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ANNUAL REPORT AND ACCOUNTS 2012 - Royal and Sun Alliance

ANNUAL REPORT AND ACCOUNTS 2012 - Royal and Sun Alliance

2012

2012 HIGHLIGHTS Welcome to our Annual Report and Accounts 2012 www.rsagroup.com RSA operations SCANDINAVIA Third largest in Denmark and Sweden and growing business in Norway Leading positions in Renewable Energy, Personal Accident and Marine. CANADA Third largest general insurer Second largest affinity writer through Johnson. UK AND WESTERN EUROPE A leading Commercial Lines and a top five Personal Lines insurer in the UK Largest general insurer in Ireland. ABOUT RSA We have a strong and diversified portfolio of businesses combining: Strong operations in the attractive mature markets of Scandinavia and Canada Fast-growing Emerging Markets businesses, with particular strength in Latin America Leading positions in the competitive UK market An Irish business which consistently outperforms the market. EMERGING MARKETS Number one general insurer in Chile Largest private insurer in Uruguay Leading insurer in Argentina and a leading Marine insurer in Brazil. Net written premiums (£m) Combined operating ratio (%) 5% at constant exchange 6,462 6,737 7,455 8,138 8,353 95.4% 94.5 94.6 96.4 94.9 95.4 Net written premium growth (3% growth as reported) 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

INTRODUCTION This Annual Report and Accounts contains ‘forward-looking statements’ with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition, performance, results, strategic initiatives and objectives. For further details, reference should be made to the ‘important disclaimer’ on the inside back cover. Pages 8 to 33 constitute the business review of RSA and are incorporated by reference into the Directors’ and corporate governance report set out on pages 40 to 54. The Directors’ and corporate governance report has been drawn up and presented in accordance with and in reliance upon applicable English company law and the liabilities of the Directors in connection with that report shall be subject to the limitations and restrictions provided by such law. CONTENTS Introduction 2 RSA at a glance 4 What we do Business review 8 Chairman’s Statement 10 Group Chief Executive’s review 14 Financial review 18 Scandinavia business review 20 Canada business review 22 UK and Western Europe business review 24 Emerging Markets business review 26 Risk review 30 Corporate responsibility EMERGING MARKETS Number one general insurer in the Baltics A leading Direct writer in Poland and Russia A leading international insurer in the Middle East and number one in Oman In Asia we have Commercial lines hubs in Hong Kong, Singapore and mainland China We have associates in India and Thailand. OPERATING HIGHLIGHTS Net written premiums up 5% at constant exchange to £8.4bn Underwriting result flat at £375m after negative impact from UK adverse weather and Italian earthquakes in first half Investment income of £515m impacted by the continued low yield environment Emerging Markets now represents 10% of insurance result Capital position remains strong with an IGD surplus of £1.2bn In 2013 we expect to deliver strong premium growth, a COR of better than 95%, around £470m of investment income and return on equity of 10-12%. Corporate governance 36 Board of Directors 38 Executive team 40 Directors’ and corporate governance report 55 Directors’ Remuneration report Financial statements 74 Directors’ responsibilities 75 Independent auditor’s report to the members of RSA Insurance Group plc 76 Consolidated income statement 77 Consolidated statement of comprehensive income 77 Consolidated statement of changes in equity 78 Consolidated statement of financial position 79 Consolidated statement of cashflows 80 Significant accounting policies 88 Estimation techniques, risks, uncertainties and contingencies 92 Risk management 103 Notes to the financial statements 137 Independent auditor’s report to the members of RSA Insurance Group plc 138 Parent Company statement of comprehensive income 138 Parent Company statement of changes in equity 139 Parent Company statement of financial position 140 Parent Company statement of cashflows 141 Notes to the separate financial statements Other information 148 Shareholder information 150 Financial calendar 151 Jargon buster Underlying return on average equity (%) 16.4 13.4 9.9 11.6 10.1 Dividend for the year (p) 10.1% 7.31p 7.71 8.25 8.82 9.16 7.31 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Annual Report and Accounts 2012 | RSA | 1

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