RSA Insurance Group Limited
Consolidated financial statements for the year ended 31 December 2024
1
Strategic report
for the year ended 31 December 2024
In accordance with the Companies Act 2006, the Directors present their Strategic Report for the year ended 31 December 2024.
RSA Insurance Group Limited (the Company) is incorporated and domiciled in England and Wales. The Company's immediate
parent company is 2283485 Alberta Limited. The Company's ultimate parent company and controlling party is Intact Financial
Corporation (IFC).
RSA Insurance Group Limited and its subsidiaries operate in the UK, Ireland and Continental Europe (known as the Group or
RSA).
Several of the Group’s subsidiaries are regulated by the Financial Conduct Authority and/or the Prudential Regulation Authority.
The principal activity of the Group is the transaction of insurance and related financial services.
In the UK, RSA currently offers predominately commercial lines insurance including specialty commercial lines insurance, as
well as personal property and pet insurance, but is in the process of repositioning to become a leading UK commercial and
specialty lines insurer.
RSA entered into an agreement to acquire the commercial lines broker business of Direct Line Insurance Group on 6
September 2023 (the DLG acquisition), increasing its market share in the domestic commercial lines market. Commercial lines
in the UK are now offered through the RSA, NIG and Farmweb brands via brokers and delegated brokers. The NIG and
Farmweb brands were acquired through the DLG acquisition. RSA is also a specialist insurer largely in the London Market
distributing through brokers under the RSA brand. The operational transfer was completed on 1 May 2024. The transfer of
policy renewals started during June 2024 and new business written by the Group started in July 2024.
In 2023, the Group made the decision to exit the UK Personal lines market (Motor, Home and Pet), including the announcement
of the sale of its direct Home and Pet operations to Admiral Group plc (Admiral), which closed on 31 March 2024, and its
decision to transfer the Home and Pet partnerships to other parties or to allow them to expire over time.
In Ireland, RSA holds a top six position in the multi-line insurance market, distributing through 123.ie (a direct-to-consumer
Personal lines brand), affinity partnerships and brokers. In addition, RSA is Ireland’s largest commercial wind energy insurer.
In Europe, RSA operates within France, Belgium, Netherlands and Spain as a commercial lines insurer distributing under the
RSA brand via brokers.
RSA also provides reinsurance to other companies within the IFC group and has quota share arrangements with Unifund
Assurance Company (Unifund) and Belair Insurance Company Inc. (Belair) under which insurance risk for a proportion of the
business of those companies is transferred to the Group.
The Belair arrangement was entered into on 1 January 2024.
Further
Our business model
a. Products that protect our customers:
Our customers are our business. We strive to address their changing needs and continually improve our service.
b. Effective product distribution:
We need to reach our target customers effectively and efficiently to continue to develop as a business. Our products are
distributed directly to customers, through brokers and affinity partnerships.
c. Understanding risk to price correctly:
To help ensure we offer the right products, at the right price on the right terms, we work hard to increase our understanding of
our customers’ risks and their evolving needs.
d. Proactively managing claims:
We aim to settle claims quickly and smoothly, delivering good outcomes for our customers.
Our strategy
Our ambition is to build on RSA’s strengths to deliver a consistently outperforming underwriting result. We have six key areas of
strategic focus to achieve outperformance:
a. Leading customer experiences
: Customers are at the heart of everything we do. We aim for continuous improvement of
experiences and outcomes.
b. Expand broker distribution
:
Through strengthening and deepening our relationships with brokers
.
c. Optimise underwriting for outperformance:
With market leading pricing, underwriting and claims capability.
d. Responsive and agile technology and operations:
By simplifying business channels and processes to improve our efficiency.
e. Be a best employer
: People are at the heart of our organisation, and of our success.
We aim to be a best employer and for
our employees and leaders to be representative of the communities we serve.
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f. Look after tomorrow
: We seek to be recognised as leaders in building resilient communities and delivering net zero.
Following RSA’s withdrawal from UK Personal Lines markets and acquisition of DLG’s NIG & Farmweb operations, focus has
shifted to strengthening our position in the UK Commercial and Specialty markets which will be achieved through the execution
of our key areas of strategic focus.
We will also continue to build the customer proposition and grow our European businesses through alignment with IFC’s
specialty businesses in North America and the London Market, while continuing to focus on the underwriting excellence which
has enabled the performance improvement of recent year
s
Business review
The Group reports a profit before tax of
£195m
for the year ended 31 December 2024 (2023: £19m
loss
). Net written
premiums
1
for the year ended 31 December 2024 are
£3,987m
(2023: £3,347m) and net assets at 31 December 2024 are
£2,767m
(2023: £2,812m).
Profit before tax of
£195m
consists of
£291m
underwriting result (2023: £77m), investment result of
£251m
(2023: £185m),
£29m
of
central costs (2023: £15m) and
£318m
of other charges (2023: £266m).
The financial results for the year ended 31 December 2024 reflect the process of repositioning the UK business to commercial
and specialty lines insurance and include
£164m
of integration and restructuring costs (2023: £162m). Some of these measures
are alternative performance measures (APMs). Refer to note 36 - Alternative performance measures for a reconciliation of these
measures to the Consolidated income statement, and to Our Key Performance Indicators (KPIs) below for further information.
The DLG acquisition was structured through several agreements including a business transfer agreement related to new
business franchise and certain operations, renewal rights, data, brands, employees, contractors, third party contracts, and
premises. The business transfer agreement resulted in a business combination on 26 October 2023 and the operational transfer
was completed on 1 May 2024. The transfer of policy renewals started during June 2024 and new business written by the Group
started in July 2024.
The sale of direct Home and Pet operations to Admiral closed on 31 March 2024 for an initial cash consideration and gain on
disposal of £85m.
For further information on the DLG acquisition and the exit of UK Personal lines, refer to note 5 - Business combinations and
disposals.
On 12 June 2024, the Group’s Preferred Shareholders were invited to tender their preference shares and, following the
shareholders approval on 16 July 2024 at a General Meeting, all 125,000,000 preferred shares were cancelled for total cash
consideration of £155m.
This transaction is part of the Group’s on-going process of optimising its capital structure. Refer to note
17 - Share capital for further information on this transaction.
On 16 July 2024 at a General Meeting of shareholders, a resolution was passed to implement a reduction of capital in the
Company by cancelling its entire share premium account, resulting in the creation of distributable reserves.
Our KPIs
The Group uses both IFRS and non-IFRS financial measures (APMs) to assess performance, including common insurance
industry metrics. Refer to note 36 - Alternative performance measures for a reconciliation of these measures to the
Consolidated income statement.
The KPIs most relevant to the financial performance of the Group are as follows:
Net written premiums
1
£3,987m
(2023: £3,347m): 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 retains for assuming risk.
The Group targets growth that does not compromise underwriting performance.
Underwriting result
1
£291m
(2023: £77m): Net earned premium and other operating income less net claims and
underwriting and policy acquisition costs. The Group aims to provide competitive pricing to customers that delivers a
sustainable ongoing underwriting profit for the Group.
Profit before tax £195m
(2023: £19m loss): net profit generated before taxes have been deducted. This is a key statutory
measure of the earnings performance of the Group. The Group seeks to maximise its profit before tax.
Non-financial and sustainability KPI statement
Customer:
From a customer perspective, the Group’s customer advocacy ambitions are aligned with the IFC strategic
objectives to have three out of four customers as advocates and four out of five brokers who value the Group’s specialised
expertise.
The Group provides tailored products to meet the evolving needs of our customers by analysing trends and keeping pace with
market developments.
Customers ultimately determine who wins in the market.
A core pillar on the Group’s strategy is focussed on customer
experience and delivering good customer outcomes. This involves improving products and propositions, omni-channel customer
journeys, service levels, and claims experience. The Group’s strategy is also focussed on ensuring products are fit for purpose
and provide fair value to customers, while providing them with the information they need in a way that is easily understood, and
ensuring they receive the full benefits of the services they buy. The Group’s customer policy sets out principles for the business
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to help deliver good customer outcomes and monitor customer outcomes to understand performance and act where needed.
Further information on how we support and engage with our customers is contained in the Section 172 statement on pages 8 to
10.
Climate:
The Group’s ambition is to achieve net zero by 2050 and halve operations’ emissions by 2030. We continue our
strategy towards this with IFC across all our geographies. Further information can be found in the Community and environment
section of our Section 172 statement on page 8 and the Climate-Related Financial Disclosures report on pages 11 to 17.
Employees:
The Group aims to be a best employer and this is tracked primarily through employee engagement scores. Our
employee engagement score was 53% in 2024 and we are targeting 65% in 2025. We also continue to progress the Group’s
Diversity, Equity and Inclusion agenda. Having achieved our Women in Finance target of 34% representation in the
Management Group by 2023 a year early, our representation of 35.2% at the end of 2024 reflects substantial workforce change
from our acquisitions and divestments. We remain committed to the charter and the actions that support it.
Principal risks and uncertainties
The principal risks and uncertainties of the Group are set out in note 9 - Financial risk and note 11 - Insurance risk. Further
detail on how the Group manages its principal risks and uncertainties is set out in the risk management report on pages 4 to 7.
Related party transactions
During the year ended 31 December 2024, the Group received a capital injection of £154m from 2283485 Alberta Limited to
fund the cancellation of the Group’s preferred shares. In addition, the Group paid ordinary interim dividends of £82m and £100m
in July 2024 and November 20024 respectively to 228345 Alberta Limited. Refer to note 29 - Related party transactions for
further information on these transactions.
Future outlook
We continue to improve the performance and resilience of the business. An ongoing focus is to further simplify what we do and
to concentrate on areas of strength, whilst remaining disciplined and prioritising profitable and sustainable growth. We continue
to enhance our pricing and segmentation capabilities. Markets remain competitive but the Group has the right foundation to
target sustainable growth in targeted product lines and customer types.
Events after the reporting period
Effective 1 January 2025, the Group entered into a commutation and release agreement and terminated the retrospective quota
share agreement with Unifund, an insurance company based in Canada that is also a subsidiary of IFC, for an approximate
amount of
£115m
. Under the terms of this agreement, Unifund was ceding 60% of its obligations (net of reinsurance) with
effective dates prior to 1 January 2022 to the Group. Further information in respect of the quota share agreements with IFC
group companies is provided in note 29.2 – Other related party transactions.
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Net written premiums and the underwriting result are Alternative Performance Measures (APMs). Refer to Further information – Jargon buster
and note 36 - Alternative performance measures.
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Managing Risk
Managing risk to deliver for our customers and achieve our goals
The Group’s aim is to deliver consistently for our customers while delivering outperformance.
The Group’s operating plan provides a platform for ensuring the business remains aligned with its strategic goals, including
strong delivery for our customers and sustainable performance with a robust capital base. The Risk function takes an active role
in challenging the business on its development of our plans and delivery against our objectives and those of our customers.
Approach to managing risk and our appetite in 2025
Our risk management and controls frameworks have been maintained to ensure that we continue to identify, assess and
respond to risks across the Group before they adversely impact on our customers or the business. This information, together
with the strength of the Group’s capital position, allows the Board to set a risk strategy and appetite that articulates the level of
risk it is prepared to take in delivering its strategic objectives.
Risk is managed within risk appetite, with the help of key risk indicators and thresholds. For our principal financial risks, the
Group remained within tolerance throughout the year and three-year plans assume this will continue.
From time to time, certain
risks may exceed tolerance and action is taken to manage them back to acceptable positions. This year saw continued progress
in some key risk areas, including customer, underwriting and operational risk (specifically IT systems and information risk).
Risk culture – culture of accountability and openness
We consider the foundation of an effective risk management framework to be the cultivation of a risk culture that promotes
accountability and openness (a willingness to admit mistakes and learn from the past). At RSA, the Board and senior
management team has been instrumental in setting the right ‘tone from the top’, and we gain insights from periodic culture
health reviews and periodic workforce surveys.
A key part of our culture is ensuring our customers are at the heart of all we do. We give considerable attention to ensuring our
customers are treated fairly and our colleagues are passionate about achieving good customer outcomes.
Employment policy
Our people are central to achieving our core purpose, and our culture of support for personal well-being, diversity and equal
opportunity to excel is important to us. Alongside our People and Diversity, Equity & Inclusion Strategies, group-wide
Employment Practices and Speaking-up & Whistleblowing Policies drive our approach on people matters and are reviewed
annually. RSA actively promotes inclusivity, including ensuring there is no less favourable treatment on the grounds of protected
characteristics. The Group gives full and fair consideration to applications for employment from persons with disabilities, where
a person with disability can adequately fulfil the job’s requirements. Where existing employees become disabled, the Group’s
policy, wherever practicable, is to provide continuing employment under normal terms and conditions and make any required
changes to their working environment. The Group provides training, career development and promotion to disabled employees.
Human rights
As a signatory to the United Nations (UN) Global Compact, RSA is committed to aligning its operations with the ten universal
principles that together cover our approach to environment, human rights, labour and anti-corruption.
Our Human Rights Policy sets out our commitment to the Universal Declaration of Human Rights, the International Labour
Organization’s Declaration on Fundamental Principles and Rights at Work, and the UN Guiding Principles on Business and
Human Rights. It sets the standard we expect for our employment practices, the actions of our supply chain, and principles we
apply to our investment and underwriting portfolios.
Anti-bribery and corruption
We do not tolerate bribery and corruption anywhere in our business.
Our Anti-Bribery and Corruption Policy and Personal
Conflicts of Interest, Gifts and Hospitality Policy apply across our business.
Directors, people leaders and others with
supervisory responsibility must ensure that employees, contractors, business partners and suppliers are aware of these policies
and comply with them.
5
Emerging risk – monitoring the future threats
Emerged risk
Cyber (including war and
terrorism related to cyber)
Cyber threats arise on a
frequent basis; however, risk of
hostile states and organised
crime engineering severe
attacks remains elevated.
Terrorism / Civil disorder
Attacks could impact a large
number of our customers,
colleagues and third-party
suppliers.
Political unrest in UK, EU and
US cities may cause property
damage and business
interruption claims due to riots,
exacerbated by misinformation.
Inflation / Recession
The economic climate remains
challenging, with elevated
inflation and low levels of
economic growth. This
combination has continued to
contribute to higher claims and
repair costs, increased liabilities,
reduced consumer spending and
political tensions.
Geopolitical tensions
Ongoing conflicts contribute to
geopolitical tensions, including
political, economic, cyber, trade
disputes, tensions or conflict in
other regions, relations with
China, and EU stability. This
continues to be monitored
against a backdrop of elections.
Near-term risk
Competition and disruption
The combination of high UK inflation and
higher for longer interest rate environment
has put pressure on consumers and
business. The competitive landscape has
changed, with increased competition in large
accounts as a result of increased capacity,
especially in the London Market.
Climate change: transition
Economic effects are starting to materialise.
There remains uncertainty about the scale of
disruption to the economy or asset
valuations as actions are taken to deliver on
net zero targets.
Climate change litigation
There are a growing number of litigation
cases globally relating to climate change
against organisations and governments.
Medium-term risk
Toxic / Chemical products
Risk associated with long-term health
implications from a range of small particles
and hazardous chemicals/substances that
could cause harm when ingested, inhaled, or
come into contact with skin. Impacts include
potential for significant long-tail future liability
claims.
Battery fire / explosion
There has been a notable increase in claims
cases globally due to fires associated with
the improper handling of shipments and
storage of lithium batteries.
Technological innovation
Emerging technologies, including the rapid
adoption of generative artificial intelligence,
are changing both insurance operations and
insurance needs and could affect both
frequency and severity of losses.
Long-term risk
Climate change acceleration
While transition and litigation risks are nearer term, the physical risks will take longer to fully materialise and come with even greater
uncertainty. We are already experiencing volatility in global weather patterns that are being reflected in weather assumptions but there are
substantial risks that these physical effects could accelerate (e.g. wildfires). More information on our approach can be found in the climate-
related financial disclosures section pages 11 to 17.
6
Risk management approach
Risk management system
1. The Board sets business
strategy
The Board sets the business
strategy which is incorporated in
the three-year operational plan.
The Risk function provides robust
challenge of the validity and the
achievability of the plan.
2. The Board sets risk appetite
The Board sets risk appetite,
indicators and tolerances which
aligns to our business strategy.
Underpinning risk appetite and
indicators are set and monitored
by the business.
3. Policies set a framework for
operating within appetite
Our principle-based policy suite
and associated frameworks and
procedures set out the guiderails
to deliver the operational plan
within appetite. Control testing
and monitoring supports risk
management.
4. Monitor appetite and action
tracking
The business is accountable for
managing their own risks and
defining risk response action
plans. Oversight is provided by
Risk and Control Committees
and escalation to the Board is via
the Risk Committee.
8. Own Risk and Solvency
Assessment (ORSA) reported
to Board
Forward-looking assessment of
risks and capital requirements
are combined to inform decision-
making on the strategy, planning
and risk appetite for the next
cycle.
7. Model outputs used in ORSA
The internal model is run
regularly throughout the year to
assess the risks impacting the
Group and determines how much
capital the Group needs to hold
to remain solvent, even after a
major stress event(s). This forms
part of the ORSA process.
6. Model outputs inform
business decision making
Validated model outputs are used
to assess and inform business
decision making, including capital
planning, reinsurance analysis
and risk-weighted returns for
pricing.
5. Risk assessment and update
internal model
Significant changes in risk
assessments are considered by
the Internal Model Governance
Committee and, where
appropriate, the Group’s internal
model is updated.
The model is validated by the
Risk function, informed by stress
and scenario testing.
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Key risks and mitigants
Key risks and exposures
Key mitigants and controls
Financial Risk
Capital risk
This is the risk that the Group is unable to meet
capital requirements.
•
Controlled through well-defined risk appetite statements and indicators which are
rigorously monitored.
•
RSA adopts a disciplined approach to economic and regulatory capital planning
and allocation.
Market and Credit risk
This is the risk to our insurance funds arising from
movements in macroeconomic variables, including
widening credit spreads, fluctuating bond yields and,
to a lesser extent, currency fluctuations.
•
RSA adopts a prudent investment strategy favouring high-quality fixed income
bonds, a modest allocation to equities and selected less liquid assets subject to
strong internal and external governance.
•
RSA ensures assets are closely duration and currency matched with insurance
liabilities to hedge volatility.
•
Investment positions are regularly monitored to ensure limits remain within
quantitative and qualitative appetite (including ESG factors).
•
Asset Managers position assets to align to the Low Carbon Position Statement.
Liquidity risk
This is the risk that the Group may be unable to pay
obligations (e.g. claims payments, repayment of
loans, etc.) when due, as a result of assets not being
available in a form that can be easily converted into
cash.
•
Controlled through well-defined risk appetite statements and indicators which are
rigorously monitored.
•
RSA holds a high proportion of high-quality liquid assets to ensure that we can
respond to claims and other liabilities in a stressed scenario.
Insurance Risk
Catastrophe and Reinsurance risk
This is the risk that a single event, or series of events
(natural or man-made), of major magnitude could
lead to a significant increase in actual claims
compared to total expected claims.
•
Our reinsurance programme significantly reduces our exposure to catastrophe
risks, with modelled extreme losses and historic experience being well covered by
our programme. The programme is designed to cover at least 1-in-200-year
events and is stress-tested for extreme weather events.
