other businesses, low interest rates, exchange rate moves and modest growth rates BQD@SD�RHFMHãB@MS�ODQENQL@MBD�headwinds. Strong price competition, HMSDMRHãDC�AX�SGHQC�O@QSX�B@OHS@K�seeking alternative outlets from stock and bond markets, has led to sharper price/volume trade-offs than before in a number of segments. As a result,

STRATEGY AND FOCUSRSA 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.

We have three interrelated priorities. Customers are our lifeblood; serving them well is our purpose. We need to NODQ@SD�VHSG�ãM@MBH@K�RSQDMFSG�@MC�transparency; and have the discipline to sustain it. Our shareholders own the Company; we are concentrating intensely on building strong, long-term performance to make RSA the best investment proposition we can achieve.

in each of our larger markets there are some competitors reporting falls in, or static like-for-like, premium income. Five-year bond yields are down a ETQSGDQ�� í�RHMBD�SGD�RS@QS�NE��across our principal markets, impacting the outlook for investment returns. Around two-thirds of RSA’s premiums KHD�NTSRHCD�SGD�4* �)@MT@QX��month-end spot exchange rates would HLOKX�@�B �í�QDCTBSHNM�HM�SGD�QDONQSDC�2SDQKHMF�ãFTQDR�UDQRTR�SGD�OQDLHTLR�QDONQSDC�ENQ��VHSG�SGD�HLO@BS�ADHMF�K@QFDQ�HM�OQNãS@AHKHSX�SDQLR

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.

6D�Q@HRDC�`��L�HM�,@X�SG@MJR�SN�shareholder support via a rights issue @MC�@�ETQSGDQ�`��L�NE�OQNBDDCR�EQNL�announced divestments to date (of VGHBG�`��L�@KQD@CX�BNLOKDSDC��@S�prices well above tangible book value. 6D�@KRN�RTBBDRRETKKX�QDãM@MBDC�`��L�of long-term subordinated debt and saw credit ratings restored.

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

��

STRATEGIC REPORT

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.

!DGHMC�SGD��GD@CKHMD�ãFTQDR� @QD�L@MX�LNUHMF�O@QSR��QDâDBSHMF�market movements and the actions we have taken.

/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


#HRONR@K�F@HMR�NE�`��L�VDQD�NEERDS�AX�the charges outlined above, albeit much of the latter being non-cash items.

PLANS FOR THE FUTURERSA’s new and focused strategy was set out a year ago. We believe it is the right one. Our medium-term performance S@QFDSR�@QD�@KRN�TMBG@MFDC��í�underlying return on net tangible @RRDSR��í�S@MFHAKD�DPTHSX�MDS�premiums, though the latter is sensitive to Solvency II outcomes as well as market factors and may need to AD�TOC@SDC�@S�SGD�DMC�NE��

THANKSManaging 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.

STEPHEN HESTERGroup Chief Executive��%DAQT@QX��

How we are delivering against our new strategic vision continued...

17

FOCUSED

We said we would tighten the strategic focus of the Group so we can concentrate on performing sustainably well in core businesses.

MAY

£220mSale agreed of Noraxis in Canada

APRIL

£290mSale of Baltic and Polish operations announced


STRATEGIC REPORT

Still on our to-do list:

• Agree remaining disposals

• Complete all agreed sales

We have focused the geographical footprint of our business onto our core operations in Scandinavia, Canada, UK and Ireland, and Latin America.

Baltics, Poland, Hong Kong, Singapore, China, Italy, India, and Thailand, and our brokerage business in Canada (Noraxis).

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 BESTAt 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

AUGUST

£130mSale of operations in Singapore and Hong Kong announced

FEBRUARY 2015

£46mSale of India minority stake agreed

OCTOBER

£19mSale of Italian business agreed

JULY

£71mSale of Chinese business agreed

DECEMBER

£37mSale of Thailand minority stake agreed and completed

19

STRONGER

We said we would reset the quantity and quality of capital the Group works with, and the disciplines that will sustain it.

FEBRUARY

A STABLES&P credit rating upgraded

APRIL

£773mProceeds from successful completion of rights issue


STRATEGIC REPORT

BUILDING CAPITAL STRENGTHAfter 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.

AUGUST

H1 RESULTSBalance sheet strengthening @BSHNMR�@MMNTMBDC ��í�HMBQD@RD� in tangible equity.

DECEMBER

£450mOutstanding bond HRRTD�VHSG�� í�coupon retired

FEBRUARY 2015

£810mDisposals reported to date

OCTOBER

£400mBond issue completed VHSG�� í�BNTONM


��!DMDãSR�EQNL�remaining disposals and future earnings

• Build towards a sustainable ordinary dividend

• Complete preparations for Solvency II

��

STRATEGIC REPORT

APRILGROUP COOPaul Whittaker announced as Group "GHDE�.ODQ@SHMF�.EãBDQ

BETTER

We said we would improve business performance and the Group’s ability to sustain it. This means underwriting, expense, technology and people actions.

MARCHIRELAND CEOKen Norgrove announced as new Irish CEO


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

JUNEUK AND SCANDINAVIAN CEOSStephen Lewis and Patrick Bergander announced as UK and Scandinavia CEOs respectively

AUGUST

£180mCost saving target HM�DWBDRR�NE�`��L�announced

FEBRUARY 2015

£250mUpdated cost saving target NE�HM�DWBDRR�NE�`��,�AX� ��@MMNTMBDC

IMPROVING BUSINESS PERFORMANCEThe focus of our operating plans is about being better. In fact, aiming at being among the best at what we do. This is a multifaceted task. We have two core priorities in this regard: costs and revenues. To be competitive for customers, to invest in better capabilities and to properly deliver for shareholders we need to reduce costs. At the same time we have been developing many initiatives to invest in our business to improve customer RDQUHBD�@MC�DEãBHDMBX �.TQ�SDBGMNKNFX�

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.

Determined action to improve the sustainability of our insurance portfolio and its expected loss ratios is another L@INQ�ED@STQD�NE�NTQ�VNQJ �#TQHMF��we have repriced or trimmed business we cannot make sense of, and from this new sounder base we expect to grow again but with better underlying loss ratios.

We 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.


• Implementation of cost and revenue targets

• Investment in technology

��"NLLDMBD��V@UD��initiatives

��

Key performance indicators

We consider that the following nine key performance indicators are important in measuring the delivery of our strategic priorities.

1. NET WRITTEN PREMIUMS (NWP)

Performance (£bn)

2010

2011

2012

2013

2014

7.5

8.1

8.4

8.7

7.5

Performance (£bn)2010 7.5 (11% reported growth)2011 8.1 (9% reported growth)2012 8.4 (3% reported growth)2013 8.7 (4% reported growth)2014 7.4 (-x% reported reduction)

#DëMHSHNMPremiums in respect of policies written during the year, less any costs associated with purchasing reinsurance protection.

CommentaryNWP is an important metric for RSA, ensuring an appropriate growth rate that matches the footprint of the Group and its capacity for growth. Premiums EDKK�HM��CTD�SN�ATRHMDRR�CHRONR@KR� and the remediation of portfolios in our core businesses.

OutlookGrowth rates in Scandinavia, Canada, UK and Ireland would typically be at low single-digit levels. In Latin America mid-high single-digit growth is expected.

� ��3 -&(!+$�-$3� 22$3�5 +4$�(TNAV)

Performance (£bn)

2010

2011

2012

2013

2014

2.4

2.3

2.1

1.7

2.9

TANGIBLE NET ASSET

#DëMHSHNMTotal shareholders’ funds, excluding goodwill, intangibles, and preference share capital.

CommentaryInsurance companies manage a number of different capital metrics. The common theme of these metrics, is that they @KK�ADMDãS�EQNL�FQNVHMF�KDUDKR�NE�3- 5 �TNAV is also important because it is a measure of the underlying value of our business, although our TNAV is sensitive to external factors such as market movements.

OutlookAim to continue to grow TNAV through a combination of retained earnings, and the completion of remaining disposals.

� ��3- 5�-6/

Performance (%)

2010

2011

2012

2013

2014

33

28

26

19

39

TANGIBLE NET ASSET:NWP

#DëMHSHNMThe ratio of TNAV to NWP.

CommentaryAn important metric that is widely used by investors and other stakeholders in the insurance industry to compare companies within the sector. When used as a relative metric against peers, it provides an indication of relative capital strength, but should be judged in the context of the CHUDQRHãB@SHNM�@MC�FDNFQ@OGHB@K�ROQD@C�NE�the business. It underpins all of the capital metrics (IGD, ICA, ECA, rating agency) of the Group.

Outlook HL�SN�L@HMS@HM�HM�@�Q@MFD�NE��í


STRATEGIC REPORT

� ��".,!(-$#�./$1 3(-&�1 3(.�(COR)

Performance (%)

2010

2011

2012

2013

2014

96.7

95.4

95.7

99.4

98.8

Combined operating ratio

#DëMHSHNMA measure of underwriting performance – the ratio of underwriting costs (claims, commissions and expenses) expressed in relation to earned premiums.

CommentaryAn important ratio used across the insurance industry that measures underwriting costs as a proportion of revenue. It is often used as a relative LD@RTQD�NE�TMCDQVQHSHMF�DEãBHDMBX�VGDM�comparing against peers. The aim is to keep this ratio as low as possible without compromising the quality of reserves or becoming uncompetitive on price.

OutlookImproving combined ratios over time, initially targeting a return to levels in the mid-90s.

� ��/1.%(3� %3$1�3 7� (PAT)

Performance (£m)

2010

2011

2012

2013

2014

340

407

327

(338)

76

PROFIT AFTER TAX

#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.

Outlook(LOQNUHMF�KDUDKR�NE�OQNãS�NUDQ�SHLD� @R�SGD�ADMDãSR�NE�NTQ�@BSHNMR�ADFHM� to come through.

� ��4-#$1+8(-&�1$341-�.-� TANGIBLE EQUITY (ROTE)

Performance (%)

13.5

16.7

16.7

6.9

9.7

ROTE

2010

2011

2012

2013

2014

#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).

CommentaryA key measure of shareholder value and one that informs overall valuation in the insurance sector.

Outlook3@QFDSHMF��í�HM�SGD�LDCHTL�SDQL

9. CARBON EMISSIONS

Performance (gross tonnes of CO2 per FTE)

2010

2011

2012

2013

2014

2.8

2.7

2.6

2.6

2.4

carbon emissions

#DëMHSHNMGross tonnes of carbon emissions (CO�) per full time equivalent (FTE) employee.

CommentaryWe 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.

OutlookWe aim to reduce our carbon emissions AX��í�ODQ�DLOKNXDD�AX��

� �"423.,$1

Performance (customer retention %)

2010

2011

2012

2013

2014

78

77

79

79

80

Customer

#DëMHSHNMWe use key measures such as customer retention, net promoter score (NPS) and customer satisfaction.

CommentaryWe aim to put customers at the heart of everything we do and delivering for our customers is an important part of our strategy. Our customer KPIs are important in helping us keep on track to deliver on this commitment.

Outlook'NKC�QDSDMSHNM�@S�@QNTMC��í�HLOQNUHMF�levels of customer satisfaction across our businesses.

7. CAPITAL STRENGTH

Performance (£bn)

1.1

0.8

0.7

0.7

1.2

0.2

1.8

1.5

ECA surplusIGD surplus

1.3

0.9

2010

2011

2012

2013

2014

#DëMHSHNMInsurance Groups Directive (IGD or ‘Solvency I’) and Economic Capital.

CommentaryWhile 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.

OutlookFurther 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 current year underlying loss Q@SHN�V@R�� í�� í��@MC�G@R�HLOQNUDC�HM�D@BG�PT@QSDQ�CTQHMF�� Excluding Ireland the underlying BTQQDMS�XD@Q�KNRR�Q@SHN�V@R�� í� VGHBG�HR��ONHMS�ADSSDQ�SG@M��

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 RESULTThe 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

Financial review

PREMIUMS��MDS�VQHSSDM�OQDLHTLR�VDQD�CNVM��í�EQNL��@S�BNMRS@MS�DWBG@MFD�Q@SDR�@MC�CNVM��í�NM�@M�TMCDQKXHMF�basis (excluding completed disposals, Motability and the adverse development reinsurance cover). Our premium base is smaller than last year due to portfolio restructuring, disposals and foreign exchange.

/QDLHTLR�HM�2B@MCHM@UH@�VDQD�TO��í��with good focus on increasing rates across the book. Canadian premiums VDQD�CNVM��í�CQHUDM�AX�@��í�QDCTBSHNM�in Commercial premiums due to the underwriting actions we have been taking on the portfolio. UK premiums VDQD�CNVM��í��CNVM��í�HMBKTCHMF�,NS@AHKHSX� �#TQHMF��VD�G@UD�S@JDM�RHFMHãB@MS�ONQSENKHN�@BSHNMR�HM�SGD�4*��with particular focus on UK Personal Motor where premiums were down ��í�@R�VD�QDL@HM�ENBTRDC�NM�@BGHDUHMF�our target returns. Ireland premiums VDQD�CNVM��í�ENKKNVHMF�RSQNMF�Q@SD�increases during the year in key lines requiring remediation, which affected retention rates. Latin American

RICHARD HOUGHTON&QNTO�"GHDE�%HM@MBH@K�.EãBDQ


STRATEGIC REPORT

(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.

Average book yield across the whole ONQSENKHN�EDKK�EQNL�� í�SN�� í�XD@Q� on year.

Based on current forward bond yields and foreign exchange rates, it is estimated that investment income VHKK�AD�HM�SGD�NQCDQ�NE�`��L�ENQ��E@KKHMF�SN�@QNTMC�`��L�HM��@MC�� 'NVDUDQ��VHSG�XHDKCR�@S�GHRSNQHB�lows, these income numbers are sensitive to market changes. This NTSKNNJ�QDâDBSR�SGD�BNLAHMDC�HLO@BS�of sharply lower bond yields and depreciation of our major overseas NODQ@SHMF�BTQQDMBHDR�BNLO@QDC�SN��together with the ongoing impact of maturing high yield bond positions.

TOTAL CONTROLLABLE COSTSTotal 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.

• -DS�F@HMR�NE�`��L�HMBKTCD�`��L� NE�ATRHMDRR�CHRONR@K�F@HMR��`��L�NE�gains in respect of the sale of equities L@HMKX�HM�)@MT@QX��`��L�QDK@SHMF�SN� the sale and leaseback of our Swedish GD@C�NEãBD��@MC�`��L�NE�TMQD@KHRDC�gains on property assets.

• -NM�NODQ@SHMF�BG@QFDR�NE�`��L�BNLOQHRD�`��L�NE�BTRSNLDQ�KHRS�amortisation and £10m of pension net interest costs.

• -NM�QDBTQQHMF�BG@QFDR�NE�`��L�HMBKTCD�QDNQF@MHR@SHNM�BNRSR�NE�̀ ��L��VHSGHM�VGHBG�VDQD�`��L�NE�FNNCVHKK�VQHSD�CNVMR��`��L�HM�(QDK@MC�@MC�`��L�HM�1TRRH@��`��L�HMS@MFHAKD�@RRDS�write downs mainly relating to software write downs in the UK, Ireland and Scandinavia; £110m of redundancy and restructuring costs �`��L�QDK@SHMF�SN�QDCTMC@MBX��@MC�@�ETQSGDQ�`��L�OQHL@QHKX�QDK@SHMF�SN�SGD�QDUHRHNM�NE�DRSHL@SDR �3GD�`��L�B@M�be further broken down as follows: the re-estimation of deferred acquisition costs and dilapidation provisions in respect of leasehold properties, resulted in charges of `��L�@MC�`�L�QDRODBSHUDKX��@�QDUHDV�of the Group’s reinsurance accounting

FINANCIAL RESULTS – MANAGEMENT BASIS

£m 2014 ��

Net written premiums 7,465 ��

Net earned premiums 7,874 �� 7,179

Underwriting result 90 ��

Investment result 327 ��

Insurance result 417 ��

Central costs and other activities (52) �� (100) ��

Operating result 365 ��

Non-operating items (90) ��

/QNëS��KNRR��ADENQD�S@W 275 ��

Tax (199) �� (179) ��

/QNëS��KNRR��@ESDQ�S@W 76 ��

".1��í� 98.8 ��

Tangible net asset value (£m) 2,900 ��

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.

/QNãS�ADENQD�S@W�NE�`��L�BNLOQHRDR�`��L�EQNL�BNMSHMTHMF�NODQ@SHNMR�@MC�`��L�EQNL�CHRBNMSHMTDC�NODQ@SHNMR �1DEDQ�SN�MNSD��NE�SGD�%HM@MBH@K�Statements for further detail.

��

QDRTKSDC�HM�@�BG@QFD�NE�`��L��ãM@KKX�� as a result of a remediation process, better information has become available, which has resulted in revisions to certain accounting DRSHL@SDR�@MC�@�BG@QFD�NE�`��L�VGHBG�predominately relates to Ireland.

• 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.

TAXThe Group has recognised a tax charge of £199m for the year. Included in this is a deferred tax asset impairment charge NE�`��L��`��L�QDK@SHMF�SN�SGD�4*�@MC�`�L�QDK@SHMF�SN�(QDK@MC� �3GHR�ENKKNVR�SGD�conclusion that the carrying value of the deferred tax assets in the UK and Ireland are no long fully supportable following the resetting of the Group strategy in ��SNFDSGDQ�VHSG�SGD�HRRTDR�E@BDC�HM�Ireland. This accounting charge has no economic consequences as the tax losses remain available to us. The carrying value of the remaining deferred S@W�@RRDS�HM�SGD�4*�HR�`��L��@MC�HM�(QDK@MC�HR�`�L

RESERVINGWe 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.

CAPITALThe Group monitors a range of capital positions. Strategic actions taken during ��G@UD�CQHUDM�HLOQNUDLDMSR�@BQNRR�these capital measures.

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.

The Group’s estimated economic capital RTQOKTR�V@R�`� �AM�@S��#DBDLADQ��FHUHMF�BNUDQ@FD�NE�� SHLDR�SGD�

INVESTMENT RESULT

£ 2014 �� ,NUDLDMS��í�

Bonds 354 �� (7)

Equities 23 ��

Cash and cash equivalents 29 ��

Land and buildings 28 �� –

Other 5 11 ��

Investment income 439 �� (11)

Investment expenses (29) ��

Unwind of discount (83) (97) ��

Investment result 327 �� (10)

13.5

16.7

16.7

6.9

9.7

2010

2011

2012

2013

2014

UNDERLYING RETURN ON TANGIBLE EQUITY (%)

A 86%

B 7%

E 3% D 3% C 1%

£14.2bn

COMPOSITION OF INVESTMENT PORTFOLIO (%)

A Fixed incomeB CashC EquitiesD PropertyE Other


STRATEGIC REPORT

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.

#HUDQRHãB@SHNM�OQNUHCDR�@�RHFMHãB@MS�ADMDãS�SN�12 �VHSGHM�NTQ�DBNMNLHB�capital model. We analyse our main modelled risks, including underwriting, catastrophe, reserve, market, credit and currency, pension and operational risks. .M�SGHR�A@RHR��SGD�KDUDK�NE�CHUDQRHãB@SHNM�generated within our capital model, resulting from the nature of the different types of business written, geographic spread of our business, and the non-correlation of risk events @EEDBSHMF�SGD�&QNTO��HR�@QNTMC��í�NE�SGD�TMCHUDQRHãDC�B@OHS@K�QDPTHQDLDMS

RATING AGENCIESS&P and Moody’s provide insurance ãM@MBH@K�RSQDMFSG�Q@SHMFR�ENQ�SGD�&QNTO�and its principal subsidiaries. The Group was upgraded by S&P to A ‘stable NTSKNNJ��HM�%DAQT@QX��@MC�HR�Q@SDC� ��MDF@SHUD�NTSKNNJ��AX�,NNCX�R

PENSIONSThe 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.

At the most recent funding valuations @R�NE��,@QBG��SGD�SGQDD�L@HM�4*�ETMCR�G@C�@M�@FFQDF@SD�ETMCHMF�CDãBHS�NE�`��L��DPTHU@KDMS�SN�@�ETMCHMF�KDUDK�NE��í �3GD�&QNTO�@MC�SGD�3QTRSDDR�agreed funding plans at that time to DKHLHM@SD�SGD�ETMCHMF�CDãBHSR�AX�� The funding plans will be reviewed following the next triannual funding valuations, which will have an effective C@SD�NE��,@QBG��

The 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.

The purchase of annuities would effectively result in full removal of all economic and demographic risks associated with provision of the liabilities. Alternatively, full removal of investment and economic risk on DWODBSDC�ADMDãS�O@XLDMSR�BNTKC�@KRN�be achieved through the use of a fully matched swaps based investment strategy. This effectively eliminates the @RRTLDC�QDSTQM�ADMDãSR�HM�SGD�ETMCHMF�basis of equity and credit investments that form part of the asset mix of the funds. The Trustee’s investment advisers have estimated that as at ��,@QBG��SGHR�VNTKC�G@UD�QDRTKSDC�HM�@�RGNQSE@KK�NE�`� �AM �'NVDUDQ��TMCDQ�this approach the funds would remain exposed to longevity and other behavioural and demographic risks.

DIVIDENDWe are pleased to recommence CHUHCDMC�O@XLDMSR�VHSG�@�ãM@K�CHUHCDMC�QDBNLLDMC@SHNM�NE��O�ODQ�NQCHM@QX�share. This is a modest absolute KDUDK�QDâDBSHMF��OQNãS@AHKHSX� as well as the work remaining on capital build. We reiterate a medium-term @LAHSHNM�NE��í�CHUHCDMC�O@XNTSR �

GROUP OUTLOOK(M��VD�@HL�SN�RTARS@MSH@KKX�complete the Group’s strategic restructuring and related ‘inorganic’ capital improvements. Focus will continue on actions to improve core business performance on a sustainable basis.

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.

.TQ�LDCHTL�SDQL��í�TMCDQKXHMF�return on tangible equity target remains in place. Foreign exchange and interest Q@SD�HLO@BSR�EQNL�SGD�O@RS��LNMSGR�RTFFDRS�HS�HR�LNQD�KHJDKX�SN�AD�LDS�HM��SG@M��CDROHSD�@�AQN@CKX�TMBG@MFDC�ambition for combined ratios.

RICHARD HOUGHTON&QNTO�"GHDE�%HM@MBH@K�.EãBDQ

��

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.

Scandinavia

OUR OPERATIONS IN SCANDINAVIAIn 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.

Our business is split evenly between Personal and Commercial lines and is principally directly distributed with strong agent relationships, call centre capabilities and a growing bancassurance channel. We have particular strengths in Sweden through our Motor and Personal Accident businesses, and our Danish Commercial business, while our Norwegian business is developing.

FINANCIAL PERFORMANCEOur Scandinavian business performed RSQNMFKX�@S�@M�TMCDQKXHMF�KDUDK�HM�� 4MCDQVQHSHMF�OQNãSR�VDQD�`��L� ��`��L��@MC�SGD�BNLAHMDC� Q@SHN�V@R�� í�� í�

-DS�VQHSSDM�OQDLHTLR�NE�`��L� VDQD�TO��í�@S�BNMRS@MS�DWBG@MFD� ��`��L�@R�QDONQSDC��`��L� at constant exchange), with volumes â@S�@BQNRR�SGD�QDFHNM�@MC�Q@SD� HMBQD@RDR�BNMSQHATSHMF��í�FQNVSG

/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


89.4%Combined ratio

OUR BRANDS IN SCANDINAVIA

PATRICK BERGANDERCEO Scandinavia

A 17%

B 20%

F 17

%

E 12%

C 17%

D 17%

TYPES OF BUSINESS IN SCANDINAVIA

A Household B Personal motorC Personal accident and other D Commercial property E Commercial motor F Other


STRATEGIC REPORT

VDQD�CNVM��í�@R�VD�BNMSHMTDC�NTQ�VNQJ�HM��SN�QDSTQM�SG@S�ATRHMDRR� SN�RSQNMFDQ�OQNãS@AHKHSX �-NQV@X�/DQRNM@K�OQDLHTLR�VDQD�TO��í

Commercial premiums were up �í�VHSG�FQNVSG�NE��í�HM�#DML@QJ�QDâDBSHMF�RSQNMF�QDSDMSHNM�@BQNRR� the portfolio, good new business levels in Workers Compensation and good growth in Renewable Energy. Our strategic partnership in Norwegian Hospital Care insurance continues strongly, and as a result Norway "NLLDQBH@K�OQDLHTLR�VDQD�TO��í� in the year. In Sweden, premiums VDQD�CNVM��í�@R�VD�BNMSHMTDC�SN�S@JD�actions to rationalise our Commercial portfolio and increase rate.

The Scandinavian underwriting result V@R�@�OQNãS�NE�`��L��`��L�� VHSG�@�BTQQDMS�XD@Q�OQNãS�NE�`��L��`��L��@MC�@�OQHNQ�XD@Q�OQNãS� NE�`��L��`��L� � ESDQ�HMBKTCHMF�investment returns net of discount TMVHMC�NE�`��L��`��L�� SGD�HMRTQ@MBD�QDRTKS�V@R�`��L� ��`��L�

(M�/DQRNM@K��TMCDQVQHSHMF�OQNãSR� VDQD�`��L�VHSG�@�BNLAHMDC�Q@SHN� NE�� í �3GHR�L@HMKX�QDâDBSR�@�RSQNMF�performance in Swedish Personal Accident following product enhancements and rate actions. 2B@MCHM@UH@�"NLLDQBH@K�L@CD�@��TMCDQVQHSHMF�OQNãS�NE�`��L�@MC�@�BNLAHMDC�Q@SHN�NE�� í��VHSG�FNNC�underlying performances across our Danish business and in Swedish Liability and Motor.

3GD�BNLAHMDC�Q@SHN�HM��V@R�� í�� í� �6D@SGDQ�@MC�K@QFD�KNRR�experience was broadly in line with expectations. The weather ratio of � �í�HR�HM�KHMD�VHSG�SGD�ãUD�XD@Q�@UDQ@FD��VGHKD�K@QFD�KNRRDR�NE�� í�BNLO@QD�SN� @�KNMF�SDQL�@UDQ@FD�NE�� í�@MC�HM�O@QS�ADMDãS�EQNL�@�BG@MFD�HM�TMCDQVQHSHMF�mix. The underlying current year loss Q@SHN�V@R�MNSHBD@AKX�HLOQNUDC�HM�� @S�� í�� ONHMSR�ADSSDQ�SG@M��and there were good improvements in both Sweden and Denmark. Prior XD@Q�BK@HLR�VDQD�� í��RHFMHãB@MSKX�ADKNV��KDUDKR�ATS�MNV�LNQD�normalised for likely future outlook. Controllable expenses are in line VHSG�NTQ�DWODBS@SHNMR��@MC�HM�� VD�QDCTBDC�%3$�AX��í

TEACHING WATER SAFETYTrygg-Hansa’s ‘Baby buoy’ programme teaches small BGHKCQDM�GNV�SN�âN@S�HM�V@SDQ��with the overall aim to reduce the number of drowning accidents. The Baby buoy was developed HM��@MC�DWSDMCDC�HM�� by Trygg-Hansa together with The Swedish Life Saving Society (SLS). It is an important part of Trygg-Hansa’s focus on water safety in the Swedish market, together with the sponsorship of outdoor summer swim schools and the initiative ‘swim school for everyone’ where people from other nationalities are trained to become swim school teachers, in order to train others in their native language.

OUR STRATEGYOur strategy in Scandinavia is ENBTRDC�NM�RTRS@HM@AKD�OQNãS@AKD�returns with three key levers. These are:

� � �#QHUHMF�OQNãS@AKD�FQNVSG�through business targeting, expansion of distribution channels and improving our brand offering;

� ��#DUDKNOHMF�L@QJDS�KD@CHMF�claims and underwriting capabilities; and

� ��#QHUHMF�BNMSHMTNTR�NODQ@SHNM@K�improvement through rigorous cost management and targeted systems and infrastructure investment.

OUTLOOKWe expect the Scandinavian P&C markets to grow in line with local GDP growth, and we target top line performance broadly in line with the market. Our focus is on sustaining strong Personal lines results in Sweden and improving Commercial KHMDR�OQNãS@AHKHSX��@BGHDUHMF�RHFMHãB@MS�cost improvements in Denmark; @MC�ENBTRHMF�NM�OQNãS@AKD�FQNVSG� in Norway.

SCANDINAVIA FINANCIAL SUMMARY

��MDS�VQHSSDM�premiums Underwriting result COR

£m % growth1 2014 (£m) ��`L� 2014 (%)

Personal 969 3 162 �� 83.0

Commercial 790 2 25 (11) 96.9

Total 1,759 3 187 �� 89.4

Sweden 956 2 138 ��

Denmark 633 1 47 ��

Norway 170 9 2 9

Total 1,759 3 187 ��

Notes:1. At constant exchange.

��

Canada

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.

ROWAN SAUNDERSPresident & CEO, RSA Canada

OUR OPERATIONS IN CANADAIn Canada we are the third-largest insurer, establishing our market position through a combination of strategic acquisitions and organic growth. We are a national insurer, operating across all provinces with a broad multiproduct, multidistribution offering. The market is stable and consolidating with the top ��HMRTQDQR�@BBNTMSHMF�ENQ�@QNTMC��í�market share.

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 PERFORMANCEAfter 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


98.0%Combined ratio

OUR BRANDS IN CANADA

OUR STRATEGYIn 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 29%

C 14%

E 9%

D

8%

B

40%

TYPES OF BUSINESS IN CANADA

A Household B Personal motorC Commercial property D LiabilityE Other


STRATEGIC REPORT

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.

performance of our Canadian business remains supportive of improved future results.

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 �

/DQRNM@K�OQDLHTLR�VDQD�CNVM��í��VHSG�@��í�QDCTBSHNM�HM�,NSNQ�O@QSKX�NEERDS�AX�FQNVSG�NE��í�HM�'NTRDGNKC �'NTRDGNKC�premiums included double-digit rate increases (on renewal business) as the market responded to the weather events NE��@MC�D@QKX��UNKTLDR�VDQD�CNVM��í �(M�,NSNQ��OQDLHTL�QDCTBSHNMR�QDâDBSDC�SGD�DWHS�NE�BDQS@HM�AQNJDQ�relationships, lower new business and rate in Ontario, and competitive conditions in Quebec.

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 DISTRACTIONMotoring 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.

Our survey found that almost every Canadian driver has witnessed other CQHUDQR�S@KJHMF�NM�SGD�OGNMD��@MC��í�have witnessed drivers texting. Yet NMKX��í�@CLHS�SN�S@KJHMF�@MC��í�admit to texting while behind the wheel. Despite public awareness campaigns, and in Ontario increased ãMDR�@MC�CDLDQHS�ONHMSR�ENQ�SGNRD�convicted, distracted driving is still a huge issue.

As a result, RSA Canada made SGDRD�ãMCHMFR�OTAKHB�@MC�HMHSH@SDC� a campaign of driver advice ahead NE�OTAKHB�GNKHC@XR�HM�,@X�� The research and campaign was one of RSA Canada’s most successful in terms of media coverage, with DWONRTQD�HM�NUDQ��OTAKHB@SHNMR��the advice reaching a potential @TCHDMBD�NE��LHKKHNM�ODNOKD

CANADA FINANCIAL SUMMARY1


£m % growth2 2014 (£m) ��`L� 2014 (%)

Personal 1,039 (2) 11 �� 99.0

Commercial 471 (5) 19 �� 96.0

Total 1,510 (3) 30 �� 98.0

Notes:� � #TQHMF��VD�RNKC�-NQ@WHR��@�AQNJDQ@FD�BNMS@HMDC�VHSGHM�NTQ�"@M@CH@M�ATRHMDRR �3GD�MTLADQR�

above exclude Noraxis.� � S�BNMRS@MS�DWBG@MFD

��

UK1 and Ireland

In the UK, we have made good progress in 2014 with underwriting and portfolio actions as well as operational improvements. (M�(QDK@MC��HS�G@R�ADDM�@�ETQSGDQ�CHEäBTKS� year as we continue our recovery process.

STEPHEN LEWISCEO, UK & Western Europe

OUR OPERATIONS IN UK AND IRELANDIn the UK, we are the second largest Commercial insurer with key positions in Property, Motor, Liability, and Marine, and exposures across the SME, Mid-Market and Global Specialty customer segments. We operate across the key UK market centres, as well as six European locations. We are a leading international Marine player through the London markets.

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

UK FINANCIAL PERFORMANCEIn the UK, we have made progress with management action on pricing and underwriting that included both planned exits and focused growth. CUDQRD�VD@SGDQ�HM�SGD�ãQRS�PT@QSDQ�together with reserve additions in "NLLDQBH@K�G@UD�@EEDBSDC�OQNãS@AHKHSX �However, expenses are coming down and the good progress made with cost QDCTBSHNMR�HM�SGD�ãQRS�G@KE�G@R�BNMSHMTDC�into the second half, including a reduction NE�NUDQ��í��%3$�CTQHMF�SGD�XD@Q

At a headline level, UK premiums of `��L�VDQD�CNVM��í �'NVDUDQ��premiums excluding Motability were CNVM��í�VHSG�/DQRNM@K�CNVM��í� @MC�"NLLDQBH@K�CNVM��í

£2.6bnUK net written premiums

99.5%UK combined ratio

OUR BRANDS IN UK AND IRELAND

A 25% G

11%

B 11% D

24%

F 8%

E 11

%

C 10%

TYPES OF BUSINESS IN THE UK

A Household B Personal motor C PetD Commercial property E Liability F Commercial motor G Marine and other

1 Excluding Legacy


STRATEGIC REPORT

'NTRDGNKC�OQDLHTLR�VDQD�CNVM��í�QDâDBSHMF�BNLODSHSHUD�BNMCHSHNMR�@MC�@�softening rate environment. In Personal ,NSNQ��OQDLHTLR�VDQD�CNVM��í�@R�@�result of our portfolio actions and pricing discipline, although the steep CDBKHMDR�RDDM�HM�SGD�ãQRS�G@KE�G@UD�MNV�begun to slow. Excluding planned exits, LNSNQ�OQDLHTLR�VDQD�CNVM��í �(M��VD�K@TMBGDC�NTQ�,.1$�3'�-�Smart Wheels ‘black box’ telematics product aimed at young drivers, and MORE TH>N Drive, an app that allows drivers to track their driving behaviour, which are showing promising growth. /DS�OQDLHTLR�VDQD�TO��í�@KSGNTFG�SGD�underlying movement after removing prior period accounting premium @CITRSLDMSR�V@R��í��L@HMKX�CQHUDM� by rate increases.

Across Commercial we have maintained underwriting discipline in a competitive market and a soft rate environment. 1DONQSDC�OQDLHTLR�VDQD�CNVM��í�SN�`��L��OQHL@QHKX�CQHUDM�AX�@�QDCTBSHNM�

in Motability premiums as a result of our new contract terms which took effect EQNL��.BSNADQ��,NS@AHKHSX�MDS�VQHSSDM�OQDLHTLR�HM��VDQD�`��L�UDQRTR�`��L�HM��@MC�@�QDCTBSHNM� in Marine mainly due to adjustments to prior year premiums after a change in accounting methodology. We ceased writing Specialty Lines business in Germany with effect from 1 October ��ATS�BNMSHMTD�SN�@BSHUDKX�VQHSD� and grow our Marine business there. SME, one of our areas of focused FQNVSG��FQDV��í�NUDQ�K@RS�XD@Q�@MC�targeted activity in Engineering CDKHUDQDC��í�FQNVSG

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

OUR STRATEGYIn UK Commercial, our strategy HR�SN�FQNV�SGD�ATRHMDRR�OQNãS@AKX��focusing on our revenue generating capabilities and expense reductions. In UK Personal we will continue to focus our business on our target RDFLDMSR�VGHKD�RHFMHãB@MSKX�reducing our cost base and improving our capabilities. In Ireland we have some important market positions upon which future success can be built, but we will need to invest to achieve market-leading capabilities in pricing and data, underpinned by RXRSDLR�RHLOKHãB@SHNM

SUPPORTING SOCIAL ENTERPRISEOur 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.

SSE supports individuals to set-up businesses with a social purpose. By taking part in SSE’s programmes, social entrepreneurs are able to transform

their talent into sustainable solutions to poverty and disadvantage. Over the three-year partnership we are providing bursaries to fund social entrepreneurs through the SSE Fellowship Course. We are also providing senior RSA mentors to support the students. Graduates of SGD�%DKKNVRGHO�"NTQRD�@QD��í�LNQD�KHJDKX�SN�RTQUHUD�ENQ�ãUD�XD@QR�SG@M�traditional UK business.

(M��SGHR�O@QSMDQRGHO�VNM�SGD�Chartered Insurance Institute Public Interest Awards, ‘Best corporate social responsibility initiative’.

UK AND IRELAND FINANCIAL SUMMARY1


£m % growth2 2014 (£m) ��`L� 2014 (%)

UK Personal 1,176 (6) 49 �� 95.9UK Commercial 1,393 (22) (34) �� 102.1Total UK 2,569 (15) 15 �� 99.5

Ireland 295 (5) (107) �� 132.3Notes:� � #TQHMF��VD�QDBK@RRHãDC�4*�+DF@BX�ATRHMDRR�@R��MNM�BNQD� �(S�G@R�SGDQDENQD�ADDM�DWBKTCDC�EQNL�SGD�4*�ãFTQDR�@ANUD

� � S�BNMRS@MS�DWBG@MFD

��

OUTLOOKIn 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.

loss ratios were higher than expected and loss patterns have remained volatile as data is cleansed and new patterns established. Pricing and underwriting @BSHNM�S@JDM�HM��RGNTKC�D@QM�SGQNTFG�HMSN�RHFMHãB@MS�ETQSGDQ�KNRR�Q@SHN�HLOQNUDLDMS�HM��

3GD��VD@SGDQ�Q@SHN�NE�� í�V@R� in line with long-term trends but marginally worse than plan, while SGD�K@QFD�KNRR�Q@SHN�NE�� í�V@R� 1.1 points worse than trend.

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 �

The Irish executive management team has been completely restructured and VD�G@UD�L@CD�FNNC�OQNFQDRR�HM�ãKKHMF�critical management vacancies with a new CEO, CFO, COO and Chief 4MCDQVQHSHMF�.EãBDQ�MNV�HM�OK@BD �

Cost reduction plans are in place, and underwriting actions should improve current year underwriting performance SN�@�OQNãS�HM�� 1DRDQUHMF�@BSHNMR�@QD�now largely complete, although some ��HLO@BS�QDL@HMR�ONRRHAKD

On pricing we have applied strong Q@SD�HMBQD@RDR�CTQHMF��HM�JDX�KHMDR�requiring remediation, with year-on-XD@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

IRELAND FINANCIAL PERFORMANCE(M�(QDK@MC��HS�G@R�ADDM�@�CHEãBTKS�XD@Q� for RSA in recognising further losses ENQ�DUDMSR�@MMNTMBDC�HM��@MC�beginning the recovery process. 3GD��TMCDQVQHSHMF�KNRR�V@R� £107m, recorded as a current year loss NE�`��L�@MC�@�OQHNQ�XD@Q�KNRR�NE�`��L

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.

3GD�BTQQDMS�XD@Q�KNRR�NE�`��L�QDâDBSR�the ongoing impact of the issues HCDMSHãDC�HM��HM�O@QSHBTK@Q�inadequate pricing on pre-remediation business that came through in earned premiums. Once claims reserving was LNQD�ETKKX�QDLDCH@SDC�CTQHMF��HS�became apparent that in key portfolios


STRATEGIC REPORT

UK Legacy

The UK Legacy underwriting result for ��V@R�@�KNRR�NE�`��L��`��L�loss) and was primarily driven by a combination of asbestos, deafness and ‘abuse’ reserve additions. The asbestos additions are mainly due to revisions to estimates of reinsurance recoveries SN�QDâDBS�SGD�K@SDRS�DWODQHDMBD�NE� claims across accident years.

S��#DBDLADQ��4*�+DF@BX�MDS�reserves were £1bn (with a discounted U@KTD�NE�`� �AM� �

ASBESTOSAsbestos technical provisions �ADENQD�CHRBNTMSHMF��HMBKTCD�`��L� ��#DBDLADQ��`��L��ENQ� @RADRSNR�HM�SGD�4*�BNLOQHRHMF�`��L� ��#DBDLADQ��`��L��ENQ�4*�QHRJR�@MC�`��L��#DBDLADQ��`��L��ENQ�US risks written in the UK. As in previous years, and as a standard part of our reserving practices, these asbestos provisions have been reviewed by external consultants. These provisions can be analysed by survival ratio.

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.

Our UK Legacy portfolio comprises exposure to asbestos and other long term liabilities. Our exposure to these claims arises from Employers and Public Liability policies written over the past 50 years. While these account for the majority of liabilities, the portfolio also includes a variety of London Market related legacy liabilities.

ASBESTOS RESERVES

Total

UK risks written

in the UK

US risks written

in the UK

Provisions in £m

Net of reinsurance 829 ��

Net of discount 506 ��

Survival ratios (Gross of discount) – On payment

One year 29 ��

Three-year average 30 ��

2TQUHU@K�Q@SHNR��&QNRR�NE�CHRBNTMS��¹�.M�MNSHëB@SHNMR

One year 25 ��

Three-year average 23 �� 10

��

Latin America

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.

HILARIO ITRIAGOCEO, Latin America

OUR OPERATIONS IN LATIN AMERICARSA 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.

.TQ�ATRHMDRR�HR��í�/DQRNM@K�@MC� ��í�"NLLDQBH@K � QNTMC��í�NE�NTQ�business is distributed through brokers with the remainder predominantly SGQNTFG�@EãMHSX�O@QSMDQRGHOR �6D�@QD� @�KD@CHMF�@EãMHSX�HMRTQDQ�HM�SGD�QDFHNM�with a strong track record in the ãM@MBD��QDS@HK�@MC�LNSNQ�RDFLDMSR

FINANCIAL PERFORMANCENet 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

There was strong growth in Argentina NE��í�CQHUDM�AX�SGD�GHFG�HMâ@SHNM�DMUHQNMLDMS��@MC�FQNVSG�NE��í� �NQ�`�L��HM�4QTFT@X �!Q@YHK�OQDLHTLR�VDQD�TO��í�HM�@�BNLODSHSHUD�L@QJDS � We have also taken action to restructure the business which includes the exit of Risk Managed Property, Construction and Engineering and Liability. In Chile OQDLHTLR�VDQD�â@S�CTD�SN�RNES�L@QJDS�conditions and actions taken on our Motor portfolio.


100.3%Combined ratio

A 38%

B 62%

TYPES OF BUSINESS IN LATIN AMERICA

A Personal B Commercial


STRATEGIC REPORT

OUR FOOTPRINT IN LATIN AMERICADuring the year we have restructured our business in Colombia. We have announced the exit of Personal and Commercial Motor, and intend to pursue OQNãS@AKD�FQNVSG�HM�MNM�,NSNQ�"NLLDQBH@K�KHMDR�@MC�@EãMHSX�RBGDLDR � R�@�QDRTKS��OQDLHTLR�VDQD�CNVM��í� in the year.

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

OUTLOOKIn Latin America, the markets we operate in continue to be attractive on a fundamental basis, though competitive, driven by low insurance penetration and a growing middle class across the region. Given the softer economic outlook, we anticipate growth continuing at a more subdued pace than historical levels, with improving OQNãS@AHKHSX�S@QFDSDC

OUR STRATEGYOur 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.

LATIN AMERICA FINANCIAL SUMMARY


£m % growth12014 (£m)

��(£m)

2014 (%)

Chile 166 – (4) 17 102.4

Argentina 210 32 10 (1) 94.9

Brazil 119 2 (13) � 110.9

Mexico 88 (4) 2 � 97.2

Colombia 61 (31) 1 (1) 99.1

Uruguay 46 15 2 (1) 94.7

Total Latin America 690 4 (2) �� 100.3

Notes:1. At constant exchange.

��

In 2014, we continued to put our strong levels of employee engagement to the test. Our people reacted quickly and rose to the challenges we faced by continuing to support our customers when they needed us.

Our people, our culture

Our people have continued to work hard to meet the challenging deadlines set following the business review HM�D@QKX�� 3GDX�G@UD�DLADCCDC� the necessary changes required and responded well to all the new policies we have implemented, while endeavouring to improve the customer experience and increase RG@QDGNKCDQ�BNMãCDMBD

OUR PEOPLEAs 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.

This period of change and uncertainty G@R�ADDM�CHEãBTKS�ENQ�NTQ�ODNOKD��ATS�VD�have maintained our commitment to be open, honest and to communicate early about any changes that impact them.

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.

3GD�HMHSH@SHUDR�VD�K@TMBGDC�HM�� to improve the diversity of our workforce – including our global female sponsorship programme, female networking events and mentoring programmes, enhanced âDWHAKD�VNQJHMF�NOONQSTMHSHDR�@MC� the increased intake of women on our global talent programmes – are starting to pay off and build foundations for the future.

DEVELOPMENTDespite the challenges and desire to reduce expenses, we have continued to focus on the development of our ODNOKD �(M��VD�QDEQDRGDC�NTQ�leadership development programmes and now have world-class externally recognised programmes in place to support the development of our people globally at all levels:

• 3GD�$WDBTSHUD�#DUDKNOLDMS�Programme (EDP) – focuses on increasing the leadership capabilities of senior employees regarded as having the potential to be among the future top leadership of the Group.

• 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��

NUMBER OF FULL-TIME EMPLOYEES AT THE END OF 2014

Country No. of FTEsPercentage of Group total

UK ��

Ireland ��

Scandinavia �� 19

Canada �� 19

Latin America ��

Emerging Markets ��

Group Corporate Centre �� 1

Other ��


STRATEGIC REPORT

BOARD

GROUP EXECUTIVE

SENIOR MANAGEMENT

TOTAL GROUP

Board 20% (2)

22% (2)

2013

2014

Senior management 28% (259)

28% (284)

2013

2014

Group Exec 16% (2)

17% (2)

2013

2014

Total group 52% (12,132)

49% (10,655)

2013

2014

1 Based on total Group headcount

�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 �

We have continued to use our long established and award-winning Technical Academy to develop and enhance our critical insurance skills across the Group. As a result we continue to have some of the strongest underwriting, pricing, actuarial and claims capability in our industry.

We have also focused on building our skills and expertise in new areas such as our Digital and Telematics Centres of Excellence. This is already yielding strong results.

OUR CULTUREAt 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 have introduced a new annual employee survey called Yoursay, which gives people an opportunity to ‘shout out’ about the things they want to improve or change. We have had over ��RGNTS�NTS��UDQA@SHL�BNLLDMSR�and this will provide us with valuable insight for the year ahead and the improvements we can make.

We have introduced Yammer (an internal social enterprise network) within the UK as a place where people can connect openly and honestly to CDA@SD�HRRTDR�@MC�HCD@R �.UDQ��í� of people have registered and we have, on average, 10,000 comments posted every month. Our plans are to roll-out Yammer to all of our BNTMSQHDR�CTQHMF��

We have strengthened our culture by introducing an award-winning Culture Risk Index and Assessment across the world, which helps leaders and HR teams to identify and manage cultural health and identify potential issues around culture that could lead to a failure of ethics, controls or governance before they occur.

We continue to embed our customer obsession and the expectations of our people that support this, by ensuring its integral to every aspect of the employee life cycle. Our obsession for customers guides our decision-making and this focus is underpinned by robust performance management processes. All employees are set clear annual goals – the what – as well as having to live up to our ‘expectations’ of employee behaviour – the how.

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.

FEMALE REPRESENTATION THROUGHOUT THE COMPANY1

63%In 2014, 63% of our senior executive QNKDR�VDQD�äKKDC�VHSG� internal candidates.

26%Of the 42 participants who completed the 2014 STA programme, 26% have already moved into new roles within the organisation.

48%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.

Corporate responsibility

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.

OUR RESPONSEWe take action to support the transition to an environmentally sustainable world by helping our customers respond to changing risks and promoting new ways of working that save energy and resources and create less waste.

OUR PROGRESS 2014 (TARGET: 2018)

On target: Reduce our carbon emissions by 20% per employee

On target: Support customers through the development of products and services that help them respond to changing environmental risks and opportunities

In addition to responding to high levels of weather-related claims this year, we have taken proactive measures to help customers increase their resilience to extreme weather events, including weather warnings and advice using digital communications.

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.

As a leading company in the business of risk and protection, we have a responsibility and a commercial imperative to help our customers’ and society as a whole, manage the implications of a changing climate and demographic, and social trends. This presents us with both opportunities and risks.

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.

Our recovery plan has changed the shape of our business and challenged our ability to meet some of the long-term targets we set in 2013. We may therefore not make quite as much progress as we envisaged over the short term. We will reassess the appropriateness of our long-term targets at the end of 2015.

However, this does not change our commitment to addressing the fundamental issues that impact our customers and the communities we operate in. In 2014, we made RHFMHãB@MS�OQNFQDRR�SNV@QCR�LDDSHMF�our goals and making a positive difference. Highlights are included throughout this report and in this section.


STRATEGIC REPORT

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.

OUR RESPONSEWe work to protect millions of people around the world every day, helping them to live safer, more secure lives.


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.

OUR RESPONSEWe use the experience of our staff to provide practical support in the development of employability skills among young people in our communities. We support the development of social enterprise through business mentoring and enable our staff to support causes they are passionate about, providing matched funds and time off for volunteering.


Behind target: .UDQ�SGD�MDWS�ãUD�XD@QR�we will double our annual community contribution

During 2014, we donated £1.1m to charitable causes and 6,691 employee volunteering hours.

More of our volunteering hours this year were directed towards skills-sharing opportunities, focused on education, employability and enterprise. We believe that sharing the skills that exist in the business will be more ADMDãBH@K�ENQ�ANSG�NTQ�ODNOKD�@MC�NTQ�communities. The feedback from staff who have participated in these activities has been positive; 90% of RSA volunteers ‘agreed’ or ‘strongly agreed’ they had developed their own skills following an employability workshop; 100% of RSA volunteers ‘agreed’ or ‘strongly agreed’ that they would recommend this type of volunteering opportunity to colleagues.

For further detail regarding our Corporate Responsibility strategy, visit us online at: rsagroup.com/corporate-responsibility

GREENHOUSE GAS EMISSIONS FOR RSA INSURANCE GROUP (TONNES OF CO2e*)

2014 2013

Scope 1 12,279 12,968

Scope 2 24,717 25,787

Scope 3 16,376 23,901

Total gross 53,372 62,656

Gross tonnes CO2e per FTE 2.4 2.6

Carbon offsets (UK and Ireland) 21,827 27,278

Total net emissions 31,545 35,378

Notes:* Group carbon dioxide equivalent emissions (tonnes)

Scope 1: All direct GHG emissions. Scope 2: Indirect GHG emissions from consumption of purchased electricity, heat or steam. Scope 3: Other indirect emissions

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*)

Scope 1 Scope 2 Scope 3

Canada 1,544 2,343 2,887

Latin America 1,339 2,085 2,010

Scandinavia 871 2,046 3,743

UK and Ireland 5,579 11,059 5,190

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.

43

The future success of the Group is underpinned by our conservative QHRJ�OQNäKD�@MC�BKD@Q�QHRJ�@OODSHSD

Risk management

RISK MANAGEMENT APPROACHWe take a broad view of the scope of risk management, which is taken to include the risk of underperformance as well as adverse events and the failure of processes.

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.

More detail on how we manage different types of risk is set out in pages 137 to 150.

PRINCIPLES

Simple objectives• Create value for all stakeholders

• Focus on general insurance in our selected markets

• Commitment to sustainable, OQNãS@AKD�ODQENQL@MBD

Clear risk appetite• Underwriting and operating

excellence

• Strong control environment

• 3HFGS�ãM@MBH@K�L@M@FDLDMS

• Protecting and managing the Group’s reputation.

Robust governance, control and reporting• Comprehensive policies, procedures

and controls

• Clear delegation of authorities

• Robust lines of defence

• Regular and relevant reporting and assurance processes.

OUR RISK MANAGEMENT IN PRACTICE

1. MAJOR EVENT ROOT CAUSE ANALYSIS

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.

This goes beyond identifying process failures and traces further back to identify the underlying internal management causes of RHFMHãB@MS�DUDMSR�RTBG�@R�BTKSTQD��leadership behaviour and reporting lines. The major event root cause analysis process helps to embed learnings across the organisation to ensure that similar events do not reoccur.

2. CULTURAL HEALTH INDEXThe Group Risk and HR teams worked together to create an index of positive and negative indicators to help senior leaders spot the early warning signs of cultural risk.

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.


STRATEGIC REPORT

OUR RISK MANAGEMENT IN PRACTICE: REVIEW OF INTERNAL CONTROL SYSTEM(M��12 �ENTMC�ãM@MBH@K�@MC�BK@HLR�irregularities in its Irish business. Following these an independent review by PWC was commissioned to satisfy the Board and shareholders that the problems in Ireland were not to be found elsewhere in the Group.

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.

RISK STRATEGY AND SUMMARY RISK APPETITE

KEY RISK STRATEGIES

Capital Risk:— Strong discipline

in capital planning

Insurance Risk:— Varied risk mix of insurance

business; with volume and mix effectively managed

��+HLHSDC�DWONRTQD�SN�CDãMDC�segments of special high risk business (e.g. Terrorism, Nuclear, Inwards Re)

— Strong insurance risk management disciplines

��$EãBHDMS�QDHMRTQ@MBD�strategy

— Well reserved

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

— Asset Liability duration matching with some limited âDWHAHKHSX�ENQ�S@BSHB@K�@RRDS�management

Credit Risk:— Cautious credit risk policies;

with credit rating exposures laddered from AAA to A- and only limited exposure below

Liquidity Risk:— Substantial proportion

of assets are highly liquid

Operational Risk:��2SQNMF�@MC�DEãBHDMS�

operational control environment

Pension Risk— Cautious asset allocation

and investment management policies within pension schemes

Reputational Risk:— Proactive management

of reputational risk with key focus on Serving customers well

1. Tighten strategic focus of the Group2. Reset the quality and quantity of capital strength3. Improve business performance and capability to sustain it

Serve Customers WellOperate with Capital StrengthFocus on driving shareholder value

RISK APPETITE SUMMARY

Capital Surplus:— Economic, Regulatory

and S&P Coverage Ratios above determined levels and buffers

Insurance Risk— Risk mix strategy clearly CDãMDC�@S�CDS@HKDC�ONQSENKHN�level with rigorous risk selection

— Rigorous underwriting and claims control with appropriate pricing sophistication

— 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

— Retentions in 2015: £50m per Property risk, £15m for Marine, £50m/C$50m per Catastrophe ex UK, £75m for UK Catastrophe, subject to group aggregate cover with a £180m excess.

Financial Risks— Exposures remain within RODBHãDC�KHLHSR�ENQ�@KKNB@SHNM�by asset class, single counterparties, balance sheet FX exposure, asset-liability matching @MC�BQDCHS�OQNãKD

Operational:��-N�RHFMHãB@MS�ãM@MBH@K�NQ�

reputational impacts from any operational loss event (including IT)

��2SQNMF�@MC�DEãBHDMS� ãM@MBH@K�BNMSQNK

— Effective business recovery processes

— Ensuring delivery of change OQNFQ@LLD�ADMDãSR

— High performing people, disciplined culture

Reputation:��-N�RHFMHãB@MS�C@L@FD�SN�

RSAs Reputation, including with Customers, Business Partners, Regulators, Investors or in the Media

RSA GROUP STRATEGY AND ACTION PLAN

45

ECONOMIC CAPITAL BY TYPE OF RISKA Insurance RiskB Investment RiskC Operational RiskD Pension Risk

1 in 200 yearsor <0.5% Probability

1 in 10 yearsor 10-33% Probability



Will happen this year or 95% Probability

Very High >£50m

High £30-50m

Medium £20-30m

Low £10-20m

Very Low<£10m

+HJDKHGNNC

Imp

act

1003

05 02

04

06

09

010807

08

07

GROUP STRATEGIC RISK PROFILE

� 2NKHC�ANQCDQ�CDMNSDR�MDV�QHRJ

� � QQNV�RGNVR�LNUDLDMS� of risk since previous report

GROUP STRATEGIC RISK PROFILE

DISTRIBUTION OF QUANTIFIABLE RISKSOur internal model provides a PT@MSHãB@SHNM�NE�SGD�SNS@K�@LNTMS� of risk borne by the Group, expressed as the amount of capital required to enable it to meet all liabilities to @�BNMãCDMBD�KDUDK�BNMRHRSDMS�VHSG� the Group’s target ‘A’ rating.

!X�@M@KXRHMF�SGD�B@RGâNVR�HM�NTQ�model, we can assess the extent to which the overall level of risk is attributable to broad categories of risk.

Consistent with our strategy and appetite, the majority of the Group’s risks relate to insurance, comprising higher than anticipated underwriting losses, net catastrophe losses and reserve deterioration.

Our conservative investment strategy means that investment risk forms a relatively small proportion of our overall risk compared with the industry. This HMCHB@SDR�DWONRTQD�SN�ãM@MBH@K�L@QJDS�QHRJR�@QHRHMF�EQNL�TMGDCFDC�HMâ@SHNM��and currency and other exposures in our insurance operations.

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.

A 65%

B 18%

D 9%

C 8%


STRATEGIC REPORT

Risk ID/Owner Risk Description Controls/key mitigants/actionsLikelihood change in year

01(R Houghton)

Impact of negative long-term macro-DBNMNLHB�SQDMCR��ãM@MBH@K�L@QJDS�volatility and/or persistent low yields, including impact on pension scheme position particularly of low real yields

��&DNFQ@OGHB�CHUDQRHãB@SHNM• High quality, low-risk investment strategy and portfolio• Pension de-risking actions taken, and ongoing

Trustee dialogue on future action• Tactical actions to mitigate reduction in yields• Defensive positioning to challenged Eurozone economies

02(D Coughlan)

Systemic failure in, or obsolescence of, pricing, underwriting and claims processes

• 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

03(R Houghton/ Regional CEOs)

(MRTEãBHDMS�B@OHS@K�FDMDQ@SHNM�NUDQ�medium term to support dividend and strategy or to cover any increase in capital requirement

• Delivery of UK strategy and other regions’ operational plans• Capital and risk reduction actions taken in Q1 2014 and

ongoing business review including disposals• M&A moratorium • Achieving Internal Model approval

04(R Houghton/ D Weymouth/ P Bergander)

RSA fails to secure Solvency II internal model approval, all or in part, by Q4 2015, resulting in a requirement to enter SII regime on a Standard formula basis for a material additional capital requirement

• 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

Group and local Internal Model Approval work plan

N/A

05(V Evans)

Failure of reward systems to align with corporate aspirations and external stakeholder expectations

• Remuneration committee governance• Review of remuneration system• Investor and media relations

06(R Houghton/ Regional CEOs)

Failure to align shareholder expectations VHSG�RSQ@SDFX��DWDBTSHNM�@MC�ãM@MBH@K�performance

• Robust strategic and operational planning processes• Delivery of operational plans• Robust management of underperforming businesses• Management of corporate governance requirements• Investor and media relations

07(R Houghton)

Further restrictions on fungibility of capital following tighter regulatory measures

• Internal dividend policy��2HLOKHãB@SHNM�NE�DMSHSX�RSQTBSTQD��D F �2B@MCHM@UH@�• Regulatory dialogue (and clarity from PRA on UK targets)

08(D Price)

Failure to deliver on the IS transformation programme, including stability issues or business disruption during implementation

• Programme is made up of small, incremental investments • Commenced uplift of regional capability and recruitment

of new IT Leaders• Implemented a transparent governance

and assurance model��2ODBHãB�ENBTR�@MC�B@O@AHKHSX�TOKHES�NM�CDRHFM��

partner selection and contracting��(LOKDLDMS@SHNM�BNRSR�@MC�ADMDãSR�QDUHDVDC�

and benchmarked by advisors• Better alignment and joint ownership of execution

with the business across all regions

09(V Evans/ Regional CEOs)

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

• Retention strategies targeted at key senior leaders and critical skill

• Market mapping of key areas to develop talent and succession pipeline

• Engaging our people in the Group strategic narrative• People expectations roll-out as part of Brand refresh

10(D Coughlan)

Failure of reinsurance programme SN�CDKHUDQ�OK@MMDC�ADMDãSR�SGQNTFG�� e.g. counterparty failure, operational error or failed recovery processes

• Board, Exco and BRC governance• Reinsurance recovery processes• Group-wide reinsurance placement management• Reinsurance Security controls and processes

STEPHEN HESTERGroup Chief Executive

Our 2014 Strategic Report, from page 2 to page 47, has been reviewed and approved by the Board of directors on 25 February 2015

47

We have further enhanced our governance structure globally to ensure consistency of oversight and reporting.

Chairman’s governance letter

Enrico Cucchiani was appointed as an Independent Non-Executive Director on 1 December 2014. Enrico has extensive experience and JMNVKDCFD�HM�SGD�FKNA@K�ãM@MBH@K�services sector and the insurance sector including over 15 years at Allianz in a variety of international roles, and G@R�RHFMHãB@MS�!N@QC�DWODQHDMBD�VHSG� a number of publicly quoted companies. 6D�VDKBNLD�$MQHBN�SN�SGD�!N@QC� @MC�KNNJ�ENQV@QC�SN�ADMDãSHMF�EQNL� his experience.

!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.

There have also been some changes to the Executive Committee during the year with the introduction of the new QNKD�NE�"GHDE�.ODQ@SHMF�.EãBDQ��S@JDM� up by Paul Whittaker, formerly CEO of NTQ�$LDQFHMF�,@QJDSR�ATRHMDRR�@MC�SGD�CDO@QSTQDR�NE�,HJD�'NKKHC@X�6HKKH@LR��Chief Executive, Scandinavia; Neil Lightbown, Group Global Specialty Lines Director; and Paul Donaldson, &QNTO�!QNJDQ�1DK@SHNMRGHO�@MC�2@KDR�Director. Subsequently, Patrick !DQF@MCDQ�V@R�@OONHMSDC�@R�"$.�Scandinavia; Darren Price as Group Chief (MENQL@SHNM�.EãBDQ�@MC�2SDOGDM�+DVHR�as CEO UK & Western Europe. In addition, Derek Walsh took on the role of Global !QNJDQ�1DK@SHNMRGHO�#HQDBSNQ �

#@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.

OVERVIEW3GQNTFGNTS��SGD�!N@QC�ENBTRDC� on reviewing the Company’s business NAIDBSHUDR��SN�CDãMD�SGD�&QNTO�R�priorities and identify a clear recovery programme. A Global programme was commissioned by the Group Audit "NLLHSSDD�@MC�!N@QC�1HRJ�"NLLHSSDD�Chairs to enhance the effectiveness of the Internal Control system and increase scrutiny. We have made tremendous headway on our journey to recovery, but there is still a way to go.

