26 March 2019
RSA INSURANCE GROUP PLC
(THE "COMPANY")
2018 ANNUAL FINANCIAL REPORT ANNOUNCEMENT
In accordance with Listing Rule 9.6 and Disclosure and Transparency Rule ("DTR") 4.1, the Company announces that the following documents have been posted to shareholders and have today been submitted to the UK Listing Authority via the National Storage Mechanism:
· Annual Report and Accounts for the year ended 31 December 2018
· Notice of the 2018 Annual General Meeting to be held on 10 May 2019
· Proxy form for the 2019 Annual General Meeting
The above mentioned documents (except for the Proxy form) are available on our website at www.rsagroup.com and www.rsagroup.com/agm2019 and will shortly be made available for inspection at www.morningstar.co.uk/uk/NSM. Shareholders can obtain additional copies of the Proxy form from our Registrar, Equiniti Limited, at Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA.
This announcement should be read in conjunction with the Company's announcement issued on 28 February 2019. Together these constitute the material required by DTR 6.3 to be communicated to the media in full unedited text through a Regulatory Information Service. This material is not a substitute for reading the Company's 2018 Annual Report and Accounts.
An indication of the important events that occurred in 2018 and their impact on the condensed consolidated financial statements, the condensed consolidated financial statements themselves and the responsibility statement were announced to the London Stock Exchange on 28 February 2019, forming part of the Preliminary Results announcement for the year ended 31 December 2018. In the Appendix below for the purposes of compliance with DTR 6.3.5 is the statement of key risks and mitigants which is set out in the 2018 Annual Report and Accounts and the text of note 15 to the consolidated financial statements in the 2018 Annual Report and Accounts concerning related party transactions.
Other information:
LEI number: 549300HOGQ7E0TY86138
Enquiries:
Chris Smyth
Deputy Group Company Secretary
RSA Insurance Group plc
Tel: +44 (0) 20 7111 7000
IMPORTANT DISCLAIMER
Visit www.rsagroup.com for more information.
This press release (together with the Annual Report and Accounts referred to herein) has been prepared in accordance with the requirements of English company law and the liabilities of the directors in connection with this press release (together with the Annual Report and Accounts referred to herein) shall be subject to the limitations and restrictions provided by such law. This press release may contain 'forward-looking statements' with respect to certain of the Group's plans and its current goals and expectations relating to its future financial condition, performance, results, strategic initiatives and objectives. Generally, words such as "may", "could", "will", "expect", "intend", "estimate", "anticipate", "aim", "outlook", "believe", "plan", "seek", "continue", "potential", "target", "reasonably possible" or similar expressions identify forward-looking statements. By their nature, all forward-looking statements involve risk and uncertainty because they relate to, and maybe impacted by, future events and circumstances which are beyond the Group's control, including amongst other things, UK domestic, European and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of governments, central banks and regulatory authorities (including changes related to capital and solvency requirements whether in the UK, Europe or globally), the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation or regulations in the jurisdictions in which the Group and its affiliates operate. The Group's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Group's forward-looking statements and, as a result these forward-looking statements are not guarantees of future performance of the Group and undue reliance should not be placed on them. The Group undertakes no obligation to update any forward-looking statements, save in respect of any requirement under applicable law or regulation. Neither the content of RSA's website nor the content of any other website accessible from hyperlinks on RSA's website is incorporated into, or forms part of, this document. Nothing in this press release (together with the Annual Report and Accounts referred to herein) should be construed as a profit forecast.
APPENDIX
References to page numbers and notes to the accounts made in this Appendix refer to page numbers and notes to the accounts in the 2018 Annual Report and Accounts.
KEY RISKS AND MITIGANTS
| Key risk and exposures | Key mitigants and controls | Commentary |
| Catastrophe risk Arises from the risk of large natural disasters, with our main exposure being to North European windstorms and Canadian earthquakes.
| - Our reinsurance programme significantly reduces our exposure to catastrophe risks, with historical losses being well covered by our programme. The programme is designed to cover at least 1-in-200-year events. | Consistent with our strategy and appetite of retaining risks that reside within our core expertise, where we are able to maximise risk-adjusted returns, our Solvency II Capital Requirement (SCR) primarily comprises insurance related risks, including higher than anticipated underwriting losses, large retained catastrophe losses and deterioration in our stock of reserves for future claims.
While our investment strategy remains deliberately conservative, we continue to look for opportunities to increase returns through the purchase of less liquid high-quality assets as we are able to match the cash flow profile against that of our liabilities.
Another key SCR risk arises from the Group's defined benefit pension schemes. Although these schemes are well funded (95% at the latest triennial review), under the Solvency II rules we are required to hold suffi cient capital to withstand a 1-in-200-year event. For more information on the pension schemes, see note 38 of the financial statements.
