TIDMRSAB
RNS Number : 4779H
RSA Insurance Group Limited
04 August 2021
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 GBP4,308m for the six
month period to 30 June 2021 of which continuing operations
contributed a loss before tax of GBP(249)m and discontinued
operations a profit before tax of GBP4,557m (six month period to 30
June 2020: GBP11m and GBP200m 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 GBP(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 GBP(143)m underwriting losses (2020: GBP14m profit),
GBP57m investment result (2020: GBP60m), GBP(6)m central costs
(2020: GBP(3)m) and GBP(157)m of other charges (2020: GBP(60)m).
Other charges were also hit by GBP(104)m of costs relating to the
transaction and GBP(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
GBP4,388m gain on the disposal of the Group's operations in
Scandinavia and Canada (refer to note 5 discontinued
operations).
Net written premiums were GBP2,898m of which GBP1,717m were in
respect of continuing operations and GBP1,181m from discontinued
(2020: GBP1,446m and GBP1,689m respectively).
Net assets of the Group are GBP2,799m (2020: GBP4,730m).
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 GBP1,021m during the period and also declared a dividend in
specie of GBP6,914m. 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 GBP1,717m
(2020: GBP1,446m): 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 GBP(143)m
(2020: GBP14m): 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 GBP(249)m
(2020: GBP11m): 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.
CONDENSED CONSOLIDATED INCOME STATEMENT
STATUTORY BASIS
For the 6 month period ended 30 June 2021
Re-presented(1)
(Unaudited) (Unaudited)
6 months 6 months
30 June 30 June
2021 2020
Note GBPm GBPm
================================================= ==== =========== ================================
Continuing operations
Income
Gross written premiums 2,327 1,979
Less: reinsurance written premiums (610) (533)
================================================== ==== =========== ================================
Net written premiums 6 1,717 1,446
=========== ================================
Change in the gross provision for unearned
premiums (155) 33
Change in provision for unearned reinsurance
premiums 127 43
=========== ================================
Change in provision for net unearned premiums (28) 76
================================================== ==== =========== ================================
Net earned premiums 1,689 1,522
Net investment return 7 58 39
Other operating income 41 47
================================================== ==== =========== ================================
Total income 1,788 1,608
================================================== ==== =========== ================================
Expenses
=========== ================================
Gross claims incurred (1,657) (1,245)
Less: claims recoveries from reinsurers 430 268
=========== ================================
Net claims (1,227) (977)
Underwriting and policy acquisition costs (645) (576)
Unwind of discount (3) (3)
Other operating expenses (131) (26)
================================================== ==== =========== ================================
(2,006) (1,582)
================================================== ==== =========== ================================
Finance costs (31) (15)
(Loss)/profit before tax from continuing
operations 6 (249) 11
Income tax expense 8 (20) (1)
================================================== ==== =========== ================================
(Loss)/profit after tax from continuing
operations (269) 10
Profit from discontinued operations, net
of tax 5 4,528 154
================================================== ==== =========== ================================
Profit for the period 4,259 164
================================================== ==== =========== ================================
Attributable to:
Owners of the Parent Company from continuing
operations (272) (2)
Owners of the Parent Company from discontinued
operations 4,528 154
================================================== ==== =========== ================================
Total owners of the Parent Company 4,256 152
Non-controlling interests 3 12
================================================== ==== =========== ================================
4,259 164
================================================== ==== =========== ================================
(1) Comparatives have been re-presented to show Scandinavia and Canada
as discontinued operations. Refer to note 5 for further information.
The following explanatory notes form an integral part of these condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
STATUTORY BASIS
For the 6 month period ended 30 June 2021
Re-presented(1)
(Unaudited) (Unaudited)
6 months 6 months
30 June 30 June
2021 2020
GBPm GBPm
================================================== ================== ============ ================
(Loss)/profit for the period from continuing operations (269) 10
Profit for the period from discontinued operations 4,528 154
====================================================================== ============ ================
Profit for the period 4,259 164
Items from continuing operations that may be reclassified
to the income statement:
============ ================
Exchange (losses)/gains net of tax on translation of
foreign operations (19) 27
Fair value (losses)/gains on available for sale financial
assets net of tax (39) 49
============ ================
(58) 76
Items from continuing operations that will not be reclassified
to the income statement:
Pension - remeasurement of defined benefit asset/liability
net of tax (123) 4
Other comprehensive (expense)/income for the period
from continuing operations (181) 80
Other comprehensive (expense)/income for the period
from discontinued operations (129) 76
====================================================================== ============ ================
Total other comprehensive (expense)/income for the
period (310) 156
====================================================================== ============ ================
Comprehensive (expense)/income for the period from
continuing operations (450) 90
Comprehensive income for the period from discontinued
operations (note 5) 4,399 230
====================================================================== ============ ================
Total comprehensive income for the period 3,949 320
====================================================================== ============ ================
Attributable to:
Owners of the Parent Company from continuing operations (450) 64
Owners of the Parent Company from discontinued operations 4,399 230
====================================================================== ============ ================
Total owners of the Parent Company 3,949 294
Non-controlling interests - 26
====================================================================== ============ ================
3,949 320
================================================== ================== ============ ================
(1) Comparatives have been re-presented to show Scandinavia and Canada
as discontinued operations. Refer to note 5 for further information.
The following explanatory notes form an integral part of these condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
STATUTORY BASIS
For the 6 month period ended 30 June 2021
(Unaudited)
==========================================================================================================================================
Equity
attributable
Foreign to owners
Ordinary Ordinary Tier Capital currency of the
share share Preference 1 Revaluation redemption translation Retained Parent Non-controlling Total
capital premium shares notes reserves reserve reserve earnings Company(2) interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=================== ========= ========= =========== ====== ============ =========== ============ =========== ============= ================ ========
Balance at 1
January
2021 1,035 1,095 125 297 371 389 20 1,232 4,564 166 4,730
Total comprehensive income
========= =========== ====== ============ =========== ============ =========== ============= ================ ========
Profit for the
period - - - - - - - 4,256 4,256 3 4,259
Other comprehensive
expense for the
period - - - - (228) - 32 (111) (307) (3) (310)
========= ========= =========== ====== ============ =========== ============ =========== ============= ================ ========
- - - - (228) - 32 4,145 3,949 - 3,949
Transactions with owners of
the Group
Contribution and distribution
========= =========== ====== ============ =========== ============ =========== ============= ================ ========
Dividends (note 9) - - - - - - - (6,926) (6,926) (10) (6,936)
Shares issued for
cash 1,023 7 - - - - - - 1,030 - 1,030
Share-based
payments 11 - - - - - - 17 28 - 28
Transfers - - - - 1 - - (1) - - -
Capital
reduction(1) (800) (1,095) - - - (389) - 2,284 - - -
========= ========= =========== ====== ============ =========== ============ =========== ============= ================ ========
234 (1,088) - - 1 (389) - (4,626) (5,868) (10) (5,878)
Changes in
shareholders'
interests in
subsidiaries - - - - - - - - - (2) (2)
==================== ========= ========= =========== ====== ============ =========== ============ =========== ============= ================ ========
Total transactions
with owners of the
Group 234 (1,088) - - 1 (389) - (4,626) (5,868) (12) (5,880)
==================== ========= ========= =========== ====== ============ =========== ============ =========== ============= ================ ========
Balance at 30 June
2021 1,269 7 125 297 144 - 52 751 2,645 154 2,799
==================== ========= ========= =========== ====== ============ =========== ============ =========== ============= ================ ========
Balance at 1
January
2020 1,032 1,090 125 297 259 389 (26) 1,003 4,169 173 4,342
Total comprehensive income
========= =========== ====== ============ =========== ============ =========== ============= ================ ========
Profit for the
period - - - - - - - 152 152 12 164
Other comprehensive
income for the
period - - - - 47 - 81 14 142 14 156
========= ========= =========== ====== ============ =========== ============ =========== ============= ================ ========
- - - - 47 - 81 166 294 26 320
Transactions with owners of
the Group
Contribution and distribution
========= =========== ====== ============ =========== ============ =========== ============= ================ ========
Dividends (note 9) - - - - - - - (12) (12) (5) (17)
Shares issued for
cash 1 2 - - - - - - 3 - 3
Share-based
payments 2 - - - - - - 6 8 - 8
3 2 - - - - - (6) (1) (5) (6)
Balance at 30 June
2020 1,035 1,092 125 297 306 389 55 1,163 4,462 194 4,656
==================== ========= ========= =========== ====== ============ =========== ============ =========== ============= ================ ========
(1) A reduction of the Company's share capital of GBP800m, share premium
of GBP1,095m and capital redemption reserve of GBP389m was effected
in June 2021 by special resolution supported by a solvency statement
which resulted in the creation of distributable reserves of GBP2,284m
(2) Equity attributable to owners of the Parent Company was a new
sub total at 31 December 2020 and includes Tier 1 notes. This has replaced
the shareholders equity sub total disclosed in the 2020 interim financial
statements, which did not include Tier 1 notes.