•
RSA monitors the potential impact of natural and man-made catastrophes through
scenario analysis with appropriate response taken.
Underwriting risk
This is the risk that claims arising on exposures after
the valuation date are higher (or lower) than
assumed in the pricing This may arise due to
misestimation in pricing, inadequate risk selection,
deviation from underwriting guidelines, technical
policy wording flaws, and so on.
•
Controlled through well-defined risk appetite statements (including climate change
factors) which are rigorously monitored quarterly.
•
Risks to inflation and the economic environment are actively monitored with
appropriate response taken.
•
Underwriting licences and limits are used to drive appropriate risk selection and
pricing.
•
Regular quality management, Control Testing and assurance activities are
performed over underwriting pricing and claims.
Operational Risk
Operational risk
This is the risk of direct or indirect losses resulting
from human factors, external events, and inadequate
or failed internal processes and systems. Operational
risks are inherent in the Group’s operations and are
typical of any large enterprise.
•
Operational risk and resilience processes and procedures are in place, including
incident management.
•
Continued improvement to our Operational Resilience and Third-Party oversight
capabilities, supported by simulation exercises which test the adequacy of our
approach.
•
Control effectiveness is monitored through Control Testing and assurance
activities.
•
System and information (including information security) risks remain a key focus,
and we have made significant progress with risk reduction over the year.
Customer risk
This is the risk that customers do not receive good
outcomes and suffer harm because of products and
services that are not fit-for purpose, offer poor value,
are poorly explained or inadequately supported.
•
The UK Operating Committee oversees key matters and decisions relating to good
customer outcomes, supported by Customer Outcomes Monitoring, which is
reported to the Board periodically.
•
Adherence to key frameworks, such as Product Governance and Delegated
Oversight, is monitored and subject to Control Testing and assurance.
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Section 172(1) Companies Act 2006 statement
The Board has balanced the views and interests of our stakeholders, alongside the need to promote the long-term success of
the Group. The Board has acted in a way that it considers, in good faith, would be most likely to promote the success of the
Group for the benefit of its members as a whole. This section sets out how the Board, in doing so, has had regard to the matters
set out in Section 172 of the Companies Act 2006, including:
i.
the likely consequences of decisions in the long-term;
ii.
the interest of our employees;
iii.
the need to further the Group’s business relationships with suppliers, customers and others;
iv.
the impact of the Group’s operations on the community and the environment;
v.
the desirability of the Group to maintain a reputation for high standards of business conduct; and
vi.
the need to act fairly.
Shareholder
The Group’s ultimate parent is IFC. RSA shares the Purpose and Values of IFC and is aligned with IFC’s strategic objectives to
deliver outperformance and value for its shareholders. Shareholder representatives are included on the RSA Board.
Customers
Good business starts with our customers and our strategic objectives aim to have 3 out of every 4 customers and 4 out of every
5 brokers as advocates. The Board works hard to increase its understanding of risks to our customers’ so that we continue to
provide tailored products and services that meet their diverse and evolving needs. Customer satisfaction and customer retention
are critical to the long-term sustainable prospects of the Group.
The Board receives regular updates from senior management on customer and conduct matters, including key indicators that
monitor customer outcomes and insights on customer-driven decision-making. These updates keep the Board informed on
customer priorities and key risks to the consistent delivery of good customer outcomes, and future areas of focus.
The Board's Customer Champion (a Non-Executive Director) supports
the Chair and the CEO in ensuring that our customer
ambitions and the Financial Conduct Authority’s (FCA’s) Consumer Duty requirements are regularly discussed and considered
by the Board.
The Board continues to be kept informed on how management is responding to ongoing Consumer Duty requirements and
takes steps to support good customer outcomes to ensure sustainability.
Workforce
The Board recognises that a values-driven, open culture and an engaged workforce are central to achieving our strategic goals
and long-term success. As such, the Board is committed to setting the tone from the top and engaging in a meaningful way with
our people.
The Board has supported management’s communication approach to ensure the workforce is informed of, and engaged in,
business strategy and performance. Communications span a range of digital and in-person channels to achieve a broad reach
and two-way exchange of views.
The Board received insights from employee feedback gained through these communication channels and also from employee
surveys and dialogue with employee representation groups. The Board also hosted a lunch with individuals in our talent
succession plans to directly exchange views.
During the year, the Board received and supported a number of updates on people priorities including:
i.
our People Strategy; culture and engagement assessments; talent and succession initiatives; and progress against our
Diversity, Equity and Inclusion ambitions, for example, Gender Pay Gap and Women in Finance.
ii.
our approach to the people impacts from changes to our business portfolio, the focus being transparent and
considerate engagement, a tailored redeployment service for employees, and retention of key skills.
iii.
refinements to our UK hybrid working approach, augmenting employee support and collaboration through greater in-
person interaction in our offices alongside a comprehensive suite of work-life balance provisions.
Regulators
Several of the Group’s subsidiaries are regulated by the Prudential Regulatory Authority (PRA) and the FCA. RSA is committed
to working with its regulators in an open, cooperative and transparent manner. RSA’s subsidiary in Ireland is regulated by the
Central Bank of Ireland. RSA’s subsidiary in Luxembourg is regulated by the Commissariat aux Assurances (CAA). We seek to
ensure a strong regulatory compliance culture throughout RSA in order to pre-empt and, where necessary, resolve regulatory
issues and to avoid or minimise business impact and the risk of customer harm. The Board continues to have constructive
engagement with our regulators, ensuring that they gain a comprehensive view of the Group’s financial soundness, strategic
and operational priorities, governance and culture, and that we understand the issues of interest to them.
The Board regularly engages with RSA’s regulators across all the regions that it operates. The PRA attended a Board meeting
in October 2024 to discuss regulatory priorities.
9
We believe that open and regular dialogue promotes transparency between the Group and its regulators and ensures that we
are in a position to reflect the views of our regulators when setting strategy. The outcomes of our engagement with our
regulators influence RSA’s priorities and focus for the year and are set out in the regulatory compliance plan, which is
considered and approved by the Governance, Conduct & Remuneration (GCR) Committee.
Community and the environment
Building resilience is core to the Group’s purpose – to help people, businesses and society prosper in good times and be
resilient in bad times. This is demonstrated by our contribution to communities and how we work to mitigate the impact of our
business on the environment, in particular how we work with business partners, suppliers and customers to respond to the
challenges posed by climate change.
The Board has oversight of the implementation of RSA’s climate change strategy and is engaged on how the business is
supporting the transition to a low emissions and climate-resilient economy. Further information on the Board’s oversight and
engagement on climate change is set out in the Climate-Related Financial Disclosures report on pages 11 to 17.
We are focused on building resilient communities. That means helping society and our customers adapt to the impacts of
climate change, investing in skills to help communities access opportunities for growth and prepare for the future, as well as
supporting the well-being of communities where we operate. RSA reports annually on its performance as part of the IFC Social
Impact and Environmental, Social and Governance (ESG) report, available at
www.intactfc.com
.
Our community programmes continue to empower our employees to help build resilient communities by harnessing their
commitment to our value of generosity and enthusiasm in support of some of the most vulnerable in society. This year, we
launched a new strategic partnership with social mobility charity UK Youth, supporting young people not in education,
employment or training.
In 2024, the Group directly contributed £1.6m to charitable initiatives, supporting causes such as food
poverty, education, and mental and physical health. Together with employee contributions, we donated £1.9m, a 24% increase
on the previous year, to 720 charities.
All RSA employees are provided with two days to volunteer per year. Employees volunteered 10,686 work-time hours in 2024.
This represents an increase of 23% compared to 2023, reflecting the enthusiasm of RSA colleagues to demonstrate our value
of ‘Generosity’ by supporting local causes. In 2025, we are focused on sustaining high levels of participation in our volunteering
programmes and inspiring greater participation and impact through our community engagement.
Suppliers
Our suppliers are critical to our business and the long-term success of RSA. Our Supplier Code of Conduct sets out the
minimum standards we expect from our suppliers.
These include respect for human rights, Diversity, Equity and Inclusion and
environmental sustainability. In 2024, we built on the work in previous years to continue to engage with our suppliers, through
structured supplier management practices, across a range of ESG topics.
We are continually evolving the approach to third
party management to ensure that our supplier relationships are managed in a cooperative and proportionate manner.
A balanced and collaborative approach to stakeholder engagement
The Board is committed to fostering strong engagement with its shareholders. As part of its decision-making throughout the
year, the Board has considered and balanced the views and interests gained through its stakeholder engagement, as well as
the need to promote the long-term success of the Group.
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Key strategic decisions in 2024
The Board considers the potential consequences of decisions in the long-term, the stakeholders that might be affected and how
they may be impacted as part of the decision-making process. The key strategic decisions undertaken by the Board in 2024
were informed and supported by consideration of the Group’s stakeholders. The Board fulfils its duties under the Companies Act
through:
Capital decisions
Stakeholders: Shareholders, Regulator
During the year, collaborative discussions were held with the Group’s shareholder on a number of topics including strategic
opportunities, capital management, financial performance and planning and reinsurance arrangements. As a result of this
engagement, the Group decided to retire its 125,000,000 7.375% perpetual preference shares by offering shareholders a
premium to the prevailing market price. The shares were cancelled for a total cash consideration of £155m. The offering
followed consultation with specialist advisors and engagement with the PRA and required approval from the shareholders to
cancel the preference shares in full. Following this a resolution was passed to implement a reduction of capital by cancelling its
share premium account, resulting in the creation of distributable reserves.
Strategic decisions
Stakeholders: Shareholders, Regulators, Employees and Customers
Whilst the Group did not commence any new strategic opportunities within the market during the year, it continued to monitor
market opportunities and to execute on the strategic decisions made in 2023. The Group’s key focus of this execution in the
year has been its exit from Personal Lines and integration and profitability of the acquired NIG & FarmWeb business. As the
Group pivots to a Commercial & Specialty Lines focused business, the Board considers that the Group has a unique opportunity
to reshape the organisation, accelerate a path to outperformance, and strengthen competitive advantages in line with the overall
IFC group’s strategic objectives. Throughout its decision-making process and monitoring of execution throughout the year, the
Board paid careful consideration to the impact on the Group’s regulatory obligations, employees and customers as well as
financial and performance considerations. The Board concluded that in each of the strategic decisions and related transactions
being executed, action had been taken to ensure good outcomes for employees, including extensive and meaningful dialogues
with unions and regular two-way communications with impacted employees, listening and responding to feedback and support
and training for leaders managing change. For both employees and customers there was clear and timely communication of the
matters related to strategic decisions and related transactions, their progress and their impact. The Board continued to be
satisfied that strategic decisions and related transactions and their progress were in the best long-term interests of the Group.
Diversity, Equity & Inclusion
Stakeholders: Employees
The Group is committed to supporting diversity, equity and inclusion across the organisation to ensure a diverse workplace. A
UK Equal Parental Leave Policy was implemented from 1 January 2024 as part of this drive.
11
Climate-related financial disclosures
Purpose
Our purpose is to help people, businesses and society prosper in good times and be resilient in bad times. Our strategic
objectives include financial performance and helping society. Our commitment to both is reflected in the Group’s climate
strategy and approach to social impact and ESG. Information regarding RSA’s business model and the ongoing resilience of the
business having considered risk factors, including climate risk, can be found in the Strategic Report from page 3 and the
Managing Risk section on pages 4 to 7. This section covers the RSA Group which encompasses the Company and its
subsidiaries.
RSA is committed to enabling the transition to a low emissions and climate-resilient future. Our strategic objectives include our
commitment to achieve net zero by 2050, to halve our operations’ emissions by 2030, and to be recognised by three out of four
stakeholders as being a leader in building resilient communities.
Our net zero by 2050 commitment is in alignment with the relevant principles of the Paris Agreement
1
.
Our enterprise-wide strategic objectives, governance systems, enterprise risk management process, and global climate strategy
demonstrate RSA’s strong position to manage climate-related risks to our business, and pursue climate-related opportunities.
We believe that, in addressing climate risks, we have an opportunity to help both people and society manage the impacts of a
changing climate and win in the marketplace by providing products and services that help shape behaviours and enable the
transition. RSA’s Climate Change and Low Carbon Policy underpins our commitment to enable the transformation of businesses
and industries that are key to the transition and support new industries that will be created to build a sustainable future.
Governance
Board oversight
RSA is committed to delivering the strategic direction and initiatives of our parent company, IFC, including our climate strategy.
The Board of Directors is responsible for overseeing the strategic direction and initiatives of RSA with regard to climate change
.
Climate change is an integral accountability of the Board’s Risk Committee and Governance, Conduct and Remuneration (GCR)
Committee. Further information on the composition of the Committees can be found on pages 22 and 23. These Committees
oversee the assessment and monitoring of the risks and opportunities for our business related to climate change and the risks
inherent to the transition to a low emissions and climate-resilient economy. The Board is fully engaged in shaping the approach
to Enterprise Risk Management, including setting our risk appetite where appropriate and ensuring governance structure and
policies are effective.
Committee
Climate-related roles and responsibilities
Board of Directors
•
Oversees the delivery of the climate change strategy and achievement of
strategic objectives (which include climate change focused objectives).
•
Reviews RSA performance against the climate change strategy on a twice-yearly
basis.
Risk Committee
•
Oversees the assessment and monitoring of the risks related to climate change
and the development of strategies to manage these risks, on a quarterly basis.
•
Reviews risk monitoring programmes and receives quarterly reports on risk
monitoring activities.
•
Establishes our risk tolerance for natural catastrophe risk.
•
Reviews the adequacy of our reinsurance program relative to weather-related
catastrophe risk exposure.
Governance, Conduct & Remuneration Committee
•
Oversees corporate disclosure on climate change and climate risk management,
on a twice-yearly basis.
Audit Committee
•
Oversees the integrity, fairness and completeness of our financial statements
and other financial disclosures.
•
Oversees the quality and integrity of our internal controls and procedures.
•
Oversees our actuarial practices, ensuring pricing and segmentation practices
are adapted to address our risks including those related to climate change and
trends in catastrophes and severe weather events.
1
According to the relevant principles of the Paris Agreement, in order to limit global temperature rise to 1.5C, emissions need to be reduced by
at least 45% by 2030, and net zero by 2050. See
https://www.un.org/en/climatechange/net-zero-coalition
for more information.
12
Management oversight
At the forefront of risk management at RSA, our Enterprise Risk Committee (ERC) is headed by our Chief Risk Officer, and
reports to the Board’s Risk Committee quarterly. The Chief Risk Officer and Enterprise Risk Management (ERM) Committee
oversees the ERM process, which is integrated into all business activities and strategic planning, in line with our ERM
framework. This includes the identification, assessment, response, monitoring and reporting of risks, including those related to
climate and ESG.
The ERC meets quarterly with risk owners within RSA to investigate emerging risks and ensure risk management plans are in
place. This includes consideration of both existing and emerging regulatory requirements related to climate change.
Our Management Team, including the CEO, provides direct leadership on ESG Initiatives. The CFO, Chief Risk Officer and
Chief Underwriting Officer each hold Senior Management Functions responsibilities for climate risk management and a number
of senior executives have climate-specific performance goals. Our executive compensation package aims to align the
compensation of Senior Executives with the achievement of IFC’s financial and strategic objectives, including ESG
performance, and with the long-term interests of shareholders and other stakeholders, such as our employees, customers and
communities. More information about ESG links to executive compensation can be found in the IFC Social Impact and ESG
report available at
www.intactfc.com
.
Committee
Climate related roles and responsibilities
Action in 2024
Operating Committee
The Operating Committee oversees the climate change
strategy, net zero target progress, climate adaptation
initiatives and climate risk management approaches.
Reviewed and discussed climate strategy
progress
updates
throughout
2024.
Reviewed approach to addressing new
and emerging ESG and climate-related
regulatory and disclosure requirements.
Enterprise Risk Committee (ERC)
Headed by our Chief Risk Officer, the ERC is an
enterprise-
wide executive committee with a mandate to
assist the Board of Directors and senior management with
their responsibilities of managing and providing oversight
over risks that could materially impact the business,
including climate-related risks. Material risks are assessed
to determine their significance and impact on financial
resources and reputation and are managed and monitored
in accordance with our Enterprise Risk Management
Framework to ensure they remain within our established
risk appetites.
Conducted ongoing assessment of risks
and opportunities arising from climate
change.
Engaged quarterly with leadership of
commercial, personal and specialty lines
leaders to ensure proper risk assessment
and mitigation plans are in place.
Reviewed natural catastrophe risk metrics
and actions to mitigate weather related
perils.
Operational Investment Committee
(OIC)
Reviews investment strategies for the Group, including
RSA. The OIC oversees the climate change engagement
strategies with investees and commitments to climate
initiatives.
Reviewed investment strategies to confirm
alignment
with
the
climate
strategy,
identify gaps, and work to close them.
Strategy
The IFC climate change strategy is led by IFC’s Chief People, Strategy and Climate Officer, and is operationalised at the IFC
group-level. RSA executives and teams actively deliver on the strategy in the RSA business. Our five-point climate strategy
focuses on managing our own business impacts and supporting the transition to a low emissions and climate resilient economy.
Our climate strategy is guided by the following principles:
i.
We will help people, businesses, and society de-risk the transition toward a sustainable future by leveraging our
strengths.
ii.
We will take an inclusionary approach to supporting our stakeholders in the transition.
iii.
We will focus our actions on areas that maximise the overlap between helping and winning.
Workstreams have been mobilised, including in operations, supply chain, underwriting, investments, and social impact, to
establish the foundations and deliver on the milestones necessary to achieve our goals, which comprise:
Commit
: We have a commitment to achieve net zero GHG emissions by 2050 in line with the Paris Agreement. Our interim goal
is to halve GHG emissions from our operations by 2030 using 2019 data as a baseline. Our GHG emissions reduction plan
includes initiatives such as electrifying our fleet of vehicles, increasing renewable energy use to power our offices and reducing
corporate travel. Our Essential Car User scheme allows employees on the scheme to choose between a plug-in hybrid electric
vehicle (PHEV) or a battery electric vehicle (BEV). In the UK, 93% of vehicles are now PHEV or full BEV. Of the electricity we
purchase directly in the UK, over 90% is now procured from renewable sources. GHG emissions from RSA’s corporate real
estate have reduced by 3.7% this year.
IFC has set interim targets at IFC Group level for its investment portfolio.
This includes engaging with the top 20 emitters
among our investees by 2025, and achieving a minimum 40% reduction in the emissions intensity of the investments portfolio
(ordinary shares, preferred shares and corporate bonds) by 2030, compared to our baseline year of 2019.
More information can
be found in the IFC Social Impact and ESG report available at
www.intactfc.com
.
13
Adapt
: Through our second year of partnership with Gloucestershire Wildlife Trust, we have delivered a range of nature-based
solutions, such as establishing new wetlands, creating rain gardens, and driveway de-paving, in a part of the country prone to
flooding. A broadened scope of our partnership this year included research on the co-benefits of natural flood management for
climate, nature and people, which has contributed new data on the impacts of nature-based solutions, providing an evidence
base to support greater uptake. We have also been involved in designing interventions to engage local residents, businesses
and schools on reducing flood risk and helping protect local habitats.
