ANNUAL REPORT AND ACCOUNTS 2012 - RSA, Annual Report ...

FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
1. OPERATING SEGMENTS
From 1 January 2012, the Group is organised into four operating segments, Scandinavia, Canada, UK & Western Europe, and Emerging
Markets with each operating segment managed by a Chief Executive Officer (CEO) who is directly accountable to the Group Chief
Executive and the Board of Directors. Each of the CEOs is also a member of the Group Executive Committee. Scandinavia, Canada and
UK & Western Europe represent the major geographical areas in which the Group operates through established businesses in mature
markets. The UK is the Group’s country of domicile and one of its principal markets. Western Europe includes the operations in Ireland and
Italy. Emerging Markets comprises the Group’s operations in Latin America, Asia and Central and Eastern Europe and the Middle East. All
operations are engaged in providing personal and commercial general insurance services. Central functions include the Group’s internal
reinsurance function and Group Corporate Centre.
Prior to this date, the businesses in Scandinavia, Canada, Ireland and Italy had been reported together as the International region.
Additionally, the investment result now comprises investment income and the unwind of discount. The comparative information
has been restated.
The Group uses the following key measures to assess the performance of its operating segments:
• Net written premiums
• Underwriting result
• Combined operating ratio (COR).
Net written premiums is the key measure of revenue used in internal reporting. Underwriting result and COR are the key internal measures
of profitability of the operating segments. The COR reflects the ratio of claims costs and expenses (including commission) to premiums,
expressed as a percentage.
As described in the Risk Management section of the notes to the financial statements sufficient net assets are maintained by each of the
Group’s subsidiaries to satisfy local regulatory and internal risk based capital requirements. In addition the Group monitors the Group’s total
capital position at all times. Assets and liabilities are reviewed by the chief operating decision maker at the Group level, and as such are not
presented at the operating segment level.
All of these items are measured in accordance with the Group’s accounting policies. Certain items included within the Group’s investment
result are allocated to the operating segments based on economic capital requirements.
Transfers or transactions between segments are entered into under normal commercial terms and conditions that would also be available
to unrelated third parties.
Management basis
The management basis reflects the way management monitor the business. Operating result on a management basis comprises the
underwriting result, the investment result and other activities.
Major components of underwriting result are net earned premiums, other operating income, net claims incurred, acquisition costs and other
underwriting costs.
Other activities comprise administration expenses, ongoing investment in the Group’s operations in Central and Eastern Europe and other
expenses of £89m (2011: £99m), which includes the Group share in the loss after tax of its associates of £6m (2011: £9m). In addition there
are investment expenses and charges of £33m (2011: £34m).
Annual Report and Accounts 2012 | RSA | 103