RSA.L Regulatory News (RSA)

25 Feb 2016 07:00

2015 PRELIMINARY RESULTS

25 February 2016

2015 operating profit of £523m, up 43% on 2014 (up 57% at constant exchange)

Underwriting profit up 437%. Post-tax profit up 221%. Final dividend 7p/share, up 250%

Record1 current year underwriting profits, despite UK floods. Good prospects of substantial further improvement. Performance targets and ambitions raised

Stephen Hester, RSA Group Chief Executive, commented:

“2015 was a year of major achievement for RSA. As a result, the turnaround phase of our Action Plan is largely complete and we have good prospects of substantial further performance improvement.

“RSA is now a strong and focused international insurer with leadership positions in the UK, Scandinavia and Canada. The Group's strategic restructuring will complete in 2016 as remaining contracted disposals close. The power of increased simplicity and focus is already helping drive better performance. RSA is well placed for a bright long-term future.

“In 2015, we delivered both value and risk reduction from successful disposals, Solvency II approval and a positive UK pension agreement. We delivered strong and pleasing improvements in core business performance, with plenty more to come. We showed the promise of our customer offering, winning our largest new partnership agreement with Nationwide Building Society for their UK home insurance business.

“We are today increasing our annual gross cost savings target to over £350m by 2018 and raising our underlying return on tangible equity expectation to the upper half of our 12-15% target range by 2017 with further improvement to come thereafter. We see 2016 as the last major restructuring year with disposals and balance sheet work completing and the heavy lifting of core business improvement and cost reduction action continuing. We expect challenging markets and to rely on self-help to progress. Despite these headwinds we face the future with determination and confidence.”

Trading results

Core Group premiums up 1%2,3. Overall Group net written premiums of £6.8bn down 3%2 year-on-year driven mainly by disposal programme. Group operating profit £523m (2014: £365m): Scandinavia £163m; Canada £182m; UK £175m4. Group underwriting profit of £220m (2014: £41m). Core Group combined ratio of 96.0% (2014: 98.8%). Strong underlying results across Scandinavia, Canada and the UK; Record underwriting profit in Canada with combined ratio of 91.7%. Record1 Group current year underwriting profit of £129m (2014: £73m); Core Group current year attritional loss ratio 1.9pts better than prior year on an underlying basis. Weather and large losses £68m worse than planned and £20m5 better than 2014; Net cost of the December weather events was £76m.

1 On a like-for-like basis (since 2005); 2 At constant FX; 3 Ex Group reinsurance programme; 4 Pro forma for aggregate reinsurance net recovery of £28m shown separately in Group Re; 5 Net of Group aggregate reinsurance cover 2015 earned premium of £46m (2014: nil)

Prior year underwriting profit of £91m: Positive development in Canada and the UK; net strengthening in Scandinavia. Ireland operating loss of £26m, much reduced from 2014 (£97m loss), and expected to reach operating profit in 2016. Investment income of £403m (2014: £439m). Gains of £184m from disposals completed in the year. Reorganisation costs were £183m and include items relating to the increased cost saving target. Post tax profit of £244m up 221% (2014: £76m), after one-off costs associated with our restructuring and turnaround. Solvency II coverage over the solvency capital requirement (SCR) of 143% (155% pro forma for the closing of the Latin America disposal). 2016 year-to-date market impacts are a further net positive. A new Solvency II target ratio of 130-160% has been established. Reserve margin stable at 5% of booked reserves. Triennial UK pension review completed, agreeing a significant de-risking of the asset mix with no change in annual top-up contributions (£65m p.a.). Surplus of £64m at 31 December 2015 on IAS19 basis. Funding basis deficit equivalent to 95% funding adequacy (92% at 2012 valuation). Tangible equity £2.8bn (31 December 2014: £2.9bn), 279p per share. Tangible equity to premiums ratio of 42% (36% ex unrealised gains) up from 39% a year ago. Underlying return on opening tangible equity of 9.7%. Underlying earnings per share (EPS) 27.8p (2014: 16.8p). Headline EPS 22.3p (2014: 6.2p). Final dividend of 7.0p/share proposed, bringing total 2015 dividends to 10.5p/share (up 425%).

Strategic update

Strategic priorities to make RSA ‘focused, stronger and better’ are being implemented strongly. Turnaround phase of our Action Plan largely complete with good prospects for substantial further performance improvement. During 2015 disposals in Hong Kong, Singapore, China, India, Italy and UK Engineering were completed. The disposal of our operations in Russia completed post year end. In September the £403m sale of our Latin American operations was announced and this is scheduled to complete in stages over the next 6 months. Total agreed disposal proceeds to date now stand at £1.2bn. Improvements in RSA’s financial strength and resilience continue. During the year our S&P ‘A’ rating was reaffirmed; Solvency II internal model approval was received in December; and the triennial UK pension review process successfully concluded. We are progressing well with our goal to improve operating performance from below that of our competitors to ‘in the pack’ and then towards ‘best in class’. Many initiatives to improve customer service and underwriting results are in train, with technology advances an important ingredient. Total Group controllable costs were down 8% year-on-year at constant exchange to £1,808m. Core business controllable costs were down 3% in the same period at constant exchange to £1,505m (comprising 4% cost reductions, offset by 1% inflation). Cost reduction programme is ahead of original targets. We expect to achieve in the region of £250m gross savings by 2016, a year ahead of schedule (£180m achieved to date). Total programme target upgraded for second time to over £350m gross annualised savings by 2018. Medium term performance target of 12-15% underlying return on tangible equity remains, however now targeting upper half of this range in 2017. Dividend policy unchanged: medium term ordinary dividend payout of 40-50% with additional ‘special’ payouts where justified.

Note: On an IFRS basis, pre-tax profit of £323m comprises profits from both continuing and discontinued operations. Please refer to page 43 for further details.

MANAGEMENT REPORT – KEY FINANCIAL PERFORMANCE DATA

Management basis

		FY 2015 £m						FY 2015 £m		FY 20145 £m Constant FX		FY 20145 £m Reported FX
Net Written Premiums		Personal				Commercial		Total		Total		Total
Scandinavia		883				723		1,606		1,551		1,759
Canada		950				410		1,360		1,409		1,510
UK		1,133				1,473		2,606		2,558		2,569
Ireland		161				100		261		271		295
Group Re1		-				(111)		(111)		(42)		(42)
Total Core Group		3,127				2,595		5,722		5,747		6,091
Discontinued & non-core2								1,103		1,265		1,374
Total Group net written premiums								6,825		7,012		7,465
		Combined operating ratio (%)						FY 2015 £m		FY 20145 £m		FY 20145 £m
Underwriting performance		FY 2015				FY 20145				Constant FX		Reported FX
Scandinavia		94.0				90.4		94		149		169
Canada		91.7				98.6		116		20		21
UK		99.5				99.9		12		4		4
UK pro forma3		98.5						40
Ireland		113.4				132.8		(35)		(97)		(108)
Group Re1		-				-		50		(15)		(15)
Total Core Group		96.0				98.8		237		61		71
Discontinued & non-core2		-				-		(17)		(31)		(30)
Total Group underwriting		96.9				99.5		220		30		41
Investment result								322		323		343
Operating result								523		334		365
Profit before tax								323		255		275
Profit after tax								244		56		76
Earnings per share – basic (pence)								22.3				6.2
Earnings per share – underlying (pence)								27.8				16.8
Interim dividend per share (pence)								3.5				-
Final dividend per share (pence)								7.0				2.0
Return on tangible equity (%)								7.8				3.6
Underlying return on tangible equity (%)								9.7				9.7
								31 Dec 2015				31 Dec 2014
Net asset value (£m)								3,642				3,825
Tangible net asset value (£m)								2,838				2,900
Net asset value per share (pence)								346				365
Tangible net asset value per share (pence)								279				286
Solvency II surplus (£bn)4								0.9				-
Solvency II coverage ratio4								143%				-
Solvency II coverage ratio pro forma for Latin American disposal4								155%				-

1 Group Re premiums include £139m in 2015 for the purchase of a new 3 year Group aggregate reinsurance cover, and £67m in 2014 for the purchase of the Group Adverse Development Cover.2 Discontinued operations include Poland, Baltics, Italy, Hong Kong, Singapore, China, Thailand, India, Russia and Latin America. Non-core operations include Noraxis, UK Legacy and the Middle East.3 Pro forma for aggregate reinsurance 2015 net recovery of £28m (£74m recovery net of £46m earned premium cost) shown separately in Group Re.4 Capital positions are estimated5 Represented, please refer to page 30 for further details.

CHIEF EXECUTIVE’S STATEMENT

2015 was a year of major achievement for RSA. As a result, the turnaround phase of our Action Plan is largely complete and we have good prospects of substantial further performance improvement.

Strategy and Focus

With our strategic restructuring largely complete, RSA is a strong and focused international insurer. We have leadership positions in the major general insurance markets of the UK, Scandinavia and Canada. We have valuable franchise strength and balance - across regions, between Commercial and Personal customers, and across product lines.

The history, dynamics and structure of our markets show that focused regional market leaders can successfully sustain both customer appeal (market position) and excellent shareholder performance. The benefits of relative simplicity and focus, applied to regional leadership, are visible in the performance and valuation of certain key competitors which can trump those of the largest global companies in our industry. RSA has now built the foundations to follow this course and to credibly set ‘best in class’ as our future performance ambition. Our plans over the next three years show RSA advancing on that goal.

We set out on the ‘turnaround’ of RSA in 2014 with three central priorities: to serve customers well; to operate with strong finances; and to build strong sustainable performance, making RSA the best investment proposition we can achieve. These priorities are unchanged.

During the summer we received the unsolicited takeover approach from Zurich which was negotiated into a potential 550p/share cash offer that they subsequently did not pursue. Given the uncertainties of markets and our own turnaround at that time, the Board felt responding to the short term shareholder value of this proposal was our duty. However, notwithstanding the assessment at that moment, we believe strongly that RSA can prosper independently, indefinitely into the future; and that we can exceed this valuation on a standalone basis. Our strategy and plans support this view. Despite the distraction during summer, much has been accomplished since. Key risks have been successfully tackled. Performance plans have further improved. RSA is stronger, better and inherently more valuable today than six months ago.

Industry Conditions

RSA operates in a relatively mature, stable and consolidated industry. Our markets show that attractive performance is possible, despite economic and competitive challenges. To achieve this requires intense operational focus, within a disciplined strategic envelope set to concentrate on natural strengths. Customer needs will continue to evolve. Slow market growth and competition puts special focus on underwriting skills and discipline, and on cost reduction. Technology is a key enabler of both.

The immediate market outlook for RSA seems broadly similar to that we described 12 months ago. Low interest rates force our industry to put more emphasis on underwriting results and leading players are showing the discipline to achieve that. However, slow growth and strong price competition remain dominant themes with sharp value/volume trade-offs.

Financial markets are important for all insurers. At the year end, bond yields in our major markets were slightly higher on average than a year ago. However, the start of the year has seen troubling market volatility with weak equity markets, bond yield declines and credit spread widening. While these moves have not as yet led us to materially change our outlook, and indeed our capital position has strengthened further since year end, we remain alert to the risks. FX rates are also important to RSA with around two thirds of premiums from non-UK business.

2015 Actions

2015 was a year of delivery, with more achieved than we had thought probable. Our actions spanned three areas:

Strategic focus: Divestments were closed in Asia, India, Italy and UK Engineering. Russia has closed since year end. The Latin America sale is scheduled to close in stages over the next six months, adding a further 12% to our Solvency II capital ratio. The latter was a key uncertainty for us, but successfully contracted in September some weeks after the Zurich approach. Only the Middle East business remains outstanding from our non-core list (£43m net attributable assets).

