25 Mar 2021 10:30
RSA INSURANCE GROUP PLC
(THE "COMPANY")
2020 ANNUAL FINANCIAL REPORT ANNOUNCEMENT
In accordance with Listing Rule 9.6 and Disclosure Guidance and Transparency Rule ("DTR") 4.1, the Company announces that its Annual Report and Accounts for the year ended 31 December 2020 has been posted to shareholders and has today been submitted to the Financial Conduct Authority via the National Storage Mechanism.
The Company's 2020 Annual Report and Accounts is available on our website at www.rsagroup.com. Shareholders can obtain copies of the Annual Report and Accounts from our Registrar, Equiniti Limited, at Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA.
Further information
This announcement should be read in conjunction with the Company's preliminary results announcement issued on 26 February 2021. 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 2020 Annual Report and Accounts.
An indication of the important events that occurred in 2020 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 26 February 2021, forming part of the preliminary results announcement for the year ended 31 December 2020. In the Appendix below, for the purposes of compliance with DTR 6.3.5, is the statement of key risks and mitigants which is set out in the 2020 Annual Report and Accounts and the text of note 16 to the consolidated financial statements in the 2020 Annual Report and Accounts concerning related party transactions.
Annual General Meeting and Proposed Cash Offer
Details of the 2021 Annual General Meeting will be announced in due course if required.
Disclosure pursuant to Rule 24.16(c) of the City Code on Takeovers and Mergers
Following the approval by shareholders of the recommended cash offer for the Company by Intact Financial Corporation and Tryg A/S announced on 18 November 2020, the Company has been supporting Intact and Tryg in their planning for integration, post-completion steps related to the separation of RSA's Scandinavian and other businesses and "Day 1" readiness following completion. This has included engagement of external consultants to provide project management and technical support, which the Company currently expects to result in additional costs, based in part on hourly rates, of approximately £2 to 4 million (excluding any applicable VAT) above those disclosed in relation to "other professional services" in section 9.1 of the scheme document dated 16 December 2020. The Company is accordingly disclosing this pursuant to Rule 24.16(c) of the City Code on Takeovers and Mergers. Completion of the acquisition continues to be expected in Q2 2021.
Other information:
LEI number: 549300HOGQ7E0TY86138
Enquiries:
Christopher Smyth
Deputy Group Company Secretary
RSA Insurance Group plc
Tel: +44 (0) 20 7111 7000
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", "potential", "target", "reasonably possible" or similar expressions, are intended to identify forward-looking statements. By their nature, all forward-looking statements involve risk and uncertainty because they relate to, and may be impacted by, future events and circumstances which are beyond the Group's control, including amongst other things, UK domestic, European and global economic business conditions, market-related risks such as fluctuations 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, Europe or globally), 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. The Group's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in such 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. Forward-looking statements speak only as of the date they are made. 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. 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 2020 Annual Report and Accounts.
