Rsa Ins. 7te%pf Regulatory News (RSAB)

 4 August 2021

RSA Insurance Group Limited

(the "Company")

2021 Interim Results

In accordance with its obligations under section 4.2.2. of the Disclosure Guidance and Transparency Rules, the Company announces that its Interim Results for the period ended 30 June 2021 are available on the Company's website at www.rsagroup.com. The document has also been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

In fulfilment of its obligations under sections 6.3.3(2) and 6.3.5(1) of the Disclosure Guidance and Transparency Rules, the Company hereby releases the unedited full text of its 2021 Interim Results for the period ended 30 June 2021.

Enquiries:

Matthew Cohen

Group Head of Investor Relations

RSA Insurance Group Limited

+44 (0) 7967 343 633

Natalie Whitty

Group Communications Director

RSA Insurance Group Limited

+44 (0) 20 7111 7213

+44 (0) 7584 342052

LEI: 549300HOGQ7E0TY86138

INTERIM MANAGEMENT REPORT

For the 6 month period ended 30 June 2021

RSA Insurance Group Limited (the Company), formerly RSA Insurance Group plc, was re-registered as a private limited company on 26 May 2021 and 100% of the Company's ordinary share capital was purchased by Regent Bidco Limited (a wholly owned subsidiary of Intact Financial Corporation (IFC)) on 1 June 2021. On 1 June 2021, the Company disposed of its operations in Scandinavia (Codan A/S) and Canada (Roins Holdings Limited), and these have been classified as discontinued operations (refer to note 5 for further information).

Principal activity

The principal activity of the Company, its subsidiaries and associates (together the Group or RSA) remains the transaction of insurance and related financial services predominantly in the United Kingdom, Ireland, Europe and Middle East.

Business review

The Group reports a profit before tax of £4,308m for the six month period to 30 June 2021 of which continuing operations contributed a loss before tax of £(249)m and discontinued operations a profit before tax of £4,557m (six month period to 30 June 2020: £11m and £200m profit before tax respectively).

On a continuing basis, profitable underwriting performance was impacted by specific accounting adjustments. These were in respect of reserve strengthening, primarily to align to IFC practices and to reflect heightened estimation uncertainty along with an increased level of reserve margin to reflect the methodology of IFC (refer to note 16 insurance contract liabilities) and £(61)m write-down of software assets (refer to note 10 goodwill and intangible assets). On the same continuing basis, losses before tax consisted of £(143)m underwriting losses (2020: £14m profit), £57m investment result (2020: £60m), £(6)m central costs (2020: £(3)m) and £(157)m of other charges (2020: £(60)m). Other charges were also hit by £(104)m of costs relating to the transaction and £(16)m of early redemption fees on the repayment of senior debt (within interest costs). Refer to note 6 operating segments for a full profit and loss breakdown.

Profit from discontinued operations before tax included a £4,388m gain on the disposal of the Group's operations in Scandinavia and Canada (refer to note 5 discontinued operations).

Net written premiums were £2,898m of which £1,717m were in respect of continuing operations and £1,181m from discontinued (2020: £1,446m and £1,689m respectively).

Net assets of the Group are £2,799m (2020: £4,730m).

Other important events that have occurred after the period end include the announcement on 22 July 2021 that Motability Operations Ltd intend to switch to another insurance provider upon completion of the existing contract with RSA in 18 months' time. No significant impact is anticipated in the 2021 financial results or financial position. Also, on 27 July 2021, the Group entered into a reinsurance contract for adverse development coverage which will reduce the potential volatility in the Group's claims liabilities. Refer to note 19 Events after the reporting period for more detail.

Related party transactions

The group received a capital injection from Regent Bidco Limited of £1,021m during the period and also declared a dividend in specie of £6,914m. Refer to note 18 for further information on all related party transactions.

Key performance indicators (KPIs)

The Group use both IFRS and non-IFRS financial measures (alternative performance measures (APMs)) to assess performance, including common insurance industry metrics, as well as measures that management and the Board consider are useful to enhance the understanding of its performance and allow meaningful comparisons between periods and business segments.