In addition to releasing the power of focus on our core businesses, the disposals (gains totalling c.£500m since 2014) have both bolstered capital and pay for the restructuring actions needed to reduce costs and improve core business performance.

Financial strength: RSA's financial strength and resilience continue to improve. In addition to disposal proceeds, our stronger business results and prospects are important supplements. RSA’s credit ratings are now at the level we target. A key December milestone was receiving Solvency II internal model approval. The year end 2015 capital ratio at 143% of ‘SCR’ falls within our newly established 130-160% target zone, prior to receiving Latin American disposal proceeds. Additionally we were pleased to successfully conclude the triennial UK pension scheme reviews. This allows us to implement a major de-risking from 25% to 15% equity content in the schemes with no change in annual top-up contributions (£65m p.a.). At year end we show an IFRS reported pension surplus of £64m and (at the March 2015 valuation date) a funding basis deficit below 2012’s level and equivalent to 95% funding adequacy.

Core business improvement: We start with strong business franchises in our three core regions - the product of over 300 years of history. The goal is to renew these, to step up customer service and to improve operating performance fundamentally - from below our competitors' to ‘in the pack’, and then towards our ’best in class’ ambitions. We are well on the way.

Our customer actions have maintained retention rates and improved satisfaction measures on average across the Group. The partnership with Nationwide Building Society announced before Christmas is a major new business win, a marquee endorsement of our customer proposition and gives us market leadership in UK home insurance, the most attractive of the UK Personal Lines segments.

Critical to performance improvement are better underlying underwriting results. Business wide initiatives are paying off, covering portfolio re-underwriting, data and model sophistication, staff training and market discipline. Attritional loss ratios for the core business are 1.9% better than 2014 on an underlying basis, and are on track to improve again in 2016.

Improving our cost position is the other critical element of performance. We are ahead of original targets (>£180m gross savings by 2016) and able to increase for the second time our future savings targets to in excess of £350m by 2018. Headcount has come down 36% since 2013 (pro-forma for LatAm) and 13% in Core businesses, with more to come. And all of these continuing efforts are enabled by extensive people, technology and infrastructure renewal.

Financial Results

Operating profits - our key ongoing measure - rose 43% to £523m. This forms a more respectable base from which we aim for further substantial improvements over the next three years. While December's UK floods took results from well above, to slightly below our 2015 underwriting plan, sharp improvement on prior year is still visible.

Our financial results have many moving parts, reflecting the nature of our industry, as well as the ongoing restructuring programme.

Core premium income is up 1% on an underlying basis (down 9% post disposals, Group reinsurance and FX), meeting our goal of stabilising top line erosion.

Current year underwriting profits at £129m are up 77% and a record1 for RSA. This was driven by improved underlying profits and a swing on volatile weather/large losses of £20m2 vs 2014 (£68m worse than planned). The storm and flood events in December cost £76m within this total (£174m pre-reinsurance recoveries, which shows the risk management conservatism of our business).

Total underwriting profit was £220m, over five times higher than last year. The combined operating ratio (COR) was 96.0% for core businesses (96.9% total Group), improving from 98.8% in 2014. Reserve margins are unchanged on the year at 5%.

Within these figures are notable achievements on a regional basis. Canada delivered a 91.7% COR, albeit helped by positive reserve run-off. The Scandinavian COR of 94.0% was held back by one-off additional Swedish reserve strengthening but lower costs and an improving attritional loss ratio provides a platform for attractive further profit growth. UK pro forma underwriting profit was £40m3 despite significant impact from the December storms, while the attritional loss and cost ratios improved year-on-year. This is the best UK result for many years.

Reflecting RSA's progress, a final dividend of 7.0p/share is proposed making a 10.5p/share total for the year (up 425%), or 47% pay-out of headline and 38% of underlying EPS. Our dividend policy is unchanged; medium-term pay-outs of 40-50%, plus other capital return if surpluses so allow. Once restructuring is complete and bond pull-to-par has unwound, we expect capital generation, net of organic growth needs, to be strong.

Looking Forward

Our medium term performance target of 12-15% underlying return on net tangible assets remains sensible for RSA. It translates to 15-20% ROTE pre-pension/legacy capital charges. Our latest plans, if achieved, show underlying ROTE in the upper half of our target range in 2017 with further gains thereafter. Our focus on moving COR towards ‘best in class’ levels for our markets sets an ‘ambition’ which is actually above our ‘target’ range.

Thanks

The support and efforts of all our stakeholders are integral to the improvements at RSA. We are grateful to customers, brokers and shareholders alike. We are appreciative of regulatory engagement, not least over Solvency II. But especially I should recognise the efforts of our people, my colleagues. It’s tough work, uncertainties abound and there are hard decisions being made. RSA’s people are stepping up and we are grateful for it. So too do we welcome the talented newcomers to our management and thank those who have left us.

RSA is a valuable company. We can make it much more valuable. We are on a course to do just that.

Stephen HesterGroup Chief Executive24 February 2016

1 On a like-for-like basis2 Net of Group aggregate reinsurance cover 2015 earned premium of £46m (2014: nil)3 Pro forma for aggregate reinsurance 2015 net recovery of £28m (£74m recovery net of £46m earned premium cost) shown separately in Group Re.

MANAGEMENT REPORT

INCOME STATEMENT

Management basis – 12 months ended 31 December 2015

		Group FY 2015		Of which: ‘Core’5				Group FY 20146		Of which:‘Core’5
		£m		£m				£m		£m
Net Written Premiums		6,825		5,722				7,465		6,091
Net Earned Premiums		7,012		5,927				7,874		6,483
Net Incurred Claims1		(4,579)		(3,933)				(5,381)		(4,496)
Commissions		(1,113)		(848)				(1,195)		(917)
Operating expenses		(1,100)		(909)				(1,257)		(999)
Underwriting result		220		237				41		71
Investment income		403		319				439		351
Investment expenses		(14)		(12)				(13)		(12)
Unwind of discount		(67)		(28)				(83)		(46)
Investment result		322		279				343		293
Central expenses		(19)		(18)				(19)		(16)
Operating result		523		498				365		348
Net gains/losses/exchange – tangible		204						476
Net gains/losses/exchange – intangible2		(51)						(99)
Interest		(106)						(119)
Non-operating charges3		(35)						(42)
Non-recurring charges4		(212)						(306)
Profit before tax		323						275
Tax		(79)						(199)
Profit after tax		244						76
Loss ratio (%)		65.3		66.4				68.3		69.3
Weather loss ratio		3.1		3.2				3.2		3.6
Large loss ratio		7.9		8.5				7.4		8.1
Current year attritional loss ratio		55.7		56.6				57.6		57.8
Current year attritional loss ratio pro forma7		55.2		55.9				57.6		57.8
Prior year effect on loss ratio		(1.4)		(1.9)				0.1		(0.2)
Commission ratio (%)		15.9		14.3				15.2		14.1
Expense ratio (%)		15.7		15.3				16.0		15.4
Combined ratio (%)		96.9		96.0				99.5		98.8
Reported ROTE		7.8						3.6
Underlying ROTE		9.7						9.7
Notes:
1 Of which: claims handling costs		(395)						(460)
2 Impairments of non-financial assets		(51)						(99)
3 Amortisation		(27)						(32)
3 Pension net interest costs		(8)						(10)
4 Solvency II costs		(26)						(25)
4 Reorganisation costs		(183)						(110)
4 Other non-recurring charges		(3)						(171)

5 ‘Core’ comprises Scandinavia, Canada, UK (ex Legacy), Ireland, and central functions.6 Represented, please refer to page 30 for further details.7 Attributes the impact of moving the Group aggregate reinsurance cover (taken out in 2015) earned premiums to weather/large and to adjust for 2014 year end discount rate change impact on 2015 claims in Scandinavia.

SEGMENTAL ANALYSIS

Management basis – 12 months ended 31 December 2015

		Scandinavia				Canada				UK				Ireland				Centralfunctions				Total ‘non-core’1		GroupFY 2015
		£m				£m				£m				£m				£m				£m		£m
Net Written Premiums		1,606				1,360				2,606				261				(111)				1,103		6,825
Net Earned Premiums		1,566				1,387				2,734				264				(24)				1,085		7,012
Net Incurred Claims		(1,156)				(852)				(1,781)				(222)				78				(646)		(4,579)
Commissions		(60)				(186)				(566)				(34)				(2)				(265)		(1,113)
Operating expenses		(256)				(233)				(375)				(43)				(2)				(191)		(1,100)
Underwriting result		94				116				12				(35)				50				(17)		220
U’writing result pro forma2										40								22
Investment income		91				72				147				9				-				84		403
Investment expenses		(2)				(3)				(7)				-				-				(2)		(14)
Unwind of discount		(20)				(3)				(5)				-				-				(39)		(67)
Investment result		69				66				135				9				-				43		322
Central expenses		-				-				-				-				(18)				(1)		(19)
Operating result		163				182				147				(26)				32				25		523
Operating result pro forma2										175								4
Net gains/losses/exchange – tangible																								204
Net gains/losses/exchange – intangible																								(51)
Interest																								(106)
Non-operating charges																								(35)
Non-recurring charges																								(212)
Profit before tax																								323
Tax																								(79)
Profit after tax																								244
Loss ratio (%)		73.8				61.5				65.1				84.3				-				-		65.3
Weather loss ratio		1.0				2.3				6.5				1.5				-				-		3.1
Large loss ratio		6.3				4.7				12.4				6.4				-				-		7.9
Current year attritional loss ratio		64.5				60.3				48.1				74.2				-				-		55.7
Curr. yr att’nl loss ratio pro forma3		63.7																						55.2
Prior year effect on loss ratio		2.0				(5.8)				(1.9)				2.2				-				-		(1.4)
Commission ratio (%)		3.8				13.4				20.7				12.8				-				-		15.9
Expense ratio (%)		16.4				16.8				13.7				16.3				-				-		15.7
Combined ratio (%)		94.0				91.7				99.5				113.4				-				-		96.9
Combined ratio pro forma (%)2										98.5
1 Total ‘non-core’ comprises discontinued operations of Poland, Baltics, Italy, Hong Kong, Singapore, China, Thailand, India, Russia and Latin America; and non-core operations of Noraxis, UK Legacy and the Middle East. 2 Pro forma for aggregate reinsurance 2015 net recovery of £28m (£74m recovery net of £46m earned premium cost) shown separately in Group Re. 3 Adjusts, for Scandinavia, for the 2014 year end discount rate change impact on 2015 claims in Scandinavia. Reflects this adjustment for Group and also attributes the impact of moving the Group aggregate reinsurance cover (taken out in 2015) earned premiums to weather/large.

Note: please refer to appendix for FY 2014 comparatives

Market conditions

Insurance market conditions seem broadly unchanged from a year ago. Slow growth and intense price competition continue to drive sharp price/volume trade-offs, though in line with our expectations overall.

During 2015, five-year bond yields increased by c.20bps in each of the UK, Sweden and Denmark, but were down c.60bps in Canada. At an aggregate level, this has had a positive impact on economic capital ratios, the outlook for investment returns and discount rates on liabilities, but reduces tangible equity in the short term as unrealised bond gains reverse. However, since year end, five-year bond yields have fallen – down 15-60bps across our core territories.

Around two thirds of RSA's core premiums lie outside the UK. Foreign exchange movements, notably the strengthening of Sterling during 2015, have impacted reported results, with Core Group premiums flat at constant exchange rates (up 1% underlying), but down 6% at reported exchange rates. A 5% change in the average rates of our operating currencies against Sterling would imply a 4% change in our 2015 operating profit.