LEADERSHIPThe Company is led by a strong, experienced leadership team with wide-ranging expertise and capability. (M�%DAQT@QX��2SDOGDM�'DRSDQ�INHMDC�SGD�!N@QC�@R�&QNTO�"GHDE�$WDBTSHUD�bringing a wealth of experience and FKNA@K�ãM@MBH@K�RDQUHBDR�DWODQSHRD � 'D�G@R�ADDM�HMRSQTLDMS@K�HM�CQHUHMF� our action plan forward.

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.

MARTIN SCICLUNAChairman


DIRECTORS’ AND CORPORATE GOVERNANCE REPORT

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.

In January 2014, the PWC Report made a number of recommendations which have been incorporated into a Global programme, commissioned by the &QNTO� TCHS�"NLLHSSDD�@MC�!N@QC� Risk Committee Chairs to enhance the effectiveness of the Internal Control RXRSDL �3GD�!N@QC�HR�BNMãCDMS�SG@S� the standards of corporate governance put in place globally and the solid governance framework in place enables DEãBHDMS�@MC�DEEDBSHUD�CDBHRHNM�L@JHMF�with clear responsibilities.

Our Remuneration Policy was approved AX�RG@QDGNKCDQR�@S�SGD�� &,��following a review of our incentive programmes to simplify arrangements and improve transparency. The Policy is well aligned to our business strategy, incorporating stretching measures, QDâDBSHMF�NTQ�INTQMDX�SN�QDBNUDQX� and the long-term success of the business. Responding to shareholder feedback, we will, in 2015, additionally include TNAV:NWP into our incentive @QQ@MFDLDMSR �%TKK�CDS@HKR�@QD�RDS�NTS�HM�the Directors’ Remuneration Report on pages 80 to 106.

ACCOUNTABILITYAs 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.

ENGAGEMENTThroughout the year, the management team have had open discussions with our stakeholders: including employees, investors, the regulators and rating agencies.

3GD�!N@QC�G@R�ADDM�SQ@MRO@QDMS�HM�HSR�reporting disclosure to keep the market informed of the strategic progress we have made in our recovery plan, with management reinforcing the messages through discussions with institutional shareholders and analysts. During the year, over 500 meetings have been held with institutional investors focusing on the outlook and strategic direction of the Group.

3GD�!N@QC�HR�BNLLHSSDC�SN�HLOQNUHMF�the experience of the customer and providing an exceptional service.

BOARD COMMITTEES R�"G@HQL@M�NE�SGD�!N@QC�@MC�"G@HQ�NE�the Group Nomination and Governance Committee, I am responsible for ensuring SG@S�SGD�!N@QC�@MC�HSR�"NLLHSSDDR�operate effectively, have the right

balance of skills and experience required, and that these Committees ADMDãS�EQNL�U@QHDC�DWODQSHRD �3GD�composition of each of the Committees was reviewed in the light of Edward +D@�@MC�,@KBNKL�+D�,@X�R�CDO@QSTQDR �Johanna Waterous succeeded Edward Lea as Senior Independent Director. Kath Cates succeeded Edward as "G@HQ�NE�SGD�!N@QC�1HRJ�"NLLHSSDD� and became a member of the Group Remuneration Committee. Jos Streppel RTBBDDCDC�,@KBNKL�SN�ADBNLD�"G@HQ�NE�the Group Investment Committee and became a member of the Group Audit Committee. All have embraced their new roles and you will hear from Kath and Jos giving an overview of their Committee activity later in the report. Upon appointment, Enrico Cucchiani INHMDC�SGD�!N@QC�1HRJ�"NLLHSSDD�@MC�Group Remuneration Committee.

#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.

CONCLUSION3GD�!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.

MARTIN SCICLUNAChairman��%DAQT@QX��

��

Board of Directors

Committees:

A B I

N R

Chairman

Name:�, 13(-�2"("+4- �Role: ChairmanAppointment date: January 2013Nationality:�!QHSHRGSkills 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

Committees:

A B I

N R

Executive Director

Name:�23$/'$-�'$23$1�Role: Group Chief ExecutiveAppointment date:�%DAQT@QX��Nationality:�!QHSHRGSkills and experience: Stephen was OQDUHNTRKX�"GHDE�$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

Committees:

A B I

N R

Independent Non-Executive Director

Name:�).' -- �6 3$1.42�"!$�Role: Senior Independent Non-Executive Director Appointment date:�,@X��Nationality: Canadian Skills and experience: Johanna’s previous roles include Chairman of Tate Enterprises and over 20 years with ,B*HMRDX�î�"NLO@MX��ONRHSHNMR�HMBKTCHMF�"N�KD@CDQ�NE�SGD�&KNA@K�,@QJDSHMF�@MC�Sales Practice and Leader of their UK Consumer Practice and the European Retail Practice, and Director of Shoppers #QTF�,@QS�"NQONQ@SHNM��@�BNLO@MX�KHRSDC�on the Toronto Stock Exchange). Johanna brings deep expertise on consumer behaviour, sales and marketing across multiple sectors.

External appointments: Non-Executive #HQDBSNQ�NE�6,�,NQQHRNM�2TODQL@QJDSR�OKB��Non-Executive Director and Senior Independent #HQDBSNQ�NE�1DW@L�/+"��#HQDBSNQ�NE�1!&�*DV�Enterprises Limited and Chairman of Sandpiper CI.

Committees:

A B I

N R

Executive Director

Name:�1("' 1#�'.4&'3.-�Role:�&QNTO�"GHDE�%HM@MBH@K�.EãBDQAppointment date: June 2012Nationality:�!QHSHRGSkills 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.

External appointments: No external appointments to listed companies.

��1HBG@QC�VHKK�QDRHFM�@R�@�CHQDBSNQ�VHSG� DEEDBS�EQNL��,@X��



Committees:

A B I

N R


Name:�$-1(".�"4""'( -(�Role: Independent Non-Executive DirectorAppointment date: December 2014Nationality: ItalianSkills and experience: Enrico has over 35 years’ global executive and non-DWDBTSHUD�DWODQHDMBD�@BQNRR�ãM@MBH@K�services including banking and insurance @MC�@�MTLADQ�NE�AKTD�BGHO�AQ@MCR �'D�spent over 15 years at Allianz in a variety NE�HMSDQM@SHNM@K�QNKDR��HMBKTCHMF�'D@C�NE�&KNA@K�/î"�@MC�'D@C�NE�LNRS�NE�$TQNOD��Latin America and Africa. External appointments: Partner of Think Global Investments LLP.

Committees:

A B I

N R


Name:� + 23 (1�! 1!.41�Role: Independent Non-Executive DirectorAppointment date: October 2011Nationality:�!QHSHRGSkills 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�- 3 �!TSSDQãDKC�î�2NM�+HLHSDC��@�BNLO@MX�KHRSDC� HM�!DQLTC@�

COMMITTEE MEMBER KEY

A Group Audit CommitteeB� !N@QC�1HRJ�"NLLHSSDDI Group Investment CommitteeN Group Nomination and Governance CommitteeR Group Remuneration Committee

Chair of Committee� ,DLADQ�NE�"NLLHSSDD

Committees:

A B I

N R


Name:�'4&'�,(3"'$++Role: Independent Non-Executive DirectorAppointment date: September 2012Nationality:�!QHSHRGSkills and experience:�'TFG�HR�SGD�"GHDE�'TL@M�1DRNTQBDR�@MC�"NQONQ@SD�.EãBDQ�of Royal Dutch Shell plc and a member NE�SGD�2GDKK�$WDBTSHUD�"NLLHSSDD �'TFG�has considerable experience in advising NM�'1�@MC�QDLTMDQ@SHNM�L@SSDQR

External appointments: Director of Shell (MSDQM@SHNM@K�+HLHSDC��2GDKK�%NTMC@SHNM�@MC�Shell Aircraft Limited. Advisory roles held at 3GD�"DMSQD�ENQ� CU@MBDC�'TL@M�1DRNTQBDR� @S�"NQMDKK�4MHUDQRHSX� CUHRNQX�!N@QC��(,#�!TRHMDRR�2BGNNK� CUHRNQX�!N@QC��%DKKNV�NE�SGD�-@SHNM@K� B@CDLX�NE�'TL@M�1DRNTQBDR�(USA) and Independent Director of Edinburgh !TRHMDRR�2BGNNK �

Committees:

A B I

N R


Name:�).2$/'�231$//$+�Role: Independent Non-Executive DirectorAppointment date: October 2011Nationality: DutchSkills and experience: Jos has a comprehensive understanding of the insurance market globally, extensive ãM@MBH@K�RDQUHBDR�DWODQSHRD�@MC�@�FNNC�knowledge of international and emerging markets. Previous roles include Chief %HM@MBH@K�.EãBDQ�NE� DFNM�TMSHK�� "G@HQL@M�NE�SGD�,NMHSNQHMF�"NLLHSSDD� of the Dutch Corporate Governance Code and Advisor to the Tilburg Centre NE�%HM@MBD

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

Committees:

A B I

N R


Name:�* 3'�" 3$2�Role: Independent Non-Executive DirectorAppointment date: September 2013Nationality:�!QHSHRGSkills and experience: Kath has over ��XD@QR��DWODQHDMBD�HM�FKNA@K�ãM@MBH@K�services. She was previously Chief .ODQ@SHMF�.EãBDQ��6GNKDR@KD�!@MJHMF�ENQ�2S@MC@QC�"G@QSDQDC�!@MJ�@MC�RODMS��XD@QR�@S�4!2 �*@SG�G@R�F@HMDC�@�CDDO�knowledge of control, governance and risk management, working in emerging markets and across different sectors and cultures.

External appointments: Non-Executive Director NE�!QDVHM�#NKOGHM�'NKCHMFR�OKB

51

Executive Committee

Name:�/ 31("*�!$1& -#$1Role: CEO Scandinavia/@SQHBJ�!DQF@MCDQ�INHMDC�SGD�12 �Group’s Executive Committee in June 2014 following his appointment as CEO NE�12 �2B@MCHM@UH@ �/QDUHNTRKX�"%.�ENQ�Scandinavia, Patrick has been with the RSA Group since 2011. /@SQHBJ�G@R�GDKC�RDMHNQ�ãM@MBD�QNKDR� at Electrolux and If Skadeförsäkring.

Name: DARREN PRICERole:�&QNTO�"GHDE�(MENQL@SHNM�.EãBDQDarren 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 8Role: Group Chief AuditorCaroline 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�*/,&

"@QNKHMD�VHKK�QDSHQD�EQNL�SGD�&QNTO�HM�)TMD��

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: ROWAN SAUNDERSRole: President & CEO, RSA CanadaRowan is a member of the Canadian !N@QC�NE�#HQDBSNQR �2HMBD�INHMHMF�SGD�&QNTO�HM��1NV@M�G@R�GDKC�progressive leadership positions in the areas of underwriting, marketing, sales @MC�ãM@MBD �'D�HR�@�LDLADQ�NE�SGD�!N@QC�NE�#HQDBSNQR�NE�SGD�(MRTQ@MBD�!TQD@T�NE�"@M@C@��(!"��@MC�V@R�SGD�(!"�R�O@RS�"G@HQ �Rowan is currently a Non-Executive Director at Equitable Group Inc., a publicly traded company on the Toronto Stock Exchange.

The Executive Committee comprises the two Executive Directors whose biographies are on pages 50 to 51 and the following senior management:



Name:�23$/'$-�+$6(2Role: CEO, UK & Western EuropeSteve became CEO for UK & Western Europe on 1 January 2015, joining from Zurich where he was CEO, UK General (MRTQ@MBD�@MC�2G@QDC�2DQUHBDR�ENQ�ãUD�years. During his 25 year career at Zurich, Steve held a number of operational and ãM@MBH@K�QNKDR�HMBKTCHMF�&QNTO�%HM@MBD��'D@C�NE�&QNTO�.ODQ@SHNMR��/K@MMHMF�@MC�/DQENQL@MBD�,@M@FDLDMS��@MC�"NQONQ@SD��"GHDE�%HM@MBH@K�.EãBDQ�@MC�'D@C�NE�.ODQ@SHNMR��&"H$�� 2SDUD�HR�@�%DKKNV�NE�SGD�"G@QSDQDC� RRNBH@SHNM�NE�"DQSHãDC� BBNTMS@MSR��G@UHMF�PT@KHãDC�HM��

Name:�6(++( ,�,B#.--$++Role:�&QNTO�"GHDE�1HRJ�.EãBDQWilliam 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:�#$1$*�6 +2'Role: Group General Counsel and Company Secretary Derek joined the Group in July 2010. Derek has 20 years’ experience in the HMRTQ@MBD�HMCTRSQX �%QNL��GD�RDQUDC�@R�&QNTO�&DMDQ@K�"NTMRDK�@S�!DMãDKC�Group Limited, where he was responsible for the global legal, company secretarial and compliance teams. Prior to that, #DQDJ�GDKC�ONRHSHNMR�HM�K@V�ãQLR�/HMRDMS�"TQSHR��MNV�/HMRDMS�,@RNMR��,B*DMM@� î�"N��MNV�",2�"@LDQNM�,B*DMM@��@MC�Norton Rose. In June 2014, Derek took on the additional executive responsibility NE�&KNA@K�!QNJDQ�1DK@SHNMRGHO�#HQDBSNQ

Name:�# 5(#�6$8,.43'Role:�&QNTO�"GHDE�1HRJ�.EãBDQDavid was appointed Group Chief Risk .EãBDQ�HM�-NUDLADQ�� 2HMBD�INHMHMF�the Group in June 2007, David has also held the post of Group Operations and 1HRJ�#HQDBSNQ �!DENQD�INHMHMF�12 ��#@UHC�spent two years consulting to blue-chip @MC�FNUDQMLDMS�NQF@MHR@SHNMR �'D�V@R�@KRN�"(.�@S�!@QBK@XR�@MC�@�LDLADQ�NE�SGD�&QNTO�$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

��#@UHC�HR�BTQQDMSKX�VNQJHMF�VHSG�6HKKH@L�,B#NMMDKK�SN�DMRTQD�@�RLNNSG�G@MCNUDQ� NE�SGD�&QNTO�"GHDE�1HRJ�.EãBDQ�ONRS �'D�VHKK�QDSHQD�EQNL�SGD�&QNTO�NM��,@X��

Name:�/ 4+�6'(33 *$1Role:�&QNTO�"GHDE�.ODQ@SHMF�.EãBDQPaul joined the Group in 2003 and was "GHDE�$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 EVANSRole:�&QNTO�'TL@M�1DRNTQBDR�#HQDBSNQ5@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.

53

BOARD TENURE AS AT 31 DECEMBER 2014

A 0 to 3 yearsB 3 to 6 yearsC 6 to 9 years

A 67%

B 22%

C 11%

LEADERSHIPDIRECTORSThe names of the directors together with their biographical and Committee membership details are set out on pages 50 and 51. In addition, Edward Lea and Malcolm Le May served as directors until their retirement on 8 May 2014 and Adrian Brown until his resignation on 16 April 2014. Richard Houghton will step down as a director on 7 May 2015 but will continue his role until a leaving date is agreed.

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.

A summary of the role statements for the Chairman, Group Chief Executive and Senior Independent Director are provided later in this report on page 55. No one individual has unfettered powers of decision making.

The Company’s Articles of Association give the directors power to appoint and replace directors as required. Non-Executive 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.

Details of the directors’ service contracts and terms of appointment, together with their interests in the Company’s shares, are shown in the Directors’ Remuneration Report on pages 80 to 106 and are incorporated into this report by reference.

COMPOSITION OF BOARD AS AT 31 DECEMBER 2014

A ChairmanB Independent Non-Executive DirectorsC Executive Directors

C 22%

A 11% B 67%



DIVISION OF RESPONSIBILITIES – SUMMARY OF ROLE STATEMENTS

Role of Chairman Role of Group Chief Executive

Responsible for:• Leadership of the Board, promoting a culture of openness

and debate• Effectiveness of the Board • Ensuring provision of timely, accurate and clear information• Effectiveness and structure of the Board’s Committees• Leading the annual evaluation of the Board and its

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

• Undertaking the role of ambassador for the Company, participating in the engagement and effective communication with the Company’s stakeholders

• Chairing effective General Meetings.

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

• Preparing detailed Business Plans for the Company and its major subsidiaries, monitoring the performance of the Group, ensuring that objectives are achieved and Business Plans are implemented within budget

• �.UDQRDDHMF��CHQDBSHMF�@MC�BNMSQNKKHMF�ãM@MBH@K�L@M@FDLDMS��control standards and reporting processes of the Company and its main subsidiaries

• Reviewing the organisational framework to ensure that policies relating to management selection, performance review, development and change are appropriate

• Ensuring that management succession plans are in place• Identifying and executing acquisitions and disposals up to

prescribed limits • Compliance with legal and regulatory requirements of the

relevant regulatory bodies• Developing the Company’s communications strategy to

meet the needs of, and engage with, all internal and external stakeholders

• Representing the Company in the industry and business community

• Liaising with the Chairman and Board on matters which are material to the performance of the Company.

Role of Senior Independent Director Role of Non-Executive Directors

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

Committee when considering matters relating to the Chairman of the Board

• 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.

Responsible for:• Challenging and agreeing the Group’s strategy with

senior management • Assessing the performance against Group Strategy • Participating in the activities of the Board Committees.

Committee selection is regularly reviewed by the Group Nomination and Governance Committee based on skills and experience

• Meeting with the Chairman without Executive Directors being present

• Meeting with the Senior Independent Director without the Chairman being present to review the Chairman’s performance and other matters.

3GD�&QNTO�"GHDE�$WDBTSHUD�G@R�CDKDF@SDC�@TSGNQHSX��SGQNTFG�SGD�&QNTO�R�#DKDF@SDC� TSGNQHSX�%Q@LDVNQJ��VGHBG�CDãMDR� SGD�KHLHSR�NE�DWODMCHSTQD�VGHBG�@QD�RODBHãB@KKX�CDKDF@SDC�SN�GHL �%QNL�SHLD�SN�SHLD�@CCHSHNM@K�@TSGNQHSHDR�@QD�CDKDF@SDC� EQNL�SGD�!N@QC�SN�BNUDQ�RODBHãB�L@SSDQR�@R�QDPTHQDC �

%TQSGDQ�HMENQL@SHNM�NM�SGD�HMCHUHCT@KR�ETKãKKHMF�SGDRD�QNKDR�B@M�AD�ENTMC�NM�O@FDR��SN��

55

ROLE OF THE BOARDThe 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 �

The Board reviews on an annual basis a Schedule of Matters Reserved for the Board which can only be amended by the Board itself, which is reviewed annually. Matters reserved to the Board include:

• Approval of the Group’s long-term objectives and commercial strategy

• Approval of changes to the Group’s senior management structure

• Approval of the Group’s overall risk appetite

• Annual review of the effectiveness of the Group’s systems of risk management and internal control

• Approval of the annual operating and capital budgets

• Changes to the Group’s capital structure

• OOQNU@K�NE�SGD�&QNTO�R�ãM@MBH@K�QDRTKSR�@MC�@MX�RHFMHãB@MS�changes to accounting practices or policies

• Corporate governance arrangements

• OOQNU@K�NE�@MX�RHFMHãB@MS�DWODMCHSTQD��L@SDQH@K�transactions and contracts.

There is a standing agenda of items for consideration by the Board that is continually refreshed.

The Board initiated a Group-wide review of governance and internal control systems during 2014 following the irregularities uncovered in Ireland. The programme is driving enhancements to the Internal Control system globally to ensure consistency of oversight and reporting is achieved VHSG�RTEãBHDMS�NAIDBSHUHSX�@MC�HMCDODMCDMBD �3GD�!N@QC� has been fully involved in this programme. Non-Executive Directors participate in Steering Group Meetings and the Board receives regular updates.

In addition to the Schedule of Matters Reserved for the Board, the Board has delegated authority to core Committees focusing on key specialised areas. Each of these Board Committees have VQHSSDM�3DQLR�NE�1DEDQDMBD�CDãMHMF�SGDHQ�QNKD�@MC�SGD�@TSGNQHSX�delegated to them. The Schedule of Matters Reserved for the Board and the Terms of Reference for each Board Committee were reviewed in the year and changes made where appropriate. The Terms of Reference are available on the Company’s website www.rsagroup.com/termsofreference. Upon the departure of Edward Lea and Malcolm Le May, a full review of Committee composition was undertaken to broaden the Committees’ experience and knowledge. Further details on the principal duties of each Board Committee can be found under the Board Committees section commencing on page 69, in the Group Audit Committee Report on pages 75 to 79 and the Directors’ Remuneration Report on pages 80 to 106.

The Chairman is responsible for leading the annual review of the effectiveness of the Board and its Committees. The Board, through the Group Remuneration Committee, determines the Remuneration Policy for the Executive Directors, the Chairman, Group General Counsel and Company Secretary, as well as for the members of the Executive Committee.

BOARD AND BOARD COMMITTEE ATTENDANCE The Board held nine scheduled meetings during the year and four additional meetings. In addition, Non-Executive Directors met privately without Executive Directors or senior management being present.

Scheduled BoardMeetings Attended

Additional BoardMeetings Attended

Martin Scicluna 9/9 4/4

Alastair Barbour 9/9 4/4

Adrian Brown1 3/3 4/4

Kath Cates 9/9 4/4

Enrico Cucchiani4 1/1 0/0

Stephen Hester2 8/8 3/3

Richard Houghton 9/9 4/4

Malcolm Le May3 4/4 3/4

Edward Lea3 4/4 4/4

Hugh Mitchell 9/9 4/4

Jos Streppel 7/9 4/4

Johanna Waterous 9/9 3/4

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

5 February 2014.3. Edward Lea and Malcolm Le May ceased to be directors with effect from

8 May 2014.4. Enrico Cucchiani was appointed as a director with effect from

1 December 2014.5. Details of Board Committee attendance can be found in the individual

Board Committee reports on pages 69 to 106.



TIME SPENT ON BOARD AND BOARD COMMITTEE ACTIVITIES

A StrategyB FinancialC Risk Management and ControlsD Governance

FOCUS OF THE BOARD AND COMMITTEES DURING 2014

Strategy • Strategic Business Review: strategic objectives, planning and implementation

• Approval of business disposals• Key functional updates and developments• Review of regional strategies

• IT Development and strategy• Brand, marketing and e-business

Financial • Monthly review of performance for each business • �1DUHDV�NE�OQNãS@AHKHSX�@F@HMRS�OK@M• Financial reporting and controls• Reserving• Capital strengthening: rights issue, share consolidation,

bond issue• Review of the capital position against internal and

external capital measures

• 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

Risk Management and Controls

• Approval of the Group Risk Appetite • Monitoring material claims and reinsurance matters• Capital risk • Solvency II: risks• Conduct risk: customer, conduct, culture• Regulatory risk• Pension risk• FX risk

• Cultural Health Index• Review of strategic and operational plan risk OQNãKDR

• 1DUHDV�NE�ãM@MBH@K�@MC�QDFTK@SNQX�QDONQSHMF�controls

• Internal controls in the regional businesses• Internal Audit updates

Governance • Review of governance and control systems• MMT@K�#HQDBSNQR�@MC�.EãBDQR�/NKHBX�QDMDV@K�TOC@SD• Investor reaction, analyst consensus and market

sentiment• Share consolidation• �2G@QDGNKCDQ�L@SDQH@K��ãM@MBH@K�QDRTKSR��BHQBTK@QR��

Annual Report and Accounts, AGM • Review of Board and Committee evaluation• Succession planning

• Review of Board and Committee membership, Schedule of Matters Reserved for the Board and Board Committee Terms of Reference

• Delegated Authority Framework and Executive Licence limits

• Regulatory compliance: conduct, bribery and corruption, know your customer

• Whistleblowing policy and training• Training and development• Regular Committee updates to the Board

2015 AND BEYONDThe Board’s key business objectives are to:

• improve the Group’s focus: become stronger and better AX�QDCDãMHMF�SGD�&QNTO�R�RSQ@SDFX�

• strengthen the Group’s capital and balance sheet

• optimise the business portfolio

• provide an exceptional customer experience.

In doing so, the Company aims to improve business performance to deliver a sustainable dividend into the future, delivering long-term value to shareholders.

During 2014, the Board has made good progress in delivering against these objectives with a number of disposals through which the Group has strengthened its capital position, and as we move into 2015 the Board will continue to focus on these priorities. Details of the progress made are set out in the Strategic Report on pages 2 to 47.

A 19%

B 29%

C 29%

D 23%

57

EFFECTIVENESS EFFECTIVENESS OF THE BOARDThe 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

In accordance with the 2012 Code recommendations, an internal performance evaluation process is undertaken annually to ensure the Board remains effective. At least once every three years, the evaluation process is carried out by an external party. This process is run by the Chairman, supported by the Senior Independent Director. The results of the performance evaluation are discussed by the Group Nomination and Governance Committee and the Board. Details of progress against the 2013 external performance evaluation and the key focus of the 2014 internal performance evaluation can be found on pages 60 to 61 later in this report.

COMPOSITION OF THE BOARDIn accordance with the 2012 Code, the Board believes that it has the appropriate balance of skills, experience, independence and knowledge to enable it and its Committees to discharge their duties and responsibilities effectively. 3GD�!N@QC�HR�R@SHRãDC�SG@S�HS�HR�NE�@�RHYD�@OOQNOQH@SD�SN�SGD�needs of the business and that no individual or small group of directors can dominate the Board’s decision making. One of the key responsibilities of the Group Nomination and Governance Committee is to keep under review Board membership and succession planning to ensure the balance remains appropriate. This review was undertaken during the course of the year.

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.

The Board considers the skills, experience, independence and knowledge already represented when making decisions on new appointments and ensures that succession planning processes are in place. The Group Nomination and Governance Committee recommend directors for appointment or re-election to the Board. Directors are proposed for annual election or re-election by shareholders at the Company’s AGM, if they wish to stand.

The Board reviews the membership of its Committees on an annual basis to ensure they remain appropriate. Further details on changes to Board Committee membership are contained in the relevant Committee report. Only members of the Board Committees are entitled to attend Committee meetings; however, the Committee or its chairman may invite any directors, senior management or any external professional advisers to attend all or part of any meetings as and when required. The key functions of Risk, Actuarial, Compliance and Internal Audit, all directly report to a Board Committee providing expert advice on their remits to the relevant Committee and senior management.

Details of current directors together with their biographical and Committee membership details are set out on pages 50 and 51.

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.

COMMITMENTThe letters of appointment for the Chairman and each of the Non-Executive Directors set out the anticipated time commitment, being an average of two days per week for the Chairman and 28-32 days per year for Non-Executive Directors. Non-Executive Directors are required to allocate RTEãBHDMS�SHLD�SN�LDDS�SGD�DWODBS@SHNMR�NE�SGD�QNKD��@MC� to attend Board and Committee meetings and the AGM. In addition, directors may be required from time to time SN�@SSDMC�@CCHSHNM@K�LDDSHMFR��SQ@HMHMF�@MC�AQHDãMFR �

3GQNTFGNTS��#HQDBSNQR�G@UD�CDLNMRSQ@SDC�âDWHAHKHSX�@MC�commitment in attending additional, short notice Board and Committee meetings, and have made themselves available to meet with the regulators as required. During the period from 1 January to 4 February 2014, Martin Scicluna performed the role of Executive Chairman until Stephen Hester joined as Group Chief Executive. Upon his appointment as Executive "G@HQL@M�HM�#DBDLADQ��SGD�!N@QC�BNMãQLDC�SG@S�CTD� SN�SGD�HMSDQHL�M@STQD�NE�SGD�@OONHMSLDMS��SGDX�VDQD�R@SHRãDC�that Martin Scicluna’s external commitments would not restrict him from effectively performing this role.

Martin Scicluna is also Chairman of Great Portland Estates plc, a director of Ship Midco Limited, trading as Worldpay, and a member of the Financial Services Trade and Investment !N@QC �3GD�!N@QC�HR�R@SHRãDC�SG@S�SGDRD�BNLLHSLDMSR�@QD� not a constraint on the Chairman’s time or his ability to carry out his duties.



Stephen Hester and Richard Houghton, Executive Directors of the Company, do not hold outside directorships of FTSE100 (or any other listed) companies but would be allowed to have one such appointment, subject to the approval of the Group Nomination and Governance Committee.

Service agreements and letters of appointment for the Chairman, Executive and Non-Executive Directors, are available for inspection at the Company’s registered NEãBD�@MC�VHKK�AD�@U@HK@AKD�ENQ�HMRODBSHNM�@S�SGD� &,

INDUCTION, TRAINING AND DEVELOPMENT OF DIRECTORSUpon 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.

Each director has an individual training plan for the development and enhancement of their business knowledge which is subject to discussion with the Chairman. The directors have access to the services and advice of the Group General Counsel and Company Secretary, and in addition may take independent professional advice at the expense of the Company in the furtherance of their duties.

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

• #DUDKNOLDMSR�HM�2SQ@SDFHB�1DONQSR�@MC�ãM@MBH@K�QDONQSHMF�� fair, balanced and understandable; going concern

• Corporate governance

• Developments in Accounting principles: IFRS, UK GAAP

• Financial Control Framework

• Evolving risk and capital disclosures

• Cyber security

• Solvency II

• Meetings with various function heads and regional business areas.

“ 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 BarbourNon-Executive Director and Chair of the Group Audit Committee

59

During the year, an internal evaluation of the effectiveness of the Board, its Committees and individual directors was led by the Chairman with the support of the Senior (MCDODMCDMS�#HQDBSNQ �3GD�QDUHDV�QDâDBSDC�NM�SGD�QDRTKSR�from the governance and controls review and the key strategic objectives to be achieved in the short term.

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��

• Increased scrutiny of the near-term performance, including achievement of key milestones in line with the three-year strategic turnaround plan

• 1DãMD�SGD�KNMFDQ�SDQL�RSQ@SDFHB�UHRHNM�NE�SGD�&QNTO

• Review of the Group’s operational and commercial capabilities

• Board and Committee agendas to be reviewed to have greater focus on major issues in addition to ‘Business As Usual’

• Deeper review of succession planning, engagement and culture

• Review the pace and evidence of cultural change, in line with the new control and risk frameworks

• 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

• Additional informal meetings of the Chairman, Non-Executive and Executive Directors to discuss issues beyond the normal Board meeting agendas.

The review took the form of a questionnaire and included interviews with all Board members. It concluded that the Board remains an engaged and effective Board, the members of which work well together, aligning risk management to strategy. The Board sets stretching performance targets and monitors performance against them. In addition, the Board and its Committees place the right focus on topical matters and the priorities for 2015 and beyond have been reinforced.

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.

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PERFORMANCE EVALUATION

PERFORMANCE EVALUATION



Recommendations from the 2013 Evaluation Actions taken as a result of the 2013 Evaluation recommendations

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.

Allocate time to discuss the risks emerging from culture and strategy, and the activities and behaviour of individual leaders.

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.

Site visits to build awareness of the Group. Stephen Hester has undertaken a programme of visits SN�@KK�QDFHNM@K�NEãBDR�SGQNTFGNTS�� (M�@CCHSHNM�� Non-Executive Directors have attended regional Board and Audit Committee meetings and spent time with regional senior management.

The ability to work together to identify priorities and integrate into the Group’s evolving executive culture should be a particular focus by the Board in the future.

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.

The Group Remuneration Committee has reviewed the Remuneration Policy. The Policy is well aligned to the business strategy incorporating stretching measures. TNAV:NWP is being included as an additional measure in 2015. The Business Review Scorecard in the PSP will be strengthened to include controllable expense targets. The Group Remuneration Committee has taken steps to include provisions to extend the Clawback Policy with effect from January 2015, to enable the Company to recover sums paid to Executives, in addition to withholding payments due to be made.

Increase attention on the role of executive succession planning throughout the Group. Regular discussions about people becoming a greater part of the Board’s agendas.

Members of the Board attend the Executive, senior and FastTrack Executive Development Programmes to support talent development and build relationships with key succession players.

The Board has discussed and shared thoughts on people, culture, cultural risk and employee engagement during the year.

As reported in the 2013 Annual Report and Accounts, an external performance evaluation was carried out during 2013 by Boardroom Review Limited (2013 Evaluation). Throughout the year, the Board has worked through the observations @MC�QDBNLLDMC@SHNMR�GHFGKHFGSDC�HM�SGD��$U@KT@SHNM �2ODBHãB@KKX�

61

ENGAGEMENTEMPLOYEESThe 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.

Rigorous performance and talent management processes are in place across the Group to ensure an ongoing focus on high performance and the development and acquisition of talent. The Group runs a number of talent programmes for senior and emerging talent and has continued to focus on retaining talent, among our high performing and high potential populations. The Company also continues to be recognised in the insurance market for its deep technical expertise and the Technical Academy.

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.

CUSTOMERThe 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.

In addition to NPS, we track a range of metrics to ensure that the right decisions are made for our customers. These differ by product and region to ensure we are focusing on what HR�HLONQS@MS�ENQ�SGD�RODBHãB�BTRSNLDQ�RDS �3GDRD�HMBKTCD�retention, complaint levels, consideration of non-customers to take out a product, service levels, trust and internal product advocacy.

The focus on improving these metrics is driven by a keen intent to base decisions on real customer insight. Over the next few years we will continue to improve the Company’s customer satisfaction through the application of learning across the business from the areas of success we have HCDMSHãDC�SGQNTFG�QDONQSHMF �3GDQD�HR�@KRN�@�ENBTR�NM�QDCTBHMF�and preventing insurable risks before they even happen as well as providing great, personal customer support should the worst happen.

REGULATORS The Board is responsible to the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) for complying with the Group’s UK insurance regulatory obligations. The Board attaches great importance to its regulatory responsibilities and is committed to dealing with the regulators in an open, cooperative and transparent manner. The Board paid close attention to the expectations of the PRA and FCA following their establishment on 1 April 2013 and also monitored developing EU and international regulation, in particular Solvency II. During the year the PRA and FCA conducted private meetings with several members of the Board and senior management. Regular management information is provided to assist the PRA and FCA with the supervision of the Group. In addition, the Group includes a number of regulated subsidiary entities which seek to foster positive regulatory relationships in support of the businesses. Accordingly, maintaining effective relationships with the Group’s regulators across the world is integral to the success of the Group’s strategy and its long-term value.

RATING AGENCIES The Group is rated on an interactive basis by Standard & Poors @MC�,NNCX�R �3GD�HMRTQ@MBD�ãM@MBH@K�RSQDMFSG�Q@SHMFR�@QD�currently A (stable outlook) and A2 (negative outlook) QDRODBSHUDKX �3GDRD�Q@SHMFR�VDQD�@EãQLDC�ENKKNVHMF�SGD��year-end results, the rights issue and after discussions with both rating agencies. During 2014, there has been regular contact with both agencies including calls to discuss the half-year results. In addition, both agencies spent one day VHSG�RDMHNQ�L@M@FDLDMS�CHRBTRRHMF�&QNTO�RSQ@SDFX��ãM@MBH@K�plans, capital and risk management. The rating agencies both rated the bond issue in October 2014.

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.

#TQHMF��SGD�&QNTO�RHFMHãB@MSKX�HMBQD@RDC�@MC�DMG@MBDC�SGD�CHRBKNRTQD�NE�ãM@MBH@K�HMENQL@SHNM�SN�RG@QDGNKCDQR�@MC�other market participants. Examples of this include more detailed breakdowns of our underwriting performance, disclosure of our reserve margin, changing the methodology used to calculate our combined ratio to bring it more in line with peers, enhanced pension disclosures and details around SGD�&QNTO�R�B@OHS@K�CHUDQRHãB@SHNM�ADMDãS �3GD�&QNTO�HR�BNLLHSSDC�SN�SGD�NMFNHMF�QDUHDV�NE�ãM@MBH@K�CHRBKNRTQD� to ensure that it is relevant and appropriate.

SUBSTANTIAL SHARE INTERESTS1

The following table shows the holdings of major shareholders as disclosed to the Company in accordance with the Disclosure and Transparency Rules as at 31 December 2014 and at the date of this report. There are no shareholder agreements in place with the Company that may restrict transfer of securities or voting rights.

As at 31 December 2014 As at 25 February 2015

No. of ordinary shares

% total voting rights

Nature of Holding

No. of ordinary shares

% total voting rights

Nature of Holding

Ameriprise Financial, Inc, and its group2 188,902,771 5.13% Direct & Indirect & CFD

188,902,771 5.13% Direct & Indirect & CFD

Artemis Investment Management LLP2 182,450,614 4.96% Direct & Indirect 182,450,614 4.96% Direct & Indirect

Cevian Capital II G. P. Limited 133,068,287 13.12% Indirect 133,068,287 13.12% Indirect

Franklin Mutual Advisers, LLC2 184,256,341 5.01% Direct & Indirect 184,256,341 5.01% Direct & Indirect

Newton Investment Management Ltd2 168,455,475 4.88% Indirect 168,455,475 4.88% Indirect

Schroders plc2 170,851,201 4.95% Direct & Indirect through subsidiaries

170,851,201 4.95% Direct & Indirect through subsidiaries

Standard Life Investments Ltd2 152,266,879 4.42% Direct & Indirect 152,266,879 4.42% Direct & Indirect

The Capital Group Companies Inc2 260,447,169 5.14% Indirect 260,447,169 5.14% Indirect

Notes:� � (MSDQDRSR�RTAIDBS�SN�#31�� VGHBG�G@UD�ADDM�MNSHãDC�@R�E@KKHMF�ADKNV��í�@QD�MNS�HMBKTCDC�HM�SGD�@ANUD�S@AKD �� 6GDQD�SGD�GNKCHMF�G@R�MNS�ADDM�QD�MNSHãDC�SN�SGD�"NLO@MX�RHMBD�SGD�RG@QD�BNMRNKHC@SHNM�ADB@LD�DEEDBSHUD� NM��,@X��SGD�MTLADQ�NE�NQCHM@QX�RG@QDR�RGNVM�HR�@R�MNSHãDC�OQD�BNMRNKHC@SHNM

REGISTERED SHAREHOLDINGS BY SIZE AS AT 31 DECEMBER 2014

Balance RangesNumber of

HoldingsPercentage of

HoldingsNumber of

SharesPercentage of Issued Capital

1–24,999 37,100 98.15% 35,029,394 3.45%

25,000–99,999 275 0.73% 13,802,057 1.36%

100,000–499,999 225 0.60% 51,082,462 5.03%

500,000–999,999 67 0.18% 48,587,488 4.78%

1,000,000–1,999,999 57 0.15% 79,418,937 7.82%

2,000,000 and above 77 0.20% 787,566,535 77.56%

Totals 37,801 100.00% 1,015,486,873 100.00%

ANALYSIS OF REGISTERED HOLDERS

A Unit trust/Mutual fundsB Private/RetailC Pension fundsD OtherE Insurance

C 12%

A 56%

D 18%

E 11%

B 3%

DISTRIBUTION OF SHARES BY GEOGRAPHY

A UKB EuropeC US and CanadaD Rest of the WorldE Unanalysed

A 48%

C 25%

B 20%

E 4%

D 3%

63

Share CapitalThe 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.

In March 2014, the Company announced a rights issue of three for eight 27.5p Ordinary Shares at a price of 56p per Ordinary Share. On 9 April 2014, 1,380,976,863 Ordinary Shares were issued ranking pari passu with those previously in issue. Following the rights issue and the passing of a shareholder resolution at the Company’s 2014 AGM, in May 2014 the Company took steps to subdivide its 27.5p Ordinary Share into one Ordinary Share of 20p carrying the same rights and restrictions as a 27.5p Ordinary Share, and one 7.5p Deferred Share (Deferred Share) with restricted rights. Immediately thereafter the 20p Ordinary Shares were consolidated on the A@RHR�NE�ãUD��O�.QCHM@QX�2G@QDR�HMSN�NMD�MDV�.QCHM@QX�2G@QD�of £1.00 carrying the same rights as a 20p Ordinary Share. In June 2014, the Deferred Shares were purchased for an aggregate payment of one penny and subsequently cancelled in accordance with the rights attaching to this share class. The capital equivalent of the cancelled 7.5p Deferred Shares is being held in a non-distributable capital redemption reserve. Further information on the Company’s share capital, together with details of the movements in the Company’s issued share capital during the year and rights attaching to the shares can be found in note 20 on page 177 of the Notes to the Financial Statements which is incorporated into this report by reference.

As at 31 December 2014, the Ordinary Shares and Preference Shares represented 89% and 11% respectively of the total issued share capital. Directors are limited as to the number of shares they can allot (save in respect of share schemes). Renewal of the directors’ authorities to allot shares will be sought at the 2015 AGM. In addition, directors are restricted by the limits set out by the Investment Association. During 2014, the directors exercised their authorities to allot shares only in respect of the employee share schemes.

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.

During the year, the Company operated three employee ADMDãS�SQTRSR�SN�GNKC�.QCHM@QX�2G@QDR�HM�SGD�"NLO@MX�VGHBG�are used to satisfy grants under the Group’s share incentive schemes and Capita Trustees Limited was the Trustee of each trust. Two of these trusts were closed on 31 December 2014 and the assets of these trusts transferred to the remaining trust. In addition, a Share Incentive Plan (Sharebuild) Trust is operated of which Capita IRG Trustees is the Trustee. The Trustees may vote in respect of any shares held in the trusts but have no obligation to do so, and Trustees may have regard SN�SGD�ãM@MBH@K�HMSDQDRSR�NE�SGD�ADMDãBH@QHDR�HM�DWDQBHRHMF�SGDHQ�voting rights over the Company’s shares. Standard dividend waiver agreements are in place for the employee share trusts to receive dividends of 0.01 pence per share excluding the Voluntary Invested Deferred Shares.

The Company operates a sponsored American Depositary Receipts (ADR) programme which is managed by JP Morgan Chase NA. The programme allows shareholders to invest in the Company through US dollar denominated funds. As part of the subdivision and share consolidation programme, the Company changed its American Depositary Share (ADS) ratio for its ADR programme from one ADS representing ãUD�.QCHM@QX�2G@QDR�NE�� O�D@BG�SN�NMD� #2�QDOQDRDMSHMF�one Ordinary Share of £1.00 each.

Dividends3GD�#HQDBSNQR�QDBNLLDMC�@�ãM@K�CHUHCDMC�NE��O�ODQ�.QCHM@QX�Share to be paid on 15 May 2015 to holders of Ordinary Shares on the register at the close of business on 6 March 2015, subject to ordinary shareholder approval. No interim dividend was paid during 2014, so the total dividend for the year is 2p (2013: 10.2p restated post-consolidation). The Company will not AD�NEEDQHMF�@�2BQHO�#HUHCDMC�@KSDQM@SHUD�HM�QDRODBS�NE�SGD�ãM@K�dividend recommended.

The Company’s Preference Shares receive a dividend at the rate of 7.375% per annum paid in two instalments on, or as near as practicably possible to, 1 April and 1 October each year.

AGMThe AGM will be held at 200 Aldersgate, St Paul’s, London EC1A 4HD on Friday, 8 May 2015 at 11.00am. A letter from the Chairman and the notice convening the AGM (Notice) is made available to all ordinary shareholders at least 20 working days before the meeting and can be found on the Company’s website at www.rsagroup.com/AGM2015. Presentations are given on the Company’s performance and activities during SGD�XD@Q�@MC�SGD�ãM@MBH@K�QDRTKSR�NE�SGD�"NLO@MX�OQHNQ�SN�SGD�formal business of the meeting. All directors attend the AGM if they are able to do so, with the Chairman and each Board Committee Chair making themselves available to take questions from ordinary shareholders.



Separate resolutions are proposed on each item of business. In accordance with the provisions of the Articles of Association, any proxy form sent by the Company to shareholders in relation to any general meeting must be returned to the Company, whether in written form or in electronic form, not less than 48 hours before the time for holding the meeting, excluding non-business days (or, in the case of a poll taken otherwise than at, or on, the same day as the meeting, not less than 24 hours before the time appointed for the taking of the poll). At any general meeting, every ordinary shareholder present shall have one vote on a show of hands and on a poll, every ordinary shareholder present in person or by proxy shall have one vote for each share of which he/she is the holder. Each resolution will be put to a poll at the AGM in 2015. The results of the vote on each resolution will be announced to the London Stock Exchange and will be available on the Company’s website, www.rsagroup.com/AGM2015.

Preference shareholders are only entitled to receive notice of, attend, speak and vote at general meetings if the dividend payable on the Preference Shares is in arrears at the date of the Notice, a resolution is proposed that affects the rights of the preference shareholders, a resolution is proposed to wind up the Company, a resolution is proposed to reduce the capital of the Company (other than a redemption or purchase of shares), or in such other circumstances as the Board shall determine. In any of these situations the preference shareholders may only vote on the relevant resolution and not on all the business of the general meeting.

At the 2014 AGM, an average of 69.17% of the total issued share capital was voted across all resolutions, with an average of 98.29% voting in favour of all resolutions.

CORPORATE RESPONSIBILITYThe Group’s Corporate Responsibility programme supports the communities in which we operate with direct corporate donations to registered charities and through supporting our people to volunteer and fundraise. The strategy focuses on helping to create ‘Thriving Communities’ by targeting two RODBHãB�HRRTDR��$CTB@SHNM�@MC�$LOKNX@AHKHSX��@MC�$MSDQOQHRD�and Entrepreneurship. More detail can be found in the Strategic Report on pages 2 to 47.

Public AffairsThe Group contributes to public policy debate on issues relevant to the business, either individually or through industry bodies such as the Association of British Insurers and the Confederation of British Industry. This can include issues RTBG�@R�âNNCHMF��LNSNQ�HMRTQ@MBD��@RADRSNR��QDMDV@AKD�DMDQFX�@MC�ãM@MBH@K�RDQUHBDR�QDFTK@SHNM �3GD�"NLO@MX�engages with policymakers to improve understanding of the role the insurance industry plays in society and the economy.

Employees apply the principles of openness, transparency, honesty and integrity to all of their activity with policymakers. The Company adheres to principles of best practice, declaring the interests which it represents and ensuring that, to the best of its knowledge, information provided is unbiased, complete, up to date and not misleading.

Each year the Company proposes a resolution authorising political expenditure up to £100,000 for each of donations to political parties and independent election candidates, donations to political organisations and incurring political expenditure. This resolution is proposed in the event that the funding of seminars, functions and charitable donations by the Company may be regarded as political in nature. During the year the Company has not made any donations to political parties or independent election candidates.

Annual Greenhouse Gas EmissionsIn accordance with Part 7 of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, certain disclosures are required in respect of greenhouse F@R�DLHRRHNMR �3GD�HMENQL@SHNM�SN�ETKãK�SGHR�QDPTHQDLDMS�B@M�be found in the Corporate Responsibility section on pages 42 to 43 and is incorporated into this report by reference.

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.

65

ACCOUNTABILITYSTATEMENT BY DIRECTORSSection 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.

A balanced and understandable assessment of the Group’s position and prospects, and an explanation of its strategy for delivering the objectives of the Company are contained in the Strategic Report on pages 2 to 47 which includes:

• 4RD�NE�ãM@MBH@K�HMRSQTLDMSR�AX�SGD�"NLO@MX��CDS@HKR�NE�ãM@MBH@K�QHRJ�L@M@FDLDMS�NAIDBSHUDR�@MC�ONKHBHDR�NE�SGD�Company, including the policy for hedging each major type of forecasted transaction for which hedge accounting is used

• The Company’s exposure to price risk, credit risk, insurance QHRJ��KHPTHCHSX�QHRJ�@MC�B@RG�âNV�QHRJ

• An indication of likely future developments in the Company’s business.

Details of the Group’s principal subsidiaries is detailed in note 31 on page 196. A full list of Group subsidiaries will be attached to the Company’s next Annual Return and be available from Companies House.

Details of events which have occurred after the reporting period are set out on note 35 on page 199.

There are no activities relevant for disclosure in respect of research and development of the Company.

The directors are responsible for preparing the Annual Report and Accounts and consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy. Further explanation on the assurances undertaken by the Group Audit Committee on behalf of the Board are set out in the Group Audit Committee Report on pages 75 to 79.

The Directors’ Responsibility Statement appears on page 107 and is incorporated by reference into this report.

A report from the external auditor can be found on pages 108 to 114.

GOING CONCERNIn 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 FRAMEWORKThe 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.

This is important as effective management of Delegated Authority enables the business to:

• Ensure that all employees execute their responsibilities VHSGHM�@�BKD@QKX�CDãMDC�RDS�NE�KHLHSR�@MC�RTAIDBS�SN�RODBHãDC�terms and conditions appropriate to their role, competence, experience and technical capability so as to mitigate the risk of the Group being exposed or committed to material ãM@MBH@K��NODQ@SHNM@K��KDF@K��QDOTS@SHNM@K�@MC�NQ�QDFTK@SNQX�risk and/or loss

• 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

• Ensure compliance with relevant regulatory and statutory requirements.



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.

COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODEThe UK Corporate Governance Code sets out standards and expectations on corporate governance matters for UK companies. The Financial Reporting Council are responsible for the publication and periodic review of the Code. The latest published version of the 2014 Code can be found at https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf.

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.

Throughout the year, the Company has complied with the 2012 Code, with the exception of the period from 1 January 2014 to 4 February 2014 when Martin Scicluna performed the role of Executive Chairman on an interim basis until Stephen Hester joined the Group as Group Chief Executive.

The Company has familiarised itself with the 2014 UK Corporate Governance Code (2014 Code). The changes were reviewed by the Group Nomination and Governance Committee upon publication. The Group Remuneration Committee has taken steps to include provisions to extend the Clawback Policy into its Remuneration Policy with effect from January 2015, to enable the Company to recover sums paid to Executives, in addition to withholding payments due to be made. Further details on the Performance Share Plan can be found in the Directors’ Remuneration Report on pages 80 to 106.

CONFLICTS OF INTEREST AND RELATED PARTY TRANSACTIONSIn accordance with section 175 of the Companies Act 2006, D@BG�CHQDBSNQ�G@R�@�CTSX�SN�@UNHC�BNMâHBSR�NE�HMSDQDRS �4MCDQ�Articles 91 and 92 of the Company’s Articles of Association, BNMâHBSR�NE�HMSDQDRS�L@X�AD�@TSGNQHRDC�AX�SGD�!N@QC�NQ�@�Board Committee. Directors are required to notify the Group General Counsel and Company Secretary when a potential BNMâHBS�NE�HMSDQDRS�@QHRDR �$@BG�CHQDBSNQ�R�QDONQSDC�BNMâHBSR�NE�interest are reviewed on an annual basis. Any director who G@R�CDBK@QDC�@�BNMâHBS�NE�HMSDQDRS�RG@KK�MNS�BNTMS�SNV@QCR�SGD�PTNQTL�NQ�UNSD�NM�@MX�QDRNKTSHNM�SN�@TSGNQHRD�SGD�BNMâHBS�NE�interest and, at the Board’s discretion, may be excluded from @MX�LDDSHMF�@S�VGHBG�SGD�BNMâHBS�NE�HMSDQDRS�HR�TMCDQ�BNMRHCDQ@SHNM �6GDQD�@�BNMâHBS�NE�HMSDQDRS�HR�@TSGNQHRDC��QDRSQHBSHNMR�L@X�AD�HLONRDC�NM�SGD�BNMâHBSDC�CHQDBSNQ��RTBG�as excluding the director from the discussion or receiving any HMENQL@SHNM�HM�BNMMDBSHNM�VHSG�SGD�BNMâHBS�NE�HMSDQDRS �

3GD�!N@QC�BNMãQLR�SG@S�HS�G@R�QDUHDVDC�SGD�RBGDCTKD�NE�CHQDBSNQR��BNMâHBSR�NE�HMSDQDRS�CTQHMF�SGD�XD@Q�@MC�SG@S�SGD�procedure in place operated effectively in 2014. None of the directors had any interest in any other contract with the Company or any of its subsidiaries during 2014 apart from those disclosed in the Related Party Transactions note 33 on pages 197 to 198.

ESSENTIAL CONTRACTS AND CHANGE OF CONTROLThe Company does not consider that it, or any of its RTARHCH@QHDR��G@R�@MX�RHFMHãB@MS�@FQDDLDMSR�SN�VGHBG�SGD�Company is a party that take effect, alter or terminate upon a change of control of the Company following a takeover bid that are required to be disclosed pursuant to paragraph 13(2)�H��NE�2BGDCTKD��NE�SGD�+@QFD�@MC�,DCHTL�2HYDC�"NLO@MHDR�and Groups (Accounts and Reports) Regulations 2008 (as amended), other than as disclosed below:

4MCDQ�SGD�"NLO@MX�R�`��L�ãUD�XD@Q�RDMHNQ�BNLLHSSDC�debt facility, if a change of control occurs, the facility can be cancelled with immediate effect and all outstanding loans, together with accrued interest, become due and payable, if the majority of lenders require.

The Company does not have agreements with any director or DLOKNXDD�SG@S�VNTKC�OQNUHCD�BNLODMR@SHNM�ENQ�KNRR�NE�NEãBD�or employment resulting from a takeover except that provisions of the Company’s share schemes and plans may cause some options and awards granted to employees under such schemes and plans to vest in such circumstances.

67

DIRECTORS’ INDEMNITYArticle 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.

(M�@CCHSHNM��SGD�"NLO@MX�G@R�HMCDLMHãDC�SGD�CHQDBSNQR� of SAL Pension Fund Limited, a majority owned subsidiary of the Group, in relation to its role as Trustee of an occupational pension scheme. This indemnity constitutes a qualifying indemnity provision under section 235 of the Companies Act 2006.

ARTICLES OF ASSOCIATIONThe 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.

BORROWING POWERSArticle 98 of the Articles of Association sets out the restrictions on the borrowings of the Company. The aggregate amount, for the time being, remaining borrowed by the Group must not, without the previous sanction of an ordinary resolution of the Company, be more than one and a half times the aggregate of:

(i) The amount paid up on the issued share capital of the Company

(ii) The total of the capital and revenue reserves of the Group (subject to certain adjustments).

DISCLOSURES REQUIRED UNDER LISTING RULE 9.8.4RThe 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 requiredLocation in Annual Report and Accounts

Dividend waivers Page 64

DIRECTORS RESPONSIBILITY STATEMENTThe Directors’ Responsibility Statement appears on page 107 and is incorporated by reference into this report.

By order of the Board

DEREK WALSHGroup General Counsel and Company Secretary25 February 2015



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 MEMBERSHIPThe 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.

The composition of each Committee is recommended by the Group Nomination and Governance Committee to the Board for approval. This is reviewed on an annual basis or more frequently if appropriate. When reviewing Committee membership, consideration is given to each individual’s expertise and experience. To enhance the Committee role and effectiveness, each director is a member of multiple Committees to ensure a good exchange of information between the Committees at all times.

The diagram below illustrates the relationship of each Committee to the Board and those subsidiary committees that report information and support the purpose of each Board Committee.

CORPORATE GOVERNANCE FRAMEWORK – STRUCTURE OF BOARD AND COMMITTEES AS AT 31 DECEMBER 2014

*In addition the Group Continuous Disclosure team meet as required.†Regional Risk Committees comprise of Latin America, Asia, Middle East and Russia.

Board

Canada Risk Committee

Group Disclosure

Committee*

Group Reserving

Committee

Scandinavia Risk

Committee

Group Risk Investments and Treasury Committee

Canada Audit

Committee

Board Risk Committee

Group Nomination

and Governance Committee

Group Remuneration

Committee

Group Investment Committee

Group Audit

Committee

Regional Risk Committees†

Capital Management Committee

GCC Risk

Committee

Ireland Audit Committee

Control and Governance

Advisory Committee

UK and Western

Europe Risk Committee

Group Asset Management Committee

Codan Audit

Committee

Balance Sheet

Committee

Internal ModelGovernance Committee

UK and Western Europe Controls Review

Forum

Solvency II Steering

Committee

Monthly Performance

Pack

Operational Planning

StrategicPlanning

Quarterly BusinessReviews

Board Committee and Delegations Management Committee Regional Committee

Principle business management process

Group Chief Executive

Group Executive

Committee

Investment Committee

Group Reinsurance

Credit Committee

69

GROUP NOMINATION AND GOVERNANCE COMMITTEE

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.

COMMITTEE COMPOSITION

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.

Meetings Attended

Martin Scicluna* 8/8

Alastair Barbour 8/8

Edward Lea1 5/5

Hugh Mitchell 8/8

Johanna Waterous 8/8

* Chair of Committee

Notes:1. Edward Lea ceased to be a member of the Group Nomination and

Governance Committee with effect from 8 May 2014.

ROLE AND RESPONSIBILITIES The principal role of the Committee is to manage the process, to advise and make recommendations to the Board on matters relating to the Board’s membership, Committee membership and related appointments. During 2014, the purpose of the Group Nomination and Governance Committee expanded to formalise its responsibility for governance matters. The name of the Committee now QDâDBSR�SGHR�@CCHSHNM@K�QNKD � R�O@QS�NE�SGHR�DWO@MCDC�QNKD� the Committee monitors compliance against the UK Corporate Governance Code, Board and Committee responsibilities and membership, and the evaluation of Board members’ performance.

The Committee keeps under review the capabilities required by the Board, considers the leadership needs of the Group and reviews succession planning for the Board. The Committee makes recommendations to the Board in relation to the appointment of any new Executive and Non-Executive Directors and the re-appointment of directors on an annual basis with a view to ensuring the continued ability of the Company to compete effectively in the marketplace and attract and retain key people. An assessment of the time BNLLHSLDMS�QDPTHQDC�SN�@CDPT@SDKX�ETKãK�D@BG�QNKD�HR�considered by the Committee and consideration is given to approval of additional commitments of Non-Executive Directors during their tenure, especially where such commitment might affect the time the director is able to devote to their role.

The key areas of focus for the Committee during 2014 are shown in the table below:

Group Nomination and Governance Committee focus during 2014

• Consideration and recommendation of the directors’ appointments at the 2014 AGM

• Review of director recruitment

• Consideration of applicants and recommendation of Enrico Cucchiani’s appointment as director and Committee member

• Review of Board focus, effectiveness and composition

• Board succession planning

• Diversity, balance, experience and independence on the Board

• Review of Board Committee membership and Terms of Reference

• Review of Group Nomination and Governance Committee responsibilities and effectiveness

• Expansion of the responsibilities of the Committee to include governance matters

• Internal Board and Board Committee evaluation process for 2014

• Review of overseas visits by the Board

• Review feedback from the Board meeting held with the PRA

• Compliance with the 2012 Code

• Review of changes to the 2012 Code.

SKILLS AND EXPERIENCE OF THE BOARD

A Insurance IndustryB Financial ServicesC Strategic ManagementD Sales and Marketing

A 15%

B 54% C 23%

D 8%



DIVERSITY OF THE BOARD BETWEEN 9 MAY AND 1 DECEMBER 2014

A MaleB Female

SUCCESSION PLANNING, DIVERSITY, SKILLS AND EXPERIENCEThe 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.

Between 9 May and 1 December 2014, the Company had met the Davies Report requirement of 25% of women on the Board. Following the appointment of Enrico, the composition of the Board is 78% male and 22% female directors but with effect from 7 May 2015 the composition will again revert to 75% male and 25% female directors. We recognise the importance of diversity for Board effectiveness and remain committed to meeting the Davies Report requirements that a minimum of 25% of the Board will be women. All appointments are ultimately made on merit against the agreed selection criteria.

The skills and experience of the Board are varied, with a third of the Board having longevity of service and 67% of the Board having joined over the past three years bringing fresh ideas and experience to the table.

The Committee ensures that an internal Board evaluation process is carried out annually and at least once every three years the evaluation process is carried out by an external party in line with the 2012 Code recommendations.

A 75%

B 25%

DIVERSITY OF THE BOARD AS AT 31 DECEMBER 2014

A MaleB Female A 78%

B 22%

MARTIN SCICLUNAChairman of the Board and Chairman of the Group Nomination and Governance Committee25 February 2015

71

GROUP INVESTMENT COMMITTEE As Chairman of the Group Investment Committee, I am pleased to present an update for the year to Shareholders.

COMMITTEE COMPOSITIONI 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.

Membership of the Committee comprises myself as Chairman, Alastair Barbour, Martin Scicluna, Stephen Hester and Richard Houghton. The Group Investments Director attends all meetings of the Committee to provide an update on the economic and market background and outlook affecting the Group, the investment activities taken since the Committee last met and any portfolio actions which require the Committee’s approval.

Meetings Attended

Jos Streppel*3 2/2


Stephen Hester1 2/2

Richard Houghton 2/2

Malcolm Le May2 1/1

Martin Scicluna 2/2

* Chair of CommitteeNotes:1. Stephen Hester became a member of the Committee with effect

from 5 February 2014.2. Malcolm Le May ceased to be the Chair and member of the

Committee with effect from 8 May 2014.3. Jos Streppel was appointed as Chair of the Committee with effect

from 8 May 2014.

ROLE AND RESPONSIBILITIESThe Group Investment Committee is authorised by the Board to manage all aspects of investment policy and strategy for the Group and provide oversight of the operation of the Group’s investment portfolios within established strategy and risk frameworks. The key areas of focus for the Committee during 2014 are shown in the table below.

Group Investment Committee focus during 2014

• Investment updates including:– Economic and market development– Activity, disposition and performance– Economic and market outlook– Investment strategy

INVESTMENT PORTFOLIOThe 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.

Despite the low yields in bond markets, the Group has maintained its disciplined approach to investment strategy with its focus on maintaining a core high quality, low risk portfolio structure. Over the course of the year the geographical disposition of the portfolio was impacted by both the rights issue and the sale of a number of our overseas subsidiaries. Proceeds from these actions were primarily invested into high quality bonds, maintaining the strong overall credit quality of the Group’s portfolios. #TQHMF�SGD�ãQRS�G@KE�NE�SGD�XD@Q�NTQ�QHRJ�ONRHSHNM�V@R�ETQSGDQ�reduced through the sale of approximately £300m of equities to improve the capital position of the Group. The proceeds from these sales were again invested into high quality bonds or retained as cash.

The Group has continued to examine alternative strategies to enhance the income generated by its investment portfolios. This has included further modest allocations to funds investing in loans backed by property. All strategies reviewed and approved were consistent with maintaining the Group’s prudent risk framework and the Committee monitored asset disposition to ensure implementation remained in line with expectations.

Details of the Group’s investments are contained in the Financial Review on pages 26 to 29.