As the Group is now a wholly owned subsidiary with no publicly listed ordinary share capital, the KPIs reported by the Group have been reassessed and have subsequently reduced.

The KPIs most relevant to the financial performance of the Group are now as follows:

· Net written premiums for continuing operations £1,717m (2020: £1,446m): premiums incepted in the period, irrespective of whether they have been paid, less the amount shared with reinsurers. They represent how much premium the Group gets to keep for assuming risk. The Group targets growth - that is without compromising underwriting performance.

· Underwriting result* for continuing operations £(143)m (2020: £14m): net earned premium less net claims and underwriting and policy acquisition costs. The Group aims to achieve an underwriting result that is as sustainably high as possible - that is without uncompetitive pricing or compromising reserves. The Group targets further improvements to its underwriting result.

· (Loss)/profit before tax for continuing operations £(249)m (2020: £11m): the Group seeks to maximise its profit before tax, which is a key statutory measure of the earnings of the Group.

\* The underwriting result is an Alternative Performance Measure (APM). Refer to Appendix B for reconciliation to the nearest IFRS measure. A 'Jargon buster' can also be found on pages 181 to 183 of the RSA Insurance Group plc Annual Report and Accounts 2020.

Principal risks and uncertainties

Following the disposal of the Group's operations in Scandinavia and Canada, the principal risks and uncertainties of the Group have been reassessed. These are set out in note 4, risk and capital management.

BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

RSA Insurance Group Limited (the Company), formerly RSA Insurance Group plc, was re-registered as a private limited company on 26 May 2021 and the Company's ordinary share capital was purchased by Regent Bidco Limited (a wholly owned subsidiary of Intact Financial Corporation) on 1 June 2021 (the acquisition). The company is incorporated and domiciled in England and Wales and, through its subsidiaries and associates (together the Group or RSA), provides personal and commercial insurance products to its global customer base, principally in the UK, Ireland, Europe and Middle East. On 1 June 2021, the Group disposed of its operations in Scandinavia (Codan A/S) and Canada (Roins Holdings Limited), and these have been classified as discontinued operations (refer to note 5 for further information).

1. BASIS OF PREPARATION

The annual financial statements were prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applied in the European Union and in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006, and the next annual financial statements will be prepared in accordance with UK-adopted International Accounting Standards. The condensed consolidated financial information in this half-yearly financial report has been prepared in accordance with the UK-adopted International Accounting Standard 34 'Interim Financial Reporting' (IAS 34).

The condensed consolidated financial statements have been prepared on a going concern basis. In adopting the going concern basis, the Board has reviewed the Group's ongoing commitments for the next twelve months and beyond. The Board's assessment included the review of Group's strategic plans and latest forecasts, capital position and liquidity including on demand capital funding arrangements with Intact Financial Corporation. These assessments include stress and scenario testing and consider significant areas of risk and uncertainty for the Group in the current challenging economic environment. Scenarios considered include the impacts and uncertainty as a result of the COVID-19 pandemic and the transition to a post Brexit environment. In making their assessment, the Board have reviewed the latest position on business interruption losses and availability of reinsurance to recover incurred claims and there have been no significant changes. Based on this review no material uncertainties that would require disclosure have been identified in relation to the ability of the Group to remain a going concern for at least the next twelve months, from both the date of the condensed consolidated statement of financial position and the approval of the condensed consolidated financial statements.

These condensed consolidated financial statements have been prepared by applying the accounting policies used in the 2020 Annual Report and Accounts (see note 5 and Appendix A therein), with the addition of the following discontinued operations accounting policy.

Discontinued operations accounting policy

A discontinued operation is a component of the Group that has been disposed of and represents a separate major line of business or geographical area of operation.

The profit from discontinued operations is shown separately on the face of the consolidated income statement as a single amount. It comprises the profit or loss after tax from discontinued operations together with the gain or loss after tax recognised on disposal. Further information can be found in note 5.