Premiums

2015 Group net written premiums were down 3% year-on-year at constant exchange rates due to disposals, however Core Group premiums rose 1% on an underlying basis, with the key movements being:

		Scandi-navia		Canada		UK		Ireland		Total
Net Written Premiums (£m)		1,606		1,360		2,606		261
% changes in NWP
Volume change including portfolio actions		1		(5)		-		(8)		(1)
Rate increases		3		2		2		4		2
Core Group FY 2015 CFX movt. (ex Group Re)		4		(3)		2		(4)		1
Impact of Group Re1										(1)
Core Group FY 2015 CFX movt.										-
Impact of non-core businesses/disposals										(3)
Total Group FY 2015 CFX movt.										(3)

1 Group Re premiums include £139m in 2015 for the purchase of a new 3 year Group aggregate reinsurance cover, and £67m in 2014 for the purchase of the Group Adverse Development Cover.

Regional highlights (at constant FX) include:

Scandinavian premiums were up 4% (Personal up 4% and Commercial up 3%), due to improving rate and retention across the book; Canadian premiums were down 3% with Personal down 3% and Commercial down 5%. The movements reflect the underwriting actions we have been taking to improve profitability as well as competitive market conditions; UK premiums were up 2%. Commercial was up 7% driven by growth in our target portfolios whilst Personal was down 4% reflecting continued discipline in a competitive market and the ongoing impact of business exits; and Ireland premiums were down 4% reflecting the continued impact of our remediation work.

Retention trends remained broadly stable with overall retention across the Group of around 80%.

Underwriting result

Group underwriting profit of £220m has improved significantly year-on-year (2014: £41m) and comprised £237m from core operations, and a £17m loss from discontinued and non-core operations.

		Total UW result						Current Year UW						Prior Year UW
£m		2015		20141				2015		20141				2015		20141
Scandinavia		94		169				127		148				(33)		21
Canada		116		21				35		(17)				81		38
UK		12		4				(34)		6				46		(2)
Ireland		(35)		(108)				(29)		(63)				(6)		(45)
Group Re		50		(15)				37		9				13		(24)
Total Core		237		71				136		83				101		(12)
Non-core & discontinued		(17)		(30)				(7)		(10)				(10)		(20)
Total Group		220		41				129		73				91		(32)

1 Represented, please refer to page 30 for further details.

Current year profit of £129m (2014: £73m):

The Core Group current year attritional loss ratio was 56.6% which showed a 1.9 point improvement from 2014 on an underlying basis1. There were good improvements across all core regions. Total weather costs for 2015 were £218m representing a weather loss ratio of 3.1% (2014: £253m or 3.2%; five year average: 3.2%).

Included within this is a £76m net cost to the Group relating to the adverse weather in the UK, Ireland and Scandinavia in November and December. The gross cost of these storms was £174m, and after recoveries from the Group catastrophe treaty the cost was £150m (two events at a net retention of £75m each). In addition, the Group booked recoveries of £74m from the Group aggregate reinsurance cover, bringing the overall Group net cost down to £76m.

Impact of November/December storm events:

£m				Loss net ofcat treatyrecoveries		Aggregatecoverrecovery		Overallnet cost
UK				134		-		134
Scandinavia				8		-		8
Ireland				3		-		3
Group Re				5		(74)		(69)
Total				150		(74)		76

Please refer to page 35 for further information on our 2016 reinsurance programme.

Total large losses were £556m or 7.9% of premiums (2014: £587m or 7.4%), which was marginally lower than the five year average of 8.1%, with lower than trend levels in the UK (although slightly worse than expectations), partly offset by more elevated levels in Scandinavia, Canada and Ireland.

1 Attributes the impact of moving the Group aggregate reinsurance cover (taken out in 2015) earned premiums to weather/large and to adjust for 2014 year end discount rate change impact on 2015 claims in Scandinavia.

Prior year profit of £91m provided a 1.4 point benefit to the combined ratio and included the following specific items:

Positive prior year development from Canada and the UK; Reserve strengthening in Scandinavia relating to legacy long-tail Swedish Personal Accident products; A much reduced prior year loss of £6m in Ireland (2014: £45m loss) as our actions to improve the business continue to take effect; and A non-core prior year loss of £10m which included a £39m loss in UK Legacy and a £26m profit in Italy.

Our guidance is for prior year profits to be around 1% of premiums, but there remains the potential for volatility given our commitment to transparent reserve margins.

Our assessment of the margin in reserves for the Group (the difference between our actuarial indication and the booked reserves in the financial statements) remains stable at 5% of booked claims reserves.

Underwriting operating expenses

The overall Group underwriting expense ratio was down 0.3pts to 15.7% in 2015 and at a Core Group level was down marginally to 15.3%. There were improvements of 0.5pts and 0.4pts in Scandinavia and the UK respectively, offset by a higher ratio in Canada (the product of lower underwriting expenses more than offset by lower premiums). In 2016 we expect the Core Group expense ratio to fall again, and we target further reductions thereafter.

Commissions

The Group commission ratio in 2015 of 15.9% was up from 15.2% in 2014, driven mainly by an increase in the non-core commission ratio (up 4.5pts to 24.5%). The Core Group commission ratio was relatively stable at 14.3% (2014: 14.1%). We currently expect the Core Group commission ratio to be at or around 14% over the medium term.

Investment result

The investment result was £322m (2014: £343m) with investment income of £403m (2014: £439m) partly offset by investment expenses of £14m (2014: £13m) and the liability discount unwind of £67m (2014: £83m).

Investment income was slightly ahead of our guidance but down 8% on prior year, primarily reflecting the continued impact of the low bond yield environment with the average book yield across our major bond portfolios falling from 3.0% to 2.8% year-on-year. The liability discount unwind was lower than 2014 following the reduction in Scandinavian discount rates made at the end of 2014.

Based on current forward bond yields and foreign exchange rates, together with the expected timing of disposal completions in 2016, it is estimated that investment income (pre discount unwind and investment expenses) will be close to previous guidance once adjusted for the Latin America sale impacts. This is in the order of £330m for 2016 (of which c.£15m relates to pre-completion Latin America income), with around £315m expected in 2017 and 2018. Discount unwind of c.£55m is expected for 2016, falling to around £50m thereafter, with the reduction from 2015 reflecting the disposal of Latin America.

Total controllable costs1

Against our target of greater than £250m annual gross cost reduction by 2017 we have delivered £180m at the end of 2015 and now expect to achieve in the region of £250m by 2016. We have therefore raised our future savings targets for a second time to in excess of £350m by 2018. We now expect ‘costs to achieve’ to be less than 1.5 times the annual cost savings once fully achieved. These costs will be booked over the years 2014-17, falling sharply in 2017.

Total Group controllable costs1 were down 8% year-on-year at constant exchange to £1,808m. Core business controllable costs were down 3% in the same period at constant exchange to £1,505m (comprising 4% cost reductions, offset by 1% inflation).

The majority of the year-on-year core business cost reduction has come from our Scandinavian business (8% down) and our UK business (4% down).

Group FTE2 is down 26% since the start of 2014 to 16,713 at the end of 2015, and will be down 36% post the completion of the Latin America disposal. Over the same period Core business FTE has fallen by 13% to 13,637.

Non-operating items

Tangible net gains of £204m (2014: £476m) include:

£184m of disposal gains (2014: £342m) including Hong Kong & Singapore £103m, China £28m, Italy £29m and India £21m; £20m of investment gains mainly comprising realised equity gains and unrealised gains on property assets.

Intangible net losses of £51m in respect of goodwill and intangible asset write downs (2014: £99m) mainly relate to the write-down of certain non-core assets to their recoverable amount.

Non-cash non-operating charges of £35m (2014: £42m) comprise £27m of amortisation of customer related intangible assets and £8m of pension net interest costs. We expect the amortisation of customer related intangible assets to fall in 2016 to around half the amount booked in 2015.

Non-recurring charges of £212m (2014: £306m) include:

Reorganisation costs of £183m (2014: £110m) in respect of redundancy (£59m) and restructuring (£124m). Restructuring costs in 2015 related to amounts incurred across the Group for activities such as process re-engineering, office footprint consolidation, reducing spans of control, and renegotiation of supplier contracts. Of particular note is the recent announcement of our transition to a new IT infrastructure provider, Wipro, in the UK, Ireland and Scandinavia. Restructuring costs have been incurred in relation to this transition, but our new arrangements should lead to cumulative benefits in excess of £250m over the contract period; and Solvency II implementation costs of £26m (2014: £25m). In 2016 we expect a significantly reduced Solvency II cost (reflecting ongoing preparations for Pillar III reporting), falling to zero thereafter.

1 Total controllable costs includes underwriting operating expenses, claims expenses, investment expenses, central expenses and Solvency II costs2 Full time equivalent employees

Tax

The Group has reported a tax charge of £79m for the year, giving an effective tax rate (ETR) of 24.5%. The charge largely comprises:

Tax on overseas profits, particularly in Canada, Latin America and Scandinavia, and other overseas tax charges; A reduced UK deferred tax asset valuation due to the lower UK corporation tax rate of 18%; The upward revaluation of UK deferred tax assets based on current assessments of probable future UK taxable profits.

The carrying value of the Group’s net deferred tax asset at 31 December 2015 was £126m (of which £101m is in the UK). Additionally, the Group has income tax losses of £631m for which no deferred tax asset has currently been recognised, predominantly in the UK (c.£400m) and Ireland (c.£130m).

In 2016, we expect an optically higher ETR due to the accounting impact of the Latin American disposal, higher taxed foreign profits, and UK reorganisation costs that do not give an immediate tax benefit. Thereafter, we anticipate an ETR more in line with the statutory rates in our Core territories.

Dividend

We are pleased, in the light of our continued progress, to propose a final dividend of 7.0p per ordinary share. Together with the interim dividend of 3.5p, this brings the total dividend for the year to 10.5p, representing 47% pay out of headline and 38% of underlying EPS.

Our medium term policy of between 40-50% ordinary dividend payouts remains, with additional payouts where justified. Potential for additional payouts should follow the completion of restructuring and the unwind of unrealised bond gains.

BALANCE SHEET

Movement in Net Assets

		Shareholders’funds		Noncontrollinginterests		Loancapital		Equity plus loancapital		TNAV
		£m		£m		£m		£m		£m
Balance at 1 January 2015		3,825		108		1,243		5,176		2,900
Profit/(loss) after tax		235		9		-		244		357
Exchange gains/(losses) net of tax		(220)		5		-		(215)		(167)
Fair value gains/(losses) net of tax		(218)		(1)		-		(219)		(218)
Pension fund gains/(losses) net of tax		65		-		-		65		65
Repayment & amortisation of loan capital		-		-		11		11		-
Share issue		3		-		-		3		3
Changes in shareholders’ interests in subsidiaries		3		11		-		14		3
Share based payments		14		-		-		14		14
2014 final/2015 interim dividend		(56)		(3)		-		(59)		(56)
Preference dividend		(9)		-		-		(9)		(9)
Goodwill and intangible additions		-		-		-		-		(54)
Balance at 31 December 2015		3,642		129		1,254		5,025		2,838
Per share (pence)
At 1 January 2015		365								286
At 31 December 2015		346								279

Tangible net assets have reduced by 2% to £2.8bn during 2015. Profits in the year (including disposal gains) and positive IAS 19 pension fund movements were offset by adverse foreign exchange, fair value mark-to-market reductions due to higher bond yields, the payment of dividends and intangible asset additions.