The following explanatory notes form an integral part of these condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
STATUTORY BASIS
As at 30 June 2021
(Unaudited) (Audited)
30 June 31 December
2021 2020
Note GBPm GBPm
=== ======================================================================== ========================= =========== =========================================
Assets
Goodwill and other intangible assets 10 294 868
Property and equipment 116 237
=========== =========================================
Investment property 305 285
Investments in associates - 5
Financial assets 11 5,038 11,826
=========== =========================================
Total investments 5,343 12,116
Reinsurers' share of insurance contract liabilities 16 2,446 2,340
Insurance and reinsurance debtors 1,926 2,989
=========== =========================================
Deferred tax assets 12 149 199
Current tax assets 3 23
Other debtors and other assets 693 840
=========== =========================================
Other assets 845 1,062
Cash and cash equivalents 13 1,114 1,094
============================================================================= ========================= =========== =========================================
Total assets 12,084 20,706
============================================================================= ========================= =========== =========================================
Equity and liabilities
Equity
Equity attributable to owners of the Parent
Company 2,645 4,564
Non-controlling interests 154 166
============================================================================= ========================= =========== =========================================
Total equity 2,799 4,730
============================================================================= ========================= =========== =========================================
Liabilities
Issued debt 15 403 751
Insurance contract liabilities 16 7,200 12,614
Insurance and reinsurance liabilities 907 932
Borrowings 13 132
=========== =========================================
Deferred tax liabilities 12 - 105
Current tax liabilities 8 40
Provisions 72 172
Other liabilities 682 1,230
=========== =========================================
Provisions and other liabilities 762 1,547
============================================================================= ========================= =========== =========================================
Total liabilities 9,285 15,976
============================================================================= ========================= =========== =========================================
Total equity and liabilities 12,084 20,706
============================================================================= ========================= =========== =========================================
The following explanatory notes form an integral part of these condensed
consolidated financial statements.
The condensed financial statements were approved on 3 August 2021 by
the Board of Directors and are signed on its behalf by:
Charlotte Jones
Group Chief Financial Officer
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
STATUTORY BASIS
For the 6 month period ended 30 June 2021
(Unaudited) (Unaudited)
6 months 6 months
30 June 30 June
2021 2020
Note GBPm GBPm
=== ===================================================================================== ============ ========================== ================
Cash flows from operating activities
Cash generated from operating activities 21 289 8
Tax paid (93) (51)
========================================================================================== ============ ========================== ================
Net cash flows from operating activities 196 (43)
========================================================================================== ============ ========================== ================
Cash flows from investing activities
Proceeds from sales or maturities of:
Financial assets 1,115 1,560
Subsidiaries and associates (net of cash disposed
of) 6,559 -
Purchase of:
Financial assets (1,411) (1,364)
Property and equipment (8) (10)
Intangible assets (53) (54)
Subsidiaries (1) -
=== ===================================================================================== ============ ========================== ================
Net cash flows from investing activities 6,201 132
========================================================================================== ============ ========================== ================
Cash flows from financing activities
Proceeds from issue of share capital 1,029 3
Dividends paid to ordinary shareholders 9 (6,914) -
Coupon payment on Tier 1 notes (7) (7)
Dividends paid to preference shareholders (5) (5)
Dividends paid to non-controlling interests (10) (5)
Redemption of debt instruments (350) -
Payment of lease liabilities (17) (21)
Movement in other borrowings (71) (42)
Interest paid (24) (4)
========================================================================================== ============ ========================== ================
Net cash flows from financing activities (6,369) (81)
========================================================================================== ============ ========================== ================
Net increase in cash and cash equivalents 28 8
Cash and cash equivalents at beginning of the
period 1,083 886
Effect of exchange rate changes on cash and cash
equivalents (10) 27
========================================================================================== ============ ========================== ================
Cash and cash equivalents at end of the period 13 1,101 921
========================================================================================== ============ ========================== ================
The following explanatory notes form an integral part of these condensed
consolidated financial statements.
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, GBP2m of impairments have been recognised
on a continuing basis (6 months to 30 June 2020: GBP2m) (note 7).
The value of unrealised losses in the revaluation reserve at 30
June 2021 is GBP13m (31 December 2020: GBP84m).
-- Valuation of intangible assets: determining if there is
evidence of impairment requires judgement and in the 6 months to 30
June 2021, GBP61m of internally generated software assets not yet
available for use were written down (6 months to 30 June 2020:
GBPnil). 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 GBP83m 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 (GBP49m). 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.
As at 30 June 2021
Credit rating relating to financial assets
that are neither past due nor impaired
=============================================================
Total
financial
assets
that are
neither
Not past due
AAA AA A BBB <BBB rated nor impaired
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================================= ===== ====== ====== ====== ===== ======= ==============
Debt securities 706 1,253 1,456 1,042 173 - 4,630
Of which would qualify as solely
for payment of principal and
interest (SPPI) under IFRS 9(1) 706 1,234 1,400 938 75 - 4,353
Loans and receivables(2) 3 - 59 193 27 - 282
Reinsurers' share of insurance
contract liabilities - 619 1,711 60 37 19 2,446
Insurance and reinsurance debtors(3) - 19 926 28 37 820 1,830
Derivative assets - - 61 - - - 61
Other debtors - - 8 8 - 82 98
Cash and cash equivalents 791 2 291 4 4 22 1,114
======================================= ----- ------ ------ ------ ----- ------- ==============
(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.
As at 31 December 2020
Credit rating relating to financial
assets that are neither past due nor
impaired
==============================================================
Total
financial
assets
that are
neither
Not past due
AAA AA A BBB <BBB rated nor impaired
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================================= ====== ====== ====== ====== ===== ======= ==============
Debt securities 4,978 2,026 2,295 1,288 107 4 10,698
Of which would qualify as SPPI
under IFRS 9(1) 4,977 2,006 2,065 1,159 91 4 10,302
Loans and receivables(2) 64 - 59 274 27 5 429
Reinsurers' share of insurance
contract liabilities - 670 1,554 58 34 21 2,337
Insurance and reinsurance debtors(3) - 12 928 50 49 1,803 2,842
Derivative assets - 1 15 78 - 31 125
Other debtors - - 21 17 - 140 178
Cash and cash equivalents 447 207 343 77 4 16 1,094
======================================= ====== ====== ====== ====== ===== ======= ==============
(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.
As at 30 June 2021
Financial assets that
are past due but not
impaired
======================================
Carrying Impairment
Financial value losses
Neither assets in the charged/(reversed)
past Six Greater that statement to the income
due Up to Three months than have of statement
nor three to six to one one been financial during the
impaired months months year year impaired position period
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============= ===== ========== ======== ======== ======== ======== ========== =========== ===================
Debt
securities 11 4,630 - - - - - 4,630 -
Loans and
receivables 11 282 - - - - - 282 -
Reinsurers'
share
of
insurance
contract
liabilities 16 2,446 - - - - - 2,446 -
Insurance
and
reinsurance
debtors(1) 1,830 57 15 9 3 12 1,926 7
Derivative
assets 61 - - - - - 61 -
Other
debtors 98 1 2 1 1 - 103 -
Cash and
cash
equivalents 13 1,114 - - - - - 1,114 -
============= ===== ---------- -------- -------- -------- -------- ---------- =========== -------------------
(1) Debtors with similar credit risk characteristics are
collectively assessed for impairment with provisions being made
based on past experience.
As at 31 December 2020
Financial assets that
are past due but not
impaired
======================================
Carrying Impairment
Financial value losses
Neither assets in the charged/(reversed)
past Six Greater that statement to the income
due Up to Three months than have of statement
nor three to six to one one been financial during the
impaired months months year year impaired position period
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ===== ========= ======== ======== ======== ======== ========== ========== ===================
Debt
securities 11 10,698 - - - - 26 10,724 8
Loans and
receivables 11 429 - - - - - 429 -
Reinsurers'
share
of insurance
contract
liabilities 16 2,337 - - - - 3 2,340 -
Insurance and
reinsurance
debtors(1, 2) 2,842 81 21 17 5 23 2,989 19
Derivative
assets 125 - - - - - 125 -
Other debtors 178 2 2 3 - - 185 -
Cash and cash
equivalents 13 1,094 - - - - - 1,094 -
=============== ===== ========= ======== ======== ======== ======== ========== ========== ===================
(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
GBP10m 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 GBP126m (31 December 2020: GBP673m). 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 GBP1m (31
December 2020: GBP190m) 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 GBPnil (2020: GBP29m) 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.
Changes in the income statement and other comprehensive income (OCI):
Increase in Decrease in other
income statement comprehensive
income
==================== ====================
1 July 1 January 1 July 1 January
As at: 2021 2021 2021 2021
GBPm GBPm GBPm GBPm
============================================= ======== ========== ======== ==========
Increase in interest rate markets:
Impact on fixed income securities and cash
of an increase in interest rates of 100bps 11 22 (149) (440)
============================================== ======== ========== ======== ==========
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.