Shape
: In 2024, we have focussed on upskilling our employees by providing training to increase their climate knowledge and
what they can do to support our strategy, through a series of climate change training modules. In 2024, these modules have
achieved over 12,000 completions.
Enable
: We are enabling the transformation of businesses and industries key to the transition and supporting new industries that
will be created to build a sustainable future. RSA’s Climate Change and Low Carbon Policy, first implemented in 2020, outlines
our role in insuring renewable energy generation projects. The policy includes a commitment to target an underwriting portfolio
for energy production that is over 75% low carbon by 2030.
Collaborate
: We collaborate with governments and industry to accelerate climate action. RSA is an active participant in business
and industry groups engaging with the issue of climate change. This includes ClimateWise, the Association of British Insurers
and the Central Bank of Ireland’s Climate Risk and Sustainable Finance Forum sharing best practice on climate risk and
strategies that will help to mobilise finance towards low GHG industries, technologies and services. This year RSA partnered
with Emerging Risks to publish a paper on the impacts of climate change on the maritime sector.
Released ahead of the 150th
International Union of Marine Insurance (IUMI) conference, the paper explores how the industry can transition to net zero and
adapt to rising sea levels and more extreme weather.
Stress tests
RSA’s stress tests are designed to help the business understand the potential financial consequences of complex risk events,
including climate change-related extreme weather events, where the impacts can be broad, far-reaching and with a range of
outcomes.
Global catastrophe risk is a material part of RSA’s risk profile, and extensive reinsurance arrangements are in place to manage
and mitigate this risk. RSA also monitors the locations of its exposures and whether there is the potential for accumulation of
them in regions susceptible to weather events, and prices risks accordingly.
Our stress testing also considers other climate-related scenarios, such as litigation risk, and how our clients could be
susceptible to these risks. These types of stress tests inform our underwriting and pricing strategy and approach. Additional
analysis was conducted in early 2024 to understand climate change impact on RSA industry exposures.
Climate change scenario analysis
In 2024, IFC conducted a group-wide climate change scenario analysis exercise, which included all RSA operations and lines of
business. Pathways were selected in line with IFC’s analysis, to form an IFC group-wide view of climate risk. We assessed both
physical and transition risks, under different climate scenarios. For physical risk, we conducted our analysis using the
Intergovernmental Panel on Climate Change (IPCC) RCP8.5 and RCP2.6 model projections. The RCP8.5 scenario projects a 3-
5°C global warming by the end of this century. The RCP2.6 scenario is the most ambitious of the RCP scenarios and represents
a low GHG emission trajectory, assuming substantial climate action is taken to reduce emissions over time. For transition risk,
our analysis aligned with two of the Network for the Greening of Financial Systems (NGFS) scenarios. The Delayed Transition
scenario assumes a transition risk projection associated with delays in policy action (we assumed a delay to 2050), whereas the
Net Zero 2050 scenario considers that climate policies are introduced early and gradually become more stringent.
The analysis advances the risk management of physical climate risk and seeks to quantify RSA’s exposure to climate change
under scenarios representing low and high GHG emissions. The climate scenario analysis tool will assist us in understanding
and planning for future climate-related risks and opportunities. The outcomes will continue to be integrated into business
planning, pricing and risk selection, product innovation, and claims and supply chain planning
Risk management
We have a proven ability to manage climate risks in our operations and we take a number of actions to protect our business and
our customers. RSA has a number of risk management strategies in place to mitigate risk, reduce financial impact and capture
potential opportunities. Our business strategy and intrinsic risk management processes are responsible, in large part, for our
climate change resilience. More information can be found in the Managing Risk section on pages 4 to 7, which includes climate
risk.
Our risk and operational teams regularly review the emerging risk landscape, which includes considering existing and emerging
regulatory requirements related to climate change and ESG. We analyse Group-wide data, exposure and trends, and external
research to identify a management approach to climate-related risks. Climate risk is managed through our operational policies
and standards, and categorised into pricing and selection, product innovation, supply chain and claims, prevention and
investments.
Group policies are reviewed on a risk-based cycle (with the majority annually) to ensure that we respond to changes in the
internal and external risk profiles, including climate change, through relevant requirements and controls. We have also
integrated climate change into our Risk Appetite Statement and Own Risk and Solvency Assessment (ORSA). The primary
financial impact of the physical risk of climate change relates to the number and cost of claims associated with weather perils
increasing in our property insurance business. Details of these financial impacts feature in the Targets and Metrics section
below.
Reinsurance and operational planning processes are our primary means of both understanding and reducing the
14
financial impacts of climate-related losses associated with the physical risks of changing weather patterns. More information on
the ORSA can be found in note 19.4 to the financial statements.
Climate-related risks and opportunities
Through our risk management process, we have identified climate-related risks and opportunities to our business. Risks and
opportunities are presented in the tables below. In the tables we have outlined the ways in which we manage those risks, and
how we take advantage of potential opportunities.
The key climate-related risks with the potential to impact our business include:
Risk
Type
Time Horizon
Risk Description
Risk Management
Physical
Short to long-term
Climate change impacts our property insurance
business due to changing weather patterns and
an increase in the number and cost of claims
associated with severe storms and other natural
disasters. Weather patterns could continue to
change and impact the likelihood and severity of
acute and chronic natural catastrophes, such as
severe convective storms, winter storms,
hurricane/cyclone, wildfire, flood (acute) and/or
cumulative gradual climatic changes (chronic) —
for example, rise in sea level.
Managed through pricing, underwriting actions and
reinsurance informed by climate risk assessment and
scenario analysis.
Transition
Short/Medium-term
Physical and transition risks may also lead to
liability risk, such as the risk of climate-related
claims under liability policies, as well as the risk
arising from other climate-related litigation or
direct actions against RSA. Such litigation or
direct actions may also pose reputational risk.
Managed through the application of our disclosure
practices, including disclosing our progress in a timely
and transparent manner.
Medium-term
Changes in the operational cost base or claims
profile due to new or unproven technologies
associated with the net zero transition (e.g. switch
to electric vehicles, large turbine size, battery
storage etc.).
Managed through underwriting actions and
reinsurance.
Long-term
A decline in the valuation of assets we hold in
certain sectors that are vulnerable to transition
risks. There is more pressure on companies to
disclose their transition pathways to continue
attracting capital from investors. Furthermore, the
investment in and exposure to GHG-intensive
sectors or companies could increase the
reputational risk associated with public
perception. We also expect some assets to
appreciate and be viewed favourably as
supporting the transition.
Managed through diversified investment portfolio and
risk appetite on GHG-intensive sectors.
Long-term
Net zero commitments are contingent on many
variables, including the role of governments and
their ability to meet climate commitments. There
is a risk that companies have overstated their
ability to meet their target or miss their interim net
zero targets.
Managed through the application of our disclosure
practices, including disclosing our progress in a timely
and transparent manner.
15
The key climate-related opportunities with the potential to impact our business include:
Type
Time Horizon
Opportunity Description
Opportunity Management
Physical
Medium-term
Investing in climate resilience in our promoting
research and development.
Managed through product/service offering, such as
providing insurance products to industries that
support climate resilience, risk management
expertise, engaging customers and brokers on
climate change, and supporting community
partnership.
Long-term
Increased demand (and revenues) for insurance
as changes to weather patterns increase public
awareness of the need for cover.
Managed through product/service offering, such as
providing insurance products to industries that
support climate resilience.
Transition
Short/Medium-term
We use our expertise and resources to help
facilitate the transformation of industries that are
key to the transition and help de-risk industries
and technologies that can accelerate the
transition, including renewable energy
technologies. We anticipate increasing demand
for renewable energy insurance and increasing
revenue from this stream.
Managed through product/service offering, such as
providing insurance products to industries that
support climate resilience, renewables centre of
excellence and our Climate Change and Low Carbon
Policy position.
Short/Medium-term
Our product and service offerings support new
industries and technologies that will grow as the
transition accelerates, using risk management
expertise and customer engagement to
understand coverage needs.
Managed through product/service offering, such as
providing insurance products to industries that
support climate resilience, engaging customers and
brokers on climate change, and ongoing market
analysis.
Definitions
Short term
0 – 1 years
Risks that arise within the horizon of the reporting timeframe
Medium term
2 – 5 years
Risks that arise within an operational and strategic planning horizon
Long term
> 5 years
Risks that arise beyond the medium term strategic planning horizon
Physical risks
Some of our key risk management activities for physical climate risks include:
i.
most of our insurance policies are 12 months in duration, enabling us to respond to changing weather patterns. This
ensures our charged prices are responsive to the latest weather-related trends which we assess and action in our
property business quarterly;
ii.
Underwriting Portfolio Management monitors trends within specific lines of business, identifying and determining
actions needed to respond to changes driven by climate change;
iii.
reinsurance provides protection against losses from severe weather events. Our catastrophe reinsurance covers flood,
windstorms, hurricanes, wildfires and other severe weather events, with special provisions providing additional
protection for prolonged or greater frequency events. Below our catastrophe cover, we purchase specific treaties for
business that is more exposed to major events and use facultative and per risk reinsurance to limit exposure on any
one risk;
iv.
we work with our customers to promote measures that improve resilience to extreme weather. For example, through
our risk consulting business risk engineers work directly with our customers to survey risks and develop responses
such as raising awareness of new locational hazards, installation of property flood resilience measures, promotion of
construction standards and plans to minimise business damage or disruption e.g. contingency plans for flood
preparedness and pre-event preparation and post-event recovery; and
v.
we use weather peril models and geolocation tools to support risk assessments and underwriting of residential and
commercial properties. Our operational planning processes also consider changing weather patterns. Using up-to-date
catastrophe models and building identifiable trends into our weather planning, technical pricing and exposure
management are key parts of our underwriting guidance.
Transition risks
Transition risks within our business relate to the transition to a low emissions and climate-resilient economy and potential
negative impacts to certain businesses, adding risk to the assets we hold and customers we insure in certain sectors. Some of
our key management activities for transition risk are:
i.
RSA has a well-established renewable energy proposition in market. This has been expanded via the development of a
dedicated renewable energy vertical and the appointment of a President of Renewable Energy for the IFC Group, with
responsibility for further building and strengthening our renewable energy capabilities globally;
16
ii.
our Climate Change and Low Carbon Policy formalises our position on investments and underwriting of GHG-intensive
sectors. We target an underwriting portfolio for energy production that is over 75% low carbon by 2030. We have a
dynamic underwriting strategy to support this 75% ambition, including careful expansion of appetite for new
technologies that are supportive of the transition, as well as ongoing engagement with existing customers in high-
emitting sectors. This will reflect the needs of the communities in which we operate; and
iii.
Intact Investment Management (IIM) adopted and implemented positions on coal and oil and gas. IIM actively engages
with high emitting investees, focused on emissions disclosure, net zero ambitions and strategies, and climate
governance. More information can be found in the IFC Social Impact and ESG report available at
www.intactfc.com
.
Overall Resilience to Climate Change
Our business strategy and intrinsic risk management processes are responsible, in large part, for our climate change resilience.
Some of the key activities contributing to our resilience as a business include taking into consideration latest weather trends and
events to ensure we have included adequate budget within the financial operating plan. During the planning process we also
ensure we are within our coverage ratios from a Capital perspective so that we can fund any major events.
More information on
the Own Risk Solvency Assessment (ORSA) can be found in note 19.4 to the financial statements.
Resilience strategies also include continuously investing in and redefining how we select and price risk with data and predictive
analysis; repricing our products with weather trends annually at renewal, given most of our policies are 12 months in duration;
and with a reinsurance program for catastrophe protection that covers flood, windstorms, hurricanes, wildfires and other severe
weather events.
RSA plays an important role in supporting the energy transition through industry collaboration, reducing our operations
emissions, providing products and services that support low-GHG energy generation, and in aligning our underwriting activities
with our Climate Change and Low Carbon Policy. We work to align our business activities with our commitment to support the
development of renewable energy and other clean energy technologies through our products and services. We also have an
opportunity to influence our customers and suppliers to improve their resilience to climate change through engagement and
education, and to place increased focus on adaptation in the geographies and communities in which we operate.
The outcomes of our internal stress-testing, climate-related peril modelling, and operational planning, support the conclusion
that climate risks are well managed within our business.
Targets and metrics
We recognise the importance of understanding, measuring and managing the impact of our own operations, and progress on
our climate strategy priorities. Our climate strategy outlines our commitment to achieve net zero emissions by 2050 and halve
operations emissions by 2030, compared to a 2019 baseline.
We experienced £191m in weather and subsidence related losses in 2024, a reduction of 6% relative to the previous year.
Weather-related losses and weather loss ratio represent the total business for 2024, including UK Personal Lines whose exit
was announced in Q4 2023. Our weather and subsidence loss ratio has improved compared to 2023 with exposure to UK
Personal Lines now reducing year on year.
The percentage of our energy portfolio premium that relates to renewable energy in 2024 is consistent with the objectives set
out in our Climate Change and Low Carbon Policy. This policy set a target for an underwriting portfolio that is over 75% low
carbon energy production by 2030. In 2024, our energy portfolio contained 59% low carbon energy production. At UK&I level,
the Energy business mix shifted slightly away from the low carbon target in 2024, driven by challenging market conditions in UK
Specialty Lines. However, the energy mix in all other areas improved, with the Irish Renewables portfolio reaching as high as
89% of the total Energy book. In addition, the growth of battery storage (+4% GWP) is a positive indicator and, as a progressive
energy storage solution, contributes toward our goal of enabling the transition and supporting innovative technologies.
We report a reduction of 41% in our total GHG emissions when comparing our 2024 data (location-based) to our baseline year
of 2019. We are making progress on our goals and remain on track towards achieving our interim target of halving operations
emissions by 2030, despite a reported increase in our total GHG operations emissions this year on the prior year’s emissions.
This increase is primarily due to the rise of business travel related emissions, which are continuing to stabilize into a pattern
more consistent with life before the COVID pandemic. For further information on our Scopes 1, 2 and 3 (business travel, waste
and water) GHG emissions and energy consumption data, including our baseline year and GHG emissions calculations
methodologies, please see the Streamlined Energy and Carbon Reporting section from page 24.
17
Metrics
2024
2023
2022
2021
2020
2019
Weather and subsidence related losses
(£m)
191
204
174
112
83
60
Weather and subsidence loss ratio
¹
6.0%
7.4%
6.8%
4.4%
3.2%
2.4%
Energy portfolio premium in renewable
energy
²
59%
61%
59%
61%
37%
58%
Total GHG emissions (Scopes 1, 2 and
3)
³
5,545 tonnes
CO
2
e
4,816 tonnes
CO
2
e
4,452 tonnes
CO
2
e
4,278 tonnes
CO
2
e
5,203 tonnes
CO
2
e
9,460 tonnes
CO
2
e
Total GHG emissions (Scopes 1, 2 and
3)
4
4,535 tonnes
CO
2
e
3,987 tonnes
CO
2
e
3,705 tonnes
CO
2
e
3,760 tonnes
CO
2
e
4,393 tonnes
CO
2
e
-
Notes:
¹
Net losses resulting from flood, wind and other weather-related damage as a percentage of net insurance revenue. This covers both event and
non-event weather.
²
Renewable energy is here defined as bio fuel; bio gas (where sourced responsibly or generated from waste); biomass; geo thermal; hydro;
hydrogen; onshore / offshore wind; solar / PV; and tidal. Premium is here defined as written premium before reinsurance.
³
Total GHG emissions are reported using the Location-Based methodology. The full GHG emissions data table, including notes relating to
Scope 1, 2 and 3 (business travel, waste and water) emissions is available in the Streamlined Energy and Carbon Reporting section from page
24.
4
Total GHG emissions are reported using the Market-Based methodology.
The full GHG emissions data table, including notes relating to Scope
1, 2 and 3 (business travel, waste and water) emissions is available in the Streamlined Energy and Carbon Reporting section from page 24.
GHG emissions figures have been restated to account for the disposal of operations previously under RSA control and the impact of the DLG
acquisition.
Karim Hirji
Chief Financial Officer
4 March 2025
18
Governance
for the year ended 31 December 2024
Company Information
Directors
1
Mark Hodges (Chair)
Ken Anderson
Sally Bridgeland
Rosie Harris
Louis Marcotte²
Susan McInnes
Ken Norgrove
Andy Parsons
Sylvie Paquette²
Mathieu Lamy²
Company Secretary
Jonathan Cope
Independent Auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF
Registered Office
22 Bishopsgate
London
United Kingdom
Company Registration Number
02339826
1
These are the directors who served during the year ended 31 December 2024, changes in 2025 are shown on page
24
.
² Shareholder nominated director.
19
Corporate Governance
The Company is a wholly owned subsidiary of IFC. The Company applies the Wates Corporate Governance Principles for Large
Private Companies (published by the Financial Reporting Council in December 2018 and available at www.frc.org.uk).
Principle 1: Purpose and leadership
The values of RSA and IFC are strongly aligned.
Purpose
Our purpose is to help people, business and society prosper in good times and be resilient in bad times.
Values and culture
In line with our purpose, the Group’s values are (i) integrity, (ii) respect, (iii) customer-driven, (iv) excellence; and (v) generosity.
Our values are designed to guide our decision-making and everything that we do. They underpin how we seek to deliver for our
customers and other stakeholders. We are a people-centred business which aims for a culture of high performance, where
working together as a team is valued and the business invests in its people. There are various mechanisms in place to monitor
our culture, including employee surveys and cultural health assessments.
Principle 2: Board composition
Chair and Chief Executive Officer
The roles of Chair and CEO are separate and clearly defined. The independent non-executive Chair is responsible for leading
the Board, its overall effectiveness and for facilitating open debate and constructive challenge. The CEO is responsible for
implementing the strategy and decisions of the Board and its committees and leading the Operating Committee.
Size and structure
An overview of the composition of the Board has been included on pages 22 and 23.
The Board considers that it has an appropriate combination of skills, backgrounds, experience and knowledge, and that there is
an effective balance of independent directors to ensure constructive challenge.
Balance and diversity
Ensuring an appropriate balance of skills and experience has been a key focus of the Board.
The Board has approved a Board Diversity Policy which is available to view on the RSA website www.rsainsurance.co.uk and
sets the objective of at least 40% female representation and at least 40% male representation on the Board and at least one
Black, Asian or other ethnic minority Board member. The Board currently has four female Directors representing 40% of the
Board. At the Executive level there are four women, representing 36% of the Operating Committee.
The Board recognises that its current membership does not currently meet its own aspirational targets and is committed to
improving its diversity. This will be taken into account when new directors are appointed as part of the succession planning
process.
The Board keeps under regular review the Board’s composition in terms of its balance of skills, experience and length of
service, and industry knowledge as well as wider diversity considerations. The non-executive Directors bring a broad range of
experience and skills which are highly relevant to the Group’s operations and the sectors in which it operates. The shareholder-
nominated Directors also bring experience and knowledge of the wider Group.
Effectiveness
A governance framework has been established to ensure that independent decision-making by the Board is clear. The Board
has approved a Matters Reserved for the Board and adopted a Matters Reserved for the Shareholder, as approved by the IFC
Board, and independent non-executive Directors have been appointed who are fully independent from IFC as well as the RSA
Group. On joining the Board, Directors are provided with a tailored induction programme.