CAPITAL POSITION

Solvency II position131 December 2015:			Requirement(SCR)			Eligible OwnFunds				Surplus				Coverage
			£bn			£bn				£bn				%
As reported			2.0			2.9				0.9				143%
Pro forma for Latin America disposal			2.0			3.1				1.1				155%

Solvency II approach

Internal Model approval received on 5 December 2015. Fully consolidated Internal Model tailored to RSA’s risk profile (benefiting from having been part of the PRA’s ICA regime for the past 11 years). The SCR (Solvency Capital Requirement) represents the Value-at-Risk of basic own funds subject to a confidence level of 99.5 % over a one-year period. Covers existing business and all new business expected to be written over the next 12 months. No transitional measures utilised, except for grandfathering of debt.

Target operating range

We maintain a measured approach to capital management, targeting a single ‘A’ capital rating. This involves considering a range of indicators relating to capital, to operating results, and to qualitative factors. RSA is a diversified, multi-channel, multi-product general insurer and its business mix reduces exposure to significant volatility. However, the UK pension scheme provides a degree of IAS 19 volatility under Solvency II for RSA. During 2016, as Solvency II beds in across the industry, we will assess target coverage ratios. But based on current knowledge, we consider a target operating range of 130-160% to be appropriate for the Group’s risk profile. Our previous guidance with respect to tangible net assets : premium ratio is superceded by Solvency II but will continue to be a comparative tool we analyse.

Solvency II sensitivities2
FY 2015 coverage ratio			143% /155% pro forma
Interest rates: +1% parallel shift			-2%
Interest rates: -1% parallel shift			+3%
Equities: -15%			-8%
Foreign exchange: GBP +10% vs all currencies			-4%
Cat loss of £75m net			-5%
Credit spreads: +0.25% parallel shift			2%
Credit spreads: -0.25% parallel shift			-10%

The above sensitivities have been considered in isolation. Should sensitivities impact in combination there may be some natural offsets between them.

1 The Solvency II capital position at 31 December 2015 is estimated2 Shown pro forma for pension de-risk actions (see page 34 for further details)

Capital requirement (SCR) by risk type1:								Capital requirement (SCR) by territory1:
				31 Dec 2015							31 Dec 2015
				%							%
Underwriting risk				19				UK			24
Catastrophe risk				12				Scandinavia			15
Reserve risk				13				Canada			12
Legacy2 risk				11				Ireland			5
Market & credit risk				12				Pension			29
Currency risk				3				Legacy2,3			13
Pension risk				23				Discontinued			2
Operational risk				7				Total			100
Total				100

Diversification benefit

The level of diversification benefit generated within our SII model, resulting from the nature of the different types of business written and the non-correlation of risk events affecting the group, is around 40% of the undiversified capital requirement (SCR).

Reconciliation of IFRS total capital to Eligible Own Funds

			31 Dec 2015
			£m
Shareholders’ funds (incl. preference shares)			3.6
Loan capital			1.3
Non-controlling interests			0.1
Total IFRS capital			5.0
Less: goodwill & intangibles			(0.6)
Adjust technical provisions to SII basis			(0.8)
Other			(0.1)
Basic Own Funds			3.5
Tiering & availability restrictions			(0.5)
Forseeable dividends & NCI			(0.1)
Eligible Own Funds			2.9

1 Shown as a proportion of the undiversified solvency capital requirement.2 Includes asbestos, disease and abuse.3 Estimated as part of the total UK risk.

Note: Because gross SCR is analysed using different categories, percentages for Pensions and Legacy vary between the SCR by risk type and by territory.

GROUP OUTLOOK

The Group expects to make further good progress in 2016 against its Action Plan and the year has started well in that regard. Core business NWP is targeted to show only modest growth vs 2015 (at constant FX). Attritional loss ratios are expected to show further improvement, as are controllable expenses. Volatile items in weather/ large losses remain unpredictable though bounded by reinsurance protection similar to 2015. Our current medium term planning assumption is for a Core Group weather ratio of around 3% and large loss ratio of around 8.5%. If volatile items stay per plan, attractive further underwriting profit and combined ratio improvement is expected.

Group investment income (excluding the contribution from Latin America pre-sale completion) is expected to be c.£315m and to stay around that level for 2017 assuming current market implied rates. Volatile financial markets are a risk factor for RSA and industry competitors which could present challenges to our plans during the year.

An advance in 2016 operating profit is our goal with underwriting improvements more than offsetting reduction in investment income and disposal impacts from Latin America. Non-operating items are expected to include tangible gains on disposals, but other charges including FCTR1 (and potentially debt refinancing) will optically exceed these, albeit with no capital or cash impact.

2016 should see the last major year of restructuring charges associated with capability improvement and our increased cost savings targets. The totality of management actions across 2014-16 is expected to produce further strong performance gains in 2017/18 consistent with the Group’s ambition and financial targets.

1 Foreign currency translation reserve – please refer to page 35 for further details.

BUSINESS REVIEW – INVESTMENT PERFORMANCE

Management basis

Investment result														FY 2015£m												FY 2014£m								Change%
Bonds														332												354								(6)
Equities														25												23								9
Cash and cash equivalents														17												29								(41)
Property														22												28								(25)
Other														7												5								40
Investment income														403												439								(8)
Investment expenses														(14)												(13)								(8)
Unwind of discount														(67)												(83)								19
Investment result														322												343								(6)
Balance sheet unrealised gains														31 Dec 2015(£m)												31 Dec 2014(£m)								Change%
Bonds														414												634								(35)
Equities														(1)												35								-
Other														2												3								(33)
Total														415												672								(38)
Investment portfolio		Value31 Dec2014		Foreignexchange				Mark tomarket										Othermovements								Transfer toassets held for sale												Value31 Dec2015
		£m		£m				£m										£m								£m												£m
Government bonds		4,163		(236)				(52)										140								(308)												3,707
Non-Government bonds		8,085		(315)				(203)										(94)								(68)												7,405
Cash		1,011		(72)				-										(26)								(97)												816
Equities		160		(5)				6										(2)								-												159
Property		346		(2)				25										-								(4)												365
Prefs & CIVs		335		(18)				(36)										145								-												426
Other		97		(8)				(9)										20								-												100
Total		14,197		(656)				(269)										183								(477)												12,978
Split by currency:
Sterling		4,466																																				4,543
Danish Krone		1,229																																				936
Swedish Krona		2,344																																				2,207
Canadian Dollar		3,128																																				2,706
Euro		1,308																																				1,247
Other		1,722																																				1,339
Total		14,197																																				12,978
Credit quality – bond portfolio						Non-government																								Government
						31 Dec2015%				31 Dec2014%																				31 Dec2015%												31 Dec2014%
AAA						33				31																				89												81
AA						15				21																				6												10
A						37				38																				5												3
BBB						14				8																				-												5
< BBB						1				1																				-												1
Non rated						-				1																				-												-
Total						100				100																				100												100

INVESTMENT PERFORMANCE

Investment income of £403m (2014: £439m) was offset by investment expenses of £14m (2014: £13m) and the liability discount unwind of £67m (2014: £83m). Investment income of £403m is ahead of our expectations but down 8% on prior year, primarily reflecting the continued impact of the low bond yield environment.

The average book yield on the total portfolio was 2.9% (2014: 3.1%), with average yield on the bond portfolios of 2.8% (2014: 3.0%). Reinvestment rates in the Group’s major bond portfolios at 31 December 2015 were approximately 1.3%.

Average duration of the Group’s bond portfolios is 4.0 years (31 December 2014: 4.0 years).

The investment portfolio fell by 9% during the year to £13.0bn. The movement was driven primarily by the impact of strengthening of Sterling, negative mark-to-market on bond holdings, and transfers to assets held for sale (mainly relating to the agreed sale of Latin America). This was partly offset by positive cash flow, including proceeds from completed disposals in the year. Excluding transfers to assets held for sale the investment portfolio was down 5% in 2015.

At 31 December 2015, high quality widely diversified fixed income securities represented 86% of the portfolio (31 December 2014: 86%). Equities represented 1% (31 December 2014: 1%) and cash 6% of the total portfolio (31 December 2014: 7%).

The quality of the bond portfolio remains very high with 99% investment grade and 67% rated AA or above. We remain well diversified by sector and geography.

Unrealised bond gains and pull-to-par

Balance sheet unrealised gains of £415m (pre-tax) decreased by £257m during the year (31 December 2014: £672m) driven by higher bond yields, the pull-to-par of existing bonds and negative foreign exchange movements.

The Group’s future capital generation will be driven by its TNAV generation, which includes book yield investment income through the P&L, offset by a mark-to-market valuation, which will include a pull-to-par effect through equity.

This will unwind the unrealised gains on the balance sheet, currently £415m (almost entirely related to fixed income). These are expected to largely unwind over the next 3 years, based on current forward yields.

This pull-to-par effect notwithstanding, the Group’s economic insurance asset and liability position is broadly matched; parallel shifts in the yield curve should not have a significant impact on Solvency II surplus (this excludes IAS 19 impact).

Outlook

Based on current forward bond yields and foreign exchange rates, together with the expected timing of disposal completions in 2016, it is estimated that investment income will be little changed from previous guidance once adjusted for the Latin America sale impacts. This will be in the order of £330m for 2016 (of which £15m relates to pre-completion Latin America income), with around £315m expected in 2017 and 2018. Discount unwind of c.£55m is expected in 2016, falling to c.£50m thereafter. These projected income numbers are, however, sensitive to changes in market conditions.

REGIONAL REVIEW – SCANDINAVIA

Management basis

			Net written premiums																				Change								Underwriting result
			FY 2015£m								FY 20141£m												Constant FX (%)								FY 2015 £m												FY 20141 £m
Split by country
Sweden			874								956												4								101												130
Denmark			585								633												3								(11)												39
Norway			147								170												2								4												-
Total Scandinavia			1,606								1,759												4								94												169
Split by class
Household			295								307												9								35												-
Personal Motor			313								360												-								89												51
Personal Accident & Other			275								302												3								(16)												102
Total Scandinavia Personal			883								969												4								108												153
Property			297								324												3								7												(1)
Liability			129								133												9								(11)												27
Commercial Motor			184								206												2								4												(2)
Marine & Other			113								127												1								(14)												(8)
Total Scandinavia Commercial			723								790												3								(14)												16
Total Scandinavia			1,606								1,759												4								94												169
Investment result																															69												72
Scandinavia operating result																															163												241
Operating Ratios (%)			Claims												Commission												Op Expenses												Combined
			FY ‘15				FY ‘14								FY ’15				FY ‘14								FY ‘15								FY ‘141				FY ‘15								FY ‘141
Household																																							87.9								99.9
Personal Motor																																							71.6								85.8
Personal Accident & Other																																							105.9								65.6
Total Scandinavia Personal			71.3				66.3								3.2				3.4								13.2								14.3				87.7								84.0
Property																																							97.5								100.1
Liability																																							108.4								79.3
Commercial Motor																																							98.1								101.0
Marine & Other																																							112.0								106.5
Total Scandinavia Commercial			77.0				73.5								4.7				4.5								20.4								19.9				102.1								97.9
Total Scandinavia			73.8				69.6								3.8				3.9								16.4								16.9				94.0								90.4
Of which:															5yr ave
Weather loss ratio			1.0				1.6								1.8
Large loss ratio			6.3				4.7								5.2
Current year attritional loss ratio			64.5				64.8
Curr. yr att’nl loss ratio pro forma2			63.7
Prior year effect on loss ratio			2.0				(1.5)
YTD rate increases3 (%)			At Dec 2015												At Sept 2015												At June 2015												At March 2015
Personal Household			5												4												4												3
Personal Motor			3												3												3												3
Commercial Property			1												2												2												2
Commercial Liability			5												5												5												4
Commercial Motor			4												4												4												3

1 Represented, please refer to page 30 for further details.2 To adjust for 2014 discount rate change impact on 2015 claims in Scandinavia.3 Rating increases reflect rate movements achieved for risks renewing in the year-to-date versus comparable risks renewing in the same period the previous year

SCANDINAVIA

Scandinavian net written premiums of £1,606m were up 4% at constant exchange (2014: £1,759m as reported; £1,551m at constant exchange), with volumes up 1% across the region and rate increases contributing 3% growth.