At 30 June 2021, the Group's equity attributable to owners of the Parent
Company deployed by currency was:
United
Pounds States
Sterling Euro Dollar(1) Other(2) Total
GBPm GBPm GBPm GBPm GBPm
============================================= ========== ===== =========== ========= ======
Equity attributable to owners of the Parent
Company at 30 June 2021 2,354 105 193 (7) 2,645
Equity attributable to owners of the Parent
Company at 31 December 2020 2,579 335 204 1,446 4,564
============================================= ========== ===== =========== ========= ======
(1) United States Dollar equity includes equity denominated in Bahraini
Dinar, Omani Rihal, Saudi Arabian Riyal and UAE Dirham, currencies
which are pegged to the United States Dollar.
(2) Other as at 31 December 2020 includes the Danish Krone, Swedish
Krona and Canadian Dollar equity in respect of the subsidiaries disposed
of.
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.
Movement in equity attributable to owners of the Parent
Company at:
30 June 31 December
2021 2020
GBPm GBPm
========================================================= ======== ============
10% strengthening in Pounds Sterling against Euro (10) (30)
10% weakening in Pounds Sterling against Euro 12 37
10% strengthening in Pounds Sterling against US Dollar (18) (19)
10% weakening in Pounds Sterling against US Dollar 21 23
========================================================= ======== ============
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.
As at 30 June 2021
Carrying
value
Less Greater in the
than One Two Three Four Five than statement
one to two to three to four to five to ten ten of financial
year years years years years years years Total position
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
====================== ==== ===== ======= ========= ======== ======== ======= ======= ===== =============
Subordinated guaranteed
US$ bonds(1) 15 - - - - - 7 - 7 6
Guaranteed subordinated
notes due 2045(1) 15 - - - - 400 - - 400 397
Provisions for
losses and loss
adjustment expenses 16 2,183 981 590 317 202 443 499 5,215 5,215
Direct insurance
creditors 72 1 - - - - - 73 73
Reinsurance creditors 570 198 66 - - - - 834 834
Borrowings 13 - - - - - - 13 13
Deposits received
from reinsurers - - - - - - - - -
Derivative liabilities 12 - - 4 1 1 60 78 78
Lease liabilities(1) 13 15 11 11 9 24 12 95 84
======================= ==== ===== ======= ========= ======== ======== ======= ======= ===== =============
Total 2,863 1,195 667 332 612 475 571 6,715 6,700
======================= ==== ===== ======= ========= ======== ======== ======= ======= ===== =============
Interest on bonds
and notes 21 21 21 21 6 2 - 92
======================= ==== ===== ======= ========= ======== ======== ======= ======= ===== =============
(1) Maturity profile shown on an undiscounted basis
As at 31 December 2020
Carrying
value
Less Two Greater in the
than One to Three Four Five than statement
one to two three to four to five to ten ten of financial
year years years years years years years Total position
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================ ===== ====== ======== ======= ========= ========= ======== ======== ======= ==============
Subordinated
guaranteed
US$ bonds(1) 15 - - - - - 7 - 7 6
Senior notes due
2024(1) 15 - - - 350 - - - 350 348
Guaranteed
subordinated
notes due
2045(1) 15 - - - - 400 - - 400 397
Provisions for
losses and loss
adjustment
expenses 16 3,106 1,885 1,108 721 492 1,088 979 9,379 9,379
Direct insurance
creditors 121 - - - - - - 121 121
Reinsurance
creditors 537 201 73 - - - - 811 811
Borrowings 132 - - - - - - 132 132
Deposits
received
from reinsurers 8 - - - - - - 8 8
Derivative
liabilities 32 - - 2 4 2 105 145 145
Lease
liabilities(1) 39 35 30 25 22 51 29 231 204
================= ===== ====== ======== ======= ========= ========= ======== ======== ======= ==============
Total 3,975 2,121 1,211 1,098 918 1,148 1,113 11,584 11,551
================= ===== ====== ======== ======= ========= ========= ======== ======== ======= ==============
Interest on
bonds
and notes 27 27 27 27 17 2 - 127
================= ===== ====== ======== ======= ========= ========= ======== ======== ======= ==============
(1) Maturity profile shown on an undiscounted basis
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.
Income statement of discontinued operations
For the 6 month period ended 30 June 2021
6 months 6 months
30 June 30 June
2021 2020
GBPm GBPm
============================================================== ========= ===========
Income
Gross written premiums 1,269 1,773
Less: reinsurance written premiums (88) (84)
=============================================================== ========= ===========
Net written premiums 1,181 1,689
========= ===========
Change in the gross provision for unearned
premiums (97) (160)
Change in provision for unearned reinsurance
premiums 39 33
========= ===========
Change in provision for net unearned premiums (58) (127)
=============================================================== ========= ===========
Net earned premiums 1,123 1,562
Net investment return 65 38
Other operating income 15 24
=============================================================== ========= ===========
Total income 1,203 1,624
=============================================================== ========= ===========
Expenses
========= ===========
Gross claims incurred (711) (1,017)
Less: claims recoveries from reinsurers 2 3
========= ===========
Net claims (709) (1,014)
Underwriting and policy acquisition costs (297) (375)
Unwind of discount and change in economic
assumptions (10) (20)
Other operating expenses (19) (13)
=============================================================== ========= ===========
(1,035) (1,422)
=============================================================== ========= ===========
Finance costs (1) (2)
Gain on disposal of business 2 -
Profit before tax from operating activities 169 200
Income tax expense (29) (46)
=============================================================== ========= ===========
Profit after tax from operating activities 140 154
Gain on disposal of discontinued operation 4,388 -
=============================================================== ========= ===========
Profit after tax from discontinued operation 4,528 154
=============================================================== ========= ===========
Attributable to:
Owners of the Parent Company 4,528 154
Non-controlling interests - -
=============================================================== ========= ===========
4,528 154
=============================================================== ========= ===========
Statement of comprehensive income of discontinued operations
For the 6 month period ended 30 June 2021
6 months 6 months
30 June 30 June
2021 2020
GBPm GBPm
================================================================ ========= =========
Profit for the period 4,528 154
Items that may be reclassified to the income statement:
========= =========
Exchange gains net of tax on translation of foreign
operations 42 79
Fair value losses on available for sale financial assets
net of tax (183) (13)
========= =========
(141) 66
Items that will not be reclassified to the income statement:
Pension - remeasurement of defined benefit asset/liability
net of tax 12 10
Total other comprehensive (expense)/income for the
period (129) 76
================================================================= ========= =========
Total comprehensive income for the period 4,399 230
================================================================= ========= =========
Attributable to:
Owners of the Parent Company 4,399 230
Non-controlling interests - -
================================================================= ========= =========
4,399 230
================================================================ ========= =========
Cash flows from discontinued operations
For the 6 month period ended 30 June 2021
6 months 6 months
30 June 30 June
2021 2020
GBPm GBPm
=== ================================================================= ========= =========
Net cash flows from operating activities 54 187
Net cash flows from investing activities 6,562 (25)
Net cash flows from financing activities (81) (115)
Net increase in cash and cash equivalents 6,535 47
====================================================================== ========= =========
Gain on disposal of discontinued operations
30 June
2021
GBPm
======================================================================= ======================
Consideration 6,913
Net assets disposed of:
Goodwill and other intangible assets 521
Property and equipment 123
Investments in associates 4
Financial assets 6,603
Reinsurers' share of insurance contract liabilities 1,073
Insurance and reinsurance debtors 1,194
Deferred tax assets 18
Current tax assets 47
Other debtors and other assets 182
Cash and cash equivalents 357
----------------------------------------------------------------------- ----------------------
Total assets 10,122
Insurance contract liabilities 6,659
Insurance and reinsurance liabilities 159
Borrowings 46
Deferred tax liabilities 79
Current tax liabilities 16
Provisions 91
Other liabilities 500
----------------------------------------------------------------------- ----------------------
Total liabilities 7,550
Total net assets disposed of 2,572
Net assets disposed of attributable to non-controlling interests 2
======================================================================= ======================
Net assets disposed of attributable to owners of the Parent
Company 2,570
Gain on disposal of discontinued operation before recycling
of items from other comprehensive income 4,343
Gains/(losses) recycled to income statement:
Fair value gains on available for sale financial assets 114
Exchange losses on translation of foreign operations (69)
======================================================================= ======================
Total gains recycled to income statement 45
Gain on disposal of discontinued operation 4,388
======================================================================= ======================
NOTES TO THE CONDENSED CONSOLIDATED INCOME STATEMENT, CONDENSED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND DIVIDS
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.
Segment revenue and results
Period ended 30 June 2021
UK International Central Total Discontinued Total
Functions continuing operations Group
operations
GBPm GBPm GBPm GBPm GBPm GBPm
======================================== ====== ============== =========== ============ ============= =======
Net written premiums 952 363 402 1,717 1,181 2,898
========================================= ====== ============== =========== ============ ============= =======
Underwriting result(2) (143) 27 (27) (143) 134 (9)
Investment result 57 37 94
Central costs and other activities (6) - (6)
========================================= ====== ============== =========== ============ ============= =======
Business operating result (management
basis) (92) 171 79
Realised (losses)/gains (7) 9 2
Unrealised (losses)/gains, impairments
and foreign exchange (16) 2 (14)
Interest costs (31) (1) (32)
Amortisation of intangible assets - (2) (2)
Pension net interest and administration
costs (note 17) 1 (1) -
Transaction costs(1) (104) (11) (115)
Gain on disposal of business - 4,390 4,390
========================================= ====== ============== =========== ============ ============= =======
Profit before tax (249) 4,557 4,308
Tax on operations (20) (29) (49)
========================================= ====== ============== =========== ============ ============= =======
Profit after tax (269) 4,528 4,259
========================================= ====== ============== =========== ============ ============= =======
(1) Transaction costs relate to central costs incurred in relation
to the acquisition of the Group.