The Board sets the strategy for the business and during the year has overseen a review of strategy for the Group. The Board
has received deep-dive presentations on customer and conduct matters as well as pricing and underwriting. It has also received
updates and reports throughout the year on the regulatory change agenda and outcomes for customers.
The Board conducts an annual review of its effectiveness, including engagement of an external provider to carry out a review
every three years. An internal review was completed in the second half of 2024. The results of the review were shared with the
Board and each of its Board Committees and regular attendees, and action plans to address the areas highlighted in the review
were agreed with each of the relevant Chairs.
Principle 3: Director responsibilities
Accountability
The Board is committed to effective governance, sound risk management and a robust control environment. The Board
considers that the foundation of an effective risk management framework is the cultivation of a risk culture that promotes
accountability and openness.
The Board periodically reviews and approves the Group’s governance documents including the System of Governance, UK
Corporate Governance Framework, Delegated Authority Framework, and a suite of governance policies. The Board has also
reviewed and adopted its own constitutional documents including the Matters Reserved for the Board and Conflicts of Interest
policy. These documents set out the policies and practices that govern the internal affairs of the Group.
20
The responsibilities of the Directors are set out in their letters of appointment and role profiles. All Directors are expected to
report any potential conflicts of interest. The Conflicts of Interest register is reviewed at each Board meeting and the Directors
declare any actual conflicts of interest at each Board meeting.
Board committees
In order that it can operate efficiently and give the appropriate level of attention and consideration to relevant matters, the Board
delegates certain activities to the Audit Committee, the Risk Committee and the GCR Committee. The Chair and membership of
each Board Committee is composed of non-executive Directors. Each Committee has terms of reference that have been
approved by the Board which set out its authority and responsibilities.
Further information on the Board committees including their membership and responsibilities can be found on pages 22 and 23
of this report.
Integrity of information
The Board receives regular and timely information on all aspects of the Group’s business. This includes financial performance,
strategy, performance against the operational plan, internal audit, risk and compliance, customer metrics, governance, and
people and culture matters. Internal processes and systems are robust and this ensures that management information is
accurate and timely. Reporting to the Board includes consideration of the impact on stakeholders, where appropriate, and
includes an assessment of any potential risks to the success of the business. The Group’s financial statements are audited by
Ernst & Young LLP (EY) on an annual basis.
Principle 4: Opportunity and risk
Opportunity
The Group strategy is aligned with IFC’s purpose and strategy. RSA’s strategic opportunities were carefully assessed and
analysed during 2024 and those aspects decided upon have been incorporated into the current 3-year operational plan. Any
proposed changes in strategic focus are reviewed and approved by the Board.
Risk
RSA’s Risk Management System provides a framework for the management of risks by management. The Board sets the risk
strategy and appetite that articulates the level of risk the Board is prepared to take in delivering its strategic objectives. The
Board delegates to the Risk Committee oversight of both current and emerging risks that the business faces. The Chief Risk
Officer is a member of the Operating Committee. The Chief Risk Officer is supported by the Risk function, which is responsible
for providing expert review and challenge of Line 1’s management of risks within their own operating segment. There is a clear
governance structure for the oversight, management and escalation of risks that fall outside risk appetite. This structure is
based on clear processes and a risk culture that promotes accountability and openness.
Further details on risk management are included in the Risk Management section on pages 4 to 7.
Responsibilities
The Matters Reserved for the Board states that the Board will:
i.
approve the Group’s overall risk appetite and high-level business strategy, including portfolio risk, claims management
and financial controls, and capital management;
ii.
approve the Group’s approach to its Own Risk and Solvency Assessment (ORSA);
iii.
review the effectiveness of the Group’s system of risk management and internal controls, including all material
controls, and including financial, operational and compliance controls; and
iv.
when considering the Group’s overall strategy and risk appetite, understand, assess and have oversight on the
financial risks and impacts associated with climate change that affect the Group.
The Risk Management Internal Controls Policy documents the requirements for the identification, measurement, management,
monitoring and reporting of all risk types. It sets out the processes and procedures for the effective operation of the Risk
Management and Internal Control systems.
The Risk Committee supports the Board to ensure that the key risks to the Group are identified, understood and effectively
managed within risk appetite. The Risk Committee advises the Board on risk management matters, including solvency needs
and the risk management arrangements for the Group. It monitors the Group’s solvency by reviewing the outputs of the ORSA
process, the Internal Model and conclusions of model validation, making recommendations to the Board on capital adequacy.
The Risk function, alongside the business functions and Conduct Risk function, facilitate the determination of the principal risks
facing the business, through application of the Risk Management Framework and the Conduct Risk Framework. These
frameworks are subject to debate and challenge by various management committees and the Risk Committee, which also
oversee plans to mitigate and manage high and medium rated risks. There are clear internal communication channels on the
identification of risk factors.
Principle 5: Remuneration
The GCR Committee is responsible for the oversight of remuneration principles, policy and practices, as well as determining
policy and setting remuneration in respect of the Chair of the Board, Executive Directors and other executives within its scope.
Membership of the GCR Committee is set out on page 23 and includes independent non-executive Directors. The GCR
Committee discharges its responsibilities in line with the Wates Principles.
21
Policies
The GCR Committee ensures appropriate remuneration arrangements are in place through the adoption of a Remuneration
Policy, which is designed to support the business strategy by appropriately rewarding performance and promoting sound and
effective risk management, compliance with external regulatory requirements and alignment to long-term interests of the Group.
Setting remuneration
The remuneration principles that the Committee follows are:
i.
competitiveness and cost effectiveness: remuneration packages are set at competitive levels to attract, retain and
reward high calibre talent in the context of market conditions;
ii.
fair-minded: appropriate reward complying with principles of good risk management (including deferral and malus
arrangements), inclusivity and avoiding conflicts of interest and unconscious bias. Information on our Gender Pay Gap
figures and our actions in this area can be found at
www.rsainsurance.co.uk
. The Group has been accredited by the
UK’s Living Wage Foundation as a Living Wage Employer since 2016;
iii.
pay for performance: variable remuneration that strongly aligns employees with shareholders and/or is fully contingent
on the achievement of stretching objectives which support strategic priorities and adherence to our organisational
values; and
iv.
open and transparent: remuneration components that are simple and transparent, to be effective and understood by
employees and other stakeholders.
All employees are eligible to be considered for a performance-related bonus, and those in the UK and Ireland can participate in
all-employee share plans. General remuneration arrangements for our employees (for example, salary increases and pension
and incentive opportunities) are considered by the GCR Committee when determining total remuneration for senior executives.
Consideration is also given to the reputational and behavioural risks to the Group that can result from inappropriate incentives
and excessive reward and the GCR Committee can adjust rewards based on consideration of risk factors. A significant
proportion of senior-level remuneration is variable, long term and at risk, with an emphasis on share-based remuneration; bonus
deferral is operated (and also where required by Solvency UK), as is participation in the long-term incentive plan.
Remuneration for the Chair, Executive Directors and heads of key governance functions is set in agreement with IFC. IFC’s
compensation framework can be found at
www.intactfc.com
.
PricewaterhouseCoopers (PwC) is appointed by the Committee as its independent adviser. PwC is a member of the
Remuneration Consultants’ Group and a signatory to its Code of Conduct. In addition, the Committee has satisfied itself that the
advice it receives is objective and independent as PwC has confirmed there are no conflicts of interest arising between it, its
advisers and RSA.
Principle 6: Stakeholder relationships and engagement
External impacts
The broad social impact and responsibility of the Group to its customers is core to the policies and practices of the Group.
The
key objective of the Group is to ensure good outcomes for customers, and this is a central principle of the Board decision
making processes.
Further information on the Group’s approach to ESG matters can be found on pages 11 to 17.
Stakeholders
The Group has a number of material stakeholders, which includes its workforce, customers, partners and brokers, suppliers and
regulators.
Information on the Group’s stakeholder relationships and engagement can be found in the s172 statement on pages 8 to 10 of
the Strategic Report.
The Board and its committees
An overview of the responsibilities of the Board and its committees for the year ended 31 December 2024 is set out on pages 22
and 23.
22
The Board and its committees
The Board
The Board is led by Mark Hodges, the independent non-executive Chair of the Group. The Board is composed of the
independent non-executive Chair, seven non-executive Directors and two Executive Directors. The primary responsibility of the
Board is to provide effective leadership to ensure it promotes the success of the Group for the benefit of all stakeholders.
Committees
The Board has established a number of committees to which it has delegated responsibility for oversight of some of its activities.
Each committee has adopted Terms of Reference, which are reviewed annually, and any changes proposed by the committee
are approved by the Board.
Audit Committee
Members: Andy Parsons (Chair), Rosie Harris & Mathieu Lamy
The Audit Committee is a committee of the Board. Membership of the Committee is composed of three non-executive Directors,
one of whom acts as Chair. The Committee members have experience and competence in accounting and auditing and also
within the insurance sector. At the invitation of the Committee, the Chair of the Board, Chief Executive Officer, Chief Finance
Officer and representatives from functions within the business attend to advise the Committee. Attendees also include
representatives from Finance, Actuarial, the external auditors, the Head of Corporate Audit Services (Internal Audit) and a
representative from the Corporate Audit Function of IFC. The Audit Committee plays an important role in assisting the Board in
its oversight and monitoring of the Group’s financial statements and the robustness of RSA’s systems of internal control. The
Committee oversees the effectiveness and objectivity of the internal and external auditors.
Internal audit operates an ongoing quality assurance programme that is performed by external specialists. A summary of the
quality assurance results is reported annually to the Committee. The Committee remained satisfied that Internal Audit was
operating effectively, was sufficiently resourced, and that the risk to their independence and objectivity was low.
The Audit Committee is responsible for:
i.
monitoring the financial reporting process and making recommendations or proposals to ensure its integrity;
ii.
monitoring the effectiveness of internal quality control and risk management systems and internal audit;
iii.
monitoring the statutory audit of the financial statements;
iv.
reviewing and monitoring the independence of the external auditors; and
v.
reporting to the Board the outcome of the external audit and the integrity of financial reporting.
Auditor tenure
The Committee is responsible for overseeing relations with the external auditor, including the proposed external audit plan and
the approval of fees. The Committee assesses the independence and effectiveness of the external auditor each year and
makes a recommendation to the Board on their appointment or re-appointment. EY was appointed as the Group’s external
auditor in 2023, effective for the year ended 31 December 2024. The appointment of EY was approved by the Board on 2
November 2023.
The Group has complied with the Statutory Audit Services for Large Companies Market Investigation (Mandatory Uses of
Competitive Tender Process and Audit Committee Responsibilities) Order 2014 for the year ended 31 December 2024.
Board Risk Committee
Members: Rosie Harris (Chair), Sally Bridgeland, Susan McInnes, Sylvie Paquette & Mathieu Lamy
The Risk Committee is a committee of the Board. Membership of the Committee comprises five non-executive Directors, one of
whom acts as Chair of the Committee.
The Risk Committee has a pivotal role in ensuring the key risks to the Group are identified and understood, are effectively
managed within risk appetite with regard to the views and interests of stakeholders, and are appropriately reflected in the
Internal Model.
The Risk Committee is responsible for:
i.
advising the Board on risk management matters, including solvency needs;
ii.
overseeing the risk management arrangements of the Group;
iii.
monitoring the emerging and principal material risks facing the Group, ensuring appropriate arrangements are in place
to identify, manage and mitigate risks effectively, and that appropriate levels of capital are held in relation to these
risks;
iv.
recommending the Group’s risk strategy and risk appetite for approval by the Board;
v.
approval of the Risk Management Plan;
vi.
reviewing the outputs of the ORSA process, the internal model and the conclusions of model validation, making
recommendations to the Board on capital adequacy and the ORSA;
vii.
reviewing the Group’s investment strategy framework and investment portfolio disposition and performance to ensure
these remain within risk appetite and consistent with the Group’s investment strategy; and
viii. oversight of the Risk function.
23
Governance, Conduct & Remuneration Committee
Members: Susan McInnes (Chair), Sylvie Paquette, Andy Parsons & Sally Bridgeland
The GCR Committee is a committee of the Board. Membership of the Committee comprises four non-executive Directors, one
of whom acts as Chair of the Committee.
The Committee plays an important role in assisting the Board in its oversight of customer, conduct, compliance and ESG
matters and has oversight of the robustness of the governance framework, delivery of the ESG strategy and internal policies for
the Group. The Committee is responsible for the oversight of RSA’s Remuneration Policy and ensuring this promotes the long-
term sustainable success of the Group. This includes reviewing and setting the remuneration of executive directors and the
Chair of the Board. The Committee also reviews workforce remuneration and related policies and the alignment of incentives
and rewards with culture and takes these into account when setting the policy for executive director remuneration. The
Committee appointed PwC as its independent adviser during the year.
The Committee also has oversight of customer and conduct risks.
Operating Committee
The Operating Committee is the management committee that assists the Chief Executive Officer in discharging his
responsibilities and delegated authority. It is not a committee of the Board.
The Operating Committee is collectively responsible for implementing strategy and delivering performance. The members have
a broad range of skills and expertise that are updated through training and development. Membership of the Operating
Committee currently comprises Ken Norgrove and Karim Hirji, who replaced Ken Anderson as Chief Financial Officer from 13
February 2025 and key functional and business leaders. The CEOs of the European and Ireland businesses regularly attend
meetings to provide updates on their regions.
24
Report of the Directors
Directors
Mark Hodges (Chair)
Ken Anderson (resigned 13 February 2025)
Karim Hirji (appointed 13 February 2025)
Sally Bridgeland
Rosie Harris
Mathieu Lamy
Louis Marcotte
Susan McInnes
Ken Norgrove
Andy Parsons
Sylvie Paquette
Corporate governance statement
An overview of the corporate governance code applied by the Group is set out in the Corporate Governance Report on pages
19 to 21.
Dividend
Ordinary interim dividends of
£82m
and
£100m
were paid in July 2024 and November 2024 respectively (2023: £nil). The
Directors do not recommend the payment of a final dividend for the year ended 31 December 2024 (2023: £nil). The Group paid
£8m
of dividends to its preference shareholders during the period (2023: £9m), including £3m of accrued dividends on
cancellation of the preferred shares in issue.
Going concern
The consolidated financial statements have been prepared on a going concern basis. In adopting the going concern basis, the
Board have reviewed the Group’s ongoing commitments over the next twelve months. The Board’s assessment included review
of the Group’s strategic plans and latest forecasts, capital position, and liquidity including on demand capital funding
arrangements with IFC. The risk profile, both current and emerging, has been considered, as well as the implications for capital.
These assessments include sensitivity analysis and stress testing and scenario analysis on forward-looking capital projections,
assessing a combined 1-in-10 year market risk shock, a 1-in-20 year catastrophe shock, and reduction of longer-term
underwriting profitability. Key risk indicators demonstrate that the risk appetite is aligned to the available capital. Risk
management strategies are in place to assess and mitigate climate risk, with stress and scenario testing and climate scenario
analysis informing the Group’s policies and standards, pricing, risk selection and reinsurance. The Board have considered the
impact of events after the balance sheet date with none identified which could impact the Group’s ability to continue as a going
concern.
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 over the next twelve months from the date of the approval of the consolidated financial
statements.
Share capital
On 12 June 2024, the Group’s Preferred Shareholders were invited to tender their preference shares and to vote on their
cancellation. Following approval on 16 July 2024 at a General Meeting of shareholders, all 125,000,000 preferred shares were
cancelled for total cash consideration of £155m.
On 16 July 2024, at a General Meeting of shareholders, a resolution was passed to implement a reduction of capital by
cancelling the Group’s entire share premium account, resulting in the creation of distributable reserves.
Further information on the Group’s share capital is provided in note 17 - Share capital.
Streamlined energy and
carbon reporting
We have reported on all sources of GHG emissions as required by the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013 and the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018. The 2024 data covers the period 1 January to 31 December.
Our reporting has been conducted in accordance with the World Resources Institute’s GHG Protocol Corporate Accounting and
Reporting Standard.
We have consolidated our organisational boundary according to the operational control approach, which includes emissions
from all operations. Where data is not provided by an operating entity, or if the entity has less than 50 full-time equivalent
employees, values have been estimated using either extrapolation of intensities from similar sites within RSA or using the
previous data as a proxy.
All conversion factors have been sourced from recognised public sources, including the UK’s Department for Business, Energy
& Industrial Strategy, the International Energy Agency and the GHG Protocol’s stationary combustion tool.
IFC has committed to achieving net zero by 2050, including an interim goal to halve operations emissions by 2030 from a 2019
baseline. Operations emissions include all known sources of Scopes 1 and 2, and Scope 3 employee business travel and
waste, water and paper consumption. All emissions estimates have been calculated following the GHG protocol.
25
We are reporting our Scope 2 market-based emissions to reflect our purchase of REGOs at UK sites where we are directly
responsible for energy procurement or have engaged with landlords to switch to a renewable supply. We now secure REGOs
for over 90% of the electricity we purchase directly in the UK. This is a decrease in the proportion of renewable energy
purchased on the prior year due to the acquisition and integration of DLG real estate into our portfolio
RSA continues to deliver meaningful emissions reductions versus the 2019 baseline. Our Scope 1 and Scope 2 reductions are
principally from the execution of RSA’s real estate plan, which includes a rationalised footprint and relocations to lower-
emissions locations. Business travel related emissions are continuing to stabilise into a pattern more consistent with life before
the COVID pandemic. We are making progress on our goals and remain on track towards achieving our interim target of halving
operations emissions by 2030, despite a reported increase in our total GHG operations emissions this year on the prior year’s
emissions.
Data has been subject to quality control by our external carbon footprint verifiers and consultants, EcoAct. EcoAct has
supported RSA in our GHG emissions disclosures for seven years. We continue to consolidate our approach to the capturing
and reporting of environmental data across IFC and reconcile the potential impact of associated carbon reduction strategies
across the global business. We expect to resume formal assurance of GHG emissions data in future IFC Group level disclosure.
As we progress further with this consolidation, we will then embark on assurance of our GHG inventory.
Baseline
Year
tCO
2
e emissions
2024
2023
2022
2021
2020
2019
Scope 1
1,002
1,051
1,343
1,461
1,371
2,109
Scope 2 (location-based
LB
)
1,741
1,622
1,741
2,371
2,821
3,845
Scope 2 (market-based
MB
)
732
793
994
1,853
2,011
-
Scope 3
2,801
2,143
1,368
446
1,011
3,506
Business travel
2,313
1,781
1,017
178
679
3,124
Scope 3 Waste, Water and Paper
488
362
351
268
332
383
Total emissions (Scope 1, 2, 3)
LB
5,545
4,816
4,452
4,278
5,203
9,460
Total emissions (Scope 1, 2, 3)
MB
4,535
3,987
3,705
3,760
4,393
-
Intensity ratio:
Gross tonnes CO
2
e per FTE
LB
0.93
0.75
0.71
0.70
0.78
1.40
Gross tonnes CO
2
e per FTE
MB
0.76
0.62
0.59
0.61
0.66
-
Global energy use (kWh)
2024
2023
2022
2021
Electricity (kWhs)
7,203,129
6,858,057
8,199,297
10,244,138
Onsite thermal energy; gas and diesel
(kWhs)
4,408,617
4,868,113
6,638,719
7,655,848
Transportation - vehicles (kWhs)
1,626,437
1,625,434
1,383,309
548,268
Total energy use
13,238,183
13,351,604
16,221,325
18,448,254
Notes
All figures have been restated to account for the sale of operations previously under RSA control and the acquisition of DLG. Figures are also
restated as data availability improves.