In the period in which an operation is first classified as discontinued, the consolidated income statement and consolidated statement of other comprehensive income for the comparative prior period is re-presented to present those operations as discontinued.

Where intragroup arrangements between continuing and discontinued operations continue after the point of disposal, the continuing operations are presented as if the income/expense had always been an external party, with the result of the discontinued operation being reduced to offset. Where the arrangement ceased at the point of disposal the income/expense of the continuing operation in relation to the arrangement with the discontinued operation is eliminated.

2. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

In preparing these condensed consolidated financial statements, management has made judgements and calculated estimates in accordance with the Group's accounting policies. Estimates are based on management's best knowledge of current circumstances and expectation of future events and actions, which may subsequently differ from those used in determining the accounting estimates.

Estimates and their underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. The significant estimates described below, including the underlying estimation techniques and assumptions, remain consistent with those reported in the 2020 Annual Report and Accounts (see note 2 for more information). These estimates have been reviewed following the disposals of the Group's operations in Scandinavia and Canada, and any changes as a result of this have been disclosed below or in the relevant note.

· Valuation of insurance contract liabilities: the assumptions used in the estimation of the eventual outcome of the claim events that have occurred but remain unsettled at the end of the reporting period. Refer to note 16 of this interim report and note 39 of the 2020 Annual Report and Accounts for additional information.

· Measurement of defined benefit obligations: key actuarial assumptions. Refer to note 17 of this interim report and note 41 of the 2020 Annual Report and Accounts.

· Recognition of deferred tax assets: availability of future taxable profits against which deductible temporary differences and tax losses carried forward can be utilised. Forecast future taxable profits include the potential impact of COVID-19 and are based on the continuing Group composition following the disposals of the Canadian and Scandinavian operations. Refer to note 12 of this interim report and note 31 of the 2020 Annual Report and Accounts for additional information.

· Valuation of level 3 financial assets and investment properties: use of significant unobservable inputs. The continued economic uncertainty means that asset valuation techniques that rely on unobservable inputs have a greater degree of estimation uncertainty. Refer to note 11 of this interim report for additional information.

· Measurement and impairment of goodwill and intangible assets: key assumptions applied in the valuation of the recoverable amount and the estimation of useful economic life. The value in use calculations are based on management's latest operational plans, which include the potential impact of COVID-19 and are based on the continuing Group composition following the disposals of the Canadian and Scandinavian operations, and considering both RSA, and Intact Financial Corporation management future intent. Refer to note 10 of this interim report and note 23 of the 2020 Annual Report and Accounts for additional information.

The areas where management has applied judgement are as follows:

· Classification of financial assets in fair value hierarchy: management apply judgement when deciding to classify financial instruments for which immediate prices are available as being level 1 in the fair value hierarchy and financial assets for which observable prices are also available as level 2 on the basis of a lower level of activity in the market from which those prices are quoted. Refer to note 11 for additional information.

· Impairment of financial assets: determining if there is objective evidence of impairment requires judgement and, in the 6 months to 30 June 2021, £2m of impairments have been recognised on a continuing basis (6 months to 30 June 2020: £2m) (note 7). The value of unrealised losses in the revaluation reserve at 30 June 2021 is £13m (31 December 2020: £84m).

· Valuation of intangible assets: determining if there is evidence of impairment requires judgement and in the 6 months to 30 June 2021, £61m of internally generated software assets not yet available for use were written down (6 months to 30 June 2020: £nil). Refer to note 10 of this interim report for more information.

· Valuation of insurance contract liabilities: management continually monitors claims experience, key assumptions and estimation techniques to determine best estimate provisions. As a result of management's review given the current uncertain economic environment and in alignment with IFC practices, reserves have been strengthened and additional margin is held. Refer to note 16 for additional information.