TOTAL ASSETS AS AT 31 DECEMBER 2014: £14.2BN

A CashB Fixed incomeC Property – InvestmentD EquitiesE Alternatives and other

A 7% B 86%

D 1%

G 3%

C 3%

JOSEPH STREPPELNon-Executive Director and Chairman of the Group Investment Committee25 February 2015



BOARD RISK COMMITTEE As Chairman of the Board Risk Committee, I am pleased to present the Committee’s report for 2014 to shareholders.

COMMITTEE COMPOSITION I became Chair of the Committee in May 2014. I would like to thank Edward Lea for his contribution as Chairman of the Committee between March 2013 and May 2014.

During 2014, a review of Committee membership was undertaken. To achieve increased oversight and challenge, the membership of the Committee was updated in September 2014 to comprise Non-Executive Directors only, with myself as Chair, Martin Scicluna, Alastair Barbour, Hugh Mitchell and Enrico Cucchiani as members. The Group Chief $WDBTSHUD��&QNTO�"GHDE�%HM@MBH@K�.EãBDQ�@MC�&QNTO�"GHDE�1HRJ�.EãBDQ�@QD�DWODBSDC�SN�@SSDMC�AX�HMUHS@SHNM

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.

Meetings Attended

Kath Cates5* 4/4


Enrico Cucchiani4 1/1

Stephen Hester6 3/3

Richard Houghton6 3/3

Edward Lea3 1/1

Malcolm Le May2 1/1

Hugh Mitchell1 2/2

Martin Scicluna 4/4

* Chair of Committee

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 2014.3. Edward Lea ceased to be Chair and a member of the Committee with

effect from 8 May 2014.4. Enrico Cucchiani became a member of the Committee with effect from

1 December 2014.5. Kath Cates was appointed Chair of the Committee with effect from

8 May 2014. 6. The Terms of Reference for the Committee were amended at the

September meeting, after which Stephen Hester and Richard Houghton ceased to be members, although both still attend meetings at the invitation of the Committee.

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.

AREAS OF FOCUS The key areas of focus for the Committee are shown in the table below, with further detail provided in the report that follows.

Board Risk Committee focus during 2014

• �"GHDE�1HRJ�.EãBDQ�NUDQUHDV

• Strategic Risk review

• Risk appetite review and monitoring

• Business Risk review - Insurance risk - Financial risk - Reinsurance risk - Operational risk - Emerging risks - Pension risk - FX risk

• Solvency II and capital review

• Own Risk Solvency Assessment (ORSA) and Capital Report

• Internal model validation

• Stress and Scenario Testing design and outcomes

• Remuneration review

• People risk and culture

• System of Governance, including the Risk Management System

• Governance and Controls review

• Review of Group policies

• Risk review of 2015-17 operating plan

• Anti-bribery and corruption

• IT Risk management

• Board Risk Committee governance.

In addition to those areas of focus, certain risk matters were referred to the Board for discussion, including the risks QDK@SHMF�SN�SGD�&QNTO�R�CDãMDC�ADMDãS�ODMRHNM�RBGDLD �

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.

73

CAPITALThe 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.

GOVERNANCE AND RISK MANAGEMENT

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.

(M�@CCHSHNM��RHFMHãB@MS�QHRJ�DUDMSR�@MC�AQD@BGDR��VHSG�@MX�evident or emerging trends, were the subject of ongoing analysis by management and consideration by the Committee. The Group Risk team has developed a major event root cause analysis process which helps to embed learnings across the organisation to ensure that similar events do not reoccur.

Enterprise Risk Management The Business Risk Review presented at each meeting to the Committee covered insurance risk, including remediation OQNFQDRR�NM�RODBHãB�QHRJ�ONQSENKHNR��ãM@MBH@K�QHRJ��QDHMRTQ@MBD�risk and strategy.

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.

The Group’s Remuneration Policy is reviewed by the Committee at least annually, to ensure that risk is properly considered in the overall setting of the policy for the Group and the remuneration of executive directors and other senior management.

During the year the Group’s Risk Appetite was reviewed by the Committee. We have developed a new Risk Appetite architecture, enhancing the existing approach. This ensures 2NKUDMBX�((�BNLOKH@MBD�@MC�QDâDBSR�SGD�CDUDKNOHMF�HMCTRSQX�thinking on Risk Appetite. Key Risk Indicators (KRIs) have @KRN�ADDM�QDUHRDC�@MC�RHLOKHãDC �

The risk department undertook an independent analysis of the Group’s operating plan from a risk perspective which was reviewed and challenged by the Committee and outcomes communicated to management.

3GD�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

3GD�"NLLHSSDD�BNMRHCDQDC�RHFMHãB@MS�BG@MFDR�HM�SGD� QHRJ�OQNãKD�@MC�QHRJ�@OODSHSD�CTQHMF�SGD�XD@Q�HMBKTCHMF� the rights issue, a programme of disposals of non-core businesses, a reduction in equity exposures in the investment portfolio and further enhancements to the reinsurance programme structure.

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.

KATH CATESNon-Executive Director and Chair of the Board Risk Committee25 February 2015



GROUP AUDIT COMMITTEE REPORTI am pleased to present to shareholders the Group Audit Committee Report for 2014, which sets out the responsibilities and the key activities of the Committee, recognising its role in the governance of the Company. I would like to welcome Jos Streppel, who joined the Committee on 8 May 2014. As an introduction to the report, the principal areas of focus for the Committee are shown in the table below, with further detail provided in the report that follows.

Group Audit Committee focus during 2014

• Reviewing all scheduled results announcements

• Financial accounting and reporting matters

• Financial Control Framework

• Reviewing the effectiveness of internal control and risk management processes

• Selection and recommendation regarding the appointment of the external auditor

• Overseeing the external audit plan, progress and reporting by KPMG

• Group and regional Internal Audit Reports and plan for 2015

• Regulatory Risk and Compliance updates and plans

• Financial crime, money laundering and whistleblowing procedures.

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.

During the year, the Committee was internally evaluated as part of the wider review of the Board and its Committees, the outcome of which can be found on pages 60 to 61.

ROLE AND RESPONSIBILITIESThe purpose of the Committee is to assist the Board in discharging its responsibilities for the integrity of the Annual Report and Financial Statements, for the effectiveness NE�SGD�RXRSDLR�NE�HMSDQM@K�BNMSQNK�@MC�ãM@MBH@K�@MC� regulatory risk management systems, and for monitoring the effectiveness and objectivity of the internal and external auditors.

The Committee 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.

COMMITTEE COMPOSITION, SKILLS AND EXPERIENCEThe Committee is comprised of four independent Non-Executive Directors. With effect from 8 May 2014, Jos Streppel V@R�@OONHMSDC�SN�SGD�"NLLHSSDD��AQHMFHMF�RHFMHãB@MS�ãM@MBH@K�reporting and international insurance management DWODQHDMBD �3GD�!N@QC�HR�R@SHRãDC�SG@S�SGD�"NLLHSSDD� G@R�QDBDMS�@MC�QDKDU@MS�ãM@MBH@K�DWODQHDMBD�@R�QDPTHQDC�AX�SGD��"NCD��VHSG�@KK�LDLADQR�AQHMFHMF�CHUDQRD�ãM@MBH@K��overseas and industry experience which, together with their varied tenure at the Company, enables the members collectively to act as an effective Committee. In addition, two of the four Committee members are also members of the Board Risk Committee, facilitating close working and ready exchange of information between the two Committees.

The Committee acknowledges the importance of keeping skills current and relevant. To that end, it receives training EQNL�OQNEDRRHNM@K�RDQUHBDR�ãQLR�@MC�EQNL�L@M@FDLDMS �3GD�Committee members review and identify training needs on both a collective and individual basis, and training is arranged as appropriate.

MEETINGS3GD�"NLLHSSDD�GDKC�ãUD�RBGDCTKDC�LDDSHMFR�CTQHMF�SGD� XD@Q��ENTQ�VDQD�SHLDC�SN�@KKNV�BNMRHCDQ@SHNM�NE�SGD�ãM@MBH@K�information being presented to the market in respect of the Group’s full-year and half-year results and to consider key ãM@MBH@K�L@SSDQR�RTOONQSHMF�SGD�SVN�HMSDQHL�L@M@FDLDMS�RS@SDLDMSR �3GD�ãM@K�LDDSHMF�HM�#DBDLADQ�BNMRHCDQDC�@MC�approved the Group Internal Audit and Regulatory Risk and Compliance plans for 2015, and considered matters which VDQD�@MSHBHO@SDC�VNTKC�HLO@BS�SGD��XD@Q�DMC�ãM@MBH@K�reporting processes. A further special meeting was held HM�D@QKX�%DAQT@QX��SN�BNMRHCDQ��XD@Q�DMC�ãM@MBH@K�reporting matters including impairment testing of goodwill balances and the carrying value of intangible assets.

The Committee members met privately before each scheduled meeting to discuss issues on which to concentrate with management and advisers in the meeting. The Committee held regular private meetings with the Group Chief Auditor and the external auditor without other members of management being present.

75

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.

Meetings Attended

Alastair Barbour* 5/5

Edward Lea1 2/2


Kath Cates 5/5

Jos Streppel2 2/3* Chair of Committee

Notes:1. Edward Lea ceased to be a member of the Group Audit Committee with

effect from 8 May 2014.2. Jos Streppel became a member of the Group Audit Committee with

effect from 8 May 2014.

The Committee has been assisted in carrying out its duties by the Group Disclosure Committee which meets quarterly, and is responsible for considering and identifying any disclosure matters in connection with the preparation NE�PT@QSDQKX�L@QJDS�QDKD@RDR�BNMS@HMHMF�L@SDQH@K�ãM@MBH@K�information. The Group Disclosure Committee is chaired by the Group General Counsel and Company Secretary and comprises members of senior management from Finance, Legal, Investor Relations, Company Secretarial and Risk.

The Committee Chairman reports to the Board on the outcome of Committee meetings and the Board also receives the minutes of Committee meetings.

WhistleblowingThe 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.

The Committee considered, as part of the annual effectiveness review, changes made to the policy in response SN�DUDMSR�HM�(QDK@MC�HM��@MC�R@SHRãDC�HSRDKE�SG@S�SGD�ONKHBX�continues to be readily accessible, communicated to, and understood by, employees across the Group. Training on the revised policy and updated procedures has been rolled out to all members of staff and to directors.

%HM@MBH@K�QDONQSHMF�@MC�RHFMHëB@MS�ëM@MBH@K�HRRTDRThe Committee attaches great importance to the work, NOHMHNMR�@MC�ãMCHMFR�NE�SGD�DWSDQM@K�@TCHSNQ��*/,& � The auditor participates in all Committee meetings and met privately with the Committee on two occasions. During the year the Committee’s principal interactions with the auditor were:

• Consideration of the strategy and plan for the audit of the ãM@MBH@K�RS@SDLDMSR�HMBKTCHMF��CHRBTRRHNM�@MC�BG@KKDMFD� in relation to materiality levels set; the scope of proposed audit coverage by business unit; determination and approach to the audit of key areas of risk; understanding the oversight by the group audit team of subsidiary business unit audit teams and visits by the group team to business units.

• At the half-year and year end, detailed discussion and BNMRHCDQ@SHNM�NE�SGDHQ�ãMCHMFR�@MC�NOHMHNMR�HM�QDK@SHNM� to the key risk areas, judgements made, any changes to the plan and to materiality and discussion of the underlying reasons.

• Consideration of their wider comments on governance, ãM@MBH@K�QDONQSHMF�OQNBDRRDR�@MC�DEãBHDMBHDR�@MC�information systems and controls, with particular focus on general IT controls.

• 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:



• The Committee received and reviewed actuarial reserving reports which described the basis for judgement in valuing HMRTQ@MBD�KH@AHKHSHDR �3GD�"NLLHSSDD�R@SHRãDC�HSRDKE�SG@S�L@M@FDLDMS�QDâDBSDC�@U@HK@AKD�@MC�QDKH@AKD�HMENQL@SHNM�when setting the reserves and that an appropriate margin was maintained.

• The Committee 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 considered the results of an external review of the Group’s reserving practices and governance in respect of setting and monitoring reserves together with reports from the Group-wide project undertaken to review and enhance control processes and concluded that the processes in place are appropriate.

• 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 assets and liabilities held for sale and discontinued operations• As part of the restructuring programme the Group has

made a number of disposals throughout 2014. Progress on the disposal programme has been reported to the Committee on a quarterly basis and the Committee has focused on the accounting consequences of classifying businesses as ‘held for sale’ as well as considering whether they met the requirements for presentation as discontinued operations. This was assessed both for the announced upcoming disposals of China, Singapore, Hong Kong and Italy, together with the accounting on the completed disposals of Poland, Latvia, Lithuania, Estonia and Noraxis (the broker business in Canada). The Committee has R@SHRãDC�HSRDKE�SG@S�SGD�CHRONR@KR�@BSHUHSHDR�G@UD�ADDM�@OOQNOQH@SDKX�QDâDBSDC�HM�SGD�ãM@MBH@K�RS@SDLDMSR

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.

The Committee also supported management’s judgement on the assessment of other goodwill balances carried by the Group. The Committee further considered the carrying value of software in Scandinavia and in view NE�BG@MFDR�SN�DWODBS@SHNMR�NE�ETSTQD�ADMDãSR��@R�@�QDRTKS� of the business review and ongoing restructuring, agreed that a further write down of certain capitalised software was appropriate.

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.

$LOKNXDD�ADMDãSR�@MC�QDSHQDLDMS�NAKHF@SHNMR• During 2014, the Committee received reports on the

valuation of the pension schemes. As the pension schemes are sensitive to changes in key assumptions, management completed an assessment as to the appropriateness of SGD�@RRTLOSHNMR�TRDC�@MC�QDONQSDC�SGDHQ�ãMCHMFR�SN�SGD�Committee. The Committee supported the conclusion that the assumptions used were appropriate and in line with other companies with similar schemes. In addition, any non-standard changes in assumptions and judgements are reviewed by the Committee: management reviewed the methodology used to assess the fair value of the longevity arrangements and recommended a change SN�SGD�A@RHR�NM�VGHBG�TMCDQKXHMF�B@RG�âNVR�@QD�U@KTDC �Following discussion and challenge the Committee agreed with management’s assessment. During 2014, the Committee also discussed the buy-out value of the pension schemes’ liabilities and agreed with management that it was appropriate to include information in respect of the buy-out values in the Annual Report and Accounts.

Assessment of the Annual Report and Accounts• At the request of the Board, the Committee considered

whether the 2014 Annual Report and Accounts were fair, balanced and understandable and whether the disclosures were appropriate. To ensure that new accounting standards VDQD�TMCDQRSNNC�@MC�@OOQNOQH@SDKX�QDâDBSDC�HM�SGD�ãM@MBH@K�RS@SDLDMSR��SGD�"NLLHSSDD�QDBDHUDC�PT@QSDQKX�updates of all relevant accounting standards that could HLO@BS�SGD�ãM@MBH@K�RS@SDLDMSR �3GD�&QNTO�G@R�MNS�L@CD�@MX�RHFMHãB@MS�BG@MFDR�SN�HSR�@BBNTMSHMF�ONKHBHDR�CTQHMF�2014 and has complied with new IFRS’ as required during SGD�XD@Q �3@JDM�@R�@�VGNKD��SGD�"NLLHSSDD�HR�R@SHRãDC�SG@S�the Annual Report and Accounts is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.

77

FINANCIAL CONTROL FRAMEWORKThe Financial Control Framework aims to deliver a consistent @OOQN@BG�SN�ãM@MBD�QDK@SDC�BNMSQNKR�@BQNRR�SGD�&QNTO � 3GD�EQ@LDVNQJ�DMRTQDR�SG@S�BNMSQNKR�@QD�ãS�ENQ�OTQONRD� in all regions. Embedding a control culture that strengthens SGD�&QNTO�R�ãM@MBH@K�BNMSQNK�DMUHQNMLDMS�@MC�DMRTQDR�ãM@MBH@K�OQNBDRRDR�@QD�L@M@FDC�DEEDBSHUDKX�HM�NQCDQ�SN�LHSHF@SD�SGD�QHRJ�NE�ãM@MBH@K�LHRRS@SDLDMS �3GD�OQNBDRR�involves documenting and testing the operation of key ãM@MBH@K�BNMSQNKR��SGDQDAX�OQNUHCHMF�@M�@BBDOS@AKD�CDFQDD� NE�@RRTQ@MBD�@QNTMC�SGD�ãM@MBH@K�BNMSQNK�DMUHQNMLDMS �

During the year the Committee received quarterly updates on the assessment and testing of controls including breaches and the action taken as a result. The Committee considered @MC�CHRBTRRDC�VHSG�L@M@FDLDMS�QDBSHãB@SHNM�NE�@MX�CDãBHDMBHDR�HM�BNMSQNKR�@MC�ETQSGDQ�@BSHNM�SN�AD�S@JDM�@R�appropriate. The Financial Control framework is subject to regular effectiveness assessments by an independent team at Group Corporate Centre and the results of this work were reported to the Committee both as part of the regular reporting and at a separate meeting held to consider SGD�PT@KHSX�NE�SGD�NUDQ@KK�ãM@MBH@K�BNMSQNK�DMUHQNMLDMS� across the Group.

INTERNAL CONTROLThe Board has overall responsibility for the effectiveness of internal control systems, with the implementation and maintenance being delegated to the Executive Directors and senior management.

The Committee reviews the performance of internal control systems quarterly, with an annual review undertaken by the !N@QC �3GHR�RXRSDL�HMBKTCDR�FNUDQM@MBD��ãM@MBH@K�BNMSQNKR��the risk management framework and processes to deliver regulatory and compliance requirements. In addition, the Board, through the Board Risk Committee, considers reports from risk specialists across the Group and reviews Group-level risk management information. The systems are designed to identify and mitigate, rather than eliminate, the potential risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against L@SDQH@K�ãM@MBH@K�LHRRS@SDLDMS�NQ�KNRR

In February 2015, the Committee on behalf of the Board reviewed the systems of internal control in operation during 2014. The conclusion reached by the Board in conjunction with management on the basis of the reviews, and the work undertaken as part of the project to review and enhance control processes, as described on pages 44 to 47, was that NUDQ@KK�MN�RHFMHãB@MS�E@HKHMFR�NQ�VD@JMDRRDR�HM�SGD�&QNTO�R�BNMSQNK�DMUHQNMLDMS�CTQHMF��VDQD�HCDMSHãDC

The Committee received regular reports from the Group Chief Auditor on the integrity of the control environment, and from the external auditor based on its audit work. Findings and recommendations arising from internal and external audit work were discussed by the Committee together with any control improvements recommended.

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.

The reporting framework delivers information to enable the systems of internal control to be monitored and their effectiveness to be reviewed as required by the 2012 Code. The Board considers that an ongoing process for identifying, DU@KT@SHMF�@MC�L@M@FHMF�SGD�RHFMHãB@MS�QHRJR�E@BDC�AX� the Group has been in place during 2014, and up to the date of approval of the Annual Report and Accounts. This process accords with the latest Turnbull Guidance.

GROUP INTERNAL AUDITThe Committee oversees and reviews the activities and effectiveness of Group Internal Audit (GIA) who assist in accomplishing the Group’s objectives by evaluating the Group’s risk management, control and governance processes, and assist with improving their effectiveness. Their primary role is to help the Board and Executive Management to protect the assets, reputation and sustainability of the organisation. The scope of GIA is unrestricted.

A comprehensive, risk-based audit plan is prepared by GIA on an annual basis, taking into consideration the key strategic and emerging risks facing the Group. Regular updates were provided to the Committee on the progress of the 2014 plan, and in December the 2015 Audit plan was reviewed, challenged and approved by the Committee. The Committee received quarterly reports from GIA on their assessment of the internal control environment of the Group and management were required to present to the Committee SGDHQ�UHDVR�NM�SGD�JDX�QHRJR�@MC�HRRTDR�HCDMSHãDC�AX�&( �� along with the related remediation plans.

EXTERNAL AUDITORIn 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 Committee has provided clear guidance to KPMG on the Committee’s expectations of them as part of their roles as auditor; that the Committee, not management, is their client; that they are expected to challenge appropriately; that they are expected to raise issues and concerns with the Committee as soon as is appropriate; and on material matters they are expected to indicate their agreement to the position taken by management, or to explain why they do not, and the implications.



79

It is the intention of the Committee that the Company will adhere to the 2012 Code requirement of tendering for the external auditor at least every 10 years.

The 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.

The Committee undertakes a thorough review of the effectiveness of the external auditor on an annual basis, usually during completion of the year-end audit. The review has covered the perceived quality, effectiveness, objectivity and independence of the external auditor together with their compliance of the Committee’s guidance referred to above. It was conducted by seeking the views of the Committee, senior management and members of the Group Financial Reporting team, and asking for opinions against set criteria and the performance of the external auditor against those BQHSDQH@ �.M�SGD�A@RHR�NE�SGD�QDUHDV��SGD�"NLLHSSDD�HR�R@SHRãDC�with the work of KPMG and that they are objective and independent. Accordingly, the Committee has recommended to the Board that a resolution be put to the 2015 AGM for the reappointment of KPMG LLP as external auditor, and the Board has accepted this recommendation.

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.

ALASTAIR WS BARBOUR FCANon-Executive Director and Chairman of the Group Audit Committee25 February 2015


CORPORATE GOVERNANCE

80

Committee Chairman’s letter

Dear Shareholder,

As Chairman of the Group Remuneration Committee of the Board, I am pleased to present this Report covering the year to 31 December 2014 for your approval.

LINKING REMUNERATION WITH PERFORMANCEIn 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

At the start of the year, a Business Review component was built into the Group’s incentive plans, to align them to the turnaround strategy.

2HFMHãB@MS�GD@CV@X�@F@HMRS�SGD�!TRHMDRR�1DUHDV�NAIDBSHUDR�has been made, with the successful completion of the Rights Issue and over delivery against the disposal programme. Substantial advances have also been seen in portfolio management optimisation, improving organisational DEãBHDMBX�@MC�DWODMRD�QDCTBSHNM �(M�@CCHSHNM�L@M@FDLDMS�has continued to place emphasis on the implementation and embedding of internal controls as well as identifying additional revenue opportunities to support future growth.

The Business Review Scorecard indicators include IGD 2TQOKTR�@S�`� �AM��$" �2TQOKTR�@S�`� �AM�@MC�SGD�2î/�BQDCHS�Q@SHMF�QD�DRS@AKHRGDC�@S� �RS@AKD��RGNVHMF�RHFMHãB@MS�RSDOR�ENQV@QC�@F@HMRS�HM�XD@Q�@MC�LTKSH�XD@Q�NAIDBSHUDR�SG@S�management was tasked to deliver.

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

• None of the performance-based long-term incentive plan (LTIP) awards from the 2012–14 cycle will vest.

INDEX TO THE REPORT

".,,(33$$�"' (1, -�2�+$33$1� ��

1$,4-$1 3(.-�2- /2'.3� ��

--4 +�1$/.13�.-�1$,4-$1 3(.-� ��1. Introduction 832. Information about the Group

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 949. Percentage change in remuneration 9410. Relative importance of spend on pay 9411. Implementation of Remuneration Policy in 2015 95�� 2S@SDLDMS�NE�UNSHMF�@S�&DMDQ@K�,DDSHMF� ��13. Dilution 98�� $WSDQM@K�#HQDBSNQRGHOR� ��15. Directors’ contracts 98

//$-#(7��24,, 18�.%�1$,4-$1 3(.-�/.+("8� ��

Directors’ Remuneration Report

81

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.

ALIGNING REMUNERATION AND STRATEGY IN 2015The Group’s Remuneration Policy was approved by RG@QDGNKCDQR�@S�SGD� &,�NM��,@X�� 3GD�"NLLHSSDD�considers that the Policy remains aligned to the business strategy, the long-term interests of the Company and its shareholders, and so no changes are proposed to it this year.

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.

In 2015, the Policy will be implemented in the following ways:

• 3GD�$WDBTSHUD�#HQDBSNQ�R�HMBDMSHUD�OK@MR�VHKK�BNMSHMTD� to align management and shareholders’ interests by LD@RTQHMF�ODQENQL@MBD�@F@HMRS�OQNãS��TMCDQVQHSHMF�performance, shareholder returns, balance sheet strength, capital strength, expense goals and management actions which include a focus on risk.

• 3GD� MMT@K�!NMTR�/K@M�ENQ��VHKK�HMBKTCD�ãM@MBH@K�measures, Business Review and personal targets. The ratio of TNAV to Net Written Premium (TNAV:NWP) will be included in the Business Review Scorecard as a measure of capital strength and the organisation’s sustainability.

• /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��

– A Business Review Scorecard, which will be strengthened taking into account the progress made in 2014, and will additionally include TNAV:NWP, and the revised controllable expense targets detailed on page 23 over the three-year performance period.

• 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.

3GD�!N@QC�1HRJ�"NLLHSSDD�"G@HQL@M��*@SG�"@SDR��INHMDC� SGD�1DLTMDQ@SHNM�"NLLHSSDD�HM�,@X��VGHBG�SNFDSGDQ�with my membership of the Board Risk Committee ensures we have integrated decision making.

Details on how the Remuneration Policy will be implemented HM��@QD�RDS�NTS�NM�O@FDR��SN��

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.

SHAREHOLDER ENGAGEMENTIn early 2014, the Committee engaged with the Group’s largest shareholders and the ABI, NAPF and ISS on the remuneration structure. Following shareholder approval NE�SGD�1DLTMDQ@SHNM�/NKHBX�HM�,@X��SGD�"NLLHSSDD� has continued this dialogue. It has shared information and taken on board feedback in respect of the incentive plan performance measures for the 2015 cycle.

I remain committed to ensuring our remuneration decisions E@HQKX�QDâDBS�ODQENQL@MBD�@MC�NTQ�CTSX�SN�RG@QDGNKCDQR � (�GNOD�XNT�ãMC�SGHR�QDONQS�TRDETK�@MC�SGD�!N@QC�KNNJR� ENQV@QC�SN�XNTQ�RTOONQS�ENQ�HS�@S�SGD� &,

HUGH S MITCHELL-NM�$WDBTSHUD�#HQDBSNQ�@MC�"G@HQL@M�of Group Remuneration Committee25 February 2015



82

Remuneration SnapshotHOW IS RSA IMPLEMENTING ITS APPROVED REMUNERATION POLICY FOR EXECUTIVE DIRECTORS?

Policy summary for 2014 onwards

.OONQSTMHSX�@MC�ODQENQL@MBD�conditions

Implementation in 2014 (pages 85 to 94)

Implementation HM��O@FDR��SN��

Base salary• ,@QJDS�BNLODSHSHUD • Reviewed annually.

• �.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.

• No salary increases effective 1 April 2014.

• No salary increases effective 1 April 2015.

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�

as detailed on page 89.

• 80% of salary on-target and 160% of salary for maximum performance.

• Targets aligned to operational plan.

• 2014 performance measures: &QNTO�TMCDQKXHMF�1.3$�@MC�/!3��&QNTO�".1��!TRHMDRR�1DUHDV�@MC�Personal Scorecards.

• Bonuses awarded at 68% and 13% of the maximum for Stephen Hester and Richard Houghton respectively.

• Introduction of TNAV:NWP performance measure to Business Review Scorecard.

• $WSDMRHNM�SN�"K@VA@BJ�/NKHBX� to allow recovery of cash bonuses paid for 2015 performance year onwards.

Long-term Incentive Plan• Performance shares granted annually VGHBG�UDRS�RTAIDBS�SN�ODQENQL@MBD�conditions measured over three years.

• Two-year additional retention period on vested performance-based awards.

• 2TAIDBS�SN�12 �R�"K@VA@BJ�/NKHBX� as detailed on page 89.

• 4O�SN��í�NE�R@K@QX�@S�L@WHLTL • For recruitment purposes, or in

highly exceptional circumstances, such as for retention, an award may be made up to an additional ��í�NE�R@K@QX

Awards granted (2014-16 cycle) • Conditional grants for Group Chief $WDBTSHUD�@MC�&QNTO�"%.��í�and 230% of salary respectively).

• Performance conditions: Relative 321��&QNTO�TMCDQKXHMF�1.3$� and Business Review Scorecard.

Awards vesting (2012-14 cycle)• 0% vesting on performance-

based awards.

Awards granted (2015-17 cycle) • Conditional grant for Group Chief $WDBTSHUD��í�NE�R@K@QX�� in view of his criticality to company turnaround).

• Performance conditions: Relative 321��&QNTO�TMCDQKXHMF�1.3$� and Business Review Scorecard (to also include TNAV:NWP and controllable expenses).

• Clawback can apply to vested awards granted from 2015.

HOW WAS REWARD ALIGNED TO THE BUSINESS STRATEGY IN 2014?

Strategic Priorities: Key Performance Indicators Annual Bonus Plan 2014 Long-term incentive cycle 2014-16Business Review:- Strategic Focus,- Capital and Balance Sheet Strength, – Performance Improvement

Capital metrics:3- 5��(&#��$"

Business Review Scorecard: "@OHS@K�LDSQHBR��,@M@FDLDMS�@BSHNMR�

including expenses

Business Review Scorecard: Capital metrics,

Cumulative earnings,Growth in TNAV per Share

/QNãS@AHKHSX Group underlying PBT, &QNTO�".1 &QNTO�TMCDQKXHMF�/!3��&QNTO�".1 Cumulative earnings

Shareholder Value &QNTO�TMCDQKXHMF�1.3$ &QNTO�TMCDQKXHMF�1.3$ &QNTO�TMCDQKXHMF�1.3$� (3-year average), Relative TSR

HOW HAVE WE PERFORMED AGAINST OUR OBJECTIVES?

Annual Bonus Plan 2014Performance 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��

40% 13%

Business Review Scorecard 30% 25%Personal Scorecard 30% 30%

Total (% of maximum) 100% 68%

Long-term incentive cycle 2012-14 Performance measures Actual performance Vesting (% of maximum)

Relative TSR Performance targets, results and narrative on page 88

0%

&QNTO�TMCDQKXHMF�1.$ 0%

WHAT REMUNERATION DID THE EXECUTIVE DIRECTORS RECEIVE IN 2014? (details on page 85)

Salary 3@W@AKD�ADMDãSR Bonus LTIPPension related

ADMDãSR.SGDQ�

remuneration Total�`�� 2014 2013 2014 20131 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Adrian Brown2 143 482 15 43 - – - – 24 84 1 2 183 611

Stephen Hester2 864 – 57 – 939 – - – 258 – - – 2,118 –

Richard Houghton 494 491 21 19 100 – - – 67 �� - – 682 580Simon Lee - �� - �� - – - – - 194 - 2 - 1,011Total 1,501 �� 93 99 1,039 – - – 349 348 1 4 2,983 2,202

Notes:� � �%HFTQDR�@QD�QDRS@SDC�SN�HMBKTCD�@M�@LNTMS�HM�QDRODBS�NE�S@W�O@X@AKD�NM�SGD�ADMDãSR�OQNUHCDC�HM�SGD�QDKDU@MS�ãM@MBH@K�XD@Q�NM�ADG@KE�NE�SGD�CHQDBSNQ �

Previously, tax had been included based on date paid.� � ��R@K@QX�ãFTQDR�@QD�OQN�Q@SDC�ENQ�SHLD�RDQUDC�@R�CHQDBSNQR�CTQHMF�SGD�XD@Q �

83

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.

COMMITTEE MEMBERSThe Committee comprises a number of independent -NM�$WDBTSHUD�#HQDBSNQR�VGN�@QD�B@KKDC�TONM�SN�DWDQBHRD�ITCFDLDMS�NM�SGD�RDSSHMF�@MC�L@M@FDLDMS�NE�DWDBTSHUD�remuneration. The Committee’s members in 2014 are detailed in the table below. The number of meetings each Director attended is shown as a proportion of the total number of meetings held during the period of the year in which they were a Committee member.

Committee member ,DDSHMFR�HM��

'TFG�,HSBGDKK* 5/5

Kath Cates1 2/2

$MQHBN�"TBBGH@MH2 1/1

,@KBNKL�+D�,@X3 2/3

Jos Streppel 3/5


Notes:* Chair of Committee� � �*@SG�"@SDR�V@R�@OONHMSDC�SN�SGD�"NLLHSSDD�DEEDBSHUD��,@X�� $MQHBN�"TBBGH@MH�V@R�@OONHMSDC�SN�SGD�"NLLHSSDD�DEEDBSHUD�

December 2014.� � �,@KBNKL�+D�,@X�V@R�@�LDLADQ�NE�SGD�"NLLHSSDD�TMSHK��,@X��

COMMITTEE ATTENDEES3GD�"G@HQL@M��&QNTO�"GHDE�$WDBTSHUD�@MC�NSGDQ�RDMHNQ�executives attend Committee meetings by invitation to advise on Group strategy, performance, HR and remuneration policies and practices. However, none of these executives have a right to attend and are not present if their own remuneration is being discussed. The table below notes the Committee attendees during 2014.

Committee attendee Position

,@QSHM�2BHBKTM@ Chairman

Derek Walsh Group General Counsel (Secretary to the Committee)

Stephen Hester &QNTO�"GHDE�$WDBTSHUD

5@MDRR@�$U@MR Group Human Resources Director

Leigh Harrison1

Lorna Benton2 Group Reward Director

Notes:1. Attended meetings from January to September 2014.2. Attended meetings from September to December 2014.

1. INTRODUCTIONThis section of the Directors’ Remuneration Report describes the way in which remuneration decisions have been carried NTS�HM�SGD�ãM@MBH@K�XD@Q�DMCDC��#DBDLADQ�� 3GDQD� is a statement on how the Group intends to implement HSR�1DLTMDQ@SHNM�/NKHBX�HM��NM�O@FDR��SN�� Any information contained in this section of the report SG@S�HR�RTAIDBS�SN�@TCHS�HR�GHFGKHFGSDC

2. INFORMATION ABOUT THE GROUP REMUNERATION COMMITTEEPURPOSE OF THE COMMITTEEThe 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.

The Committee determines the remuneration and contractual SDQLR�ENQ�SGD�$WDBTSHUD�#HQDBSNQR�@MC�SGD�$WDBTSHUD�"NLLHSSDD��VGNRD�OQNãKDR�@QD�BNMS@HMDC�NM�O@FDR��SN�� It also approves the fee and contractual terms of the "G@HQL@M��VGNRD�OQNãKD�HR�NM�O@FD��

The decisions the Committee makes are intended to promote the ongoing success of the Group, whilst upholding the interests of shareholders, regulators, customers and other stakeholders. Consequently, it pays close attention to the Group’s risk management policies, ensuring that these are considered alongside other relevant information so that its actions are balanced, appropriate and support the Group’s strategy.

Annual Report on Remuneration



84

COMMITTEE ADVISORSPricewaterhouseCoopers (PwC) was formally appointed by the Committee as its independent advisor in September 2012. It was selected following a market tender exercise. During 2014, PwC also provided wide-ranging advice and consultancy services across the Group globally on matters including business processes, IT, internal audit, corporate social responsibility, direct and indirect tax, and governance. PwC is a member of the Remuneration Consultants’ Group and a signatory to its "NCD�NE�"NMCTBS �(M�@CCHSHNM��SGD�"NLLHSSDD�G@R�R@SHRãDC�HSRDKE�SG@S�SGD�@CUHBD�HS�QDBDHUDR�HR�NAIDBSHUD�@MC�HMCDODMCDMS� @R�SGD�ãQL�G@R�BNMãQLDC�SGDQD�@QD�MN�BNMâHBSR�NE�HMSDQDRSR�@QHRHMF�ADSVDDM�HS��HSR�@CUHRNQR�@MC�12 �3GD�EDD�O@HC�ENQ�RDQUHBDR� SN�SGD�"NLLHSSDD�HM�SGD�XD@Q�V@R�`��DWBKTCHMF�5 3��A@RDC�NM�@�ãWDC�EDD�ENQ�@�CDãMDC�RBNOD�NE�VNQJ��@MC�GNTQKX�Q@SDR� ENQ�RODBHãB�OQNIDBSR

COMMITTEE MEETINGS HELD IN 2014(M��SGD�"NLLHSSDD�LDS�NM�ãUD�NBB@RHNMR�@MC�SGD�S@AKD�ADKNV�RTLL@QHRDR�SGD�L@SSDQR�HS�CHRBTRRDC

,DDSHMF Regular items Additional items

January • Review of 2014 incentive performance conditions • Appointment terms of SGD�&QNTO�"GHDE�$WDBTSHUD

February • Approval of 2014 incentive performance conditions

• Review of directors’ base salaries and approval to maintain current salaries from 1 April 2014

• Testing of the performance conditions underpinning the Annual Bonus Plan 2013 and the LTIP cycle 2011-13; approval of the level of directors’ awards

• Review of Directors’ Remuneration Report 2013

• Shareholder engagement update

• 4OC@SD�NM�4*�ODMRHNM� plan provider review

• Sharesave and Sharebuild participation update

,@X • Approval of the terms of the LTIP grant 2014 and directors’ associated conditional share awards

• 1DUHDV�NE�$WDBTSHUD�#HQDBSNQR��ODQRNM@K�FN@KR�ENQ��

• Corporate governance update

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

• 4OC@SD�NM�SGD� MMT@K�!NMTR�/K@M��@MC�+3(/�BXBKDR��@MC��

• Approval to operate Sharesave and Sharebuild in 2014

• Approval of revised Remuneration Committee terms of reference

• None

December • 4OC@SD�NM�SGD� MMT@K�!NMTR�/K@M��@MC�+3(/�BXBKDR��@MC��

• Review of 2015 incentive performance conditions

• Review of draft Directors’ Remuneration Report 2014

• 4OC@SD�NM�SGD�RTOOKDLDMS@QX�FQ@MS�NE�BNMCHSHNM@K�+3(/�@V@QCR� in November 2014 for non-Board employees

• 1DUHDV�NE�NTSOTSR�NE�1DLTMDQ@SHNM�"NLLHSSDD�$EEDBSHUDMDRR�2TQUDX��

• Review of Committee meeting schedule for 2015

• Corporate governance update

85

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.

EXECUTIVE DIRECTORS

Salary 3@W@AKD�ADMDãSR1 2 Bonus3 LTIPPension related

ADMDãSR6.SGDQ�

remuneration� Total

�`�� 2014 2013 2014 2013 2014 2013 20144 20135 2014 2013 2014 2013 2014 2013

Adrian Brown8 143 482 15 43 - – - – 24 84 1 2 183 611

Stephen Hester9 864 – 57 – 939 – - – 258 – - – 2,118 –

Richard Houghton 494 491 21 19 100 – - – 67 �� - – 682 580

Simon Lee10 - �� - �� - – - – - 194 - 2 - 1,011

Total 1,501 �� 93 99 1,039 – - – 349 348 1 4 2,983 2,202

NON-EXECUTIVE DIRECTORS

�`��

FeesTaxable ADMDãSR1 2 Total

2014 2013 2014 2013 2014 2013

Alastair Barbour 95 90 13 19 108 109

Kath Cates11 83 23 - – 83 23

$MQHBN�"TBBGH@MH12 6 – - – 6 –

Noel Harwerth13 - 19 - – - 19

$CV@QC�+D@14 39 102 3 3 42 105

,@KBNKL�+D�,@X14 29 80 - 1 29 81

)NGM�,@WVDKK13 - 16 - 2 - 18

'TFG�,HSBGDKK 88 80 - – 88 80

,@QSHM�2BHBKTM@15 400 400 2 1 402 401

Jos Streppel 78 68 1 1 79 69

Johanna Waterous 88 �� 2 – 90 ��

Total 906 948 21 �� 927 ��

Notes:� � �3@W@AKD�ADMDãSR��HMBKTCDR�QDHLATQRDLDMS�HM�QDRODBS�NE�SQ@UDK�@MC�@BBNLLNC@SHNM � CQH@M�!QNVM�QDBDHUDC�@�B@Q�@KKNV@MBD�NE�`��`��

2SDOGDM�'DRSDQ�QDBDHUDC�@�B@Q�@KKNV@MBD�@MC�SGD�TRD�NE�@�B@Q�@MC�CQHUDQ�RDQUHBD�VGHBG�SNS@KKDC�`�� 1HBG@QC�'NTFGSNM�QDBDHUDC�@�B@Q�@KKNV@MBD� NE�`��`�� (M�@CCHSHNM��D@BG�NE�SGD�$WDBTSHUD�#HQDBSNQR�QDBDHUDC�LDCHB@K�ADMDãSR�@MC�2SDOGDM�'DRSDQ�QDBDHUDC�RDO@Q@SD�KHED�BNUDQ � K@RS@HQ�!@QANTQ�QDBDHUDC�ADMDãSR�NE�`��`��ENQ�S@W@AKD�SQ@UDK�VGDQD�QDKHDE�TMCDQ�',1"�QTKDR�HR�MNS�@U@HK@AKD �

� � �3@W@AKD�ADMDãSR��3GD��ãFTQDR�@ANUD�HMBKTCD�@M�@LNTMS�HM�QDRODBS�NE�S@W�O@X@AKD�NM�SGD�ADMDãSR�OQNUHCDC�HM��NM�ADG@KE�NE�SGD�CHQDBSNQ � 3GD��ãFTQDR�@QD�QDRS@SDC�SN�OQDRDMS�SGDL�NM�@�BNLO@Q@SHUD�A@RHR��OQDUHNTRKX��S@W�G@C�ADDM�HMBKTCDC�A@RDC�NM�C@SD�O@HC�

� � �!NMTR��BNLOQHRDR�@V@QCR�HM�QDRODBS�NE�ODQENQL@MBD�LD@RTQDR�QDK@SHMF�RNKDKX�SN�SGD�ãM@MBH@K�XD@Q�RGNVM��HM�@BBNQC@MBD�VHSG�SGD�OK@M�CDRBQHADC� NM�O@FDR��SN�� '@KE�NE�SGD�ANMTR�RGNVM�HR�@V@QCDC�HM�#DEDQQDC�!NMTR�2G@QDR�VGHBG�UDRS�SGQDD�XD@QR�EQNL�SGD�C@SD�NE�FQ@MS��@MC�@QD�RTAIDBS� SN�L@KTR�@CITRSLDMS�TMCDQ�SGD�&QNTO�R�"K@VA@BJ�/NKHBX�CDS@HKDC�NM�O@FD��

� � �+3(/��ODQENQL@MBD�A@RDC�@V@QCR�FQ@MSDC�TMCDQ�SGD��+3(/�BXBKD�VHKK�K@ORD�HM�ETKK�NM��,@X�� !X�DWBDOSHNM��1HBG@QC�'NTFGSNM�R�@V@QC��which was awarded following his appointment as a director effective 12 June 2012, will lapse in full on 15 June 2015.

� � �+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�

Sharebuild matching shares granted during the year (detailed on page 91). These other items in the nature of remuneration are available to all qualifying 4*�DLOKNXDDR�@MC�@QD�MNM�S@W@AKD

8. Adrian Brown resigned from the Board effective 16 April 2014 and his employment ended effective 31 August 2014. The salary shown in the table is the pro-rated amount for the time he was a director, i.e. 1 January – 16 April 2014. Further details are given on page 93.

� � �2SDOGDM�'DRSDQ�V@R�@OONHMSDC�@R�@�CHQDBSNQ�DEEDBSHUD��%DAQT@QX��NM�@M�@MMT@K�R@K@QX�NE�`�� 3GD�R@K@QX�U@KTD�RGNVM�HM�SGD�S@AKD�ENQ� 2014 is the pro-rated amount based on his appointment date.

10. Simon Lee resigned from the Board and his employment ended on 12 December 2013. The salary value shown in the table for 2013 is the pro-rated @LNTMS �/@X�HM�KHDT�NE�MNSHBD�HR�MNS�HMBKTCDC�HM�SGHR�S@AKD��@MC�V@R�CHRBKNRDC�HM�K@RS�XD@Q�R�1DONQS�NM�O@FD��TMCDQ�/@XLDMSR�ENQ�+NRR�NE�.EãBD

�� *@SG�"@SDR�V@R�@OONHMSDC�@R�@�-NM�$WDBTSHUD�#HQDBSNQ�DEEDBSHUD��2DOSDLADQ�� $MQHBN�"TBBGH@MH�V@R�@OONHMSDC�@R�@�-NM�$WDBTSHUD�#HQDBSNQ�DEEDBSHUD��#DBDLADQ�� -NDK�'@QVDQSG�@MC�)NGM�,@WVDKK�QDRHFMDC�@R�-NM�$WDBTSHUD�#HQDBSNQR�VHSG�DEEDBS�EQNL��,@QBG�� $CV@QC�+D@�@MC�,@KBNKL�+D�,@X�QDRHFMDC�@R�-NM�$WDBTSHUD�#HQDBSNQR�VHSG�DEEDBS�EQNL��,@X�� ,@QSHM�2BHBKTM@�V@R�@OONHMSDC�@R�"G@HQL@M�NM��)@MT@QX�� 'D�V@R�@OONHMSDC�SN�SGD�QNKD�NE�$WDBTSHUD�"G@HQL@M�EQNL��#DBDLADQ��SN�

��%DAQT@QX�� S�GHR�QDPTDRS��SGDQD�V@R�MN�HMBQD@RD�HM�EDD�ENQ�SGHR�ODQHNC � �`��ONQSHNM�NE�SGD�@ANUD��EDDR�QDK@SD�SN�SGD�ODQHNC�VGDM� GD�V@R�$WDBTSHUD�"G@HQL@M



86

4. COMPONENTS OF EXECUTIVE DIRECTORS’ REMUNERATIONBASE SALARY3GD�"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 �

3GD�$WDBTSHUD�#HQDBSNQR��R@K@QHDR�QDL@HMDC�TMBG@MFDC�ENQ�SGD�� OQHK��QDUHDV��@R�RS@SDC�HM�SGD�S@AKD�ADKNV �3GD�R@K@QHDR� of Stephen Hester and Richard Houghton effective from 1 April 2015 will be unchanged, as also noted on page 96.

DirectorAnnual base salary

effective 1 April 2014%

Change

Stephen Hester `�� 0%

Richard Houghton `�� 0%

Note:� � � CQH@M�!QNVM�R�R@K@QX�DEEDBSHUD�� OQHK��@KRN�QDL@HMDC�TMBG@MFDC��@S�`��

EMPLOYMENT BENEFITS3GD�$WDBTSHUD�#HQDBSNQR�QDBDHUDC�@�Q@MFD�NE�DLOKNXLDMS�ADMDãSR�CTQHMF��HMBKTCHMF�B@Q�@MC�LDCHB@K�ADMDãSR�� and the value of these is noted in the table on page 85.

PENSION PROVISION (audited)3GD�$WDBTSHUD�#HQDBSNQR��ODMRHNM�ADMDãSR�ENQ�SGD�XD@Q�VDQD�@R�ENKKNVR�

• CQH@M�!QNVM�QDBDHUDC�@�S@W@AKD�B@RG�@KKNV@MBD�NE�� í�NE�A@RD�R@K@QX�ENQ�SGD�ODQHNC�GD�V@R�DLOKNXDC�CTQHMF�� • Stephen Hester received a taxable cash allowance of 30% of base salary following his appointment effective 5 February 2014.• Richard Houghton was a member of the Stakeholder Pension Plan until April 2014 and received an employer pension BNMSQHATSHNM�NE��í�NE�A@RD�R@K@QX�@MC�@�S@W@AKD�B@RG�@KKNV@MBD�NE�� í�NE�A@RD�R@K@QX �'D�QDBDHUDC�@�S@W@AKD�B@RG�@KKNV@MBD�NE�� í�NE�A@RD�R@K@QX�EQNL� OQHK��NMV@QCR �3GD�SNS@K�S@W@AKD�B@RG�@KKNV@MBD�CTQHMF�SGD�XD@Q�V@R�`��@MC�SGD�SNS@K�DLOKNXDQ�ODMRHNM�BNMSQHATSHNM�V@R�`��

3GD�@FFQDF@SD�U@KTD�O@HC�AX�12 �HMSN�SGD�"NLO@MX�R�RS@JDGNKCDQ�ODMRHNM�RBGDLD�ENQ�SGD�$WDBTSHUD�#HQDBSNQR�HM��V@R�`��`��

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.

3GD�L@WHLTL�ANMTR�NOONQSTMHSX�ENQ�SGD�$WDBTSHUD�#HQDBSNQR�V@R��í�NE�R@K@QX��NE�VGHBG�G@KE�NE�@MX�@V@QC�VNTKC�AD�BNLOTKRNQHKX�CDEDQQDC�HMSN�12 �RG@QDR�ENQ�SGQDD�XD@QR�@MC�RTAIDBS�SN�L@KTR�@CITRSLDMS�TMCDQ�SGD�&QNTO�R�"K@VA@BJ�/NKHBX�detailed on page 89.

In determining bonus awards, the Committee considered how goals had been met, ensuring that performance took account of key risk factors.

GROUP CHIEF EXECUTIVE

Financial performance (40% weighting – achieved 13%)4MCDQKXHMF�LDSQHBR�ENQ�ANMTR�OTQONRDR�DWBKTCDC�MDS�F@HMR��QDNQF@MHR@SHNM�BNRSR��SQ@MR@BSHNM�BNRSR�@MC�NMD�NEE�KNRRDR�QDK@SHMF�SN�OQHNQ�XD@Q�HRRTDR�HM�(QDK@MC � R�RGNVM�HM�SGD�S@AKD��ãM@MBH@K�ODQENQL@MBD�V@R�ADKNV�SGD�S@QFDS�KDUDK�ENQ�D@BG�LDSQHB�KD@CHMF�to an outcome of 13% against a possible maximum of 40%.

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.

��

/DQENQL@MBD�TMCDQ�SGD�!TRHMDRR�1DUHDV�2BNQDB@QC�V@R�@RRDRRDC�SN�G@UD�ADDM�HM�DWBDRR�NE�SGD�RODBHãB�S@QFDSR �

Substantial outperformance was seen in the disposal programme and good execution of the portfolio exits within the ATRHMDRR �3GD�ATRHMDRR�G@R�ADDM�QDB@OHS@KHRDC�@GD@C�NE�S@QFDSR �$WODMRDR�VDQD�QDCTBDC�@GD@C�NE�/K@M�VHSG�QDCTBSHNM�S@QFDSR�exceeded as a result of additional actions developed. The Committee was of the view that overall a strong platform has been created for the business turnaround.

As a result the Committee assessed an outcome of 25% out of a possible score of 30% in this category.

Personal Element (30% weighting – achieved 30%)This element focuses on personal performance versus the highest priorities set by the Board for Stephen Hester in 2014, namely efforts driving company recapitalisation, new strategy and operational plans, stakeholder engagement, operational CDKHUDQX�NE�BNMSQNKK@AKD�HSDLR�@MC�$WDBTSHUD�SD@L�CDUDKNOLDMS �

KSGNTFG�SGD�"NLO@MX�@R�@�VGNKD�EDKK�RGNQS�NE�HSR�TMCDQKXHMF�OQNãS@AHKHSX�S@QFDSR�ENQ�SGD�XD@Q��@R�QDâDBSDC�HM�SGD�ãM@MBH@K�element of the bonus, progress was made in a number of areas. Those elements of performance most controllable by L@M@FDLDMS�DWBDDCDC�SGDHQ�OK@MMDC�NTSBNLDR��M@LDKX�BTQQDMS�XD@Q�TMCDQVQHSHMF�OQNãS�DWBKTCHMF�(QDK@MC��@�QDBNQC�� BNRSR��ADSSDQ�SG@M�OK@M��@MC�HMUDRSLDMS�HMBNLD�NM�OK@M �3GHR�V@R�BNMRHCDQDC�@�RHFMHãB@MS�@BGHDUDLDMS �3GD�RGNQSE@KKR�K@X� OQHL@QHKX�HM�(QHRG�KNRRDR�@MC�4*�OQHNQ�XD@Q�QDRDQUD�RSQDMFSGDMHMF�

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.

R�@�BNMRDPTDMBD��,Q�'DRSDQ�V@R�@V@QCDC�@�ANMTR�NE��í�NE�SGD�L@WHLTL�@U@HK@AKD�NOONQSTMHSX��ADHMF��í�NE�GHR�@MMT@K�base salary.

Overview of bonus outcomesThe following table summarises the 2014 annual bonus outcome for Stephen Hester.

Bonus 2014 performance measures Target Actual

Weighting(% of maximum)

Stephen Hester Award(% of maximum)

&QNTO�TMCDQKXHMF�1.3$ 10.8% � �í 20% 6%

Group underlying PBT `��L `��L 10% 3%

&QNTO�".1 99.0%1 �� í1 10% 4%

Business Review Scorecard

–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.

30% 25%

Personal Scorecard See narrative 30% 30%

Total (% of maximum) 100% 68%

Total (% of annual base salary)3 99%

Bonus receivable4 `��

Notes:� � �%NQ�SGD��ANMTR�OK@M��".1�@MC�DWODMRD�Q@SHN�VDQD�B@KBTK@SDC�NM�SGD�A@RHR�NE�ANSG�VQHSSDM�@MC�D@QMDC�OQDLHTLR �3GD�&QNTO�G@R�RHMBD�QDUHRDC�HSR�CDãMHSHNM�NE�".1�SN�B@KBTK@SD�HS�NM�SGD�A@RHR�NE�D@QMDC�OQDLHTLR�NMKX��@MC�SGDQDENQD�SGD�ãFTQDR�@ANUD�CHEEDQ�EQNL�SGNRD�NM�O@FD��NE�SGHR�1DONQS

� � ��(&#�@MC�$" �ONRHSHNMR�@QD�CDS@HKDC�HM�SGD�B@OHS@K�CHRBKNRTQD�NM�O@FD��SN�� 3. Stephen Hester was appointed as a director effective 5 February 2014. His bonus has been determined by the Committee relative to his gross annual A@RHB�R@K@QX�NE�`��@MC�OQN�Q@SDC�EQNL�SGHR�C@SD�TMSHK��#DBDLADQ��

� � �'@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.

&QNTO�"GHDE�%HM@MBH@K�.EëBDQ�The Financial, Business Review and Personal Scorecard elements were considered in a corresponding manner for Richard Houghton. In light of Richard Houghton’s departure from the Group, announced on 26 February 2015, and the associated SDQLR�@FQDDC�HM�@BBNQC@MBD�VHSG�SGD�&QNTO�R�ONKHBX�ENQ�$WDBTSHUD�CDO@QSTQDR��SGD�"NLLHSSDD�CDSDQLHMDC�SG@S�SGD�@V@QC� ENQ�,Q�'NTFGSNM�RGNTKC�AD�`��í�NE�L@WHLTL�ADHMF��í�NE�@MMT@K�A@RD�R@K@QX��VHSG�G@KE�NE�SGHR�@V@QC�ADHMF� CDEDQQDC�HM�RG@QDR�ENQ�SGQDD�XD@QR�RTAIDBS�SN�L@KTR�@CITRSLDMS



88

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.

3GD�UDRSHMF�NE�SGDRD�@V@QCR�V@R�BNMSHMFDMS�NM�12 �@BGHDUHMF�S@QFDSR�ENQ�&QNTO�TMCDQKXHMF�1DSTQM�NM�$PTHSX��1.$��@MC�QDK@SHUD�Total Shareholder Return (TSR), measured over a three-year performance period. The outcome of the 2012–14 cycle has been SDRSDC�AX�SGD�"NLLHSSDD�@MC�HMCDODMCDMSKX�UDQHãDC � R�@�QDRTKS��/DQENQL@MBD�@MC�,@SBGHMF�RG@QD�@V@QCR�FQ@MSDC�TMCDQ�SGD�2012–14 cycle will not vest as neither of the performance conditions was achieved. The tables below show the outcome of SGD�ODQENQL@MBD�LD@RTQDR�@MC�SGD�QDRTKSHMF�KDUDK�NE�UDRSHMF�ENQ�$WDBTSHUD�#HQDBSNQR��@V@QCR�

LTIP performance measures 2012-14 Threshold target: 25% vesting ,@WHLTL�S@QFDS��í�UDRSHMF Actual performance Vesting (% of maximum)

Relative TSR1, 3 ,DCH@M�� í 4OODQ�PTHMSHKD�� í 9.5% 0%

&QNTO�TMCDQKXHMF�1.$2, 3 10% 16% 6.6% 0%

LTIP vesting4

Performance Shares5

Compulsory Deferred ,@SBGHMF�2G@QDR5

Voluntarily Invested Deferred ,@SBGHMF�2G@QDR6 Total

Granted Vested Value Granted Vested Value Granted Vested Value Granted Vested Value

Adrian Brown� �� 0 `� �� 0 `� �� 0 `� �� 0 `�

Richard Houghton 159,863 0 `� n/a n/a n/a n/a n/a n/a 159,863 0 `�

Notes:� � �1DK@SHUD�321�S@QFDS�HR�ADSVDDM�LDCH@M�@MC�TOODQ�PTHMSHKD�VHSGHM�@�ODDQ�FQNTO�NE�� DFNM�� KKH@MY�� UHU@�� 7 ��!@KNHRD��&DMDQ@KH��+DF@K�î�&DMDQ@K��,TMHBG�1D��0!$��2VHRR�1D�@MC�9TQHBG �

� � �&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�

by the Group in 2014.

LONG-TERM INCENTIVES – AWARDS GRANTED IN 2014 (AUDITED)"NMCHSHNM@K�KNMF�SDQL�HMBDMSHUD�@V@QCR�VDQD�L@CD�SN�SGD�$WDBTSHUD�#HQDBSNQR�NM��,@X��TMCDQ�SGD�/DQENQL@MBD�2G@QD�/K@M��/2/��VGHBG�V@R�@OOQNUDC�AX�RG@QDGNKCDQR�NM��,@X�� 3GDRD�/DQENQL@MBD�2G@QD�@V@QCR�VHKK�UDRS�HM��RTAIDBS� SN�SGD�R@SHRE@BSHNM�NE�SGD�OK@M�R�ODQENQL@MBD�BNMCHSHNMR�A@RDC�NM�&QNTO�TMCDQKXHMF�1.3$��QDK@SHUD�321�@MC�@�!TRHMDRR�1DUHDV�Scorecard comprising growth in Tangible Net Asset Value per Share (TNAV), cumulative earnings and a range of capital strength metrics.

The targets for the performance measures are shown in the following table. Achievement against the Business Review Scorecard will be evaluated using a performance framework whereby each metric will be reviewed against its target, @MC�ITCFDLDMS�HM�SGD�QNTMC�TRDC�SN�CDSDQLHMD�SGD�KDUDK�NE�UDRSHMF �3GD�RODBHãB�S@QFDSR�B@MMNS�AD�CHRBKNRDC�OQNRODBSHUDKX� for reason of price sensitivity, particularly regarding the capital metrics. A performance narrative will be given to summarise the level of vesting on the Business Review Scorecard once the performance conditions have been tested.

LTIP performance measures 2014–16 Weighting Threshold target: 25% vesting ,@WHLTL�S@QFDS��í�UDRSHMF

Relative TSR1, 3 RSA’s TSR is equal to the unweighted index of comparators

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

&QNTO�TMCDQKXHMF�1.3$2, 3 11% 16%

Business Review Scorecard Commercially sensitive Commercially sensitive

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.

89

3GD�@V@QCR�FQ@MSDC�SN�D@BG�$WDBTSHUD�#HQDBSNQ�@QD�RDS�NTS�HM�SGD�S@AKD�ADKNV�

Director

Performance Shares1, 2

Basis of Award No. of Shares3 Face Value4

Stephen Hester5 300% of salary 585,431 `��

Richard Houghton 230% of salary 233,581 �`��

Notes:� � �3GD�ODQENQL@MBD�LD@RTQDR�@QD�&QNTO�TMCDQKXHMF�1.3$��QDK@SHUD�321�@MC�@�!TRHMDRR�1DUHDV�2BNQDB@QC��VDHFGSHMF�D@BG� 2. The performance period is three years and ends on 31 December 2016. By exception, the relative TSR metric which will be targeted against a ODQENQL@MBD�ODQHNC�BNLLDMBHMF�ENTQ�VDDJR�ADENQD�SGD�FQ@MS�C@SD�@MC�DMCHMF�NM��,@QBG��SGHR�HR�SN�DMRTQD�SG@S�SGD�LD@RTQDLDMS�ODQHNC� does not begin during a time when shareholders were not in possession of the full information on RSA’s performance and strategy.

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.

CLAWBACK POLICYA Clawback Policy was introduced in 2013 regarding variable remuneration and is reviewed annually, as set out in the Remuneration Policy on page 100 to 102.

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).

The circumstances in which malus and clawback may apply are outlined in the table below:

,@KTR�@CITRSLDMS Clawback

• ,@SDQH@K�ãM@MBH@K�LHRRS@SDLDMS�NE�QDRTKSR�ENQ�@MX�ãM@MBH@K�XD@Q�NQ�SGD�L@SDQH@K�ãM@MBH@K�KNRR�TMCDQ�ODQENQL@MBD�NE�@�ATRHMDRR�TMHS�SG@S�BNTKC�G@UD�ADDM�reasonably risk-managed

• ,@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

• $LOKNXDD�LHRBNMCTBS��HMBKTCHMF�QDFTK@SNQX�NQ�NSGDQ�AQD@BGDR • Gross or serious employee misconduct.

• Legitimate concerns regarding an employee’s conduct, capability or performance

• Actions leading to reputational damage

• #DSDQHNQ@SHNM�HM�SGD�ãM@MBH@K�GD@KSG�NE�SGD�"NLO@MX�KD@CHMF�SN�RDUDQD�ãM@MBH@K�constraint

• Any other situation as the Committee may reasonably determine.



90

5. DIRECTORS’ SHAREHOLDING (audited)EXECUTIVE DIRECTORS’ REQUIRED SHAREHOLDING 201412 �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.