The GHG referenced in the table cover:
Scope 1: Direct emissions from RSA’s activities, including natural gas consumption, diesel and company-owned vehicles.
Scope 2: Indirect emissions from purchased electricity, district cooling and district heating. This year we are reporting Scope 2 emissions
according to two different methodologies (dual reporting): (i) the location-based method reflects the average emissions intensity of grids on
which energy consumption occurs (using primarily grid-average emission factor data); and (ii) the market-based method, which takes into
account emissions from electricity that companies have purposefully chosen. The market-based method takes into account emissions factors
from contractual instruments, including contracts for the purchase of REGOs and similar environmental attributes. For more information see The
Greenhouse Gas Protocol Scope 2 Guidance.
Scope 3: Emissions relating to RSA activities not within our direct control, including business travel, water supply, wastewater treatment, paper
consumption and waste generated. These are the only Scope 3 categories included.
26
Business travel: Emissions from flights, trains and vehicles not owned by the organisation.
Methodology and approach: Operations emissions
Operational boundary
We define our operational boundary based on an operation control approach as defined by the GHG Protocol, including our owned and leased
assets where we can influence how spaces and vehicles are utilised.
Data collection
Data is obtained from data owners on a site-by-site basis. Data is collected from a variety of sources and formats.
For building energy consumption, actual consumption data is requested for all sites with floor area greater than 8,000 square feet or 50 Full
Time Equivalents (FTEs), with all others estimated.
Data validation procedures
Data owners are requested to submit data sources for activities pertaining to more than 1% of emissions, to allow for review of information and
internal quality assurance.
Data owners are responsible for data integrity procedures for the data submitted quarterly. Data validation is performed by a third party
consultancy, including data integrity, reported activity, and supporting evidence checks. The calculated GHG inventory is further reviewed by
IFC’s corporate Climate team, including trend analysis, comparison with prior year data, and sample testing.
Emission factors
Emission factors applied are defined on a metric-by-metric basis. Unless otherwise specified, the latest data published by the relevant emissions
factor provider is applied to the reporting year.
Charitable donations
During the year donations to charities were made amounting to
£1.57m
(2023 £1.24m).
Political donations
£nil
political donations were made during the year (2023: £nil).
Conflicts of interest
In accordance with section 175 of the Companies Act 2006, each director has a duty to avoid conflicts of interest. Under Articles
15.1 and 15.2 of the Company’s Articles of Association, conflicts of interest may be authorised by the Board or a Board
committee. Directors are required to notify the Company Secretary when a potential conflict of interest arises. Each Director’s
conflicts of interest are reviewed on an annual basis. Any director who has declared a conflict of interest shall not count towards
the quorum or vote on any resolution to authorise the conflict of interest and, at the Board’s discretion, may be excluded from
any meeting at which the conflict of interest is under consideration. Where a conflict of interest is authorised, restrictions may be
imposed on the conflicted director, such as excluding the director from the discussion or restricting the receipt of information in
connection with the conflict of interest.
The Board confirms that it has reviewed the schedule of directors’ conflicts of interest during the year and that the procedures in
place operated effectively in 2024. The Board also considers at each meeting whether there is any potential conflict of interest
for the shareholder-nominated Directors.
Directors’ indemnity
Article 85 of the Articles of Association provides that, among other things and insofar as permitted by law, the Company may
indemnify its directors against any liability and may purchase and maintain insurance against any liability. The Company has
granted an indemnity to each of the directors pursuant to the power conferred by Article 85.1 of the Articles of Association.
The indemnities granted constitute qualifying third-party indemnity provisions, as defined by section 234 of the Companies Act
2006 and is in addition to appropriate insurance cover. The Company believes that it promotes the success of the Company to
provide this indemnity to its Directors in order to ensure that RSA attracts and retains high calibre Directors through competitive
terms of employment in line with market standards. The Directors and Officers of the Company and its subsidiaries also have
the benefit of Directors & Officers insurance which provides suitable cover in respect of legal actions brought against them.
In addition, the Company maintains a pension trustee liability insurance policy for the directors of SAL Pension Fund Limited
and Royal & Sun Alliance Pension Trustee Limited, subsidiaries of the Group, in relation to such person’s role as a trustee of an
occupational pension scheme. This insurance constitutes a qualifying pension scheme indemnity provision under section 235 of
the Companies Act 2006. These insurances were in force during the year ended 31 December 2024 and remain in force as at
the date of this report.
Workforce and stakeholder engagement statements
An overview of how the Directors have fostered relations with the Group’s suppliers, customers and other key stakeholders is
included in the Company’s s.172 statement on pages 8 to 10 in the Strategic Report.
Further information on workforce engagement, as required by the Companies Act 2006 is also included in the Company’s s.172
statement on pages 8 to 10.
Modern slavery
As per section 54(1) of the Modern Slavery Act 2015, our Slavery and Human Trafficking Statement is published annually on
our website. The statement covers the activities of the Group and details policies, processes and actions we have put in place to
ensure that appropriate steps are taken to protect against slavery and human trafficking in our supply chains and all parts of our
own business.
27
Management report
The Strategic report is considered to form the management report for the purpose of DTR 4.1.8.R.
Directors’ report
The Directors’ report for the year ended 31 December 2024 was approved by order of the Board and signed on its behalf by:
Jonathan Cope
Company Secretary
4 March 2025
28
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE
FINANCIAL STATEMENTS
The directors are responsible for preparing the Annual Report and the RSA Insurance Group Limited (Group) and parent company
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare Group and parent company financial statements for each financial year.
Under that law
they have elected to prepare the Group and parent company financial statements in accordance with UK-adopted International
Accounting Standards (IAS) and applicable law.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and parent company and of the Group’s profit or loss for that period. In preparing each of the Group
and parent company financial statements, the directors are required to:
i.
select suitable accounting policies and then apply them consistently;
ii.
make judgements and estimates that are reasonable, relevant and reliable;
iii.
state whether they have been prepared in accordance with UK-adopted IAS and the requirements of the Companies Act
2006 and applicable law;
iv.
assess the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern; and
v.
use the going concern basis of accounting unless they either intend to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to
ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report and
Corporate Governance Statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, the financial statements will form part of the annual financial
report prepared using the single electronic reporting format under the Technical Detail European Single Electronic Format (ESEF)
Regulation.
The auditor’s report on these financial statements provides no assurance over the ESEF format.
Responsibility statement
We confirm that, to the best of our knowledge:
i.
The financial statements on pages 39 to 43, prepared in accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position and profit or loss of the parent company and the undertakings
included in the consolidation taken as a whole.
ii.
The Strategic Report on pages 1 to 3 includes a fair review of the development and performance of the business and the
position of the parent company and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
iii.
So far as each director of the Board is aware, there is no relevant audit information (as defined in section 418(3) of the
Companies Act 2006) of which the Company’s external auditor is unaware, and each director has taken all reasonable steps
to make himself/ herself aware of, and to establish that the external auditor is aware of, any relevant audit information.
We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and performance, business model and strategy.
Karim Hirji
Ken Norgrove
Chief Financial Officer
Chief Executive Officer
4 March 2025
4 March 2025
29
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RSA INSURANCE GROUP LIMITED
Opinion
In our opinion:
•
RSA Insurance Group Limited’s group financial statements and parent company financial statements (the “financial
statements”) give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December
2024 and of the group’s profit for the year then ended;
•
the group financial statements have been properly prepared in accordance with UK adopted international accounting
standards;
•
the parent company financial statements been properly prepared in accordance with UK adopted international accounting
standards as applied in accordance with section 408 of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of RSA Insurance Group Limited (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 31 December 2024 which comprise:
Group
Parent company
Consolidated statement of financial position as at 31
December 2024
Statement of comprehensive income
Consolidated income statement for the year then
ended
Statement of financial position at 31 December 2024
Consolidated statement of comprehensive income for
the year then ended
Statement of changes in equity for the year then
ended
Consolidated statement of changes in equity for the
year then ended
Cash flow statement for the year then ended
Consolidated statement of cash flows for the year
then ended
Related notes 1 to 12 to the financial statements
including
material accounting policy information
Related notes 1 to 38 to the financial statements,
including
material accounting policy information
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international
accounting standards and as regards to the parent company financial statements, as applied in accordance with section 408 of
the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion. We are independent of the Group and Parent Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and we
remain independent of the Group and Parent Company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Parent
Company’s ability to continue to adopt the going concern basis of accounting included;
•
We confirmed our understanding of management’s going concern assessment process and engaged with
management early to ensure all key factors were considered in their assessment.
•
We evaluated management’s going concern assessment which included assessing their long-term business and
strategic plans, liquidity and funding positions. Management also performed stress tests and reverse test scenarios
which included principal and emerging risks. We challenged the plausibility of these based on our knowledge and
understanding of the Group and available external data.
30
•
We assessed management’s consideration of how solvency and liquidity has been managed in response to the
current economic environment and evaluated management’s liquidity and solvency projections, and their associated
stress and scenario testing (including reverse stress testing).
•
We challenged the key assumptions included within management’s going concern assessment related to the
performance of the Group, which were drawn from the Group’s business plan.
•
We evaluated the consistency, arithmetical accuracy and reasonableness of the data and assumptions used in
management’s going concern assessment.
•
We reviewed the Group’s going concern disclosures included in the annual report for conformity with the reporting
standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern
for a period of 12 months to the 4 March 2026.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
Group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
•
As the primary team, we performed an audit of the complete financial information of
four entities with the exception of investment related balances, for which we instructed
Ernst & Young LLP (EY) Canada to audit, as investments are managed centrally by
Intact Financial Corporation (the ultimate parent company). We also instructed Ernst
& Young Chartered Accountants (EY) Ireland to complete audit procedures on specific
balances for the RSA Insurance Ireland DAC component.
•
We performed full scope procedures for all audit areas except those as outlined in the
tailoring the scope section.
Key audit matters
•
Valuation of Liability for Incurred Claims
•
Valuation of Deferred Tax Asset
Materiality
•
Overall Group materiality of £56m (2023: £39.9m) which represents 2% of Net Assets.
•
Parent Company materiality of £60m (2023: £38m), which is 2% of Net Assets of the
Parent Company.
First year audit considerations
In preparation for our first-year audit of the 31 December 2024 Financial Statements, we performed a number of transitional
procedures. Following our selection, we undertook procedures to establish our independence of the Group. We used time prior
to commencing any audit work to gain an understanding of the business issues and meet with key management.
We were appointed auditor and signed an engagement letter on 16 July 2024 and were independent from 1 January 2024.
Our transition activities included shadowing the former auditors KPMG LLP (KPMG) at key meetings with management, such as
meetings of the Audit and Risk Committee. We reviewed KPMG’s 2023 audit work papers and gained an understanding of their
risk assessment and key judgements.
We used the understanding the audit team had formed through the above activities and our walkthroughs over key processes
and controls to assist us with establishing our audit base.
An overview of the scope of the parent and group audits
Tailoring the scope
In the current year our audit scoping reflects the new requirements of ISA (UK) 600 (Revised). We have followed a risk-based
approach when developing our audit approach to obtain sufficient appropriate audit evidence on which to base our audit opinion.
We performed risk assessment procedures, to identify and assess risks of material misstatement of the Group financial
statements and identified significant accounts and disclosures. When identifying components at which audit work needed to be
performed to respond to the identified risks of material misstatement of the Group financial statements, we considered our
understanding of the Group and its business environment, the potential impact of climate change, the applicable financial
framework, the Group’s system of internal control at the entity level, the existence of centralised processes, applications and
any relevant internal audit results.
31
We identified four entities (detailed below) as individually relevant components to the Group. These were due to relevant events
and conditions underlying the identified risks of material misstatement of the Group financial statements being associated with
the reporting components or a pervasive risk of material misstatement of the Group financial statements or a significant risk or
an area of higher assessed risk of material misstatement of the Group financial statements being associated with the
components.
For those individually relevant components, we identified the significant accounts where audit work needed to be performed at
these components by applying professional judgement, having considered the group significant accounts on which full scope
procedures will be performed, the reasons for identifying the financial reporting component as an individually relevant
component and the size of the component’s account balance relative to the Group significant financial statement account
balance.
We, as the primary team, performed full scope procedures for the following entities:
•
Royal & Sun Alliance Insurance Limited
•
RSA Luxembourg S.A.
•
The Marine Insurance Company Limited
•
Royal & Sun Alliance Reinsurance Limited
In addition, we instructed EY Ireland and EY Canada to perform specific procedures as set out below;
Component
Scope
Key
locations
RSA Insurance Ireland DAC
Reinsurance contract assets, insurance contract
liabilities, insurance revenue and insurance service
expenses.
Ireland
Intact Financial Corporation - Shared
Service Centre
Financial assets, financial assets (liabilities) related
to investments, investment property, net investment
income, net gains on investment portfolio
Canada
We then considered whether the remaining Group significant account balances not yet subject to audit procedures, in
aggregate, could give rise to a risk of material misstatement of the Group financial statements. We did not identify additional
scope required as we assessed the residual risk to not be material.
Our scoping to address the risk of material misstatement for each key audit matter is included in the Key audit matters section of
our report.
The table below illustrates the coverage obtained from the work performed. We considered total assets, total equity and total
income to verify we had appropriate overall coverage.
Full
scope
(1)
Specific
scope-
Ireland
(2)
Specific
scope
-EY
Canada
(2)
Net Assets
92%
7%
N/A
Revenue
89%
8%
N/A
Total Assets
(3)
92%
5%
67%
(1)
Full scope: audit procedures on all significant accounts covered by the primary team.
(2)
Specific scope: audit procedures for accounts as detailed in the scope above.
(3)
Out of 97% of the full scope components’ total assets, 67% was tested by EY Canada through specific scope procedures.
The audit scope of the specific scope components may not have included testing of all significant accounts within the
components. However, the testing will have contributed to the total coverage of significant accounts tested for the overall Group.
32
Involvement with component audit teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of
the components by us, as the Group audit engagement team, or by component audit teams operating under our instruction.
The Group audit engagement team interacted regularly with the component audit teams where appropriate throughout the
course of the audit, which included holding planning meetings, maintaining regular communications on the status of the audits,
reviewing key working papers and taking responsibility for the scope and direction of the audit process. The Group audit team
continued to follow a programme of oversight that has been designed to ensure that the Senior Statutory Auditor, or another
Group audit partner, has ongoing interactions with all in scope locations, including those outside the United Kingdom.
Senior
members of the audit team visited both the shared service centre component team in Canada and the specific component audit
team in Ireland in order to direct, supervise and review the work of these teams. The Group audit team interacted regularly with
the component audit teams and maintained a continuous and open dialogue, to ensure that the Group audit team were fully
aware of their progress and results of their procedures. Where relevant, the section on key audit matters details the level of
involvement we had with component auditors to enable us to determine that sufficient audit evidence had been obtained as a
basis for our opinion on the Group as a whole. This, together with the additional procedures performed at Group level, gave us
appropriate evidence for our opinion on the Group financial statements.
Climate change
Stakeholders are increasingly interested in how climate change will impact companies. The Group has determined that the most
significant future impacts from climate change on its operations will be from pricing and underwriting risk, operational risk,
reputational risk, conduct risk and regulatory compliance risk. These are explained in the required Task Force on Climate
Related Financial Disclosures in the Strategic Report. The Group has also explained their climate commitments in the Strategic
Report. All of these disclosures form part of the “Other information,” rather than the audited financial statements. Our
procedures on these unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent
with the financial statements, or our knowledge obtained in the course of the audit or otherwise appear to be materially
misstated, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any
consequential material impact on its financial statements.
The Group has explained in the Business Review and the Climate Disclosure its articulation of how climate change has been
reflected in the financial statements, including how this aligns with their commitment to the aspirations of the Paris Agreement to
achieve net zero emissions by 2050.
Significant judgements and estimates relating to climate change are included in note 9
and 11. These disclosures also explain where governmental and societal responses to climate change risks are still developing,
and where the degree of certainty of these changes means that they cannot be taken into account when determining asset and
liability valuations under the requirements of UK adopted IAS and IFRS as issued by the IASB.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating the Group’s
assessment of the impact of climate risk, physical and transition, their climate commitments and the significant judgements and
estimates disclosed in accounting policies, and whether these have been appropriately reflected in the asset values where
these are impacted by future cash flows, and in the timing and nature of liabilities recognised, following the requirements of UK
adopted IAS. As part of this evaluation, we performed our own risk assessment, supported by our climate change and economic
specialists, to determine the risk of material misstatement in the financial statements from climate change which needed to be
considered in our audit.
We also evaluated the Directors’ considerations of climate change risks in their assessment of going concern and associated
disclosures.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter.
33
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Valuation
of
Liability
for
Incurred
Claims at 31 December 2024 - £5.8bn,
(2023: £5.9bn)
Accounting policies (page 45-49)
; and
Note 10 of the Consolidated Financial
Statements (page 70-78)
We determined that the Liability for
Incurred
Claims
(LIC)
represents
a
significant balance and an area of fraud
risk as it involves significant judgment
and complexities, depends on inputs that
can be volatile and sensitive to changes,
and are subjective in nature, which could
create
opportunity
for
management
override of internal control.
Whilst there are a number of elements
which are complex and require judgment
(e.g. risk adjustment and PAA eligibility),
we have determined that the following
assumptions and areas of judgement
contain a higher risk, and we have
therefore attached our fraud risk to the
items below:
Initial
Expected
Loss
Ratios
(‘IELR’)
Discount Rates and Inflation
Periodic
Payment
Orders
(PPOs)
The impact of the Ogden rate
changes
Catastrophe losses estimates
Material Litigation (especially in
relation to COVID BI)
The appropriate
application of these
assumptions is predicat
ed on reliable
data and models.
With the assistance of EY actuaries as part of our team at Group and component
level:
We
obtained
an
understanding
of
the
Company’s
actuarial
methodologies and assessed whether they were in accordance with
IFRS 17 –
Insurance Contracts, including a particular focus on
validating the accounting policies and elections following the first
implementation of the standard in 2023.
We performed independent re-projections of the standard classes using
our own models and assessed management’s roll-forward analysis to
determine uplifts for experience through to the year-end.
For the remaining classes we performed procedures based on evidence
available from other alternative analyses, focusing on understanding,
challenging and assessing the methodology and key assumptions of
the analyses.
We performed procedures to respond to the risk on the key
assumptions:
we performed independent projections for IELR, development
patterns
and
inflation
which
involved
setting
our
own
assumptions.
we leveraged our market knowledge to perform benchmarking on
discount rates.
we performed methodology and assumptions procedures for
PPOs, catastrophe loss estimates and areas of material litigation.
This included leveraging market knowledge and benchmarks. For
PPOs we additionally performed sensitivity testing of key
assumptions.
we considered recent changes in the Personal Injury Discount
Rate ("Ogden Rate") and ensured that management had
appropriately reflected these changes in the LIC.
We tested the completeness of policy data by reconciling the policy
level claims data to the actuarial triangles used for independent
reprojections with the output then reconciled to the financial statements.