(2) A profitable UK underwriting result has been offset by the impacts
of reserve strengthening in aligning to IFC practices and due to heightened
uncertainty and an increased level of reserve margin to reflect the
methodology of IFC (note 16) and GBP(61)m write down of internally
generated software (note 10).
Period ended 30 June 2020
Re-presented(1)
====================================================================================
UK International Central Total Discontinued Total
Functions continuing operations Group
operations
GBPm GBPm GBPm GBPm GBPm GBPm
=================================== ======= ================= ========== =========== ============= ================
Net written premiums 926 365 155 1,446 1,689 3,135
==================================== ======= ================= ========== =========== ============= ================
Underwriting result 6 50 (42) 14 193 207
Investment result 60 52 112
Central costs and other activities (3) - (3)
==================================== ======= ================= ========== =========== ============= ================
Business operating result
(management
basis) 71 245 316
Realised (losses)/gains (4) 3 (1)
Unrealised losses, impairments
and foreign exchange (24) (27) (51)
Interest costs (15) (2) (17)
Amortisation of intangible assets (1) (5) (6)
Impairment of goodwill - (5) (5)
Pension net interest and
administration
costs 2 (1) 1
Reorganisation costs (18) - (18)
Changes in economic assumptions - (8) (8)
==================================== ======= ================= ========== =========== ============= ================
Profit before tax 11 200 211
Tax on operations (1) (46) (47)
==================================== ======= ================= ========== =========== ============= ================
Profit after tax 10 154 164
==================================== ======= ================= ========== =========== ============= ================
(1) Comparatives have been re-presented to show Scandinavia and Canada
as discontinued operations (see note 5 for further information) and
for the new segmental basis explained above, with UK shown separately
from International.
7. NET INVESTMENT RETURN
A summary of the net investment return in the income statement is given
below:
Total
Investment Net realised Net unrealised investment
income (losses)/gains (losses)/gains Impairments return
=================== ================= =================== ========================== ================
30 30 30 30 30
June 30 June June 30 June June 30 June 30 June 30 June June June
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ======= ========== ======= ======== ======= ========== =========== ============= ======= =======
Investment
property 8 9 - - (1) (14) - - 7 (5)
Equity
securities
Available for
sale 1 3 - 1 - - (2) - (1) 4
Debt
securities
Available for
sale 45 47 (5) (1) - - - (2) 40 44
At FVTPL - - - - (12) (1) - - (12) (1)
Other loans
and
receivables
Loans secured - - - - - - - - - -
by
mortgages
Other loans 4 3 - - - - - - 4 3
Deposits, cash
and
cash
equivalents - 2 - (4) - - - - - (2)
Derivatives - 1 - - 1 (5) - - 1 (4)
Other 21 - (2) - - - - - 19 -
=============== ======= ========== ======= ======== ======= ========== =========== ============= ======= =======
Continuing
operations 79 65 (7) (4) (12) (20) (2) (2) 58 39
Discontinued
operations 51 69 9 3 16 (16) (11) (18) 65 38
=============== ======= ========== ======= ======== ======= ========== =========== ============= ======= =======
Total net
investment
return 130 134 2 (1) 4 (36) (13) (20) 123 77
=============== ======= ========== ======= ======== ======= ========== =========== ============= ======= =======
Unrealised gains and losses recognised in other comprehensive income
for available for sale assets are as follows:
Net realised
losses/(gains) Net movement
transferred Impairments recognised
Net unrealised to income transferred in other comprehensive
(losses)/gains statement to income statement income
================== ================== ======================= ==========================
30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
2021 2020 2021 2020 2021 2020 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================= ======== ======== ======== ======== =========== ========== ============ ============
Equity securities (2) 6 - (1) 2 - - 5
Debt securities (79) 47 5 1 - 2 (74) 50
Other - - 2 - - - 2 -
========================= ======== ======== ======== ======== =========== ========== ============ ============
Continuing operations (81) 53 7 - 2 2 (72) 55
Discontinued operations (85) (29) (168) (3) 11 18 (242) (14)
========================= ======== ======== ======== ======== =========== ========== ============ ============
Total (166) 24 (161) (3) 13 20 (314) 41
========================= ======== ======== ======== ======== =========== ========== ============ ============
8. INCOME TAX
Income tax expense is calculated based on management's estimate
of the weighted average effective annual income tax rate expected
for the full financial year by region, adjusted for the tax effect
of certain items recognised in full in the interim period. As such,
the effective tax rate in the interim financial statements may
differ from management's estimate of the effective tax rate for the
annual financial statements.
The Group reported a tax charge for continuing operations for
the six months ended 30 June 2021 of GBP20m (six months ended 30
June 2020: GBP1m), giving an effective tax rate of (8.1)% (six
months ended 30 June 2020: 9%).
The main drivers of the Group's tax charge (and effective tax
rate) for the continuing operations for the six months to 30 June
2021 are as follows:
-- The Group made a loss for tax purposes in the period to 30
June 2021 on its continuing UK operations of GBP209m. These tax
losses have not been recognised for deferred tax purposes due to
insufficient future taxable profits. The tax loss of GBP209m
includes the impact of non-deductible expenses predominantly
related to the acquisition of the Group (GBP86m). The tax impact of
the unrecognised losses in the income statement is an increased tax
charge of GBP40m.
-- In May 2021, the change in the UK tax rate from 19% to 25%
from 1 April 2023 was substantively enacted. The change in tax rate
increased the valuation of the Group's UK deferred tax assets,
which has been reflected in the period to 30 June 2021. In
addition, the UK deferred tax asset was partially derecognised in
the period to 30 June 2021 f ollowing the latest view of taxable
profits post the acquisition (see note 12 for further detail). The
combined impact of the tax rate change and derecognition on the
deferred tax asset reported in the income statement is an GBP11m
charge.
-- A GBP4m current tax charge arose in relation to intra-group
interest received from Canada for which no UK group relief was
claimed.
The low effective tax rate of 1.1% in respect of total profits
(including discontinued operations) for the period to 30 June 2021
is mainly due to the non-taxable gain realised on the disposal by
the Group of its Canadian and Scandinavian subgroups as part of the
restructuring post the acquisition. The GBP4.4bn gain realised on
these disposals is not subject to tax due to the applicability of
the UK substantial shareholding exemption. This had a cGBP830m
favourable impact on the Group's tax charge for discontinued
operations.
9. DIVIDS
30 June 30 June
2021 2020
GBPm GBPm
================================================== ============ ============
Ordinary dividend 6,914 -
Preference dividend 5 5
Tier 1 notes coupon payment 7 7
================================================== ============ ============
6,926 12
================================================= ============ ============
Following the acquisition of the Group and the disposal of the Group's
operations in Scandinavia and Canada, a dividend in specie of GBP6,914m
was paid to Regent Bidco Limited. The dividend was settled with highly
liquid financial instruments, classified as cash equivalents.
NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
10. GOODWILL AND INTANGIBLE ASSETS
31 December
30 June 2021 2020
GBPm GBPm
=============================================== ============== ============
Goodwill 40 330
Externally acquired software 3 3
Internally generated software 251 499
Customer related intangibles(1) - 36
================================================== ============== ============
Total goodwill and other intangible assets 294 868
================================================= ============== ============
(1) Customer related intangibles includes customer lists and renewal
rights.
The disposal of the Group's operations in Scandinavia and Canada has
reduced goodwill and other intangible assets by GBP521m in the period.
Refer to note 5 for further detail.
The carrying value of intangible assets not yet available for use at
30 June 2021 is GBP74m (31 December 2020: GBP188m). This primarily
relates to the implementation of strategic software assets in the UK
and Ireland (2020 including Canada and Scandinavia also).
Impairment assessments
A review for indications of impairment since the end of the last
annual reporting period has been performed.
The disposals as detailed above, were in respect of the Canadian
and Scandinavian Cash Generating Units (CGU's). There have been no
other changes to the CGU's recognised by the Group.
The appropriateness of key assumptions and operational plans
underpinning the 2020 year end value in use calculations have been
reviewed, including the potential impact of the acquisition on cash
flow projections. Lower forecast profits are expected in the UK due
to transitional costs associated with the acquisition along with
increased contingency to reflect increased uncertainty in the
forecast following the acquisition. This change in cashflow
projections did not significantly impact headroom. Overall, no
material adverse changes have been identified.
Following this review, no impairments of Goodwill were required
as at 30 June 2021 with recoverable values sufficiently exceeding
carrying values. For more information on the headroom for the
remaining CGU's and sensitivities relating to the key assumptions
refer to note 23 of the 2020 Annual Report and Accounts.