Personal grew 4%, with strong growth of 6% in Sweden driven by all lines, particularly Household, due to a combination of rate increases and good retention levels. Denmark Personal premiums were flat although we are seeing good traction in our affinity offering. Norway Personal premiums were down 1% mainly due to the termination of a single large affinity arrangement in late 2014.

Commercial premiums were up 3% overall with growth of 4% in Denmark Commercial driven by continued strong progress in Workers Compensation and Renewable Energy. Sweden Commercial grew 1% driven by rate increases, whilst Norway Commercial premiums were up 5%.

The Scandinavian underwriting result was a profit of £94m (2014: £169m) with a current year profit of £127m (2014: £148m) and a prior year loss of £33m (2014: £21m profit). Excluding weather and large loss movements, current year profits were £12m up on 2014 (at constant FX). After including the investment result of £69m (2014: £72m), the operating profit was £163m (2014: £241m).

Underlying performance remains strong with current year profits of £127m that included record current year profits of £165m in Sweden. Denmark profitability was impacted by a series of Marine large losses. The current year attritional loss ratio was 64.5%, however this was 63.7% before the impact of 2014 year end discount rate changes which was 1.1 points better than the 2014 ratio of 64.8%. Weather losses of 1.0% compared to 1.6% in 2014 and a five year average of 1.8%. Large loss experience of 6.3% was adverse to prior year (4.7%) and to the long term average (5.2%) due to a small number of large Property and Marine losses.

The prior year loss of £33m reflected the legacy long-tail Swedish Personal Accident strengthening that was flagged at the half year. Overall, the prior year effect on the loss ratio was adverse at 2.0% (2014: 1.5% positive).

The combined ratio was 94.0% (2014: 90.4%) and 91.9% on a current year basis.

Total controllable expenses are down 8% year-on-year (comprising 9% cost reduction, partly offset by 1% inflation) and FTE was down 5% in 2015 and 9% since the start of 2014. This was particularly pleasing given costs are a key area of focus for the business.

Scandinavia – Outlook

We continue to 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 remains on improving the underlying performance of the business, in particular attritional loss ratios and cost improvements in Denmark and Sweden. We target combined ratios converging with those of key competitors over the planning period.

Initiatives and actions for 2016 include further IT cost reductions; commencing the roll out of our new policy administration system across Denmark Personal; further claims excellence initiatives; digital improvements for our customers; and enhancements to our proposition in Denmark Small Commercial.

REGIONAL REVIEW – CANADA

Management basis

				Net written premiums								Change				Underwriting result
				FY 2015£m				FY 20141£m				ConstantFX (%)				FY 2015£m				FY 20141£m
Household				421				440				2				62				(4)
Personal Motor				529				609				(7)				42				17
Total Canada Personal				950				1,049				(3)				104				13
Property				176				204				(8)				6				(30)
Liability				99				114				(7)				(5)				2
Commercial Motor				85				89				2				7				24
Marine & Other				50				54				-				4				12
Total Canada Commercial				410				461				(5)				12				8
Total Canada				1,360				1,510				(3)				116				21
Investment result																66				78
Canada operating result																182				99

Operating Ratios (%)			Claims								Commission								Op Expense								Combined
			FY ‘15				FY ‘14				FY ’15				FY ‘14				FY ‘15				FY ‘141				FY ‘15				FY ‘141
Household																											85.3				100.8
Personal Motor																											92.3				97.2
Total Canada Personal			62.4				72.7				11.1				11.5				15.7				14.6				89.2				98.8
Property																											96.7				114.0
Liability																											105.2				98.7
Commercial Motor																											91.2				73.6
Marine & Other																											92.6				78.9
Total Canada Commercial			59.2				60.1				18.8				19.5				19.2				18.9				97.2				98.5
Total Canada			61.5				68.7				13.4				14.0				16.8				15.9				91.7				98.6
Of which:											5yr ave
Weather loss ratio			2.3				5.0				4.4
Large loss ratio			4.7				3.6				3.2
Current year attritional loss ratio			60.3				62.8
Prior year effect on loss ratio			(5.8)				(2.7)
YTD rate increases2 (%)			At Dec 2015								At Sept 2015								At June 2015								At March 2015
Personal Household			9								9								9								9
Personal Motor			(1)								(1)								(2)								(4)
Commercial Property			3								3								3								4
Commercial Liability			2								2								2								3
Commercial Motor			1								1								1								2

1 Represented, please refer to page 30 for further details.2 Rating increases reflect rate movements achieved for risks renewing in the year-to-date versus comparable risks renewing in the same period the previous year

CANADA

Net written premiums in Canada were down 3% on a constant exchange rate basis to £1,360m (2014: £1,510m as reported; £1,409m at constant exchange) with 5% volume reductions partly offset by 2% rate growth.

Personal premiums were down 3%, with 2% growth in Household offset by a 7% reduction in Motor. Household premiums included continued rate action whilst lower Motor premiums were primarily driven by competitive conditions in Ontario, Quebec and the Pacific region. In Commercial, premiums were down 5% as a result of the rating and portfolio action we have been taking, particularly on poorer performing blocks of business.

Underwriting profit for the year was £116m (2014: £21m) which is our strongest ever performance in Canada. Current year underwriting produced a profit of £35m, up £52m on 2014, with a prior year profit of £81m. The combined ratio was 91.7% (2014: 98.6%). After including an investment result of £66m (2014: £78m), the operating result was £182m (2014: £99m).

Taken together, weather and large losses were slightly better than long term averages. Weather losses of 2.3% compared to 5.0% for 2014 and a five year average for our Canadian business of 4.4%. Large losses, at 4.7%, were adverse to both prior year (3.6%) and the five year average (3.2%) reflecting a number of large losses in the Commercial portfolios. The current year attritional loss ratio showed a strong improvement of 2.5 points from the prior year to 60.3% as the benefits of our underwriting and portfolio actions begin to build. The prior year effect on the loss ratio was a benefit of 5.8% with prior year profits arising from the Personal and Commercial Property, Personal Auto and General Liability books. This is an unusually good result, with just over half of prior year development coming from the 2014 accident year.

Controllable expenses are flat year-on-year, although the actions we have been taking in 2015 set the path to achieving attractive cost savings in 2016. Employee headcount was down 6% in the year, ahead of our plans.

Canada – Outlook

Our Canadian business is beginning to deliver better performance patterns, and we expect this trend to continue, subject to volatile items such as weather events. Our focus continues to be on delivering operational improvement, particularly underwriting and claims improvements, process simplification and modernisation of technology and infrastructure. In 2016 we expect premiums to stabilise, current year profitability to continue improving, prior year profits to be lower than in 2015, costs and cost ratios to fall, and headcount to continue reducing.

REGIONAL REVIEW – UK

Management basis

			Net written premiums								Change				Underwriting result
			FY 2015£m				FY 20141£m				ConstantFX (%)				FY 2015£m				FY 20141£m
Household			600				644				(7)				60				63
Personal Motor			255				270				(6)				(21)				(8)
Pet			278				262				6				8				(10)
Total UK Personal			1,133				1,176				(4)				47				45
Property			634				611				5				(8)				(12)
Liability			297				295				1				(4)				(44)
Commercial Motor			256				214				20				4				23
Marine & Other			286				273				5				(27)				(8)
Total UK Commercial			1,473				1,393				7				(35)				(41)
Total UK			2,606				2,569				2				12				4
Total UK pro forma2															40
Investment result															135				132
UK operating result															147				136
UK operating result pro forma2															175

Operating Ratios (%)		Claims							Commission							Op Expenses						Combined
		FY ‘15			FY ‘14				FY ’15			FY ‘14				FY ‘15			FY ‘141			FY ‘15			FY ‘141
Household																						90.3			90.5
Personal Motor																						107.8			102.8
Pet																						96.7			103.9
Total UK Personal		59.0			58.5				21.3			22.0				15.6			15.8			95.9			96.3
Property																						101.3			102.0
Liability																						101.5			115.5
Commercial Motor																						99.1			95.1
Marine & Other																						109.4			103.2
Total UK Commercial		69.6			70.4				20.3			19.4				12.4			12.8			102.3			102.6
Total UK		65.1			65.3				20.7			20.5				13.7			14.1			99.5			99.9
Total UK pro forma2																						98.5
Of which:									5yr ave
Weather loss ratio		6.5			3.8				3.6
Large loss ratio		12.4			12.9				14.2
Current year attritional loss ratio		48.1			49.0
Prior year effect on loss ratio		(1.9)			(0.4)
YTD rate increases3 (%)		At Dec 2015							At Sept 2015							At June 2015						At March 2015
Personal Household		1							1							1						1
Personal Motor		5							4							2						1
Commercial Property		(1)							-							-						1
Commercial Liability		2							1							1						1
Commercial Motor		2							2							3						2

1 Represented, please refer to page 30 for further details.2 Pro forma for aggregate reinsurance 2015 net recovery of £28m (£74m recovery net of £46m earned premium cost) shown separately in Group Re.3 Rating increases reflect rate movements achieved for risks renewing in the year-to-date versus comparable risks renewing in the same period the previous year

UK

The UK continued to deliver on its performance improvement programme. Premiums grew 2% against a challenging competitive landscape whilst attritional loss ratios improved and expenses and FTE continued to fall.

The headline underwriting profit of £12m and combined ratio of 99.5% includes the impact of £134m1 of claims from storms Desmond, Eva and Frank in December (£100m Commercial, £34m Personal). On a pro forma basis, underwriting profit was £40m2 with a COR of 98.5%2. Total weather losses were 6.5%, which was 2.7 points worse than 2014 and 2.9 points worse than the five year average. Importantly attritional loss ratios continued to fall (2015: 48.1%, 2014: 49.0%), as did large losses at £340m or 12.4% (2014: 12.9%), as we maintain underwriting and pricing discipline. We have also seen further cost and FTE reductions during the year. Controllable expenses are down 4% year-on-year (comprising 5% cost reduction, partly offset by 1% inflation) and FTE down 6% in 2015 and down 13% since the end of 2013 excluding the impact of the sale of the UK Engineering Inspection business.

We have continued our work in the UK to focus the business on its core capabilities – during the year we completed the sale of our UK Engineering Inspection business, and our withdrawal from the Specialty Property market in Germany. In December we transferred our in-house loss adjusting services to a specialist loss adjuster.

In UK Personal, net written premiums were down 4%. Household premiums fell 7% reflecting competitive conditions and lower retention. The partnership with Nationwide Building Society announced in late 2015 is a major new business win, and will give us market leadership in UK home insurance. The deal will commence trading in 2017. Motor premiums were down 6% with the impact of our decision to exit broker motor more than offsetting strong rating action and growth in Telematics. Pet growth of 6% was driven by rate increases to cover claims inflation.