We tested the accuracy of policy data elements which were relied upon
within actuarial models in our independent re-projections of the liability
for incurred claims including premium inputs.
We considered the adequacy of the Group’s disclosures in respect of
the sensitivity of the valuation of liability for incurred claims and key
assumptions applied to key areas of judgement and estimation
uncertainty.
Key observations communicated to the Audit Committee
We found the valuation of liability for incurred claims to be acceptable and concluded RSA’s gross and net reserves are within
our reasonable ranges.
How we scoped our audit to respond to the risk and involvement with component teams
We performed full scope procedures for four entities, and specific scope audit procedures over this risk in Ireland, which
covered 98% of the risk amount.
34
Risk
Our response to the risk
Valuation of Deferred Tax Assets
(£275m, 2023: £266m)
Accounting policies (page 54 to 55);
and Note 24 of the Consolidated
Financial Statements (page 92 to 95).
The
Deferred
Tax
Assets
(DTA)
balance is significant and depends on
a number of judgmental assumptions
and estimates linked to the future
performance of the business.
Management
use
a
model
to
calculate the DTA with a key input
being the Operational Plan (Op Plan)
as the basis for forecasting the
taxable profits across a five-year
horizon on which the recoverability of
the
DTA
is
based.
Management
applies
a
series
of
judgmental
revisions to the forecast taxable
profits and considers which deferred
tax attributes can be supported for
recognition.
The significant audit risk is focused
on
the
judgemental
assumptions
applied in developing the taxable
profits forecast within the DTA model.
With the support of EY tax audit professionals:
We have considered the appropriateness of the DTA model and methodology
for compliance with IAS 12.
We have considered the year end deductible temporary differences position,
completeness and accuracy of adjustments to arrive at the taxable profits
forecast, and appropriateness of the DTA recognition principles.
We performed audit procedures over the Operational Plan including:
Reviewing the historical performance of the business.
Reviewing the historical forecasting accuracy of management by
reviewing the outcome of prior period forecasts.
Assessing internal integrity and mathematical accuracy.
Challenging the key assumptions which drive the forecast taxable
profits through comparison to historical performance and forecasting
accuracy, analysis of external information and benchmarks, where
relevant, enquiries of management as to future business planning,
and through the performance of sensitivity analysis.
We produced an independent range of forecast taxable profits and the
resulting DTA, in order to challenge management’s recorded DTA. In
constructing this range we assessed the judgemental revisions to the forecast
taxable
profits
applied
by
management
and
considered
alternative
assumptions and sensitivities.
We considered the appropriateness of the forecast period upon which the DTA
is recognised, with reference to the Group’s historic performance and levels of
forecasting accuracy, developments in the Group’s structure and strategy, and
benchmarking of the period used to other relevant organisations.
Key observations communicated to the Audit Committee
We reported the outcome of the EY independently determined range and concluded that the Group’s deferred tax asset
was within our reasonable range.
We also concluded that the deferred tax asset was materially calculated in line with applicable tax rates and laws.
How we scoped our audit to respond to the risk and involvement with component teams
•
We performed full scope audit procedures over one component (Royal & Sun Alliance Insurance Limited) which
represents 96% of the total deferred tax asset balance.
35
Prior year comparison
In the prior year, KPMG identified ‘Valuation of acquired intangible assets’ and ‘Voluntary change in accounting policy’ for parent
company’s investment in subsidiaries’ as key audit matters. Based on our risk assessment procedures we did not consider
either to be a key audit matters due to these being specific non-recurring events occurring in the prior year.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and
extent of our audit procedures.
We determined materiality for the Group to be £58 million (2023 KPMG: £39.9 million), which is 2% of net assets (2023 KPMG:
0.85% of insurance revenue). Whilst insurance revenue is a common base for materiality, we believe that net asset provides a
measure of the balance sheet strength and more closely correlates to the key performance metrics of the Group which include
Solvency II capital requirements upon which key stakeholders of the Group (policyholders, regulators, lenders and preferred
shareholders) are primarily concerned.
We determined materiality for the Parent Company to be £60 million (2023 KPMG: £38 million), which is 2% (2023 KPMG: 1.1%
net assets) of net assets.
During the course of our audit, we reassessed initial materiality and the Group materiality remained unchanged. Materiality for
the Parent Company changed from £59.1m at original assessment to £60m at final assessment due to an increase in net assets
in the parent company.
Performance materiality
The application of materiality at the individual account or balance level.
It is set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement
was that performance materiality was 50% (2023 KPMG: 65%) of our planning materiality, namely £28m (2023 KPMG: £25.9m).
We have set performance materiality at this percentage due to this being our first year of audit. The performance materiality for
the Parent Company was set at 50% of our planning materiality, namely £30m (2023 KPMG: £28.5m). We have set
performance materiality at this percentage due to this being our first year of audit.
Audit work was undertaken at component locations for the purpose of responding to the assessed risks of material
misstatement of the Group financial statements. The performance materiality set for each component is based on the relative
scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component.
In
the current year, the range of performance materiality allocated to components was £5.5m to £26.2m (2023 KPMG: £15m to
£31m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £2.8m (2023
KPMG: £1.9m) for the Group and £3m (2023 KPMG: £1.9m) for the Parent Company, which is set at 5% of planning materiality,
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.
36
Other information
The other information comprises the information included in the Annual Report and Accounts, including the Business review,
Risk management, Section 172 statement, Environment risk management, Corporate governance, Report of the directors, other
than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained
within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we
have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
•
the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
•
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the Parent Company financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on (Page 28), the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group and Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
37
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud.
The risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of
fraud rests with both those charged with governance of the company and management.
•
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined
that the most significant are the regulations, licence conditions and supervisory requirements of the Prudential
Regulation Authority (PRA) and the Financial Conduct Authority (FCA); Companies Act 2006;
•
We understood how the Group and the Parent Company is complying with those frameworks by making inquiries of
management, internal audit, and those responsible for legal and compliance matters and reviewing the Group’s
governance framework.
•
We reviewed correspondence between the Group, the PRA and FCA. We attend Audit and Risk Committees.
•
We carried out an assessment of matters reported on the Group’s whistleblowing programmes where these related to
financial statements.
•
We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might
occur by considering the controls established to address risks identified to prevent and detect fraud. We also assessed
the risk of fraud in key audit matters. Our procedures over our key audit matters and other significant accounting
estimates included challenging management on the assumptions and judgements made in determining these
estimates.
•
We designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved
inquiries of legal counsel, executive management, internal audit and reading reports of reviews performed by legal
counsel. We also performed procedures to respond to any financial statement impacts of non-compliance with laws
and regulations. These procedures were performed centrally by the Group audit team.
•
We identified and tested journal entries, including those posted with certain descriptions or unusual characteristics,
backdated journals or posted by infrequent and unexpected users.
•
The Group operates in the insurance industry which is a highly regulated environment. As such, the Senior Statutory
Auditor considered the experience and expertise of the engagement team to ensure that the team had the appropriate
competence and capabilities, involving specialists where appropriate.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at
https://www.frc.org.uk/auditorsresponsibilities
. This description forms part of our auditor’s report.
Other matters we are required to address
Following the recommendation from the audit committee we were appointed by the company on 26
th
July 2024 to audit the
financial statements for the year ending 31 December 2024 and subsequent financial periods.
•
The period of total uninterrupted engagement including previous renewals and reappointments is one year, covering the
year ending 1January to 31 December 2024.
•
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company
and we remain independent of the group and the parent company in conducting the audit.
•
The audit opinion is consistent with the additional report to the Audit Committee.
38
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006.
Our audit work has been undertaken so that we might state to the Parent Company’s members those
matters we are required to state to them in an auditor’s 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 Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Edward Jervis
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
4 March 2025
39
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2024
2023
As at 31 December
Note
£m
£m
Assets
Cash and cash equivalents
6
Financial assets
6
Investment property
6
Reinsurance contract assets
10
Income taxes receivable
Deferred tax assets
24
Property and equipment
14
Intangible assets
13
Goodwill
13
Other assets
15
Total assets
Liabilities
Insurance contract liabilities
10
Income taxes payable
Deferred tax liabilities
24
Debt outstanding
16
Other liabilities
15
Total liabilities
Equity
Total equity and liabilities
The following explanatory notes form an integral part of these consolidated financial statements.
by:
Karim Hirji
40
CONSOLIDATED INCOME STATEMENT
2024
2023
For the years ended 31 December
Note
£m
£m
Insurance revenue
10
Insurance service expense
10, 22
(3,512 )
(3,665 )
Insurance service result from insurance contracts
Expense from reinsurance contracts
10
(566 )
(808 )
Income from reinsurance contracts
10
Net expense from reinsurance contracts
(472 )
(177 )
Insurance service result
Net investment income
20
Net (losses) gains on investment portfolio
20
(119 )
Net investment return
Insurance finance expense
20
(144 )
(179 )
Reinsurance finance income
20
Net insurance financial result
(94 )
(119 )
Net investment return and net insurance financial result
Other net gains (losses)
21
(7 )
Other income and expense
21
(129 )
(56 )
Integration and restructuring costs
23
(164 )
(162 )
Finance costs
27
(10 )
(10 )
Profit (loss) before tax
(19 )
Income tax expense
24
(16 )
(70 )
Profit (loss)
(89 )
The following explanatory notes form an integral part of these consolidated financial statements.
41
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2024
2023
For the years ended 31 December
£m
£m
Profit (loss)
(89 )
Items that may be reclassified to the income statement:
Exchange (losses) gains net of tax on translation of foreign operations
(1 )
Fair value gains on FVTOCI assets net of tax
Items that will not be reclassified to the income statement:
Pension – remeasurement of defined benefit asset/liability net of tax
(34 )
(742 )
Movement in property revaluation surplus net of tax
(3 )
(3 )
(37 )
(745 )
Total other comprehensive expense
(33 )
(669 )
Total comprehensive income (expense)
(758 )
The following explanatory notes form an integral part of these consolidated financial statements.
42
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary share
capital
Ordinary share
premium
Preference
shares
Fair value
reserve
Foreign
currency
translation
reserve
Retained
earnings
Equity
For the year ended 31 December 2024
£m
£m
£m
£m
£m
£m
£m
Balance at 1 January 2024
(59 )
(243 )
Total comprehensive income
Profit for the period
Other comprehensive income (expense) for the period
(1 )
(34 )
(33 )
Transfers
1
(6 )
(4 )
(1 )
Transactions with owners of the Group
Contribution and distribution
Dividends
Ordinary shares
(182 )
(182 )
Preference shares
(8 )
(8 )
Shares issued for cash
Cancellation of preference shares
2
(125 )
(30 )
(155 )
Capital reduction
2
(1,520 )
(1,366 )
(125 )
(191 )
Balance at 31 December 2024
(63 )
For the year ended 31 December 2023
Balance at 1 January 2023
(126 )
Total comprehensive income
Loss for the period
(89 )
(89 )
Other comprehensive income (expense) for the period
(742 )
(669 )
(831 )
(758 )
Transactions with owners of the Group
Contribution and distribution
Dividends
Preference shares
(9 )
(9 )
Shares issued for cash
(9 )
Balance at 31 December 2023
(59 )
(243 )
1
Release of revaluation reserve to retained earnings on disposal of a Group occupied property
2
Following shareholder approval on 16 July 2024 the Company’s preferred shares were cancelled. The Company subsequently reduced its share capital. Refer to
note 17 - Share capital for further information.
The following explanatory notes form an integral part of these consolidated financial statements.
43
CONSOLIDATED STATEMENT OF CASH FLOWS
2024
2023
For the years ended 31 December
Note
£m
£m
Operating activities
Profit (loss) before tax
(19 )
Income tax paid
(2 )
(5 )
Adjustments for non-cash items
28
Changes in other operating assets and liabilities
28
(377 )
Net cash flows provided by (used in) operating activities
(355 )
Investing activities
Business combinations, net of cash acquired
5
(520 )
Proceeds from sale of businesses
5
Proceeds from sale of investments
Purchases of investments
(5,092 )
(3,232 )
Purchases of intangibles and property and equipment, net
(90 )
(130 )
Net cash flows used in investing activities
(582 )
(709 )
Financing activities
Payment of lease liabilities
(11 )
(10 )
Redemption of long-term borrowings
16
(40 )
Cancellation of preference shares
17
(155 )
Proceeds from issuance of ordinary shares
17
Payment of dividends on ordinary shares and preferred shares
(190 )
(9 )
Net cash flows (used in) provided by financing activities
(202 )
Net decrease in cash and cash equivalents
(81 )
(39 )
Cash and cash equivalents, net of bank overdraft at beginning of the year
Effect of exchange rate changes on cash and cash equivalents
(10 )
(3 )
Cash and cash equivalents, net of bank overdraft at end of the year
The following explanatory notes form an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
Glossary of abbreviations
12mECL |
12-month expected credit loss |
IAS |
International Accounting Standard |
AIC |
Asset for incurred claims |
IASB |
International Accounting Standards Board |
AOCI |
Accumulated other comprehensive income (loss) |
IFRS |
International Financial Reporting Standards (as |
ARC |
Asset for remaining coverage |
adopted by the UK) |
|
CAD |
Canadian Dollar, Canada’s official currency |
LIC |
Liability for incurred claims |
CGU |
Cash generating unit |
LRC |
Liability for remaining coverage |
CPI |
Consumer price index |
LTECL |
Lifetime expected credit loss |
DB |
Defined benefits |
OCI |
Other comprehensive income |
ECL |
Expected credit loss |
PAA |
Premium Allocation Approach |
EUR (€) |
Currency of the Euro zone countries in Europe |
RPI |
Retail price index |
FVTOCI |
Fair value through other comprehensive income |
SPPI |
Solely payments of principal and interest |
FVTPL |
Fair value through profit or loss |
UK |
United Kingdom |
GBP (£) |
British pound sterling, UK’s official currency |
USD |
US Dollar, United States official currency |
GMM |
General Measurement Model |
The Company is an indirect subsidiary of IFC. Its parent is 2283485 Alberta Limited (a Canadian incorporated company), a
wholly owned subsidiary of IFC, the ultimate controlling party. It operates in the UK, Ireland and Continental Europe.
These consolidated financial statements include the accounts of the Company and its subsidiaries. The Company’s significant
operating subsidiaries are listed in Appendix A. Several of the Group’s subsidiaries are regulated by the Financial Conduct
Authority and/or the Prudential Regulation Authority.
There are a small number of narrow scope amendments to standards that are applicable to the Group for the first time in 2024,
3.1 |
Basis of presentation |
44 |
3.2 |
Basis of consolidation |
45 |
3.3 |
Insurance and reinsurance contracts |
45 |
3.4 |
Financial instruments |
49 |
3.5 |
Business combinations |
53 |
3.6 |
Goodwill and intangible assets |
53 |
3.7 |
Foreign currency translation |
53 |
3.8 |
Property and equipment |
54 |
3.9 |
Investment property and rental income |
54 |
3.10 |
Leases |
54 |
3.11 |
Income taxes |
54 |
3.12 |
Share-based payments |
55 |
3.13 |
Employee future benefits |
55 |
3.14 |
Current vs non-current |
56 |
requirements of the Companies Act 2006. They were authorised for issue in accordance with a resolution of the Board of
The material accounting policies applied in the preparation of these consolidated financial statements are described below.
These policies have been applied consistently to all periods presented.
Certain comparative figures have been reclassified to conform to the presentation adopted in the current period.
The Group presents its consolidated statement of financial position broadly in order of liquidity.
Except where otherwise stated, all figures included in the consolidated financial statements are presented in millions of pounds
sterling (£m).
45
The consolidated financial statements have been prepared on a going concern basis. In adopting the going concern basis, the
Board have reviewed the Group’s ongoing commitments over the next twelve months. The Board’s assessment included review
of the Group’s strategic plans and latest forecasts, capital position, and liquidity including on demand capital funding
arrangements with IFC. The risk profile, both current and emerging, has been considered, as well as the implications for capital.
These assessments include sensitivity analysis and stress testing and scenario analysis on forward-looking capital projections,
assessing a combined 1-in-10 year market risk shock, a 1-in-20 year catastrophe shock, and reduction of longer-term
underwriting profitability. Key risk indicators demonstrate that the risk appetite is aligned to the available capital. Risk
management strategies are in place to assess and mitigate climate risk, with stress and scenario testing and climate scenario
analysis informing the Group’s policies and standards, pricing, risk selection and reinsurance. The Board have considered the
impact of events after the balance sheet date with none identified which could impact the Group’s ability to continue as a going
concern.
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 over the next twelve months, from the date of the approval of the consolidated financial
These consolidated financial statements include the accounts of the Company and its subsidiaries.
Subsidiaries are entities where the Company has the power over the relevant activities of the investee, is exposed to, or has
rights to variable returns from its involvement with the investee; and has the ability to affect those returns through its power over
the investee. All subsidiaries are fully consolidated from the date control is transferred to the Company and are deconsolidated
from the date control ceases and any gain or loss is recognised in Other net gains (losses).
In some cases, voting rights in themselves are not sufficient to assess power or significant influence over the relevant activities
of the investee or the sharing of control in a joint arrangement. In such cases, judgement is applied through the analysis of
management agreements, the effectiveness of voting rights, the significance of the benefits to which the Company is exposed
and the degree to which the Company can use its power to affect its returns from investees.
All balances, transactions, income and expenses and profits and losses resulting from intercompany transactions and dividends
Management uses judgements, estimates and assumptions when accounting for insurance and reinsurance contracts, further
details of which are provided in note 10 - Insurance and reinsurance contracts.
a)
Classification and summary of measurement models
Insurance contracts transfer significant insurance risk at the inception of the contract. Insurance risk is transferred when the
Group agrees to compensate a policyholder on the occurrence of an adverse specified uncertain future event. As a general
guideline, the Group determines whether it has significant insurance risks by comparing the benefits that could become payable
under various possible scenarios relative to the premium received from the policyholder for insuring the risk.
The Group issues insurance contracts in the normal course of business (direct business) and holds reinsurance contracts
(ceded business), under which it is compensated by other entities for claims arising from one or more insurance contracts
issued by the Group. The Group may acquire insurance and reinsurance contracts through a business combination or transfer
of contracts. All references apply to insurance contracts issued and acquired and reinsurance contracts held and acquired by
the Group, unless otherwise stated.
The Group uses different measurement models depending on the type of contact. The Group chose to apply the simplified
measurement model (the PAA) for all of its insurance and reinsurance contracts except in limited circumstances where the
GMM is required as described in the following table. The GMM is the default model for the recognition and measurement of
insurance contracts; however, there is an option to use the PAA for contracts that have a coverage period of one year or less or
if the resulting liability for remaining coverage (insurance coverage to be provided after the reporting period) is not expected to
materially differ from its measurement under the GMM.
Summary of the Group’s types of contracts and measurement models
Type of contract |
Measurement model |
All of the Group’s insurance and reinsurance contracts except for retroactive reinsurance contracts |
PAA |
Retroactive reinsurance contracts (accepted and ceded) to cover adverse development of existing |
GMM |
claims |
b)
Separating components from insurance and reinsurance contracts
Insurance and reinsurance contracts are assessed to determine whether they contain components which must be accounted for
under an IFRS Accounting Standard other than the insurance contract standard. The Group’s insurance and reinsurance
contracts do not include any components that require separation.
