14th Apr 2011 10:29
RSA INSURANCE GROUP PLC(THE "COMPANY")2010 ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING 2011
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 2010 Annual Review and Summary Financial Statements for the year ended 31 December 2010 Notice of the 2011 Annual General Meeting to be held on 23 May 2011 Proxy form for the 2011 Annual General MeetingThe above mentioned documents (except for the Proxy form) are available on our website at www.rsagroup.com/rsa//pages/ir/reports and www.rsagroup.com/agm2011 and will shortly be made available for inspection at www.hemscott.com/nsm.do.
The information that follows is disclosed in accordance with DTR 6.3. An indication of the important events that occurred in 2010 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 24 February 2011, forming part of the Preliminary Results announcement for the year ended 31 December 2010. Additional content forming part of the management report is in the Appendix below.
Enquiries:
John MillsDeputy Group Company SecretaryRSA Insurance Group plcTel: +44 (0) 20 7111 7000
IMPORTANT DISCLAIMER
This announcement contains 'forward-looking statements' with respect to certain of the Company'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 Company'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 and other regulations in the jurisdictions in which the Company and its affiliates operate. As a result, the Company's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Company's forward-looking statements. The Company 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 announcement.
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 2010 Annual Report and Accounts.
RISK REVIEW
OUR BUSINESS SUCCESS IS UNDERPINNED BY OUR STRONG RISK MANAGEMENT
RISK MANAGEMENT
We ensure risk is managed to reduce losses and ensure opportunities for profitable growth are taken. The Group operates 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 defining the Group's risk appetite. Executive management is responsible for implementing systems and controls that manage our risk exposures to the risk appetite. Each Group business is required to follow a consistent process to identify, assess, manage and monitor 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.
GROUP RISK APPETITE
The Group risk appetite is set and monitored at both a Group and regional level and is annually reviewed and signed off by the Board Risk Committee and 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 and other measures. There is a formal identification and escalation
process for emerging risks.
RISK FRAMEWORK
The Group has '3 lines of defence' for the oversight and management of risk as follows:
1st line - Management
• Setting strategy, performance measurement, establishment and maintenance of internal control and risk management in the business.
2nd line - Risk oversight
• Operating a formal risk management framework 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
Risk elements are viewed under headings that broadly correspond to those used in the Financial Services Authority's Prudential Sourcebook for Insurers (IN SPRU) and Senior Management Arrangements, Systems and Controls (SYSC). Additional information is provided in the Risk Management section on page 89. Some of the key current practices and tools for each risk category are set out overleaf alongside our risks and uncertainties.
| 2010 UPDATE |
| During the year we maintained our focus on risk management, strengthening and developing our processes, controls and capabilities through the following activities:
We continued to invest in our integrated Group wide governance, risk and compliance approach through which we manage and report our risks We continued to make solid progress on extending our risk capability to support our transition into the Solvency II regulatory environment We further developed our rolling programme of comprehensive stress and scenario testing which reinforces our understanding of our risk profile and the effectiveness of our control environment We actively responded to the changing insurance regulatory architecture across the UK and Europe We recruited a new Group Risk Director to develop and strengthen our risk capability We have developed formal processes to envisage and critically evaluate our emerging risks. |
| RISK CATEGORIES | |||||||
| RISKS | PRIMARY ACTIVITIES | KEY TOOLS FOR MANAGING | |||||
| INSURANCE RISK Our insurance risk strategy has enabled us to continue delivering strong insurance results. | Pricing, acceptance and management of risks arising from our contracts with customers Claims development and reserving. | Reviews of individual insurance portfolios Regional and Group Reserving Committees held to determine a recommended level of outstanding claims and aggregate outstanding claims reserves 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 the Chilean earthquake. | Reinsurance strategy and appetite recommended to the Board by the Board Risk Committee Purchase of the worldwide programme of global and local treaties. | Group reinsurance policy aligned with strategy and appetite Analysis of major treaty purchases using various sophisticated modelling tools Monitoring and control of the Group's reinsurance activity Monitoring of the reinsurance markets. | |||||
| OPERATIONAL RISK We have completed various Group wide assessments and roll-out activities 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 Our conservative approach to financial risks has helped support the business in a challenging climate. | Investment strategy and portfolio management Treasury activities such as Group liquidity Reinsurance counterparty management Contingency funding plans ensuring minimum levels are met even in stress conditions. | Controls to ensure that exposure is managed within risk appetite Reinsurance counterparties approved by the Group Reinsurance Credit Committee Requirements to maintain a minimum level of cash or highly liquid assets Committees overseeing the Group's investment strategy and risk limits. | |||||
| REGULATORY RISK Our response to regulatory changes and compliance has helped safeguard our business and we remain at the forefront of UK firms in respect of our Solvency II application process. | Ensuring compliance in all geographical locations, with diverse regulatory requirements Response to regulatory changes. | 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 | Exposure reduction impacts premium levels Increased claims frequency. | Diversified portfolio providing exposure to markets at different levels of development and insurance cycle Limited exposure to economically triggered contracts KPI dashboard developed to support early corrective action Maintain focus on underwriting discipline and targeted profitable growth Continuous action on rate and expenses. | |||||
| ADVERSE FINANCIAL MARKETS | Impact on investment portfolio and investment income due to lower interest rates and market volatility. | Retain focus on high quality, low risk investment strategy Action taken to mitigate falling yields includes increased holding in non government bonds, and measured increase in higher-yielding equities, property and duration. | |||||
| 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. | |||||
| 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. | |||||
32. RELATED PARTY TRANSACTIONS
The ultimate Parent Company of the Group is RSA Insurance Group plc which is incorporated in England and Wales.
The following transactions were carried out with related parties:
Key management compensation
| 2010 | 2009 | ||||||||
| £m | £m | ||||||||
| Salaries and other short term employee benefits | 6 | 5 | |||||||
| Bonus awards | 4 | 4 | |||||||
| Pension benefits | 1 | 1 | |||||||
| Share based awards | 8 | 8 | |||||||
| Total | 19 | 18 | |||||||
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 available at discounted rates to all employees including Executive Directors.
As at 31 December 2010, there are interest free loans totalling £10,000 (2009: £10,000) outstanding to two members of the Executive 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 2011
Related Shares:
RSA.L