2nd Apr 2013 17:00
2 April 2013
RSA INSURANCE GROUP PLC
(THE “COMPANY”)
2012 ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING 2013
In accordance with Listing Rule 9.6 and Disclosure and Transparency Rule (“DTR”) 4.1, the Company announces that the following documents have been posted to shareholders and have today been submitted to the UK Listing Authority via the National Storage Mechanism:
Annual Report and Accounts for the year ended 31 December 2012 Notice of the 2013 Annual General Meeting to be held on 15 May 2013 Proxy form for the 2013 Annual General MeetingThe above mentioned documents (except for the Proxy form) are available on our website at www.rsagroup.com/ar2012 and www.rsagroup.com/agm2013 and will shortly be made available for inspection at www.hemscott.com/nsm.do. Shareholders can obtain additional copies of the Proxy form from our Registrar, Equiniti Limited at Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA or view online at www.shareview.co.uk.
This announcement should be read in conjunction with the Company’s announcement issued on 20 February 2013. Together these constitute the material required by DTR 6.3 to be communicated to the media in full unedited text through a Regulatory Information Service. This material is not a substitute for reading the Company’s 2012 Annual Report and Accounts.
An indication of the important events that occurred in 2012 and their impact on the condensed consolidated financial statements, the condensed consolidated financial statements themselves and the responsibility statement were announced to the London Stock Exchange on 20 February 2013, forming part of the Preliminary Results announcement for the year ended 31 December 2012. Additional content forming part of the management report is in the Appendix below.
Enquiries:
| John Mills |
| Deputy Group Company Secretary |
| RSA Insurance Group plc |
| Tel: +44 (0) 20 7111 7000 |
About RSA
With a 300-year heritage, RSA is one of the world's leading multinational listed insurance groups. RSA has major operations in the UK, Scandinavia, Canada, Ireland, Asia, Central & Eastern Europe, Middle East and Latin America and has the capability to write business in around 140 countries. Focusing on general insurance, RSA has around 23,000 employees and, in 2012, its net written premiums stood at £8.353 million.
IMPORTANT DISCLAIMER
Visit www.rsagroup.com for more information.
This press release (together with the Annual Report and Accounts referred to herein) has been prepared in accordance with the requirements of English company law and the liabilities of the directors in connection with this press release (together with the Annual Report and Accounts referred to herein) shall be subject to the limitations and restrictions provided by such law. This press release may contain ‘forward-looking statements’ with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition, performance, results, strategic initiatives and objectives. Generally, words such as “may”, “could”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “aim”, “outlook”, “believe”, “plan”, “seek”, “continue” or similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the Group’s control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities (including changes related to capital and solvency requirements), the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation or regulations in the jurisdictions in which the Group and its affiliates operate. As a result, the Group’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Group’s forward-looking statements. The Group undertakes no obligation to update any forward-looking statements, save in respect of any requirement under applicable law or regulation. Nothing in this press release (together with the Annual Report and Accounts referred to herein) should be construed as a profit forecast.
Appendix
References to page numbers and notes to the accounts made in this Appendix refer to page numbers and notes to the accounts in the 2012 Annual Report and Accounts.
RISK REVIEW
OUR BUSINESS SUCCESS IS UNDERPINNED BY OUR STRONG RISK MANAGEMENT
RISK MANAGEMENT
We manage risk to minimise losses and take opportunities to invest appropriately in profitable growth.
We operate under a common framework through which risk management and control is embedded throughout the Group.
The Board is responsible for the Group’s Risk Management System and for defining the Group’s risk appetite.
Executive management is responsible for implementing systems and controls that manage our risk exposures in line with our risk appetite. Each Group business is required to follow a consistent process to identify, measure, manage, monitor and report its risks.
The Board Risk Committee ensures that material risks are identified and that appropriate arrangements are in place to manage and mitigate those risks effectively in line with risk appetite.
GROUP RISK APPETITE
The Group risk appetite is set and monitored at a Group, regional and business level, is reviewed annually, approved by the Board Risk Committee and signed off at the Group Board. It sets business volumes for certain higher risk insurance classes, stipulates loss retention limits, reinsurance protection, targets for credit rating and solvency margins.