KEY RISKS AND MITIGANTS
Key risk and exposures | Key mitigants and controls |
Catastrophe risk Arises from the risk of large natural disasters, with our main exposure being to North European windstorms and Canadian earthquakes. | · Our reinsurance programme significantly reduces our exposure to catastrophe risks, with historical losses being well covered by our programme. The programme is designed to cover at least 1-in-200-year events and is stress-tested for climate change scenarios. |
Reserving risk This is the risk that the Group's estimate of future claims is insufficient. Longer tail-lines of business present more uncertainty on the size and timing of payments, with our largest exposure being the Swedish Personal Lines (including motor). | · Reserves are reviewed and challenged at the Group Reserving Committee meeting which is attended by the Group Chief Actuary, CRO, CUO, CFO and CEO. During 2020 additional focus was given to pinpoint Covid-19 impacts on behaviours and claims patterns as far as possible, to inform assumptions used in the reserving process and projections. · The reserve assurance programme has independently verified >90% of the Group's net reserves over a three-year period. · Claims case reserves are prudently set and reviewed at quarterly case reserving committees. |
Underwriting and claims risk This is the risk that underwritten business is not in line with appetite or is less profitable than planned due to insufficient pricing and setting of claims case reserves. Key exposures arise from large portfolios where claims trends are slow to emerge, such as UK Commercial and Marine. | · Controlled through well-defined risk appetite statements (including climate change factors) which are rigorously monitored at quarterly portfolio reviews, with remediation action taken where deemed necessary. · Brexit risks to inflation and supply chain delays are being monitored and we are ready to respond. · Extensive control validation and assurance activities are performed over underwriting pricing and claims. · During 2020 RSA has taken focussed actions in response to the Covid-19 global pandemic, these include adjusting policy wordings, and enhanced claims monitoring of covid-19 related risks. |
Market, credit and currency risk This is the risk to our insurance funds arising from movements in macroeconomic variables, including widening credit spreads, fluctuating bond yields and currency fluctuations. | · RSA adopts a prudent investment strategy with the investment portfolio favouring high-quality fixed income bonds and selected less liquid assets subject to strong internal and external governance. · RSA ensures assets are closely duration and currency matched with insurance liabilities to hedge volatility. · Investment positions are regularly monitored to ensure limits remain within quantitative and qualitative appetite (including ESG factors). · Asset Managers positioning assets to minimise Brexit risk where possible. · Enhanced monitoring was implemented since the early phases of the pandemic to monitor premium credit risk exposures.
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Pension risk We face longevity and in particular market-related risks, which arise from our defined benefit pension schemes. The largest exposures arise from credit spread and equity movements, although these are partly hedged by offsetting movements in the Insurance Investment Fund. | · Funding assets are well matched to liabilities in the pension schemes, including the use of swap arrangements. · A long-term de-risking plan is in place following the last triannual valuation. · Possible market impacts are examined and well understood with a specific focus on Pension risk. |
Operational risk This risk relates to customer and/or reputational damage arising from operational failures such as IT system failure. | · Operational risk and resilience processes and procedures are in place, including incident management. · Operational resilience mechanisms have been particularly important in 2020 given the pace of change and disruption to the operating environment from Covid-19. Through this time the customer focus and governance has continued to be strong, and resilience plans and procedures have ensured service continuity. · Control effectiveness is monitored through formal Validation and Assurance. · Customer Committees in all regions oversaw decisions for example the provision of financial relief to vulnerable customers during Covid-19. · IT and data risks remain a key focus, especially cyber threat. |
RELATED PARTY TRANSACTIONS
Key management personnel comprise members of the Group Executive Committee, executive directors, and non-executive directors.
Key management personnel compensation
| 2020 £m | 2019 £m |
Salaries and other short-term employee benefits | 7 | 8 |
Bonus awards | 6 | 5 |
Pension benefits | - | - |
Share based awards | 7 | 4 |
Total | 20 | 17 |
Included in salaries and other short term employee benefits and bonus awards is £6,760,000 (2019: £6,719,000) paid in respect of directors. These amounts exclude the value of share options granted to directors and gains made on the exercise of such options, Group contributions paid in respect of pension schemes and cash or other assets received or receivable under long term incentive schemes. The total value of the directors' remuneration (including values for these excluded items) and other details are disclosed in the Directors' Remuneration Report.
Key management personnel transactions
One member of key management personnel has control over an entity external to the RSA Group. This company did not transact with the Group during the year.
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.
RESPONSIBILITY STATEMENT
We confirm that, to the best of our knowledge:
· The financial statements on pages 102 to 180, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Parent Company and the undertakings included in the consolidation taken as a whole.
· The Strategic Report on pages ifc to 39 includes a fair review of the development and performance of the business and the position of the Parent Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
We 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 Group's position and performance, business model and strategy.
Stephen Hester | Charlotte Jones |
Group Chief Executive | Group Chief Financial Officer
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25 February 2021 | 25 February 2021 |