Position % of salary

&QNTO�"GHDE�$WDBTSHUD 300%

.SGDQ�$WDBTSHUD�#HQDBSNQR 150%

3GD�MTLADQ�NE�RG@QDR�GDKC�AX�SGD�$WDBTSHUD�#HQDBSNQR�@R�@S��#DBDLADQ��HR�RGNVM�HM�SGD�S@AKD�ADKNV �2SDOGDM�'DRSDQ�INHMDC�12 �HM�%DAQT@QX��@MC�BNMSHMTDR�SN�ATHKC�TO�GHR�GNKCHMF�VHSGHM�SGD�@KKNSSDC�ãUD�XD@Q�ODQHNC

Director Shares1 Valuation2 % of salary3

Adrian Brown4 298,469 `�� 285%

Stephen Hester 21,500 `�� 10%

Richard Houghton 58,861 `�� 52%

Notes:� � �3GD�RG@QDGNKCHMF�DWBKTCDR�@KK�TMUDRSDC�RG@QD�@V@QCR�@MC�SGNRD�NSGDQVHRD�RTAIDBS�SN�ENQEDHSTQD �(S�HMBKTCDR�5NKTMS@QHKX�(MUDRSDC�#DEDQQDC�2G@QDR�

related to the legacy Long-term Incentive Plan 2006, and shares acquired through RSA’s all-employee plan, Sharebuild.� � �3GD�U@KT@SHNM�HR�@F@HMRS�SGD�LHC�L@QJDS�BKNRHMF�OQHBD�NE�@M�12 �NQCHM@QX�RG@QD�@R�@S��#DBDLADQ��NE�`� ��ODQ�RG@QD 3. The gross annual base salary as at 31 December 2014.4. Adrian Brown resigned from the Board effective 16 April 2014. His shareholding is shown as at that date, and valued using his gross annual base salary @MC�SGD�LHC�L@QJDS�BKNRHMF�OQHBD�NE�@M�12 �NQCHM@QX�RG@QD�@S�SG@S�C@SD�NE�`� ��S@JHMF�HMSN�@BBNTMS�SGD�RG@QD�BNMRNKHC@SHNM�

SHAREHOLDINGS 3GD�HMSDQDRSR�NE�#HQDBSNQR�HM�NQCHM@QX�RG@QDR�NE�`� ��D@BG�NE�SGD�"NLO@MX�VDQD�@R�ENKKNVR��

Director

Shares held at1 January

20141

Shares held at 31 December

2014

Executive Directors2

Adrian Brown3 211,140 ��

Stephen Hester4 0 21,500

Richard Houghton5 41,414 49,419

Non-Executive Directors2

Alastair Barbour 10,089 12,039

Kath Cates 0 4,124

$MQHBN�"TBBGH@MH6 0 0

$CV@QC�+D@� 208,009 248,219

,@KBNKL�+D�,@X� 5,314 6,342

'TFG�,HSBGDKK 4,862 8,552

,@QSHM�2BHBKTM@ 9,681 14,303

Jos Streppel 0 4,125

Johanna Waterous �� 12,419

Notes:� � �3GD�MTLADQ�NE�RG@QDR�GDKC�@R�@S��)@MT@QX��G@R�ADDM�QDRS@SDC�SN�QDâDBS�SGD�HLO@BS�NE�SGD��ENQ��1HFGSR�(RRTD�@MMNTMBDC�NM��,@QBG��@MC� ENQ�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��

� � � R�@S��%DAQT@QX��SGD�HMSDQDRSR�HM�NQCHM@QX�RG@QDR�NE�SGD�BTQQDMS�-NM�$WDBTSHUD�#HQDBSNQR��2SDOGDM�'DRSDQ�@MC�1HBG@QC�'NTFGSNM�G@UD�MNS�changed since 31 December 2014.

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.� � �1HBG@QC�'NTFGSNM�G@C�@�ADMDãBH@K�HMSDQDRS�@R�@S��#DBDLADQ��HM�5NKTMS@QHKX�(MUDRSDC�#DEDQQDC�2G@QDR�GDKC�TMCDQ�SGD�+3(/ �3GDRD�@QD�MNS�HMBKTCDC�

in the table above. They are disclosed on page 92.� � �$MQHBN�"TBBGH@MH�V@R�@OONHMSDC�@R�@�CHQDBSNQ�DEEDBSHUD��#DBDLADQ�� 3GD�S@AKD�@ANUD�RGNVR�GHR�RG@QDGNKCHMF�NM�SGD�C@SD�NE�GHR�@OONHMSLDMS�

and not 1 January 2014.� � �$CV@QC�+D@�@MC�,@KBNKL�+D�,@X�QDRHFMDC�EQNL�SGD�!N@QC�NM��,@X�� 3GDHQ�HMSDQDRSR�@QD�RGNVM�@R�@S��,@X��@MC�MNS��#DBDLADQ��

91

SCHEME INTERESTS HELD#DS@HKR�NE�$WDBTSHUD�#HQDBSNQR��DWHRSHMF�@V@QCR�HM�SGD�&QNTO�R�HMBDMSHUD�RBGDLDR�@MC�@KK�DLOKNXDD�RG@QD�OK@MR�ENQ�SGD�ãM@MBH@K�year are set out below. Full details of all directors’ shareholdings and options to subscribe for shares are recorded in the &QNTO�R�1DFHRSDQ�NE�#HQDBSNQR��(MSDQDRSR�VGHBG�HR�NODM�SN�HMRODBSHNM�AX�RG@QDGNKCDQR�@S�SGD� &,�@MC�@S�SGD�"NLO@MX�R�QDFHRSDQDC�NEãBD�CTQHMF�RS@MC@QC�ATRHMDRR�GNTQR

Outstanding options4MDWOHQDC�NOSHNMR�GDKC�CTQHMF��HM�QDRODBS�NE�SGD�NQCHM@QX�RG@QDR�NE�SGD�"NLO@MX�@R�@�QDRTKS�NE�2G@QDR@UD�RG@QD�NOSHNM�schemes are shown below. All options were granted for nil consideration. None of the terms or conditions of any of the existing options over shares of the Group were varied during the year.

Director and Scheme

Number of options at

1 January 20141

CITRSLDMS due to

Rights Issue2

.OSHNMR�granted

during the year

.OSHNMR�vested but

unexercised during the

year

.OSHNMR�exercised

during the year

,@QJDS price

(pence) on date of

exercise3

.OSHNMR�lapsed during

the year

Number of options at

31 December 2014

$WDQBHRD�price

(pence)

Dates exercisable

from

Dates exercisable

to

Adrian Brown4

Sharesave 1,019 125 - - - - 1,144 0 521.10 01.12.13 31.05.14

Sharesave 1,218 149 - - - - �� 0 432.00 01.12.14 31.05.15

Sharesave 815 100 - - - - 915 0 445.35 01.12.15 31.05.16

Notes:� � �3GD�MTLADQ�NE�NOSHNMR�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��

� � � 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

Sharebuild The Directors’ interests in Sharebuild shares during 2014 were as follows:

Sharebuild Sharesheld at 1 January 20141

Partnership Shares acquired during the year

,@SBGHMF�2G@QDR� awarded during the year

Dividend Shares acquired during the year

Sharebuild Shares held at 31 December 2014

Adrian Brown2 2,352 232 232 0 0

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.

� � �2G@QDATHKC�HR�@M�',1"�@OOQNUDC�2G@QD�(MBDMSHUD�/K@M �2G@QDR�@QD�MNS�RTAIDBS�SN�ODQENQL@MBD�BNMCHSHNMR��ATS�SGD�,@SBGHMF�2G@QDR�@QD�RTAIDBS�SN�RDQUHBD�conditions.



92

Long-term Incentive Plan 2006 (LTIP)The directors’ interests in the LTIP were as follows:

Share awardsheld at

1 January20141

CITRSLDMS�due to Rights

Issue2

Share awards granted

during the year3

Share awards vested during

the year4, 5

Share awards lapsed during

the year

Share awards held at

31 December 2014

Adrian Brown

Voluntarily Invested Deferred Shares6 23,894 8,959 0 32,853 0 0

Compulsory Deferred Shares� 41,646 5,106 0 20,868 25,884 0

5NKTMS@QHKX�(MUDRSDC�#DEDQQDC�,@SBGHMF�2G@QDR8 105,165 54,590 0 0 �� 0

"NLOTKRNQX�#DEDQQDC�,@SBGHMF�2G@QDR9 92,588 11,351 0 0 103,939 0

Performance Shares10 446,252 �� 0 0 500,961 0

Richard Houghton

Voluntarily Invested Deferred Shares6 �� 0 0 0 9,442

Compulsory Deferred Shares� 14,448 �� 0 0 0 16,220

5NKTMS@QHKX�(MUDRSDC�#DEDQQDC�,@SBGHMF�2G@QDR8 28,613 15,553 0 0 0 44,166

"NLOTKRNQX�#DEDQQDC�,@SBGHMF�2G@QDR9 �� 3,543 0 0 0 32,440

Performance Shares10 269,609 33,053 0 0 0 302,662

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�� (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�

`� ��SGD�L@QJDS�OQHBD�NM�C@SD�NE�UDRSHMF�NE�@V@QCR�� OQHK��V@R�`� ��S@JHMF�HMSN�@BBNTMS�SGD�RG@QD�BNMRNKHC@SHNM �� 3GD�@FFQDF@SD�U@KTD�NE�RG@QD�@V@QCR�UDRSDC�ENQ�CHQDBSNQR�CTQHMF�SGD�XD@Q�TMCDQ�SGD�+NMF�SDQL�(MBDMSHUD�/K@M�@LNTMSDC�SN�`�� 5NKTMS@QHKX�

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 �

� � �"NLOTKRNQX�#DEDQQDC�2G@QDR�G@UD�@�RDQUHBD�BNMCHSHNM�NE�SGQDD�XD@QR�EQNL�C@SD�NE�FQ@MS � � �3GD�ODQENQL@MBD�BNMCHSHNM�ENQ�5NKTMS@QHKX�(MUDRSDC�#DEDQQDC�,@SBGHMF�2G@QD�FQ@MSR�L@CD�HM��@MC��V@R�&QNTO�TMCDQKXHMF�1.$�

(100% weighting).� � �3GD�ODQENQL@MBD�BNMCHSHNMR�ENQ�"NLOTKRNQX�#DEDQQDC�,@SBGHMF�2G@QD�FQ@MSR�L@CD�HM��@MC��VDQD�&QNTO�TMCDQKXHMF�1.$��í�VDHFGSHMF��

and relative TSR (30% weighting).�� 3GD�ODQENQL@MBD�BNMCHSHNMR�ENQ�/DQENQL@MBD�2G@QD�FQ@MSR�L@CD�HM��@MC��VDQD�&QNTO�TMCDQKXHMF�1.$��í�VDHFGSHMF��@MC�QDK@SHUD�

TSR (30% weighting).11. The date by which performance and other conditions for LTIP awards must be met is as follows: 2011 awards by 31 December 2013, 2012 awards

by 31 December 2014 and 2013 awards by 31 December 2015.12. No other directors of the Company held long-term incentive scheme interests in the LTIP Plan during 2014.

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 awardsheld at

1 January 2014

Share awards granted during

the year1

Share awards vested during

the year2

Share awards lapsed during

the year

Share awards held at 31 December

2014

Stephen Hester

Performance Shares3 0 585,431 0 0 585,431

Richard Houghton

Performance Shares3 0 233,581 0 0 233,581

Notes:� � �3GD�"NLO@MX�FQ@MSDC�BNMCHSHNM@K�@V@QCR�NUDQ�NQCHM@QX�RG@QDR�TMCDQ�SGD�/2/�@S�MHK�BNRS �3GD�L@QJDS�OQHBD�NE�NQCHM@QX�RG@QDR�NM��,@X��SGD�C@SD�NM�VGHBG�/2/�HMSDQDRSR�VDQD�FQ@MSDC�CTQHMF�SGD�XD@Q��V@R�`� ��

� � �3GD�@FFQDF@SD�U@KTD�NE�RG@QD�@V@QCR�UDRSDC�ENQ�CHQDBSNQR�CTQHMF�SGD�XD@Q�TMCDQ�SGD�/2/�@LNTMSDC�SN�`� �� 3GD�ODQENQL@MBD�BNMCHSHNMR�ENQ�/DQENQL@MBD�2G@QDR�FQ@MSDC�HM��@QD�&QNTO�TMCDQKXHMF�1.3$��VDHFGSHMF��QDK@SHUD�321��VDHFGSHMF��@MC�

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.

93

6. PAYMENTS TO DIRECTORS FOR LOSS OF OFFICE (audited) CQH@M�!QNVM��"GHDE�$WDBTSHUD�4*�@MC�6DRSDQM�$TQNOD��resigned from the Board effective 16 April 2014 and his employment ended on 31 August 2014. He continued to QDBDHUD�GHR�BNMSQ@BST@K�R@K@QX�@MC�ADMDãSR�ENQ�SGD�SHLD� he remained an employee up to 31 August 2014 and was then treated in line with the leaver treatment in the Group’s Remuneration Policy.

,Q�!QNVM�HR�MNS�DMSHSKDC�SN�QDBDHUD�@�ANMTR�HM�QDRODBS�NE�SGD��ãM@MBH@K�XD@Q��@MC�QDBDHUDC�MN�NSGDQ�DW�FQ@SH@�@V@QCR

�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.

1HBG@QC�'NTFGSNM��&QNTO�"GHDE�%HM@MBH@K�.EãBDQ��VHKK�RSDO�CNVM�EQNL�SGD�!N@QC�NM��,@X��@MC�KD@UD�SGD�&QNTO� later in the year once a successor has been appointed.

He will continue to receive his contractual salary and ADMDãSR�ENQ�RN�KNMF�@R�GD�QDL@HMR�@M�DLOKNXDD��@ESDQ� which he will be treated in line with the Leaver Treatment outlined in the Group’s Remuneration Policy.

-N�KNRR�NE�NEãBD�O@XLDMS�VHKK�AD�L@CD�SN�,Q�'NTFGSNM

,Q�'NTFGSNM�G@R�@��LNMSG�BNMSQ@BST@K�MNSHBD�ODQHNC� which will commence on 26 February 2015 and expire at midnight on 25 February 2016, at the latest. Whilst an DLOKNXDD�,Q�'NTFGSNM�VHKK�QDBDHUD�GHR�BNMSQ@BST@K�R@K@QX� NE�`��ODQ�LNMSG��@�ODMRHNM�@KKNV@MBD�NE�`�� ODQ�LNMSG�@MC�ADMDãSR�VGHBG�HMBKTCD�@�B@Q�@KKNV@MBD� NE�`��ODQ�LNMSG�@R�VDKK�@R�/,(�@MC�KHED�HMRTQ@MBD �

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.

,Q�'NTFGSNM�R�TMUDRSDC��/DQENQL@MBD�@MC�,@SBGHMF�share awards in the Long-term Incentive Plan 2006 and Performance Share Plan 2014 will vest in line with the normal vesting timetable. Time pro-ration will be applied, such that based on his employment ending effective 25 February 2016, a maximum of 510,499 awards can vest. Additional pro-rating will be applied if the performance conditions attached to these awards are not met in full, or if his employment ends at an earlier date.

In addition, his unvested 16,220 Compulsory Deferred Shares awarded as part of his bonus for 2012 will vest in line with SGDHQ�MNQL@K�UDRSHMF�SHLDS@AKD �3GDRD�VDQD�U@KTDC�@S�`��A@RDC�NM�@�RG@QD�OQHBD�NE�`� ��@R�@S��%DAQT@QX�� He will retain his 9,442 Voluntarily Invested Deferred Shares that were purchased using part of his net bonus awards for 2012, in accordance with the Plan rules. These were U@KTDC�@S�`��A@RDC�NM�@�RG@QD�OQHBD�NE�`� �� ,Q�'NTFGSNM�VHKK�MNS�QDBDHUD�@M�+3(/�@V@QC�HM��

7. PAYMENTS TO FORMER DIRECTORS (audited)There were no payments made to former directors during 2014, other than those disclosed in the Payments for Loss NE�.EãBD�RDBSHNM



94

8. HISTORICAL TSR PERFORMANCE AND EXECUTIVE REMUNERATIONThe graph shows the TSR of the Group with reference to SGD�%32$��(MCDW�@MC�SGD�QDK@SHUD�321�ODDQ�FQNTO�TRDC� as an LTIP performance measure for the 2014–16 cycle, the constituents of which are noted on page 88.

3GD�%32$��(MCDW�HR�HMBKTCDC�@R�HS�BNLOQHRDR�SGD��LNRS�GHFGKX�B@OHS@KHRDC�BNLO@MHDR�HM�SGD�4*�L@QJDS��NE�VGHBG�12 �was a member in 2014.

RSA’s TSR performance relative to the indices is shown over the six years from 31 December 2008 to 31 December 2014. 3GD�FQ@OG�QDâDBSR�SGD�BG@MFD�HM�U@KTD�NE�NQCHM@QX�RG@QDR�HM� @�BNLO@MX�NUDQ�SHLD��@R�QDOQDRDMSDC�AX�@�GXONSGDSHB@K�`��holding in the shares. Any distribution of dividends is included. Data was provided by Datastream.

VALUE OF HYPOTHETICAL £100 HOLDING

FTSE 100RSA LTIP Peer Group (2014-16 cycle)RSA

100

80

220

180

200

160

140

120

Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

The table below shows the total remuneration for the HMBTLADMSR�@OONHMSDC�@R�SGD�LNRS�RDMHNQ�$WDBTSHUD�#HQDBSNQ�in the Group over the past six years. The percentages show the proportion of bonuses and LTIPs that were received. Bonuses include both cash and deferred shares components.

Director

2HMFKD�ãFTQD�of total

remuneration �`��

Annual bonus award rates

(% of maximum)

LTIP vesting rates (% of

maximum)

2014 Stephen Hester1 2,118 68% n/a,@QSHM�2BHBKTM@2 39 n/a n/a

2013 ,@QSHM�2BHBKTM@2 21 n/a n/aSimon Lee3 1,011 0% 0%

2012 Simon Lee 2,164 50% 34%2011 Simon Lee4 311 59% 34%

Andy Haste5 2,488 58% 31%2010 Andy Haste 4,024 ��í 66%2009 Andy Haste 4,451 89% 100%

Notes:� � �2SDOGDM�'DRSDQ�V@R�@OONHMSDC�&QNTO�"GHDE�$WDBTSHUD�DEEDBSHUD� ��%DAQT@QX�� 3GD�RHMFKD�ãFTQD�NE�SNS@K�QDLTMDQ@SHNM�ENQ�� above is pro-rated for his time in the position. He did not have any long-term incentives in the 2012-14 cycle.

� � �,@QSHM�2BHBKTM@�V@R�@OONHMSDC�$WDBTSHUD�"G@HQL@M�DEEDBSHUD� ��#DBDLADQ��TMSHK��%DAQT@QX�� 3GD�RHMFKD�ãFTQDR�NE�SNS@K�remuneration for 2013 and 2014 above are pro-rated for his time in the position.

� � �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.

� � �2HLNM�+DD�ADB@LD�SGD�&QNTO�"GHDE�$WDBTSHUD�DEEDBSHUD��-NUDLADQ� �� 3GD�RHMFKD�ãFTQD�NE�SNS@K�QDLTMDQ@SHNM�@ANUD�HR�OQN�Q@SDC�ENQ� his time in the position.

� � � 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.

9. PERCENTAGE CHANGE IN REMUNERATIONThe table below sets out the percentage change in salary, ADMDãSR�@MC�ANMTR�ENQ�SGD�HMCHUHCT@K�TMCDQS@JHMF�SGD�LNRS�RDMHNQ�$WDBTSHUD�#HQDBSNQ�QNKD�HM�SGD�"NLO@MX�BNLO@QDC�VHSG�4*�DLOKNXDDR�NM�@UDQ@FD�ADSVDDM��@MC�� 3GD�4*�population was selected for this comparison because pay BG@MFDR�VHSGHM�12 �U@QX�RHFMHãB@MSKX��@BBNQCHMF�SN�KNB@K�L@QJDS�E@BSNQR �3GD�&QNTO�"GHDE�$WDBTSHUD�R�QNKD�G@R�@�&QNTO�VHCD�QDLHS��ATS�HR�KNB@SDC�HM�SGD�4*

3GD�ãFTQDR�ENQ�SGD�LNRS�RDMHNQ�$WDBTSHUD�#HQDBSNQ�HMBKTCD� SGD�CHEEDQDMS�INAGNKCDQR�CTQHMF�SGD�ODQHNC �2SDOGDM�'DRSDQ�V@R�@OONHMSDC�&QNTO�"GHDE�$WDBTSHUD�HM�%DAQT@QX�� and received no salary increase in the year. No bonus was @V@QCDC�SN�SGD�&QNTO�"GHDE�$WDBTSHUD�HM�QDRODBS�NE��RN� a percentage change between 2013 and 2014 is not calculable.

Salary and Fees

Taxable ADMDãSR Bonus

All employees 1.9% 1.9% -6.0%,NRS�RDMHNQ�$WDBTSHUD�#HQDBSNQ1, 2 13% 56% n/a

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).

� � �3GD�B@KBTK@SHNM�ENQ��HMBKTCDR�,@QSHM�2BHBKTM@�ENQ�SGD�ODQHNC�GD�V@R�$WDBTSHUD�"G@HQL@M��SN��#DBDLADQ��@MC�2HLNM�+DD�ENQ�SGD�ODQHNC�GD�V@R�&QNTO�"GHDE�$WDBTSHUD��)@MT@QX�SN��#DBDLADQ��

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

�`L� 2013 2014

% difference from prior

year

3NS@K�2ODMC�NM�$LOKNXDD�/@X1 1,215 1,101 -9.4%Total Distributions to Shareholders2 232 9 -96.1%

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.

� � �(MBKTCDR�SGD�ãFTQDR�@R�RGNVM�HM�SGD�MNSDR�SN�SGD�%HM@MBH@K�2S@SDLDMSR�on page 165.

95

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.

RSA has a pay-for-performance culture, whereby remuneration is closely linked to the performance of both the business and the individual. The Committee’s aim is that superior levels of remuneration will only be paid in return for delivering superior KDUDKR�NE�ODQENQL@MBD �3GD�BG@QS�ADKNV�RGNVR�GNV�LTBG�SGD�&QNTO�"GHDE�$WDBTSHUD�BNTKC�D@QM�ENQ�SGD��ãM@MBH@K�XD@Q�based on the application of the Remuneration Policy (detailed on pages 99 to 106). His remuneration potential changes according to varying levels of performance.

ILLUSTRATIONS OF THE APPLICATION OF THE REMUNERATION POLICY

£’000

6,000

5,000

3,000

4,000

2,000

1,000

Group Chief Executive Fixed remuneration Variable remuneration (short-term) Variable remuneration (long-term)

On-target

20%

46%

£3,833

34%

Maximum

27%

50%

£5,662

23%

Below threshold

100%

£1,292

0

Notes:1. The ‘below threshold’ scenario shows the minimum remuneration receivable. It includes the value of annual base salary and pension as at 1 January ��@MC�SGD�U@KTD�NE�ADMDãSR�A@RDC�NM�SGD�RHMFKD�SNS@K�ãFTQD�NE�QDLTMDQ@SHNM�ENQ�� -N�ANMTR�HR�@V@QCDC�@MC�MN�+3(/�UDRSHMF�NBBTQR

2. The ‘on-target’ scenario shows the remuneration receivable with a bonus award at half of the maximum opportunity (i.e. 80% of salary) and LTIP vesting at 62.5% (i.e. half-way between threshold (25% vesting) and maximum (100% vesting)). The LTIP maximum award level is taken to be 300% NE�R@K@QX��VGHBG�QDâDBSR�2SDOGDM�'DRSDQ�R�@V@QC�ENQ�SGD��FQ@MS

3. The ‘maximum’ scenario shows the remuneration receivable with both the Annual Bonus Plan and the LTIP paying out in full (i.e. 160% of salary and 300% of salary, respectively).

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��

%HM@MBH@K�8D@Q

Remuneration Package Component 2015 2016 �� 2018 2019 2020

Base salary

!DMDãSR

Pension contribution/cash allowance

Annual bonus: cash award

Annual bonus: deferred share award

LTIP: performance share award

�8D@Q�NE�B@RG�ANMTR�@V@QC��NQ�RG@QD�@V@QC�FQ@MSHMF� �8D@Q�NE�RG@QD�@V@QC�UDRSHMF�8D@Q�VGDM�@MX�QDRSQHBSHNMR�NQ�BK@VA@BJ�OQNUHRHNMR�G@UD�DMCDC

,@KTR�@CITRSLDMS�L@X�@OOKX

,@KTR�@CITRSLDMS�L@X�@OOKX

Clawback may apply

Share retention period, clawback may apply



96

BASE SALARY, BENEFITS AND PENSION3GD�"NLLHSSDD�QDUHDVDC�SGD�&QNTO�"GHDE�$WDBTSHUD�R�R@K@QX�@MC�G@R�CDSDQLHMDC�SG@S�MN�HMBQD@RD�VHKK�@OOKX�EQNL�� OQHK��@R�RGNVM�HM�SGD�S@AKD�ADKNV �(M�QDRODBS�NE�ADMDãSR�@MC�ODMRHNM��SGD�/NKHBX�VHKK�BNMSHMTD�SN�AD�HLOKDLDMSDC�SGD�R@LD�V@X�@R�HS�was at the end of 2014.

Director Annual base salary effective 1 April 2015 % Change

Stephen Hester `�� 0%

Note:� � �1HBG@QC�'NTFGSNM�R�R@K@QX�V@R�QDUHDVDC�@MC�VHKK�@KRN�QDL@HM�TMBG@MFDC�@S�`��DEEDBSHUD�� OQHK��

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��

Strategic Priorities: Key Performance Indicators Annual Bonus Plan 2015 +NMF�SDQL�HMBDMSHUD�BXBKD��

Business Review:- Strategic Focus,- Capital and Balance Sheet Strength,- Performance Improvement

Capital metrics: 3- 5��(&#��$"

Business Review Scorecard:Capital metrics including TNAV:NWP,

,@M@FDLDMS�@BSHNMR�HMBKTCHMF�controllable expenses

Business Review Scorecard:Capital metrics including TNAV:NWP,

Controllable expenses,Cumulative earnings,

Growth in TNAV per share

/QNãS@AHKHSX Group underlying PBT,&QNTO�".1

Group underlying PBT, &QNTO�".1 Cumulative earnings

Shareholder Value &QNTO�TMCDQKXHMF�1.3$ &QNTO�TMCDQKXHMF�1.3$ &QNTO�TMCDQKXHMF�1.3$� (3-year average), Relative TSR

ANNUAL BONUS PLAN 2015As noted in the Committee Chairman’s letter on pages 80 to 81, the Annual Bonus Plan will follow a similar design to 2014. (SR�ODQENQL@MBD�LD@RTQDR�@QD�@KHFMDC�VHSG�SGD�BNQD�OQHNQHSHDR�ENQ�ENBTR�HM�� 3GD�&QNTO�"GHDE�$WDBTSHUD�VHKK�AD�DWODBSDC� to deliver against stretching targets which are geared towards making continued performance improvement.

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.

3GD�/DQRNM@K�2BNQDB@QC�BNMRHRSR�NE��2, 13��NAIDBSHUDR��VGHBG�@QD�@KHFMDC�SN�SGD�@QD@R�NE��ãM@MBH@KR��RSQ@SDFX��QHRJ�L@M@FDLDMS��customer and people.

The bonus opportunity remains unchanged at 80% of salary for on-target achievement, rising to a maximum of 160% of salary. Threshold performance represents 16% of salary (i.e. 10% of the maximum opportunity). Half of the total bonus will be awarded HM�B@RG�VGDQD�BK@VA@BJ�B@M�@OOKX��SGD�A@K@MBD�HR�CDEDQQDC�HMSN�RG@QDR�ENQ�@�SGQDD�XD@Q�ODQHNC�VHSG�L@KTR�@CITRSLDMS �

3GD�"NLLHSSDD�VHKK�@RRDRR�ODQENQL@MBD�ENQ��NMBD�SGD�ãM@MBH@K�XD@Q�G@R�DMCDC � KK�NE�SGD�ANMTR�S@QFDSR�@QD�BNMRHCDQDC�SN�be commercially sensitive because they signal the Group’s forward plan for the year, and therefore they are not provided in this document. Disclosure will be provided in the 2015 Directors’ Remuneration Report, to the extent that the targets do not remain commercially sensitive.

3GD�S@AKD�ADKNV�RDSR�NTS�SGD�RSQTBSTQD�NE�SGD�&QNTO�"GHDE�$WDBTSHUD�R�ANMTR�OK@M�ENQ��

Bonus performance measuresWeighting

(% of bonus),@WHLTL�NOONQSTMHSX�

(% of salary)

&QNTO�TMCDQKXHMF�1DSTQM�NM�3@MFHAKD�$PTHSX��1.3$� 20% 32%

&QNTO�TMCDQKXHMF�/QNãS�ADENQD�3@W��/!3� 10% 16%

&QNTO�".1 10% 16%

Business Review Scorecard 30% 48%

Personal Scorecard 30% 48%

Totals 100% 160%

LONG-TERM INCENTIVE PLAN 2015-17 �MDV�KNMF�SDQL�HMBDMSHUD�OK@M��B@KKDC�SGD�12 �/DQENQL@MBD�2G@QD�/K@M��/2/��V@R�@OOQNUDC�AX�RG@QDGNKCDQR�@S�SGD� &,�NM� ��,@X�� 3GD�OK@M�CHQDBSKX�RTOONQSR�SGD�ATHKCHMF�NE�RG@QDGNKCDQ�U@KTD�AX�S@QFDSHMF�&QNTO�TMCDQKXHMF�1DSTQM�NM�3@MFHAKD�$PTHSX��1.3$��QDK@SHUD�3NS@K�2G@QDGNKCDQ�1DSTQM��321��@MC�@�!TRHMDRR�1DUHDV�2BNQDB@QC�VGHBG�BNLOQHRDR��FQNVSG�HM�3@MFHAKD�Net Asset Value per Share (TNAV), cumulative earnings, controllable expenses and a range of capital strength metrics including the ratio of TNAV:NWP.

��

%NQ�SGD��FQ@MS��@KK�LDSQHBR�VHKK�AD�@RRDRRDC�@F@HMRS�@�ODQENQL@MBD�ODQHNC�NE��)@MT@QX��SN��#DBDLADQ��

&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%.

The Business Review Scorecard will be strengthened taking into account progress made in 2014, and include additionally TNAV:NWP and controllable expense targets. Achievement will be evaluated using a performance framework whereby each metric will be reviewed against its target, together with any other aspects connected to the business turnaround and ITCFDLDMS�HM�SGD�QNTMC�TRDC�AX�SGD�"NLLHSSDD�SN�CDSDQLHMD�SGD�KDUDK�NE�UDRSHMF �3GD�RODBHãB�S@QFDSR�B@MMNS�AD�CHRBKNRDC�prospectively for reason of price sensitivity. A performance narrative will be given to summarise the level of vesting on the Business Review Scorecard once the performance conditions have been tested.

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

+3(/�ODQENQL@MBD�LD@RTQDR�� Weighting Threshold target: 25% vesting ,@WHLTL�S@QFDS��í�UDRSHMF

Relative TSR1 RSA’s TSR is equal to the unweighted index of comparators

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

&QNTO�TMCDQKXHMF�1.3$2 11% 16%

Business Review Scorecard Commercially sensitive Commercially sensitive

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.

� � ��&QNTO�TMCDQKXHMF�1.3$�VHKK�AD�B@KBTK@SDC�NM�@�SGQDD�XD@Q�@UDQ@FD�A@RHR � �RSQ@HFGS�KHMD�B@KBTK@SHNM�HR�@OOKHDC�SN�CDSDQLHMD�SGD�ONQSHNM�NE�@V@QCR�SG@S�vest for performance between threshold and on-target, and between on-target and maximum. The average required for on-target vesting (62.5% vesting) is less than the mid-point of the 11-16% range and is considered commercially sensitive because it is set in line with, and therefore signals, the Group’s forward plan for the period. Disclosure will be provided retrospectively following the end of the performance period.

EXECUTIVE SHAREHOLDING REQUIREMENT3GD�&QNTO�"GHDE�$WDBTSHUD�R�RG@QDGNKCHMF�QDPTHQDLDMS�HR�L@HMS@HMDC�@S��í�NE�R@K@QX �3GD�QDPTHQDLDMS�ENQ�NSGDQ�$WDBTSHUD�Directors remains at 150%.

NON-EXECUTIVE DIRECTORS’ FEES 4MCDQ�12 �R� QSHBKDR��SGD�-NM�$WDBTSHUD�#HQDBSNQR��QDLTMDQ@SHNM�HR�CDSDQLHMDC�AX�SGD�!N@QC��VHSGHM�KHLHSR�RDS�AX�RG@QDGNKCDQR ��3GD�AHNFQ@OGHDR�NE�SGD�-NM�$WDBTSHUD�#HQDBSNQR�@QD�BNMS@HMDC�NM�O@FDR��SN�� 3GD�NMKX�DWBDOSHNM�HR�HM�QDRODBS�NE�SGD�Chairman, whose terms fall within the remit of the Group Remuneration Committee. The Chairman and Board (minus the -NM�$WDBTSHUD�#HQDBSNQR��CHRBG@QFDR�HSR�@BBNTMS@AHKHSX�ENQ�RDSSHMF�@MC�L@M@FHMF�-NM�$WDBTSHUDR�#HQDBSNQR��QDLTMDQ@SHNM�� it will do this when their contractual terms or fee structure are under consideration, which is typically once a year, as noted on pages 104 to 105.

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.

Fee structure From 1 July 2013

Base fee `��

Additional fee for chairing committees:

Group Audit Committee `��

Group Remuneration Committee `��

Group Investment Committee `��

Board Risk Committee `��

Additional fee for Senior Independent Director `��

Additional committee fee1 `��

Note:� � �EDD�NE�`��@OOKHDR�ENQ�D@BG�BNLLHSSDD�@�-NM�$WDBTSHUD�#HQDBSNQ�HR�@�LDLADQ�NE�NSGDQ�SG@M�@R�"NLLHSSDD�"G@HQL@M



98

12. STATEMENT OF VOTING AT GENERAL MEETING 3GD�ENKKNVHMF�UNSHMF�V@R�QDBNQCDC�@S�SGD� &,�NM��,@X��QDF@QCHMF�SGD�QDRNKTSHNMR�SN�@OOQNUD�SGD�#HQDBSNQR��Remuneration Policy and the Annual Report on Remuneration: Resolution Votes For Votes Against Total Votes Cast Votes Witheld1

To approve the Directors’ Remuneration Policy

Number of votes �� 106,612,562 3,415,640,423 100,893,815

% of votes cast 96.88% 3.12% 100% –

To approve the Directors’ Remuneration Report

Number of votes 3,502,199,226 12,403,512 �� 2,000,250

% of votes cast 99.65% 0.35% 100% –

To approve the 2014 RSA Performance Share Plan

Number of votes 3,290,659,268 125,166,169 ��

% of votes cast 96.34% 3.66% 100% –

Note:1. Votes withheld are not included in the calculation as a vote withheld is not a vote in law.

13. DILUTIONRSA 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 %

10% over 10 years for all share schemes � ��í

5% over 10 years for discretionary schemes, including long-term incentives 2.98%

14. EXTERNAL DIRECTORSHIPS2SDOGDM�'DRSDQ�@MC�1HBG@QC�'NTFGSNM�CN�MNS�GNKC�NTSRHCD�CHQDBSNQRGHOR�NE�%32$��NQ�@MX�NSGDQ�KHRSDC��BNLO@MHDR� ATS�VNTKC�AD�@KKNVDC�SN�G@UD�NMD�RTBG�@OONHMSLDMS��RTAIDBS�SN�SGD�@OOQNU@K�NE�SGD�&QNTO�-NLHM@SHNM�@MC�&NUDQM@MBD�Committee. In accordance with the Remuneration Policy, they would be permitted to retain any fees or expenses arising from such an appointment.

15. DIRECTORS’ CONTRACTS3GD�$WDBTSHUD�#HQDBSNQR��RDQUHBD�@FQDDLDMSR�ADB@LD�DEEDBSHUD�NM�SGD�ENKKNVHMF�C@SDR�

$WDBTSHUD�#HQDBSNQ $EEDBSHUD�C@SD

Stephen Hester 5 February 2014

Richard Houghton 12 June 2012

3GD�S@AKD�ADKNV�RGNVR�VGDM�SGD�-NM�$WDBTSHUD�#HQDBSNQR��@OONHMSLDMSR�ADB@LD�DEEDBSHUD�@MC�VGDM�SGDHQ�SDQLR�VHKK�DWOHQD

-NM�$WDBTSHUD�#HQDBSNQ Date of initial appointment $WOHQX�C@SD�NE�BTQQDMS�SDQL

Alastair Barbour ��.BSNADQ�� .BSNADQ��

Kath Cates 1 September 2013 1 September 2016

$MQHBN�"TBBGH@MH 1 December 2014 ��#DBDLADQ��

'TFG�,HSBGDKK 26 September 2012 26 September 2015

,@QSHM�2BHBKTM@ 1 January 2013 1 January 2016

Jos Streppel ��.BSNADQ�� .BSNADQ��

Johanna Waterous ��,@X�� ,@X��

HUGH S MITCHELL-NM�$WDBTSHUD�#HQDBSNQ�@MC�"G@HQL@M�NE�&QNTO�1DLTMDQ@SHNM�"NLLHSSDD�25 February 2015

99

INTRODUCTIONThe Remuneration Policy was approved by shareholders on ��,@X��@MC�V@R�DEEDBSHUD�EQNL�SGHR�C@SD �-N�BG@MFDR� to the Policy are proposed this year.

The Policy covers how decisions on directors’ remuneration will be made at RSA, and the remuneration philosophy and strategy which underpin these decisions.

For ease of reference, the elements of the Policy referenced in Committee activity during 2014 are re-presented on the following pages 99 to 106, including the policy tables and information on directors’ contractual terms. The full Policy Report is contained in the 2013 Annual Report and Accounts �O@FDR��SN��VGHBG�HR�@U@HK@AKD�@S�VVV QR@FQNTO BNL� in the Investor Relations section.

RSA’S REMUNERATION PHILOSOPHY AND STRATEGYRSA’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 �

The remuneration principles the Committee follows are:

• Competitive remuneration packages are offered in order to attract, retain and reward the levels of high calibre talent which are essential to RSA’s success in today’s competitive global insurance market

• $@BG�BNLONMDMS�NE�SGD�SNS@K�QDLTMDQ@SHNM�O@BJ@FD� is simple and transparent, so as to be effective and understood by executives, shareholders and regulators

• �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

Appendix -Summary of Remuneration Policy

• $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 remuneration framework is reviewed regularly to ensure that it continues to appropriately reward executives, while protecting shareholders’ interests and complying with principles of good risk management and reward governance.

The tables on the following pages describe how these remuneration principles are applied in practice.



100

RSA’S REMUNERATION POLICY FOR EXECUTIVE DIRECTORS

Purpose and Strategic Link Policy for 2014 onwards Opportunity and performance conditions

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.

• Reviewed annually with consideration of factors including: market positioning, internal pay relativities, levels NE�O@X�ENQ�NSGDQ�12 �DLOKNXDDR��HMâ@SHNM��@EENQC@AHKHSX��INA�RB@KD�@MC�BNMSDMS��HMCHUHCT@K�R�DWODQHDMBD�@MC�DWODQSHRD �.MKX�@MMT@K�A@RD�R@K@QX�HR�ODMRHNM@AKD � M�DWHRSHMF�$WDBTSHUD�#HQDBSNQ�R�R@K@QX�L@X�AD�HMBQD@RDC�outside of the normal review cycle for material role changes.

• 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.

• Committee can change the constituents of the benchmark peer group or the basis upon which market information is obtained at its discretion to ensure that the data remains robust and relevant.

• Performance conditions do not apply, but business and individual performance may be considered when conducting the review process. Although salaries are reviewed annually, there is no automatic right for any Director to receive a salary increase.

• .SGDQ�SG@M�DWBDOSHNM@K�BHQBTLRS@MBDR�RTBG�@R�@�QNKD�BG@MFD��R@K@QX�HMBQD@RDR�VHKK�MNS�DWBDDC�SGD�KDUDK�NE�HMBQD@RDR�@OOKHDC�SN�NSGDQ� RSA employees.

• 3GD�$WDBTSHUD�#HQDBSNQR��R@K@QHDR�DEEDBSHUD�� OQHK��@QD�MNSDC�NM�O@FD��

Note to table:�/NKHBX�HR�BNMRHRSDMS�ENQ�NSGDQ�4*�A@RDC�L@M@FDQR

!DMDëSR �ëWDC�QDLTMDQ@SHNM�$LOKNXLDMS�ADMDãSR�@QD�provided to support the executive and form part of a market competitive package.

• #HQDBSNQR�QDBDHUD�@�U@QHDSX�NE�ADMDãSR��RNLD�NE�VGHBG�@QD�CDKHUDQDC�@R�S@W@AKD�B@RG�HM�KHDT�@KKNV@MBDR � !DMDãSR�BNUDQ�SGD�@QD@R�NE��GD@KSG�@MC�VDKK�ADHMF��KD@UD�NE�@ARDMBD��B@Q�@MC�ATRHMDRR�SQ@UDK��RHBJMDRR�ADMDãS��insurances, professional subscriptions, external advice and employee discounts on certain insurance products. Home to work travel may be covered where appropriate. Tax changes are not compensated.

• Assistance would be available under RSA’s relocation policy or global mobility policy should this be required. This may include tax equalisation in the event an executive is subsequently appointed to the Board as an expatriate, although the Committee would review if this was necessary long-term.

• 4*�A@RDC�$WDBTSHUD�#HQDBSNQR�B@M�O@QSHBHO@SD�HM�12 �R�âDWHAKD�ADMDãSR�OQNFQ@LLD�@MC�@BPTHQD�RG@QDR�SGQNTFG�UNKTMS@QX�',1"�@OOQNUDC�RG@QD�OK@MR��2G@QDR@UD�@MC�2G@QDATHKC� �3GDX�B@M�@KRN�BK@HL�DWODMRDR�@BBNQCHMF� to RSA’s business and travel policies.

• !DMDãSR�@QD�CDSDQLHMDC�VHSG�QDEDQDMBD�SN�L@QJDS�OQ@BSHBD�VHSGHM�SGD�R@LD�ADMBGL@QJ�ODDQ�FQNTOR�QDEDQDMBDC�@ANUD �3GD�"NLLHSSDD�B@M�@KRN�RNTQBD�HMENQL@SHNM�EQNL�ADRONJD�ADMDãSR�RTQUDXR�SN�@HC�CDBHRHNM�L@JHMF

• "NLLHSSDD�B@M�@LDMC�@MX�ADMDãS�NQ�HMSQNCTBD�MDV�NMDR�SN�DMRTQD�SGD�QDLTMDQ@SHNM�O@BJ@FD�QDL@HMR�L@QJDS�competitive or to respond to regulatory, legal or best practice changes. Internal appointees to the Board may QDS@HM�@MX�KDF@BX�ADMDãSR�SGDX�QDBDHUD��@S�SGD�"NLLHSSDD�R�CHRBQDSHNM��NQ�@�ATX�NTS�L@X�AD�L@CD�CDODMCHMF� NM�SGD�ADMDãS�SXOD�@MC�BHQBTLRS@MBD

• Performance conditions do not apply.

• !DMDãSR�@QD�U@KTDC�@MC�CDSDQLHMDC�VHSG�QDEDQDMBD�SN�SGD�ADMBGL@QJHMF�ODDQ�FQNTOR�@MC�NSGDQ�RTQUDXR�QDUHDVDC�AX�SGD�1DLTMDQ@SHNM�"NLLHSSDD �#DS@HKR�NE�SGD�ADMDãSR�QDBDHUDC�AX�SGD�$WDBTSHUD�#HQDBSNQR�ENQ��@QD�OQNUHCDC�NM�O@FDR��SN��

Note to table:�/NKHBX�HR�BNMRHRSDMS�ENQ�NSGDQ�4*�A@RDC�L@M@FDQR�@MC�LNRS�NSGDQ�4*�A@RDC�DLOKNXDDR

Pension �ëWDC�QDLTMDQ@SHNM�/DMRHNM�ADMDãS�ENQLR�@�part of a market competitive package and enables executives to save for retirement.

• Non-contributory pension plan membership or a full/partial cash allowance, where the Director is unable SN�INHM�SGD�"NLO@MX�R�ODMRHNM�OK@MR �3GD�12 �CDãMDC�ADMDãS�ODMRHNM�OK@M�HR�BKNRDC�SN�@KK�MDV�DMSQ@MSR

• /DMRHNM�B@RG�@KKNV@MBDR�@QD�O@HC�LNMSGKX�@MC�@QD�RTAIDBS�SN�RS@STSNQX�CDCTBSHNMR

• Pension cash allowances are set referencing practice within the benchmark peer groups and specialist survey data may also be obtained. The Committee has regard to the market median allowance data.

• "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.


• -N�$WDBTSHUD�#HQDBSNQ�VHKK�QDBDHUD�@�ODMRHNM�ADMDãS�HM�DWBDRR�NE��í�NE�R@K@QX

• 3GD�$WDBTSHUD�#HQDBSNQR��ODMRHNM�ADMDãSR�ENQ��@QD�CDS@HKDC�NM�O@FDR��SN��


Annual Bonus Plan (variable remuneration)Supports RSA’s short-SDQL�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.

• Fifty per cent of the bonus will be awarded in cash and the remainder will be deferred into a share award for a period of three years. Dividends or equivalents accrue on the deferred shares, and are awarded at the end of the deferral period. The deferred bonus shares are granted under the rules of the LTIP as a conditional award.

• 4MCDQ�12 �R�"K@VA@BJ�/NKHBX��B@RG�@MC�CDEDQQDC�RG@QD�@V@QCR�@QHRHMF�EQNL�SGD� MMT@K�!NMTR�/K@M�B@M�AD�reduced or forfeited prior to receipt under a range of circumstances and other sanctions can apply. The policy is noted in detail on page 89. The Committee reviews the policy annually and may amend or update it, as required.

• 3GD�$WDBTSHUD�#HQDBSNQR��L@WHLTL�ANMTR�NOONQSTMHSX�HR�RDS�G@UHMF�QDF@QC�SN�SGD�L@QJDS�LDCH@M�ANMTR�opportunity of its benchmark peer groups.

• Committee can exercise discretion to change the bonus measures, how they are weighted, calculated and targeted. It can also change the Directors’ bonus awards (both upwards and downwards) once the measures have been tested, provided this is appropriate and in shareholders’ interests. The Committee can make such amendments as are necessary to respond to regulatory, legal or accounting requirements. Shareholders will AD�MNSHãDC�HE�SGHR�G@R�ADDM�B@QQHDC�NTS�AX�CHRBKNRTQD�HM�SGD�QDKDU@MS�#HQDBSNQR��1DLTMDQ@SHNM�1DONQS �

• Normal bonus opportunity is 16% of salary at threshold, rising to 80% of salary for on-target performance and 160% of salary at maximum. Additional bonus headroom of up to a further 40% of salary may be available, at the Committee’s discretion, to recognise highly exceptional circumstances. Full disclosure will be given if an increased bonus opportunity is applied.

• /DQENQL@MBD�HR�LD@RTQDC�NUDQ�NMD�ãM@MBH@K�XD@Q��@BBNQCHMF�SN�@�Q@MFD�NE�LDSQHBR��RNLD�NE�VGHBG�B@M�AD�@RRDRRDC�NM�@�RBNQDB@QC�A@RHR��SXOHB@KKX�HMBKTCHMF��FQNVSG�HM�D@QMHMFR�@MC�OQNãS@AHKHSX��TMCDQVQHSHMF�ODQENQL@MBD��QHRJ�L@M@FDLDMS��DWODMRD�Q@SHN�@MC�BNRS�R@UHMFR��B@OHS@K�RSQDMFSG��A@K@MBD�RGDDS�RSQDMFSG��BTRSNLDQ�@MC�DLOKNXDD�DMF@FDLDMS��@MC�NAIDBSHUDR�VGHBG�@QD�ODQRNM@K�SN�SGD�DWDBTSHUD � KK�LD@RTQDR�NODQ@SD�HMCDODMCDMSKX � QNTMC��í�NE�SGD� MMT@K�!NMTR�/K@M�HR�VDHFGSDC�@BBNQCHMF�SN�ãM@MBH@K�LDSQHBR �3GD�ODQENQL@MBD�BNMCHSHNMR�@MC�S@QFDSR�VGHBG�VDQD�TRDC�SN�HMENQL�SGD��ANMTR�@V@QCR�@QD�CDS@HKDC�NM�O@FDR��SN��

• &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.

• 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.

Note to table:� KK�ODQL@MDMS�4*�A@RDC�DLOKNXDDR�@QD�DKHFHAKD�SN�QDBDHUD�@�ANMTR�@V@QC��ATS�RG@QD�CDEDQQ@K�HR�NMKX�NODQ@SDC�ENQ�RDMHNQ�KD@CDQR�@S�12

101

RSA’S REMUNERATION POLICY FOR EXECUTIVE DIRECTORS


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.

• Reviewed annually with consideration of factors including: market positioning, internal pay relativities, levels NE�O@X�ENQ�NSGDQ�12 �DLOKNXDDR��HMâ@SHNM��@EENQC@AHKHSX��INA�RB@KD�@MC�BNMSDMS��HMCHUHCT@K�R�DWODQHDMBD�@MC�DWODQSHRD �.MKX�@MMT@K�A@RD�R@K@QX�HR�ODMRHNM@AKD � M�DWHRSHMF�$WDBTSHUD�#HQDBSNQ�R�R@K@QX�L@X�AD�HMBQD@RDC�outside of the normal review cycle for material role changes.

• 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.

• Committee can change the constituents of the benchmark peer group or the basis upon which market information is obtained at its discretion to ensure that the data remains robust and relevant.

• Performance conditions do not apply, but business and individual performance may be considered when conducting the review process. Although salaries are reviewed annually, there is no automatic right for any Director to receive a salary increase.

• .SGDQ�SG@M�DWBDOSHNM@K�BHQBTLRS@MBDR�RTBG�@R�@�QNKD�BG@MFD��R@K@QX�HMBQD@RDR�VHKK�MNS�DWBDDC�SGD�KDUDK�NE�HMBQD@RDR�@OOKHDC�SN�NSGDQ� RSA employees.

• 3GD�$WDBTSHUD�#HQDBSNQR��R@K@QHDR�DEEDBSHUD�� OQHK��@QD�MNSDC�NM�O@FD��


!DMDëSR �ëWDC�QDLTMDQ@SHNM�$LOKNXLDMS�ADMDãSR�@QD�provided to support the executive and form part of a market competitive package.

• #HQDBSNQR�QDBDHUD�@�U@QHDSX�NE�ADMDãSR��RNLD�NE�VGHBG�@QD�CDKHUDQDC�@R�S@W@AKD�B@RG�HM�KHDT�@KKNV@MBDR � !DMDãSR�BNUDQ�SGD�@QD@R�NE��GD@KSG�@MC�VDKK�ADHMF��KD@UD�NE�@ARDMBD��B@Q�@MC�ATRHMDRR�SQ@UDK��RHBJMDRR�ADMDãS��insurances, professional subscriptions, external advice and employee discounts on certain insurance products. Home to work travel may be covered where appropriate. Tax changes are not compensated.

• Assistance would be available under RSA’s relocation policy or global mobility policy should this be required. This may include tax equalisation in the event an executive is subsequently appointed to the Board as an expatriate, although the Committee would review if this was necessary long-term.

• 4*�A@RDC�$WDBTSHUD�#HQDBSNQR�B@M�O@QSHBHO@SD�HM�12 �R�âDWHAKD�ADMDãSR�OQNFQ@LLD�@MC�@BPTHQD�RG@QDR�SGQNTFG�UNKTMS@QX�',1"�@OOQNUDC�RG@QD�OK@MR��2G@QDR@UD�@MC�2G@QDATHKC� �3GDX�B@M�@KRN�BK@HL�DWODMRDR�@BBNQCHMF� to RSA’s business and travel policies.

• !DMDãSR�@QD�CDSDQLHMDC�VHSG�QDEDQDMBD�SN�L@QJDS�OQ@BSHBD�VHSGHM�SGD�R@LD�ADMBGL@QJ�ODDQ�FQNTOR�QDEDQDMBDC�@ANUD �3GD�"NLLHSSDD�B@M�@KRN�RNTQBD�HMENQL@SHNM�EQNL�ADRONJD�ADMDãSR�RTQUDXR�SN�@HC�CDBHRHNM�L@JHMF

• "NLLHSSDD�B@M�@LDMC�@MX�ADMDãS�NQ�HMSQNCTBD�MDV�NMDR�SN�DMRTQD�SGD�QDLTMDQ@SHNM�O@BJ@FD�QDL@HMR�L@QJDS�competitive or to respond to regulatory, legal or best practice changes. Internal appointees to the Board may QDS@HM�@MX�KDF@BX�ADMDãSR�SGDX�QDBDHUD��@S�SGD�"NLLHSSDD�R�CHRBQDSHNM��NQ�@�ATX�NTS�L@X�AD�L@CD�CDODMCHMF� NM�SGD�ADMDãS�SXOD�@MC�BHQBTLRS@MBD


• !DMDãSR�@QD�U@KTDC�@MC�CDSDQLHMDC�VHSG�QDEDQDMBD�SN�SGD�ADMBGL@QJHMF�ODDQ�FQNTOR�@MC�NSGDQ�RTQUDXR�QDUHDVDC�AX�SGD�1DLTMDQ@SHNM�"NLLHSSDD �#DS@HKR�NE�SGD�ADMDãSR�QDBDHUDC�AX�SGD�$WDBTSHUD�#HQDBSNQR�ENQ��@QD�OQNUHCDC�NM�O@FDR��SN��

Note to table:�/NKHBX�HR�BNMRHRSDMS�ENQ�NSGDQ�4*�A@RDC�L@M@FDQR�@MC�LNRS�NSGDQ�4*�A@RDC�DLOKNXDDR

Pension �ëWDC�QDLTMDQ@SHNM�/DMRHNM�ADMDãS�ENQLR�@�part of a market competitive package and enables executives to save for retirement.

• Non-contributory pension plan membership or a full/partial cash allowance, where the Director is unable SN�INHM�SGD�"NLO@MX�R�ODMRHNM�OK@MR �3GD�12 �CDãMDC�ADMDãS�ODMRHNM�OK@M�HR�BKNRDC�SN�@KK�MDV�DMSQ@MSR

• /DMRHNM�B@RG�@KKNV@MBDR�@QD�O@HC�LNMSGKX�@MC�@QD�RTAIDBS�SN�RS@STSNQX�CDCTBSHNMR

• Pension cash allowances are set referencing practice within the benchmark peer groups and specialist survey data may also be obtained. The Committee has regard to the market median allowance data.

• "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.


• -N�$WDBTSHUD�#HQDBSNQ�VHKK�QDBDHUD�@�ODMRHNM�ADMDãS�HM�DWBDRR�NE��í�NE�R@K@QX

• 3GD�$WDBTSHUD�#HQDBSNQR��ODMRHNM�ADMDãSR�ENQ��@QD�CDS@HKDC�NM�O@FDR��SN��


Annual Bonus Plan (variable remuneration)Supports RSA’s short-SDQL�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.

• Fifty per cent of the bonus will be awarded in cash and the remainder will be deferred into a share award for a period of three years. Dividends or equivalents accrue on the deferred shares, and are awarded at the end of the deferral period. The deferred bonus shares are granted under the rules of the LTIP as a conditional award.

• 4MCDQ�12 �R�"K@VA@BJ�/NKHBX��B@RG�@MC�CDEDQQDC�RG@QD�@V@QCR�@QHRHMF�EQNL�SGD� MMT@K�!NMTR�/K@M�B@M�AD�reduced or forfeited prior to receipt under a range of circumstances and other sanctions can apply. The policy is noted in detail on page 89. The Committee reviews the policy annually and may amend or update it, as required.

• 3GD�$WDBTSHUD�#HQDBSNQR��L@WHLTL�ANMTR�NOONQSTMHSX�HR�RDS�G@UHMF�QDF@QC�SN�SGD�L@QJDS�LDCH@M�ANMTR�opportunity of its benchmark peer groups.

• Committee can exercise discretion to change the bonus measures, how they are weighted, calculated and targeted. It can also change the Directors’ bonus awards (both upwards and downwards) once the measures have been tested, provided this is appropriate and in shareholders’ interests. The Committee can make such amendments as are necessary to respond to regulatory, legal or accounting requirements. Shareholders will AD�MNSHãDC�HE�SGHR�G@R�ADDM�B@QQHDC�NTS�AX�CHRBKNRTQD�HM�SGD�QDKDU@MS�#HQDBSNQR��1DLTMDQ@SHNM�1DONQS �

• Normal bonus opportunity is 16% of salary at threshold, rising to 80% of salary for on-target performance and 160% of salary at maximum. Additional bonus headroom of up to a further 40% of salary may be available, at the Committee’s discretion, to recognise highly exceptional circumstances. Full disclosure will be given if an increased bonus opportunity is applied.

• /DQENQL@MBD�HR�LD@RTQDC�NUDQ�NMD�ãM@MBH@K�XD@Q��@BBNQCHMF�SN�@�Q@MFD�NE�LDSQHBR��RNLD�NE�VGHBG�B@M�AD�@RRDRRDC�NM�@�RBNQDB@QC�A@RHR��SXOHB@KKX�HMBKTCHMF��FQNVSG�HM�D@QMHMFR�@MC�OQNãS@AHKHSX��TMCDQVQHSHMF�ODQENQL@MBD��QHRJ�L@M@FDLDMS��DWODMRD�Q@SHN�@MC�BNRS�R@UHMFR��B@OHS@K�RSQDMFSG��A@K@MBD�RGDDS�RSQDMFSG��BTRSNLDQ�@MC�DLOKNXDD�DMF@FDLDMS��@MC�NAIDBSHUDR�VGHBG�@QD�ODQRNM@K�SN�SGD�DWDBTSHUD � KK�LD@RTQDR�NODQ@SD�HMCDODMCDMSKX � QNTMC��í�NE�SGD� MMT@K�!NMTR�/K@M�HR�VDHFGSDC�@BBNQCHMF�SN�ãM@MBH@K�LDSQHBR �3GD�ODQENQL@MBD�BNMCHSHNMR�@MC�S@QFDSR�VGHBG�VDQD�TRDC�SN�HMENQL�SGD��ANMTR�@V@QCR�@QD�CDS@HKDC�NM�O@FDR��SN��

• &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.

• 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.

Note to table:� KK�ODQL@MDMS�4*�A@RDC�DLOKNXDDR�@QD�DKHFHAKD�SN�QDBDHUD�@�ANMTR�@V@QC��ATS�RG@QD�CDEDQQ@K�HR�NMKX�NODQ@SDC�ENQ�RDMHNQ�KD@CDQR�@S�12



102


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.

• Performance conditions are reviewed annually. Dividends or equivalents accrue during the performance period and are added to the shares that vest.

• �SVN�XD@Q�QDSDMSHNM�ODQHNC�VHKK�@OOKX�SN�SGD�$WDBTSHUD�#HQDBSNQR��UDRSDC�RG@QDR�OQNGHAHSHMF�SGDHQ�R@KD��DWBKTCHMF�any sold to satisfy statutory deductions). This policy will cover performance-based awards granted through the +3(/�@MC�HS�VHKK�ãQRS�AD�HLOKDLDMSDC�ENQ�RG@QDR�UDRSHMF�HM��H D �SGD��FQ@MS� �3GD�QDSDMSHNM�ODQHNC�NMKX�applies while the Director remains in employment.

• 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.

• 3GD�$WDBTSHUD�#HQDBSNQR��L@WHLTL�@V@QC�NOONQSTMHSX�HR�RDS�G@UHMF�QDF@QC�SN�SGD�L@QJDS�LDCH@M�FQ@MS�VHSGHM�the benchmark peer groups.

• Committee can act within the parameters of the Plan’s rules as approved by shareholders and its performance conditions, covering matters such as the measures, calculation methods, performance period, eligibility rules, and general Plan mechanics. The purpose of discretion is to enable the LTIP to be appropriately administered under both normal and exceptional circumstances, e.g. corporate or capital events affecting the Group or a RHFMHãB@MS�MTLADQ�NE�DLOKNXDDR �(M�@CCHSHNM��SGD�"NLLHSSDD�B@M�L@JD�RTBG�@LDMCLDMSR�@R�L@X�AD�MDBDRR@QX�to respond to legal, accounting or regulatory changes. Awards can be reduced or otherwise amended, provided SGD�@BSHNM�HR�E@HQ�@MC�ITRSHã@AKD��ENQ�DW@LOKD��SN�FT@QC�@F@HMRS�@�VHMCE@KK�@V@QC�NQ�SGD�BNMUDQRD�FDMDQ@SDC�AX�@M�@BBNTMSHMF�SQD@SLDMS��SN�OTS�DLOKNXDDR�HM�@�MDTSQ@K�ONRHSHNM�ENKKNVHMF�@�B@OHS@K�DUDMS �2ODBHãB@KKX��TMCDQ�@�change of control, performance conditions are tested and awards can vest earlier than scheduled, pro-rated for time and performance, however, the Committee can determine whether a pro-ration for time is applied to NSGDQ�ENQLR�NE�@V@QC�MNS�RTAIDBS�SN�ODQENQL@MBD�BNMCHSHNMR �

• Normal threshold LTIP opportunity is 58% of salary, rising to 144% of salary for on-target performance and 230% of salary at maximum.

• 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.

• Conditional awards are determined based on the Director’s salary as at the grant date, using the mid-market closing price of an RSA ordinary share, as determined by the Committee in accordance with the Plan’s rules.

• The LTIP is intended to support the delivery of the business strategy over a three-year time horizon, and it will therefore include at least SVN�LDSQHBR�VGHBG��SXOHB@KKX��VHKK�AD�CHQDBSKX�KHMJDC�SN�U@KTD�BQD@SHNM�SGQNTFG�ODQENQL@MBD�NE�SGD�&QNTO�R�RG@QD�OQHBD��D@QMHMFR�OQNãS@AHKHSX��capital strength and balance-sheet strength. The measures can be assessed on an absolute and/or a relative basis. The metrics can be @RRDRRDC�SGQNTFG�@�RBNQDB@QC �3GD�ODQENQL@MBD�BNMCHSHNMR�@QD�MNS�RTAIDBS�SN�QD�SDRSHMF

• 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.

• 3GD�ODQENQL@MBD�BNMCHSHNMR�@MC�S@QFDSR�SG@S�VHKK�@OOKX�SN�SGD��FQ@MS�@QD�CDS@HKDC�NM�O@FDR��SN��

• Shareholders will be consulted if changes to the measures are proposed by the Committee.

Note to table:��3GD�ONKHBX�@OOKHB@AKD�SN�SGD�$WDBTSHUD�#HQDBSNQR��KNMF�SDQL�HMBDMSHUDR�HR�SGD�R@LD�ENQ�@KK�NSGDQ�O@QSHBHO@MSR�VGN�QDBDHUD�ODQENQL@MBD�A@RDC�@V@QCR��VHSG�DWBDOSHNM�SN�SGD�SVN�XD@Q�ONRS�UDRSHMF�QDSDMSHNM�ODQHNC�VGHBG�NMKX�BNUDQR�$WDBTSHUD�#HQDBSNQR �+3(/�@V@QC�NOONQSTMHSHDR�U@QX�ENQ�HMCHUHCT@KR�below the Board.