· Recognition of deferred tax assets: management apply judgement in the application of contingency on the estimation of future forecast taxable profits in determining the value of deferred tax asset to be recognised. Following the acquisition, the UK profit forecasts have been updated to reflect the latest view of taxable profits. A number of transactions post acquisition and a higher DTA contingency have reduced forecast UK taxable profits and have resulted in a £83m reduction in the UK deferred tax asset at 30 June 2021. This impact was offset by the effect of the UK tax rate increase on the UK deferred tax asset (£49m). Refer to note 12 of this interim report for additional information on these changes.

3. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

Transition from EU-adopted IAS to UK-adopted IAS

Following the end of the Brexit Transition Period, SI 2019/685 brought the International Accounting Standards (IAS) already endorsed in the EU into UK law as 'UK-adopted international accounting standards'. The Group has applied UK-adopted IAS from 1 January 2021. As there are no changes when applying UK-adopted IAS, there has not been an impact on the Group with the exception of the following narrow scope amendments:

Extension of the Temporary Exemption from Applying IFRS 9

IFRS 9 has been issued to replace IAS 39 'Financial Instruments: Recognition and Measurement' (IAS 39). IFRS 4 'Insurance Contracts' (IFRS 4) permits an insurance company that meets the criteria a temporary exemption from applying IFRS 9 and continue to apply IAS 39. The exemption has been extended by two years to annual periods beginning before 1 January 2023.

The Group meets the criteria and has elected to defer the application of IFRS 9 to the reporting period beginning on 1 January 2023, alongside IFRS 17.

Other standards

Other amendments to UK-adopted IAS became mandatory as of 1 January 2021. The Group has evaluated these changes, none of which have had a significant impact on the condensed consolidated financial statements.

RISK AND CAPITAL MANAGEMENT

4. RISK AND CAPITAL MANAGEMENT

Risk management

Following the disposals of the Group's operations in Scandinavia and Canada, the Group's exposures to certain risks arising from its financial instruments have materially changed as at 30 June 2021 and the updated positions have been set out below.

Except for the quantitative impact of the disposals on exposures, the Group's principal risks and uncertainties are broadly consistent with those reported in the 2020 Annual Report & Accounts. Where there have been any changes since those last reported updates have been included in the relevant sections.

Risk and capital management information can be found in note 6 on pages 114 to 122 of the 2020 Annual Report & Accounts.

Insurance risk - reserving risk

There is a risk to the Group from the inherent uncertainty in estimating provisions at the end of the reporting period for the eventual outcome of outstanding notified claims as well as estimating the number and value of claims that are still to be notified. This is especially true due to the heightened uncertainty arising through 2020 and 2021 as the direct and indirect impacts of the COVID-19 pandemic evolve. There is also uncertainty in the level of future costs of handling and settling the outstanding claims.

The Group seeks to reduce its reserving risk through the use of experienced, regional actuaries who estimate the actuarial indication of the required reserves based on claims experience, business volume, anticipated change in the claims environment and claims cost. This information is used by local reserving committees to recommend to the newly established UK&I Reserving Committee (formed to replace the former RSA Group Reserving Committee further to the acquisition) the appropriate level of reserves for each region. This will include adding a margin onto the actuarial indication as a provision for unforeseen developments such as future claims patterns differing from historical experience, future legislative changes and the emergence of latent exposures. The UK&I Reserving Committee reviews these local submissions and recommends the final level of reserves to be held by the Group. The UK&I Reserving Committee is chaired by the UK&I Chief Financial Officer and includes the UK&I Chief Executive, UK&I Underwriting Director, UK&I Claims Director, Managing Directors for key business units, UK&I Chief Actuary and UK&I Chief Risk Officer. A similar committee has been established in each of the UK&I's primary operating segments. The UK&I Reserving Committee monitors the decisions and judgements made by the business units as to the level of reserves to be held. It then recommends to the Group Board via the Group Audit Committee the final decision on the level of reserves to be included within the consolidated financial statements. In forming its collective judgement, the committee considers the following information:

· The actuarial indication of ultimate losses together with an assessment of risks and possible favourable or adverse developments that may not have been fully reflected in calculating these indications. These risks and developments include: the possibility of future legislative change having a retrospective effect on open claims or changes in interpretation or regulatory application of existing legislation; changes in claims settlement practice or procedures potentially leading to future claims payment patterns differing from historical experience; the possibility of new types of claim arising either from changes in business mix, or, such as disease claims emerging from historical business; general uncertainty in the claims environment and emerging claims trends; the emergence of latent exposures; the outcome of litigation on claims received; failure to recover reinsurance as we expect and unanticipated changes in claims inflation.