46
c)
Level of aggregation
Insurance and reinsurance contracts are aggregated into portfolios and groups for measurement purposes. Portfolios are
comprised of contracts with similar risks which are managed together. The Group divides its direct and ceded business into
portfolios. Management uses judgement in considering the main geographic areas, lines of business, distribution channels and
legal entities in which it operates as the relevant drivers for establishing its various portfolios. Portfolios are then divided into
groups of contracts based on expected profitability. Such groups do not contain contracts issued more than one year apart since
they are further subdivided into annual cohorts.
Portfolios of insurance contracts that are assets and those that are liabilities and portfolios of reinsurance contracts that are
assets and those that are liabilities are presented separately in the Consolidated statement of financial position.
d)
Recognition
Groups of insurance and reinsurance contracts are recognised from the earliest of the following:
i.
the beginning of the coverage period (except for proportionate coverage reinsurance that could be recognised at a later
date when any underlying insurance contract is initially recognised);
ii.
the date that the first payment is due; or
iii.
the date when facts and circumstances indicate that the group of contracts is potentially onerous.
Groups of contracts are established on initial recognition and their composition is not revised subsequently.
Any premiums received before the recognition of the corresponding group of insurance contracts are recognised as deferred
revenues in Other liabilities. When the group of contracts are recognised as per above the premiums received are reclassified to
the liability for remaining coverage.
e)
Contract boundary
The measurement of a group of contracts includes all the future cash flows within the boundary of each contract.
Cash flows are within the boundary of insurance and reinsurance contracts if they arise from substantive rights and obligations
that exist during the reporting period in which the Group can compel the policyholder to pay the premiums or has a substantive
obligation to provide the policyholder with services.
A substantive obligation or right ends when the Group has the practical ability to reassess risks and can set a price or level of
benefits that fully reflects those risks.
f)
Measurement models
The carrying amount of a group of insurance and reinsurance contracts at the end of each reporting period is comprised of the
following:
Component | Description | Relates to |
Liability for | The obligation to provide coverage after the reporting period for insured events | Future service |
remaining | that have not yet occurred. | |
coverage | ||
Liability for incurred | The obligation to investigate and pay valid claims for insured events that have | Past service |
claims | already occurred, including events that have occurred but for which claims have | |
not been notified, and other incurred insurance expenses. | ||
Asset for remaining | The right to receive coverage from a reinsurer after the reporting period for | Future service |
coverage | reinsured events that have not yet occurred. | |
Asset for incurred | The right to receive compensation for reinsured events that have already | Past service |
claims | occurred, including events that have occurred but for which reinsured claims | |
have not been reported. |
Premium Allocation Approach
The Group applies the PAA when measuring the liability for remaining coverage as follows:
Description | |
Overview | The PAA is a simplified measurement model which may be applied to insurance contracts when: |
i. the coverage period is one year or less; or | |
ii. for contracts longer than one year, and there is no material difference in the liability for | |
remaining coverage between the PAA and the GMM. | |
Contracts applying | The Group applies the PAA to all its insurance and reinsurance contracts, except in limited circumstances |
this model | where the GMM is required. |
47
Description | |
Initial and | The liability for remaining coverage includes: |
subsequent | i. premiums received; |
| measurement | ii. minus insurance acquisition cash flows paid net of the amortisation of the insurance |
acquisition cash flows recognised; | |
iii. minus any amounts recognised as insurance revenue for the services provided; | |
iv. minus any investment component paid or transferred to the liability for incurred claims; and | |
v. plus any loss component for onerous contracts. | |
Insurance | Insurance acquisition cash flows are costs directly attributable to selling or underwriting a portfolio of |
acquisition cash | insurance contracts and are presented in the liability for remaining coverage. These cash flows include |
flows | direct costs such as commissions and allocation of indirect costs such as salaries, rent and technology |
costs. | |
Management uses judgement in determining the driver s used to allocate indirect costs to groups of | |
insurance contracts. | |
Onerous contracts | The Group assumes that no contracts in a portfolio are potentially onerous at initial recognition unless |
facts and circumstances indicate otherwise. | |
The Group has developed a methodology for identifying indicators of possible onerous contracts, which | |
includes internal management information, forecast information and historic experience (refer to Onerous | |
contracts below). | |
Other policies | The Group: |
i. does not discount the liability for remaining coverage; and | |
ii. allocates insurance acquisition cash flows to related groups and amortises them over the | |
coverage period of those groups. | |
Reinsurance | Reinsurance contracts are measured on the same basis as insurance contracts, except: |
| contracts | i. they are adapted to reflect the features of reinsurance contracts that differ from insurance |
contracts, for example the generation of expenses or reduction in expenses rather than | |
revenue; | |
ii. they include an allowance for non-performance risk by the reinsurer; and | |
iii. the risk adjustment represents the amount of risk being transferred to the reinsurer. |
For contracts measured under PAA, the Group measures its liability for incurred claims as follows:
Generally, the liability for incurred claims is discounted to consider the time value of money.
However, for contracts measured
under the PAA only, the Group is not required to adjust future cash flows for the time value of money and the effect of financial
risk if those cash flows are expected to be paid or received in one year or less from the date the claims are incurred. The Group
has elected to discount all of its liability for incurred claims.
The Group estimates the liability for incurred claims as the fulfilment cash flows related to incurred claims. The fulfilment cash
flows incorporate, in an unbiased way, all reasonable and supportable information available without undue cost or effort about
the amount, timing and uncertainty of those future cash flows. They reflect current estimates from the perspective of the Group
and include an explicit risk adjustment.
Liability for incurred claims include periodic payment orders which are settlements in the form of annuities awarded by UK
courts on some high value injury claims where the claimant's quality of life has been impaired due to severe injuries. These
annuities are payable until death and increase annually, applying a defined index set in the court decision, usually linked to care
provider professionals' salaries and are eligible for reinsurance where applicable.
Refer to note 10.4 Significant accounting judgements, estimates and assumptions for more details.
Onerous contracts
A group of contracts is onerous at initial recognition if there is a net outflow of fulfilment cash flows.
As a result, a liability for the
net outflow is recognised as a loss component within the liability for remaining coverage and a loss is recognised immediately in
Insurance service expense.
The loss component is then amortised over the coverage period to offset incurred claims in
Insurance service expense. The loss component is measured on a gross basis but may be mitigated by a loss recovery
component if the contracts are covered by reinsurance.
At initial recognition, the loss-recovery component is calculated by multiplying the loss recognised on the underlying insurance
contracts and the percentage of claims on the underlying insurance contracts the Group expects to recover from the group of
reinsurance contracts. The loss recovery component is included in the asset for remaining coverage and the recovery is
recognised immediately in Income from reinsurance contracts.
The loss recovery is subsequently amortised in Income from
reinsurance contracts.
48
During the coverage period, if facts and circumstances indicate that a group of insurance contracts is onerous, the Group
applies the same analysis it has performed for groups potentially onerous at initial recognition.
General Measurement Model
The Group applies the GMM when measuring the liability for remaining coverage as follows:
Description | |
Overview | The GMM is the d efault model to measure insurance contracts using updated estimates and assumptions |
that reflect the timing of cash flows and any uncertainty relating to insurance contracts. | |
The liability for remaining coverage includes: | |
i. Fulfilment cash flows are measured using current estimates and are comprised of: | |
• discounted estimates of future cash flows; and | |
• a risk adjustment for non-financial risk (risk adjustment) which is the compensation | |
required for bearing uncertainty. | |
ii. Contractual service margin, which is the unearned profit that is recognised as services are | |
provided. | |
Contracts applying | The Group applies the GMM to a limited number of contracts for retroactive reinsurance contracts |
this model | covering adverse development of existing claims. |
Initial and | At initial recognition, unless the group of contracts is onerous, the contractual service margin is measured |
subsequent | at an amount that results in no income or expenses arising from: |
measurement | i. initial recognition of fulfilment cash flows; |
ii. any cash flows arising from the contracts in the group at that date; and | |
iii. any amount arising from the derecognition of assets or liabilities previously recognised for | |
cash flows related to the group. | |
Subsequently, the contractual service margin is adjusted for: | |
i. the effect of any new contracts; | |
ii. interest accreted at the discount rates at initial recognition (locked-in discount rate); | |
iii. changes in fulfilment cash flows relating to future service, except to the extent that such: | |
• increases exceed the contractual service margin, in which case the excess is | |
recognised as a loss in the Consolidated income statement and a loss component is | |
recognised; | |
• decreases are allocated to the loss component, reversing losses previously recognised | |
in the Consolidated income statement; | |
iv. the effect of any currency exchange differences; and | |
v. amounts recognised as insurance revenue for services provided, determined by allocating | |
the contractual service margin over the current and remaining service coverage period. | |
Changes in fulfilment cash flows related to current services are recognised immediately in the | |
Consolidated income statement which include: | |
i. changes in risk adjustment for expired risk; and | |
ii. experience adjustments which are the difference between estimated premiums and claims | |
and other insurance service expenses incurred in the period. | |
Onerous contracts | Groups of contracts are assessed as onerous when fulfilment cash flows exceed the carrying amount of |
the liability for remaining coverage. | |
Reinsurance | Reinsurance contracts are measured on the same basis as insurance contracts, except: |
| contracts | i. they include an allowance for non-performance risk by the reinsurer; |
ii. the risk adjustment represents the amount of risk being transferred to the reinsurer; | |
iii. day 1 gains/losses are recognised initially as a contractual service margin and released to | |
the Consolidated income statement as the reinsurer renders services, except for day 1 | |
losses related to events before initial recognition; and | |
iv. changes in fulfilment cash flows adjust the contractual service margin only to the extent that | |
they relate to changes in underlying fulfilment cash flows that have adjusted the underlying | |
contractual service margin. Any changes to the reinsurance contracts’ fulfilment cash flows | |
outside of this limit are recognised in the Consolidated income statement. |
49
g)
Modification and derecognition
The Group derecognises insurance contracts when:
i.
the rights and obligations relating to the contract are extinguished; or
ii.
the contract is modified such that it results in a change in the measurement, substantially changes the contract
boundary, or requires the modified contract to be included in a different group.
In such cases, the Group derecognises the initial contract and recognises the modified contract as a new contract. When a
modification is not treated as a derecognition, the Group recognises amounts paid or received for the modification as an
adjustment to the relevant liability for remaining coverage.
h)
Insurance revenue
Insurance revenue on direct business is allocated over the coverage period and includes:
i.
premium receipts net of cancellations and sales taxes (excluding any investment component); and
ii.
other insurance revenue which includes fees collected from policyholders in connection with the costs incurred for
the Group’s yearly billing plans.
i)
Insurance service expense
Insurance service expense includes fulfilment and acquisition cash flows which are costs directly attributable to insurance
contracts and are comprised of both direct costs and an allocation of indirect costs. It is composed of the following:
i.
incurred claims and other insurance service expenses, which are fulfilment cash flows and include direct incurred
claims and non-acquisition costs directly related to fulfilling insurance contracts;
ii.
amortisation of insurance acquisition cash flows; and
iii.
losses and reversal of losses on onerous contracts.
The Group has elected to present changes in risk adjustment related to the non-financial portion in Insurance service result and
changes in the financial portion (unwinding and change in discount rates) in Net insurance financial result.
j)
Insurance finance income and expense
Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts arising
from:
i.
the discount unwinding;
ii.
changes in discount rates;
iii.
the effect of financial risk and changes in financial risk; and
iv.
net foreign currency gains (losses).
The Group has elected to record changes in discount rates in Net insurance financial result.
k)
Net expense from reinsurance contracts
Net expense from reinsurance contracts comprises amounts expected to be recovered from reinsurers less other fulfilment
expenses (Income from reinsurance contracts) and an allocation of reinsurance premium paid (Expense from reinsurance
contracts).
The Group treats reinsurance cash flows that are contingent on claims of the underlying contracts as part of the amounts
expected to be recovered from reinsurers and includes commissions not contingent on claims as a reduction of the allocation of
reinsurance premiums.
l)
Investment component
The Group identifies the investment component of a contract by determining the amount that it would be required to repay to the
policyholder in all scenarios with commercial substance. These include circumstances in which an insured event occurs or the
contact matures or is terminated without an insured event occurring. Investment components are excluded from insurance
Management uses judgements, estimates and assumptions when accounting for financial instruments, further details of which
are provided in note 9 – Financial risk.
Classification and measurement of financial instruments
Financial assets
Business model assessment
The Group determines its investment business model by considering its insurance business. In addition, judgement is used in
concluding which model aligns best with its core business objectives and practices. Factors that are used in business model
decisions include how insurance business generate profits and cash flow, significant risks facing the business on asset and
liability fronts, how compensation is determined for portfolio managers responsible for managing investments, as well as
50
historical and projected turnover of the investment portfolio to fund insurance business on a day-to-day basis. The Group’s
business models fall into two categories, which are indicative of the key strategies to generate returns:
i.
the Group’s primary business model is held-to-collect and sell which provides a desired flexibility to support the
Group’s insurance business i.e., contractual cash flows from financial assets are collected by holding such
investments, and these financial assets are sold when required to fund insurance contract liabilities; and
ii.
the Group also carries certain financial assets under a held-to-collect business model where the emphasis is to collect
contractual cash flows. Sales are incidental to this objective and are expected to be insignificant or infrequent.
The Group also specifically designates, on an individual basis, a portion of investments as FVTPL to reduce accounting
mismatch in the Consolidated income statement. This designation is irrevocable.
SPPI assessment
Financial assets which are held within held-to-collect and sell and held-to-collect business models are assessed to evaluate if
their contractual cash flows are comprised of SPPI. Contractual cash flows generally meet SPPI criteria if such cash flows
reflect compensation for basic credit risk and customary returns from a debt instrument which also includes time value for
money. Where the contractual terms introduce exposure to risk or variability of cash flows that are inconsistent with a basic
lending arrangement, the related financial asset is classified and measured at FVTPL.
Debt instruments
The classification and measurement of debt instruments is dependent on the business model (refer to
Business model
assessment
above) and cash flow characteristics of the asset (refer to SPPI assessment above). They are reclassified when
and only when business model for managing those assets changes.
Amortised cost | FVTOCI | FVTPL |
Assets held for the collection of | Assets held for the collection of | Assets that do not meet the criteria for amortised |
contractual cash flows. | contractual cash flows and for selling | cost or FVTOCI are mandatorily measured at |
Cash flows represent solely | the financial assets. | FVTPL. |
payments of principal and interest. | Cash flows represent solely | Irrevocable election can be made (on an |
payments of principal and interest. | instrument-by-instrument basis) to designate | |
assets as FVTPL instead of amortised cost or | ||
FVTOCI if doing so eliminates or significantly | ||
reduces an accounting mismatch. |
Equity instruments
There are two measurement categories under which an equity instrument could be classified:
FVTPL | FVTOCI |
Default classification for all equity | Irrevocable election (on an instrument-by-instrument basis) on the date of acquisition. |
instruments. | Designation is not permitted if the equity instrument is held for trading. |
Financial instruments
Classification and measurement of the Groups most significant financial instruments under IFRS 9
Financial | |||
Classification | instruments | Description | Initial and subsequent measurement |
FVTOCI | Debt securities | Investments intended to be held for an indefinite | Initially measured at fair value using |
period and which may be sold in response to | transaction prices at the trade date. | ||
liquidity needs or changes in market conditions. | Subsequently measured at fair value | ||
using bid prices at the end of the period | |||
(except as noted below for Level 3 | |||
instruments), with changes in fair value | |||
recognised in OCI when unrealised or in | |||
the Consolidated income statement when | |||
realised or impaired. | |||
Designated as | Debt securities | A portion of the Group’s investments backing its | |
FVTPL on | backing | insurance and reinsurance contracts has been | |
initial | insurance and | voluntarily designated as FVTPL to eliminate the | |
recognition | reinsurance | accounting mismatch caused by fluctuations in | |
contracts | fair values of underlying insurance contracts due | ||
to changes in discount rates. The Group | Initially measured at fair value using | ||
ensures that the duration of debt securities | transaction prices at the trade date. | ||
designated as FVTPL is approximately equal to | Subsequently measured at fair value | ||
the duration of insurance contracts. | using bid prices (for financial assets) or |
51
Financial | |||
Classification | instruments | Description | Initial and subsequent measurement |
Classified as | Equity | All ordinary share portfolios, classified as FVTPL | ask prices (for financial liabilities) at end of |
FVTPL and | instruments | by default. | period, with changes in fair value |
instruments in | recognised in the Consolidated income | ||
a hedging | Derivative | Derivatives used for economic hedging | statement. |
arrangement | financial | purposes and for the purpose of modifying the | The effective portion of designated cash |
instruments | risk profile of the Group’s investment portfolio as | flow hedges and net investment hedges in | |
long as the resulting exposures are within the | foreign operations is recognised in foreign | ||
investment policy guidelines. | exchange gains or losses in OCI. | ||
Contingent | Financial liability arising from a business | ||
considerations | combination to be remeasured at fair value | ||
based on future performance. | |||
Other | Investments in mutual and private funds. | ||
instruments | |||
Amortised | Cash and cash | Highly liquid investments held to meet short- | Initially measured at fair value using |
cost – other | equivalents | term requirements that are readily convertible | transaction prices at the trade date. |
financial | into a known amount of cash, are subject to an | Subsequently measured at amortised cost | |
assets | insignificant risk of changes in value and have | using the effective interest method. | |
an original maturity of three months or less. | |||
Loans | Direct lending under illiquid credit investment | ||
mandates. | |||
Amortised | Debt | Financial liabilities with fixed or determinable | Initially measured at fair value at the |
cost - financial | outstanding | payments and maturity date. | issuance date net of transaction costs. |
liabilities | Subsequently measured at amortised cost | ||
using the effective interest method. |
Revenue and expense recognition
Net investment income
i.
FVTOCI debt security interest is recognised in Interest income using the effective interest rate method, including the
amortisation of premiums earned or discounts incurred as well as transaction costs;
ii.
FVTPL debt security interest is recognised in Interest income using the same methodology, except that transaction
costs are expensed as incurred.
iii.
Interest income from loans is recognised on an accruals basis, using the effective interest rate method; and
iv.
Dividends are recognised when the shareholders’ right to receive payment is established, which is the ex-dividend
date.
Net gains (losses) on investment portfolio
Gains and losses on the sale of FVTOCI debt securities are calculated on a first in, first out basis.
Transaction costs
Transaction costs associated with the acquisition of financial instruments classified or designated as FVTPL are expensed as
incurred; otherwise, transaction costs are capitalised on initial recognition and amortised using the effective interest rate
method.
Impairment of financial assets other than those classified or designated as FVTPL
The Group assesses, on a forward-looking basis, the ECL associated with its assets carried at amortised cost and FVTOCI debt
securities. The impairment methodology applied depends on whether there has been a significant increase in credit risk or an
actual default since the initial recognition of the financial asset.