Legacy incentives (variable remuneration)

• 3GD�$WDBTSHUD�#HQDBSNQR�VHKK�BNMSHMTD�SN�QDS@HM�@MX�@V@QCR�FQ@MSDC�TMCDQ�12 �R��+NMF�SDQL�(MBDMSHUD� Plan including deferred share awards. No further grants will be made under the 2006 Plan. The Committee can exercise the same discretion as noted in the LTIP section above, as appropriate.

• /DQENQL@MBD�BNMCHSHNMR�ENQ�@MX�NTSRS@MCHMF�@V@QCR�@QD�&QNTO�TMCDQKXHMF�1DSTQM�NM�$PTHSX�@MC�QDK@SHUD�3NS@K�2G@QDGNKCDQ�1DSTQM�@R�MNSDC�in the Directors’ Remuneration Report for 2013 and in this Report on page 92. There is no re-testing of the performance conditions.

Required shareholding$MRTQDR�@KHFMLDMS� with shareholders’ interests and enables the Director to build a stake in the business.

• $WDBTSHUD�#HQDBSNQR�LTRS�@BPTHQD�RG@QDR�HM�12 �@MC�GNKC�SGDL�@BBNQCHMF�SN�RODBHãDC�KDUDKR��DWOQDRRDC�@R�@�salary multiple.

• $WDBTSHUDR�G@UD�ãUD�XD@QR�HM�VGHBG�SN�ATHKC�TO�SGDHQ�GNKCHMF��BNLLDMBHMF�EQNL�SGD�ãQRS�C@SD�@M�TMBNMCHSHNM@K�share award is made to them as a Director. No shares are to be sold until the holding level is reached, except where required to cover statutory deductions.

• 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.

• For the purpose of reporting to shareholders, the holding levels will be determined using the mid-market closing price of an RSA ordinary share and executives’ annual gross basic salaries, both as at 31 December in the reporting year.

• 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� �


• With effect from 1 January 2014, the shareholding levels to be reached are:

� &QNTO�"GHDE�$WDBTSHUD�� í�NE�R@K@QX

� .SGDQ�$WDBTSHUD�#HQDBSNQR�� í�NE�R@K@QX

3GD�$WDBTSHUD�#HQDBSNQR��RG@QDGNKCHMF�KDUDKR�@R�@S��#DBDLADQ��@QD�MNSDC�NM�O@FD��

• The shareholding levels were determined with reference to the practice across the benchmark peer groups.

Note to table:�,DLADQR�NE�SGD�$WDBTSHUD�3D@L�@MC�RDKDBSDC�RDMHNQ�KD@CDQR�@BQNRR�SGD�&QNTO�@QD�@KRN�QDPTHQDC�SN�GNKC�RG@QDR�HM�12

RSA’S REMUNERATION POLICY FOR EXECUTIVE DIRECTORS – CONTINUED

103


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.

• Performance conditions are reviewed annually. Dividends or equivalents accrue during the performance period and are added to the shares that vest.

• �SVN�XD@Q�QDSDMSHNM�ODQHNC�VHKK�@OOKX�SN�SGD�$WDBTSHUD�#HQDBSNQR��UDRSDC�RG@QDR�OQNGHAHSHMF�SGDHQ�R@KD��DWBKTCHMF�any sold to satisfy statutory deductions). This policy will cover performance-based awards granted through the +3(/�@MC�HS�VHKK�ãQRS�AD�HLOKDLDMSDC�ENQ�RG@QDR�UDRSHMF�HM��H D �SGD��FQ@MS� �3GD�QDSDMSHNM�ODQHNC�NMKX�applies while the Director remains in employment.

• 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.

• 3GD�$WDBTSHUD�#HQDBSNQR��L@WHLTL�@V@QC�NOONQSTMHSX�HR�RDS�G@UHMF�QDF@QC�SN�SGD�L@QJDS�LDCH@M�FQ@MS�VHSGHM�the benchmark peer groups.

• Committee can act within the parameters of the Plan’s rules as approved by shareholders and its performance conditions, covering matters such as the measures, calculation methods, performance period, eligibility rules, and general Plan mechanics. The purpose of discretion is to enable the LTIP to be appropriately administered under both normal and exceptional circumstances, e.g. corporate or capital events affecting the Group or a RHFMHãB@MS�MTLADQ�NE�DLOKNXDDR �(M�@CCHSHNM��SGD�"NLLHSSDD�B@M�L@JD�RTBG�@LDMCLDMSR�@R�L@X�AD�MDBDRR@QX�to respond to legal, accounting or regulatory changes. Awards can be reduced or otherwise amended, provided SGD�@BSHNM�HR�E@HQ�@MC�ITRSHã@AKD��ENQ�DW@LOKD��SN�FT@QC�@F@HMRS�@�VHMCE@KK�@V@QC�NQ�SGD�BNMUDQRD�FDMDQ@SDC�AX�@M�@BBNTMSHMF�SQD@SLDMS��SN�OTS�DLOKNXDDR�HM�@�MDTSQ@K�ONRHSHNM�ENKKNVHMF�@�B@OHS@K�DUDMS �2ODBHãB@KKX��TMCDQ�@�change of control, performance conditions are tested and awards can vest earlier than scheduled, pro-rated for time and performance, however, the Committee can determine whether a pro-ration for time is applied to NSGDQ�ENQLR�NE�@V@QC�MNS�RTAIDBS�SN�ODQENQL@MBD�BNMCHSHNMR �

• Normal threshold LTIP opportunity is 58% of salary, rising to 144% of salary for on-target performance and 230% of salary at maximum.

• 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.

• Conditional awards are determined based on the Director’s salary as at the grant date, using the mid-market closing price of an RSA ordinary share, as determined by the Committee in accordance with the Plan’s rules.

• The LTIP is intended to support the delivery of the business strategy over a three-year time horizon, and it will therefore include at least SVN�LDSQHBR�VGHBG��SXOHB@KKX��VHKK�AD�CHQDBSKX�KHMJDC�SN�U@KTD�BQD@SHNM�SGQNTFG�ODQENQL@MBD�NE�SGD�&QNTO�R�RG@QD�OQHBD��D@QMHMFR�OQNãS@AHKHSX��capital strength and balance-sheet strength. The measures can be assessed on an absolute and/or a relative basis. The metrics can be @RRDRRDC�SGQNTFG�@�RBNQDB@QC �3GD�ODQENQL@MBD�BNMCHSHNMR�@QD�MNS�RTAIDBS�SN�QD�SDRSHMF

• 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.

• 3GD�ODQENQL@MBD�BNMCHSHNMR�@MC�S@QFDSR�SG@S�VHKK�@OOKX�SN�SGD��FQ@MS�@QD�CDS@HKDC�NM�O@FDR��SN��

• Shareholders will be consulted if changes to the measures are proposed by the Committee.

Note to table:��3GD�ONKHBX�@OOKHB@AKD�SN�SGD�$WDBTSHUD�#HQDBSNQR��KNMF�SDQL�HMBDMSHUDR�HR�SGD�R@LD�ENQ�@KK�NSGDQ�O@QSHBHO@MSR�VGN�QDBDHUD�ODQENQL@MBD�A@RDC�@V@QCR��VHSG�DWBDOSHNM�SN�SGD�SVN�XD@Q�ONRS�UDRSHMF�QDSDMSHNM�ODQHNC�VGHBG�NMKX�BNUDQR�$WDBTSHUD�#HQDBSNQR �+3(/�@V@QC�NOONQSTMHSHDR�U@QX�ENQ�HMCHUHCT@KR�below the Board.

Legacy incentives (variable remuneration)

• 3GD�$WDBTSHUD�#HQDBSNQR�VHKK�BNMSHMTD�SN�QDS@HM�@MX�@V@QCR�FQ@MSDC�TMCDQ�12 �R��+NMF�SDQL�(MBDMSHUD� Plan including deferred share awards. No further grants will be made under the 2006 Plan. The Committee can exercise the same discretion as noted in the LTIP section above, as appropriate.

• /DQENQL@MBD�BNMCHSHNMR�ENQ�@MX�NTSRS@MCHMF�@V@QCR�@QD�&QNTO�TMCDQKXHMF�1DSTQM�NM�$PTHSX�@MC�QDK@SHUD�3NS@K�2G@QDGNKCDQ�1DSTQM�@R�MNSDC�in the Directors’ Remuneration Report for 2013 and in this Report on page 92. There is no re-testing of the performance conditions.

Required shareholding$MRTQDR�@KHFMLDMS� with shareholders’ interests and enables the Director to build a stake in the business.

• $WDBTSHUD�#HQDBSNQR�LTRS�@BPTHQD�RG@QDR�HM�12 �@MC�GNKC�SGDL�@BBNQCHMF�SN�RODBHãDC�KDUDKR��DWOQDRRDC�@R�@�salary multiple.

• $WDBTSHUDR�G@UD�ãUD�XD@QR�HM�VGHBG�SN�ATHKC�TO�SGDHQ�GNKCHMF��BNLLDMBHMF�EQNL�SGD�ãQRS�C@SD�@M�TMBNMCHSHNM@K�share award is made to them as a Director. No shares are to be sold until the holding level is reached, except where required to cover statutory deductions.

• 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.

• For the purpose of reporting to shareholders, the holding levels will be determined using the mid-market closing price of an RSA ordinary share and executives’ annual gross basic salaries, both as at 31 December in the reporting year.

• 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� �


• With effect from 1 January 2014, the shareholding levels to be reached are:

� &QNTO�"GHDE�$WDBTSHUD�� í�NE�R@K@QX

� .SGDQ�$WDBTSHUD�#HQDBSNQR�� í�NE�R@K@QX

3GD�$WDBTSHUD�#HQDBSNQR��RG@QDGNKCHMF�KDUDKR�@R�@S��#DBDLADQ��@QD�MNSDC�NM�O@FD��

• The shareholding levels were determined with reference to the practice across the benchmark peer groups.

Note to table:�,DLADQR�NE�SGD�$WDBTSHUD�3D@L�@MC�RDKDBSDC�RDMHNQ�KD@CDQR�@BQNRR�SGD�&QNTO�@QD�@KRN�QDPTHQDC�SN�GNKC�RG@QDR�HM�12



104


Appointment treatment$MRTQDR�@�BNMRHRSDMS�@MC�transparent approach is taken when appointing executives to the Board, in line with best practice.

• Appointment salaries are set using the same approach as for the Directors’ salary reviews, as noted on pages 100 to 101 above. The Committee can exercise discretion on the timing and level of salary reviews for newly @OONHMSDC�#HQDBSNQR�QDâDBSHMF�SGD�HMCHUHCT@K�R�CDUDKNOLDMS�@MC�ODQENQL@MBD�HM�SGD�QNKD

• !DMDãSR��ODMRHNM�@MC�BNMSQ@BST@K�SDQLR�VHKK�AD�SGD�R@LD�@R�SGNRD�NEEDQDC�SN�BTQQDMS�$WDBTSHUD�#HQDBSNQR�� ATS�SGD�"NLLHSSDD�L@X�DWDQBHRD�ITCFDLDMS�SN�âDW�SGD�O@BJ@FD�SN�@BBNLLNC@SD�@MX�RODBHãB�SDQLR�ADRONJD� SN�SGD�HMCHUHCT@K��D F �QDK@SDC�SN�GD@KSG��@MMT@K�KD@UD��ODMRHNM�NQ�HMRTQ@MBD�ADMDãSR

• No Director will be appointed on a notice period exceeding 12 months.

• Where the Director is an internal promotion within the Group, he/she may be permitted to retain any legacy ADMDãSR�NQ�SDQLR�@S�SGD�"NLLHSSDD�R�CHRBQDSHNM �"NMSHMTHSX�NE�RDQUHBD�VHSG�SGD�&QNTO�VHKK�AD�L@HMS@HMDC

• 6GDQD�SGD�#HQDBSNQ�HR�@M�DWSDQM@K�@OONHMSLDMS��SGD�"NLLHSSDD�L@X�@FQDD�SN�@�BNLODMR@SNQX�O@BJ@FD�QDâDBSHMF�HMBDMSHUDR�NQ�ADMDãSR�ENQEDHSDC�TONM�QDRHFM@SHNM �3GHR�VHKK�NMKX�AD�ODQLHSSDC�NM�QDBDHOS�NE�QD@RNM@AKD�DUHCDMBD�of loss. There will be no cash sign-on payments where there is no loss.

• 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.

• As a point of principle, restricted shares will only be used where a performance condition has been achieved or is nearing testing and there is a reasonable expectation of the vesting level. Cash bonuses may be bought out with restricted shares in order to give the Director an early ‘stake’ in RSA.

• Committee can exercise discretion on how to settle any buyout and over what time period to phase any compensatory awards. It will have regard to the performance and vesting periods of the Director’s forfeited incentives when determining this.

• (E�SGD�#HQDBSNQ�HR�DMSDQDC�HMSN�@M�12 �+3(/�@MC�L@CD�@M�@V@QC�NE�ODQENQL@MBD�RG@QDR��SGDRD�VHKK�AD�RTAIDBS�SN�SGD�R@LD�ODQENQL@MBD�conditions and vesting date as applies to other plan participants.

• 4MCDQ�MNQL@K�BHQBTLRS@MBDR��@�MDV�$WDBTSHUD�#HQDBSNQ�VHKK�AD�DKHFHAKD�ENQ�HMBDMSHUD�@V@QCR�HM�KHMD�VHSG�SGD�TRT@K�ONKHBX�VGHBG�OQNUHCDR� for a maximum bonus of 160% of salary and LTIP award of 230% of salary. However, in exceptional circumstances, a higher bonus opportunity of up to 200% of salary may be agreed and a performance-related LTIP award may be approved by the Committee in the #HQDBSNQ�R�ãQRS�XD@Q�NE�RDQUHBD�TO�SN�SGD�KHLHS�NE��í�NE�R@K@QX �

• 1DRSQHBSDC�RG@QDR�L@X�AD�HRRTDC�@MC��HE�RN��SGDRD�VHKK�MNS�B@QQX�@MX�ãM@MBH@K�ODQENQL@MBD�BNMCHSHNMR��NMKX�BNMSHMTDC�RDQUHBD�VHSG�SGD� &QNTO�NQ�RTBG�NSGDQ�BNMCHSHNMR�@R�SGD�"NLLHSSDD�L@X�@FQDD �1DRSQHBSDC�RG@QDR�VHKK�NMKX�AD�@V@QCDC�SN�@M�$WDBTSHUD�#HQDBSNQ�HM�SGD� case of compensation for loss upon recruitment.

• 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).

• Any compensatory award using cash or restricted shares will always carry a service condition and an appropriate repayment schedule to protect shareholders’ interests.

Note to table: The policy is largely consistent with the approach taken on recruitment remuneration for senior executives across the Group.

Leaver treatment$MRTQDR�E@HQ�SQD@SLDMS�ENQ�departing executives while avoiding reward for failure.

• Directors who resign or are dismissed for cause are not eligible for an annual bonus if they have left or are under notice at the date of payment, and forfeit all unvested LTIP awards. They retain any shares they have voluntarily deferred in the LTIP under the 2006 Plan. Directors who resign can retain any compulsory deferred bonus shares awarded from 2014 onwards and any associated dividends or equivalents.

• Good leavers, at the Committee’s discretion, and normally including such circumstances as planned retirement, death, disability/medical severance, transfers outside of the Group and redundancy, would be eligible for an annual bonus for the proportion of the bonus year served. Deferred bonus shares will normally vest in line with SGD�MNQL@K�SHLDS@AKD��@MC�+3(/R�UDRS�RTAIDBS�SN�ODQENQL@MBD�@MC�SHLD�OQNQ@SHMF �3GD�"NLLHSSDD�VHKK�L@JD�QD@RNM@AKD�ITCFDLDMS�NM�CDSDQLHMHMF�VGDSGDQ�@�#HQDBSNQ�PT@KHãDR�ENQ�FNNC�KD@UDQ�RS@STR�AX�QD@RNM�NE�retirement, by understanding the individual’s intentions post employment termination and taking account of the BNMSDWS�NE�GHR�GDQ�CDO@QSTQD�EQNL�SGD�&QNTO �3GD�"NLLHSSDD�G@R�SGD�CHRBQDSHNM�SN�L@JD�SGD�ãM@K�ANMTR�@V@QC�in cash and therefore waive compulsory deferral.

• (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.

• The unexpired period of the Director’s notice may either be paid or served, including on garden leave; this is regardless of which party has served notice. Generally, in the event of termination and in all cases of termination on performance grounds, the Committee’s policy would be to seek and apply mitigation, and payments may be made on a phased basis.

• Where good leavers receive pro-rated bonus or LTIP awards, performance is tested in line with the normal performance timetable. The Committee can, however, arrange for the performance conditions to be tested early and for awards to vest sooner than the scheduled date in cases of death in service, medical severance (with discretion) or under a change of control.

• Based on the leaving circumstances and having regard of shareholders’ interests, the Committee can exercise discretion to reduce or lapse awards or enable a proportion of awards to be received but only in highly exceptional circumstances and where appropriate. Shareholders will be informed if discretion is applied, and details will be provided wherever possible.

• 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.

• -N�O@XLDMS�NQ�BNLODMR@SHNM�ENQ�KNRR�NE�NEãBD�L@CD�SN�@MX�CDO@QSHMF�#HQDBSNQ�VHKK�AD�CHRBKNRDC�HE�HS�HR�KDRR�SG@M�`��FQNRR

Note to table: The policy is largely consistent with the approach taken for senior executives across the Group.

RSA’S REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORSPurpose and Strategic Link Policy for 2014 onwards Opportunity and performance conditions

Fees$MRTQDR�BNLODSHSHUD�remuneration is paid to attract high calibre non-executives and recognise their time commitment on the Board.

• Fees are reviewed annually but an annual increase may not always be applied.

• When assessing fee levels, account is taken of the required time commitment and the degree of expertise MDBDRR@QX�SN�ETKãK�SGD�O@QSHBTK@Q�QNKD��RTBG�@R�BG@HQHMF�@�BNLLHSSDD�

• 3GD�EDDR�@QD�ADMBGL@QJDC�TRHMF�SGD�R@LD�ODDQ�FQNTOR�@R�ENQ�SGD�$WDBTSHUD�#HQDBSNQR��QDLTMDQ@SHNM�� and will have regard to the market median.

• %DDR�@QD�O@HC�HM�B@RG��RTAIDBS�SN�@MX�QDPTHQDC�RS@STSNQX�CDCTBSHNMR�VGHBG�@QD�S@JDM�@S�RNTQBD

• 3GD�"NLO@MX�G@R�SGD�CHRBQDSHNM�SN�HMSQNCTBD�MDV�EDDR�NQ�BG@MFD�SGD�-NM�$WDBTSHUDR�#HQDBSNQR��SDQLR


• 6HSG�DWBDOSHNM�SN�SGD�"G@HQL@M��@KK�-NM�$WDBTSHUD�#HQDBSNQR�QDBDHUD�@�A@RD�EDD��ETQSGDQ�EDDR�@QD�SGDM�O@HC�SN�QDâDBS�LDLADQRGHO�NE�LNQD�than one committee and for chairing a committee. A separate fee is paid to the Senior Independent Director. The Chairman receives a fee for his role and this is set by the Committee.

• Base fees (including the Chairman’s fee) will be kept within the aggregate limit stated in the Group’s Articles of Association.

• #DS@HKR�NE�SGD�"G@HQL@M�R�EDD�@MC�SGD�-NM�$WDBTSHUD�#HQDBSNQR��EDDR�D@QMDC�ENQ��@QD�MNSDC�NM�O@FD��

.SGDQ�JDX�SDQLR�NE�NEëBD1DâDBSR�BTQQDMS�FNNC�governance.

• 3GD�"G@HQL@M�HR�OQNUHCDC�VHSG�RDBQDS@QH@K�RTOONQS�@MC�SGD�TRD�NE�@M�NEãBD

• -NM�$WDBTSHUD�#HQDBSNQR�L@X�BK@HL�DWODMRDR�HM�KHMD�VHSG�12 �R�ATRHMDRR�@MC�SQ@UDK�ONKHBHDR��RNLD�NE�SGDRD�DWODMRDR�CN�MNS�PT@KHEX�ENQ�',1"�S@W�QDKHDE �3GDX�QDBDHUD�MN�NSGDQ�ADMDãSR��ATS�SGDX�B@M�G@UD�12 �HMRTQ@MBD�products at a discount.

• 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.

• 3GD�-NM�$WDBTSHUD�#HQDBSNQR�L@X�GNKC�RG@QDR�HM�12 ��ATS�SGHR�HR�@�ODQRNM@K�L@SSDQ�@MC�HR�MNS�L@MC@SNQX


• Contractual terms are noted on page 106.

RSA’S REMUNERATION POLICY FOR EXECUTIVE DIRECTORS – CONTINUED

105


Appointment treatment$MRTQDR�@�BNMRHRSDMS�@MC�transparent approach is taken when appointing executives to the Board, in line with best practice.

• Appointment salaries are set using the same approach as for the Directors’ salary reviews, as noted on pages 100 to 101 above. The Committee can exercise discretion on the timing and level of salary reviews for newly @OONHMSDC�#HQDBSNQR�QDâDBSHMF�SGD�HMCHUHCT@K�R�CDUDKNOLDMS�@MC�ODQENQL@MBD�HM�SGD�QNKD

• !DMDãSR��ODMRHNM�@MC�BNMSQ@BST@K�SDQLR�VHKK�AD�SGD�R@LD�@R�SGNRD�NEEDQDC�SN�BTQQDMS�$WDBTSHUD�#HQDBSNQR�� ATS�SGD�"NLLHSSDD�L@X�DWDQBHRD�ITCFDLDMS�SN�âDW�SGD�O@BJ@FD�SN�@BBNLLNC@SD�@MX�RODBHãB�SDQLR�ADRONJD� SN�SGD�HMCHUHCT@K��D F �QDK@SDC�SN�GD@KSG��@MMT@K�KD@UD��ODMRHNM�NQ�HMRTQ@MBD�ADMDãSR

• No Director will be appointed on a notice period exceeding 12 months.

• Where the Director is an internal promotion within the Group, he/she may be permitted to retain any legacy ADMDãSR�NQ�SDQLR�@S�SGD�"NLLHSSDD�R�CHRBQDSHNM �"NMSHMTHSX�NE�RDQUHBD�VHSG�SGD�&QNTO�VHKK�AD�L@HMS@HMDC

• 6GDQD�SGD�#HQDBSNQ�HR�@M�DWSDQM@K�@OONHMSLDMS��SGD�"NLLHSSDD�L@X�@FQDD�SN�@�BNLODMR@SNQX�O@BJ@FD�QDâDBSHMF�HMBDMSHUDR�NQ�ADMDãSR�ENQEDHSDC�TONM�QDRHFM@SHNM �3GHR�VHKK�NMKX�AD�ODQLHSSDC�NM�QDBDHOS�NE�QD@RNM@AKD�DUHCDMBD�of loss. There will be no cash sign-on payments where there is no loss.

• 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.

• As a point of principle, restricted shares will only be used where a performance condition has been achieved or is nearing testing and there is a reasonable expectation of the vesting level. Cash bonuses may be bought out with restricted shares in order to give the Director an early ‘stake’ in RSA.

• Committee can exercise discretion on how to settle any buyout and over what time period to phase any compensatory awards. It will have regard to the performance and vesting periods of the Director’s forfeited incentives when determining this.

• (E�SGD�#HQDBSNQ�HR�DMSDQDC�HMSN�@M�12 �+3(/�@MC�L@CD�@M�@V@QC�NE�ODQENQL@MBD�RG@QDR��SGDRD�VHKK�AD�RTAIDBS�SN�SGD�R@LD�ODQENQL@MBD�conditions and vesting date as applies to other plan participants.

• 4MCDQ�MNQL@K�BHQBTLRS@MBDR��@�MDV�$WDBTSHUD�#HQDBSNQ�VHKK�AD�DKHFHAKD�ENQ�HMBDMSHUD�@V@QCR�HM�KHMD�VHSG�SGD�TRT@K�ONKHBX�VGHBG�OQNUHCDR� for a maximum bonus of 160% of salary and LTIP award of 230% of salary. However, in exceptional circumstances, a higher bonus opportunity of up to 200% of salary may be agreed and a performance-related LTIP award may be approved by the Committee in the #HQDBSNQ�R�ãQRS�XD@Q�NE�RDQUHBD�TO�SN�SGD�KHLHS�NE��í�NE�R@K@QX �

• 1DRSQHBSDC�RG@QDR�L@X�AD�HRRTDC�@MC��HE�RN��SGDRD�VHKK�MNS�B@QQX�@MX�ãM@MBH@K�ODQENQL@MBD�BNMCHSHNMR��NMKX�BNMSHMTDC�RDQUHBD�VHSG�SGD� &QNTO�NQ�RTBG�NSGDQ�BNMCHSHNMR�@R�SGD�"NLLHSSDD�L@X�@FQDD �1DRSQHBSDC�RG@QDR�VHKK�NMKX�AD�@V@QCDC�SN�@M�$WDBTSHUD�#HQDBSNQ�HM�SGD� case of compensation for loss upon recruitment.

• 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).

• Any compensatory award using cash or restricted shares will always carry a service condition and an appropriate repayment schedule to protect shareholders’ interests.

Note to table: The policy is largely consistent with the approach taken on recruitment remuneration for senior executives across the Group.

Leaver treatment$MRTQDR�E@HQ�SQD@SLDMS�ENQ�departing executives while avoiding reward for failure.

• Directors who resign or are dismissed for cause are not eligible for an annual bonus if they have left or are under notice at the date of payment, and forfeit all unvested LTIP awards. They retain any shares they have voluntarily deferred in the LTIP under the 2006 Plan. Directors who resign can retain any compulsory deferred bonus shares awarded from 2014 onwards and any associated dividends or equivalents.

• Good leavers, at the Committee’s discretion, and normally including such circumstances as planned retirement, death, disability/medical severance, transfers outside of the Group and redundancy, would be eligible for an annual bonus for the proportion of the bonus year served. Deferred bonus shares will normally vest in line with SGD�MNQL@K�SHLDS@AKD��@MC�+3(/R�UDRS�RTAIDBS�SN�ODQENQL@MBD�@MC�SHLD�OQNQ@SHMF �3GD�"NLLHSSDD�VHKK�L@JD�QD@RNM@AKD�ITCFDLDMS�NM�CDSDQLHMHMF�VGDSGDQ�@�#HQDBSNQ�PT@KHãDR�ENQ�FNNC�KD@UDQ�RS@STR�AX�QD@RNM�NE�retirement, by understanding the individual’s intentions post employment termination and taking account of the BNMSDWS�NE�GHR�GDQ�CDO@QSTQD�EQNL�SGD�&QNTO �3GD�"NLLHSSDD�G@R�SGD�CHRBQDSHNM�SN�L@JD�SGD�ãM@K�ANMTR�@V@QC�in cash and therefore waive compulsory deferral.

• (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.

• The unexpired period of the Director’s notice may either be paid or served, including on garden leave; this is regardless of which party has served notice. Generally, in the event of termination and in all cases of termination on performance grounds, the Committee’s policy would be to seek and apply mitigation, and payments may be made on a phased basis.

• Where good leavers receive pro-rated bonus or LTIP awards, performance is tested in line with the normal performance timetable. The Committee can, however, arrange for the performance conditions to be tested early and for awards to vest sooner than the scheduled date in cases of death in service, medical severance (with discretion) or under a change of control.

• Based on the leaving circumstances and having regard of shareholders’ interests, the Committee can exercise discretion to reduce or lapse awards or enable a proportion of awards to be received but only in highly exceptional circumstances and where appropriate. Shareholders will be informed if discretion is applied, and details will be provided wherever possible.

• 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.

• -N�O@XLDMS�NQ�BNLODMR@SHNM�ENQ�KNRR�NE�NEãBD�L@CD�SN�@MX�CDO@QSHMF�#HQDBSNQ�VHKK�AD�CHRBKNRDC�HE�HS�HR�KDRR�SG@M�`��FQNRR

Note to table: The policy is largely consistent with the approach taken for senior executives across the Group.

RSA’S REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORSPurpose and Strategic Link Policy for 2014 onwards Opportunity and performance conditions

Fees$MRTQDR�BNLODSHSHUD�remuneration is paid to attract high calibre non-executives and recognise their time commitment on the Board.

• Fees are reviewed annually but an annual increase may not always be applied.

• When assessing fee levels, account is taken of the required time commitment and the degree of expertise MDBDRR@QX�SN�ETKãK�SGD�O@QSHBTK@Q�QNKD��RTBG�@R�BG@HQHMF�@�BNLLHSSDD�

• 3GD�EDDR�@QD�ADMBGL@QJDC�TRHMF�SGD�R@LD�ODDQ�FQNTOR�@R�ENQ�SGD�$WDBTSHUD�#HQDBSNQR��QDLTMDQ@SHNM�� and will have regard to the market median.

• %DDR�@QD�O@HC�HM�B@RG��RTAIDBS�SN�@MX�QDPTHQDC�RS@STSNQX�CDCTBSHNMR�VGHBG�@QD�S@JDM�@S�RNTQBD

• 3GD�"NLO@MX�G@R�SGD�CHRBQDSHNM�SN�HMSQNCTBD�MDV�EDDR�NQ�BG@MFD�SGD�-NM�$WDBTSHUDR�#HQDBSNQR��SDQLR


• 6HSG�DWBDOSHNM�SN�SGD�"G@HQL@M��@KK�-NM�$WDBTSHUD�#HQDBSNQR�QDBDHUD�@�A@RD�EDD��ETQSGDQ�EDDR�@QD�SGDM�O@HC�SN�QDâDBS�LDLADQRGHO�NE�LNQD�than one committee and for chairing a committee. A separate fee is paid to the Senior Independent Director. The Chairman receives a fee for his role and this is set by the Committee.

• Base fees (including the Chairman’s fee) will be kept within the aggregate limit stated in the Group’s Articles of Association.

• #DS@HKR�NE�SGD�"G@HQL@M�R�EDD�@MC�SGD�-NM�$WDBTSHUD�#HQDBSNQR��EDDR�D@QMDC�ENQ��@QD�MNSDC�NM�O@FD��

.SGDQ�JDX�SDQLR�NE�NEëBD1DâDBSR�BTQQDMS�FNNC�governance.

• 3GD�"G@HQL@M�HR�OQNUHCDC�VHSG�RDBQDS@QH@K�RTOONQS�@MC�SGD�TRD�NE�@M�NEãBD

• -NM�$WDBTSHUD�#HQDBSNQR�L@X�BK@HL�DWODMRDR�HM�KHMD�VHSG�12 �R�ATRHMDRR�@MC�SQ@UDK�ONKHBHDR��RNLD�NE�SGDRD�DWODMRDR�CN�MNS�PT@KHEX�ENQ�',1"�S@W�QDKHDE �3GDX�QDBDHUD�MN�NSGDQ�ADMDãSR��ATS�SGDX�B@M�G@UD�12 �HMRTQ@MBD�products at a discount.

• 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.

• 3GD�-NM�$WDBTSHUD�#HQDBSNQR�L@X�GNKC�RG@QDR�HM�12 ��ATS�SGHR�HR�@�ODQRNM@K�L@SSDQ�@MC�HR�MNS�L@MC@SNQX


• Contractual terms are noted on page 106.



106

CONTRACTUAL TERMS

Executive Directors$@BG�NE�SGD�$WDBTSHUD�#HQDBSNQR�HR�DLOKNXDC�TMCDQ�@�RDQUHBD�agreement, which contains a variety of contractual terms and conditions. Their employment can be terminated by the Company or the individual, by the serving of 12 months’ notice. In the case of summary dismissal, no notice will be served by the Company and no compensation will be paid in lieu of it. Notice periods are approved by the Committee @MC��@S�HSR�CHRBQDSHNM��B@M�AD�QDCTBDC�HM�SGD�DUDMS�@M�$WDBTSHUD�Director resigns and wishes to leave prior to the end of his contractual notice period.

R�VHSG�@MX�12 �DLOKNXDD��SGD�$WDBTSHUD�#HQDBSNQR�L@X� be suspended from their duties in the event of their misconduct or during an investigation which might result in their dismissal.

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.

$WDBTSHUD�#HQDBSNQR�L@X�GNKC�NMD�DWSDQM@K�MNM�DWDBTSHUD�ONRHSHNM�NE�@�%32$��BNLO@MX�OQNUHCDC�SGHR�CNDR�MNS�FHUD�QHRD�SN�@MX�BNMâHBS�NE�HMSDQDRS��VHSG�SGD�@OOQNU@K�NE�SGD�Nomination Committee. If there is any remuneration arising from this role, the individual can retain it.

3GD�C@SD�VGDM�D@BG�$WDBTSHUD�#HQDBSNQ�V@R�@OONHMSDC� to the Board is shown in the table on page 98. Contracts are available for inspection by shareholders at the "NLO@MX�R�QDFHRSDQDC�NEãBD

Non-Executive Directors-NM�$WDBTSHUD�#HQDBSNQR�@QD�MNS�DLOKNXDC�AX�12 �ATS�SGDX�are engaged on a contract for services basis. They are issued with an appointment letter for an initial three-year term, which can be extended with the Board’s agreement. 3GD�SDQL�NE�NEãBD�B@M�DMC�OQHNQ�SN�HSR�DWOHQX�VHSG�DHSGDQ� the individual or the Company serving one month’s notice, or three months in respect of the Chairman. No notice will be served by the Company in the event of gross misconduct.

-NM�$WDBTSHUD�#HQDBSNQR�@QD�DWODBSDC�SN�CHRBKNRD�@MX�BNMâHBSR�NE�HMSDQDRS�OQHNQ�SN��@MC�CTQHMF��SGD�BNTQRD�NE�SGDHQ�tenure. They will not participate in making a decision if any BNMâHBS�HR�BNMRHCDQDC�SN�HLO@BS�SGDHQ�HMCDODMCDMBD�NQ�KHLHS�their ability to discharge their duties to shareholders. Since -NM�$WDBTSHUD�#HQDBSNQR�@MC�SGD�"G@HQL@M�QDBDHUD�NMKX�EDDR�@MC�DWODMRDR��MN�HMCHUHCT@K�B@M�G@UD�@�KNRR�NE�NEãBD�O@XLDMS��although payment in lieu of notice can be made.

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 �

107

Directors’ responsibilities

The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable laws and QDFTK@SHNMR �"NLO@MX�K@V�QDPTHQDR�SGD�#HQDBSNQR�SN�OQDO@QD�RTBG�ãM@MBH@K�RS@SDLDMSR�ENQ�D@BG�ãM@MBH@K�XD@Q �4MCDQ�SG@S� K@V�SGD�#HQDBSNQR�@QD�QDPTHQDC�SN�OQDO@QD�&QNTO�ãM@MBH@K�RS@SDLDMSR�HM�@BBNQC@MBD�VHSG�(MSDQM@SHNM@K�%HM@MBH@K�1DONQSHMF�2S@MC@QCR��(%12��@R�@CNOSDC�AX�SGD�$4�@MC� QSHBKD��NE�SGD�( 2�1DFTK@SHNM�@MC�G@UD�@KRN�BGNRDM�SN�OQDO@QD�SGD�/@QDMS�"NLO@MX�ãM@MBH@K�RS@SDLDMSR�TMCDQ�(%12�@R�@CNOSDC�AX�SGD�$TQNOD@M�4MHNM �4MCDQ�BNLO@MX�K@V�SGD�#HQDBSNQR�LTRS�MNS�@OOQNUD�SGD�@BBNTMSR�TMKDRR�SGDX�@QD�R@SHRãDC�SG@S�SGDX�FHUD�@�SQTD�@MC�E@HQ�UHDV�NE�SGD�RS@SD�NE�@EE@HQR�NE�SGD�&QNTO�@MC�/@QDMS�"NLO@MX�@MC�NE�SGDHQ�OQNãS�NQ�KNRR�ENQ�SG@S�ODQHNC �(M�OQDO@QHMF�SGDRD�ãM@MBH@K�RS@SDLDMSR��(MSDQM@SHNM@K� BBNTMSHMF�2S@MC@QC��QDPTHQDR�that Directors:

• Properly select and apply accounting policies;

• /QDRDMS�HMENQL@SHNM��HMBKTCHMF�@BBNTMSHMF�ONKHBHDR��HM�@�L@MMDQ�SG@S�OQNUHCDR�QDKDU@MS��QDKH@AKD��BNLO@Q@AKD�@MC�understandable information;

• /QNUHCD�@CCHSHNM@K�CHRBKNRTQDR�VGDM�BNLOKH@MBD�VHSG�SGD�RODBHãB�QDPTHQDLDMSR�HM�(%12�HR�HMRTEãBHDMS�SN�DM@AKD�SGD�TRDQR�SN�TMCDQRS@MC�SGD�HLO@BS�NE�O@QSHBTK@Q�SQ@MR@BSHNMR��NSGDQ�DUDMSR�@MC�BNMCHSHNMR�NM�SGD�DMSHSX�R�ãM@MBH@K�ONRHSHNM�@MC�ãM@MBH@K�performance and;

• Make an assessment of the Group and Parent Company’s ability to continue as a going concern.

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

4MCDQ�@OOKHB@AKD�K@V�@MC�QDFTK@SHNMR��SGD�#HQDBSNQR�@QD�@KRN�QDRONMRHAKD�ENQ�OQDO@QHMF�@�2SQ@SDFHB�1DONQS��#HQDBSNQR��1DONQS��#HQDBSNQR��1DLTMDQ@SHNM�1DONQS�@MC�"NQONQ@SD�&NUDQM@MBD�2S@SDLDMS�SG@S�BNLOKHDR�VHSG�SG@S�K@V�@MC�SGNRD�QDFTK@SHNMR

3GD�#HQDBSNQR�@QD�QDRONMRHAKD�ENQ�SGD�L@HMSDM@MBD�@MC�HMSDFQHSX�NE�SGD�BNQONQ@SD�@MC�ãM@MBH@K�HMENQL@SHNM�HMBKTCDC�NM�SGD�"NLO@MX�R�VDARHSD �+DFHRK@SHNM�HM�SGD�4MHSDC�*HMFCNL�FNUDQMHMF�SGD�OQDO@Q@SHNM�@MC�CHRRDLHM@SHNM�NE�ãM@MBH@K�RS@SDLDMSR�may differ from legislation in other jurisdictions.

RESPONSIBILITY STATEMENT6D�BNMãQL�SN�SGD�ADRS�NE�NTQ�JMNVKDCFD�

• 3GD�ãM@MBH@K�RS@SDLDMSR�NM�O@FDR��SN��OQDO@QDC�HM�@BBNQC@MBD�VHSG�(%12�@R�@CNOSDC�AX�SGD�$4��FHUD�@�SQTD�@MC�E@HQ� UHDV�NE�SGD�@RRDSR��KH@AHKHSHDR��ãM@MBH@K�ONRHSHNM�@MC�OQNãS�NQ�KNRR�NE�SGD�&QNTO�@MC�/@QDMS�"NLO@MX�

• 3GD�ATRHMDRR�QDUHDV�NM�O@FDR��SN��VGHBG�HR�HMBNQONQ@SDC�HMSN�SGD�#HQDBSNQR��QDONQS��HMBKTCDR�@�E@HQ�QDUHDV�NE�SGD�CDUDKNOLDMS�@MC�ODQENQL@MBD�NE�SGD�ATRHMDRR�@MC�SGD�ONRHSHNM�NE�SGD�&QNTO��@MC

• 3GD�QHRJ�QDUHDV�RDBSHNM�NM�O@FDR��SN��VGHBG�HR�HMBNQONQ@SDC�HMSN�SGD�#HQDBSNQR��QDONQS��HMBKTCDR�@�CDRBQHOSHNM�NE�SGD�principal risks and uncertainties faced by the Group.

Signed by order of the Board

STEPHEN HESTER RICHARD HOUGHTON&QNTO�"GHDE�$WDBTSHUD� &QNTO�"GHDE�%HM@MBH@K�.EãBDQ��%DAQT@QX�� %DAQT@QX��


FINANCIAL STATEMENTS

108

Independent Auditor’s Report to the Members of RSA Insurance Group plc only

OPINIONS AND CONCLUSIONS ARISING FROM OUR AUDIT

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• SGD�ãM@MBH@K�RS@SDLDMSR�FHUD�@�SQTD�@MC�E@HQ�UHDV�NE�SGD�RS@SD�NE�SGD�&QNTO�R�@MC�NE�SGD�/@QDMS�BNLO@MX�R�@EE@HQR�@R�@S��^#DBDLADQ��@MC�NE�SGD�&QNTO�R�OQNãS�ENQ�SGD�XD@Q�SGDM�DMCDC�

• SGD�&QNTO�ãM@MBH@K�RS@SDLDMSR�G@UD�ADDM�OQNODQKX�OQDO@QDC�HM�@BBNQC@MBD�VHSG�(MSDQM@SHNM@K�%HM@MBH@K�1DONQSHMF�2S@MC@QCR�@R�@CNOSDC�AX�SGD�$TQNOD@M�4MHNM��(%12�@R�@CNOSDC�AX�SGD�$4��

• SGD�/@QDMS�"NLO@MX�ãM@MBH@K�RS@SDLDMSR�G@UD�ADDM�OQNODQKX�OQDO@QDC�HM�@BBNQC@MBD�VHSG�(%12R�@R�@CNOSDC�AX�SGD�$4� @MC�@R�@OOKHDC�HM�@BBNQC@MBD�VHSG�SGD�OQNUHRHNMR�NE�SGD�"NLO@MHDR� BS��@MC

• SGD�ãM@MBH@K�RS@SDLDMSR�G@UD�ADDM�OQDO@QDC�HM�@BBNQC@MBD�VHSG�SGD�QDPTHQDLDMSR�NE�SGD�"NLO@MHDR� BS��@MC�� @R�QDF@QCR�SGD�&QNTO�ãM@MBH@K�RS@SDLDMSR�� QSHBKD��NE�SGD�( 2�1DFTK@SHNM

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3N�BNMCTBS�NTQ�QHRJ�@RRDRRLDMS��VD�BNMRHCDQDC�SGD�HMGDQDMS�QHRJR�E@BHMF�SGD�&QNTO�@MC�SGD�O@QDMS�BNLO@MX��HMBKTCHMF� SGNRD�@QHRHMF�EQNL�SGD�QDRODBSHUD�ATRHMDRR�LNCDKR��@MC�GNV�SGD�&QNTO�BNMSQNKR�SGNRD�QHRJR �.TQ�QHRJ�@RRDRRLDMS�SGDQDENQD�BNMRHCDQDC�SGD�DWSDQM@K�DMUHQNMLDMS�HM�VGHBG�SGD�&QNTO�R�ATRHMDRRDR�NODQ@SD�HM��HMBKTCHMF�ANSG�VHCDQ�DBNMNLHB�E@BSNQR� @MC�ED@STQDR�RODBHãB�SN�SGD�QDKDU@MS�HMRTQ@MBD�L@QJDS��RTBG�@R�BNLODSHSHNM��CHRSQHATSHNM�LNCDKR��SQDMCR�HM�BK@HLR�DWODQHDMBD�@MC�SGD�HLO@BS�NE�QDFTK@SNQX�BNLOKH@MBD �6D�SGDM�@RRDRRDC�GNV�RTBG�E@BSNQR�HLO@BS�SGD�&QNTO�R�ATRHMDRR�LNCDKR��@MC�GNV�QHRJR�@QHRHMF�ANSG�DWSDQM@KKX�@MC�HMSDQM@KKX�@QD�BNMSQNKKDC �(M�CNHMF�RN��VD�BNMRHCDQDC�@�MTLADQ�NE�E@BSNQR�HMBKTCHMF��SGD�QHRJ� NE�EQ@TC��SGD�CDRHFM�@MC�HLOKDLDMS@SHNM�NE�SGD�&QNTO�R�BNMSQNK�DMUHQNMLDMS��@MC�SGD�QHRJ�NE�L@M@FDLDMS�NUDQQHCD�NE� JDX�BNMSQNKR �6D�TOC@SDC�NTQ�QHRJ�@RRDRRLDMS�@ESDQ�SDRSHMF�SGD�NODQ@SHMF�DEEDBSHUDMDRR�NE�@�MTLADQ�NE�SGD�&QNTO�R�JDX�BNMSQNKR�HMBKTCHMF�HMSDQM@K�BNMSQNKR�NUDQ�ãM@MBH@K�QDONQSHMF�@MC�RODBHãB�@MSH�EQ@TC�BNMSQNKR�@R�VDKK�@R�SDRSHMF�SGD�A@RHR�NE�SGD�FNHMF�concern assumption.

3GQNTFGNTS�SGHR�QHRJ�@RRDRRLDMS��VD�BNMRHCDQDC�GNV�SGD�E@BSNQR�HCDMSHãDC�HLO@BSDC�SGD�&QNTO�R�@AHKHSX�SN�BNMSHMTD�@R�@�FNHMF�BNMBDQM�HMBKTCHMF�HSR�@AHKHSX�SN�LDDS�ETSTQD�QDFTK@SNQX�B@OHS@K�QDPTHQDLDMSR�@MC�HM�O@QSHBTK@Q�SGNRD�QDPTHQDC�AX�SGD�2NKUDMBX�((�B@OHS@K�QDFHLD��@OOKHB@AKD�EQNL��)@MT@QX��BNMRHCDQHMF�SGD�FQNTO�R�OQNRODBSR�ENQ�RDBTQHMF�QDFTK@SNQX�@OOQNU@K�ENQ�SGD� TRD�NE�@M�HMSDQM@K�LNCDK��@KK�NQ�HM�O@QS��ENQ�B@KBTK@SHMF�SGD�ETSTQD�B@OHS@K�QDPTHQDLDMS��@MC�BNMSHMFDMBX�OK@MR�ENQ�@BGHDUHMF� a materially higher capital requirement if it were required to enter the new regime on a standard formula basis.

%HM@KKX��VD�BNMRHCDQDC�SGD�HMGDQDMS�MDDC�ENQ�SGD�CHQDBSNQR�SN�L@JD�@MC�@OOQNOQH@SDKX�CHRBKNRD�ITCFDLDMSR�VGDM�OQDO@QHMF� SGD�ãM@MBH@K�RS@SDLDMSR �

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:

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(MRTQ@MBD�KH@AHKHSHDR��OQNUHRHNM�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR��`��LHKKHNM1DEDQ�SN�O@FD��&QNTO� TCHS�"NLLHSSDD�1DONQS��O@FD��@BBNTMSHMF�ONKHBX��@MC�O@FDR��SN��ãM@MBH@K�CHRBKNRTQDR�

The risk Our response

3GD�&QNTO�G@R�RHFMHãB@MS�HMRTQ@MBD�KH@AHKHSHDR�QDOQDRDMSHMF��í�NE�SNS@K�KH@AHKHSHDR �3GD�U@KT@SHNM�NE�HMRTQ@MBD�KH@AHKHSHDR�HR�NMD�NE�the key judgemental areas that our audit is concentrated on due SN�SGD�KDUDK�NE�RTAIDBSHUHSX�HMGDQDMS�HM�DRSHL@SHMF�SGD�HLO@BS�NE�BK@HLR�DUDMSR�SG@S�G@UD�NBBTQQDC�ATS�ENQ�VGHBG�SGD�DUDMST@K�NTSBNLD�QDL@HMR�TMBDQS@HM �/@QSHBTK@Q�ITCFDLDMS�@QHRDR�NUDQ� SGD�DRSHL@SHNM�NE�SGD�U@KTD�NE�@LNTMSR�SG@S�RGNTKC�AD�OQNUHCDC�ENQ�BK@HLR�SG@S�G@UD�ADDM�HMBTQQDC�@S�SGD�QDONQSHMF�C@SD�ATS� G@UD�MNS�XDS�ADDM�QDONQSDC�SN�SGD�&QNTO �

We were assisted by our own actuarial specialists to understand @MC�BG@KKDMFD�SGD�&QNTO�R�QDRDQUHMF�OQ@BSHBDR�@MC�PT@MSTL� NE�OQNUHRHNMR�DRS@AKHRGDC�SGQNTFGNTS�NTQ�@TCHS�OQNBDCTQDR� in this area.

.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�DU@KT@SDC�SGD�FNUDQM@MBD�@QNTMC�SGD�NUDQ@KK�QDRDQUHMF�OQNBDRR�HMBKTCHMF�RBQTSHMX�@OOKHDC�AX�KNB@K��QDFHNM@K�@MC� &QNTO�QDRDQUHMF�BNLLHSSDDR�@MC�&QNTO�KDUDK�@BST@QH@K�QDUHDVR��@R�CDRBQHADC�NM�O@FD��SGQNTFG�DU@KT@SHMF�VGDSGDQ�SGNRD�QDRONMRHAKD�G@C�@OOQNOQH@SD�PT@KHãB@SHNMR�@MC�DWODQHDMBD��DW@LHMHMF�SGD�NTSOTS�SN�@RRDRR�SGD�RBNOD�@MC�CDOSG�NE�SGDRD�OQNBDRRDR�@MC�DEEDBSHUDKX�QDODQENQLHMF�SGHR�QDUHDV�ENQ�SGD� LNRS�RHFMHãB@MS�@MC�RTAIDBSHUD�HMRTQ@MBD�KH@AHKHSHDR�@MC�SGD� key assumptions applied.

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 �

(M�UHDV�NE�SGD�HRRTDR�HCDMSHãDC�HM�SGD�(QHRG�ATRHMDRR�HM�SGD�OQHNQ�year around the amount and timing of recognition of case QDRDQUDR��VD�BNMSHMTD�SN�ODQENQL�NTQ�NVM�HMCDODMCDMS�reprojections of the insurance liabilities in that business in order to conclude on the reasonableness of the estimates made by L@M@FDLDMS �(M�@CCHSHNM�SN�SGDRD�@QD@R�VD�HMBQD@RDC�SGD�DWSDMS�NE�NTQ�SDRSHMF�HM�"@M@C@�HM�NQCDQ�SN�DU@KT@SD�SGD�@OOQNOQH@SDMDRR�NE�SGD�BG@MFDR�L@CD�SN�SGD�QDRDQUHMF�@OOQN@BG�VHSGHM�SGHR�ATRHMDRR��VGHBG�VDQD�L@CD�HM�NQCDQ�SN�@KKNV�ENQ�@�LNQD�FQ@MTK@Q�@OOKHB@SHNM�NE�SGD�&QNTO�R�QDRDQUHMF�ONKHBX �

%TQSGDQLNQD��VD�@RRDRRDC�VGDSGDQ�SGD�&QNTO�R�CHRBKNRTQD�HM�QDK@SHNM�SN�HMRTQ@MBD�KH@AHKHSHDR��HMBKTCHMF�SGD�CHRBNTMS�Q@SD�@MC�GHRSNQHB�BK@HLR�CDUDKNOLDMS��VDQD�@OOQNOQH@SD �



110

Independent Auditor’s Report to the Members of RSA Insurance Group plc only continued

&NNCVHKK�@MC�NSGDQ�HMS@MFHAKD�@RRDSR�`��LHKKHNM1DEDQ�SN�O@FD��&QNTO� TCHS�"NLLHSSDD�1DONQS��O@FD��@BBNTMSHMF�ONKHBX��@MC�O@FDR��SN��ãM@MBH@K�CHRBKNRTQDR�


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.

Goodwill is tested for impairment annually and the most RHFMHãB@MS�ITCFDLDMSR�@QHRD�NUDQ�SGD�CHRBNTMS�Q@SD�@OOKHDC�HM�SGD�QDBNUDQ@AKD�@LNTMS�B@KBTK@SHNM�@MC�SGD�@RRTLOSHNMR�RTOONQSHMF�SGD�TMCDQKXHMF�ENQDB@RS�B@RGâNVR��HM�O@QSHBTK@Q�SGD�SDQLHM@K�FQNVSG�Q@SD��ENQDB@RS�FQNVSG�Q@SDR�HM�SGD�OQNIDBSHNM�ODQHNC�@MC�the combined operating ratio. Our focus has been on goodwill HM�ATRHMDRRDR�SG@S�@QD�LNRS�RDMRHSHUD�SN�SGD�@RRTLOSHNMR�TMCDQKXHMF�SGD�U@KT@SHNMR �6D�G@UD�@KRN�ENBTRDC�NTQ�OQNBDCTQDR�NM�SGD�A@RHR�ENQ�HLO@HQLDMSR�SG@S�G@UD�ADDM�QDBNFMHRDC� in respect of the Group’s businesses in Ireland and Russia.

(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 � �

!@RDC�NM�NTQ�TMCDQRS@MCHMF�NE�SGD�ATRHMDRR�@MC�HSR�NODQ@SHNMR��VD�G@UD�@RRDRRDC�VGDSGDQ�SGDQD�VDQD�@MX�HMCHB@SHNMR�SG@S�capitalised software intangible assets may be impaired. Where HLO@HQLDMS�HMCHB@SNQR�VDQD�HCDMSHãDC��ENQ�DW@LOKD�CTD�SN� KNVDQ�DWODBS@SHNMR�NE�SGD�ADMDãSR�SN�AD�QDBDHUDC�NQ�GHFGDQ�SG@M�DWODBSDC�RODMC�NM�(3�RXRSDLR��VD�BNLO@QDC�SGD�&QNTO�R�UHDV�NE�SGD�DWODBSDC�ETSTQD�ADMDãSR�SN�NTQ�NVM �(M�@RRDRRHMF�SGHR�� we compared the assumptions underlying the estimated future ADMDãSR�SN�NTQ�TMCDQRS@MCHMF�NE�SGD�ATRHMDRR�@MC�QDKDU@MS�DBNMNLHB�@MC�HMCTRSQX�E@BSNQR��HMBKTCHMF�SGD�HLO@BS�NE�QDUHRDC�operating plan assumptions.

6D�G@UD�@KRN�@RRDRRDC�SGD�@CDPT@BX�NE�SGD�&QNTO�R�CHRBKNRTQDR�HM�QDRODBS�NE�FNNCVHKK�@MC�NSGDQ�HMS@MFHAKD�@RRDSR��@MC�HM�O@QSHBTK@Q�SGD�CHRBKNRTQD�NE�RDMRHSHUHSX�SN�JDX�@RRTLOSHNMR� ENQ�SGNRD�ATRHMDRRDR�VHSG�L@QFHM@K�KDUDKR�NE�GD@CQNNL �

#DEDQQDC�S@W�@RRDSR�`��LHKKHNM1DEDQ�SN�O@FD��&QNTO� TCHS�"NLLHSSDD�1DONQS��O@FD��@BBNTMSHMF�ONKHBX��@MC�O@FDR��SN��ãM@MBH@K�CHRBKNRTQDR�


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 �

111

/DMRHNMR�@MC�ONRS�QDSHQDLDMS�NAKHF@SHNMR�MDS�ODMRHNM�CDãBHS�NE�`��LHKKHNM1DEDQ�SN�O@FD��&QNTO� TCHS�"NLLHSSDD�1DONQS��O@FD��@BBNTMSHMF�ONKHBX��@MC�O@FDR��SN��ãM@MBH@K�CHRBKNRTQDR�


2HFMHãB@MS�ITCFDLDMSR�@QD�L@CD�HM�U@KTHMF�SGD�&QNTO�R� ONRS�QDSHQDLDMS�CDãMDC�ADMDãS�RBGDLDR�@MC�RL@KK�BG@MFDR� HM�@RRTLOSHNMR�@MC�DRSHL@SDR�TRDC�SN�U@KTD�SGD�&QNTO�R�MDS�ODMRHNM�CDãBHS�VNTKC�G@UD�@�RHFMHãB@MS�DEEDBS�NM�SGD�ãM@MBH@K�position of the Group.

(M�SGHR�@QD@�NTQ�@TCHS�OQNBDCTQDR�HMBKTCDC��@LNMF�NSGDQR��challenging the key assumptions applied to determine the FQNTO�R�MDS�CDãBHS��ADHMF�SGD�CHRBNTMS�Q@SD��HMâ@SHNM�Q@SD�@MC�LNQS@KHSX�KHED�DWODBS@MBX �(M�SGHR��VD�VDQD�RTOONQSDC�AX�NTQ�own pension specialists. As part of our audit procedures we BNLO@QDC�JDX�@RRTLOSHNMR�@F@HMRS�DWSDQM@KKX�CDQHUDC�C@S@ � We also considered the adequacy of the group’s disclosures in QDRODBS�NE�SGD�RDMRHSHUHSX�NE�SGD�CDãBHSR�SN�SGDRD�@RRTLOSHNMR

IT systems and controls1DEDQ�SN�O@FD��&QNTO� TCHS�"NLLHSSDD�1DONQS�


,@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.

(M�SGHR�@QD@�NTQ�@TCHS�OQNBDCTQDR�HMBKTCDC��@LNMF�NSGDQR�� testing general IT controls around system access and change L@M@FDLDMS�@MC�SDRSHMF�BNMSQNKR�NUDQ�BNLOTSDQ�NODQ@SHNMR�VHSGHM�RODBHãB�@OOKHB@SHNMR�VGHBG�@QD�QDPTHQDC�SN�AD�NODQ@SHMF�BNQQDBSKX�SN�LHSHF@SD�SGD�QHRJ�NE�LHRRS@SDLDMS�HM�SGD�ãM@MBH@K�RS@SDLDMSR �6HSG�SGD�RTOONQS�NE�NTQ�NVM�(3�RODBH@KHRSR��VD�SDRSDC�SGDRD�BNMSQNKR�SGQNTFG�DW@LHMHMF�VGDSGDQ�BG@MFDR� L@CD�SN�SGD�RXRSDLR�VDQD�@OOQNOQH@SDKX�@OOQNUDC��@MC�assessing whether appropriate restrictions were placed on access to core systems through testing the permissions @MC�QDRONMRHAHKHSHDR�NE�SGNRD�FHUDM�SG@S�@BBDRR

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

6D�BNMSHMTD�SN�ODQENQL�@TCHS�OQNBDCTQDR�NUDQ�SGD�QHRJ�NE�L@M@FDLDMS�NUDQQHCD�NE�BNMSQNKR �'NVDUDQ��ENKKNVHMF�BG@MFDR� SN�SGD�L@M@FDLDMS�RSQTBSTQD�@MC�BNMSQNK�DMUHQNMLDMS��@ESDQ�SGD�HCDMSHãB@SHNM�HM�SGD�OQHNQ�XD@Q��NE�ãM@MBH@K�@MC�BK@HLR�HQQDFTK@QHSHDR�HM�SGD�&QNTO�R�(QHRG�ATRHMDRR��VD�G@UD�MNS�@RRDRRDC�SGHR�@R�NMD�NE�SGD�QHRJR�SG@S�G@C�SGD�FQD@SDRS�DEEDBS�NM�NTQ�@TCHS�@MC��SGDQDENQD��HS�HR�MNS�RDO@Q@SDKX�HCDMSHãDC�HM�NTQ�QDONQS�SGHR�XD@Q



��

� �.TQ�@OOKHB@SHNM�NE�L@SDQH@KHSX�@MC�@M�NUDQUHDV�NE�SGD�RBNOD�NE�NTQ�@TCHS3GD�L@SDQH@KHSX�ENQ�SGD�&QNTO�ãM@MBH@K�RS@SDLDMSR�@R�@�VGNKD�V@R�RDS�@S�`��L��CDSDQLHMDC�VHSG�QDEDQDMBD�SN�@�ADMBGL@QJ� NE�MDS�VQHSSDM�OQDLHTLR��NE�VGHBG�HS�QDOQDRDMSR�� í� �6D�BNMRHCDQDC�MDS�VQHSSDM�OQDLHTL�SN�AD�SGD�LNRS�@OOQNOQH@SD�ADMBGL@QJ�ADB@TRD�HS�HR�@�JDX�ãM@MBH@K�RS@SDLDMS�LDSQHB�TRDC�HM�@RRDRRHMF�SGD�ODQENQL@MBD�NE�SGD�&QNTO��ATS�HR�MNS�@R� UNK@SHKD�@R�OQNãS�@MC�KNRR�LD@RTQDR

6D�@FQDDC�VHSG�SGD� TCHS�"NLLHSSDD�SN�QDONQS�SN�HS�@MX�BNQQDBSDC�NQ�TMBNQQDBSDC�LHRRS@SDLDMSR�DWBDDCHMF�`�L��HM�@CCHSHNM� SN�NSGDQ�HCDMSHãDC�LHRRS@SDLDMSR�SG@S�V@QQ@MSDC�QDONQSHMF�NM�PT@KHS@SHUD�FQNTMCR

Group net written premium Materiality

£40m Materialtiy for the &QNTO�ãM@MBH@K�RS@SDLDMSR�

`��L�1@MFD�NE�L@SDQH@KHSX@OOKHDC�SN�BNLONMDMS�@TCHSR��`��L�

`�L�3GQDRGNKC�,HRRS@SDLDMSR�reported to the Audit Committee

£7,000m

3GD�&QNTO�G@R�HMRTQ@MBD�NODQ@SHNMR�HM��BNTMSQHDR�SG@S�ENQ�@TCHS�OTQONRDR�BNLOQHRD��BNLONMDMSR �3GD�.ODQ@SHMF�2DFLDMS�CHRBKNRTQDR�HM�MNSD��RDS�NTS�SGD�HMCHUHCT@K�RHFMHãB@MBD�NE�SGD�L@INQ�FDNFQ@OGHB@K�QDFHNMR �

TCHSR�ENQ�FQNTO�QDONQSHMF�OTQONRDR�VDQD�ODQENQLDC�AX�BNLONMDMS�@TCHSNQR�@S�RDUDM�QDONQSHMF�BNLONMDMSR�ADHMF��2B@MCHM@UH@��"@M@C@��4*��(QDK@MC��(S@KX��!Q@YHK�@MC�"GHKD �

(M�@CCHSHNM��RODBHãDC�QHRJ�ENBTRDC�@TCHS�OQNBDCTQDR�VDQD�ODQENQLDC�AX�BNLONMDMS�@TCHSNQR�HM�DHFGS�ETQSGDQ�BNLONMDMSR � 3GD�BNLONMDMSR�ENQ�VGHBG�VD�ODQENQLDC�RODBHãDC�QHRJ�ENBTRDC�@TCHS�OQNBDCTQDR�VDQD�MNS�HMCHUHCT@KKX�RHFMHãB@MS�DMNTFG� SN�QDPTHQD�@M�@TCHS�ENQ�FQNTO�QDONQSHMF�OTQONRDR��ATS�CHC�OQDRDMS�RODBHãB�HMCHUHCT@K�QHRJR�SG@S�MDDCDC�SN�AD�@CCQDRRDC

%NQ�SGD�QDL@HMHMF�BNLONMDMSR��SGDQD�HR�MN�FQNTO�QDONQSHMF�QDPTHQDC�EQNL�SGD�KNB@K�RS@STSNQX�@TCHS�SD@L �6D�ODQENQLDC�@M@KXRHR�@S�@M�@FFQDF@SDC�FQNTO�KDUDK�SN�QD�DW@LHMD�NTQ�@RRDRRLDMS�SG@S�SGDQD�VDQD�MN�RHFMHãB@MS�QHRJR�NE�L@SDQH@K�misstatement within these.