· How previous actuarial indications have developed as claims experience has evolved.

· The views of internal peer reviewers of the reserves and of other parties including actuaries, legal counsel, risk directors, underwriters and claims managers.

· The outcome from independent assurance reviews performed by both external actuarial consultants and the Intact Financial Corporation Group Actuarial Function to assess the reasonableness of regional actuarial indication estimates.

· Emerging trends where COVID-19 has caused changes in experience along with analysis to demonstrate the impact on reserving estimates. Some areas such as business interruption have observed direct claims, whereas other lines have seen indirect changes in policyholder behaviour such as reduced motor frequency during lockdown which can change the mix of claims.

· Changes in the external claims environment in areas such as legal and medical activities which impact the speed of claims development. The distortions in data caused by the various issues means identification of trends is more difficult than normal. Claims experience may exhibit different characteristics and runoff trends compared to historic experience, resulting in increased uncertainty relating to actuarial indications of ultimate losses.

· COVID-19 claims experience, which continues to be monitored closely and the Group is engaging with its reinsurers as payment and settlement activity grows following the increased clarity brought by the Supreme Court judgement on 15 January 2021. Whilst experience has tracked in line with the Groups expectations to this stage, it is still relatively early in the process. Many key areas of uncertainty remain such as the value of eligible claims and the extent to which reinsurance will ultimately respond compared to how the Group expects. It may take many months before clarity increases on these gross and reinsurance uncertainties as claims details and consideration of these evolve.

· Given the COVID-19 pandemic and other changes such as Brexit, there is considerable uncertainty in the economic environment through 2021 and beyond, and the potential impacts any changes in the economic environment could have on claims costs, such as inflationary pressure. This is a key uncertainty that is monitored by Reserving Committee with sensitivity testing to monitor, assess and understand potential impacts should the risks manifest.

As a result of the disposal of Codan A/S on 1 June 2021, the Group is no longer exposed to very long-tail liabilities in Scandinavia that are closely tied to the economic, legislative and social environment. The relevant classes of business that fell into this category were Denmark Workers Compensation, Swedish Personal Accident, and Swedish Motor annuities. Selling these liabilities has materially reduced the Group's exposure to this type of risk.

Credit risk

The Group's largest reinsurance exposures to active reinsurance groups are Berkshire Hathaway, Lloyd's of London and Talanx. At 30 June 2021 the reinsurance asset recoverable from these groups does not exceed 8.5% (31 December 2020: 3.9%) of the Group's total financial assets. Stress tests are performed by reinsurer counterparty and the limits are set such that in a catastrophic event, the exposure to a single reinsurer is estimated not to exceed 14.9% (31 December 2020: 6.3%) of the Group's total financial assets.

The credit profile of the Group's assets exposed to credit risk is shown below. The credit rating bands are provided by independent rating agencies. The table below sets out the Group's aggregated credit risk exposure for its financial and insurance assets.

1 The debt securities meeting SPPI criteria under IFRS 9 which are below investment grade are stated under IAS 39 at fair value.

2 Loans and receivables are measured using amortised cost and their carrying amounts are considered to be as approximate fair values.

3 The insurance and reinsurance debtors classified as not rated comprise personal policyholders and small corporate customers that do not have individual credit ratings. Credit risk of this balance is managed through close monitoring of ageing profiles and cover can be cancelled if payment isn't received in accordance with agreed credit terms.