The Personal profit of £47m reflected a strong performance in Household with an underwriting profit of £60m despite the storms and floods in December. The Personal Motor loss of £21m reflects an improving trend on the first half (H1 15: £18m loss) as strong rating action begins to deliver. Pet profitability also improved in the second half as the benefits of strong rating and claims management action delivered an underwriting profit of £8m for the full year.

In UK Commercial premium growth was 7% driven predominantly by growth in Commercial property and Commercial motor where the Motability book continues to shift to the new contract. We saw growth of 7% in the Marine book in the second half, following shrinkage in H1 due to the impact of remediation and market pricing.

The underlying drivers of Commercial profitability continue to improve with attritional loss ratios 2pts better in 2015 vs 2014 and expense ratios continuing to fall. It was particularly pleasing to see our Property and Marine attritional loss ratios improve by 1.8pts and 1.5pts respectively year-on-year. However the extreme weather in December together with higher Marine large losses in the second half of the year led to a 2015 underwriting loss of £35m prior to Group aggregate reinsurance recoveries (2014: £41m loss).

UK – Outlook

The competitive landscape in the UK will continue to be challenging. We have ambitious plans to transform the UK business. We have commenced the implementation of a new UK operating model including revised contractual terms with our major suppliers, optimisation of site footprint, process redesign and investing in new technology. Once fully implemented this will result in greater underwriting and pricing capability, a lower cost base, and improved customer outcomes.

1 Group impact from November/December storms is £76m after recoveries from the Group aggregate reinsurance cover.2 Pro forma for aggregate reinsurance 2015 net recovery of £28m (£74m recovery net of £46m earned premium cost) shown separately in Group Re.

REGIONAL REVIEW – IRELAND

Management basis

			Net written premiums								Change				Underwriting result
			FY 2015£m				FY 20141£m				ConstantFX (%)				FY 2015£m				FY 20141£m
Personal			161				193				(8)				(22)				(58)
Commercial			100				102				4				(13)				(50)
Total Ireland			261				295				(4)				(35)				(108)
Investment result															9				11
Ireland operating result															(26)				(97)

Operating Ratios (%)		Claims				Commission				Op Expenses				Combined
		FY ‘15		FY ‘14		FY ’15		FY ‘14		FY ‘15		FY ‘141		FY ‘15		FY ‘141
Personal														113.8		126.9
Commercial														112.8		144.5
Total Ireland		84.3		103.5		12.8		12.6		16.3		16.7		113.4		132.8
Of which:						5yr ave
Weather loss ratio		1.5		5.8		5.0
Large loss ratio		6.4		3.4		2.8
Current year attritional loss ratio		74.2		80.3
Prior year effect on loss ratio		2.2		14.0
YTD rate increases2 (%)		At Dec 2015				At Sept 2015				At June 2015				At March 2015
Personal Household		1				1				1				1
Personal Motor		19				19				14				9
Commercial Property		1				2				(1)				(4)
Commercial Liability		13				12				13				15
Commercial Motor		14				15				13				15

1 Represented, please refer to page 30 for further details.2 Rating increases reflect rate movements achieved for risks renewing in the year-to-date versus comparable risks renewing in the same period the previous year

IRELAND

In Ireland we continue to make strong progress in remediation. Underwriting losses have reduced and premiums stabilised in the second half. Full year premiums of £261m were down 4% at constant FX versus 2014. Personal premiums were down 8%, whilst Commercial premiums were up by 4%.

The underwriting loss of £35m is much reduced from 2014 (£108m loss). It comprises a £29m current year loss (2014: £63m loss) and a £6m prior year loss (2014: £45m loss).

Within the underwriting result, the impact of weather and large losses, taken together, was broadly in line with long term averages although weather losses were relatively low despite the December storms and large losses relatively high. Current year attritional loss ratios of 74.2% were improved from 2014 (80.3%) and should improve further as the portfolio and pricing action taken in the second half are earned through to the underwriting result. There has been particular focus on Private Motor, Motor Fleet and Liability.

The performance improvement plan in Ireland is progressing. Irish FTE was down 13% in 2015, with total controllable expenses down 5% year-on-year.

Ireland - Outlook

Our goal remains to return the business to operating profitability in 2016 through continued underwriting improvement and cost reduction.

DISCONTINUED & NON-CORE OPERATIONS

		Net written premiums						Underwriting result
		FY 2015£m		FY 2014£m				FY 2015£m		FY 2014£m
Latin America1		691		690				(6)		(11)
Middle East2		181		147				8		4
UK Legacy2		2		-				(39)		(48)
Other1, 3		229		537				20		25
Total Discontinued & Non-Core		1,103		1,374				(17)		(30)

1 Discontinued.2 Non-core.3 Includes Baltics, Poland, Noraxis, Hong Kong, Singapore, Thailand, China, India, Italy, UK Engineering, and Russia.

Disposal programme

In 2014 we commenced a major disposal programme with the intention of focusing RSA on its strongest businesses. Significant progress has been made to date, as follows:

Completed disposals:

Baltics (Lithuania, Latvia, Estonia): announced 17 April 2014, completed 30 June 2014 Latvia, 31 October 2014 Lithuania and Estonia. Total proceeds: £215m. Gain on sale: £124m. Poland: announced 17 April 2014, completed 15 September 2014. Total proceeds: £74m. Gain on sale: £29m. Noraxis: announced 19 May 2014, completed 2 July 2014. Total proceeds: £220m. Gain on sale: £164m. Thailand associate: announced and completed 19 December 2014. Total proceeds: £37m. Gain on sale: £21m. Hong Kong & Singapore: announced 21 August 2014, completed 31 March 2015. Total proceeds: £123m. Gain on sale: £103m. China: announced 3 July 2014, completed 14 May 2015. Total proceeds: £69m. Gain on sale: £28m. India associate: announced 18 February 2015, completed 29 July 2015. Total proceeds: £46m. Gain on sale: £21m. Italy: announced 17 October 2014, completed 31 December 2015. Total proceeds: £18m. Gain on sale: £29m. UK Engineering Inspection: Completed 1 November 2015. Gain on sale: £2m. Russia: announced 9 December 2015, completed 29 January 2016. Total proceeds: £5m.

Disposals pending completion:

Latin America: announced 8 September 2015. Expected total proceeds: £403m. Please refer to page 35 for details on expected disposal accounting in 2016.

Remaining non-core operations (not all will necessarily be disposed):

Middle East UK Legacy

UK Legacy

Our UK Legacy portfolio comprises exposure to asbestos and other long term liabilities arising from Employers’ and Public Liability policies written over the past 50 years. The UK Legacy underwriting result for 2015 was a loss of £39m (2014: £48m loss) and was primarily driven by strengthening for abuse and deafness claims, together with operating expenses incurred.

APPENDIX

RATIOS, DEFINITIONS AND OTHER INFORMATION

Expense allocation changes

In line with the Group’s focus on transparency of performance, we have revisited the methodology used to allocate expenses across the Group. This has identified certain expense items within the Group’s P&L which we believe should be allocated into the underwriting result but which previously sat elsewhere in the management basis P&L. These fall into two categories:

1. Investment expenses – historically a number of additional overheads have been allocated into this P&L line. Only genuine investment related expenses are now charged to this line.

2. Central expenses – a review has been conducted of the activities within the Group Corporate Centre and a revised allocation into the underwriting result has been determined.

The Group began to prepare its results on this new basis in 2015 and therefore the 2014 comparatives have been represented. The Group’s operating result remains unchanged, as does ROTE, but the underwriting result is reduced and the combined operating ratios that were reported in 2014 increased slightly. The impact for 2014 was to transfer £49m of cost into the underwriting result, whilst the Group's COR ratio increased from 98.8% to 99.5%.

Combined operating ratio

The Group’s combined operating ratio (COR) is calculated on an ‘earned’ basis as follows:

COR = loss ratio + commission ratio + expense ratio

Where:

Loss ratio = net incurred claims / net earned premiums

Commission ratio = earned commissions / net earned premiums

Expense ratio = earned operating expenses / net earned premiums

Net asset value and tangible net asset value per share

Net asset value per share data at 31 December 2015 was based on total shareholders’ funds of £3,642m, adjusted by £125m for preference shares. Tangible net asset value per share was based on a tangible book value of £2,838m.

Earnings per share

The earnings per share (EPS) is calculated by reference to the result attributable to the ordinary shareholders of the Parent Company and the weighted average number of shares in issue during the period. On a basic and diluted basis these were 1,015,489k and 1,019,280k respectively (net of RSA owned shares). The number of shares in issue at 31 December 2015 was 1,017,060k (net of RSA owned shares).

Headline EPS uses profit attributable to ordinary shareholders (profit after tax less non-controlling interests and preference share dividends). Underlying EPS uses an underlying profit measure calculated as operating profit less interest costs taxed at an underlying tax rate of 28% for 2015, less non-controlling interests and preference share dividends.

Return on equity and tangible equity

					FY 2015				FY 2014
					£m				£m
		Profit after tax			244				76
		Less: non-controlling interest			(9)				(7)
		Less: preference dividend			(9)				(9)
A		Profit attributable to ordinary shareholders			226				60
		Operating profit before tax			523				365
		Less: interest costs			(106)				(119)
		Underlying profit before tax			417				246
		Less: tax1			(117)				(69)
		Less: non-controlling interest			(9)				(7)
		Less: preference dividend			(9)				(9)
B		Underlying profit after tax attributable to ordinary shareholders			282				161
		Opening shareholders’ funds			3,825				2,893
		Less: preference share capital			(125)				(125)
C		Opening ordinary shareholders’ funds			3,700				2,768
		Less: goodwill & intangibles			(800)				(1,103)
D		Opening tangible ordinary shareholders’ funds			2,900				1,665
		Return on equity
A/C		Reported			6.1%				2.2%
B/C		Underlying			7.6%				5.8%
		Return on tangible equity
A/D		Reported			7.8%				3.6%
B/D		Underlying			9.7%				9.7%

1 Using underlying assumed tax rate of 28%

Note: we currently expect the non-controlling interest deduction in 2016 to be around half the 2015 amount of £9m. We also expect the underlying assumed tax rate to fall steadily over the next three years towards a rate broadly in line with the statutory tax rates in our Core territories.

LOSS DEVELOPMENT TABLES & RESERVE MARGIN

The table below (for continuing operations) presents the general insurance claims provisions net of reinsurance for the accident years 2005 and prior through to 2015. The top half of the table shows the estimate of cumulative claims at the end of the initial accident year and how these have developed over time. The bottom half of the table shows the value of claims paid for each accident year in each subsequent year. The current year provision for each accident year is calculated as the estimate of cumulative claims at the end of the current year less the cumulative claims paid.

The table is shown pre-discounting and excludes annuities and held-for-sale businesses.