The different components accounted for the following percentages of the group’s results:

GROUP NET WRITTEN PREMIUM

A 88% B

7%

C 5%

TOTAL GROUP ASSETS

A 66%

B 24%

C 12%

GROUP INSURANCE LIABILITIES

A 94%

C 2% B 4%

TOTAL GROUP PROFIT/(LOSS) BEFORE TAX

A 71% C 9%

B 20%

Audit for group reporting 2ODBHäDC�@TCHS�OQNBDCTQDR� � M@KXRHR�@S�FQNTO�KDUDK


��

3GD�&QNTO�@TCHS�SD@L�HMRSQTBSDC�BNLONMDMS�@TCHSNQR�@R�SN�SGD�RHFMHãB@MS�@QD@R�SN�AD�BNUDQDC��HMBKTCHMF�SGD�QDKDU@MS�QHRJR�CDS@HKDC�@ANUD�@MC�SGD�HMENQL@SHNM�SN�AD�QDONQSDC�A@BJ �3GD�&QNTO�@TCHS�SD@L�@OOQNUDC�SGD�BNLONMDMS�L@SDQH@KHSHDR�� VGHBG�Q@MFDC�EQNL�`��L�SN�`��L��G@UHMF�QDF@QC�SN�SGD�LHW�NE�RHYD�@MC�QHRJ�OQNãKD�NE�SGD�&QNTO�@BQNRR�SGD�BNLONMDMSR �

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�TMLNCHëDCIn our opinion:

• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies BS��@MC

• SGD�HMENQL@SHNM�FHUDM�HM�SGD�2SQ@SDFHB�1DONQS�@MC�#HQDBSNQR��1DONQS�ENQ�SGD�ãM@MBH@K�XD@Q�ENQ�VGHBG�SGD�ãM@MBH@K�RS@SDLDMSR�@QD�OQDO@QDC�HR�BNMRHRSDMS�VHSG�SGD�ãM@MBH@K�RS@SDLDMSR

� �6D�G@UD�MNSGHMF�SN�QDONQS�HM�QDRODBS�NE�SGD�L@SSDQR�NM�VGHBG�VD�@QD�QDPTHQDC�SN�QDONQS�AX�DWBDOSHNM4MCDQ�(2 R��4*�@MC�(QDK@MC��VD�@QD�QDPTHQDC�SN�QDONQS�SN�XNT�HE��A@RDC�NM�SGD�JMNVKDCFD�VD�@BPTHQDC�CTQHMF�NTQ�@TCHS�� VD�G@UD�HCDMSHãDC�NSGDQ�HMENQL@SHNM�HM�SGD�@MMT@K�QDONQS�SG@S�BNMS@HMR�@�L@SDQH@K�HMBNMRHRSDMBX�VHSG�DHSGDQ�SG@S�JMNVKDCFD� NQ�SGD�ãM@MBH@K�RS@SDLDMSR��@�L@SDQH@K�LHRRS@SDLDMS�NE�E@BS��NQ�SG@S�HR�NSGDQVHRD�LHRKD@CHMF

(M�O@QSHBTK@Q��VD�@QD�QDPTHQDC�SN�QDONQS�SN�XNT�HE��

• VD�G@UD�HCDMSHãDC�L@SDQH@K�HMBNMRHRSDMBHDR�ADSVDDM�SGD�JMNVKDCFD�VD�@BPTHQDC�CTQHMF�NTQ�@TCHS�@MC�SGD�CHQDBSNQR��RS@SDLDMS�SG@S�SGDX�BNMRHCDQ�SG@S�SGD�@MMT@K�QDONQS�@MC�ãM@MBH@K�RS@SDLDMSR�S@JDM�@R�@�VGNKD�HR�E@HQ��A@K@MBDC�@MC�TMCDQRS@MC@AKD�@MC�OQNUHCDR�SGD�HMENQL@SHNM�MDBDRR@QX�ENQ�RG@QDGNKCDQR�SN�@RRDRR�SGD�FQNTO�R�ODQENQL@MBD��ATRHMDRR�model and strategy; or

• the Group Audit Committee Report does not appropriately address matters communicated by us to the audit committee.

4MCDQ�SGD�"NLO@MHDR� BS��VD�@QD�QDPTHQDC�SN�QDONQS�SN�XNT�HE��HM�NTQ�NOHMHNM�

• @CDPT@SD�@BBNTMSHMF�QDBNQCR�G@UD�MNS�ADDM�JDOS�AX�SGD�O@QDMS�BNLO@MX��NQ�QDSTQMR�@CDPT@SD�ENQ�NTQ�@TCHS�G@UD�MNS�ADDM�QDBDHUDC�EQNL�AQ@MBGDR�MNS�UHRHSDC�AX�TR��NQ�

• 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

• BDQS@HM�CHRBKNRTQDR�NE�CHQDBSNQR��QDLTMDQ@SHNM�RODBHãDC�AX�K@V�@QD�MNS�L@CD��NQ�

• VD�G@UD�MNS�QDBDHUDC�@KK�SGD�HMENQL@SHNM�@MC�DWOK@M@SHNMR�VD�QDPTHQD�ENQ�NTQ�@TCHS �

4MCDQ�SGD�+HRSHMF�1TKDR�VD�@QD�QDPTHQDC�SN�QDUHDV��

• SGD�CHQDBSNQR��RS@SDLDMS��RDS�NTS�NM�O@FD��HM�QDK@SHNM�SN�FNHMF�BNMBDQM��@MC

• SGD�O@QS�NE�SGD�"NQONQ@SD�&NUDQM@MBD�2S@SDLDMS�NM�O@FDR��SN��QDK@SHMF�SN�SGD�BNLO@MX�R�BNLOKH@MBD�VHSG�SGD�SDM�OQNUHRHNMR�NE�SGD�4*�"NQONQ@SD�&NUDQM@MBD�"NCD��RODBHãDC�ENQ�NTQ�QDUHDV �

6D�G@UD�MNSGHMF�SN�QDONQS�HM�QDRODBS�NE�SGD�@ANUD�QDRONMRHAHKHSHDR �



��

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 CRISPSenior Statutory AuditorENQ�@MC�NM�ADG@KE�NE�*/,&�++/��2S@STSNQX� TCHSNQ�Chartered Accountants London��%DAQT@QX��


��

Consolidated income statementENQ�SGD�XD@Q�DMCDC��#DBDLADQ��

Notes�� `L

Restated1

��`L

(MBNLDGross 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 ��

"G@MFD�HM�OQNUHRHNM�ENQ�TMD@QMDC�OQDLHTLR �� Net earned premiums �� -DS�HMUDRSLDMS�QDSTQM � 521 ��Other operating income � 188 ��3NS@K�HMBNLD �� $WODMRDR

Gross claims incurred �� +DRR��BK@HLR�QDBNUDQHDR�EQNL�QDHMRTQDQR ��

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 ��

�� -NM�BNMSQNKKHMF�HMSDQDRSR�EQNL�BNMSHMTHMF�NODQ@SHNMR 7 �-NM�BNMSQNKKHMF�HMSDQDRSR�EQNL�CHRBNMSHMTDC�NODQ@SHNMR – –

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$@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

� �O �� O

#HKTSDC%QNL�BNMSHMTHMF�NODQ@SHNMR 7 (14.4)p �� O%QNL�CHRBNMSHMTDC�NODQ@SHNMR 7 �� O �� O

� �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�

Notes:� � %NQ�HMENQL@SHNM�@ANTS�SGD�QDRS@SDLDMS�@OOKHDC�SN�SGDRD�ãM@MBH@K�RS@SDLDMSR��OKD@RD�RDD�SGD�1DRS@SDLDMS�RDBSHNM�NE�SGD�2HFMHãB@MS� BBNTMSHMF�/NKHBHDR�MNSD��O@FD��

3GD�@SS@BGDC�MNSDR�ENQL�@M�HMSDFQ@K�O@QS�NE�SGDRD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR



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"NMRNKHC@SDC�RS@SDLDMS�NE�BNLOQDGDMRHUD�HMBNLDENQ�SGD�XD@Q�DMCDC��#DBDLADQ��

Notes�� `L

Restated1

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+NRR�ENQ�SGD�XD@Q�EQNL�BNMSHMTHMF�NODQ@SHNMR (122) ��

/QNëS��KNRR��ENQ�SGD�XD@Q�EQNL�CHRBNMSHMTDC�NODQ@SHNMR �@ ��

/QNëS��KNRR��ENQ�SGD�XD@Q ��

(SDLR�EQNL�BNMSHMTHMF�NODQ@SHNMR�SG@S�L@X�AD�QDBK@RRHëDC�SN�SGD�HMBNLD�RS@SDLDMS�

$WBG@MFD�KNRRDR�MDS�NE�S@W �� (147) ��

2G@QD�NE�@RRNBH@SDR��NSGDQ�BNLOQDGDMRHUD�DWODMRD �� – ��

%@HQ�U@KTD�F@HMR��KNRRDR��NM�@U@HK@AKD�ENQ�R@KD�ãM@MBH@K�@RRDSR�MDS�NE�S@W �� 247 ��

��

(SDLR�EQNL�BNMSHMTHMF�NODQ@SHNMR�SG@S�VHKK�MNS�AD�QDBK@RRHëDC�SN�SGD�HMBNLD�RS@SDLDMS�

/DMRHNM��QDLD@RTQDLDMS�NE�MDS�CDãMDC�ADMDãS�KH@AHKHSX�MDS�NE�S@W �� (7) ��

,NUDLDMS�HM�OQNODQSX�QDU@KT@SHNM�RTQOKTR�MDS�NE�S@W �� 4 �

(3) 18

.SGDQ�BNLOQDGDMRHUD�HMBNLD��DWODMRD��ENQ�SGD�XD@Q�EQNL�BNMSHMTHMF�NODQ@SHNMR ��

.SGDQ�BNLOQDGDMRHUD�HMBNLD��DWODMRD��ENQ�SGD�XD@Q�EQNL�CHRBNMSHMTDC�NODQ@SHNMR �@ 12 ��

3NS@K�NSGDQ�BNLOQDGDMRHUD�HMBNLD��DWODMRD��ENQ�SGD�XD@Q ��

3NS@K�BNLOQDGDMRHUD�DWODMRD�ENQ�SGD�XD@Q�EQNL�BNMSHMTHMF�NODQ@SHNMR (25) ��

3NS@K�BNLOQDGDMRHUD�HMBNLD�ENQ�SGD�XD@Q�EQNL�CHRBNMSHMTDC�NODQ@SHNMR ��

3NS@K�BNLOQDGDMRHUD�HMBNLD��DWODMRD��ENQ�SGD�XD@Q 185 ��

Attributable to:

Equity holders of the Parent Company 178 ��

-NM�BNMSQNKKHMF�HMSDQDRSR 7 �

185 ��


117

Consolidated statement of changes in equityENQ�SGD�XD@Q�DMCDC��#DBDLADQ��

Ordinary share

capital`L

Ordinary share

premium `L

Own shares

`L

Preference shares

`L

1D�U@KT@SHNM�QDRDQUDR

`L

Capital redemption

QDRDQUD`L

%NQDHFM�currency

translation QDRDQUD

`L

Retained earnings

`L

2G@QD��holders’

equity`L

-NM�controlling

interests`L

Total equity

`L

Balance at ��)@MT@QX�� 717 �� 8 ��

3NS@K�BNLOQDGDMRHUD�HMBNLD�+NRR��OQNãS� for the year – – – – – – – �� Other BNLOQDGDMRHUD�HMBNLD��MNSD�� – – – – �� – ��

– – – – �� – ��

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�� – – – – – – � � – ��

�� – – – – – ��

"G@MFDR�HM�RG@QDGNKCDQR¼�HMSDQDRSR�HM�RTARHCH@QHDR – – – – – – – �� 1 ��3NS@K�SQ@MR@BSHNMR�VHSG�NVMDQR�NE� SGD�"NLO@MX �� – – – – – �� !@K@MBD�@S� ��)@MT@QX�� (1) 125 �� 8 �� 121 ��

3NS@K�BNLOQDGDMRHUD�HMBNLD/QNãS�ENQ�SGD�XD@Q – – – – – – – �� 7 ��Other BNLOQDGDMRHUD�HMBNLD��MNSD�� – – – – �� – (112) (8) �� – ��

– – – – �� – (112) �� 178 7 185

3Q@MR@BSHNMR�VHSG�NVMDQR�NE�SGD�"NLO@MX"NMSQHATSHNM�@MC�CHRSQHATSHNM#HUHCDMCR��MNSD�� – – – – – – – �� (15)Shares issued for B@RG��MNSD�� 382 371 – – – – – – 753 – 753 Share based O@XLDMSR��MNSD�� 2 – – – – – – 8 �� – ��.SGDQ�QDRDQUD�SQ@MREDQ��MNSD�� (381) – – – – 381 – – – – –

3 371 – – – 381 – (1) 754 �� 748 "G@MFDR�HM�RG@QDGNKCDQR¼�HMSDQDRSR�HM�RTARHCH@QHDR – – – – – – – – – (14) (14)3NS@K�SQ@MR@BSHNMR�VHSG�NVMDQR�NE� SGD�"NLO@MX 3 371 – – – 381 – (1) 754 �� 734 !@K@MBD�@S��#DBDLADQ�� (1) 125 527 �� 741 3,825 ��




118

"NMRNKHC@SDC�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM@R�@S��#DBDLADQ��

Notes�� `L

�� `L

RRDSR

Goodwill and other intangible assets � ��

Property and equipment 10 151 ��

(MUDRSLDMS�OQNODQSX 11 ��

(MUDRSLDMSR�HM�@RRNBH@SDR �� 31 ��

%HM@MBH@K�@RRDSR ��

3NS@K�HMUDRSLDMSR 13,217 ��

Reinsurers’ share of insurance contract liabilities ��

Insurance and reinsurance debtors �� 3,174 ��

#DEDQQDC�S@W�@RRDSR ��

"TQQDMS�S@W�@RRDSR �� 21 ��

Other debtors and other assets 17 �� 787

Other assets ��

"@RG�@MC�B@RG�DPTHU@KDMSR 18 ��

��

Assets held for sale and disposal groups �A ��

3NS@K�@RRDSR ��

$PTHSX�@MC�KH@AHKHSHDR

$PTHSX

Shareholders’ equity 3,825 ��

-NM�BNMSQNKKHMF�HMSDQDRSR ��

3NS@K�DPTHSX ��

+H@AHKHSHDR

Loan capital �� 1,243 ��

Insurance contract liabilities ��

Insurance and reinsurance liabilities ��

Borrowings ��

#DEDQQDC�S@W�KH@AHKHSHDR ��

"TQQDMS�S@W�KH@AHKHSHDR �� 83 ��

/QNUHRHNMR �� 338 ��

Other liabilities ��

/QNUHRHNMR�@MC�NSGDQ�KH@AHKHSHDR ��

17,355 ��

Liabilities of disposal groups �A �� –

3NS@K�KH@AHKHSHDR ��

3NS@K�DPTHSX�@MC�KH@AHKHSHDR ��


3GD�ãM@MBH@K�RS@SDLDMSR�VDQD�@OOQNUDC�NM��%DAQT@QX��AX�SGD�!N@QC�NE�#HQDBSNQR�@MC�@QD�RHFMDC�NM�HSR�ADG@KE�AX�

RICHARD HOUGHTON"GHDE�%HM@MBH@K�.EãBDQ

��

"NMRNKHC@SDC�RS@SDLDMS�NE�B@RGâNVRENQ�SGD�XD@Q�DMCDC��#DBDLADQ��

Notes�� `L

Restated1

��`L

"@RGêNVR�EQNL�BNMSHMTHMF�NODQ@SHNMR �� 33 ��3@W�O@HC (82) ��#HUHCDMC�HMBNLD 23 ��Interest income 374 ��.SGDQ�HMUDRSLDMS�HMBNLD �� Interest paid �� /DMRHNM�CDãBHS�ETMCHMF �� -DS�B@RGêNVR�EQNL�NODQ@SHMF�@BSHUHSHDR�¹�BNMSHMTHMF�NODQ@SHNMR �� -DS�B@RGêNVR�EQNL�NODQ@SHMF�@BSHUHSHDR�¹�CHRBNMSHMTDC�NODQ@SHNMR 43 ��3NS@K�MDS�B@RGêNVR�EQNL�NODQ@SHMF�@BSHUHSHDR 233 ��Proceeds from sales or maturities of:%HM@MBH@K�@RRDSR �� (MUDRSLDMS�OQNODQSX 3 ��Property and equipment 32 �(MUDRSLDMSR�HM�RTARHCH@QHDR��MDS�NE�B@RG�CHRONRDC�NE� 373 �

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 – ��

-DS�B@RGêNVR�TRDC�HM�HMUDRSHMF�@BSHUHSHDR�¹�BNMSHMTHMF�NODQ@SHNMR (1,143) ��-DS�B@RGêNVR�EQNL�HMUDRSHMF�@BSHUHSHDR�¹�CHRBNMSHMTDC�NODQ@SHNMR 272 ��3NS@K�MDS�B@RGêNVR�EQNL�HMUDRSHMF�@BSHUHSHDR (871) ��Proceeds from issue of share capital �� 753 72@KD�NE�RG@QDR�SN�-NM�BNMSQNKKHMF�HMSDQDRSR – �/TQBG@RD�NE�RG@QDR�EQNL�-NM�BNMSQNKKHMF�HMSDQDRSR – ��#HUHCDMCR�O@HC�SN�NQCHM@QX�RG@QDGNKCDQR – ��#HUHCDMCR�O@HC�SN�OQDEDQDMBD�RG@QDGNKCDQR �� #HUHCDMCR�O@HC�SN�-NM�BNMSQNKKHMF�HMSDQDRSR �� Redemption of long term borrowings �� –Receipt of long term borrowings �� –-DS�LNUDLDMS�HM�NSGDQ�ANQQNVHMFR (2) �-DS�B@RGêNVR�EQNL�ëM@MBHMF�@BSHUHSHDR�¹�BNMSHMTHMF�NODQ@SHNMR �� -DS�B@RGêNVR�EQNL�ëM@MBHMF�@BSHUHSHDR�¹�CHRBNMSHMTDC�NODQ@SHNMR – –3NS@K�MDS�B@RGêNVR�EQNL�ëM@MBHMF�@BSHUHSHDR �� -DS�HMBQD@RD��CDBQD@RD��HM�B@RG�@MC�B@RG�DPTHU@KDMSR 34 ��"@RG�@MC�B@RG�DPTHU@KDMSR�@S�ADFHMMHMF�NE�SGD�XD@Q �� $EEDBS�NE�DWBG@MFD�Q@SD�BG@MFDR�NM�B@RG�@MC�B@RG�DPTHU@KDMSR �� "@RG�@MC�B@RG�DPTHU@KDMSR�@S�DMC�NE�SGD�XD@Q 18 1,135 ��





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SELECTION OF ACCOUNTING POLICIES, CRITICAL JUDGEMENTS AND USE OF ESTIMATES3GD�&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 �

3GD�OQDO@Q@SHNM�NE�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR�QDPTHQDR�SGD�&QNTO�SN�DWDQBHRD�ITCFDLDMSR�HM�SGD�TRD�NE�DRSHL@SDR�@MC�@RRTLOSHNMR�HM�@�MTLADQ�NE�JDX�@QD@R �3GD�LNRS�RHFMHãB@MS�NE�SGDRD�@QD�@R�ENKKNVR�

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1DBNFMHSHNM�@MC�U@KT@SHNM�NE�CDEDQQDC�S@W�@RRDSR3GD�&QNTO�L@JDR�ITCFDLDMSR�HM�HSR�@RRDRRLDMSR�NM�SGD�KHJDKHGNNC�NE�HSR�@AHKHSX�SN�TSHKHRD�CDEDQQDC�S@W�@RRDSR�HM�SGD�ETSTQD�VGDM�U@KTHMF�CDEDQQDC�S@W�@RRDSR �3GHR�QDPTHQDR�SGD�TRD�NE�LNCDKR�NE�SGD�ETSTQD�OQNãS@AHKHSX�NE�HMCHUHCT@K�ATRHMDRRDR�@MC�@RRTLOSHNMR�NM�GNV�SGDRD�ATRHMDRRDR�VHKK�ODQENQL �3GD�LDSGNCNKNFX�DLOKNXDC�HR�CDRBQHADC�HM�MNSD��SN�SGD�BNMRNKHC@SDC�ãM@MBH@K�statements.

1DSHQDLDMS�ADMDëS�NAKHF@SHNMR3GD�&QNTO�DWDQBHRDR�ITCFDLDMS�HM�L@JHMF�@RRTLOSHNMR�VGDM�U@KTHMF�ODMRHNM�@MC�NSGDQ�ONRS�QDSHQDLDMS�ADMDãSR�@BBQTDC� by its current and former employees. These assumptions include the estimation of the future mortality of its current and ENQLDQ�DLOKNXDDR��SGD�U@KTD�NE�SGD�ETSTQD�ADMDãSR�SG@S�G@UD�ADDM�@BBQTDC��@MC�SGD�@OOQNOQH@SD�CHRBNTMS�Q@SD�TRDC�SN�U@KTD� SGD�NAKHF@SHNMR �3GDRD�@RRTLOSHNMR�@MC�SGD�RDMRHSHUHSX�NE�SGDRD�@RRTLOSHNMR�@QD�CHRBKNRDC�HM�MNSD��SN�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR �

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CONSOLIDATION

2TARHCH@QHDR2TARHCH@QHDR�@QD�DMSHSHDR�NUDQ�VGHBG�SGD�&QNTO�G@R�BNMSQNK �3GD�&QNTO�BNMSQNKR�RTARHCH@QX�HE�SGD�&QNTO�G@R�@KK�NE�SGD�ENKKNVHMF��SGD�ONVDQ�NUDQ�SGD�RTARHCH@QX��DWONRTQD��NQ�QHFGSR��SN�U@QH@AKD�QDSTQMR�EQNL�HSR�HMUNKUDLDMS�VHSG�SGD�RTARHCH@QX��@MC�SGD�@AHKHSX�SN�TRD�HSR�ONVDQ�NUDQ�SGD�RTARHCH@QX�SN�@EEDBS�HSR�QDSTQMR

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.

3GD�BNRS�NE�@M�@BPTHRHSHNM�HR�LD@RTQDC�@R�SGD�E@HQ�U@KTD�NE�SGD�@RRDSR�FHUDM��DPTHSX�HMRSQTLDMSR�HRRTDC�@MC�KH@AHKHSHDR�HMBTQQDC� NQ�@RRTLDC�@S�SGD�C@SD�NE�DWBG@MFD



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2HFMHãB@MS�@BBNTMSHMF�ONKHBHDR�continued

%NQ�ATRHMDRR�BNLAHM@SHNMR�BNLOKDSDC�NM�NQ�@ESDQ��)@MT@QX��SGD�BNRS�NE�@BPTHRHSHNM�HMBKTCDR�SGD�E@HQ�U@KTD�NE�CDEDQQDC� @MC�BNMSHMFDMS�BNMRHCDQ@SHNM�@S�SGD�@BPTHRHSHNM�C@SD�@MC�RTARDPTDMS�BG@MFDR�HM�SGD�B@QQXHMF�U@KTD�NE�SGD�BNMRHCDQ@SHNM� @QD�QDBNFMHRDC�HM�SGD�BNMRNKHC@SDC�HMBNLD�RS@SDLDMS �%NQ�ATRHMDRR�BNLAHM@SHNMR�BNLOKDSDC�OQHNQ�SN��#DBDLADQ�� SGD�BNRS�@KRN�HMBKTCDR�BNRSR�CHQDBSKX�@SSQHATS@AKD�SN�SGD�@BPTHRHSHNM�@MC�SGD�U@KTD�NE�BNMSHMFDMS�BNMRHCDQ@SHNM�NM�RDSSKDLDMS

(CDMSHã@AKD�@RRDSR�@BPTHQDC�@MC�KH@AHKHSHDR�@MC�BNMSHMFDMS�KH@AHKHSHDR�@RRTLDC�HM�@�ATRHMDRR�BNLAHM@SHNM�@QD�LD@RTQDC�HMHSH@KKX� @S�SGDHQ�E@HQ�U@KTDR�@S�SGD�@BPTHRHSHNM�C@SD��HQQDRODBSHUD�NE�SGD�DWSDMS�NE�@MX�MNM�BNMSQNKKHMF�HMSDQDRS �3GD�DWBDRR�NE�SGD�BNRS�NE�@BPTHRHSHNM�NUDQ�SGD�E@HQ�U@KTD�NE�SGD�&QNTO�R�RG@QD�NE�SGD�HCDMSHã@AKD�MDS�@RRDSR�@BPTHQDC�HR�QDBNFMHRDC�@R�FNNCVHKK �(E�SGD�BNRS�NE�@BPTHRHSHNM�HR�KDRR�SG@M�SGD�E@HQ�U@KTD�NE�SGD�MDS�@RRDSR�NE�SGD�RTARHCH@QX�@BPTHQDC��SGD�CHEEDQDMBD�HR�QDBNFMHRDC�CHQDBSKX�HM�SGD�consolidated income statement.

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.

RRNBH@SDR RRNBH@SDR�@QD�DMSHSHDR�NUDQ�VGHBG�SGD�&QNTO�G@R�RHFMHãB@MS�HMâTDMBD�ATS�MNS�BNMSQNK��FDMDQ@KKX�@BBNLO@MXHMF�@�RG@QDGNKCHMF�NE�ADSVDDM��í�@MC��í�NE�SGD�UNSHMF�QHFGSR �(MUDRSLDMSR�HM�@RRNBH@SDR�@QD�@BBNTMSDC�ENQ�AX�SGD�DPTHSX�LDSGNC�NE�@BBNTMSHMF�and are initially recognised at cost.

3GD�&QNTO�R�RG@QDR�NE�HSR�@RRNBH@SDR��OQNãSR�NQ�KNRRDR�@QD�QDBNFMHRDC�HM�SGD�BNMRNKHC@SDC�HMBNLD�RS@SDLDMS�@MC�HSR�RG@QD� NE�BNLOQDGDMRHUD�HMBNLD�HR�QDBNFMHRDC�HM�SGD�BNMRNKHC@SDC�RS@SDLDMS�NE�BNLOQDGDMRHUD�HMBNLD �3GD�BTLTK@SHUD� ONRS�@BPTHRHSHNM�LNUDLDMSR�@QD�@CITRSDC�HM�SGD�B@QQXHMF�@LNTMS�NE�SGD�HMUDRSLDMS �6GDM�SGD�&QNTO�R�RG@QD�NE�KNRRDR� HM�@M�@RRNBH@SD�DPT@KR�NQ�DWBDDCR�HSR�HMSDQDRS�HM�SGD�@RRNBH@SD��HMBKTCHMF�@MX�TMRDBTQDC�QDBDHU@AKDR��SGD�&QNTO�CNDR� MNS�QDBNFMHRD�ETQSGDQ�KNRRDR��TMKDRR�HS�G@R�HMBTQQDC�NAKHF@SHNMR�NQ�L@CD�O@XLDMSR�NM�ADG@KE�NE�SGD�@RRNBH@SD

CITRSLDMSR�@QD�L@CD��VGDQD�MDBDRR@QX��SN�SGD�@BBNTMSHMF�ONKHBHDR�NE�@RRNBH@SDR�SN�DMRTQD�BNMRHRSDMBX�VHSG�SGD�ONKHBHDR�adopted by the Group.

TRANSLATION OF FOREIGN CURRENCIES(SDLR�HMBKTCDC�HM�SGD�ãM@MBH@K�RS@SDLDMSR�NE�D@BG�NE�SGD�&QNTO�R�DMSHSHDR�@QD�LD@RTQDC�TRHMF�SGD�BTQQDMBX�NE�SGD�OQHL@QX�DBNMNLHB�DMUHQNMLDMS�HM�VGHBG�SGD�DMSHSX�NODQ@SDR��SGD�ETMBSHNM@K�BTQQDMBX�

3GD�QDRTKSR�@MC�ãM@MBH@K�ONRHSHNM�NE�SGNRD�&QNTO�DMSHSHDR�VGNRD�ETMBSHNM@K�BTQQDMBX�HR�MNS�2SDQKHMF�@QD�SQ@MRK@SDC�HMSN�2SDQKHMF�as follows:

• RRDSR�@MC�KH@AHKHSHDR�ENQ�D@BG�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM�OQDRDMSDC�@QD�SQ@MRK@SDC�@S�BKNRHMF�DWBG@MFD�Q@SDR�@S�SGD�DMC� of the period

• (MBNLD�@MC�DWODMRDR�ENQ�D@BG�HMBNLD�RS@SDLDMS�@QD�SQ@MRK@SDC�@S�@UDQ@FD�DWBG@MFD�Q@SDR�CTQHMF�D@BG�ODQHNC

• KK�QDRTKSHMF�DWBG@MFD�CHEEDQDMBDR�@QD�QDBNFMHRDC�@R�@�BNLONMDMS�NE�DPTHSX

.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.

&NNCVHKK�@QHRHMF�NM�SGD�@BPTHRHSHNM�NE�@�ENQDHFM�DMSHSX�HR�SQD@SDC�@R�@M�@RRDS�NE�SGD�ENQDHFM�DMSHSX�@MC�SGD�B@QQXHMF�U@KTD� HR�SQ@MRK@SDC�@S�SGD�BKNRHMF�DWBG@MFD�Q@SD

��

%NQDHFM�BTQQDMBX�SQ@MR@BSHNMR�@QD�SQ@MRK@SDC�HMSN�SGD�ETMBSHNM@K�BTQQDMBX�TRHMF�SGD�DWBG@MFD�Q@SDR�OQDU@HKHMF�@S�SGD�C@SDR� NE�SGD�SQ@MR@BSHNMR �%NQDHFM�DWBG@MFD�F@HMR�@MC�KNRRDR�QDRTKSHMF�EQNL�SGD�RDSSKDLDMS�NE�RTBG�SQ@MR@BSHNMR�@MC�EQNL�SGD�SQ@MRK@SHNM�@S�XD@Q�DMC�DWBG@MFD�Q@SDR�NE�LNMDS@QX�@RRDSR�@MC�KH@AHKHSHDR�CDMNLHM@SDC�HM�ENQDHFM�BTQQDMBHDR�@QD�QDBNFMHRDC� in the consolidated income statement.

INTANGIBLE ASSETS

&NNCVHKK&NNCVHKK��ADHMF�SGD�CHEEDQDMBD�ADSVDDM�SGD�BNRS�NE�@�ATRHMDRR�@BPTHRHSHNM�@MC�SGD�&QNTO�R�HMSDQDRS�HM�SGD�MDS�E@HQ�U@KTD�NE�SGD�HCDMSHã@AKD�@RRDSR��KH@AHKHSHDR�@MC�BNMSHMFDMS�KH@AHKHSHDR�@BPTHQDC��HR�HMHSH@KKX�B@OHS@KHRDC�HM�SGD�BNMRNKHC@SDC�RS@SDLDMS�NE�ãM@MBH@K�position at cost and is subsequently recognised at cost less accumulated impairment losses. The cost of the acquisition is the @LNTMS�NE�B@RG�O@HC�@MC�SGD�E@HQ�U@KTD�NE�NSGDQ�OTQBG@RD�BNMRHCDQ@SHNM

%NQ�ATRHMDRR�BNLAHM@SHNMR�BNLOKDSDC�OQHNQ�SN��#DBDLADQ��SGD�BNRS�@KRN�HMBKTCDR�BNRSR�CHQDBSKX�@SSQHATS@AKD�SN�SGD�@BPTHRHSHNM�@MC�SGD�U@KTD�NE�BNMSHMFDMS�BNMRHCDQ@SHNM�NM�RDSSKDLDMS

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

.SGDQ�HMS@MFHAKD�@RRDSR

.SGDQ�HMS@MFHAKD�@RRDSR�BNLOQHRD�QDMDV@K�QHFGSR��BTRSNLDQ�KHRSR��AQ@MCR�@MC�NSGDQ�@BPTHQDC�HCDMSHã@AKD�MNM�LNMDS@QX�@RRDSR�without physical form.

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

$WODMCHSTQD�SG@S�DMG@MBDR�SGD�ETSTQD�DBNMNLHB�ADMDãSR�@QHRHMF�EQNL�BNLOTSDQ�RNESV@QD�HR�QDBNFMHRDC�@R�@M�HMS@MFHAKD�@RRDS

Computer software and other intangible assets are carried at cost less accumulated amortisation and less any accumulated impairment losses. Amortisation on computer software and other intangible assets is calculated using the straight line method SN�@KKNB@SD�SGD�BNRS�NUDQ�SGDHQ�DRSHL@SDC�TRDETK�KHUDR��VGHBG�HR�MNQL@KKX�DRSHL@SDC�SN�AD�ADSVDDM��@MC��XD@QR

M�HLO@HQLDMS�QDUHDV�HR�B@QQHDC�NTS�VGDMDUDQ�SGDQD�HR�@M�HMCHB@SHNM�SG@S�@M�HMS@MFHAKD�@RRDS�HR�HLO@HQDC �6GDQD�SGD�B@QQXHMF�@LNTMS�HR�LNQD�SG@M�SGD�QDBNUDQ@AKD�@LNTMS��@M�HLO@HQLDMS�BG@QFD�HR�QDBNFMHRDC�HM�SGD�BNMRNKHC@SDC�HMBNLD�RS@SDLDMS

(LO@HQLDMS�KNRRDR�OQDUHNTRKX�QDBNFMHRDC�NM�HMS@MFHAKD�@RRDSR�L@X�AD�QDUDQRDC�HM�RTARDPTDMS�ODQHNCR�OQNUHCDC�SG@S�SGD�QDUHRDC�B@QQXHMF�@LNTMS�CNDR�MNS�DWBDDC�SGD�U@KTD�SG@S�VNTKC�G@UD�ADDM�CDSDQLHMDC��MDS�NE�@LNQSHR@SHNM�NQ�CDOQDBH@SHNM��G@C�MN�impairment loss been recognised.

PROPERTY AND EQUIPMENT/QNODQSX�@MC�DPTHOLDMS�BNLOQHRD�&QNTO�NBBTOHDC�K@MC�@MC�ATHKCHMFR��ãWSTQDR��ãSSHMFR�@MC�DPTHOLDMS��HMBKTCHMF�BNLOTSDQ�G@QCV@QD�@MC�LNSNQ�UDGHBKDR� �3GDRD�@RRDSR�@QD�CDOQDBH@SDC�NUDQ�SGDHQ�DRSHL@SDC�TRDETK�KHED�@ESDQ�S@JHMF�HMSN�@BBNTMS� QDRHCT@K�U@KTDR

&QNTO�NBBTOHDC�OQNODQSX�HR�RS@SDC�@S�E@HQ�U@KTD��KDRR�RTARDPTDMS�CDOQDBH@SHNM�ENQ�ATHKCHMFR �

KK�NSGDQ�BK@RRDR�@QD�RS@SDC�@S�BNRS�KDRR�@BBTLTK@SDC�CDOQDBH@SHNM�@MC�@BBTLTK@SDC�HLO@HQLDMS�KNRR �"NRS�HMBKTCDR�DWODMCHSTQD�that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset only when it is probable SG@S�ETSTQD�DBNMNLHB�ADMDãSR�@RRNBH@SDC�SN�SGD�HSDL�VHKK�âNV�SN�SGD�&QNTO�@MC�SGD�BNRS�B@M�AD�LD@RTQDC�QDKH@AKX



��

Land is not depreciated. Depreciation on all other items is calculated on the straight line method to write down the cost of such @RRDSR�SN�SGDHQ�QDRHCT@K�U@KTD�NUDQ�SGDHQ�DRSHL@SDC�TRDETK�KHUDR�@R�ENKKNVR�

&QNTO�NBBTOHDC�ATHKCHMFR� MNQL@KKX��XD@QR%HWSTQDR�@MC�ãSSHMFR� ��XD@QR,NSNQ�UDGHBKDR� � ��XD@QR$PTHOLDMS� � ��XD@QR

3GD�@RRDS�R�QDRHCT@K�U@KTDR�@MC�TRDETK�KHUDR�@QD�QDUHDVDC�@MC�@CITRSDC�HE�@OOQNOQH@SD

M�HLO@HQLDMS�QDUHDV�HR�B@QQHDC�NTS�VGDMDUDQ�SGDQD�HR�@M�HMCHB@SHNM�SG@S�SGD�@RRDSR�@QD�HLO@HQDC � M�@RRDS�R�B@QQXHMF�@LNTMS� HR�VQHSSDM�CNVM�SN�HSR�QDBNUDQ@AKD�@LNTMS�HE�SGD�@RRDS�R�B@QQXHMF�@LNTMS�HR�FQD@SDQ�SG@M�HSR�DRSHL@SDC�QDBNUDQ@AKD�@LNTMS

(MBQD@RDR�HM�SGD�B@QQXHMF�@LNTMS�@QHRHMF�NM�SGD�QDU@KT@SHNM�NE�&QNTO�NBBTOHDC�OQNODQSX�@QD�BQDCHSDC�SN�QDU@KT@SHNM�QDRDQUDR�HM�NSGDQ�BNLOQDGDMRHUD�HMBNLD �#DBQD@RDR�SG@S�NEERDS�SGD�OQDUHNTR�HMBQD@RDR�NE�SGD�R@LD�@RRDS�@QD�BG@QFDC�@F@HMRS�QDU@KT@SHNM�RTQOKTR�CHQDBSKX�HM�NSGDQ�BNLOQDGDMRHUD�HMBNLD��NSGDQ�CDBQD@RDR�@QD�BG@QFDC�SN�SGD�BNMRNKHC@SDC�HMBNLD�RS@SDLDMS �$@BG�XD@Q�SGD�CHEEDQDMBD�ADSVDDM�CDOQDBH@SHNM�A@RDC�NM�SGD�E@HQ�U@KTD�NE�SGD�@RRDS�BG@QFDC�SN�SGD�BNMRNKHC@SDC�HMBNLD�RS@SDLDMS�@MC�CDOQDBH@SHNM�A@RDC�NM�SGD�@RRDS�R�NQHFHM@K�BNRS�HR�SQ@MREDQQDC�EQNL�QDU@KT@SHNM�QDRDQUD�SN�QDS@HMDC�D@QMHMFR

INVESTMENT PROPERTY(MUDRSLDMS�OQNODQSX��BNLOQHRHMF�EQDDGNKC�@MC�KD@RDGNKC�K@MC�@MC�ATHKCHMFR��HR�GDKC�ENQ�KNMF�SDQL�QDMS@K�XHDKCR�@MC�HR�MNS�occupied by the Group.

(MUDRSLDMS�OQNODQSX�HR�QDBNQCDC�@S�E@HQ�U@KTD��LD@RTQDC�AX�HMCDODMCDMS�OQNEDRRHNM@KKX�PT@KHãDC�U@KTDQR�VGN�GNKC�@�QDBNFMHRDC�@MC�QDKDU@MS�OQNEDRRHNM@K�PT@KHãB@SHNM�@MC�G@UD�QDBDMS�DWODQHDMBD�HM�SGD�KNB@SHNM�@MC�B@SDFNQX�NE�SGD�HMUDRSLDMS�OQNODQSX�ADHMF�U@KTDC �5@KT@SHNMR�@QD�B@QQHDC�NTS�NM�@M�@MMT@K�A@RHR�NQ�LNQD�EQDPTDMSKX �%NQ�HMSDQHL�ODQHNCR�HMSDQM@K�U@KT@SHNMR�@QD� L@CD�AX�QDEDQDMBD�SN�BTQQDMS�L@QJDS�BNMCHSHNMR �4MQD@KHRDC�F@HMR�@MC�TMQD@KHRDC�KNRRDR�NQ�BG@MFDR�@QD�QDBNFMHRDC�HM�MDS�HMUDRSLDMS�QDSTQM

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.

.M�HMHSH@K�QDBNFMHSHNM��SGD�ãM@MBH@K�@RRDSR�L@X�AD�B@SDFNQHRDC�HMSN�SGD�ENKKNVHMF�B@SDFNQHDR��ãM@MBH@K�@RRDSR�@S�E@HQ�U@KTD�SGQNTFG�SGD�HMBNLD�RS@SDLDMS��KN@MR�@MC�QDBDHU@AKDR��GDKC�SN�L@STQHSX�ãM@MBH@K�@RRDSR�@MC�@U@HK@AKD�ENQ�R@KD�ãM@MBH@K�@RRDSR �3GD�BK@RRHãB@SHNM�CDODMCR�NM�SGD�OTQONRD�ENQ�VGHBG�SGD�HMUDRSLDMSR�VDQD�@BPTHQDC �,@M@FDLDMS�CDSDQLHMDR�SGD�BK@RRHãB@SHNM�NE�HSR�HMUDRSLDMSR�@S�HMHSH@K�QDBNFMHSHNM

3GD�&QNTO�CDRHFM@SDR�HMUDRSLDMSR�HM�DPTHSX�@MC�CDAS�RDBTQHSHDR�HM�@BBNQC@MBD�VHSG�HSR�HMUDRSLDMS�RSQ@SDFX�NM�SGD�A@RHR�NM�VGHBG�SGD�HMUDRSLDMS�QDSTQM�HR�L@M@FDC�@MC�SGD�ODQENQL@MBD�HR�DU@KT@SDC�HMSDQM@KKX �6GDQD�SGD�HMUDRSLDMS�QDSTQM�HR�L@M@FDC�NM�SGD�A@RHR�NE�SGD�ODQHNCHB�B@RGâNVR�@QHRHMF�EQNL�SGD�HMUDRSLDMS��@�ãM@MBH@K�@RRDS�HR�CDRHFM@SDC�@R�@M�@U@HK@AKD�ENQ�R@KD�ãM@MBH@K�@RRDS �6GDQD�SGD�HMUDRSLDMS�QDSTQM�HR�L@M@FDC�NM�SGD�A@RHR�NE�SGD�SNS@K�QDSTQM�NM�SGD�HMUDRSLDMS��HMBKTCHMF�TMQD@KHRDC�HMUDRSLDMS�F@HMR��SGD�ãM@MBH@K�@RRDS�HR�CDRHFM@SDC�@R�@S�E@HQ�U@KTD�SGQNTFG�SGD�BNMRNKHC@SDC�HMBNLD�RS@SDLDMS �.SGDQ�HMUDRSLDMSR�BNLOQHRHMF�KN@MR��QDHMRTQ@MBD�CDONRHSR�@MC�NSGDQ�CDONRHSR�@QD�BK@RRHãDC�@R�KN@MR�@MC�QDBDHU@AKDR

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INSURANCE CONTRACTS

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1DBNFMHSHNM�NE�HMBNLDPremiums written are accounted for in the period in which the contract is entered into and include estimates where the @LNTMSR�@QD�MNS�CDSDQLHMDC�@S�SGD�DMC�NE�SGD�QDONQSHMF�ODQHNC �/QDLHTLR�VQHSSDM�DWBKTCD�S@WDR �#TSHDR�KDUHDC�NM�OQDLHTLR�@MC�CHQDBSKX�QDK@SDC�DWODMRDR��D F �BNLLHRRHNMR�@QD�QDBNFMHRDC�@R�@M�DWODMRD �/QDLHTLR�@QD�D@QMDC�@R�QDUDMTD�NUDQ�SGD�period of the contract and are calculated principally on a daily pro rata basis.


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3GD�OQNUHRHNMR�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR��@MC�QDK@SDC�QDHMRTQ@MBD�QDBNUDQHDR��@QD�CHRBNTMSDC�VGDQD�SGDQD�HR� @�O@QSHBTK@QKX�KNMF�ODQHNC�EQNL�HMBHCDMS�SN�BK@HLR�RDSSKDLDMS�NQ�VGDM�MNLHM@K�HMSDQDRS�Q@SDR�@QD�GHFG�@MC�VGDQD�SGDQD�DWHRSR� @�RTHS@AKD�BK@HLR�O@XLDMS�O@SSDQM�EQNL�VGHBG�SN�B@KBTK@SD�SGD�CHRBNTMS �(M�CDãMHMF�SGNRD�BK@HLR�VHSG�@�KNMF�ODQHNC�EQNL�HMBHCDMS�SN�BK@HLR�RDSSKDLDMS��SGNRD�B@SDFNQHDR�NE�BK@HLR�VGDQD�SGD�@UDQ@FD�ODQHNC�NE�RDSSKDLDMS�HR�RHW�XD@QR�NQ�LNQD�G@R� ADDM�TRDC�@R�@�FTHCD �3GD�CHRBNTMS�Q@SD�TRDC�HR�A@RDC�TONM�@M�HMUDRSLDMS�QDSTQM�DWODBSDC�SN�AD�D@QMDC�AX�@RRDSR��VGHBG� @QD�@OOQNOQH@SD�HM�L@FMHSTCD�@MC�M@STQD�SN�BNUDQ�SGD�OQNUHRHNMR�ENQ�KNRRDR�@MC�KNRR�@CITRSLDMS�DWODMRDR�ADHMF�CHRBNTMSDC��VGHBG�HM�OQ@BSHBD�@QD�ANMCR�@MC�OQNODQSX��CTQHMF�SGD�ODQHNC�MDBDRR@QX�ENQ�SGD�O@XLDMS�NE�RTBG�BK@HLR

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

S�SGD�DMC�NE�D@BG�QDONQSHMF�ODQHNC�KH@AHKHSX�@CDPT@BX�SDRSR�@QD�ODQENQLDC�SN�DMRTQD�SGD�@CDPT@BX�NE�SGD�OQNUHRHNM�ENQ�TMD@QMDC�OQDLHTL�MDS�NE�QDK@SDC�# "�@RRDSR �(M�ODQENQLHMF�SGDRD�SDRSR�ADRS�DRSHL@SDR�NE�ETSTQD�BNMSQ@BST@K�B@RGâNVR�� BK@HLR�G@MCKHMF�@MC�@CLHMHRSQ@SHUD�DWODMRDR�@R�VDKK�@R�HMUDRSLDMS�HMBNLD�NM�@RRDSR�A@BJHMF�RTBG�KH@AHKHSHDR�@QD�TRDC � MX�CDãBHDMBX�HR�BG@QFDC�SN�SGD�HMBNLD�RS@SDLDMS�HLLDCH@SDKX�AX�DRS@AKHRGHMF�@�OQNUHRHNM�ENQ�KH@AHKHSX�@CDPT@BX��SGD�TMDWOHQDC�QHRJ�OQNUHRHNM� �3GD�TMDWOHQDC�QHRJ�OQNUHRHNM�HR�@RRDRRDC�HM�@FFQDF@SD�ENQ�ATRHMDRR�BK@RRDR�VGHBG��HM�SGD�NOHMHNM�NE�SGD�#HQDBSNQR��are managed together.

1DHMRTQ@MBD�BDCDCPremiums payable in respect of reinsurance ceded are recognised in the period in which the reinsurance contract is entered HMSN�@MC�HMBKTCD�DRSHL@SDR�VGDQD�SGD�@LNTMSR�@QD�MNS�CDSDQLHMDC�@S�SGD�DMC�NE�SGD�QDONQSHMF�ODQHNC �/QDLHTLR�@QD�DWODMRDC�NUDQ�SGD�ODQHNC�NE�SGD�QDHMRTQ@MBD�BNMSQ@BS��B@KBTK@SDC�OQHMBHO@KKX�NM�@�C@HKX�OQN�Q@S@�A@RHR

�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.

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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.



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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.

CASH AND CASH EQUIVALENTS"@RG�@MC�B@RG�DPTHU@KDMSR�@QD�RGNQS�SDQL��GHFGKX�KHPTHC�HMUDRSLDMSR�SG@S�@QD�RTAIDBS�SN�HMRHFMHãB@MS�BG@MFDR�HM�U@KTD�@MC�@QD�QD@CHKX�BNMUDQSHAKD�HMSN�JMNVM�@LNTMSR�NE�B@RG �"@RG�DPTHU@KDMSR�OQHMBHO@KKX�BNLOQHRD�ãM@MBH@K�@RRDSR�VHSG�KDRR�SG@M�SGQDD�months’ maturity from the date of acquisition.

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• Administration costs of operating the pension schemes.

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OPERATING SEGMENTS.ODQ@SHMF�RDFLDMSR�VDQD�OQDUHNTRKX�CHRBKNRDC�NM�SGD�A@RHR�NE�SGD�QDFHNM@K�RSQTBSTQD�NE�SGD�&QNTO�VGHBG�ENQLDC�SGD�A@RHR� NM�VGHBG�L@M@FDLDMS�QDONQSR�VDQD�OQDRDMSDC�ENQ�QDUHDV�AX�SGD�!N@QC�NE�#HQDBSNQR��CDSDQLHMDC�SN�AD�SGD�BGHDE�NODQ@SHMF�decision maker.

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ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS RRDSR�@QD�BK@RRHãDC�@R�GDKC�ENQ�R@KD�HE�SGDHQ�B@QQXHMF�@LNTMS�HR�SN�AD�QDBNUDQDC�OQHMBHO@KKX�SGQNTFG�@�R@KD�SQ@MR@BSHNM��VGHBG�GHFGKX�OQNA@AKD�@MC�VHKK�AD�BNLOKDSDC�VHSGHM�NMD�XD@Q�EQNL�SGD�C@SD�NE�BK@RRHãB@SHNM��Q@SGDQ�SG@M�SGQNTFG�BNMSHMTHMF�TRD �6GDQD�SGD�@RRDS�BNLOQHRDR�@�RDO@Q@SD�ATRHMDRR�NODQ@SHNM��D F �@�RTARHCH@QX��@M�@RRNBH@SD�NQ�@�AQ@MBG��SGD�@RRDSR��HMBKTCHMF�@MX�FNNCVHKK�@KKNB@SDC�SN�SGD�ATRHMDRR��@MC�SGD�KH@AHKHSHDR�NE�SGD�ATRHMDRR�@QD�BNMRHCDQDC�SNFDSGDQ�@MC�BK@RRHãDC�@R�@�CHRONR@K�FQNTO�2TBG�@RRDSR�@QD�LD@RTQDC�@S�SGD�KNVDQ�NE�B@QQXHMF�@LNTMS�@MC�E@HQ�U@KTD�KDRR�BNRSR�SN�RDKK�@MC�@QD�BK@RRHãDC�RDO@Q@SDKX�EQNL�NSGDQ�@RRDSR�HM�SGD�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM � RRDSR�@MC�KH@AHKHSHDR�NE�@�CHRONR@K�FQNTO�@QD�MNS�MDSSDC �(M�SGD�ODQHNC�VGDQD�@�MNM�BTQQDMS�@RRDS�NQ�CHRONR@K�FQNTO�HR�QDBNFMHRDC�ENQ�SGD�ãQRS�SHLD��SGD�BNMRNKHC@SDC�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM�ENQ�SGD�BNLO@Q@SHUD�OQHNQ�ODQHNC�OQDRDMSDC�HR�MNS�QDRS@SDC

#HRBNMSHMTDC�NODQ@SHNMR�@QD�NODQ@SHNMR�SG@S�G@UD�ADDM�RNKC�CTQHMF�SGD�QDONQSHMF�ODQHNC�NQ�BK@RRHãDC�@R�@�CHRONR@K�FQNTO� and that represents a separate geographical area of operations.

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.

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INTRODUCTION.MD�NE�SGD�OTQONRDR�NE�HMRTQ@MBD�HR�SN�DM@AKD�ONKHBXGNKCDQR�SN�OQNSDBS�SGDLRDKUDR�@F@HMRS�TMBDQS@HM�ETSTQD�DUDMSR � (MRTQ@MBD�BNLO@MHDR�@BBDOS�SGD�SQ@MREDQ�NE�TMBDQS@HMSX�EQNL�ONKHBXGNKCDQR�@MC�RDDJ�SN�@CC�U@KTD�SGQNTFG�SGD�@FFQDF@SHNM� and management of these risks.

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• 4MBDQS@HMSX�NUDQ�SGD�SHLHMF�NE�@�RDSSKDLDMS�SN�@�ONKHBXGNKCDQ�ENQ�@�KNRR�RTEEDQDC

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.

3GDQD�L@X�AD�RHFMHãB@MS�QDONQSHMF�K@FR�ADSVDDM�SGD�NBBTQQDMBD�NE�SGD�HMRTQDC�DUDMS�@MC�SGD�SHLD�HS�HR�@BST@KKX�QDONQSDC�SN�SGD�&QNTO �%NKKNVHMF�SGD�HCDMSHãB@SHNM�@MC�MNSHãB@SHNM�NE�@M�HMRTQDC�KNRR��SGDQD�L@X�RSHKK�AD�TMBDQS@HMSX�@R�SN�SGD�L@FMHSTCD�@MC�SHLHMF�NE�SGD�RDSSKDLDMS�NE�SGD�BK@HL �3GDQD�@QD�L@MX�E@BSNQR�SG@S�VHKK�CDSDQLHMD�SGD�KDUDK�NE�TMBDQS@HMSX�RTBG�@R�HMâ@SHNM��HMBNMRHRSDMS�ITCHBH@K�HMSDQOQDS@SHNMR�@MC�BNTQS�ITCFDLDMSR�SG@S�AQN@CDM�ONKHBX�BNUDQ@FD�ADXNMC�SGD�HMSDMS�NE�SGD�NQHFHM@K�HMRTQ@MBD��KDFHRK@SHUD�BG@MFDR�@MC�BK@HLR�G@MCKHMF�OQNBDCTQDR

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.

3GD�ENKKNVHMF�RDBSHNM�HCDMSHãDR�RODBHãB�QHRJR�QDK@SHMF�SN�@RADRSNR�@MC�DMUHQNMLDMS@K�BK@HLR �3GDQD�L@X�AD�NSGDQ�BK@RRDR�NE�QHRJ�VGHBG�BNTKC�CDUDKNO�HM�SGD�ETSTQD�@MC�SG@S�BNTKC�G@UD�@�L@SDQH@K�HLO@BS�NM�SGD�&QNTO�R�ãM@MBH@K�ONRHSHNM

3GD�&QNTO�DU@KT@SDR�SGD�BNMBDMSQ@SHNM�NE�DWONRTQDR�SN�HMCHUHCT@K�@MC�BTLTK@SHUD�HMRTQ@MBD�QHRJ�@MC�DRS@AKHRGDR�HSR�QDHMRTQ@MBD�ONKHBX�SN�L@M@FD�RTBG�DWONRTQD�SN�KDUDKR�@BBDOS@AKD�SN�SGD�&QNTO



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$RSHL@SHNM�SDBGMHPTDR��QHRJR��TMBDQS@HMSHDR�@MC�BNMSHMFDMBHDR�continued

ASBESTOS AND ENVIRONMENTAL CLAIMS3GD�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

%@BSNQR�BNMSQHATSHMF�SN�SGHR�GHFGDQ�CDFQDD�NE�TMBDQS@HMSX�HMBKTCD�

• 3GD�KNMF�CDK@X�HM�QDONQSHMF�BK@HLR�EQNL�SGD�C@SD�NE�DWONRTQD��ENQ�DW@LOKD��B@RDR�NE�LDRNSGDKHNL@�B@M�G@UD�@�K@SDMS�ODQHNC� NE�TO�SN��XD@QR� �3GHR�L@JDR�DRSHL@SHMF�SGD�TKSHL@SD�MTLADQ�NE�BK@HLR�SGD�&QNTO�VHKK�QDBDHUD�O@QSHBTK@QKX�CHEãBTKS

• Issues of allocation of responsibility among potentially responsible parties and insurers

• $LDQFHMF�BNTQS�CDBHRHNMR�@MC�SGD�ONRRHAHKHSX�NE�QDSQNRODBSHUD�KDFHRK@SHUD�BG@MFDR�HMBQD@RHMF�NQ�CDBQD@RHMF�HMRTQDQ�KH@AHKHSX

• 3GD�SDMCDMBX�ENQ�RNBH@K�SQDMCR�@MC�E@BSNQR�SN�HMâTDMBD�BNTQS�@V@QCR

• #DUDKNOLDMSR�ODQS@HMHMF�SN�SGD�&QNTO�R�@AHKHSX�SN�QDBNUDQ�QDHMRTQ@MBD�ENQ�BK@HLR�NE�SGHR�M@STQD

• %NQ�42�KH@AHKHSHDR�EQNL�SGD�&QNTO�R�+NMCNM�L@QJDS�ATRHMDRR��CDUDKNOLDMSR�HM�SGD�S@BSHBR�NE�42�OK@HMSHEE�K@VXDQR�@MC�BNTQS�decisions and awards.

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.

ACQUISITIONS AND DISPOSALSThe Group makes acquisitions and disposals of businesses as part of its normal operations. All acquisitions are made after CTD�CHKHFDMBD��VGHBG�VHKK�HMBKTCD��@LNMFRS�NSGDQ�L@SSDQR��@RRDRRLDMS�NE�SGD�@CDPT@BX�NE�BK@HLR�QDRDQUDR��@RRDRRLDMS�NE� SGD�QDBNUDQ@AHKHSX�NE�QDHMRTQ@MBD�A@K@MBDR��HMPTHQHDR�VHSG�QDF@QC�SN�NTSRS@MCHMF�KHSHF@SHNM�@MC�HMPTHQHDR�NE�KNB@K�QDFTK@SNQR� @MC�S@W@SHNM�@TSGNQHSHDR �"NMRHCDQ@SHNM�HR�@KRN�FHUDM�SN�ONSDMSH@K�BNRSR��QHRJR�@MC�HRRTDR�HM�QDK@SHNM�SN�SGD�HMSDFQ@SHNM�NE�@MX�OQNONRDC�@BPTHRHSHNMR�VHSG�DWHRSHMF�&QNTO�NODQ@SHNMR �3GD�&QNTO�VHKK�RDDJ�SN�QDBDHUD�SGD�ADMDãS�NE�@OOQNOQH@SD�BNMSQ@BST@K�QDOQDRDMS@SHNMR�@MC�V@QQ@MSHDR�HM�BNMMDBSHNM�VHSG�@MX�@BPTHRHSHNM�@MC��VGDQD�MDBDRR@QX��@CCHSHNM@K�HMCDLMHãB@SHNMR�HM�QDK@SHNM�SN�RODBHãB�QHRJR�@KSGNTFG�SGDQD�B@M�AD�MN�FT@Q@MSDD�SG@S�SGDRD�OQNBDRRDR�@MC�@MX�RTBG�OQNSDBSHNM�VHKK�AD�@CDPT@SD� HM�@KK�BHQBTLRS@MBDR �3GD�&QNTO�L@X�@KRN�OQNUHCD�QDKDU@MS�QDOQDRDMS@SHNMR��V@QQ@MSHDR�@MC�HMCDLMHSHDR�SN�BNTMSDQO@QSHDR� NM�@MX�CHRONR@K �%TQSGDQ�CDS@HKR�NE�SGD�CHRONR@KR�HM�SGD�XD@Q�@QD�FHUDM�HM�MNSD��

3GDRD�BK@TRDR�@QD�BTRSNL@QX�HM�RTBG�BNMSQ@BSR�@MC�L@X�EQNL�SHLD�SN�SHLD�KD@C�SN�SGD�&QNTO�QDBDHUHMF�BK@HLR�EQNL�counterparties.

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CONTRACTS WITH THIRD PARTIESThe 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 INVESTIGATIONS3GD�&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

REINSURANCE3GD�&QNTO�HR�DWONRDC�SN�CHROTSDR�NM��@MC�CDEDBSR�HM��BNMSQ@BSR�VHSG�HSR�QDHMRTQDQR�@MC�SGD�ONRRHAHKHSX�NE�CDE@TKS�AX�HSR�QDHMRTQDQR �3GD�&QNTO�HR�@KRN�DWONRDC�SN�SGD�BQDCHS�QHRJ�@RRTLDC�HM�EQNMSHMF�@QQ@MFDLDMSR�@MC�SN�ONSDMSH@K�QDHMRTQ@MBD�B@O@BHSX�constraints. In selecting the reinsurers with whom the Group conducts business its strategy is to seek reinsurers with the @OOQNOQH@SD�BNLAHM@SHNM�NE�ãM@MBH@K�RSQDMFSG��OQHBD�@MC�B@O@BHSX �3GD�&QNTO�"NQONQ@SD�"DMSQD�OTAKHRGDR�HMSDQM@KKX�@�KHRS� of authorised reinsurers who pass the Group’s selection process and which its operations may use for new transactions.