1 The debt securities meeting SPPI criteria under IFRS 9 which are below investment grade are stated under IAS 39 at fair value.

2 Loans and receivables are measured using amortised cost and their carrying amounts are considered to be as approximate fair values.

3 The insurance and reinsurance debtors classified as not rated comprise personal policyholders and small corporate customers that do not have individual credit ratings. Credit risk of this balance is managed through close monitoring of ageing profiles and cover can be cancelled if payment isn't received in accordance with agreed credit terms.

With the exception of government debt securities, the largest single aggregate credit exposure does not exceed 3% (31 December 2020: 2%) of the Group's total financial assets.

Ageing of financial assets that are past due but not impaired

The following table provides information regarding the carrying value of financial assets that have been impaired and the ageing of financial assets that are past due but not impaired, excluding those assets that have been classified as held for sale.

1 Debtors with similar credit risk characteristics are collectively assessed for impairment with provisions being made based on past experience.

1 Debtors with similar credit risk characteristics are collectively assessed for impairment with provisions being made based on past experience.

2 Included within impairment losses charged in the period is a £10m write off in relation to aged debtors in Sweden.

Market risk

Market risk for the Group can be broken down into three key components:

i. Equity risk

At 30 June 2021 the Group held investments classified as AFS equity securities of £126m (31 December 2020: £673m). These include interests in structured entities and other investments where the price risk arises from interest rate risk rather than from equity market price risk. The Group considers that within AFS equity securities, investments with a fair value of £1m (31 December 2020: £190m) may be more affected by equity index market price risk than by interest rate risk. The significant reduction in exposure to equity index market price risk is due to the disposals of the Group's operations in Scandinavia and Canada. On this basis a 15% fall in the value of equity index prices would result in the recognition of losses of £nil (2020: £29m) in other comprehensive income.

This analysis assumes that all other assets and liabilities remain unchanged and that no management action is taken. This analysis does not represent management's view of future market change, but reflects management's view of key sensitivities.

This analysis is presented gross of the corresponding tax credits/(charges).

ii. Interest rate risk

Given the composition of the Group's investments as at 30 June 2021, the table below illustrates the impact to the income statement and other comprehensive income of a hypothetical 100bps change in interest rates on fixed income securities and cash that are subject to interest rate risk.

The Group principally manages interest rate risk by holding investment assets (predominantly fixed income) that generate cash flows which broadly match the duration of expected claim settlements and other associated costs.

The sensitivity of the fixed interest securities of the Group has been modelled by reference to a reasonable approximation of the average interest rate sensitivity of the investments held within each of the portfolios. The effect of movement in interest rates is reflected as a one time rise of 100bps on 1 July 2021 and 1 January 2021 on the following year's income statement and other comprehensive income. The impact of an increase in interest rates on the fair value of fixed income securities that would be initially recognised in OCI will reduce over time as the maturity date approaches.

iii. Currency risk

The sale of the Canadian and Scandinavian subsidiaries on 1 June 2021 has simplified the structural currency exposure of the Group, noting the remaining material subsidiaries are exclusively denominated in EUR or USD.

Equity attributable to owners of the Parent Company is stated after taking account of the effect of currency forward contracts, swaps and foreign exchange options. Hedging arrangements in place to manage the structural currency risk related to the Group's operations in Scandinavia and Canada have been closed out following the disposals on 1 June 2021.

The table below illustrates the impact of a hypothetical 10% change in Euro or US Dollar exchange rates on equity attributable to owners of the Parent Company when retranslating into sterling.

Changes arising from the retranslation of foreign subsidiaries' net asset positions from their primary currencies into Sterling are taken through the foreign currency translation reserve and so consequently these movements in exchange rates have no impact on profit or loss.

Liquidity risk

The following table summarises the contractual repricing or maturity dates, whichever is earlier. Provision for losses and loss adjustment expenses are presented and are analysed by remaining estimated duration until settlement.

The above maturity analysis is presented on a discounted basis, with the exception of issued debt and lease liabilities, for consistency with the consolidated statement of financial position and supporting notes.