RISK FRAMEWORK
The Group operates a ‘three lines of defence’ model for the oversight and management of risk as follows:
1st line – Management
Delivering the business plan within risk appetite Accountable for implementing and using the Risk Management System Embedding an appropriate risk culture.2nd line – Risk oversight
Development and maintenance of a Risk Management System within which the Group policies and minimum standards are set Oversight and challenge across the Group.3rd line – Independent assurance
Providing independent and objective assurance of the effectiveness of the Group’s systems of internal control established by the first and second lines of defence.GROUP RISK POLICY STATEMENTS
Our policy statements set out the minimum standards to be maintained by the Group’s operations to manage their risks in a way that is consistent with the risk appetite.
RISK CATEGORIES
Risks are viewed under categories that broadly correspond to those used in the Financial Services Authority’s Prudential Sourcebook for Insurers (INSPRU) and Senior Management Arrangements, Systems and Controls (SYSC). Additional information is provided in the Risk Management section on page 92. Some of the key current practices and tools for each risk category are set out overleaf alongside our risks and uncertainties.
| PRINCIPLES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Simple objectives | • Create value for all stakeholders • Focus on general insurance in our selected markets • Commitment to sustainable, profitable performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Clear risk appetite | • Underwriting and operating excellence • Strong control environment • Tight financial management • Protecting and managing the Group’s reputation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Robust governance, control and reporting | • Comprehensive policy, procedures and controls • Clear delegation of authorities • Robust lines of defence • Regular and relevant reporting and assurance processes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Strong culture | • Board set ‘tone from the top’ of open communication and engagement • Putting the customer at the centre of what we do • High quality and engaged staff |
2012 UPDATE
During the year we have maintained our focus on risk management, strengthening and developing our processes, controls and capabilities across the Group through the following activities:
Organisation and Culture
Establishment of sub Risk Committees, strengthening our 1st Line ownership of risk management principles and practices and further supporting our Regional Risk Committees and Board Risk Committee Risk management in the Group strengthened by the appointment of a Group Chief Risk Officer to the Executive Committee Continued to promote risk informed decision making, with more explicit consideration of risk and reward A continued evolution of our Risk Management System to ensure compliance with Solvency II regulatory environment.Systems & Process
Continued development of the validation process across the Group, to provide assurance of the results, design and workings of the Internal Model and the adequate reflection of the Group’s risk profile Extended Stress and Scenario Testing programme across all EEA legal entities, enabling the Group to identify potential risks and their impact, calibrate risk appetite, help to validate the Internal Model Delivery of an Emerging Risk profile to the Board Risk Committee that included key themes such as: Eurozone Crisis Slow down of global growth engines- Changing attitudes of regulators to harmonisation of financial services regulation.
People
We shared the strength of our risk experts around the business to develop excellence across the Group We continue to invest in our people, in particular continuing to strengthen our capabilities for insurance and financial risk management through training, recruitment and transfer of skilled staff.| RISK CATEGORIES | |||||
| Risks | Primary activities | Key tools for managing | |||
| INSURANCE RISK Our insurance risk strategy has enabled us to continue delivering strong insurance results through our diversified portfolio. | • Pricing, acceptance and management of risks arising from our contracts with customers • Claims management and reserving • Exposure and accumulation management. | • Portfolio classification that tracks trends and performance of individual insurance portfolios • Regional and Group Reserving Committees held to determine a recommended level of outstanding claims and aggregate outstanding claims reserves • Scenario modelling that is appropriate for the size and complexity of our portfolios • Investigation of potential emerging insurance risks. | |||
| REINSURANCE RISK Our reinsurance buying and management expertise has allowed us to manage our insurance exposure and losses such as those arising from natural catastrophes during 2011 and 2012. | • Reinsurance strategy and appetite recommended to the Board by the Board Risk Committee • Purchase of the worldwide programme of global and local treaties • Reinsurance counterparty management. | • Group Reinsurance policy aligned with strategy and appetite • Various modelling tools used to determine retention strategies and analyse the effectiveness of major treaty purchases • Monitoring and control of the Group’s reinsurance activity • Monitoring of the reinsurance markets • Reinsurance counterparties approved by the Group Reinsurance Credit Committee. | |||
| OPERATIONAL RISK We have completed various Group-wide assessments to strengthen our operations. | • Effective and reliable operation of processes • Business continuity and disaster recovery • Information security management • Monitoring and control to prevent fraud and human error. | • Risk and control self-assessments • Key risk indicators to assess and manage operational risk • Scenario analyses to assess operational events that have occurred elsewhere and potential exposure to the Group • Incident management, near misses and loss reporting. | |||