3GD�&QNTO�LNMHSNQR�SGD�ãM@MBH@K�RSQDMFSG�NE�HSR�QDHMRTQDQR��HMBKTCHMF�SGNRD�SN�VGNL�QHRJR�@QD�MN�KNMFDQ�BDCDC � KKNV@MBD� HR�L@CD�HM�SGD�ãM@MBH@K�ONRHSHNM�ENQ�MNM�QDBNUDQ@AHKHSX�CTD�SN�QDHMRTQDQ�CDE@TKS�AX�QDPTHQHMF�NODQ@SHNMR�SN�OQNUHCD��HM�KHMD�VHSG�&QNTO�RS@MC@QCR��G@UHMF�QDF@QC�SN�BNLO@MHDR�NM�SGD�&QNTO�R��6@SBG�+HRS� �3GD��6@SBG�+HRS��HR�SGD�KHRS�NE�BNLO@MHDR�VGHBG�SGD�CHQDBSNQR�ADKHDUD�L@X�MNS�AD�@AKD�SN�O@X�@LNTMSR�CTD�SN�SGD�&QNTO�HM�ETKK

INVESTMENT RISK3GD�&QNTO�HR�DWONRDC�SN�L@QJDS�QHRJ�@MC�BQDCHS�QHRJ�NM�HSR�HMUDRSDC�@RRDSR �,@QJDS�QHRJ�HMBKTCDR�SGD�QHRJ�NE�ONSDMSH@K�KNRRDR�EQNL�@CUDQRD�LNUDLDMSR�HM�L@QJDS�Q@SDR�@MC�OQHBDR�HMBKTCHMF�HMSDQDRS�Q@SDR��DPTHSX�OQHBDR��OQNODQSX�OQHBDR�@MC�ENQDHFM�DWBG@MFD�Q@SDR �3GD�&QNTO�R�DWONRTQD�SN�L@QJDS�QHRJR�HR�BNMSQNKKDC�AX�SGD�RDSSHMF�NE�HMUDRSLDMS�KHLHSR�HM�KHMD�VHSG�SGD�&QNTO�R�QHRJ�@OODSHSD �%QNL�SHLD�SN�SHLD�SGD�&QNTO�@KRN�L@JDR�TRD�NE�CDQHU@SHUD�ãM@MBH@K�HMRSQTLDMSR�SN�QDCTBD�DWONRTQD�SN�@CUDQRD�âTBST@SHNMR�HM�ENQDHFM�DWBG@MFD�Q@SDR�@MC�DPTHSX�L@QJDSR �3GD�&QNTO�G@R�RSQHBS�BNMSQNKR�NUDQ�SGD�TRD�NE�CDQHU@SHUD�HMRSQTLDMSR

"QDCHS�QHRJ�HMBKTCDR�SGD�MNM�ODQENQL@MBD�NE�BNMSQ@BST@K�O@XLDMS�NAKHF@SHNMR�NM�HMUDRSDC�@RRDSR�@MC�@CUDQRD�BG@MFDR�HM� SGD�BQDCHSVNQSGHMDRR�NE�HMUDRSDC�@RRDSR�HMBKTCHMF�DWONRTQDR�SN�HRRTDQR�NQ�BNTMSDQO@QSHDR�ENQ�ANMCR��DPTHSHDR��CDONRHSR�@MC�CDQHU@SHUDR �+HLHSR�@QD�RDS�@S�ANSG�@�ONQSENKHN�@MC�BNTMSDQO@QSX�KDUDK�A@RDC�NM�KHJDKHGNNC�NE�CDE@TKS�SN�L@M@FD�SGD�&QNTO�R�NUDQ@KK�BQDCHS�OQNãKD�@MC�RODBHãB�BNMBDMSQ@SHNMR�VHSGHM�QHRJ�@OODSHSD �3GD�&QNTO�R�HMRTQ@MBD�HMUDRSLDMS�ONQSENKHNR�@QD�BNMBDMSQ@SDC�HM�KHRSDC�RDBTQHSHDR�VHSG�UDQX�KNV�KDUDKR�NE�DWONRTQD�SN�@RRDSR�VHSGNTS�PTNSDC�L@QJDS�OQHBDR �3GD�&QNTO�TRDR�LNCDK�A@RDC�@M@KXRHR�SN�UDQHEX�@RRDS�U@KTDR�VGDM�L@QJDS�U@KTDR�@QD�MNS�QD@CHKX�@U@HK@AKD

RATING ENVIRONMENTThe 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

(M�@RRDRRHMF�BQDCHS�QHRJ�HM�QDK@SHNM�SN�QDHMRTQ@MBD�@MC�HMUDRSLDMSR��SGD�&QNTO�S@JDR�HMSN�@BBNTMS�@�U@QHDSX�NE�E@BSNQR��HMBKTCHMF�BQDCHS�Q@SHMF �(E�@MX�RTBG�Q@SHMF�BG@MFDR��NQ�HR�NSGDQVHRD�QD@RRDRRDC��SGHR�G@R�ONSDMSH@K�HLOKHB@SHNMR�ENQ�SGD�QDK@SDC�DWONRTQDR



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FOREIGN EXCHANGE RISK3GD�&QNTO�OTAKHRGDR�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR�HM�/NTMCR�2SDQKHMF �3GDQDENQD��âTBST@SHNMR�HM�DWBG@MFD�Q@SDR�TRDC� SN�SQ@MRK@SD�NSGDQ�BTQQDMBHDR��O@QSHBTK@QKX�SGD�#@MHRG�*QNMD�@MC�2VDCHRG�*QNM@��SGD�$TQN�@MC�SGD�"@M@CH@M�#NKK@Q��HMSN�/NTMCR�2SDQKHMF�VHKK�HLO@BS�SGD�QDONQSDC�BNMRNKHC@SDC�ãM@MBH@K�ONRHSHNM��QDRTKSR�NE�NODQ@SHNMR�@MC�B@RGâNVR�EQNL�ODQHNC�SN�ODQHNC �3GDRD�âTBST@SHNMR�HM�DWBG@MFD�Q@SDR�VHKK�@KRN�HLO@BS�SGD�/NTMC�2SDQKHMF�U@KTD�NE��@MC�SGD�QDSTQM�NM��SGD�&QNTO�R�HMUDRSLDMSR

REGULATORY ENVIRONMENT3GD�KDF@K��QDFTK@SNQX�@MC�@BBNTMSHMF�DMUHQNMLDMS�HR�RTAIDBS�SN�RHFMHãB@MS�BG@MFD�HM�L@MX�NE�SGD�ITQHRCHBSHNMR�HM�VGHBG�SGD�&QNTO�NODQ@SDR��HMBKTCHMF�CDUDKNOLDMSR�HM�QDRONMRD�SN�BG@MFDR�HM�SGD�DBNMNLHB�@MC�ONKHSHB@K�DMUHQNMLDMS �3GD�&QNTO�BNMSHMTDR�SN�LNMHSNQ�SGD�CDUDKNOLDMSR�@MC�QD@BS�@BBNQCHMFKX

2NKUDMBX�((��SGD�MDV�RNKUDMBX�EQ@LDVNQJ�ADHMF�HMSQNCTBDC�AX�SGD�$4�VHSG�DEEDBS�EQNL��)@MT@QX��HR�HMSDMCDC�SN�@BGHDUD�FQD@SDQ�G@QLNMHR@SHNM�NE�@OOQN@BG�@BQNRR�$4�LDLADQ�RS@SDR�SN�@RRDRRHMF�B@OHS@K�QDRNTQBDR�@MC�QDPTHQDLDMSR � KSGNTFG� SGDQD�RSHKK�QDL@HMR�RNLD�TMBDQS@HMSX�@R�SN�SGD�ãM@K�QTKDR��SGD�&QNTO�HR�@BSHUDKX�OQNFQDRRHMF�HSR�HLOKDLDMS@SHNM�OK@MR�@MC� SGD�#HQDBSNQR�@QD�BNMãCDMS�SGD�&QNTO�VHKK�BNMSHMTD�SN�LDDS�QDFTK@SNQX�B@OHS@K�QDPTHQDLDMSR

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��

$RSHL@SHNM�SDBGMHPTDR��QHRJR��TMBDQS@HMSHDR�@MC�BNMSHMFDMBHDR�continued

��

Risk management

R�@M�HMRTQ@MBD�BNLO@MX��SGD�&QNTO�HR�HM�SGD�ATRHMDRR�NE�@BSHUDKX�RDDJHMF�QHRJ�VHSG�@�UHDV�SN�@CCHMF�U@KTD�AX�L@M@FHMF�HS � This section summarises the key risks to the Group and the steps taken to manage them.

R�RDS�NTS�HM�SGD�BNQONQ@SD�FNUDQM@MBD�QDONQS��SGD�&QNTO�R�!N@QC�NE�#HQDBSNQR��SGD��!N@QC��CDãMDR�SGD�QHRJ�@OODSHSD� of the organisation.

3GD�&QNTO�DLOKNXR�@�BNLOQDGDMRHUD�1HRJ�,@M@FDLDMS�2XRSDL�SG@S�HMBKTCDR�@�ETKK�Q@MFD�NE�QHRJ�ONKHBHDR��OQNBDCTQDR��LD@RTQDLDMS��QDONQSHMF�@MC�LNMHSNQHMF�SDBGMHPTDR�@MC�@�RDQHDR�NE�RSQDRR�SDRSR�@MC�RBDM@QHN�@M@KXRDR�SN�DMRTQD�SG@S� SGD�QHRJ�DWONRTQDR�SG@S�@QHRD�EQNL�NODQ@SHMF�SGD�&QNTO�R�ATRHMDRR�@QD�L@M@FDC�@OOQNOQH@SDKX

%NQ�SGD�OTQONRDR�NE�L@M@FHMF�QHRJR��SGD�&QNTO�BK@RRHãDR�QHRJR�HMSN�SGD�ENKKNVHMF�B@SDFNQHDR�

• Insurance

• Credit

• Market

• Liquidity

• Operational

• Capital management.

INSURANCE RISK

4MCDQVQHSHMF�@MC�BK@HLR�QHRJR3GD�&QNTO�L@M@FDR�SGDRD�QHRJR�SGQNTFG�HSR�TMCDQVQHSHMF�RSQ@SDFX��@CDPT@SD�QDHMRTQ@MBD�@QQ@MFDLDMSR�@MC�OQN@BSHUD�BK@HLR�G@MCKHMF �3GD�TMCDQVQHSHMF�RSQ@SDFX�@HLR�SN�DMRTQD�SG@S�SGD�TMCDQVQHSSDM�QHRJR�@QD�VDKK�CHUDQRHãDC�HM�SDQLR�NE�SXOD�@MC�@LNTMS�NE�QHRJ��HMCTRSQX�@MC�FDNFQ@OGX

/QHBHMF�ENQ�SGD�&QNTO�R�OQNCTBSR�HR�FDMDQ@KKX�A@RDC�TONM�GHRSNQHB@K�BK@HLR�EQDPTDMBHDR�@MC�BK@HLR�RDUDQHSX�@UDQ@FDR��@CITRSDC�ENQ�HMâ@SHNM�@MC�LNCDKKDC�B@S@RSQNOGDR�SQDMCDC�ENQV@QC�SN�QDBNFMHRD�@MSHBHO@SDC�BG@MFDR�HM�BK@HLR�O@SSDQMR �6GHKD�BK@HLR�QDL@HM�SGD�&QNTO�R�OQHMBHO@K�BNRS��SGD�&QNTO�@KRN�L@JDR�@KKNV@MBD�HM�SGD�OQHBHMF�OQNBDCTQDR�ENQ�@BPTHRHSHNM�DWODMRDR��@CLHMHRSQ@SHNM�DWODMRDR��HMUDRSLDMS�HMBNLD��SGD�BNRS�NE�QDHMRTQ@MBD�@MC�ENQ�@�OQNãS�KN@CHMF�SG@S�@CDPT@SDKX�BNUDQR�SGD�BNRS� of the capital.

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.

KK�NE�SGD�&QNTO�R�TMCDQVQHSDQR�G@UD�RODBHãB�KHBDMBDR�SG@S�RDS�BKD@Q�O@Q@LDSDQR�ENQ�SGD�ATRHMDRR�SGDX�B@M�TMCDQVQHSD��A@RDC� NM�SGD�DWODQHDMBD�NE�SGD�HMCHUHCT@K�TMCDQVQHSDQ � CCHSHNM@KKX��SGD�&QNTO�G@R�@�BDMSQ@KKX�L@M@FDC�ENQTL�KNNJHMF�@S�&QNTO�TMCDQVQHSHMF�HRRTDR��QDUHDVHMF�@MC�@FQDDHMF�TMCDQVQHSHMF�CHQDBSHNM�@MC�RDSSHMF�ONKHBX�@MC�CHQDBSHUDR�VGDQD�@OOQNOQH@SD � 3GD�&QNTO�G@R�@�PT@QSDQKX�ONQSENKHN�L@M@FDLDMS�OQNBDRR�@BQNRR�@KK�HSR�ATRHMDRR�TMHSR��VGHBG�OQNUHCDR�@�BNMRHRSDMS�@RRDRRLDMS�NE�D@BG�ONQSENKHN�ODQENQL@MBD�@F@HMRS�@�RDS�NE�JDX�ODQENQL@MBD�HMCHB@SNQR �4MCDQ�SGD�ONQSENKHN�L@M@FDLDMS�RXRSDL��JDX�QHRJ�HMCHB@SNQR�@QD�SQ@BJDC�SN�LNMHSNQ�DLDQFHMF�SQDMCR��NOONQSTMHSHDR�@MC�QHRJR�@MC��NM�@M�@MMT@K�A@RHR��@�QDUHDV�ENQTL�NE�ATRHMDRR�@MC�TMCDQVQHSHMF�KD@CDQR�TMCDQS@JD�@�CDS@HKDC�QDUHDV�NE�D@BG�ONQSENKHN�TSHKHRHMF�C@S@�EQNL�SGD�PT@QSDQKX�QDUHDVR

3GD�&QNTO�G@R�CDUDKNODC�DMG@MBDC�LDSGNCR�NE�QDBNQCHMF�DWONRTQDR�@MC�BNMBDMSQ@SHNMR�NE�QHRJ �3GHR�LD@MR�SGDQD�HR�FQD@SDQ�BNMSQNK�NE�DWONRTQDR�HM�GHFG�QHRJ�@QD@R�@MC�DM@AKDR�@�OQNLOS�QDRONMRD�SN�BK@HLR�EQNL�ONKHBXGNKCDQR�RGNTKC�SGDQD�AD�@�B@S@RSQNOGHB�DUDMS�RTBG�@R�@M�D@QSGPT@JD

1DHMRTQ@MBD�@QQ@MFDLDMSR�HM�OK@BD�HMBKTCD�OQNONQSHNM@K��DWBDRR�NE�KNRR��RSNO�KNRR�@MC�B@S@RSQNOGD�BNUDQ@FD �3GD�DEEDBS�NE�RTBG�reinsurance arrangements is that the Group should not suffer total net insurance losses beyond the Group’s risk appetite in any one year.



��

Risk management continued

1DRDQUD�QHRJ3GD�&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.

3GD�&QNTO�G@R�@�&QNTO�1DRDQUHMF�"NLLHSSDD�BG@HQDC�AX�SGD�&QNTO�"GHDE�%HM@MBH@K�.EãBDQ�@MC�BNMRHRSHMF�NE�SGD�&QNTO�"GHDE�$WDBTSHUD��&QNTO�4MCDQVQHSHMF�#HQDBSNQ��&QNTO�"GHDE� BST@QX�@MC�&QNTO�"GHDE�1HRJ�.EãBDQ � �RHLHK@Q�BNLLHSSDD�G@R�ADDM�DRS@AKHRGDC�HM�D@BG�NE�SGD�&QNTO�R�L@INQ�NODQ@SHMF�RDFLDMSR �3GD�&QNTO�1DRDQUHMF�"NLLHSSDD�LNMHSNQR�SGD�CDBHRHNMR�@MC�ITCFDLDMSR�L@CD�AX�SGD�ATRHMDRR�TMHSR�@R�SN�SGD�KDUDK�NE�QDRDQUDR�SN�AD�GDKC�@MC�QDBNLLDMCR�SN�SGD�&QNTO�"GHDE�$WDBTSHUD�@MC�&QNTO�"GHDE�%HM@MBH@K�.EãBDQ�VGN�QDBNLLDMC�SN�SGD�&QNTO�!N@QC�UH@�SGD�&QNTO� TCHS�"NLLHSSDD�ENQ�SGD�ãM@K�CDBHRHNM� NM�SGD�KDUDK�NE�QDRDQUDR�SN�AD�HMBKTCDC�VHSGHM�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR �(M�ENQLHMF�HSR�BNKKDBSHUD�ITCFDLDMS�� the Committee considers the following information:

• M�@BST@QH@K�HMCHB@SHNM�NE�TKSHL@SD�KNRRDR�SNFDSGDQ�VHSG�@M�@RRDRRLDMS�NE�QHRJR�@MC�ONRRHAKD�E@UNTQ@AKD�NQ�@CUDQRD�CDUDKNOLDMSR�SG@S�L@X�MNS�G@UD�ADDM�ETKKX�QDâDBSDC�HM�B@KBTK@SHMF�SGDRD�HMCHB@SHNMR � S�SGD�DMC�NE��SGDRD�QHRJR�@MC�CDUDKNOLDMSR�HMBKTCD��SGD�ONRRHAHKHSX�NE�ETSTQD�KDFHRK@SHUD�BG@MFD�G@UHMF�QDSQNRODBSHUD�DEEDBS�NM�NODM�BK@HLR��BG@MFDR�HM�BK@HLR�RDSSKDLDMS�OQNBDCTQDR�ONSDMSH@KKX�KD@CHMF�SN�ETSTQD�BK@HLR�O@XLDMS�O@SSDQMR�CHEEDQHMF�EQNL�GHRSNQHB@K�DWODQHDMBD�� SGD�ONRRHAHKHSX�NE�MDV�SXODR�NE�BK@HL��RTBG�@R�CHRD@RD�BK@HLR��DLDQFHMF�EQNL�ATRHMDRR�VQHSSDM�RDUDQ@K�XD@QR�@FN��FDMDQ@K�TMBDQS@HMSX�HM�SGD�BK@HLR�DMUHQNMLDMS��SGD�DLDQFDMBD�NE�K@SDMS�DWONRTQDR�RTBG�@R�@RADRSNR��SGD�NTSBNLD�NE�KHSHF@SHNM� NM�BK@HLR�QDBDHUDC��E@HKTQD�SN�QDBNUDQ�QDHMRTQ@MBD�@MC�TM@MSHBHO@SDC�BG@MFDR�HM�BK@HLR�HMâ@SHNM

• 3GD�UHDVR�NE�HMSDQM@K�ODDQ�QDUHDVDQR�NE�SGD�QDRDQUDR�@MC�NE�NSGDQ�O@QSHDR�HMBKTCHMF�@BST@QHDR��KDF@K�BNTMRDK��QHRJ�CHQDBSNQR��underwriters and claims managers

• 'NV�OQDUHNTR�@BST@QH@K�HMCHB@SHNMR�G@UD�CDUDKNODC

USE OF REINSURANCE3GD�&QNTO�HR�DWONRDC�SN�ANSG�LTKSHOKD�HMRTQDC�KNRRDR�@MC�KNRRDR�@QHRHMF�NTS�NE�@�RHMFKD�NBBTQQDMBD��ENQ�DW@LOKD�@�M@STQ@K� ODQHK�DUDMS�RTBG�@R�@�GTQQHB@MD��âNNC�NQ�D@QSGPT@JD

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

3GD�&QNTO�QDL@HMR�OQHL@QHKX�KH@AKD�@R�SGD�CHQDBS�HMRTQDQ�NM�@KK�QHRJR�QDHMRTQDC��@KSGNTFG�SGD�QDHMRTQDQ�HR�KH@AKD�SN�SGD�&QNTO� SN�SGD�DWSDMS�NE�SGD�HMRTQ@MBD�QHRJ�BDCDC

CREDIT RISKCredit risk is the risk of loss of due to counterparties failing to meet all or part of their obligations. The Board Risk Committee �!1"��HR�QDRONMRHAKD�ENQ�DMRTQHMF�SG@S�SGD�!N@QC�@OOQNUDC�&QNTO�BQDCHS�QHRJ�@OODSHSD�HR�MNS�DWBDDCDC �3GHR�HR�CNMD�SGQNTFG� SGD�RDSSHMF�@MC�HLONRHSHNM�NE�&QNTO�ONKHBHDR��OQNBDCTQDR�@MC�KHLHSR �(M�CDãMHMF�HSR�@OODSHSD�ENQ�BQDCHS�QHRJ�SGD�&QNTO�KNNJR� @S�DWONRTQDR�@S�ANSG�@M�@FFQDF@SD�@MC�ATRHMDRR�TMHS�KDUDK�CHRSHMFTHRGHMF�ADSVDDM�BQDCHS�QHRJR�HMBTQQDC�@R�@�QDRTKS�NE�NEERDSSHMF�HMRTQ@MBD�QHRJR�NQ�NODQ@SHMF�HM�SGD�HMRTQ@MBD�L@QJDS��D F �QDHMRTQ@MBD�BQDCHS�QHRJR�@MC�QHRJR�SN�QDBDHUHMF�OQDLHTLR�CTD� EQNL�ONKHBXGNKCDQR�@MC�HMSDQLDCH@QHDR��@MC�BQDCHS�QHRJR�HMBTQQDC�ENQ�SGD�OTQONRDR�NE�FDMDQ@SHMF�@�QDSTQM��D F �HMUDRSDC� @RRDSR�BQDCHS�QHRJ�

+HLHSR�@QD�RDS�@S�ANSG�@�ONQSENKHN�@MC�BNTMSDQO@QSX�KDUDK�A@RDC�NM�KHJDKHGNNC�NE�CDE@TKS��CDQHUDC�EQNL�SGD�Q@SHMF�NE�SGD�BNTMSDQO@QSX��SN�DMRTQD�SG@S�SGD�&QNTO�R�NUDQ@KK�BQDCHS�OQNãKD�@MC�RODBHãB�BNMBDMSQ@SHNMR�@QD�L@M@FDC�@MC�BNMSQNKKDC�VHSGHM�QHRJ�@OODSHSD �%HM@MBH@K�@RRDSR�@QD�FQ@CDC�@BBNQCHMF�SN�BNLO@MX�RS@MC@QCR � �HR�SGD�GHFGDRS�ONRRHAKD�Q@SHMF �(MUDRSLDMS�FQ@CD�ãM@MBH@K�@RRDSR�@QD�BK@RRHãDC�VHSGHM�SGD�Q@MFD�NE� �SN�!!!�Q@SHMFR �%NQ�HMUDRSDC�@RRDSR��QDRSQHBSHNMR�@QD�OK@BDC�NM�D@BG� NE�SGD�&QNTO�R�HMUDRSLDMS�L@M@FDQR�@R�SN�SGD�KDUDK�NE�DWONRTQD�SN�U@QHNTR�Q@SHMF�B@SDFNQHDR�HMBKTCHMF�TMQ@SDC�RDBTQHSHDR

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Local operations are responsible for assessing and monitoring the creditworthiness of their counterparties (e.g. brokers and ONKHBXGNKCDQR� �+NB@K�BQDCHS�BNLLHSSDDR�@QD�QDRONMRHAKD�ENQ�DMRTQHMF�SGDRD�DWONRTQDR�@QD�VHSGHM�SGD�QHRJ�@OODSHSD�NE�SGD�KNB@K�NODQ@SHNMR �$WONRTQD�LNMHSNQHMF�@MC�QDONQSHMF�HR�DLADCCDC�SGQNTFGNTS�SGD�NQF@MHR@SHNM�VHSG�@FFQDF@SD�BQDCHS�ONRHSHNMR�QDONQSDC�@MC�LNMHSNQDC�@S�&QNTO�KDUDK �

3GD�ENKKNVHMF�S@AKD�OQNUHCDR�HMENQL@SHNM�QDF@QCHMF�SGD�@FFQDF@SDC�BQDCHS�QHRJ�DWONRTQD�ENQ�ãM@MBH@K�@RRDSR�NE�SGD�&QNTO� @R�@S��#DBDLADQ��

"QDCHS�Q@SHMF�QDK@SHMF�SN�ëM@MBH@K�@RRDSR�SG@S�@QD�MDHSGDQ�O@RS�CTD� MNQ�HLO@HQDC

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Debt securities �� 2,122 3,331 �� 141 �� 12,248

+N@MR�@MC�QDBDHU@AKDR �� 1 1 – 3 �� – ��

Reinsurers’ share of insurance contract liabilities – 447 1,313 172 �� 33 ��

Insurance and reinsurance debtors 281 38 �� (143) ��

#DQHU@SHUD�@RRDSR � 7 �� – – 13 �� – ��

Other debtors – – – – – 343 343 (4) ��

"@RG�@MC�B@RG�DPTHU@KDMSR �� 24 153 1,135 (124) ��

Notes:� �3GD�HMRTQ@MBD�@MC�QDHMRTQ@MBD�CDASNQR�BK@RRHãDC�@R�MNS�Q@SDC�BNLOQHRD�ODQRNM@K�ONKHBXGNKCDQR�@MC�RL@KK�BNQONQ@SD�BTRSNLDQR�SG@S�CN�MNS�G@UD�HMCHUHCT@K�BQDCHS�Q@SHMFR �3GD�NUDQ@KK�BQDCHS�QHRJ�SN�SGD�&QNTO�HR�CDDLDC�SN�AD�KNV�@R�SGD�BNUDQ�BNTKC�AD�B@MBDKKDC�HE�O@XLDMS�VDQD�MNS�QDBDHUDC�NM�@�timely basis.

R�@S��#DBDLADQ��

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assets that are neither

past due nor impaired

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Debt securities �� – ��

+N@MR�@MC�QDBDHU@AKDR �� – �� – � �� – ��

Reinsurers’ share of insurance contract liabilities – �� 1 �� – ��

Insurance and reinsurance debtors �� – ��

#DQHU@SHUD�@RRDSR – �� – – – �� – ��

Other debtors – – – – – �� – ��

"@RG�@MC�B@RG�DPTHU@KDMSR �� – ��

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.



��


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.

3GD�&QNTO�QDFTK@QKX�LNMHSNQR�HSR�@FFQDF@SD�DWONRTQDR�AX�QDHMRTQDQ�FQNTO�@F@HMRS�OQDCDSDQLHMDC�QDHMRTQDQ�FQNTO�KHLHSR��HM�@BBNQC@MBD�VHSG�SGD�LDSGNCNKNFX�@FQDDC�AX�SGD�!1" �3GD�&QNTO�R�K@QFDRS�QDHMRTQ@MBD�DWONRTQDR�SN�@BSHUD�QDHMRTQ@MBD�FQNTOR�@QD�+KNXC�R��2VHRR�1D�@MC�!DQRJGHQD�'@SG@V@X�(MB � S��#DBDLADQ��SGD�QDHMRTQ@MBD�@RRDS�QDBNUDQ@AKD�EQNL�SGDRD�FQNTOR�CNDR�MNS�DWBDDC�7%�NE�SGD�&QNTO�R�SNS@K�ãM@MBH@K�@RRDSR �2SQDRR�SDRSR�@QD�ODQENQLDC�AX�QDHMRTQDQ�BNTMSDQO@QSX�@MC�SGD�KHLHSR� @QD�RDS�RTBG�SG@S�HM�@�B@S@RSQNOGHB�DUDMS��SGD�DWONRTQD�SN�@�RHMFKD�QDHMRTQDQ�HR�DRSHL@SDC�MNS�SN�DWBDDC�4% of the Group’s total ãM@MBH@K�@RRDSR �"DQS@HM�NE�SGD�&QNTO�R�RTARHCH@QHDR�@QD�LDLADQR�NE�FNUDQMLDMS�L@MC@SDC�ONNKR�HM�U@QHNTR�O@QSR�NE�SGD� VNQKC � R�NE��#DBDLADQ��SGD�K@QFDRS�ONNK��AX�OQDLHTL�UNKTLD��HR�/NNK�1D�NODQ@SDC�AX�SGD�4*�&NUDQMLDMS�SN�OQNUHCD�SDQQNQHRL�BNUDQ

3GDQD�@QD�MN�L@SDQH@K�ãM@MBH@K�@RRDSR�SG@S�VNTKC�G@UD�ADDM�O@RS�CTD�NQ�HLO@HQDC�G@C�SGD�SDQLR�MNS�ADDM�QDMDFNSH@SDC

3GD�ENKKNVHMF�S@AKD�OQNUHCDR�HMENQL@SHNM�QDF@QCHMF�SGD�B@QQXHMF�U@KTD�NE�ãM@MBH@K�@RRDSR�SG@S�G@UD�ADDM�HLO@HQDC�@MC�SGD�@FDHMF�NE�ãM@MBH@K�@RRDSR�SG@S�@QD�O@RS�CTD�ATS�MNS�HLO@HQDC�@R�@S��#DBDLADQ��DWBKTCHMF�SGNRD�@RRDSR�SG@S�G@UD�ADDM�BK@RRHãDC�@R�GDKC�ENQ�R@KD

Neither O@RS�CTD�MNQ�

HLO@HQDC `L

%HM@MBH@K�@RRDSR�SG@S�@QD�O@RS�CTD�ATS�MNS�HLO@HQDC%HM@MBH@K�

@RRDSR�SG@S�G@UD�ADDM�HLO@HQDC

`L

"@QQXHMF� U@KTD�HM�SGD�RS@SDLDMS� NE�ëM@MBH@K

ONRHSHNM `L

(LO@HQLDMS�KNRRDR�

BG@QFDC�SN�SGD�HMBNLD�RS@SDLDMS

`L

Up to three LNMSGR

`L

3GQDD�SN�RHW�LNMSGR

`L

2HW�LNMSGR�SN�NMD�XD@Q

`L

&QD@SDQ�SG@M� NMD�XD@Q

`L

Debt securities 12,248 – – – – – 12,248 –

+N@MR�@MC�QDBDHU@AKDR �� – – – – – �� –

Reinsurers’ share of insurance contract liabilities �� – – – – 5 �� (3)

Insurance and reinsurance debtors �� 17 – 3,174 (11)

#DQHU@SHUD�@RRDSR �� – – – – – �� –

Other debtors �� 3 – 1 7 – �� –

"@RG�@MC�B@RG�DPTHU@KDMSR �� – – – – – �� –

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Neither past due nor

impaired `L

%HM@MBH@K�@RRDSR�SG@S�@QD�O@RS�CTD�ATS�MNS�HLO@HQDC%HM@MBH@K�

assets that G@UD�ADDM�

impaired `L

Carrying U@KTD�HM�SGD�

statement NE�ãM@MBH@K

position `L

Impairment losses

charged to the income statement

`L

4O�SN�SGQDD�months

`L

3GQDD�SN�RHW�months

`L

2HW�LNMSGR�to one year

`L

Greater than one year

`L

Debt securities �� – – – – – �� –

+N@MR�@MC�QDBDHU@AKDR �� – – – – – ��

Reinsurers’ share of insurance contract liabilities �� – – – – � ��

Insurance and reinsurance debtors �� 1 ��

#DQHU@SHUD�@RRDSR �� – – – – – �� –

Other debtors �� 8 � 11 8 – �� –

"@RG�@MC�B@RG�DPTHU@KDMSR �� – – – – – �� –

3GD�&QNTO�R�HMUDRSLDMSR�BNLOQHRD�@�AQN@C�Q@MFD�NE�ãM@MBH@K�HMUDRSLDMSR�HRRTDC�OQHMBHO@KKX�HM�SGD�4*��"@M@C@�@MC�2B@MCHM@UH@

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.

(M�@CCHSHNM�SN�SGD�BNKK@SDQ@K�@BBDOSDC�EQNL�QDHMRTQDQR��SGD�&QNTO�G@R�@BBDOSDC�£429m��`��L��HM�BNKK@SDQ@K �3GD�&QNTO� HR�ODQLHSSDC�SN�RDKK�NQ�QDOKDCFD�BNKK@SDQ@K�GDKC�HM�SGD�DUDMS�NE�CDE@TKS�AX�SGD�NVMDQ �3GD�E@HQ�U@KTD�NE�SGD�BNKK@SDQ@K�@BBDOSDC� is £429m��`��L� �3GD�SDQLR�@MC�BNMCHSHNMR�NE�SGD�BNKK@SDQ@K�GDKC�@QD�L@QJDS�RS@MC@QC �3GD�@RRDSR�GDKC�@R�BNKK@SDQ@K� @QD�QD@CHKX�BNMUDQSHAKD�HMSN�B@RG

S��#DBDLADQ��SGD�&QNTO�G@C�DMSDQDC�HMSN�RGNQS�SDQL�R@KD�@MC�QDOTQBG@RD�@FQDDLDMSR�ENQ�4*�FNUDQMLDMS�RDBTQHSHDR �3GD�&QNTO�BNMSHMTDR�SN�QDBNFMHRD�SGD�CDAS�RDBTQHSHDR�HM�SGD�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM�@R�SGD�&QNTO�QDL@HMR�DWONRDC� SN�SGD�QHRJR�@MC�QDV@QCR�NE�NVMDQRGHO �3GD�B@QQXHMF�U@KTD�NE�SGDRD�CDAS�RDBTQHSHDR�QDBNFMHRDC�HM�SGD�RS@SDLDMS�NE�ãM@MBH@K�position is £300m��`��L��@MC�SGD�B@QQXHMF�U@KTD�NE�SGD�@RRNBH@SDC�KH@AHKHSHDR�HR�£299m��`��L�

3GD�&QNTO�DMSDQR�HMSN�CDQHU@SHUD�SQ@MR@BSHNMR�TMCDQ�(MSDQM@SHNM@K�2V@OR�@MC�#DQHU@SHUDR� RRNBH@SHNM��(2# ��L@RSDQ�MDSSHMF�@QQ@MFDLDMSR �(M�FDMDQ@K��TMCDQ�RTBG�@FQDDLDMSR�SGD�@LNTMSR�NVMDC�AX�D@BG�BNTMSDQO@QSX�NM�@�RHMFKD�C@X�HM�QDRODBS�NE�@KK�transactions outstanding in the same currency are aggregated into a single net amount that is payable by one counterparty to SGD�NSGDQ �(M�BDQS@HM�BHQBTLRS@MBDR��RTBG�@R�@�BQDCHS�CDE@TKS��@KK�NTSRS@MCHMF�SQ@MR@BSHNMR�TMCDQ�SGD�@FQDDLDMS�@QD�SDQLHM@SDC��SGD�SDQLHM@SHNM�U@KTD�HR�@RRDRRDC�@MC�NMKX�@�RHMFKD�MDS�@LNTMS�HR�O@X@AKD�HM�RDSSKDLDMS�NE�@KK�SQ@MR@BSHNMR

3GD�(2# �@FQDDLDMSR�CN�MNS�LDDS�SGD�BQHSDQH@�ENQ�NEERDSSHMF�HM�SGD�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM �3GHR�HR�ADB@TRD�SGD�&QNTO�CNDR�MNS�G@UD�@MX�BTQQDMS�KDF@KKX�DMENQBD@AKD�QHFGS�SN�NEERDS�QDBNFMHRDC�@LNTMSR��ADB@TRD�SGD�QHFGS�SN�NEERDS�HR�DMENQBD@AKD�NMKX�NM�SGD�NBBTQQDMBD�NE�ETSTQD�DUDMSR



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3GD�ENKKNVHMF�S@AKD�RDSR�NTS�SGD�B@QQXHMF�@LNTMSR�NE�QDBNFMHRDC�ãM@MBH@K�HMRSQTLDMSR�SG@S�@QD�RTAIDBS�SN�SGD�@ANUD�agreements:

S��#DBDLADQ��

LNTMSR�RTAIDBS�SN�DMENQBD@AKD�MDSSHMF�@QQ@MFDLDMSR

$EEDBS�NE�NEERDSSHMF�HM�RS@SDLDMS�NE�ëM@MBH@K�ONRHSHNM 1DK@SDC�HSDLR�MNS�NEERDS

&QNRR� @LNTMSR

`L

LNTMSR�NEERDS

`L

Net @LNTMSR�QDONQSDC

`L

%HM@MBH@K�HMRSQTLDMSR

`L

%HM@MBH@K�BNKK@SDQ@K

`L

Net @LNTMS

`L

#DQHU@SHUD�ãM@MBH@K�@RRDSR 18 – 18 �� – 12

3NS@K�@RRDSR� 18 – 18 �� – 12

#DQHU@SHUD�ãM@MBH@K�KH@AHKHSHDR 51 – 51 (28) (25) (2)

Repurchase arrangements and other similar secured borrowing �� – �� – –

3NS@K�KH@AHKHSHDR �� – �� (327) (25) (2)


Amounts subject to enforceable netting arrangements

Effect of offsetting in statement of ãM@MBH@K�ONRHSHNM Related items not offset

Gross amounts

`L

Amounts offset

`L

Net amounts reported

`L

%HM@MBH@K�instruments

`L

%HM@MBH@K�collateral

`L

Net amount

`L

#DQHU@SHUD�ãM@MBH@K�@RRDSR �� – ��

3NS@K�@RRDSR� �� – ��

#DQHU@SHUD�ãM@MBH@K�KH@AHKHSHDR �� – ��

Repurchase arrangements and other similar secured borrowing �� – �� – –

3NS@K�KH@AHKHSHDR �� – ��

Notes:3GD�&QNTO�R�DPTHSX�CDQHU@SHUDR�@QD�DWBG@MFD�SQ@CDC�HMRSQTLDMSR�@MC�@R�RTBG�SGD�&QNTO�SQD@SR�SGD�QDRODBSHUD�HMSDQLDCH@QX�@QD�NMD�BNTMSDQO@QSX�HM�SGD�@ANUD�S@AKD

(MUDRSLDMSR�HM�RSQTBSTQDC�DMSHSHDR4MCDQ�(%12��@�RSQTBSTQDC�DMSHSX�HR�@M�DMSHSX�SG@S�G@R�ADDM�CDRHFMDC�RN�SG@S�UNSHMF�NQ�RHLHK@Q�QHFGSR�@QD�MNS�SGD�CNLHM@MS�E@BSNQ� HM�CDBHCHMF�VGN�BNMSQNKR�SGD�DMSHSX��RTBG�@R�VGDM�@MX�UNSHMF�QHFGSR�QDK@SD�SN�@CLHMHRSQ@SHUD�S@RJR�NMKX�@MC�SGD�QDKDU@MS�@BSHUHSHDR�are directed by means of contractual arrangements.

3GD�&QNTO�CNDR�MNS�RDBTQHSHRD�@MX�NE�HSR�HMUDRSLDMSR�HM�ãM@MBH@K�HMRSQTLDMSR�@MC�CNDR�MNS�BQD@SD��OQNLNSD�NQ�@CLHMHRSDQ�RSQTBSTQDC�DMSHSHDR�NM�ADG@KE�NE�SGHQC�O@QSX�HMUDRSNQR �3GD�&QNTO�SGDQDENQD�BNMRHCDQR�SG@S�HS�CNDR�MNS�@BS�@R�@�RONMRNQ�ENQ� any structured entity.

'NVDUDQ��SGD�&QNTO�HMUDRSR�HM�TMKDUDQ@FDC�DMSHSHDR�BQD@SDC�AX�@MC�L@M@FDC�AX�DWSDQM@K�RODBH@KHRS�HMUDRSLDMS�L@M@FDQR�VGDQD�HMUDRSLDMSR�@QD�ONNKDC�VHSGHM�@M�HMUDRSLDMS�UDGHBKD�SN�OQNUHCD�@�CHUDQRHãDC�DWONRTQD�SN�O@QSHBTK@Q�BK@RRDR�NE�TMCDQKXHMF�HMUDRSLDMSR �3GD�TRD�NE�SGDRD�OQNCTBSR�@KKNVR�SGD�&QNTO�SN�AQN@CDM�SGD�CHUDQRHãB@SHNM�NE�HSR�HMUDRSLDMS�ONQSENKHN�HM�@�BNRS�DEãBHDMS�L@MMDQ �3GD�&QNTO�KHLHSR�HSR�DWONRTQDR�HM�HMCHUHCT@K�RSQTBSTQDC�DMSHSHDR�SN�KDRR�SG@M��í�NE�SGD�SNS@K�B@OHS@K� of the entity.

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3GD�&QNTO�HR�DWONRDC�SN�SGD�QHRJR�NE�SGD�TMCDQKXHMF�HMUDRSLDMSR�NE�SGD�HMUDRSLDMS�UDGHBKDR �3GD�HMUDRSLDMS�QDSTQM�EQNL� SGD�RSQTBSTQDC�DMSHSHDR�HR�DWODBSDC�SN�QDâDBS�SGD�QDSTQMR�EQNL�SGD�TMCDQKXHMF�HMUDRSLDMSR�NE�SGD�TMCDQKXHMF�UDGHBKDR

(M�@CCHSHNM��SGD�&QNTO�G@R�BNLLHSLDMSR�ENQ�ETSTQD�TMCQ@VM�RTARBQHOSHNMR�KHLHSDC�SN�SGD�@LNTMSR�RDS�NTS�HM�SGD�RTARBQHOSHNM�@FQDDLDMSR �3GD�&QNTO�G@R�MN�NAKHF@SHNMR�SN�OQNUHCD�@MX�@CCHSHNM@K�ETMCHMF�NQ�NSGDQ�ãM@MBH@K�RTOONQS�SN�SGDRD�DMSHSHDR � 3GD�&QNTO�G@R�CDSDQLHMDC�SG@S�HSR�L@WHLTL�DWONRTQD�SN�RSQTBSTQDC�DMSHSHDR�HR�SGD�RTL�NE�SGD�B@QQXHMF�U@KTD�@MC�SGD� TMCQ@VM�BNLLHSLDMSR �3GDRD�DWONRTQDR�@S��#DBDLADQ��@QD�RTLL@QHRDC�HM�SGD�S@AKD�ADKNV�

"K@RR�NE�HMUDRSLDMSR -@STQD�NE�SGD�TMCDQKXHMF�HMUDRSLDMSR�NE�SGD�UDGHBKD

Carrying U@KTD `L

4MCQ@VM�commitments

`L$WONRTQD

`L

Domestic mortgage backed securities ,@HMKX�QDRHCDMSH@K�LNQSF@FDR�HM�2B@MCHM@UH@ �� – ��

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 �� – ��

Other Mainly consist of property funds ��

��

3GD�KHMD�HSDLR�HM�SGD�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM�HM�VGHBG�SGD�HSDLR�@ANUD�@QD�HMBKTCDC�@QD�@R�ENKKNVR�

`L

(MUDRSLDMSR��ãM@MBH@K�@RRDSR��DPTHSX�RDBTQHSHDR ��

(MUDRSLDMSR��ãM@MBH@K�@RRDSR��CDAS�RDBTQHSHDR ��

"@RG�@MC�B@RG�DPTHU@KDMSR ��

Other ��

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MARKET RISK3GD�&QNTO�HR�DWONRDC�SN�SGD�QHRJ�NE�ONSDMSH@K�KNRRDR�EQNL�@CUDQRD�LNUDLDMSR�HM�L@QJDS�OQHBDR�HMBKTCHMF�SGNRD�NE�HMSDQDRS� Q@SDR��DPTHSHDR��OQNODQSX��DWBG@MFD�Q@SDR�@MC�CDQHU@SHUDR

$WONRTQDR�@QD�BNMSQNKKDC�AX�SGD�RDSSHMF�NE�HMUDRSLDMS�KHLHSR�@MC�L@M@FHMF�@RRDS�KH@AHKHSX�L@SBGHMF�HM�KHMD�VHSG�SGD�&QNTO�R� risk appetite.

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

(MSDQDRS�Q@SD�QHRJ3GD�E@HQ�U@KTD�NE�SGD�&QNTO�R�ONQSENKHN�NE�ãWDC�HMBNLD�RDBTQHSHDR�HR�HMUDQRDKX�BNQQDK@SDC�SN�BG@MFDR�HM�SGD�L@QJDS�HMSDQDRS� Q@SDR �3GTR�HE�HMSDQDRS�Q@SDR�E@KK��SGD�E@HQ�U@KTD�NE�SGD�ONQSENKHN�VNTKC�SDMC�SN�QHRD�@MC�UHBD�UDQR@�@R�RDS�NTS�HM�SGD�RDMRHSHUHSX�@M@KXRHR�NM�O@FD��

$PTHSX�OQHBD�QHRJ3GD�&QNTO�R�ONQSENKHN�NE�DPTHSX�RDBTQHSHDR�HR�RTAIDBS�SN�DPTHSX�QHRJ�@QHRHMF�EQNL�BG@MFDR�HM�L@QJDS�OQHBD �3GTR�HE�SGD�U@KTD� NE�DPTHSHDR�QHRD��RN�VHKK�SGD�E@HQ�U@KTD�NE�HSR�ONQSENKHN�@MC�UHBD�UDQR@�@R�RDS�NTS�HM�SGD�RDMRHSHUHSX�@M@KXRHR�NM�O@FD��

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the statement NE�ãM@MBH@K�

position

2TANQCHM@SDC�FT@Q@MSDDC�42ì�ANMCR – – – – – – ��

Perpetual guaranteed subordinated capital securities – – – �� – – – ��

Subordinated guaranteed perpetual notes �� – – – – – – ��

Guaranteed subordinated RSDO�TO�MNSDR�CTD�� – – – – – �� – ��

/QNUHRHNM�ENQ�TMD@QMDC�OQDLHTL �� 10 �� – ��

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Direct insurance creditors �� 1 – – – – – ��

Reinsurance creditors �� 1 – – – – ��

Borrowings �� – – – – 1 – ��

#DONRHSR�QDBDHUDC�EQNL�QDHMRTQDQR �� – – – – – – ��

#DQHU@SHUD�KH@AHKHSHDR �� – – – – – ��

3NS@K ��

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3GD�B@OHS@K�@MC�HMSDQDRS�O@X@AKD�NM�SGD�ANMCR�@MC�MNSDR�G@UD�ADDM�HMBKTCDC�TMSHK�SGD�C@SDR�NM�VGHBG�SGD�&QNTO�G@R�SGD�NOSHNM�SN�B@KK�SGD�HMRSQTLDMSR�@MC�SGD�HMSDQDRS�Q@SDR�@QD�QDRDS �%NQ�ETQSGDQ�HMENQL@SHNM�NM�SGD�SDQLR�NE�SGD�ANMCR�@MC�MNSDR��RDD�MNSD��SN�SGD�ãM@MBH@K�RS@SDLDMSR

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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

3GD�&QNTO�L@M@FDR�NODQ@SHNM@K�QHRJ�TRHMF�@�Q@MFD�NE�SDBGMHPTDR�@MC�SNNKR�SN�HCDMSHEX��LNMHSNQ�@MC�LHSHF@SD�HSR�NODQ@SHNM@K� QHRJ�HM�@BBNQC@MBD�VHSG�&QNTO�R�QHRJ�@OODSHSD �3GDRD�SNNKR�HMBKTCD�1HRJ�@MC�"NMSQNK�2DKE� RRDRRLDMSR��*DX�1HRJ�(MCHB@SNQR� �D F �EQ@TC�@MC�RDQUHBD�HMCHB@SNQR��2BDM@QHN� M@KXRDR�@MC�+NRR�1DONQSHMF �(M�@CCHSHNM��SGD�&QNTO�G@R�CDUDKNODC�@�MTLADQ� NE�BNMSHMFDMBX�OK@MR�HMBKTCHMF�(MBHCDMS�,@M@FDLDMS�@MC�!TRHMDRR�"NMSHMTHSX�/K@MR �0T@MSHS@SHUD�@M@KXRHR�NE�NODQ@SHNM@K� QHRJ�DWONRTQDR�L@SDQH@K�SN�SGD�&QNTO�HR�TRDC�SN�HMENQL�CDBHRHNMR�NM�SGD�NUDQ@KK�@LNTMS�NE�B@OHS@K�GDKC�@MC�SGD�@CDPT@BX� of contingency arrangements.

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CAPITAL MANAGEMENT

.VM�1HRJ�@MC�2NKUDMBX� RRDRRLDMS��.12 �3GD�2NKUDMBX�((�CHQDBSHUD�HMSQNCTBDR�@�QDPTHQDLDMS�ENQ�TMCDQS@JHMFR�SN�BNMCTBS�@M�.12 �(M�@MSHBHO@SHNM�NE�SGHR�QDPTHQDLDMS��the Group has updated its risk and capital management processes.

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• The quantity and quality of the risks which it seeks to assume

• 3GD�KDUDK�NE�B@OHS@K�QDPTHQDC�SN�RTOONQS�SGNRD�QHRJR

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3GD�@RRDRRLDMS�NE�QHRJ�@MC�RNKUDMBX�MDDCR�HR�HM�OQHMBHOKD�B@QQHDC�NTS�BNMSHMTNTRKX �(M�OQ@BSHBD��SGD�@RRDRRLDMS�BNMRHRSR�NE� @�Q@MFD�NE�RODBHãB�@BSHUHSHDR�@MC�CDBHRHNMR�B@QQHDC�NTS�@S�CHEEDQDMS�SHLDR�NE�SGD�XD@Q�@R�O@QS�NE�@M�@MMT@K�BXBKD��RTOOKDLDMSDC� @R�MDBDRR@QX�AX�@C�GNB�@RRDRRLDMSR�NE�SGD�HLO@BS�NE�DWSDQM@K�DUDMSR�@MC�CDUDKNOLDMSR�@MC�NE�HMSDQM@K�ATRHMDRR�OQNONR@KR

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,@INQ�BNLONMDMSR�NE�TMCDQVQHSHMF�QDRTKS�@QD�MDS�D@QMDC�OQDLHTLR��NSGDQ�NODQ@SHMF�HMBNLD��MDS�BK@HLR�HMBTQQDC��@BPTHRHSHNM�BNRSR�@MC�NSGDQ�TMCDQVQHSHMF�BNRSR

3GDQD�G@UD�ADDM�BDQS@HM�QDUHRHNMR�L@CD�SN�SGD�L@M@FDLDMS�A@RHR�NE�OQDRDMS@SHNM �(M��SGD�HLO@BS�NE�SGD�BG@MFD�HM�SGD�CHRBNTMS�Q@SD�NM�BDQS@HM�BK@RRDR�NE�KNMF�S@HK�HMRTQ@MBD�KH@AHKHSHDR�V@R�QDONQSDC�HM�SGD�HMUDRSLDMS�QDRTKS �3GD�HMUDRSLDMS�QDRTKS� HM��DWBKTCDR�SGD�HLO@BS�NE�SGD�BG@MFD�HM�CHRBNTMS�Q@SD�NE�£98m��`��L� �3GHR�A@RHR�HR�BNMRHRSDMS�VHSG�SGD�&QNTO�R�OQDRDMS@SHNM�SQD@SLDMS�NE�QD@KHRDC�@MC�TMQD@KHRDC�F@HMR�@MC�KNRRDR�NM�HSR�HMUDRSLDMSR �

(M��SGD�(MUDRSLDMS�DWODMRDR�VDQD�QDONQSDC�HM�SGD�BDMSQ@K�DWODMRDR��CTQHMF��SGDRD�DWODMRD�£29m��`��L��@QD�HMBKTCDC�HM�SGD�HMUDRSLDMS�QDRTKS �

.SGDQ�@BSHUHSHDR�BNLOQHRD�@CLHMHRSQ@SHNM�DWODMRDR��@MC�NSGDQ�DWODMRD�NE�£52m��`��L��VGHBG�HMBKTCDR�SGD�&QNTO�RG@QD� HM�SGD�KNRR�@ESDQ�S@W�NE�HSR�@RRNBH@SDR�NE�£nil��`�L�

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Segment revenue and results8D@Q�DMCDC��#DBDLADQ��

Core

Non-core £m

Continuing operations per income statement

£m

Add discontinued

operations£m

Total Group

£mScandinavia

£m

Canada (excl

Noraxis) £m

UK and Ireland

Latin America

Central Functions

£m

UK (excluding

Legacy) £m

Ireland £m

-DS�VQHSSDM�OQDLHTLR 1,759 1,510 2,569 295 690 (42) 186 6,967 498 7,465 4MCDQVQHSHMF�QDRTKS 187 30 15 (107) (2) (15) (47) 61 29 90 (MUDRSLDMS�QDRTKS 64 77 132 10 27 – 5 315 12 327 (MRTQ@MBD�QDRTKS 251 107 147 (97) 25 (15) (42) 376 41 417 .SGDQ�@BSHUHSHDR – – – – – (51) (6) (57) 5 (52).ODQ@SHMF�QDRTKS��L@M@FDLDMS�A@RHR� 251 107 147 (97) 25 (66) (48) 319 46 365 1D@KHRDC�F@HMR��KNRRDR� 85 – 85 4MQD@KHRDC�F@HMR��KNRRDR��HLO@HQLDMSR�@MC�ENQDHFM�DWBG@MFD 14 – 14 (MSDQDRS�BNRSR (119) – (119) LNQSHR@SHNM�NE�HMS@MFHAKD�@RRDSR (31) (1) (32)/DMRHNM�MDS�HMSDQDRS�@MC�@CLHMHRSQ@SHNM�BNRSR (10) – (10)2NKUDMBX�((�BNRSR (25) – (25)1DNQF@MHR@SHNM�BNRSR� (106) (4) (110)(LO@HQLDMS�NE�FNNCVHKK�@MC�HMS@MFHAKD�@RRDSR (99) – (99)$BNMNLHB�@RRTLOSHNM�BG@MFDR (98) – (98)-NM�QDBTQQHMF�BG@QFDR (67) – (67) BPTHRHSHNMR�@MC�CHRONR@KR 203 174 377 3Q@MR@BSHNM�BNRSR� (6) – (6)/QNãS�ADENQD�S@W 60 215 275 3@W�NM�BNMSHMTHMF�NODQ@SHNMR (182) – (182)3@W�NM�CHRBNMSHMTDC�NODQ@SHNMR – (15) (15)3@W�NM�CHRONR@KR�NE�CHRBNMSHMTDC�NODQ@SHNMR – (2) (2)

�+NRRDR��OQNëSR�@ESDQ�S@W (122) 198 76

"NLAHMDC�NODQ@SHMF�Q@SHN��í� 89.4 98.0 99.5 132.3 100.3 126.4 98.5 94.3 98.8 .SGDQ�RDFLDMS�HSDLR�HMBKTCDC�HM�SGD�HMBNLD�RS@SDLDMS�

(MUDRSLDMS�HMBNLD 112 82 144 11 46 28 425 14 439 (MUDRSLDMS�DWODMRD�@MC�BG@QFDR (11) (3) (7) (1) (5) – (27) (2) (29)#DOQDBH@SHNM��@LNQSHR@SHNM�@MC�HLO@HQLDMS

(47) (30) (51) (70) (27) (3) (233) – (233)



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CC�CHRBNMSHMTDC�NODQ@SHNMR

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3NS@K� Group

`L2B@MCHM@UH@

`L

"@M@C@� �DWBK�

-NQ@WHR� `L

4*�@MC�(QDK@MC

+@SHM� LDQHB@

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4*��DWBKTCHMF�+DF@BX�

`L(QDK@MC

`L

-DS�VQHSSDM�OQDLHTLR �� 599 ��4MCDQVQHSHMF�QDRTKS �� (MUDRSLDMS�QDRTKS �� (MRTQ@MBD�QDRTKS �� .SGDQ�@BSHUHSHDR � � � � � �� .ODQ@SHMF�QDRTKS��L@M@FDLDMS�A@RHR� �� 1D@KHRDC�F@HMR��KNRRDR� �� 4MQD@KHRDC�F@HMR��KNRRDR��HLO@HQLDMSR�@MC�ENQDHFM�DWBG@MFD �� (MSDQDRS�BNRSR �� LNQSHR@SHNM�NE�HMS@MFHAKD�@RRDSR �� /DMRHNM�MDS�HMSDQDRS�@MC�@CLHMHRSQ@SHNM�BNRSR �� 2NKUDMBX�((�BNRSR �� 1DNQF@MHR@SHNM�BNRSR� �� (LO@HQLDMS�NE�FNNCVHKK�@MC�HMS@MFHAKD�@RRDSR �� $BNMNLHB�@RRTLOSHNM�BG@MFDR �� -NM�QDBTQQHMF�BG@QFDR � � � BPTHRHSHNMR�@MC�CHRONR@KR � � �3Q@MR@BSHNM�BNRSR� �� +NRRDR��ADENQD�S@W �� 3@W�NM�BNMSHMTHMF�NODQ@SHNMR �� 3@W�NM�CHRONR@KR�NE�CHRBNMSHMTDC�NODQ@SHNMR � � �

�+NRRDR��OQNëSR�@ESDQ�S@W ��

"NLAHMDC�NODQ@SHMF�Q@SHN��í� �� .SGDQ�RDFLDMS�HSDLR�HMBKTCDC�HM�SGD�HMBNLD�RS@SDLDMS�

(MUDRSLDMS�HMBNLD �� (MUDRSLDMS�DWODMRD�@MC�BG@QFDR �� #DOQDBH@SHNM��@LNQSHR@SHNM�@MC�HLO@HQLDMS ��

-N�NSGDQ�L@SDQH@K�MNM�B@RG�DWODMRDR�@QD�QDONQSDC�HMSDQM@KKX�AX�RDFLDMS


155

Net written premiums

"NMSHMTHMF�NODQ@SHNMR

-DS�VQHSSDM�OQDLHTLR

2014 £m

�� `L

2B@MCHM@UH@ 1,759 ��

"@M@C@��DWBKTCHMF�-NQ@WHR� 1,510 ��

4*��DWBKTCHMF�+DF@BX� 2,569 ��

(QDK@MC 295 ��

+@SHM� LDQHB@ 690 ��

"DMSQ@K�%TMBSHNMR (42) ��

-NM�BNQD 186 ��

Total continuing operations 6,967 ��

Add: Discontinued operations 498 599

Total net written premiums 7,465 ��

-DS�VQHSSDM�OQDLHTLR�@QD�@KKNB@SDC�SN�SGD�BNTMSQHDR�HM�VGHBG�SGD�ATRHMDRR�HR�TMCDQVQHSSDM�NQ�L@M@FDC

2. DISCONTINUED OPERATIONS AND DISPOSAL

a) Discontinued operations R�@�QDRTKS�NE�SGD�RSQ@SDFHB�@BSHNM�OK@M�12 �&QNTO�@MMNTMBDC�@MC�BNLOKDSDC�SGD�ENKKNVHMF�CHRONR@KR�NE�NODQ@SHNMR

#TQHMF��SGD�&QNTO�QD@BGDC�@FQDDLDMSR�SN�RDKK�HSR�"GHMDRD�RTARHCH@QX�SN�2VHRR�1D�"NQONQ@SD�2NKTSHNMR��@MMNTMBDC��)TKX��HSR�2HMF@ONQD�@MC�'NMF�*NMF�AQ@MBG�NODQ@SHNMR�SN� KKHDC�6NQKC� RRTQ@MBD�"NLO@MX��@MMNTMBDC�� TFTRS��@MC�HSR�(S@KH@M�AQ@MBG�ATRHMDRR�SN�(3 2�,TST@��@MMNTMBDC��.BSNADQ�

3GD�&QNTO�BNLOKDSDC�SGD�R@KDR�NE�HSR�$@RSDQM�$TQNOD@M�NODQ@SHNMR�HM�SGD�!@KSHB�RS@SDR�@MC�/NK@MC�SN�/NVRYDBGMX�9@JK@C�4ADYOHDBYDM�R@ �3GD�R@KD�NE�SGD�ATRHMDRR�HM�+@SUH@�BNLOKDSDC�NM��)TMD��SGD�CHRONR@K�NE�SGD�NODQ@SHNM�HM�/NK@MC�V@R�ãM@KHRDC�NM��2DOSDLADQ�@MC�SGNRD�HM�+HSGT@MH@�@MC�$RSNMH@�D@BG�BKNRDC�NM��.BSNADQ �3GD�&QNTO�@KRN�RNKC�HSR�3G@HK@MC�@RRNBH@SD�NM� ��#DBDLADQ�SN�+D@O%QNF�3G@HK@MC�'NKCHMFR�+SC�@MC�,HMCN� RH@�(MUDRSLDMSR�+HLHSDC �3GD�SNS@K�F@HMR�QD@KHRDC�NM�SGDRD�CHRONR@KR�V@R�`��L�@ESDQ�S@W

$@BG�NE�SGDRD�ATRHMDRRDR�G@R�ADDM�BK@RRHãDC�@R�@�CHRBNMSHMTDC�NODQ@SHNM�HM�@BBNQC@MBD�VHSG�SGD�&QNTO�R�@BBNTMSHMF�ONKHBHDR



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3GD�QDUDMTD��DWODMRDR�@MC�QDK@SDC�HMBNLD�S@W�DWODMRD�HM��@MC��QDK@SHMF�SN�SGDRD�CHRBNMSHMTDC�NODQ@SHNMR�CTQHMF� SGD�XD@Q�HR�RDS�NTS�ADKNV �

Discontinued income statementENQ�SGD�XD@Q�DMCDC��#DBDLADQ��

Note2014

£m�� `L

Income

&QNRR�VQHSSDM�OQDLHTLR 584 ��

+DRR��QDHMRTQ@MBD�OQDLHTLR (86) ��

-DS�VQHSSDM�OQDLHTLR 498 599

"G@MFD�HM�SGD�FQNRR�OQNUHRHNM�ENQ�TMD@QMDC�OQDLHTLR 17 �

+DRR��BG@MFD�HM�OQNUHRHNM�ENQ�TMD@QMDC�OQDLHTLR��QDHMRTQDQR��RG@QD (2) ��

"G@MFD�HM�OQNUHRHNM�ENQ�TMD@QMDC�OQDLHTLR 15 �

-DS�D@QMDC�OQDLHTLR 513 599

-DS�HMUDRSLDMS�QDSTQM � 14 ��

Total income 527 ��

Expenses

&QNRR�"K@HLR�HMBTQQDC (339) ��

+DRR��BK@HLR�QDBNUDQHDR�EQNL�QDHMRTQDQR 28 ��

-DS�BK@HLR � (311) ��

4MCDQVQHSHMF�@MC�ONKHBX�@BPTHRHSHNM�BNRSR (173) ��

4MVHMC�NE�CHRBNTMS – ��

.SGDQ�NODQ@SHMF�DWODMRDR 5 (7) ��

Total expenses (491) ��

&@HM�NM�CHRONR@K �B 172 �

-DS�RG@QD�NE�KNRR�@ESDQ�S@W�NE�@RRNBH@SDR 5 �

/QNëS��KNRR��ADENQD�S@W 213 ��

(MBNLD�S@W�DWODMRD � (15) �

/QNëS��KNRR��@ESDQ�S@W 198 ��

.SGDQ�BNLOQDGDMRHUD�HMBNLD��MDS�NE�S@W��EQNL�CHRBNMSHMTDC�NODQ@SHNMR�NE�£12m��`��L��BNLOQHRDR�NE�£10m�TMQD@KHRDC�F@HMR�NM�@U@HK@AKD�ENQ�R@KD�HMUDRSLDMSR��TMQD@KHRDC�KNRRDR�`��L��HMBKTCHMF��`��L�NE�F@HMR�QDBXBKDC�SN�SGD�HMBNLD�RS@SDLDMS��KDRR�TMQD@KHRDC�F@HMR�QDBXBKDC�SN�OQNãS�NM�CHRONR@K�NE�CHRBNMSHMTDC�NODQ@SHNMR�NE�£8m��MDS�NE�£1m�S@W��`MHK��@MC�ENQDHFM�DWBG@MFD�F@HMR�NE�£2L��`MHK��@MC�ENQDHFM�DWBG@MFD�KNRRDR�NE�£8m��`MHK��QDBXBKDC�SN�OQNãS�NE�NM�CHRONR@K� NE�CHRBNMSHMTDC�NODQ@SHNMR