£m		2005andprior		2006		2007		2008		2009		2010		2011		2012		2013		2014		2015		Total
Estimate of Cumulative claims
At end of accident year		7,956		2,066		2,088		2,169		2,075		2,245		2,370		2,324		2,480		2,259		2,151
1 year later		7,941		2,064		2,079		2,160		2,131		2,299		2,357		2,335		2,569		2,269
2 years later		7,628		1,976		2,049		2,158		2,094		2,287		2,338		2,308		2,487
3 years later		7,346		1,894		1,972		2,115		2,067		2,302		2,288		2,273
4 years later		7,128		1,838		1,906		2,103		2,094		2,305		2,248
5 years later		6,901		1,814		1,896		2,075		2,096		2,271
6 years later		6,715		1,785		1,893		2,056		2,087
7 years later		6,600		1,753		1,878		2,049
8 years later		6,590		1,740		1,876
9 years later		6,650		1,748
10 years later		6,772
2015 movement		(122)		(8)		2		7		9		34		40		35		82		(10)				69
Claims paid
1 year later		1,677		787		871		1,011		1,003		1,163		1,069		1,073		1,178		1,043
2 years later		840		297		307		315		326		350		368		361		384
3 years later		669		160		225		217		218		234		241		218
4 years later		508		153		138		164		176		181		159
5 years later		395		101		117		97		121		91
6 years later		248		73		63		64		65
7 years later		201		51		34		32
8 years later		264		27		14
9 years later		227		13
10 years later		119
Cumulative claims paid		5,148		1,662		1,769		1,900		1,909		2,019		1,837		1,652		1,562		1,043
Current year provision before discounting		1,624		86		107		149		178		252		411		621		925		1,226		2,151		7,730
Exchange adjustment to closing rates																								(17)
Discounting																								(403)
Annuities																								623
Present value recognised in the statement of financial position																								7,933
Held for sale																								260
Total Group																								8,193

In terms of accident year, there has been significant positive development across the 2010-13 accident years. This has come from most major lines in Scandinavia, UK Commercial Property, UK Personal lines and Canada. 2005 & prior includes the impact of strengthening for abuse and deafness claims in the UK and legacy long-tail Swedish Personal Accident strengthening that was flagged at the half year.

Reconciliation to prior year underwriting result:

			£m
2015 net loss development			69
Discounting			13
Annuities			14
Held for sale/disposals			22
Prior year net incurred claims			118
Prior year premiums			(27)
Prior year commissions			2
Prior year expenses			(2)
Prior year underwriting result			91

Reserve margin

Our own assessment of the margin in reserves for the Group (the difference between our actuarial indication and the booked reserves in the financial statements) is unchanged at 5% of booked claims reserves.

PENSIONS

Funding basis

We have now reached agreement with the Trustees of RSA’s main UK pension schemes on the results of the latest triennial actuarial valuations including future pension deficit funding contributions and a significant allowance for immediate further de-risking.

As at 31 March 2015, the main UK schemes, Royal Insurance Group Pension Scheme (“RIGPS”) and the SAL Pension Scheme (“SALPS”) were in aggregate c.95% funded on the prudent measure that the Trustees are required to use, with a combined deficit of £392m. This compares to c.92% funded and a combined deficit of £477m at 31 March 2012.

Guaranteed deficit funding contributions of c.£65m p.a. will be paid in 2017, 2018 and 2019. This represents a continuation of the current level of deficit contributions.

The agreed deficit figure includes an allowance for a significant immediate de-risking of the schemes’ assets from around 25% to 15% return seeking assets (for example equities) with a corresponding increase in the schemes’ bond type assets from 75% to 85%.

Accounting basis

Under Solvency II the accounting basis becomes the principal driver of capital requirement for pensions along with the market risk arising from the asset mix versus liability profile.

The table below provides a reconciliation of the movement in the Group’s pension fund position under IAS 19 (net of tax) from 1 January 2015 to 31 December 2015.

				UK				Other				Group
				£m				£m				£m
Pension fund surplus/(deficit) at 1 January 2015				33				(105)				(72)
Actuarial gains/(losses)1				26				39				65
Deficit funding				52				-				52
Other movements2				6				13				19
Pension fund surplus/(deficit) at 31 December 2015				117				(53)				64

1 Actuarial gains/(losses) include pension investment expenses, variance against expected returns, change in actuarial assumptions and experience losses.2 Other movements include regular contributions, service/administration costs, expected returns and interest costs.

At an aggregate level the pension fund position under IAS 19 improved during the year from a deficit of £72m to a surplus of £64m. Both the UK and non-UK positions improved, and the IAS 19 surplus for the UK schemes now stands at £117m.

The improvement was driven by deficit funding contributions of £65m (pre-tax) paid in the first quarter and experience gains on liabilities due to lower actual pension increases and heavier mortality experience than expected, partly offset by adverse asset performance.

IAS 19 sensitivities

Pre de-risk

Post de-risk

Assets

Liabilities

Assets

Liabilities

IAS 19 position at 31 December 2015 (£bn)

7.2

7.1

7.2

7.1

Sensitivities (£bn change in assets/liabilities):

Interest rates: -1%

+1.4

+1.3

+1.4

+1.3

Inflation: +1%

+0.9

+0.8

+0.9

+0.8

Equities: -15%

-0.2

-

-0.1

-

‘AA’ credit spreads: -0.25%

-

+0.3

+0.1

+0.3

1 Includes 15% equities reduction and 10% reduction in all other ‘growth’ assets

REINSURANCE

The main elements of our 2016 reinsurance programme are outlined below.

The 3 year Group aggregate reinsurance deal that commenced in 2015 has been revised following the announced sale of Latin America. The key terms are as follows:

Events or individual net losses greater than £10m are added together across our financial year (when a loss exceeds £10m it is included in full); Cover attaches when total of these retained losses is greater than £150m (revised downwards from £180m in 2015); Limit of cover is £150m in any year; 3 year deal with maximum recovery available during the period 2015-17 of £300m (recovery of £74m made in 2015); £150m limit can also be used if Cat cover is exceeded; Profit commission and no claims bonus arrangements in place; and Counterparties are high credit quality reinsurers (80% AA- and 20% A or better).

Retentions for our existing Cat and Risk treaties remain broadly unchanged from 2015. The key retentions are £75m for UK Cat; £50m for non-UK Cat (Canada up from C$50m to C$75m); £50m for Property Risk.

2015 Group aggregate cover recoveries

During 2015 the Group incurred total losses of £254m relating to events or individual net losses greater than £10m. This resulted in a recovery from the Group aggregate cover of £74m (£254m less £180m deductible).

The £254m of total events/net losses greater than £10m included net losses of £75m each relating to two storm and flood events in the UK in December, flood and earthquake events in Chile, the Tianjin explosion and five further large losses mainly in the UK and Scandinavia.

EXPECTED ACCOUNTING FOR LATIN AMERICA DISPOSAL IN 2016

The Latin American disposal is capital accretive, however the accounting impacts will be as follows.

In 2016 we expect to recognise the following items in our management P&L:

A tangible disposal gain, shown in the tangible net gains line, currently expected to be around £140m; and A reclassification, as required by accounting standards, of the accumulated foreign exchange losses in the FCTR1 from reserves to profit and loss. The reclassification is non-cash, non-capital and NAV neutral for the Group, and including goodwill/intangibles is expected to be c.£(145-150)m.

Optically therefore, the 2016 net pre-tax P&L impact of these items is expected to be c.£(5-10)m.

1 Foreign currency translation reserve

SEGMENTAL ANALYSIS

Management basis – 12 months ended 31 December 2014 (re-presented onto 2015 year-end segmental split)

		Scandinavia		Canada2		UK3		Ireland		Centralfunctions		Total ‘non-core’1		GroupFY 20144
		£m		£m		£m		£m		£m		£m		£m
Net Written Premiums		1,759		1,510		2,569		295		(42)		1,374		7,465
Net Earned Premiums		1,752		1,536		2,850		328		17		1,391		7,874
Net Incurred Claims		(1,219)		(1,056)		(1,861)		(340)		(20)		(885)		(5,381)
Commissions		(68)		(215)		(585)		(42)		(7)		(278)		(1,195)
Operating expenses		(296)		(244)		(400)		(54)		(5)		(258)		(1,257)
Underwriting result		169		21		4		(108)		(15)		(30)		41
Investment income		112		82		144		11		2		88		439
Investment expenses		(3)		(2)		(7)		-		-		(1)		(13)
Unwind of discount		(37)		(2)		(5)		-		(2)		(37)		(83)
Investment result		72		78		132		11		-		50		343
Central expenses		-		-		-		-		(16)		(3)		(19)
Operating result		241		99		136		(97)		(31)		17		365
Net gains/losses/exchange – tangible														476
– intangible														(99)
Interest														(119)
Non-operating charges														(42)
Non-recurring charges														(306)
Profit before tax														275
Tax														(199)
Profit after tax														76
Loss ratio (%)		69.6		68.7		65.3		103.5		-		-		68.3
Weather loss ratio		1.6		5.0		3.8		5.8		-		-		3.2
Large loss ratio		4.7		3.6		12.9		3.4		-		-		7.4
Current year attritional loss ratio		64.8		62.8		49.0		80.3		-		-		57.6
Prior year effect on loss ratio		(1.5)		(2.7)		(0.4)		14.0		-		-		0.1
Commission ratio (%)		3.9		14.0		20.5		12.6		-		-		15.2
Expense ratio (%)		16.9		15.9		14.1		16.7		-		-		16.0
Combined ratio (%)		90.4		98.6		99.9		132.8		-		-		99.5

1 Total ‘non-core’ comprises discontinued operations of Poland, Baltics, Italy, Hong Kong, Singapore, China, Thailand, India, Russia and Latin America; and non-core operations of Noraxis, UK Legacy and the Middle East.2 Excluding Noraxis3 Excluding Legacy4 Represented, please refer to page 30 for further details.

NET EARNED PREMIUMS BY CLASS

Management basis

		FY 2015				FY 2014				Change asreported				Change atconstant fx
		£m				£m				%				%
Scandinavia
Household		289				303				(5)				8
Personal Motor		316				357				(11)				1
Personal Accident & Other		271				297				(9)				4
Total Personal		876				957				(8)				4
Property		267				330				(19)				(9)
Liability		127				131				(3)				9
Commercial Motor		182				207				(12)				-
Marine & Other		114				127				(10)				2
Total Commercial		690				795				(13)				(2)
Total Scandinavia		1,566				1,752				(11)				1
Canada
Household		423				430				(2)				5
Personal Motor		550				629				(13)				(6)
Total Personal		973				1,059				(8)				(2)
Property		179				211				(15)				(9)
Liability		102				120				(15)				(9)
Commercial Motor		83				91				(9)				(2)
Marine & Other		50				55				(9)				(2)
Total Commercial		414				477				(13)				(7)
Total Core Canada		1,387				1,536				(10)				(3)
UK
Household		614				659				(7)				(7)
Personal Motor		268				306				(12)				(12)
Pet		269				254				6				6
Total Personal		1,151				1,219				(6)				(6)
Property		623				597				4				6
Liability		289				286				1				2
Commercial Motor		384				479				(20)				(20)
Marine		287				269				7				7
Total Commercial		1,583				1,631				(3)				(2)
Total Core UK		2,734				2,850				(4)				(4)
Ireland
Personal		165				217				(24)				(16)
Commercial		99				111				(11)				(2)
Total Ireland		264				328				(20)				(11)
Group Re		(24)				17				(241)				(241)
Total Core Group		5,927				6,483				(9)				(3)
Discontinued & non-core		1,085				1,391				(22)				(15)
Total Group		7,012				7,874				(11)				(5)

COMBINED RATIO DETAIL

Core Group

£m unless stated		Currentyear						Prioryear					FY ‘15total							Currentyear			Prioryear			FY ‘14total
Net Written Premiums		1			5,731			7			(9)		13			5,722				6,183			(92)			6,091
Net Earned Premiums		2			5,957			8			(30)		14			5,927				6,516			(33)			6,483
Net Incurred Claims		3			(4,066)			9			133		15			(3,933)				(4,530)			34			(4,496)
Commissions		4			(849)			10			1		16			(848)				(910)			(7)			(917)
Operating expenses		5			(906)			11			(3)		17			(909)				(993)			(6)			(999)
Underwriting result		6			136			12			101		18			237				83			(12)			71
CY attritional claims		19			(3,368)															(3,769)
Weather claims		20			(193)															(234)
Large losses		21			(505)															(527)
Net incurred claims		22			(4,066)															(4,530)
Loss ratio (%)								=15 / 14					23			66.4										69.3
Weather loss ratio								=20 / 2					24			3.2										3.6
Large loss ratio								=21 / 2					25			8.5										8.1
Current year attritional loss ratio								=19 / 2					26			56.6										57.8
Prior year effect on loss ratio								=23 - 24 - 25 - 26					27			(1.9)										(0.2)
Commission ratio (%)								=16 / 14					28			14.3										14.1
Expense ratio (%)								=17 / 14					29			15.3										15.4
Combined ratio (%)								=23 + 28 + 29					30			96.0										98.8