| CREDIT , MARKET & LIQUIDITY RISK We continue to proactively manage our financial risks during the challenging economic climate. | • Investment strategy and portfolio management • Risk analysis using a range of techniques • Treasury activities such as Group liquidity and hedge effectiveness • Scenario and Stress Testing • Group Financial Risk policies aligned with strategy and appetite • Counterparty credit assessments. | • Controls to ensure that exposure is managed within risk appetite • Monitoring of exposure against limits set out in the investment limits framework • Portfolio analytics • Requirements to maintain a minimum level of cash or highly liquid assets • Committees overseeing the Group’s investment strategy and risk limits. | |||
| REGULATORY RISK Responding to demanding and more intrusive regulatory environment across the Group to ensure compliance and safeguard our business. | • Ensuring compliance in all geographical locations, with diverse regulatory requirements • Response to regulatory changes. • Continued preparations for the implementation of Solvency II. | • Active engagement with regulators • Close monitoring of regulatory requirements • Compliance framework with consistent monitoring methodology • Monthly reporting of significant regulatory developments and mitigation of emerging risks. | |||
| PRINCIPAL UNCERTAINTIES | |||||
| Risks | Potential impact | Mitigation | |||
| PROLONGED ECONOMIC DOWN TURN | • Impact on investment portfolio and investment income due to lower interest rates and market volatility • Insufficient capital generation. | • Action taken to mitigate falling yields include increasing holdings in non government bonds, property exposures and bond duration • Retain focus on high quality, low risk investment strategy • Asset Liability Matching and cash flow management • Delivery of key operational plans • Internal and external dividend policy. | |||
| RATING ENVIRONMENT | • Inability to charge adequate rates places downward pressure on operating results. | • Diversified portfolio • Each portfolio has a rate plan which is regularly reviewed • Focus on underwriting and profitable growth • Actively shift capacity to where we see the best returns • Continue to invest in technical skills, sales and marketing capabilities. | |||
| ADVERSE LOSS EXPERIENCE | • Catastrophic losses arising from insurance events • Increasing frequency and severity of large losses • Deterioration in long tail reserves. | • Underwriting strategy set to ensure risks written are well diversified and within risk appetite • Regular portfolio reviews to monitor underwriting performance • Emerging trends in large losses, frequency and severity are investigated and corrective action taken • Reinsurance programmes limit net losses • Conservative reserving policy ensuring that claims reserves will be more likely than not to result in positive prior year development • Exposure and accumulation management tools to monitor and control exposures in higher risk areas. | |||
| INSURANCE RISKS OUTSIDE GROUP’S RISK APPETITE | • Adverse impact on operating results due to increased volatility | • The Group operates under a clear risk appetite set by the Board which is monitored at Group and regional level • Underwriters are licensed only to write risks within specified limits based on their own experience • Reviews assess each portfolio against key performance and risk indicators. Portfolios that trigger key risk indicators are investigated. Corrective measures are implemented where required • Diversified portfolio providing exposure to markets at different levels of development and insurance cycle • Maintain focus on underwriting discipline and targeted profitable growth. | |||
NOTES TO THE FINANCIAL STATEMENTS
9. RELATED PARTY TRANSACTIONS
RSA Insurance Group plc (incorporated in England and Wales) is the ultimate Parent Company of the RSA Group of companies.
The following transactions were carried out with related parties:
Provision of services and benefits
RSA Insurance Group plc provides services and benefits to its subsidiary companies operating within the UK and overseas as follows:
Provision of technical support in relation to risk management, information technology and reinsurance services. Services are charged for annually on a cost plus basis, allowing for a margin of 5% (2011: 5%) Issue of share options and share awards to employees of subsidiaries. Costs are charged for annually, based on the underlying value of the awards granted calculated in accordance with the guidance set out within IFRS 2.| 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| £m | £m | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Salaries and other short term employee benefits | 6 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bonus awards | 3 | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension benefits | 1 | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share based awards | (1) | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 9 | 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
There are no employees with employment contracts with the Company. All employees are employed by subsidiary companies.
A number of the Directors, other key managers, their close families and entities under their control have general insurance policies with subsidiary companies of the Group. Such policies are on normal and commercial terms except that executive directors and key managers are entitled to special rates which are also available to other members of staff.
As at 31 December 2012, there are interest free loans totalling £5,000 (2011: £10,000) outstanding to members of the key management team under standard terms of the Group’s UK Car Ownership Scheme, which is open to all UK managers within a qualifying salary band.
Copyright Business Wire 2013
Related Shares:
RSA.L