��

A��'DKC�ENQ�2@KDR�CHRONR@K�FQNTO

(S@KX `L

2HMF@ONQD `L

"GHM@ `L

'NMF�*NMF `L

Total £m

RRDSR�BK@RRHëDC�@R�GDKC�ENQ�R@KD�

/QNODQSX�@MC�DPTHOLDMS � 1 � � 1

(MUDRSLDMSR �� 401

1DHMRTQDQR��RG@QD�NE�HMRTQ@MBD�BNMSQ@BS�KH@AHKHSHDR �� 15 �� 129

(MRTQ@MBD�@MC�QDHMRTQ@MBD�CDASNQR �� 143

.SGDQ�CDASNQR�@MC�NSGDQ�@RRDSR � � � 1 10

"@RG�@MC�B@RG�DPTHU@KDMSR �� 9 �� 124

3NS@K�@RRDSR�NE�CHRONR@K�FQNTOR �� 808

+H@AHKHSHDR�CHQDBSKX�@RRNBH@SDC�VHSG�@RRDSR�BK@RRHëDC�@R�GDKC�ENQ�R@KD�

(MRTQ@MBD�BNMSQ@BS�KH@AHKHSHDR �� 671

(MRTQ@MBD�@MC�QDHMRTQ@MBD�KH@AHKHSHDR �� 9 39

/QNUHRHNMR�@MC�NSGDQ�KH@AHKHSHDR � �� 20

+H@AHKHSHDR�NE�CHRONR@K�FQNTOR �� 730

3NS@K�MDS�@RRDSR�NE�CHRONR@K�FQNTOR �� 78

RRDSR�GDKC�ENQ�R@KD�@S��#DBDLADQ��BNLOQHRDC�SGD�&QNTO�R�2VDCHRG�GD@CPT@QSDQR �3GD�OQNODQSX�V@R�CDRHFM@SDC� @R�GDKC�ENQ�R@KD�ENKKNVHMF�@�CDBHRHNM�SN�L@JD�SGD�CHRONR@K�@MC�SGD�R@KD�V@R�BNMRHCDQDC�GHFGKX�OQNA@AKD �(M�)@MT@QX�� SGD�&QNTO�DMSDQDC�HMSN�@�R@KD�@MC�KD@RDA@BJ�@FQDDLDMS�ENQ�SGD�OQNODQSX�@MC�SGHR�SQ@MR@BSHNM�V@R�BNLOKDSDC�HM�,@QBG��QDRTKSHMF�@�F@HM�NE�`��L

B��#HRBNMSHMTDC�NODQ@SHNMR�CHRONRDC�NE�CTQHMF�SGD�XD@Q

+@SUH@`L

+HSGT@MH@`L

$RSNMH@`L

Total Baltics

£m/NK@MC

`L

3G@HK@MC� RRNBH@SD

`LTotal

£m

"NMRHCDQ@SHNM�QDBDHUDC��MNSD�� 215 �� 326

+DRR�SQ@MR@BSHNM�BNRSR� �� (8) �� (12)

-DS�OQNBDDCR�EQNL�R@KDR �� 207 �� 314

"@QQXHMF�U@KTD�NE�MDS�@RRDSR�CHRONRDC�NE �� (79) �� (140)

&@HMR�NM�R@KD�ADENQD�QDBXBKHMF�NE�HSDLR�EQNL�NSGDQ�BNLOQDGDMRHUD�HMBNLD �� 128 �� 19 174

1DBXBKD�NE�HSDLR�EQNL�NSGDQ�BNLOQDGDMRHUD�HMBNLD�NM�CHRONR@KR

%NQDHFM�BTQQDMBX�SQ@MRK@SHNM�QDRDQUD � �� (9) �� (8)

4MQD@KHRDC�F@HMR�NM�@U@HK@AKD�ENQ�R@KD�HMUDRSLDMSR 1 � � 5 � � 9

1DK@SDC�S@W � � � - �� (1)

/QNãSR�NM�R@KDR�NE�CHRBNMSHMTDC�NODQ@SHNMR�ADENQD�S@W �� 124 �� 174

3@W�NM�CHRONR@K � � �� (2) � � (2)

/QNëSR�NM�R@KDR�NE�CHRBNMSHMTDC�NODQ@SHNMR�@ESDQ�S@W �� 122 �� 172

-NSD�� (MBKTCDC�HM�SGD�BNMRHCDQ@SHNM�QDBDHUDC�@QD�F@HMR�NE�`��L�HM�QDRODBS�NE�ENQV@QC�DWBG@MFD�BNMSQ@BSR �3GD�BNMSQ@BSR�VDQD�DMSDQDC�HMSN�@S�SGD�C@SD� NE�@MMNTMBDLDMS�NE�SGD�R@KDR�SN�QDCTBD�ENQDHFM�DWBG@MFD�QHRJ�OQHNQ�SN�SGD�BNLOKDSHNM�NE�SGD�CHRONR@KR



��

C��.SGDQ�ATRHMDRR�CHRONR@K�BNLOKDSDC�HM�SGD�XD@Q(MBKTCDC�VHSGHM�`��L�NE�F@HMR�NM�CHRONR@KR�CTQHMF�SGD�XD@Q��`��L�QDK@SDR�SN�SGD�CHRONR@K�NE�-NQ@WHR�"@OHS@K�"NQONQ@SHNM� HM�"@M@C@�SN�@�RTARHCH@QX�NE� QSGTQ�) �&@KK@FGDQ�@MC�"N�@MC�SGD�L@INQHSX�NE�SGD�QDL@HMCDQ�QDK@SDR�SN�@RRDSR�OQDUHNTRKX�GDKC� ENQ�R@KD�VHSGHM�SGD�2B@MCHM@UH@M�QDFHNM

3. NET INVESTMENT RETURN �RTLL@QX�NE�SGD�FQNRR�HMUDRSLDMS�HMBNLD��MDS�QD@KHRDC�@MC�MDS�TMQD@KHRDC�F@HMR��KNRRDR��HMBKTCDC�HM�SGD�HMBNLD�RS@SDLDMS� HR�FHUDM�ADKNV


(MUDRSLDMS� HMBNLD

-DS�QD@KHRDC�F@HMR��KNRRDR�

-DS�TMQD@KHRDC�F@HMR��KNRRDR� (LO@HQLDMSR

3NS@K�HMUDRSLDMS�QDSTQM

2014

£m

��1DRS@SDC

`L

2014

£m

��1DRS@SDC

`L

2014

£m

��

`L

2014

£m

��

`L

2014

£m

��1DRS@SDC

`L

(MUDRSLDMS�OQNODQSX 28 �� 2 � 32 9 – � 62 ��

$PTHSX�RDBTQHSHDR

U@HK@AKD�ENQ�R@KD 18 �� 71 �� – � – �� 89 ��

S�E@HQ�U@KTD�SGQNTFG�SGD�HMBNLD�RS@SDLDMS 5 � (1) 1 (3) �� – � 1 �

#DAS�RDBTQHSHDR

U@HK@AKD�ENQ�R@KD 342 �� 11 9 – � (4) � 349 ��

S�E@HQ�U@KTD�SGQNTFG�SGD�HMBNLD�RS@SDLDMS – � – � (10) �� – � (10) ��

.SGDQ�HMUDRSLDMSR�

+N@MR�RDBTQDC�AX�LNQSF@FDR 1 1 – � – � – � 1 1

.SGDQ�KN@MR 1 � – 1 – � – �� 1 ��

.SGDQ 1 � 1 � (1) 1 – � 1 5

#DONRHSR��B@RG�@MC�B@RG�DPTHU@KDMSR 29 �� (2) � – �� – � 27 ��

#DQHU@SHUDR 1 � 3 �� (4) �� – � – ��

Continuing operations 426 �� 85 �� 14 �� (4) �� 521 ��

Discontinued operation 14 �� – � – � – � 14 ��

Net investment return 440 �� 85 �� 14 �� (4) �� 535 ��

3GD�MDS�HMUDRSLDMS�QDSTQM�NM�CDQHU@SHUDR�QDOQDRDMSR�SGD�HMUDRSLDMS�QDSTQM�NM�ãM@MBH@K�@RRDSR�SG@S�SGD�&QNTO�HR�QDPTHQDC� SN�BK@RRHEX�@R�GDKC�ENQ�SQ@CHMF�HMUDRSLDMSR �3GD�CDQHU@SHUDR�@QD�TRDC�SN�OQNUHCD�@�OQNSDBSHNM�GDCFD�ENQ�E@HQ�U@KTD�BG@MFDR� NE�@RRDSR�GDKC�VHSGHM�SGD�HMUDRSLDMS�ONQSENKHN�@MC�ENQDHFM�BTQQDMBX�B@RGâNVR�

#TQHMF��SGD�@BBQTDC�HMSDQDRS�HMBNLD�NM�HLO@HQDC�ãM@MBH@K�@RRDSR�V@R�£nil��`MHK�

#HQDBS�NODQ@SHMF�DWODMRDR��HMBKTCHMF�QDO@HQR�@MC�L@HMSDM@MBD��@QHRHMF�EQNL�HMUDRSLDMS�OQNODQSHDR�VDQD�MNS�L@SDQH@K�HM�� NQ��


159

4MQD@KHRDC�F@HMR�@MC�KNRRDR�QDBNFMHRDC�HM�NSGDQ�BNLOQDGDMRHUD�HMBNLD�ENQ�@U@HK@AKD�ENQ�R@KD�@RRDSR�@QD�@R�ENKKNVR�

-DS�TMQD@KHRDC�F@HMR��KNRRDR�

-DS�QD@KHRDC��F@HMR��KNRRDR�SQ@MREDQQDC�SN�HMBNLD�RS@SDLDMS

(LO@HQLDMSR�SQ@MREDQQDC�SN�HMBNLD�

RS@SDLDMS

-DS�LNUDLDMS�QDBNFMHRDC�HM�NSGDQ�

BNLOQDGDMRHUD�HMBNLD


2014

£m

��1DRS@SDC

`L

2014

£m

��1DRS@SDC

`L

2014

£m

��

`L

2014

£m

��1DRS@SDC

`L

$PTHSX�RDBTQHSHDR 23 �� (71) �� – � (48) �

#DAS�RDBTQHSHDR 365 �� (11) �� 4 � 358 ��

.SGDQ (1) �� – � – � (1) �

Continuing operations 387 �� (82) �� 4 � 309 ��

Discontinued operations 10 �� (9) �� – � 1 ��

Total 397 �� (91) �� 4 � 310 ��

3GD�`�L�F@HM�NM�CHRBNMSHMTDC�NODQ@SHNMR�G@R�ADDM�QDBXBKDC�SN�SGD�F@HM�NM�R@KD�NE�CHRBNMSHMTDC�NODQ@SHNMR�MNSD��@�

4. NET CLAIMS

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#HRONR@KR (171) – (93) (291) (96) (651)

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Accumulated amortisation

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LNQSHR@SHNM�BG@QFD – 2 19 50 28 99

LNQSHR@SHNM�NM�CHRONR@KR – – (66) (94) (52) (212)

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Accumulated impairment

S��)@MT@QX�� 177 – 17 222 – 416

(LO@HQLDMS�BG@QFD 55 – 6 38 4 103

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2B@MCHM@UH@ 8% �í 2% �í

"@M@C@ 9% �í��í 3% �í

4*�@MC�(QDK@MC 9% – 10% �í 2% �í��í

+@SHM� LDQHB@ 11% – 29% ��í��í 8% – 14% �í��í

-NM�BNQD 9% – 19% �í��í 5% – 14% �í��í

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Sensitivity analysis3GD�&NNCVHKK�@KKNB@SDC�SN�SGD�(QHRG�"&4�G@R�ADDM�HLO@HQDC�HM�NQCDQ�SG@S�SGD�"&4�B@QQXHMF�U@KTD�HR�MNS�FQD@SDQ�SG@M�HSR�U@KTD�HM�TRD � BBNQCHMFKX�@MX�@CUDQRD�LNUDLDMS�HM�SGD�JDX�@RRTLOSHNMR�TRDC��SDQLHM@K�FQNVSG�Q@SD�NE�� í�@MC�CHRBNTMS�Q@SD�NE�� í��BNTKC�QDRTKS�HM�ETQSGDQ�HLO@HQLDMS�NE�SGD�QDL@HMHMF�`��L�NE�&NNCVHKK�@R�HMCHB@SDC�HM�SGD�S@AKD�ADKNV �

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Cost/valuation

S��)@MT@QX�� 65 333 398

CCHSHNMR – 42 42

#HRONR@K�NE�RTARHCH@QHDR (10) (24) (34)

#HRONR@KR – (30) (30)

1DU@KT@SHNM�@CITRSLDMSR 4 – 4

$WBG@MFD�@CITRSLDMS (2) (14) (16)

3Q@MREDQ�SN�GDKC�ENQ�R@KD – (1) (1)

S��#DBDLADQ�� 57 306 363

Accumulated depreciation

S��)@MT@QX�� – 238 238

#DOQDBH@SHNM�BG@QFD 1 28 29

#DOQDBH@SHNM�NM�CHRONR@KR – (44) (44)

$WBG@MFD�@CITRSLDMS – (11) (11)

S��#DBDLADQ�� 1 211 212

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Group NBBTOHDC�OQNODQSX��K@MC�@MC�ATHKCHMFR

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Cost/valuation


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/TQBG@RDR 22 ��

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13. FINANCIAL ASSETS

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/QDRDMS�U@KTD�NE�ETMCDC�NAKHF@SHNMR 7,044 422 7,466 ��

/QDRDMS�U@KTD�NE�TMETMCDC�NAKHF@SHNMR 8 124 132 ��

/QDRDMS�U@KTD�NE�NAKHF@SHNMR 7,052 546 7,598 ��

$PTHSHDR 965 143 1,108 ��

&NUDQMLDMS�CDAS 4,047 145 4,192 ��

-NM�FNUDQMLDMS�CDAS 2,140 115 2,255 ��

#DQHU@SHUDR 698 – 698 ��

.SGDQ��HMBKTCHMF�HMEQ@RSQTBSTQD��BNLLNCHSHDR��GDCFD�ETMCR��KN@MR� – – – �

2DBTQHSHDR�VHSG�PTNSDC�L@QJDS�OQHBD�HM�@M�@BSHUD�L@QJDS 7,850 403 8,253 ��

/QNODQSX 199 – 199 ��

"@RG 63 4 67 ��

.SGDQ��HMBKTCHMF�HMEQ@RSQTBSTQD��BNLLNCHSHDR��GDCFD�ETMCR��KN@MR� 506 – 506 ��

.SGDQ�HMUDRSLDMSR 768 4 772 ��

5@KTD�NE�@RRDS�@MC�KNMFDUHSX�RV@OR (1,525) – (1,525) ��

3NS@K�@RRDSR�HM�SGD�RBGDLDR 7,093 407 7,500 ��

3NS@K�CDëBHS 41 (139) (98) ��

#DãMDC�ADMDãS�ODMRHNM�RBGDLDR 41 (76) (35) ��

.SGDQ�ONRS�QDSHQDLDMS�ADMDãSR – (63) (63) ��

2BGDLDR�HM�RTQOKTR��MNSD�� 127 2 129 ��

2BGDLDR�HM�CDãBHS��MNSD�� (86) (141) (227) ��

3GD�4*�ODMRHNM�RBGDLDR�CN�MNS�GNKC�@MX�NE�SGD�&QNTO�R�NVM�SQ@MREDQ@AKD�ãM@MBH@K�HMRSQTLDMSR�@R�OK@M�@RRDSR��@MC�MN�OQNODQSX�GDKC�AX�SGD�RBGDLDR�HR�NBBTOHDC�AX�SGD�&QNTO �



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"TQQDMS�RDQUHBD�BNRSR 29 ��

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(MSDQDRS�BNRS 305 ��

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BST@QH@K�KNRRDR 821 ��

&@HMR�NM�BTQS@HKLDMSR (8) �

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$WBG@MFD�Q@SD�@CITRSLDMS (18) ��

1DSHQDLDMS�ADMDëS�NAKHF@SHNMR�@S��#DBDLADQ 7,598 ��

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1DSTQM�NM�RBGDLD�@RRDSR�KDRR�@LNTMSR�HMBKTCDC�HM�ODMRHNM�MDS�HMSDQDRS�BNRS 821 ��

"NMSQHATSHNMR�AX�SGD�&QNTO 114 ��

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2DSSKDLDMSR (8) �

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3GD�ENKKNVHMF�SQ@MR@BSHNMR�VDQD�B@QQHDC�NTS�VHSG�QDK@SDC�O@QSHDR�

*DX�L@M@FDLDMS�BNLODMR@SHNM

2014£m

��`L

2@K@QHDR�@MC�NSGDQ�RGNQS�SDQL�DLOKNXDD�ADMDãSR 7 �

2G@QD�A@RDC�O@XLDMSR 1 ��

!NMTR�@V@QCR 3 1

/DMRHNM�ADMDãSR - 1

Total 11 9

*DX�L@M@FDLDMS�ODQRNMMDK�BNLOQHRD�LDLADQR�NE�SGD�&QNTO�$WDBTSHUD�"NLLHSSDD��$WDBTSHUD�#HQDBSNQR��@MC�-NM�$WDBTSHUD�#HQDBSNQR



��

(MBKTCDC�HM�R@K@QHDR�@MC�NSGDQ�RGNQS�SDQL�DLOKNXDD�ADMDãSR�@MC�ANMTR�@V@QCR�HR�£3,899,000 ��`��O@HC�HM�QDRODBS�NE�CHQDBSNQR �3GDRD�@LNTMSR�DWBKTCD�SGD�U@KTD�NE�RG@QD�NOSHNMR�FQ@MSDC�SN�CHQDBSNQR�@MC�F@HMR�L@CD�NM�SGD�DWDQBHRD�NE�RTBG�NOSHNMR��&QNTO�BNMSQHATSHNMR�O@HC�HM�QDRODBS�NE�ODMRHNM�RBGDLDR�@MC�B@RG�NQ�NSGDQ�@RRDSR�QDBDHUDC�NQ�QDBDHU@AKD�TMCDQ�KNMF�SDQL�HMBDMSHUD�RBGDLDR �3GD�SNS@K�U@KTD�NE�SGD�CHQDBSNQR��QDLTMDQ@SHNM��HMBKTCHMF�U@KTDR�ENQ�SGDRD�DWBKTCDC�HSDLR��@MC�NSGDQ�CDS@HKR�@QD�CHRBKNRDC�HM�SGD�QDLTMDQ@SHNM�QDONQS

�MTLADQ�NE�SGD�#HQDBSNQR��NSGDQ�JDX�L@M@FDQR��SGDHQ�BKNRD�E@LHKHDR�@MC�DMSHSHDR�TMCDQ�SGDHQ�BNMSQNK�G@UD�FDMDQ@K�HMRTQ@MBD�ONKHBHDR�VHSG�RTARHCH@QX�BNLO@MHDR�NE�SGD�&QNTO �2TBG�ONKHBHDR�@QD�@U@HK@AKD�@S�CHRBNTMSDC�Q@SDR�SN�@KK�DLOKNXDDR�HMBKTCHMF�$WDBTSHUD�#HQDBSNQR

S��#DBDLADQ��SGDQD�V@R�@M�HMSDQDRS�EQDD�KN@M�SNS@KKHMF�`��NTSRS@MCHMF�SN�@�LDLADQ�NE�SGD�JDX�L@M@FDLDMS�SD@L�TMCDQ�SGD�RS@MC@QC�SDQLR�NE�SGD�&QNTO�R�4*�"@Q�.VMDQRGHO�2BGDLD��VGHBG�HR�NODM�SN�@KK�4*�L@M@FDQR�VHSGHM�@�PT@KHEXHMF� R@K@QX�A@MC �3GD�A@K@MBD�V@R�QDO@HC�CTQHMF��

34. COMMITMENTS

Capital Commitments3GD�&QNTO�R�RHFMHãB@MS�B@OHS@K�BNLLHSLDMSR�HM�QDRODBS�NE�OQNODQSX�@MC�DPTHOLDMS�@MC�HMS@MFHAKD�@RRDSR�@QD�CDS@HKDC�HM�SGD�S@AKD�ADKNV�

2014£m

��`L

/QNODQSX�@MC�DPTHOLDMS 11 9

(MS@MFHAKD�@RRDSR 39 ��

Total 50 ��

Operating lease commitments3GD�&QNTO�KD@RDR�U@QHNTR�NTSKDSR�@MC�NEãBDR�TMCDQ�MNM�B@MBDKK@AKD�NODQ@SHMF�KD@RD�@FQDDLDMSR �3GD�KD@RDR�G@UD�U@QXHMF�SDQLR��DRB@K@SHNM�BK@TRDR�@MC�QDMDV@K�QHFGSR

.ODQ@SHMF�KD@RD�BNLLHSLDMSR�VGDQD�SGD�&QNTO�HR�SGD�KDRRDD3GD�ETSTQD�@FFQDF@SD�LHMHLTL�KD@RD�O@XLDMSR�TMCDQ�MNM�B@MBDKK@AKD�NODQ@SHMF�KD@RDR�@QD�@R�ENKKNVR�

+@MC�@MC�ATHKCHMFR .SGDQ

2014£m

��`L

2014£m

��`L

.MD�XD@Q�NQ�KDRR 47 �� 2 �

!DSVDDM�NMD�@MC�ãUD�XD@QR 137 �� 2 �

ESDQ�ãUD�XD@QR 108 �� – �

292 �� 4 �

1DBNUDQHDR�TMCDQ�RTA�SDM@MBHDR (8) �� – �

Total 284 �� 4 �


199

.ODQ@SHMF�KD@RD�BNLLHSLDMSR�VGDQD�SGD�&QNTO�HR�SGD�KDRRNQ� � � �3GD�ETSTQD�@FFQDF@SD�LHMHLTL�KD@RD�O@XLDMSR�TMCDQ�MNM�B@MBDKK@AKD�NODQ@SHMF�KD@RDR�@QD�@R�ENKKNVR�

+@MC�@MC�ATHKCHMFR

2014£m

��`L

.MD�XD@Q�NQ�KDRR 21 ��

!DSVDDM�NMD�@MC�ãUD�XD@QR 74 ��

ESDQ�ãUD�XD@QR 80 ��

Total 175 ��

Funding commitments to structured entities3GD�ETSTQD�BNLLHSLDMSR�SN�RSQTBSTQDC�DMSHSHDR�@QD�CHRBKNRDC�HM�SGD�QHRJ�L@M@FDLDMS�RDBSHNM�NE�SGDRD�ãM@MBH@K�RS@SDLDMSR

�� $5$-32� %3$1�3'$�1$/.13(-&�/$1(.#2TARDPTDMS�SN�SGD�XD@Q�DMC�SGD�&QNTO�@MMNTMBDC�SGD�HMSDMSHNM�SN�RDKK�HSR��í�HMSDQDRS�HM�1NX@K�2TMC@Q@L� KKH@MBD�(MRTQ@MBD�"NLO@MX�+SC��HSR�@RRNBH@SD�HM�(MCH@ �3GD�OQNBDDCR�NE�SGD�R@KD�@QD�DWODBSDC�SN�AD�@QNTMC�`��L��FDMDQ@SHMF�@M�DWODBSDC�OQNãS� NE�@OOQNWHL@SDKX�`��L�@MC�BNLOKDSHNM�NE�SGD�R@KD�HR�RTAIDBS�SN�ãM@K�QDFTK@SNQX�@OOQNU@K �



200

2014£m

2013£m

�+NRR��OQNãS�ENQ�SGD�XD@Q�MDS�NE�S@W (9) 271

%@HQ�U@KTD�F@HMR��KNRRDR��MDS�NE�S@W 357 (1,371)

Total comprehensive income/(expense) for the year 348 (1,100)

3GD�KNRR�ENQ�SGD�XD@Q�MDS�NE�S@W�HMBKTCDR�@�S@W�BQDCHS�NE�£7m��BG@QFD�`�L� �3GDQD�HR�MN�S@W�QDK@SHMF�SN�E@HQ�U@KTD�F@HMR

/@QDMS�BNLO@MX�RS@SDLDMS�NE�BG@MFDR�HM�DPTHSXENQ�SGD�XD@Q�DMCDC��#DBDLADQ��

.QCHM@QX�RG@QD�B@OHS@K�

£m

.QCHM@QX�RG@QD�OQDLHTL�

£m

/QDEDQDMBD�RG@QDR�

£m

1DU@KT@SHNM�QDRDQUDR�

£m

"@OHS@K�QDCDLOSHNM�

QDRDQUD�£m

1DS@HMDC�D@QMHMFR�

£m3NS@K�£m

!@K@MBD�@S��)@MT@QX�� 989 717 125 2,275 8 986 ��

/QNãS�ENQ�SGD�XD@Q�MDS�NE�S@W - - - - - 271 ��

%@HQ�U@KTD�KNRRDR�MDS�NE�S@W - - - (1,371) - - (1,371)

3NS@K�BNLOQDGDMRHUD�DWODMRD�ENQ�SGD�XD@Q - - - (1,371) - 271 (1,100)

#HUHCDMCR��O@HC��MNSD�� - - - - - (232) (232)

#HUHCDMCR��(RRTDC�AX�RBQHO 18 (18) - - - 75 ��

(RRTDC�ENQ�B@RG��MNSD�� 2 5 - - - - ��

2G@QD�A@RDC�O@XLDMSR 3 - - - - 5 ��

!@K@MBD�@S��)@MT@QX�� 1,012 �� 125 �� 8 1,105 ��

+NRR�ENQ�SGD�XD@Q�MDS�NE�S@W - - - - - (9) (9)

%@HQ�U@KTD�F@HMR�MDS�NE�S@W - - - 357 - - 357

3NS@K�BNLOQDGDMRHUD�HMBNLD�ENQ�SGD�XD@Q - - - 357 - (9) 348

#HUHCDMCR��O@HC��MNSD�� - - - - - (9) (9)

(RRTDC�ENQ�B@RG��MNSD�� 382 371 - - - - 753

2G@QD�BNMRNKHC@SHNM��MNSD�� (381) - - - 381 - -

2G@QD�A@RDC�O@XLDMSR 2 - - - - 8 10

Balance at 31 December 2014 1,015 1,075 125 1,261 389 1,095 4,960

3GD�LNUDLDMS�HM�DPTHSX�ENQ�SGD�XD@Q�MDS�NE�S@W�HMBKTCDR�@�MDS�S@W�BG@QFD�NE�`MHK��`�L�

3GD�@SS@BGDC�MNSDR�ENQL�@M�HMSDFQ@K�O@QS�NE�SGDRD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR

/@QDMS�BNLO@MX�RS@SDLDMS�NE�BNLOQDGDMRHUD�HMBNLDENQ�SGD�XD@Q�DMCDC��#DBDLADQ��

201

-NSDR2014

£m2013£m

Assets

%HWSTQDR�@MC�ãSSHMFR - 1

(MS@MFHAKD�@RRDSR 4 2

(MUDRSLDMSR 2 4,408 5,109

LNTMSR�NVDC�AX�RTARHCH@QHDR 9 2,489 1,575

"TQQDMS�S@W�@RRDSR 6 9 8

#DEDQQDC�S@W�@RRDSR 6 9 11

.SGDQ�CDASNQR�@MC�NSGDQ�@RRDSR 3 10 10

2,517 ��

"@RG�@MC�B@RG�DPTHU@KDMSR 10 3

Total assets 6,939 6,719

Equity and liabilities

Equity

2G@QD�B@OHS@K � 1,140 1,137

1DRDQUDR 2,724 1,616

1DS@HMDC�D@QMHMFR 1,096 1,105

Total equity and reserves 4,960 3,858

Liabilities

LNTMSR�NVDC�SN�RTARHCH@QHDR 9 639 ��

+N@M�B@OHS@K 5 1,243 1,309

"TQQDMS�S@W�KH@AHKHSHDR 6 2 2

BBQT@KR�@MC�NSGDQ�KH@AHKHSHDR 95 76

Total liabilities 1,979 2,861

Total equity, reserves and liabilities 6,939 6,719


3GD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR�VDQD�@OOQNUDC�NM��%DAQT@QX��AX�SGD�!N@QC�NE�#HQDBSNQR�@MC�@QD�RHFMDC�NM�HSR�ADG@KE�AX�

Richard Houghton&QNTO�"GHDE�%HM@MBH@K�.EãBDQ

/@QDMS�BNLO@MX�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM@R�@S��#DBDLADQ��



202

-NSDR2014

£m2013£m

-DS�B@RGêNVR�EQNL�NODQ@SHMF�@BSHUHSHDR 8 (102) 268

/TQBG@RD�NE�HMS@MFHAKD�@RRDSR (1) �

-DS�LNUDLDMS�HM�@LNTMSR�NVDC�AX�RTARHCH@QHDR (175) (118)

-DS�B@RGêNVR�EQNL�HMUDRSHMF�@BSHUHSHDR (176) (118)

/QNBDDCR�EQNL�HRRTD�NE�RG@QD�B@OHS@K 753 7

#HUHCDMCR�O@HC (9) (157)

(MUDRSLDMS�HM�RTARHCH@QX (395) �

2TANQCHM@SDC�CDAS��QDO@XLDMSR (459) �

2TANQCHM@SDC�CDAS��MDV�HRRTD 395 �

-DS�B@RGêNVR�EQNL�ëM@MBHMF�@BSHUHSHDR 285 (150)

-DS�HMBQD@RD�HM�B@RG�@MC�B@RG�DPTHU@KDMSR 7 �

"@RG�@MC�B@RG�DPTHU@KDMSR�@S�ADFHMMHMF�NE�SGD�XD@Q 3 3

Cash and cash equivalents at end of the year 10 3


/@QDMS�BNLO@MX�RS@SDLDMS�NE�B@RGâNVRENQ�SGD�XD@Q�DMCDC��#DBDLADQ��

203

1. SIGNIFICANT ACCOUNTING POLICIES12 �(MRTQ@MBD�&QNTO�OKB��HMBNQONQ@SDC�HM�$MFK@MC�@MC�6@KDR��HR�SGD�TKSHL@SD�/@QDMS�"NLO@MX��SGD�"NLO@MX��NE�SGD�12 �FQNTO�NE�BNLO@MHDR �3GD�OQHMBHO@K�@BSHUHSX�NE�SGD�"NLO@MX�HR�SN�GNKC�HMUDRSLDMSR�HM�HSR�RTARHCH@QHDR�@MC�SGD�QDBDHOS�@MC�O@XLDMS�NE�CHUHCDMCR

3GDRD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR�@QD�OQDO@QDC�HM�@BBNQC@MBD�VHSG�(MSDQM@SHNM@K�%HM@MBH@K�1DONQSHMF�2S@MC@QCR��(%12��@R�@CNOSDC�AX�SGD�$TQNOD@M�4MHNM

$WBDOS�VGDQD�NSGDQVHRD�RS@SDC��@KK�ãFTQDR�HMBKTCDC�HM�SGD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR�@QD�OQDRDMSDC�HM�LHKKHNMR�NE�/NTMCR�2SDQKHMF��2SDQKHMF��RGNVM�@R�`L��QNTMCDC�SN�SGD�MD@QDRS�LHKKHNM

(M�@BBNQC@MBD�VHSG�RDBSHNM��NE�"NLO@MHDR� BS��SGD�"NLO@MX�R�HMBNLD�RS@SDLDMS�@MC�QDK@SDC�MNSDR�G@UD�MNS�ADDM�OQDRDMSDC�HM�SGDRD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR

3GD�@BBNTMSHMF�ONKHBHDR�SG@S�@QD�TRDC�HM�OQDO@Q@SHNM�NE�SGDRD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR�@QD�BNMRHRSDMS�VHSG�SGD�@BBNTMSHMF�ONKHBHDR�TRDC�HM�OQDO@Q@SHNM�NE�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR�NE�12 �(MRTQ@MBD�&QNTO�OKB�@R�RDS�NTS�HM�SGNRD�ãM@MBH@K�RS@SDLDMSR

3GD�@CCHSHNM@K�@BBNTMSHMF�ONKHBHDR�SG@S�@QD�RODBHãB�SN�SGD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR�NE�SGD�"NLO@MX�@QD�RDS�NTS�ADKNV

Investment in subsidiaries3GD�"NLO@MX�@BBNTMSR�ENQ�HSR�HMUDRSLDMSR�HM�CHQDBSKX�NVMDC�RTARHCH@QHDR�@R�@U@HK@AKD�ENQ�R@KD�ãM@MBH@K�@RRDSR��VGHBG�@QD�HMBKTCDC�HM�SGD�@BBNTMSR�@S�E@HQ�U@KTD

"G@MFDR�HM�SGD�E@HQ�U@KTD�NE�SGD�HMUDRSLDMSR�HM�RTARHCH@QHDR�@QD�QDBNFMHRDC�CHQDBSKX�HM�DPTHSX�HM�SGD�RS@SDLDMS�NE�BNLOQDGDMRHUD�HMBNLD �6GDQD�SGDQD�HR�@�CDBKHMD�HM�SGD�E@HQ�U@KTD�NE�@�CHQDBSKX�NVMDC�RTARHCH@QX�ADKNV�BNRS��@MC�SGDQD�HR�NAIDBSHUD�DUHCDMBD��SG@S�SGD�HMUDRSLDMS�HR�HLO@HQDC��SGD�BTLTK@SHUD�KNRR�SG@S�G@R�ADDM�QDBNFMHRDC�HM�DPTHSX�HR�QDLNUDC�EQNL�DPTHSX�@MC�QDBNFMHRDC�HM�SGD�HMBNLD�RS@SDLDMS

Dividend income#HUHCDMC�HMBNLD�EQNL�HMUDRSLDMSR�HM�RTARHCH@QHDR�HR�QDBNFMHRDC�VGDM�SGD�QHFGS�SN�QDBDHUD�O@XLDMS�HR�DRS@AKHRGDC

2. INVESTMENTS

2014£m

2013£m

(MUDRSLDMSR�@S��)@MT@QX��@S�U@KT@SHNM 5,109 ��

CCHSHNMR�CTQHMF�SGD�XD@Q 395 �

(LO@HQLDMS�CTQHMF�SGD�XD@Q (1,158) �

%@HQ�U@KTD�@CITRSLDMSR 62 (1,370)

Investments at 31 December – at valuation 4,408 5,109

3GD�A@K@MBD�@S��#DBDLADQ�BNLOQHRDR�

2014£m

2013£m

(MUDRSLDMS�HM�RTARHCH@QHDR 3,724 ��

+N@MR�SN�RTARHCH@QHDR 684 963

4,408 5,109

-NSDR�SN�SGD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR



��

3GD�HMUDRSLDMSR�HM�RTARHCH@QHDR�@QD�QDBNFMHRDC�HM�SGD�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM�@S�E@HQ�U@KTD�LD@RTQDC�HM�@BBNQC@MBD�VHSG�SGD�"NLO@MX�R�@BBNTMSHMF�ONKHBHDR �3GD�"NLO@MX�R�HMUDRSLDMSR�@QD�BK@RRHãDC�@R�KDUDK��ãM@MBH@K�@RRDSR �%@HQ�U@KTD�NE�SGD�"NLO@MX�R�RHFMHãB@MS�RTARHCH@QX�HR�CDSDQLHMDC�AX�QDEDQDMBD�SN�SGD�L@QJDS�U@KTD��CDQHUDC�EQNL�QDKDU@MS�HMCHBDR��NE�SGD�"NLO@MX�R�NQCHM@QX�RG@QDR�@MC�KN@M�B@OHS@K�HMRSQTLDMSR�@S�SGD�DMC�NE�SGD�QDONQSHMF�ODQHNC��ADHMF�SGD�LNRS�SQ@MRO@QDMS�HMCDODMCDMS�@U@HK@AKD�HMCHB@SNQ �3GD�L@QJDS�U@KTD�HR�@CITRSDC�ENQ�SGD�E@HQ�U@KTD�NE�SGD�"NLO@MX�R�OQDEDQDMBD�RG@QDR��@RRDSR�@MC�KH@AHKHSHDR��DWBKTCHMF�CHQDBSKX�NVMDC�RTARHCH@QHDR �3GD�@CITRSHMF�HSDLR�G@UD�ADDM�E@HQ�U@KTDC�AX�CDSDQLHMHMF�SGD�OQDRDMS�U@KTD�NE�ETSTQD�B@RGâNV�OQNIDBSHNMR��TRHMF�@M�@OOQNOQH@SD�@QL�R�KDMFSG�CHRBNTMS�Q@SD �3GD�QDL@HMHMF�RTARHCH@QHDR�@QD�GDKC�@S�E@HQ�U@KTD�VGHBG�G@R�ADDM�CDSDQLHMDC�SN�AD�MDS�@RRDS�U@KTD

3GD�#HQDBSNQR�ADKHDUD�SG@S�SGD�LDSGNCNKNFX�TRDC�RTOONQSR�SGD�HMBKTRHNM�NE�SGD�HMUDRSLDMSR�HM�RTARHCH@QHDR�HM�SGD�RS@SDLDMS�NE�ãM@MBH@K�ONRHSHNM��@S�SGD�E@HQ�U@KTDR�@RBQHADC�SN�SGDL �3GD�L@QJDS�U@KTD�NE�SGD�"NLO@MX�R�NQCHM@QX�RG@QDR�@S��#DBDLADQ��V@R�4.35p � �LNUDLDMS�NE��í�HM�SGD�RG@QD�OQHBD�VNTKC�G@UD�@M�HLO@BS�NE�£44m�NM�SGD�E@HQ�U@KTD

%TKK�CDS@HKR�NE�SGD�OQHMBHO@K�RTARHCH@QHDR�NE�SGD�"NLO@MX�@QD�RDS�NTS�HM�MNSD��SN�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR

3. OTHER DEBTORS AND OTHER ASSETS – TO BE SETTLED WITHIN 12 MONTHS

2014£m

2013£m

.SGDQ�OQDO@XLDMSR�@MC�@BBQTDC�HMBNLD 1 1

.SGDQ�CDASNQR 9 9

Total other debtors and other assets 10 10

4. SHARE CAPITAL%TKK�CDS@HKR�NE�SGD�RG@QD�B@OHS@K�NE�SGD�"NLO@MX�@QD�RDS�NTS�HM�MNSD��SN�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR

5. LOAN CAPITAL%TKK�CDS@HKR�NE�SGD�KN@M�B@OHS@K�NE�SGD�"NLO@MX�@QD�RDS�NTS�HM�MNSD��SN�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR

6. CURRENT AND DEFERRED TAX

RRDS +H@AHKHSX

2014£m

2013£m

2014£m

2013£m

3N�AD�RDSSKDC�VHSGHM��LNMSGR 9 8 – �

3N�AD�RDSSKDC�@ESDQ��LNMSGR – � 2 2

9 8 2 2

3GD�BTQQDMS�S@W�QDK@SHMF�SN�HSDLR�SG@S�@QD�BQDCHSDC�SN�DPTHSX�HR�£2m��`�L�

-NSDR�SN�SGD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR�BNMSHMTDC

205

Deferred tax assets#DEDQQDC�S@W�ENQ�SGD�BTQQDMS�XD@Q�HR�A@RDC�NM�@�Q@SD�NE�20%�� í� �3GD�ENKKNVHMF�@QD�SGD�L@INQ�CDEDQQDC�S@W�@RRDSR�QDBNFMHRDC�AX�SGD�"NLO@MX�@MC�LNUDLDMSR�CTQHMF�SGD�XD@Q�

2014 £m

��£m

.SGDQ�SDLONQ@QX�CHEEDQDMBDR 1 ��

1DBK@RRHãB@SHNM�NE�ANMCR 2 ��

BBDKDQ@SDC�B@OHS@K�@KKNV@MBDR 6 ��


3GD�LNUDLDMS�HM�SGD�MDS�CDEDQQDC�S@W�@RRDSR�QDBNFMHRDC�AX�SGD�"NLO@MX�V@R�@R�ENKKNVR�

2014 £m

��£m

-DS�CDEDQQDC�S@W�ONRHSHNM�@S��)@MT@QX 11 ��

LNTMS�BG@QFDC�SN�HMBNLD�RS@SDLDMS – ��

LNTMS�BG@QFDC�SN�DPTHSX (2) ��

$EEDBS�NE�BG@MFD�HM�S@W�Q@SDR��HMBNLD�RS@SDLDMS – ��

$EEDBS�NE�BG@MFD�HM�S@W�Q@SDR��DPTHSX – ��

Net deferred tax position at 31 December 9 ��

3GD�"NLO@MX�G@R�QDBNFMHRDC�@�CDEDQQDC�S@W�@RRDS�NE�£1m��`�L��HM�NSGDQ�SDLONQ@QX�CHEEDQDMBDR�HM�QDRODBS�NE�CDEDQQDC�S@W�QDKHDER�NE�£58m��`��L� �-N�CDEDQQDC�S@W�G@R�ADDM�QDBNFMHRDC�HM�QDRODBS�NE�£55m��`��L��NE�CDEDQQDC�S@W�QDKHDER�CTD�SN�SGD�TMOQDCHBS@AHKHSX�NE�ETSTQD�OQNãSR�RSQD@LR

-DS�CDEDQQDC�S@W�@RRDSR�NE�£9m��`��L��SG@S�QDK@SD�SN�S@W�ITQHRCHBSHNMR�HM�VGHBG�SGD�"NLO@MX�G@R�RTEEDQDC�@�KNRR�HM�DHSGDQ�SGD�BTQQDMS�NQ�OQDBDCHMF�ODQHNC��G@UD�ADDM�QDBNFMHRDC�NM�SGD�A@RHR�SG@S�ETSTQD�S@W@AKD�OQNãSR�VHKK�AD�@U@HK@AKD�@F@HMRS�VGHBG�SGDRD�B@M�AD�TSHKHRDC �3GD�DUHCDMBD�ENQ�SGD�ETSTQD�S@W@AKD�OQNãSR�HR�@�ENQDB@RS�BNMRHRSDMS�VHSG�SGD�SGQDD�XD@Q�NODQ@SHNM@K�OK@MR�OQDO@QDC�AX�SGD�QDKDU@MS�ATRHMDRRDR��VGHBG�@QD�RTAIDBS�SN�HMSDQM@K�QDUHDV�@MC�BG@KKDMFD �6GDQD�QDKDU@MS��SGD�ENQDB@RS�HMBKTCDR�DWSQ@ONK@SHNMR�NE�SGD�NODQ@SHNM@K�OK@MR�TRHMF�@RRTLOSHNMR�BNMRHRSDMS�VHSG�SGNRD�TRDC�HM�SGD�OK@MR �

7. DIVIDENDS%TKK�CDS@HKR�NE�SGD�CHUHCDMCR�O@HC�@MC�OQNONRDC�AX�SGD�"NLO@MX�@QD�RDS�NTS�HM�MNSD��SN�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR

-NSDR�SN�SGD�RDO@Q@SD�ãM@MBH@K�RS@SDLDMSR�BNMSHMTDC



206

8. CASH GENERATED FROM OPERATIONS

2014£m

2013£m

-DS��KNRR��OQNãS�ENQ�SGD�XD@Q�ADENQD�S@W (16) 268

"G@MFDR�HM�NODQ@SHMF�@RRDSR�KH@AHKHSHDR (86) �

-DS�B@RGêNVR�EQNL�NODQ@SHMF�@BSHUHSHDR (102) 268

9. RELATED PARTY TRANSACTIONS12 �(MRTQ@MBD�&QNTO�OKB��HMBNQONQ@SDC�HM�$MFK@MC�@MC�6@KDR��HR�SGD�TKSHL@SD�/@QDMS�"NLO@MX�NE�SGD�12 �FQNTO�NE�BNLO@MHDR

3GD�ENKKNVHMF�SQ@MR@BSHNMR�VDQD�B@QQHDC�NTS�VHSG�QDK@SDC�O@QSHDR�

/QNUHRHNM�NE�RDQUHBDR�@MC�ADMDëSR12 �(MRTQ@MBD�&QNTO�OKB�OQNUHCDR�RDQUHBDR�@MC�ADMDãSR�SN�HSR�RTARHCH@QX�BNLO@MHDR�NODQ@SHMF�VHSGHM�SGD�4*�@MC�NUDQRD@R�@R�ENKKNVR�

�� /QNUHRHNM�NE�SDBGMHB@K�RTOONQS�HM�QDK@SHNM�SN�QHRJ�L@M@FDLDMS��HMENQL@SHNM�SDBGMNKNFX�@MC�QDHMRTQ@MBD�RDQUHBDR �2DQUHBDR�@QD�BG@QFDC�ENQ�@MMT@KKX�NM�@�BNRS�OKTR�A@RHR��@KKNVHMF�ENQ�@�L@QFHM�NE�5%��í�

�� (RRTD�NE�RG@QD�NOSHNMR�@MC�RG@QD�@V@QCR�SN�DLOKNXDDR�NE�RTARHCH@QHDR �"NRSR�@QD�BG@QFDC�ENQ�@MMT@KKX��A@RDC�NM�SGD�TMCDQKXHMF�U@KTD�NE�SGD�@V@QCR�FQ@MSDC�B@KBTK@SDC�HM�@BBNQC@MBD�VHSG�SGD�FTHC@MBD�RDS�NTS�VHSGHM�(%12��

2014£m

2013£m

2@K@QHDR�@MC�NSGDQ�RGNQS�SDQL�DLOKNXDD�ADMDãSR 7 7

!NMTR�@V@QCR 3 1

/DMRHNM�ADMDãSR – 1

2G@QD�A@RDC�O@XLDMSR� 1 ��

Total 11 9

Other transactions8D@Q�DMC�A@K@MBDR�VHSG�QDK@SDC�O@QSHDR�@QD�RDS�NTS�ADKNV�

2014£m

2013£m

1DBDHU@AKD�EQNL�QDK@SDC�O@QSHDR�

1DBDHU@AKD�EQNL�RTARHCH@QHDR��HMSDQDRS�AD@QHMF�KN@MR 1,902 728

1DBDHU@AKD�EQNL�RTARHCH@QHDR��MNM�HMSDQDRS�AD@QHMF�KN@M 587 ��

Total receivable from related parties 2,489 1,575

/@X@AKD�SN�QDK@SDC�O@QSHDR�

/@X@AKD�SN�RTARHCH@QHDR��HMSDQDRS�AD@QHMF�KN@MR 185 1,016

/@X@AKD�SN�RTARHCH@QHDR��MNM�HMSDQDRS�AD@QHMF�KN@M 454 ��

Total payable to related parties 639 ��

207

(MSDQDRS�HR�BG@QFDC�NM�HMSDQDRS�AD@QHMF�KN@MR��VGHBG�@QD�QDO@X@AKD�NM��GNTQR�VQHSSDM�MNSHBD �£170m��`��L��@S�SGQDD�LNMSGR�+(!.1�OKTR�� í�@MC�£15m��`��L��@S�SGQDD�LNMSGR�+(!.1��AO

CCHSHNM@K�KN@MR�SN�RTARHCH@QHDR�NE�£684m��`��L��@R�CHRBKNRDC�VHSGHM�MNSD��G@UD�ADDM�L@CD �.E�SGHR��£nil��`��L��£82m��`��L��@MC�£602m��`��L��@QD�RTANQCHM@SDC�KN@MR�NM�VGHBG�HMSDQDRS�HR�BG@QFDC�@S�� í�� í�@MC�� í�QDRODBSHUDKX�VHSG�SGD�QDL@HMHMF�KN@M�A@K@MBD�HMSDQDRS�EQDD�VHSG�MN�RODBHãDC�QDO@XLDMS�C@SD

1NX@K�î�2TM� KKH@MBD�(MRTQ@MBD�OKB��12 (��@�RTARHCH@QX�NE�SGD�"NLO@MX��G@R�OQNUHCDC�FT@Q@MSDDR�SN�SGD�"NLO@MX�R�BQDCHSNQR��ENQ�@LNTMSR�@QHRHMF�EQNL�HSR�KN@M�B@OHS@K�@FQDDLDMSR��@R�RDS�NTS�HM�MNSD��SN�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR��@MC��ENQ�@LNTMSR�@QHRHMF�EQNL�HSR�BNLLHSSDC�BQDCHS�E@BHKHSHDR��@R�RDS�NTS�HM�MNSD��SN�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR� ��3GD�FT@Q@MSDDR�QDK@SHMF�SN�SGD�KN@M�B@OHS@K�@FQDDLDMSR�@QD�RTANQCHM@SDC�SN�@KK�NSGDQ�BQDCHSNQR�NE�12 (

(M�.BSNADQ��SGD�"NLO@MX�RTARBQHADC�ENQ�MDV�NQCHM@QX�RG@QDR�HRRTDC�AX�HSR�VGNKKX�NVMDC�RTARHCH@QX�1NX@K�(MRTQ@MBD�'NKCHMFR�OKB�ENQ�@�SNS@K�BNMRHCDQ@SHNM�NE�`��L

10. SHARE BASED COMPENSATION%TKK�CDS@HKR�NE�RG@QD�A@RDC�BNLODMR@SHNM�OK@MR�@QD�OQNUHCDC�HM�MNSD��SN�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR

11. RISK MANAGEMENT3GD�QHRJR�E@BDC�AX�SGD�"NLO@MX�@QD�CDQHUDC�EQNL�HSR�HMUDRSLDMS�HM�RTARHCH@QHDR�@MC�@QD�SGDQDENQD�SGD�R@LD�@R�SGNRD�NE�SGD��12 �FQNTO�NE�BNLO@MHDR �#DS@HKR�NE�SGD�JDX�QHRJR�SN�SGD�&QNTO�@MC�SGD�RSDOR�S@JDM�SN�L@M@FD�SGDL�@QD�CHRBKNRDC�HM�SGD�1HRJ�,@M@FDLDMS�RDBSHNM�NE�SGD�BNMRNKHC@SDC�ãM@MBH@K�RS@SDLDMSR


OTHER INFORMATION

REGISTERED OFFICE AND GROUP CORPORATE CENTRE20 Fenchurch Street, London EC3M 3AU. Telephone: +44(0) 20 7111 7000.Registered in England and Wales No. 2339826.

GROUP WEBSITEThe 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.

REGISTRAR The Company’s share register is maintained by Equiniti Limited. Any administrative enquiries relating to shareholdings, RTBG�@R�CHUHCDMC�O@XLDMS�HMRSQTBSHNMR�NQ�@�BG@MFD�NE�@CCQDRR��RGNTKC�AD�MNSHãDC�SN�$PTHMHSH�@S�SGD�ENKKNVHMF�@CCQDRR�

Equiniti LimitedAspect HouseSpencer RoadLancingWest SussexBN99 6DATelephone: 0871 384 2048

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 http://help.shareview.co.uk.

ANNUAL GENERAL MEETINGHolders 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 ACCOUNTSShareholders who receive duplicate sets of Company mailings owing to multiple accounts in their name may contact Equiniti to request that their accounts be amalgamated.

ELECTRONIC COMMUNICATIONSReceiving the Company’s communications electronically allows the Company to communicate with its shareholders in a more environmentally friendly, cost effective and timely manner.

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.

Additionally, if you wish to register for the Company’s investor news service to receive the latest news and press releases by email, visit www.rsagroup.com/investornewsalert.

Shareholder information

209

DIVIDENDSShareholders are encouraged to have their dividends paid directly into their bank account. It is a more secure and faster way to receive the dividend payment with cleared funds available to shareholders on the dividend payment date. Shareholders who have their dividends paid directly into their bank receive a consolidated tax voucher once a year, showing payments received in the respective tax year. Alternatively, individual tax vouchers are available upon request. To take advantage of this convenient method of payment visit www.shareview.co.uk or contact Equiniti. Details of 2015 dividend dates can be found in the Financial Calendar on page 211.

SCRIP DIVIDEND SCHEMEThe 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

The Scrip Dividend Scheme Terms and Conditions were updated in February 2015 and these are available on the shareholder services area of the Company’s website or from Equiniti. Shareholders with a scrip dividend mandate in place need take MN�ETQSGDQ�@BSHNM�@R�XNTQ�L@MC@SD�QDL@HMR�DEEDBSHUD�TMSHK�MNSHãDC�SN�SGD�1DFHRSQ@Q�HM�VQHSHMF �%NQ�CHUHCDMCR�VGDQD�@�RBQHO�alternative is offered, shareholders wishing to receive a scrip dividend instead of a cash dividend should contact Equiniti for details or visit the shareholder services area of the Company’s website.

AMERICAN DEPOSITARY RECEIPTS

The Company operates a sponsored American Depositary Receipts (‘ADR’) programme which is managed by JPMorgan Chase NA. The programme allows shareholders to invest in the Company through US dollar denominated funds. Any enquiry relating to the sponsored ADR programme should be addressed to:

JPMorgan Chase & CoPO Box 64504St PaulMN 55164-0504 USA

or alternatively visit adr.com/shareholder and select Contact Us.

LOW COST SHARE DEALING FACILITIESShareholders 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.

SHARE REGISTER FRAUD: PROTECTING YOUR INVESTMENTUK law requires that our shareholder register is available for public inspection. We are unable to control the use of information obtained by persons inspecting the register. Details of any share dealing facilities that the Company endorses will be included in Company mailings or on our website.


OTHER INFORMATION

Shareholder information continued

Shareholders are advised to be wary of any unsolicited advice, offers to buy shares at a discount, or offers of free reports about the Company. If you receive any unsolicited advice, make sure you get the correct name of the person and organisation and check that they are appropriately authorised by the FCA by visiting www.fca.org.uk. More information on protecting your investment can be found at http://www.fca.org.uk/consumers/scams/investment-scams/protect-yourself. If you do receive a fraudulent approach, please advise the FCA using the share fraud reporting form at www.fca.org.uk/scams or call the FCA Consumer Helpline on 0800 111 6768.

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

• Inform Equiniti promptly when you change your address

• Be aware of dividend payment dates and contact Equiniti if you do not receive your dividend cheque, or better still, make arrangements to have the dividend paid directly into your bank account

• Consider holding your shares electronically in a CREST account via a nominee.

SHAREGIFTShareholders with a small number of shares, the value of which makes it uneconomic to sell them, may wish to consider donating them to charity through ShareGift, a registered charity administered by The Orr Mackintosh Foundation, registered charity number 1052686. The relevant share transfer form can be obtained from Equiniti. Further details can be obtained from www.sharegift.org or by calling +44(0) 20 7930 3737.

211

Financial calendar

THURSDAY 5 MARCH 2015$W�CHUHCDMC�C@SD�ENQ�SGD�NQCHM@QX�ãM@K�CHUHCDMC�ENQ�� @MC�SGD�ãQRS�OQDEDQDMBD�CHUHCDMC�ENQ��

FRIDAY 6 MARCH 20151DBNQC�C@SD�ENQ�SGD�NQCHM@QX�ãM@K�CHUHCDMC�ENQ��@MC�SGD�ãQRS�OQDEDQDMBD�CHUHCDMC�ENQ��

WEDNESDAY 1 APRIL 2015/@XLDMS�C@SD�ENQ�SGD�ãQRS�OQDEDQDMBD�CHUHCDMC�ENQ��

THURSDAY 7 MAY 2015 Q1 Interim Management Statement.

FRIDAY 8 MAY 2015Annual General Meeting.

FRIDAY 15 MAY 2015/@XLDMS�C@SD�ENQ�SGD�NQCHM@QX�ãM@K�CHUHCDMC�ENQ��

THURSDAY 6 AUGUST 2015*Announcement of the half year results for the six months ended 30 June 2015 and the ordinary interim dividend for 2015.

THURSDAY 13 AUGUST 2015*Ex dividend date for the ordinary interim dividend and the second preference dividend for 2015.

FRIDAY 14 AUGUST 2015*Record date for the ordinary interim dividend and the second preference dividend for 2015.

WEDNESDAY 1 OCTOBER 2015*Payment date for the second preference dividend for 2015.

THURSDAY 5 NOVEMBER 2015*Q3 Interim Management Statement.

FRIDAY 20 NOVEMBER 2015*Payment of the ordinary interim dividend for 2015.

* PROVISIONAL DATES


OTHER INFORMATION

Below is a simple explanation of some of the key technical terms used within this report.

Term #DãMHSHNM

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.

Capital ��3GD�LNMDX�HMUDRSDC�HM�SGD�&QNTO �3GHR�HMBKTCDR�SGD�LNMDX�HMUDRSDC�AX�RG@QDGNKCDQR�@MC�OQNãSR�QDS@HMDC� within the Group.

Claims Frequency • Average number of claims per policy over the year.

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

Claims Ratio (Loss Ratio) • Percentage of Net Earned Premiums which is paid out in claims and Claims Handling Expenses.

Claims Reserve (Provision for Losses and Loss Adjustment Expenses)

��1DRDQUD�DRS@AKHRGDC�AX�SGD�&QNTO�SN�QDâDBS�SGD�DRSHL@SDC�BNRS�NE�BK@HLR�O@XLDMSR�@MC�QDK@SDC�DWODMRDR�SG@S�we estimate we will ultimately be required to pay.

Claims Severity • Average cost of claims incurred over the period.

Combined Operating Ratio (COR)

• 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%

Net Earned Premiums

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.

Current Year Result ��3GD�TMCDQVQHSHMF�OQNãS�NQ�KNRR�D@QMDC�EQNL�ATRHMDRR�ENQ�VGHBG�OQNSDBSHNM�G@R�ADDM�OQNUHCDC�HM�SGD�BTQQDMS�ãM@MBH@K�ODQHNC

Earned Premium • The portion of an insurance premium for which we have already provided protection.

Economic Capital ��3GD�&QNTO�R�@RRDRRLDMS�NE�SGD�B@OHS@K�VD�LTRS�GNKC�SN�G@UD�@�GHFG�BNMãCDMBD�NE�LDDSHMF� our obligations given our risk appetite.

Expense Ratio • Percentage of Net Earned Premiums which is paid out in operating expenses e.g. salaries, premises costs, etc. The ratio does not include claims related expenses but can include or exclude commissions.

Exposure • A measurement of risk we are exposed to through the premiums we have written. For example, in motor insurance one vehicle insured for one year is one unit of exposure.

Financial Conduct Authority (FCA)

��3GD�QDFTK@SNQX�@TSGNQHSX�ENQ�SGD�BNMCTBS�NE�SGD�4*�ãM@MBH@K�RDQUHBDR�HMCTRSQX

Gross Written Premium (GWP)

• Total premium written or processed in the period, irrespective of whether it has been paid.

IBNR (Incurred but Not Reported)

• A reserve for accidents or incidents (which we have provided cover for) that have occurred but which have not yet been reported to us.

IGD Capital Requirement • Insurance Groups Directive capital is the capital the Group is required to hold based on standard calculations CDãMDC�AX�SGD�%2 �TMCDQ�SGD�$4�2NKUDMBX��CHQDBSHUD

Insurance Result • This is a measure of how well we have done, including both our underwriting result and investment performance.

Jargon buster

213

Term #DãMHSHNM

Large losses • Single claims or events with a net cost of £500k or higher.

Net Earned Premium (NEP) • The portion of Net Written Premiums for which we have already provided protection. This is included as income in the period.

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.

Net Written Premium (NWP) • Net Written Premium is premium written or processed in the period, irrespective of whether it has been paid, less the amount paid out in reinsurance premiums.

Prior Year Result ��/QNãS�NQ�KNRR�FDMDQ@SDC�AX�RDSSKHMF�BK@HLR�HMBTQQDC�HM�@�OQDUHNTR�XD@Q�@S�@�ADSSDQ�NQ�VNQRD� level than the previous estimated cost.

Property and Casualty (P&C)(Non Life Insurance or General Insurance)

��/QNODQSX�HMRTQ@MBD�BNUDQR�KNRR�NQ�C@L@FD�SGQNTFG�ãQD��SGDES��âNNCR��RSNQLR�@MC�NSGDQ�RODBHãDC�QHRJR �"@RT@KSX�insurance primarily covers losses arising from accidents that cause injury to other people or damage to the property of others.

Prudential Regulation Authority (PRA)

• The regulatory authority with responsibility for the prudential regulation and supervision NE�SGD�4*�ãM@MBH@K�RDQUHBDR�HMCTRSQX

Rate • The price of a unit of insurance based on a standard risk for one year. Actual premium charged to the customer may differ from the rate due to individual risk characteristics and marketing discounts.

Reinsurance • The practice whereby we transfer part or all of the risk we have accepted to another insurer (the reinsurer).

Run-off • A situation where an insurer is no longer underwriting new business but continues to meet its liabilities under existing contracts.

Solvency II • New capital adequacy regime for the European insurance industry. Establishes a revised set of EU wide capital requirements and risk management standards.

Scrip Dividend • Where shareholders choose to receive the dividend in the form of additional shares rather than cash. The Group issues new shares to meet the scrip demand.

Tangible Net Asset Value (TNAV)

• The tangible value of the Group calculated by subtracting our total liabilities including loan capital from our total tangible assets (total assets less goodwill and intangibles).

Total Shareholder Return • A measure of performance based on the overall value to shareholders of their investment in the Group over a period of time. Includes the movement in the share price and dividends paid, expressed as a percentage of the share price at the beginning of the period.

Underlying loss ratio • Claims incurred during the period expressed as a percentage of earned premiums, including claims handling expenses but excluding claims incurred in respect of large losses, weather events and subsidence losses.

Underlying Return on Tangible Equity

�� LD@RTQD�NE�SGD�TMCDQKXHMF�OQNãSR�SGD�&QNTO�D@QMR��@CITRSDC�ENQ�OQNãS�KNRR�NM�CHRONR@K�NE�RTARHCH@QHDR��reorganisation and integration costs and acquisition costs, relative to opening tangible funds attributable to ordinary shareholders.

Underwriting Result • This is a measure of how well the Group has done excluding its investment performance and is calculated as:

NEP – Net Incurred Claims (including Claims Handling Expenses) – Expenses – Commissions

Unearned Premium • The portion of a premium that relates to future periods, for which protection has not yet been provided, irrespective of whether the premium has been paid or not.

Weather losses • Weather events with a net cost of £500k or higher.

Yield • Rate of return on an investment in percentage terms.• The dividend payable on a share expressed as a percentage of the market price.


OTHER INFORMATION

Notes

215


OTHER INFORMATION

Notes

Important disclaimerThis document contains ‘forward-looking statements’ with respect to certain of the Group’s plans @MC�HSR�BTQQDMS�FN@KR�@MC�DWODBS@SHNMR�QDK@SHMF�SN�HSR�ETSTQD�äM@MBH@K�BNMCHSHNM��ODQENQL@MBD��QDRTKSR�� strategic initiatives and objectives. Generally, words such as ‘may’, ‘could’, ‘will’, ‘expect’, ‘intend’, ‘estimate’, ‘anticipate’, ‘aim’, ‘outlook’, ‘believe’, ‘plan’, ‘seek’, ‘continue’, ‘potential’ or similar expressions, identify forward-looking statements.

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.

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RSA Annual Report and Accounts 2014RSA ANNUAL REPORT AND ACCOUNTS 2014 INTRODUCTION FINANCIAL SUMMARY OUR CORE BUSINESSES GROUP RESULTS DIVIDEND FOR THE YEAR (P) PROFIT BEFORE TAX