Scandinavia

£m unless stated			Currentyear				Prioryear				FY ‘15 total								Currentyear				Prioryear				FY ‘14total
Net Written Premiums			1,606				-				1,606								1,760				(1)				1,759
Net Earned Premiums			1,572				(6)				1,566								1,753				(1)				1,752
Net Incurred Claims			(1,129)				(27)				(1,156)								(1,247)				28				(1,219)
Commissions			(60)				-				(60)								(66)				(2)				(68)
Operating expenses			(256)				-				(256)								(292)				(4)				(296)
Underwriting result			127				(33)				94								148				21				169
CY attritional claims			(1,015)																(1,136)
Weather claims			(15)																(29)
Large losses			(99)																(82)
Net incurred claims			(1,129)																(1,247)
Loss ratio (%)											73.8																69.6
Weather loss ratio											1.0																1.6
Large loss ratio											6.3																4.7
Current year attritional loss ratio											64.5																64.8
Prior year effect on loss ratio											2.0																(1.5)
Commission ratio (%)											3.8																3.9
Expense ratio (%)											16.4																16.9
Combined ratio (%)											94.0																90.4

COMBINED RATIO DETAIL

Canada

£m unless stated			Current year				Prior year				FY ‘15 total								Current year				Prior year				FY ‘14 total
Net Written Premiums			1,360				-				1,360								1,510				-				1,510
Net Earned Premiums			1,387				-				1,387								1,534				2				1,536
Net Incurred Claims			(933)				81				(852)								(1,096)				40				(1,056)
Commissions			(189)				3				(186)								(214)				(1)				(215)
Operating expenses			(230)				(3)				(233)								(241)				(3)				(244)
Underwriting result			35				81				116								(17)				38				21
CY attritional claims			(837)																(963)
Weather claims			(31)																(77)
Large losses			(65)																(56)
Net incurred claims			(933)																(1,096)
Loss ratio (%)											61.5																68.7
Weather loss ratio											2.3																5.0
Large loss ratio											4.7																3.6
Current year attritional loss ratio											60.3																62.8
Prior year effect on loss ratio											(5.8)																(2.7)
Commission ratio (%)											13.4																14.0
Expense ratio (%)											16.8																15.9
Combined ratio (%)											91.7																98.6

Total UK (excluding Legacy)

£m unless stated		Current year			Prior year				FY ‘15total								Currentyear				Prioryear				FY ‘14 total
Net Written Premiums		2,614			(8)				2,606								2,591				(22)				2,569
Net Earned Premiums		2,742			(8)				2,734								2,874				(24)				2,850
Net Incurred Claims		(1,838)			57				(1,781)								(1,887)				26				(1,861)
Commissions		(564)			(2)				(566)								(581)				(4)				(585)
Operating expenses		(374)			(1)				(375)								(400)				-				(400)
Underwriting result		(34)			46				12								6				(2)				4
CY attritional claims		(1,319)															(1,407)
Weather claims		(179)															(110)
Large losses		(340)															(370)
Net incurred claims		(1,838)															(1,887)
Loss ratio (%)									65.1																65.3
Weather loss ratio									6.5																3.8
Large loss ratio									12.4																12.9
Current year attritional loss ratio									48.1																49.0
Prior year effect on loss ratio									(1.9)																(0.4)
Commission ratio (%)									20.7																20.5
Expense ratio (%)									13.7																14.1
Combined ratio (%)									99.5																99.9

COMBINED RATIO DETAIL

UK Personal

£m unless stated		Current year		Prior year		FY ‘15 total				Current year		Prior year		FY ‘14 total
Net Written Premiums		1,134		(1)		1,133				1,174		2		1,176
Net Earned Premiums		1,153		(2)		1,151				1,217		2		1,219
Net Incurred Claims		(706)		26		(680)				(734)		21		(713)
Commissions		(241)		(4)		(245)				(268)		(1)		(269)
Operating expenses		(179)		-		(179)				(192)		-		(192)
Underwriting result		27		20		47				23		22		45
CY attritional claims		(605)								(627)
Weather claims		(65)								(69)
Large losses		(36)								(38)
Net incurred claims		(706)								(734)
Loss ratio (%)						59.0								58.5
Weather loss ratio						5.6								5.7
Large loss ratio						3.1								3.1
Current year attritional loss ratio						52.5								51.6
Prior year effect on loss ratio						(2.2)								(1.9)
Commission ratio (%)						21.3								22.0
Expense ratio (%)						15.6								15.8
Combined ratio (%)						95.9								96.3

UK Commercial

£m unless stated		Current year		Prior year		FY ‘15 Total				Current year		Prior year		FY ‘14 total
Net Written Premiums		1,480		(7)		1,473				1,417		(24)		1,393
Net Earned Premiums		1,589		(6)		1,583				1,657		(26)		1,631
Net Incurred Claims		(1,132)		31		(1,101)				(1,153)		5		(1,148)
Commissions		(323)		2		(321)				(313)		(3)		(316)
Operating expenses		(195)		(1)		(196)				(208)		-		(208)
Underwriting result		(61)		26		(35)				(17)		(24)		(41)
CY attritional claims		(714)								(780)
Weather claims		(114)								(41)
Large losses		(304)								(332)
Net incurred claims		(1,132)								(1,153)
Loss ratio (%)						69.6								70.4
Weather loss ratio						7.2								2.5
Large loss ratio						19.1								20.0
Current year attritional loss ratio						45.0								47.1
Prior year effect on loss ratio						(1.7)								0.8
Commission ratio (%)						20.3								19.4
Expense ratio (%)						12.4								12.8
Combined ratio (%)						102.3								102.6

SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Management basis – at 31 December 2015

			31 December				31 December
			2015				2014
			£m				£m
Assets
Goodwill and other intangible assets			616				800
Property and equipment			109				151
Investment property			365				346
Investment in associates			13				31
Financial assets			11,797				12,840
Total investments			12,175				13,217
Reinsurers’ share of insurance contract liabilities			1,988				1,897
Insurance and reinsurance debtors			2,653				3,174
Deferred tax assets			163				180
Current tax assets			51				21
Other debtors and other assets			693				759
Other assets			907				960
Cash and cash equivalents			816				1,011
Assets associated with continuing operations			19,264				21,210
Assets held for sale			1,347				808
Total assets			20,611				22,018
Equity and liabilities
Equity and loan capital
Shareholders’ funds			3,642				3,825
Non-controlling interests			129				108
Total equity			3,771				3,933
Loan capital			1,254				1,243
Total equity and loan capital			5,025				5,176
Liabilities (excluding loan capital)
Insurance contract liabilities			12,191				13,266
Insurance and reinsurance liabilities			945				904
Borrowings			11				299
Deferred tax liabilities			40				62
Current tax liabilities			31				83
Provisions			261				338
Other liabilities			1,017				1,160
Provisions and other liabilities			1,349				1,643
Liabilities associated with continuing operations			14,496				16,112
Liabilities held for sale			1,090				730
Total liabilities (excluding loan capital)			15,586				16,842
Total equity, loan capital and liabilities			20,611				22,018

SUMMARY CASH FLOW FOR CONTINUING OPERATIONS

Management basis

			12 months2015				12 months2014
			£m				£m
Current year underwriting profit/(loss)			129				73
Adjustment for non-cash items, claims payments/receipts			44				-
Underwriting cash			173				73
Investment cash			464				485
Underlying operating cash flow			637				558
Non-operating cash flow (including reorganisation costs)			(184)				(153)
Operating cash flow			453				405
Tax paid			(136)				(83)
Interest paid			(107)				(119)
Pension deficit funding			(65)				(65)
Cash generation			145				138
Group dividends			(65)				(9)
Dividend to non-controlling interests			(3)				(6)
Issue of share capital			3				753
Net movement of debt			(299)				(66)
Corporate activity			274				678
Cash movement			55				1,488
Represented by:
Increase/(decrease) in cash and cash equivalents			(160)				34
Purchase/(sale) of other investments			217				1,454
Cash movement			55				1,488

RECONCILIATION: MANAGEMENT BASIS TO STATUTORY REPORTING

Management basis							Discontinuedoperations		Add backother items1			Statutory basis
Net written premiums		6,825					(873)					5,952		Net written premiums
Net earned premiums		7,012					(852)					6,160		Net earned premiums
Net incurred claims		(4,579)					450					(4129)		Net claims and benefits
Commissions		(1,113)			2,213		411		(330)			(1,986)		Underwriting and policy acquisition costs
Operating expenses		(1,100)										(308)		Other expenses
Underwriting result		220
Profit before tax		323					(217)					106		Profit before tax
Tax		(79)					61					(18)		Tax
Profit from discontinued operations		-					156					156		Profit from discontinued operations
Profit after tax		244					-					244		Profit after tax

1 Other items include: reorganisation costs, central expenses, investment expenses, Solvency II costs, amortisation of intangibles, and other income

REPORTING AND DIVIDEND TIMETABLE

Reporting:
Q1 trading update				5 May 2016
AGM				6 May 2016
Half year results				4 August 2016*

Dividend:
Final dividend for year ended 31 December 2015
Announcement date				25 February 2016
Ex-dividend date				3 March 2016
Record date				4 March 2016
Dividend payment date				13 May 2016
Interim Dividend for the period ended 30 June 2016
Announcement date				4 August 2016*
Ex-dividend date				8 September 2016*
Record date				9 September 2016*
Dividend payment date				14 Oct 2016*
1st Preference Dividend
Announcement Date				25 February 2016
Ex-dividend date				3 March 2016
Record date				4 March 2016
Dividend payment date				1 April 2016
2nd Preference Dividend
Announcement date				4 August 2016
Ex-dividend date				11 August 2016
Record date				12 August 2016
Dividend payment date				3 October 2016

Note: the scrip dividend alternative is not being offered for the 2015 final dividend payment

Note: the final dividend is conditional upon the directors being satisfied, in their absolute discretion, that the payment of the final dividend would not breach any legal or regulatory requirements, including Solvency II regulatory capital requirements.

* Provisional date

Enquiries:
Investors & analysts		Press
Rupert Taylor Rea		Louise Shield
Director of Investor Relations		Director of External Communications
Tel: +44 (0) 20 7111 7140		Tel: +44 (0) 20 7111 7047
Email: rupert.taylorrea@gcc.rsagroup.com		Email: louise.shield@gcc.rsagroup.com
Ryan Jones
Investor Relations Manager
Tel: +44 (0) 20 7111 7243
Email: ryan.jones@gcc.rsagroup.com

Further information

A live webcast of the analyst presentation, including the question and answer session, will be broadcast on the website at 09:30am today. A webcast and transcript of the call will be available via the company website (www.rsagroup.com).

Important disclaimer

This press release and the associated conference call 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 are inherently predictive and speculative and 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, 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. Forward-looking statements in this press release are current only as of the date on which such statements are made. 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 shall be construed as a profit forecast.

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