The acquisition has resulted in a strategic reassessment of
programme plans for certain UK internally generated software
assets. Impairment indicators were identified for assets not yet
available for use for which there are no future economic benefits
expected. As a result of this a GBP61m write down has been
recognised in Underwriting and policy acquisition costs.
11. FINANCIAL ASSETS AND FAIR VALUE MEASUREMENTS
Financial assets
30 June 31 December
2021 2020
GBPm GBPm
================================================ ========= =============
Equity securities 126 673
Debt securities 4,630 10,724
================================================= ========= =============
Financial assets measured at fair value 4,756 11,397
Loans and receivables 282 429
================================================= ========= =============
Total financial assets 5,038 11,826
================================================= ========= =============
The disposal of the Group's operations in Scandinavia and Canada has
reduced financial assets by GBP6,603m in the period. Refer to note
5 for further detail.
IFRS 9 'Financial Instruments'
The Group qualifies for temporary exemption from applying IFRS 9
'Financial Instruments' on the grounds that it has not previously
applied any version of IFRS 9 and its activities are predominantly
connected with insurance, with the carrying amount of its
liabilities within the scope of IFRS 4 and debt instruments
included within regulatory capital being greater than 90% of the
total carrying amount of all its liabilities at 31 December 2015
and with no subsequent change in its activities.
The fair value at 30 June 2021 and change during the period of
financial assets that are held to collect cash flows on specified
dates that are solely for payment of principal and interest (SPPI)
and are not held for trading as defined under IFRS 9, nor are
managed or evaluated on a fair value basis, is set out below,
together with the same information for other financial assets:
As at 30 June 2021
SPPI financial Other financial
assets assets Total
GBPm GBPm GBPm
====================================== =============== ================ ======
Available for sale equity securities - 126 126
Available for sale debt securities 4,353 277 4,630
Loans and receivables 282 - 282
Derivative assets held for trading - 59 59
======================================= =============== ================ ======
Total 4,635 462 5,097
======================================= =============== ================ ======
As at 31 December 2020
SPPI financial Other financial
assets assets Total
GBPm GBPm GBPm
====================================== =============== ================ =======
Available for sale equity securities - 673 673
Available for sale debt securities 10,302 410 10,712
Debt securities at FVTPL - 12 12
Loans and receivables 429 - 429
Derivative assets held for trading - 85 85
======================================= =============== ================ =======
Total 10,731 1,180 11,911
======================================= =============== ================ =======
The fair value gains/losses of SPPI financial assets and other
financial assets during the six months to 30 June 2021 are GBP356m
losses (12 months to 31 December 2020: GBP144m gains) and GBP36m
gains (12 months to 31 December 2020: GBP80m losses)
respectively.
When IFRS 9 is adopted by the Group (currently expected to be
2023) an expected credit loss provision will be recognised
replacing the incurred credit loss provision under IAS 39, the
impact of which will be determined by the financial instruments
held at that time.
Companies within the Group that are applying IFRS 9 and disclose
relevant information in their own published financial statements in
addition to that already included in these condensed consolidated
financial statements are indicated in Appendix B of the 2020 Annual
Report and Accounts .
Fair value measurements recognised in the statement of financial
position
The following table provides an analysis of financial
instruments and other items that are measured subsequent to initial
recognition at fair value as well as financial liabilities not
measured at fair value, grouped into Levels 1 to 3. The table does
not include financial assets and liabilities not measured at fair
value if the carrying value is a reasonable approximation of fair
value.
Fair value hierarchy
30 June 2021
==================================
Level Level Level
1 2 3 Total
GBPm GBPm GBPm GBPm
=============================================== ======== ======= ====== =======
Group occupied property - land and buildings - - 18 18
Investment property - - 305 305
Available for sale financial assets:
Equity securities - 1 125 126
Debt securities 1,405 2,943 282 4,630
1,405 2,944 730 5,079
Derivative assets:
At fair value through the income statement - 59 - 59
Designated as hedging instruments - 2 - 2
=============================================== ======== ======= ====== =======
Total assets measured at fair value 1,405 3,005 730 5,140
================================================ ======== ======= ====== =======
Derivative liabilities:
At fair value through the income statement - 59 - 59
Designated as hedging instruments - 19 - 19
=============================================== ======== ======= ====== =======
Total liabilities measured at fair value - 78 - 78
================================================ ======== ======= ====== =======
Issued debt - 466 - 466
================================================ ======== ======= ====== =======
Total liabilities not measured at fair
value - 466 - 466
================================================ ======== ======= ====== =======
Fair value hierarchy
31 December 2020
===================================
Level Level Level
1 2 3 Total
GBPm GBPm GBPm GBPm
============================================== ======= ======= ====== =========
Group occupied property - land and buildings - - 19 19
Investment property - - 285 285
Available for sale financial assets:
Equity securities 185 179 309 673
Debt securities 2,416 7,874 422 10,712
Financial assets at fair value through
the income statement:
Debt securities - - 12 12
2,601 8,053 1,047 11,701
Derivative assets:
At fair value through the
income statement - 85 - 85
Designated as hedging instruments - 40 - 40
======= ======
Total assets measured at fair
value 2,601 8,178 1,047 11,826
Derivative liabilities:
At fair value through the
income statement - 97 - 97
Designated as hedging instruments - 48 - 48
======= ======
Total liabilities measured
at fair value - 145 - 145
======= ======
Issued debt - 837 - 837
======= ======
Total liabilities not measured
at fair value - 837 - 837
======= ======
Estimation of the fair value of assets and liabilities
Fair value is used to value a number of assets within the
statement of financial position and represents their market value
at the reporting date.
Cash and cash equivalents, loans and receivables, other assets
and other liabilities
For cash and cash equivalents, loans and receivables, commercial
paper, other assets, liabilities and accruals, their carrying
amounts are considered to be as approximate fair values.
Group occupied property and investment property
Group occupied properties are valued annually on a vacant
possession basis using third party valuers. Investment properties
are valued, at least annually, at their highest and best use.
The fair value of property has been determined by external,
independent valuers, having appropriate recognised professional
qualifications and recent experience in the location and category
of the property being valued.
The valuations of Group occupied properties and investment
properties are based on the comparative method of valuation with
reference to sales of other comparable buildings. Fair value is
then determined based on the locational qualities and physical
building characteristics (principally condition, size,
specification and layout) together with factoring in the
occupational lease terms and tenant covenant strength as
appropriate.
Derivative financial instruments
Derivative financial instruments are financial contracts whose
fair value is determined on a market basis by reference to
underlying interest rate, foreign exchange rate, equity or
commodity instrument or indices.
Issued debt
The fair value measurement of the Group's issued debt
instruments, with the exception of the subordinated guaranteed US$
bonds, are based on pricing obtained from a range of financial
intermediaries who base their valuations on recent transactions of
the Group's issued debt instruments and other observable market
inputs such as applicable risk free rate and appropriate credit
risk spreads.
The fair value measurement of the subordinated guaranteed US$
bonds is also obtained from an indicative valuation based on the
applicable risk-free rate and appropriate credit risk spread.
Fair value hierarchy
Fair value for all assets and liabilities, which are either
measured or disclosed, is determined based on available information
and categorised according to a three-level fair value hierarchy as
detailed below:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
-- Level 2 fair value measurements are those derived from data
other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
-- Level 3 fair value measurements are those derived from
valuation techniques that include significant inputs for the asset
or liability valuation that are not based on observable market data
(unobservable inputs).
A financial instrument is regarded as quoted in an active market
(level 1) if quoted prices for that financial instrument are
readily and regularly available from an exchange, dealer, broker,
industry group, pricing service or regulatory agency, and those
prices represent actual and regularly occurring market transactions
on an arm's length basis.
For level 1 and level 2 investments, the Group uses prices
received from external providers who calculate these prices from
quotes available at the reporting date for the particular
investment being valued. For investments that are actively traded,
the Group determines whether the prices meet the criteria for
classification as a level 1 valuation. The price provided is
classified as a level 1 valuation when it represents the price at
which the investment traded at the reporting date, taking into
account the frequency and volume of trading of the individual
investment, together with the spread of prices that are quoted at
the reporting date for such trades. Typically, investments in
frequently traded government debt would meet the criteria for
classification in the level 1 category. Where the prices provided
do not meet the criteria for classification in the level 1
category, the prices are classified in the level 2 category.
In certain circumstances, the Group does not receive pricing
information from an external provider for its financial
investments. In such circumstances the Group calculates fair value,
which may use input parameters that are not based on observable
market data. Unobservable inputs are based on assumptions that are
neither supported by prices from observable current market
transactions for the same instrument nor based on available market
data. In these cases, judgement is required to establish fair
values. Changes in assumptions about these factors could affect the
reported fair value of financial instruments.
The principal assets classified as Level 3, and the valuation
techniques applied to them, are described below.