Management of operational risk is key to servicing and supporting our customers, as well as an SCR driver. Cyber remains one of our key operational risks. The last few years have seen the volume, nature and capabilities of would-be attackers increase significantly, meaning the risk is ever present. In response, RSA has been investing heavily in our technology and capability to counter such threats and building employee awareness through briefings and training. These efforts continue at pace driven by a refreshed Group Cyber Strategy. |
| Reserving risk This is the risk that the Group's estimate of future claims is insufficient. Longer tail-lines of business present more uncertainty on the size and timing of payments, with our largest exposure being the Swedish Personal Lines (including motor). The risk includes legislative changes, e.g. the Ogden rate change. | - Reserves are reviewed and challenged at the Group Reserving Committee meeting which is attended by the Group Chief Actuary, CRO, CUO, CFO and CEO. - The reserve assurance programme has independently verified >90% of the Group's net reserves over a three-year period. - Claims case reserves are prudently set and reviewed at quarterly case reserving committees. | |
| Underwriting and claims risk This is the risk that underwritten business is less profitable than planned due to insufficient pricing and setting of claims case reserves. Key exposures arise from large portfolios where claims trends are slow to emerge, such as UK Commercial and Marine. | - Controlled through well-defined risk appetite statements which are rigorously monitored at quarterly portfolio reviews, with remediation action taken where deemed necessary. - Brexit risks to inflation and supply chain delays are being monitored and we are ready to respond. - Extensive control validation and assurance activities performed over underwriting pricing and claims.
| |
| Market, credit and currency risk This is the risk to our insurance funds arising from movements in macroeconomic variables, including widening credit spreads, fluctuating bond yields and currency fluctuations. |
- RSA adopts a prudent investment strategy with the investment portfolio favouring high-quality fixed income bonds. - RSA ensures assets are closely duration and currency matched with insurance liabilities to hedge volatility. - Investment positions are regularly monitored to ensure limits remain within appetite. - Asset Managers positioning assets to minimise Brexit risk where possible. | |
| Pension risk We face longevity and in particular market-related risks, which arise from our defined benefit pension schemes. The largest exposures arise from credit spread and equity movements, although these are partly hedged by offsetting movements in the Insurance Investment Fund. | - Funding assets are well matched to liabilities in the pension schemes, including the use of swap arrangements. - The tri-annual valuation process is complete and a new long-term de-risking plan has been agreed. - Possible market impacts of Brexit are examined and well understood with a specific focus on Pension risk. | |
| Operational risk This risk relates to customer and/or reputational damage arising from operational failures such as IT system failure. | - Operational risk processes and procedures are in place, including incident management. - Control Validation and Assurance review control effectiveness. - New UK Cyber Strategy has been developed.· - IT risks remain a key focus, especially cyber threat. |
RELATED PARTY TRANSACTIONS
Key management personnel comprise members of the Group Executive Committee, executive directors, and non-executive directors.
Key management personnel compensation
|
| 2018 £m | 2017 £m |
| Salaries and other short-term employee benefits | 7 | 7 |
| Bonus awards | 1 | 3 |
| Pension benefits | - | - |
| Share based awards | 5 | 5 |
| Total | 13 | 15 |
Included in salaries and other short term employee benefits and bonus awards is £3,942,000 (2017: £4,625,000) paid in respect of directors. These amounts exclude the value of share options granted to directors and gains made on the exercise of such options, Group contributions paid in respect of pension schemes and cash or other assets received or receivable under long term incentive schemes. The total value of the directors' remuneration (including values for these excluded items) and other details are disclosed in the remuneration report.
Key management personnel transactions
A number of key management personnel, or their related parties, hold positions in other companies that result in them having significant influence over these companies. A number of these companies transacted with the Group during the year. The terms and conditions of these transactions were no more favourable than those available, or which might reasonably be expected to be available, in similar transactions with non-key management personnel-related companies on an arm's length basis.
A number of the directors, other key managers, their close families and entities under their influence have general insurance policies with subsidiary companies of the Group. General insurance policies are available at discounted rates to all employees including executive directors.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
· The financial statements on pages 106 to 175, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Parent Company and the undertakings included in the consolidation taken as a whole; and
· The strategic report on pages 04 to 95 includes a fair review of the development and performance of the business and the position of the Parent Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
Signed by order of the Board
| Stephen Hester | Scott Egan |
| Group Chief Executive | Group Chief Financial Officer (appointed as CEO, UK & International on 5 February 2019) |
| 27 February 2019 | 27 February 2019 |