The capital and interest payable on the bonds and notes have been included until the earliest dates on which the Group has the option to call the instruments and the interest rates are reset.

Capital management

Following the acquisition of the Group by Regent Bidco Limited on 1 June 2021, the Company is no longer a regulated entity, however its principal operating subsidiary, Royal & Sun Alliance Insurance Limited (RSAI) is deemed to be equivalent from a risk perspective and therefore is covered within the capital management section.

It is a key regulatory requirement that RSAI maintains sufficient capital to support its exposure to risk. Accordingly, RSAI's capital management strategy is closely linked to its monitoring and management of risk. RSAI's capital objectives consist of striking the right balance between the need to support claims liabilities and ensure the confidence of policyholders, exposure to other risks, support competitive pricing strategies, meet regulatory capital requirements, and providing adequate returns for its shareholder.

RSAI's overall capital position is primarily comprised of shareholders' equity and subordinated loan capital and aims to maximise shareholder value, while maintaining financial strength and adequate regulatory capital. In addition RSAI aims to hold sufficient capital so as to maintain its single 'A' credit rating.

RSAI holds an appropriate level of capital to satisfy all applicable regulations. Compliance with regulatory requirements is embedded within the Board Risk Committee mandate, for the protection of RSAI's policyholders and the continuation of the RSAI's ability to underwrite.

Regulatory solvency position

RSAI operates a Prudential Regulation Authority (PRA) approved Solvency II Internal Model which forms the basis of the primary Solvency II solvency capital ratio (SCR) measure. The internal model is used to support, inform and improve RSAI's decision making. It is used to inform RSAI's optimum capital structure, its investment strategy, its reinsurance programme and target returns for each portfolio.

As at 30 June 2021, RSAI's estimated coverage of its Solvency II SCR is approximately 1.6 times (31 December 2020: 2.0 times).

SIGNIFICANT TRANSACTIONS AND EVENTS

5. DISCONTINUED OPERATIONS

On 1 June 2021, the Group disposed of its operations in Scandinavia and Canada. These have been classified as discontinued operations in the consolidated income statement and consolidated statement of comprehensive income, and the comparatives have been re-presented on this basis.

NOTES TO THE CONDENSED CONSOLIDATED INCOME STATEMENT, CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND DIVIDENDS

6. OPERATING SEGMENTS

The Group's primary operating segments comprise UK, International and Central Functions. Canada and Scandinavia are shown as discontinued operations following the disposal of these operations. The primary operating segments are based on geography and are all engaged in providing personal and commercial general insurance services. International comprises of all other operating segments based in Middle East, Ireland, and Europe, which individually do not meet the criteria of a reportable segment. Central Functions include the Group's internal reinsurance function and Group Corporate Centre.

The basis of the segmental disclosure has been reassessed following the acquisition of the Group and the disposal of the Group's operations in Scandinavia and Canada, with UK and International now shown separately.

Each operating segment is managed by individuals who are accountable to the Group Chief Executive and the Group Board of Directors, who together are considered to be the chief operating decision maker in respect of the operating activities of the Group. The UK is the Group's country of domicile and one of its principal markets.

As explained in note 1, where intragroup arrangements between continuing and discontinued operations continue after the disposal, the continuing operations are presented as if the income/expense had always been an external party, with the result of the discontinued operation being reduced to offset.

Assessing segment performance

The Group uses the following key measures to assess the performance of its operating segments:

· Net written premiums

· Underwriting result

Net written premiums are the key measure of revenue used in internal reporting.

Underwriting result is the key internal measure of profitability of the operating segments.

Underwriting result and business operating result are Alternative Performance Measures (APMs). Refer to Appendix B for a reconciliation to the nearest IFRS measure. A 'Jargon buster' can also be found on pages 181 to 183 of the RSA Insurance Group plc Annual Report and Accounts 2020.

Transfers or transactions between segments are entered into under normal commercial terms and conditions that would also be available to unrelated third parties.