Investment property
Investment property valuations are carried out in accordance
with the latest edition of the Valuation Standards published by the
Royal Institution of Chartered Surveyors (RICS) and are undertaken
by independent RICS registered valuers. Valuations are based on the
comparative method with reference to sales of other comparable
buildings and take into account the nature, location and condition
of the specific property together with factoring in the
occupational lease terms and tenant covenant strength as
appropriate. The valuations also include an income approach using
discounted future cash flows, which uses unobservable inputs, such
as discount rates, rental values, rental growth rates, vacancy
rates and void or rent free periods expected after the end of each
lease. The valuations at 30 June 2021 reflects equivalent yield
ranges between 4.05% and 11.35% (31 December 2020: 4.15% and
15.41%).
Private fund structures
Loan funds are principally valued at the proportion of the
Group's holding of the Net Asset Value (NAV) reported by the
investment vehicle. Several procedures are employed to assess the
reasonableness of the NAV reported by the fund, including obtaining
and reviewing periodic and audited financial statements and
estimating fair value based on a discounted cash flow model that
adds spreads for credit and illiquidity to a risk-free discount
rate. Discount rates employed in the model at 30 June 2021 range
from 0.2% to 4.6% (31 December 2020: 0.2% to 8.7%). If necessary,
the Group will adjust the fund's reported NAV to the discounted
cash flow valuation where this more appropriately represents the
fair value of its interest in the investment.
A reconciliation of Level 3 fair value measurements of financial
assets is shown in the table below. There are no Level 3 financial
liabilities.
Available for
sale investments
Debt securities
at fair
value
through Group
Equity the income Investment occupied
securities Debt securities statement property property Total
GBPm GBPm GBPm GBPm GBPm GBPm
Level 3 financial assets
at 1 January 2020 279 375 15 300 19 988
Total gains/(losses) recognised
in:
Income statement - 7 (3) (8) - (4)
Other comprehensive income (5) 1 - - - (4)
Purchases 49 153 - 19 - 221
Disposals (27) (113) - (29) - (169)
Exchange adjustment 13 (1) - - - 12
Transfer from right-of-use
assets - - - 3 - 3
Level 3 financial assets
at 1 January 2021 309 422 12 285 19 1,047
Total gains/(losses) recognised
in:
Income statement (2) (6) (12) (1) - (21)
Other comprehensive income - (4) - - - (4)
Purchases 19 128 - 26 - 173
Disposals(1) (192) (256) - (5) (1) (454)
Exchange adjustment (9) (2) - - - (11)
Level 3 financial assets
at 30 June 2021 125 282 - 305 18 730
(1) AFS equity and AFS debt securities disposals includes GBP160m
and GBP218m respectively in relation to the disposals of Codan A/S
and Roins Holdings Limited.
Unrealised losses of GBP12m (12 months to 31 December 2020:
GBP3m losses) attributable to FVTPL debt securities recognised in
the condensed consolidated income statement relate to an asset that
is still held at the end of the period but has been fully written
down.
The following table shows the level 3 available for sale
financial assets, investment properties and Group occupied property
carried at fair value as at the balance sheet date, the main
assumptions used in the valuation of these instruments and
reasonably possible decreases in fair value based on reasonably
possible alternative assumptions.
Reasonably possible alternative
assumptions
31 December
30 June 2021 2020
==================
Current Decrease Current Decrease
fair in fair fair in fair
value value value value
Available for sale financial Main assumptions
assets and property GBPm GBPm GBPm GBPm
======== ======== ======= ========
Group occupied property -
land and buildings (1) Property valuation 18 (2) 19 (2)
Cash flows; discount
Investment properties (1) rate 305 (28) 285 (25)
Level 3 available for sale
financial assets:
Cash flows; discount
Equity securities (2) rate 125 (2) 309 (4)
Cash flows; discount
Debt securities (2) rate 282 (6) 422 (7)
======== ========
Total 730 (38) 1,035 (38)
======== ========
(1) The Group's property portfolio (including the Group occupied
properties) is almost exclusively located in the UK. Reasonably
possible alternative valuations have been determined using an
increase of 50bps in the discount rate used in the valuation (31
December 2020: 50bps). This has been considered in light of the
current level of uncertainty and a change of 50bps is considered a
reasonably possible scenario.
(2) The Group's investments in financial assets classified at
level 3 in the hierarchy are primarily investments in various
private fund structures investing in debt instruments where the
valuation includes estimates of the credit spreads on the
underlying holdings. The estimates of the credit spread are based
upon market observable credit spreads for what are considered to be
assets with similar credit risk. Reasonably possible alternative
valuations have been determined using an increase of 50bps in the
credit spread used in the valuation (31 December 2020: 50bps). This
has been considered in light of the current level of uncertainty
and a change of 50bps is considered a reasonably possible
scenario.
12. deferred tax
Asset Liability
30 June 31 December 30 June 31 December
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
======= =======
Deferred tax position 149 199 - 105
The GBP105m reduction in deferred tax liabilities in the period
is due to the disposal of the Canadian and Scandinavian sub-groups
as part of the restructuring following the acquisition. The
deferred tax liabilities were GBP79m at the date of disposal (note
5).
Of the GBP149m (31 December 2020: GBP199m) deferred tax asset
recognised by the Group, GBP147m (31 December 2020: GBP181m)
relates to the UK. The GBP50m decrease in deferred tax assets
during the period is predominantly due to the de-recognition of
deferred tax assets in the UK (GBP34m) (offset partly by the impact
of the UK corporation tax rate increase) and the disposals of
Canada and Scandinavia (GBP18m) (note 5) as part of the
restructuring following the acquisition.
Deferred tax assets have been recognised on the basis that
management consider it probable that future taxable profits will be
available against which these deferred tax assets can be utilised.
The evidence for the future taxable profits is a seven-year
forecast based on the three-year operational plans prepared by the
relevant businesses and a further four years of extrapolation.
Following the acquisition, the forecasts have been updated to
reflect the latest view of taxable profits. T he UK forecast
taxable profits are lower due to the combined impact of the
following changes in the forecasts related to:
-- Internal and external debt arrangements
-- Internal and external reinsurance arrangements
-- Investment portfolio rebalancing
-- Transitional costs associated with the acquisition
-- One-off transaction costs
In addition, the level of contingency included within the profit
forecasts for the purposes of determining deferred tax asset
recognition has been increased from GBP25m per annum (GBP175m in
total across the 7-year forecast period) to GBP411m across the
7-year period. The increased contingency reflects the increased
uncertainty in the forecast following the acquisition.
The valuation of the deferred tax asset reflects the impact of
the UK corporation tax rate rise from 19% to 25 %, which was
substantively enacted in May 2021.
The movement in the UK deferred tax assets from the above
changes is summarised below:
GBPm
Deferred tax asset as at 31 December
2020 181
Impact of change in UK tax rate 49
Impact of lower profit forecast (54)
Impact of increased DTA contingency (29)
Deferred tax asset as at 30 June 2021 147
The value of the deferred tax asset is sensitive to assumptions in
respect of forecast profits. The impact of downward movements in key
assumptions on the value of the UK deferred tax asset is summarised
below. The relationship between the UK deferred tax asset and the sensitivities
below is not always linear. Therefore, the cumulative impact on the
deferred tax asset of combined sensitivities or longer extrapolations
based on the table below will be indicative only.
30 June 31 December
2021 2020
GBPm GBPm
=========
1% increase in combined operating ratio(1)
across all 7 years (23) (16)
1 year reduction in the forecast modelling
period (20) (18)
50 basis points decrease in bond yields (9) (6)
1% decrease in annual premium growth (1) (1)
=========
(1) Combined operating ratio is an Alternative Performance Measure.
A 'Jargon buster' can be found on pages 181 to 183 of the RSA Insurance
Group plc Annual Report and Accounts 2020.
13. CASH AND CASH EQUIVALENTS
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
Cash and cash equivalents and bank overdrafts
(as reported within the condensed consolidated
statement of cash flows) 1,101 1,083 921
Add: Bank overdrafts reported in Borrowings 13 11 7
Total cash and cash equivalents (as reported
within the condensed consolidated statement
of financial position) 1,114 1,094 928
No cash and cash equivalents are restricted for operational RSA Group
use at 30 June 2021 (31 December 2020: GBP27m restricted cash held
in Canada).
14. share capital
The issued share capital of the Parent Company is fully paid and
consists of two classes: Ordinary Shares with a nominal value of
GBP1 each and Preference Shares with a nominal value of GBP1 each.
The issued share capital at 30 June 2021 is:
30 June 31 December
2021 2020
GBPm GBPm
=======
Issued and fully paid
1,269,414,568 Ordinary Shares of GBP1 each (31 December
2020: 1,035,267,610 Ordinary Shares of GBP1 each) 1,269 1,035
125,000,000 Preference Shares of GBP1 each (31 December
2020: 125,000,000 Preference Shares of GBP1 each) 125 125
1,394 1,160
The movement of Ordinary Shares in issue, their nominal value and the
associated share premiums during 2021 are as follows:
Nominal Share
value premium
Number of
shares GBPm GBPm
At 1 January 2020 1,031,645,294 1,032 1,090
Issued in respect of employee share options
and employee share awards 3,622,316 3 5
At 1 January 2021 1,035,267,610 1,035 1,095
Issued in respect of employee share options
and employee share awards(1) 13,146,958 13 7
Capital injection from Regent Bidco Limited(1) 1,021,000,000 1,021 -
Capital reduction (800,000,000) (800) (1,095)
At 30 June 2021 1,269,414,568 1,269 7
(1) The consolidated statement of changes in equity shows GBP1,023m
shares issued for cash, which includes GBP1,021m capital injection
from Regent Bidco Limited and GBP2m in respect of employee share options
and employee share awards, and GBP11m share-based payments, which also
relates to shares issued in respect of employee share options and employee
share awards.
Shares issued in respect of employee share options and employee share
awards includes 9,391,504 accelerated share awards under the long-term
incentive plan (Performance Share Plan (PSP)) and 1,737,667 accelerated
shares issued under the Group employee share option plan ahead of the
acquisition of the Group.
15. ISSUED DEBT
2021 2020
GBPm GBPm
Subordinated guaranteed US$ bonds 6 6
Guaranteed subordinated notes due 2045 397 397
Total loan capital 403 403
Senior notes due 2024 - 348
Total issued debt 403 751
Loan capital
The subordinated guaranteed US$ bonds were issued in 1999 and
have a nominal value of $9m and a redemption date of 15 October
2029. The rate of interest payable on the bonds is 8.95%.
The dated guaranteed subordinated notes were issued on 10
October 2014 at a fixed rate of 5.125%. The nominal GBP400m bonds
have a redemption date of 10 October 2045. The Group has the right
to repay the notes on specific dates from 10 October 2025. If the
bonds are not repaid on that date, the applicable rate of interest
would be reset at a rate of 3.852% plus the appropriate benchmark
gilt for a further five year period.
The bonds and the notes are contractually subordinated to all
other creditors of the Group such that in the event of a winding up
or of bankruptcy, they are able to be repaid only after the claims
of all other creditors have been met.
The Group has the option to defer interest payments on the bonds
and notes, but has to date not exercised this right.
Senior notes
The nominal GBP350m senior notes, issued on 28 August 2019, were
repaid in full on 16 June 2021. Make-whole and amortisation costs
of c.GBP16m were incurred, and are presented in finance costs in
the consolidated income statement.
All issued debt
There have been no defaults on any bonds or notes during the
period.
16. INSURANCE CONTRACT LIABILITIES
Estimation techniques and uncertainties
Details of the Group accounting policies in respect of insurance
contract liabilities can be found in note 39 on page 150 of the
2020 Annual Report and Accounts.
The 2020 year-end Annual Report and Accounts included details on
all the significant accounting judgements made in the valuation of
insurance contract liabilities, with particular focus on the
increased level of estimation uncertainty due to the impact of the
COVID-19 pandemic. The notes explained how various items such as
direct COVID-19 claims, reinsurance, the legal and claims
environments, changing frequency and severity, and distorted claims
development patterns all contributed to the heightened uncertainty
at that time.
The heightened uncertainty arising from COVID-19 persists and is
not expected to subside in the short-term. The Group increased the
COVID-19 net actuarial indication by approximately GBP30m during
the six months to 30 June 2021 to true-up the estimate to reflect
the latest experience and judgements.
Whilst claims experiences and development trends have continued
to mature during 2021, the Group continues to monitor all key
assumptions and sources of estimation uncertainty. Evolving
experience, key assumptions and estimation techniques are reviewed
regularly. As a result of management's review and in aligning
practices with IFC, then given the current uncertain economic
environment which contributes to the heightened level of estimation
uncertainty, an additional strengthening of circa GBP70m was
recognised in June 2021 in best estimate provisions on top of that
noted above for COVID-19, against some of the key uncertainties
identified in the reserve review process. The method for the
reserve margin calculation has also been changed in June 2021 to
align with the method of calculation of RSA's ultimate parent
company Intact Financial Corporation. Applying this method and the
continued heightened uncertainty has resulted in an increased level
of reserve margin.
The relevant information provided in note 39 in the 2020 Annual
Report and Accounts still applies as at 30 June 2021.
Sensitivities
Sensitivities in the table below show the impact on the net
claims reserves of changes to key assumptions in relation to
reserving risk and underwriting and claims risk.
30 June 30 June
2021 2020
Impact on net claims reserves GBPm GBPm
Current year attritional loss ratios frequency or
severity assumptions +5% 25-35 75-80
Current year large loss ratios frequency or severity
assumptions +5% 5-15 15-20
Inflation being 1% higher than expected for the next
2 years (excluding annuities) 50-60 100-120
The decrease in the sensitivities compared to the prior year is mainly
due to the disposals of the Group's operations in Scandinavia and Canada.
Gross insurance contract liabilities and the reinsurers' share
of insurance contract liabilities
The gross insurance contract liabilities and the reinsurers'
(RI) share of insurance contract liabilities presented in the
condensed consolidated statement of financial position comprise the
following:
As at 30 June 2021
Gross RI Net
GBPm GBPm GBPm
Provision for unearned premiums 1,985 (812) 1,173
Provision for losses and loss adjustment expenses 5,215 (1,634) 3,581
Total insurance contract liabilities 7,200 (2,446) 4,754
As at 31 December 2020
Gross RI Net
GBPm GBPm GBPm
Provision for unearned premiums 3,235 (716) 2,519
Provision for losses and loss adjustment expenses 9,379 (1,624) 7,755
Total insurance contract liabilities 12,614 (2,340) 10,274
The disposal of the Group's operations in Scandinavia and Canada has
reduced gross insurance contract liabilities by GBP6,659m and reinsurers'
(RI) share of insurance contract liabilities by GBP(1,073)m. Refer
to note 5 for further detail.
17. RETIREMENT BENEFIT OBLIGATIONS
Defined benefit pension schemes and other post-retirement
benefits
The amounts recognised in the condensed consolidated statement
of financial position are as follows:
30 June 2021 31 December 2020
UK Other Total UK Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
======= ===== ======= ======= ===== =======
Present value of funded obligations (8,377) (73) (8,450) (8,844) (452) (9,296)
Present value of unfunded obligations (7) (8) (15) (6) (99) (105)
Fair value of plan assets 9,017 90 9,107 9,355 500 9,855
Other net surplus remeasurements (224) - (224) (179) - (179)
======= ===== ======= ======= =====
Net IAS 19 surplus/(deficits) in the
schemes 409 9 418 326 (51) 275
Defined benefit pension schemes 409 17 426 326 - 326
Other post-retirement benefits - (8) (8) - (51) (51)
======= ===== ======= ======= ===== =======
Schemes in surplus 416 17 433 333 46 379
Schemes in deficit (7) (8) (15) (7) (97) (104)
======= ===== ======= ======= ===== =======
Movement during the period:
30 June 2021
Present Fair value Other net
value of plan surplus
of obligations assets remeasurements Net surplus
GBPm GBPm GBPm GBPm
At 1 January (9,401) 9,855 (179) 275
Current service costs (2) - - (2)
Past service costs (1) - - (1)
Interest (expense)/income (66) 70 - 4
Administration costs - (3) - (3)
Total (expenses)/income recognised
in income statement (69) 67 - (2)
Return on scheme assets less amounts
in interest income - (414) - (414)
Effect of changes in financial assumptions 432 - - 432
Experience losses (26) - - (26)
Investment expenses - (6) - (6)
Other net surplus remeasurements - - (45) (45)
Remeasurements recognised in other
comprehensive income 406 (420) (45) (59)
Employer contribution - 162 - 162
Benefit payments 176 (176) - -
Disposal of subsidiary (note 5) 421 (378) - 43
Exchange adjustment 2 (3) - (1)
At 30 June (8,465) 9,107 (224) 418
Deferred tax (1)
IAS 19 net surplus net of deferred
tax 417
Employer contributions include GBP150m of deficit funding paid in the
six months to 30 June 2021. This includes an additional GBP75m of deficit
funding paid following the acquisition, on top of the GBP75m expected
deficit funding contributions disclosed in the 2020 Annual Report and
Accounts.
GBP43m disposal of subsidiary relates to the sale of the Group's Canadian
operations and is included in the net assets disposed of in note 5
as GBP36m within other debtors and other assets and GBP79m within provisions.
31 December 2020
Present Fair value Other net
value of plan surplus
of obligations assets remeasurements Net surplus
GBPm GBPm GBPm GBPm
At 1 January (8,681) 9,016 (141) 194
Current service costs (6) - - (6)
Past service costs (1) - - (1)
Interest (expense)/income (178) 186 - 8
Administration costs - (7) - (7)
Gains on settlements/curtailments 1 - - 1
Total (expenses)/income recognised
in income statement (184) 179 - (5)
Return on scheme assets less amounts
in interest income - 950 - 950
Effect of changes in financial assumptions (1,000) - - (1,000)
Effect of changes in demographic assumptions 18 - - 18
Experience gains 72 - - 72
Investment expenses - (10) - (10)
Other net surplus remeasurements - - (38) (38)
Remeasurements recognised in other
comprehensive income (910) 940 (38) (8)
Employer contribution - 95 - 95
Benefit payments 376 (376) - -
Exchange adjustment (2) 1 - (1)
At 31 December (9,401) 9,855 (179) 275
Deferred tax 15
IAS 19 net surplus net of deferred
tax 290
18. Related party Transactions
Transactions with parent company
The Group's parent company is Regent Bidco Limited, a wholly
owned subsidiary of Intact Financial Corporation, the ultimate
controlling party.
During the six months to 30 June 2021, the following related
party transactions have taken place with Regent Bidco Limited:
-- The Group received a capital injection from Regent Bidco Limited of GBP1,021m
-- Ordinary dividends paid to Regent Bidco Limited of GBP6,914m
Other related party transactions
The Group has a reinsurance arrangement with Unifund Assurance
Company (Unifund), a member of the Intact Financial Corporation
Group. Under the terms of the arrangement the insurance risk of
Unifund's business is transferred to the Group. The Group pays a
reinsurance commission in relation to the quota share agreement and
the agreement covers Unifund's existing insurance liabilities and
new written premium for all lines of business at a rate of 60%.
This transaction became a related party transaction on 1 June
following the disposal of Roins Holdings Limited. The outstanding
balances are secured against collateral assets, made up of assets
held in trust and a letter of credit.
The Group also has other reinsurance arrangements (also secured
against collateral assets) and transactions with Roins Holdings
Limited and other entities that are part of the Intact Financial
Corporation Group.
The amounts relating to the above related party transactions
included in the consolidated income statement for the 6 month
period ended 30 June 2021, the consolidated statement of financial
position as at 30 June 2021, and the collateral pledged, are
provided in the table below.
30 June
2021
GBPm
===================
Income 55
Expenses 24
Assets 85
Liabilities 658
Collateral pledged 853
The amounts outstanding are expected to be settled in cash or offset
against other outstanding balances where possible. No provisions have
been made for doubtful debts on any of the amounts owed by related
parties.
19. EVENTS AFTER THE REPORTING PERIOD
On 22 July 2021, it was announced that Motability Operations Ltd
intend to switch to another insurance provider upon completion of
the existing contract with RSA in 18 months' time. The scheme's
Gross Written Premium is approximately GBP500m per annum with 80%
of the risk reinsured back to Motability via a reinsurance captive
arrangement. RSA will continue to insure the Motability fleet until
the end of the contract with no significant impact anticipated in
the 2021 results or financial position.
On 27 July 2021, the Group entered a reinsurance contract
pursuant to which the reinsurer will assume 50% of negative reserve
development with respect to RSA's UK&I claims liabilities for
accident years 2020 and prior. The maximum amount recoverable under
the reinsurance agreement is 50% of GBP400 million and is subject
to certain exclusions and limitations. The purchase of this adverse
development coverage will reduce the potential volatility in the
Group's claims liabilities. The transaction is expected to close in
the third quarter of 2021, subject to relevant regulatory approvals
and satisfaction of various closing conditions.
20. results for THE YEAR 2020
The statutory accounts of RSA Insurance Group Limited for the
year ended 31 December 2020 have been delivered to the Registrar of
Companies. The independent auditor's report on the Group accounts
for the year ended 31 December 2020 is unqualified, does not draw
attention to any matters by way of emphasis and does not include a
statement under section 498(2) or (3) of the Companies Act
2006.
NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
21. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
The reconciliation of net profit before tax to cash flows from
operating activities is as follows:
30 June 30 June
2021 2020
GBPm GBPm
Cash flows from operating activities
Profit for the period before tax 4,308 211
Adjustments for non-cash movements in net profit for
the period
Amortisation of available for sale assets 24 26
Depreciation of tangible assets 21 28
Amortisation and impairment of intangible assets 100 42
Fair value losses on financial assets 1 19
Impairment charge on available for sale financial assets 13 20
Gain on disposal of business (4,390) -
Other non-cash movements 41 (29)
Changes in operating assets/liabilities
Loss and loss adjustment expenses 238 (24)
Unearned premiums 51 41
Movement in working capital 7 (255)
Reclassification of investment income and interest paid (101) (156)
Pension deficit funding (150) (75)
Cash generated from investment of insurance assets
Dividend income 12 16
Interest and other investment income 114 144
Cash flows from operating activities 289 8
APPIX A:
EXCHANGE RATES
6 months 6 months 12 months
Local 31 December
currency/GBP 30 June 2021 30 June 2020 2020
Average Closing Average Closing Average Closing
Canadian Dollar 1.73 1.72 1.72 1.68 1.72 1.74
Danish Krone 8.56 8.66 8.55 8.20 8.39 8.31
Swedish Krona 11.67 11.81 12.21 11.51 11.81 11.22
Euro 1.15 1.16 1.15 1.10 1.13 1.12
US Dollar 1.39 1.38 1.26 1.24 1.28 1.37
APPIX B: ALTERNATIVE PERFORMANCE MEASURES RECONCILIATIONS
IFRS reconciliation to management P&L
For the 6 month period ended 30 June 2021
Loss
before
Business tax from
Underwriting Investment Central operating Other continuing
result result costs result charges operations
GBPm IFRS Management
Continuing
operations
Income
Gross written
premiums 2,327 2,327
Less:
reinsurance
written
premiums (610) (610)
Net written
premiums 1,717 1,717
Change in the
gross
provision
for unearned
premiums (155) (155)
Change in
provision for
unearned
reinsurance
premiums 127 127
Change in
provision for
net unearned
premiums (28) (28)
Net earned
premiums 1,689 1,689
Investment
income 79 79
Realised losses
on investments (7) (7)
Unrealised
losses,
impairments
and foreign
exchange (14) (14)
Net investment
return 58
Other insurance
income 40 40
Pension net
interest and
administration
costs 1 1
Other operating
income 41
Total income 1,788
Expenses
Gross claims
incurred (1,657) (1,657)
Less: claims
recoveries
from
reinsurers 430 430
Net claims (1,227) (1,227)
Underwriting and
policy
acquisition
costs (645) (645)
Unwind of
discount (3) (3)
Investment
expenses (19) (19)
Central
expenses (6) (6)
Foreign
exchange
losses (2) (2)
Transaction
costs (104) (104)
Other operating
expenses (131)
(2,006)
Interest costs (14) (14)
Premiums on
debt buyback (16) (16)
Interest on
lease
liabilities (1) (1)
Finance costs (31) (31)
Loss/(profit)
before tax
from continuing
operations (249) (143) 57 (6) (92) (157) (249)
Income tax
expense (20)
Loss after tax
from continuing
operations (269)
Profit from
discontinued
operations 4,528
Profit for the
period 4,259
IFRS reconciliation to management P&L
For the 6 month period ended 30 June 2020
Profit
before
Business tax from
Underwriting Investment Central operating Other continuing
result result costs result charges operations
GBPm IFRS Management
Continuing
operations
Income
Gross written
premiums 1,979 1,979
Less:
reinsurance
written
premiums (533) (533)
Net written
premiums 1,446 1,446
Change in the
gross
provision
for unearned
premiums 33 33
Change in
provision for
unearned
reinsurance
premiums 43 43
Change in
provision for
net unearned
premiums 76 76
Net earned
premiums 1,522 1,522
Investment
income 67 67
Realised losses
on investments (4) (4)
Unrealised
losses,
impairments
and foreign
exchange (24) (24)
Net investment
return 39
Other insurance
income 45 45
Pension net
interest and
administration
costs 2 2
Other operating
income 47
Total income 1,608
Expenses
Gross claims
incurred (1,245) (1,245)
Less: claims
recoveries
from
reinsurers 268 268
Net claims (977) (977)
Underwriting and
policy
acquisition
costs (576) (576)
Unwind of
discount (3) (3)
Investment
expenses (4) (4)
Central
expenses (3) (3)
Amortisation of
intangibles (1) (1)
Reorganisation
costs (18) (18)
Other operating
expenses (26)
(1,582)
Interest costs (13) (13)
Interest on
lease
liabilities (2) (2)
Finance costs (15) (15)
Profit/(loss)
before tax
from continuing
operations 11 14 60 (3) 71 (60) 11
Income tax
expense (1)
Profit after tax
from continuing
operations 10
Profit from
discontinued
operations 154
Profit for the
period 164
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE
HALF-YEARLY FINANCIAL REPORT
We confirm that to the best of our knowledge:
The condensed set of financial statements has been prepared in
accordance with the UK-adopted IAS 34 'Interim Financial Reporting'
and gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group.
The interim management report includes a fair review of the
information required by:
a) 4.2.7R of the Disclosure Guidance and Transparency Rules
(DTR), being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
b) 4.2.8R of the DTR, being related party transactions that have
taken place in the first six months of the current financial year
and that have materially affected the financial position or
performance of the entity during that period; and any changes in
the related party transactions described in the last annual report
that could do so.
Signed on behalf of the Board
Scott Egan Charlotte Jones
Group Chief Executive Group Chief Financial Officer
3 August 2021 3 August 2021
INDEPENDENT REVIEW REPORT TO RSA INSURANCE GROUP LIMITED
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated statement of
changes in equity, the condensed consolidated statement of
financial position, the condensed consolidated statement of
cashflows and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the latest annual financial statements
of the Group 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 directors are responsible
for preparing the condensed set of financial statements included in
the half-yearly financial report in accordance with IAS 34 as
adopted for use in the UK.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Salim Tharani
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
3 August 2021
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