Staging | Debt securities |
Stage 1 (12 months) | Credit risk of the financial instrument is low (investment grade) or credit risk has not increased |
significantly since initial recognition (performing) | |
Stage 2 (Life -time) | Credit risk has increased significantly since inception (underperforming) but the financial instrument |
is not credit impaired | |
Stage 3 (Life -time) | Financial instrument is credit impaired. See note 9 – Financial risk. |
At each reporting date, the Group recognises an allowance for debt instruments measured at FVTOCI or at amortised cost:
52
i.
the ECL does not reduce the carrying amount of FVTOCI financial assets, which remains at their fair value. Instead, an
amount equal to the allowance and its subsequent changes is reclassified from OCI to the Consolidated income
statement. Refer to note 9 – financial risk for details; and
ii.
the ECL for financial instruments measured at amortised cost reduces the carrying amount of these financial assets
with a corresponding expense recognised in the Consolidated income statement.
IFRS 9 provides a simplification where an entity may assume that the criterion for recognising lifetime ECL is not met if the
credit risk on the financial instrument is low (investment grade) at the reporting date. The Group will apply the low credit risk
simplification to its investment grade assets with a quoted market price. This represents approximatively
99%
of the debt
securities portfolio as at 31 December 2024 (31 December 2023: 99%).
For other debtors and accrued rent, the Group applies the simplified approach permitted by IFRS 9, which requires expected
Derivative financial instruments and hedge accounting
The Group enters a variety of derivative financial instruments to manage its exposure arising from financial assets and financial
liabilities. Derivative financial instruments are financial contracts whose value is derived from an underlying interest rate, foreign
exchange rate, equity or commodity instrument or index. The Group uses derivatives for economic hedging purposes and for the
purpose of modifying the risk profile of the Group’s investment portfolio, provided the resulting exposures are within the investment
policy guidelines.
Derivatives are initially measured at fair value at the trade date and subsequently remeasured at fair value at the end of each reporting
date. Derivative financial instruments with a positive fair value are recognised as assets and presented in Other assets, while derivative
financial instruments with a negative fair value are recognised as liabilities and presented in Other liabilities. Changes in fair value are
recognised in Net gains (losses) on investment portfolio unless the derivative financial instruments are part of a qualified hedging
relationship.
Derivatives that qualify for hedge accounting
In certain circumstances, derivatives meet the requirements for hedge accounting, in which case a hedging relationship is designated
and formally documented at inception by describing the risk management objective and strategy, the hedged item and the
methodology used to assess hedge effectiveness. Risk management strategies when eligible for hedge accounting have been
designated as net investment hedges in a foreign operation, cash flow hedges or fair value hedges.
i.
Net investment hedges
–
The Group uses foreign currency derivatives to manage its book value exposure to foreign
operations with a functional currency other than GBP. Where the Group has elected to apply hedge accounting, the
effective portion of gains or losses on hedging derivatives, together with foreign exchange translation gains or losses
on foreign operations, is recognised in Foreign currency gains (losses) in OCI.
ii.
Cash flow hedges
–
The Group uses “fixed to fixed” cross currency interest rate swaps to hedge changes in the fair
value of fixed income securities. Where the Group has elected to apply hedge accounting, the effective portion of
changes in the fair value of the derivatives are recognised in OCI and the ineffective portion is recognised in Net gains
(losses) on investment portfolio in the Consolidated income statement.
iii.
Fair value hedges
– The Group uses “fixed to floating” cross currency interest rate swaps and interest rate swaps to
hedge changes in the fair value of fixed income securities. Where the Group has elected to apply hedge accounting,
the gains and losses on hedging instruments are recognised in Net gains (losses) on investment portfolio in the
Consolidated income statement and the change in fair value of the hedged item that are attributable to the hedged risk
is transferred from AOCI to the Consolidated income statement.
Hedge effectiveness is evaluated at inception and throughout the term of the hedge. Hedge accounting is only applied when the Group
expects that the hedging relationship will be highly effective in achieving offsetting changes in fair value or changes in cash flows
attributable to the risk being hedged. For net investment hedges, effectiveness is evaluated by using the dollar offset method based on
spot foreign currency rates, which is not expected to result in any ineffectiveness.
Hedge accounting is discontinued prospectively when it is determined that the hedging instrument is no longer effective as a hedge,
the hedging instrument is terminated or sold, or upon the sale or early termination of the hedged item. In the case of a sale or early
termination of the hedged item, any balance remaining in AOCI as a result of hedge accounting with this hedged item is reclassified to
the Consolidated income statement.
Derivatives not designated for hedge accounting
Certain derivative instruments, while providing effective economic hedges, are not designated as hedging instruments in formal hedge
accounting relationships. Changes in the fair value of such derivatives are recognised in Net gains (losses) on investment portfolio in
Derecognition of financial assets and financial liabilities
Financial assets are no longer recognised when the rights to receive cash flows from the instruments have expired or have been
transferred and the Group has transferred substantially all the risks and rewards of ownership.
Financial liabilities are no longer
53
Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset, and the net amount is recognised on the Consolidated statement of financial
position, only when there is:
i.
a legally enforceable right to offset the recognised amounts; and
ii.
Business combinations are accounted for using the acquisition method. The purchase consideration is measured at fair value at
acquisition date. At that date, the identifiable assets acquired, and liabilities assumed, are measured at their fair value.
Acquisition-related costs are expensed as incurred. When the Group acquires a business, it assesses the financial assets
acquired and the financial liabilities assumed for appropriate classification and designation in accordance with the contractual
term, economic circumstances, and relevant conditions at the acquisition date. The excess of the purchase consideration over
the fair value of the net identifiable assets acquired and liabilities assumed in a business combination results in Goodwill. When
Goodwill is initially measured at cost, being the excess of the fair value of the consideration transferred over the Group’s share
in the net identifiable assets acquired and liabilities assumed in a business combination. After initial recognition, goodwill is
measured at cost less any accumulated impairment losses.
Goodwill is allocated to the CGU, or groups of CGUs, that are expected to benefit from the business combination in which they
arose. Impairment testing is performed at least annually, or more frequently if there are objective indicators of impairment, by
comparing the recoverable amount of a CGU with its carrying amount. Impairment testing is undertaken at the lowest level at
which goodwill is monitored for internal management purposes, which corresponds to the Group’s operating segments.
Upon disposal of a portion of a CGU through sale of a business as defined within IFRS 3, the carrying amount of goodwill
related to the portion of the CGU sold is included in the determination of gains and losses on disposal. The carrying amount is
The Group’s intangible assets consist of distribution networks, trade names and internally developed software.
Intangible assets are initially measured at cost.
The useful lives of intangible assets are assessed to be either finite or indefinite.
For each distribution network acquired, that assessment depends on the nature of the distribution network.
When the related cash
flows are expected to continue intangible assets are assessed as having an indefinite useful life.
Intangible assets with finite economic lives are amortised over their useful lives and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. Intangible assets with indefinite lives, as well as those intangible assets that
are under development, are not subject to amortisation, but are tested for impairment on an annual basis at the CGU level.
Amortisation of intangible assets is included in the Consolidated income statement.
Amortisation methods and terms of finite life intangible assets are as follows:
Intangible assets | Method | Years |
Distribution networks | Straight-line | 15 years |
Trade names | Straight-line | 5 to 10 years |
Internally developed software | Straight-line | 3 to 10 years |
The consolidated financial statements are presented in Sterling, which is the Group’s functional currency.
The functional currency is
the currency of the primary economic environment in which an entity operates.
The functional currency of most foreign subsidiaries is
their local currency.
Foreign currency transactions
Transactions denominated in foreign currencies are initially recognised in the functional currency of the related entity using the
exchange rates in effect at the date of the transaction.
i.
monetary assets and liabilities denominated in foreign currencies are translated using the closing exchange rates. Any
resulting exchange difference is recognised in the Consolidated income statement;
ii.
non-monetary assets and liabilities denominated in foreign currencies and measured at historical cost are translated
using historical exchange rates, and those measured at fair value are translated using the exchange rate in effect at
the date the fair value is determined; and
iii.
revenues and expenses are translated using the average exchange rates for the period or the exchange rate at the
date of the transaction for significant items.
54
Foreign operations
i.
assets and liabilities of foreign operations whose functional currency is other than Sterling are translated into Sterling
using closing exchange rates;
ii.
revenue and expenses, as well as cash flows, are translated using the average exchange rates for the period; and
iii.
translation gains or losses are recognised in OCI and are reclassified to the Consolidated income statement on
disposal or partial disposal of the investment in the related foreign operation.
The exchange rates used in the preparation of the consolidated financial statements are as follows:
As at | Average rate for the years | |||
31 December | 31 December | |||
2024 | 2023 | 2024 | 2023 | |
EUR | 1.21 | 1.15 | 1.18 | 1.15 |
CAD | 1.80 | 1.69 | 1.75 | 1.68 |
USD | 1.25 | 1.27 | 1.28 | 1.24 |
Property and equipment is comprised of equipment (comprising fixtures, fittings and other equipment including computer hardware and
motor vehicles) and Group occupied property. It is initially recognised at cost.
Property and equipment are carried at cost less accumulated depreciation and accumulated impairment. Cost includes expenditure
that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset only when it is probable that the
expenditure will result directly in future economic benefits to the Group and the cost can be measured reliably. After initial recognition
Group occupied property is measured at fair value. The estimated useful lives of property and equipment are as follows:
Group occupied buildings | normally 30 years |
Fixtures and fittings | 10 years |
Equipment | 3 – 5 years |
The useful economic life and residual value are reviewed on an annual basis. Where the carrying value of an asset is deemed
to be greater than its recoverable amount the asset is impaired. Impairment losses are recognised in the Consolidated income
statement. Impairment losses may be subsequently reversed if there is a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognised. If this is the case, the increased carrying amount of an asset
shall not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years.
Investment property is freehold and leasehold land and buildings that is held to earn rental income over the longer term in accordance
with the Group’s investment strategy.
Investment properties are managed by external managers and are not occupied by the Group.
Investment property is initially measured at cost, including transaction costs, and is subsequently measured at fair value. The fair value
methodology is set out in more detail in note 8 – Fair value measurement. Rental income and gains and losses are recognised in net
investment return in the Consolidated income statement. Rental income from operating leases on investment property is in the
Consolidated income statement on a straight line basis over the length of the lease.
On the lease commencement date, a right-of-use asset and a lease liability are recognised.
The right-of-use asset is initially measured
at cost, which corresponds to the value of the lease liability adjusted for any lease payment made at or before the commencement
date, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method over the
lease term.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the Group’s incremental borrowing rate for a similar asset.
Lease payments included in the measurement of the
lease liability comprise fixed payments, reduced by any incentive receivable, and exclude operational costs and variable lease
payments.
The lease liability is subsequently measured at amortised cost using the effective interest method.
The Group presents right-of-use assets in Property and equipment and lease liabilities in Other liabilities in the Consolidated balance
Current and deferred tax are recognised in the Consolidated income statement, except to the extent that the tax arises from a
transaction or event recognised either in OCI or directly in equity. Any exceptions to this, as permitted under IAS 12 Income Taxes are
disclosed in note 24 Income taxes. To the extent that deferred tax assets are recognised or derecognised in the period and it is not
possible to attribute this directly to either the Consolidated income statement or OCI, as is the case typically for brought forward tax
losses, then these amounts are attributed between the Consolidated income statement and OCI transactions using a reasonable pro
rata split based on historical movements.
55
Current taxation is based on profits and income for the year as determined in accordance with the relevant tax legislation, together with
adjustments for prior years.
Deferred tax is provided in full using the liability method on temporary differences arising between the tax bases of assets and liabilities
and the carrying amounts in the consolidated financial statements. However, if the deferred tax arises from initial recognition of an
asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting, nor
taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates (and laws) that have been enacted or
substantively enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or
the related deferred tax liability is settled.
Deferred tax in respect of the unremitted earnings of overseas subsidiaries and principal associated undertakings is recognised as an
expense in the year in which the profits arise, except where the remittance of earnings can be controlled and it is probable that
remittance will not take place in the foreseeable future, in which case the tax charge is recognised on dividends receivable.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which unused tax
losses and temporary differences can be utilised.
IFRIC 23 Uncertainty over income tax treatments is applied to the recognition and measurement of both current and deferred tax
assets and liabilities. In cases where the applicable tax regulation is subject to interpretation, the positions taken in tax returns are
recognised in full in the determination of the tax charge in the financial statements, if the Group considers that it is probable that the
taxation authority will accept those positions. Otherwise, provisions are established based on management’s estimate and judgement
of the likely amount of the liability/recovery by providing for the single best estimate of the most likely outcome or the weighted average
The fair value of the employee share options and other equity settled share-based payments is calculated at the grant date and
recognised as an expense over the vesting period. The vesting/maturity of share awards can be dependent on service and
performance conditions, as well as market conditions. The assumption of the number of shares expected to vest is revised at the end
of each reporting period, with the corresponding credit or charge recognised immediately in the Consolidated income statement.
Where an option is cancelled by an employee, the full value of the option (less any value previously recognised) is recognised at the
cancellation date.
The cash-settled awards are recognised as an expense over the vesting period with a corresponding financial liability reported in other
liabilities. This liability is remeasured at each reporting date based on the current share price, with any fluctuations in the liability also
recorded as an expense until it is settled.
The Group operates both defined contribution and defined benefit schemes.
A defined contribution scheme is a pension scheme under which the Group pays fixed contributions and has no further payment
obligations once the contributions have been paid. Contributions to defined contribution pension schemes are charged in the
Consolidated income statement in the period in which the underlying employment services are provided to the Group.
A defined benefit scheme refers to any other pension scheme; specifically, the Group’s defined benefit schemes define an amount of
pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service
and salary.
The value of the net defined benefit liability/asset recognised in the Consolidated statement of financial position for each individual
post-employment scheme is calculated as the difference between the present value of the defined benefit obligations of the scheme
and the fair value of the scheme assets out of which the obligations are to be settled.
For those schemes in a net liability (deficit) position, the net liability is recognised in the Consolidated statement of financial position in
Other liabilities. For those schemes in a net asset (surplus) position, the net asset is recognised in the Consolidated statement of
financial position in Other assets only to the extent that the Group can realise an economic benefit, in the form of a refund or a
reduction in future contributions, at some point during the life of the scheme or when the scheme liabilities are settled.
The amounts charged (or credited where relevant) in the Consolidated income statement relating to post-employment defined benefit
schemes are as follows:
i.
the current service cost: this is the present value of additional benefits payable for employees’ services provided during the
reporting period;
ii.
the past service costs and gains or losses on settlement: these are changes to the obligations already established for past
service costs that have arisen from an amendment to the terms of the scheme or a curtailment of the benefits payable by the
scheme. These are recognised at the earlier of when the terms of the scheme are amended or the curtailment occurs or,
where applicable, when the Group recognises related restructuring costs or termination benefits;
iii.
net interest on the net defined benefit liability/asset: this is determined by applying the discount rate applied to the defined
benefit obligation for the period to the net defined benefit liability/asset, and results in a net interest expense/income; and
iv.
the administration costs of operating the pension schemes.
56
Remeasurements of the net defined benefit liability/asset recognised in OCI comprises actuarial gains and losses as a result of
changes in assumptions and experience adjustments in the calculation of the defined benefit obligation, and return on scheme assets
3.14 Current vs non-current
In line with industry practice, the Group’s Consolidated statement of financial position is not presented using current and non-
current classifications, but rather broadly in order of liquidity. Most of the Group’s assets and liabilities are considered current
given they are expected to be realised or settled within the Group’s normal operating cycle.
All other assets and liabilities are
considered as non-current and generally include: Deferred tax assets and liabilities, Property and equipment, Intangible assets,
Goodwill, and Debt outstanding.
Elements of financial investments and insurance contract liabilities and reinsurance contract
4.1 Use of judgements, estimates and assumptions
The preparation of financial statements in conformity with IFRS Accounting Standards requires management to use judgements,
estimates and assumptions that can have a significant impact on the recognised amounts of assets and liabilities, disclosure of
contingent assets and liabilities as at the balance sheet date, as well as recognised amounts of revenues and expenses during
the reporting period. Actual results could differ significantly from these estimates.
The key estimates that have a risk of causing a material adjustment to the carrying amount of certain assets and liabilities in the
next twelve months are the assumptions used in the estimation of the ultimate outcome of the claim events that have occurred
but remain unsettled at the end of the reporting period; the assumptions used in the measurement of deferred tax assets; and
the assumptions used in determining the useful economic lives and recoverable amounts for intangible assets. The key areas
where management has applied judgement are the assessment of expected credit losses of financial assets and the valuation
of intangible assets.
Further information on the key judgements, estimates and assumptions is provided in the following notes:
Descriptions | Reference | Descriptions | Reference |
Business combinations and disposals | Note 5.3 | Impairment of goodwill and intangible | Note 13.2 |
assets | |||
Insurance and reinsurance contracts | Note 10.4 | Valuation and impairment of financial | Note 8 |
assets | |||
Valuation of intangible assets | Note 13 | Measurement of income taxes | Note 24.5 |
4.2 Geopolitical risk
The current geopolitical environment increases uncertainty in financial markets with a possible resurgence of trade tariffs and
inflation, including upward pressure on oil prices and the potential for global supply-chain disruptions. With the recent changes
in the U.S. Government, the threat of protectionism increases the risk of tariffs, stagflation and turbulence in the financial
markets. Supply-chain inflation is likely to increase which would reduce insurance service results. Recessionary conditions
could also lead to lower overall demand for insurance products negatively impacting insurance revenue.
5.1 Business acquisitions completed in 2023
On 6 September 2023, the Group entered into an agreement to acquire the brokered Commercial lines operations of DLG, a
general insurer with leading market positions in the UK.
The purchase price included an initial cash consideration of £520m paid on 26 October 2023, with potential for up to a further
£30m contingent payment under earnout provisions relating to the financial performance of the acquired business lines.
The acquisition was structured through several agreements as described below:
i.
the business combination - the business transfer agreement related to new business franchise and certain operations,
renewal rights, data, brands, employees, contractors, third party contracts and premises for which the operational transfer
was completed on 1 May 2024. The business transfer agreement resulted in a business combination as the Group controlled
these net assets from the closing data of 26 October 2023. As a result, the acquired net assets were consolidated from that
date;
ii.
quota share reinsurance agreement - the reinsurance agreement related to premiums written but not yet earned starting from
1 October 2023. As a result, substantially all of the future economics of the business were transferred to the Group before the
transfer of policy renewals, which started in June 2024. The reinsurance agreement was recognised in direct insurance
results since the fourth quarter of 2023. In addition, if approved by the High Court of Justice in England and Wales, these
policies will be legally transferred to the Group.
57
iii.
administration and transitional services arrangements - the Group entered into certain arrangements to ensure the servicing
of policies during the transition.
As part of the acquisition, DLG will retain claims incurred related to premiums earned pre 1 October 2023.
As a result, the
Group is not exposed to any development on prior year claims related to premiums earned pre 1 October 2023.
The purchase price allocation was finalised in 2024 and there were no adjustments to the preliminary fair values.
The following
table summarises the consideration and the final determination of the fair value of identifiable assets acquired and liabilities
assumed at the acquisition date.
As at the acquisition date (26 October 2023) | £m |
Purchase price | |
Cash consideration | 520 |
Contingent consideration ¹ | 3 |
Total purchase price | 523 |
Fair value of the identifiable assets acquired and liabilities assumed | |
Assets | |
Intangible assets² | 229 |
Other | 2 |
Liabilities | |
Deferred tax liabilities | (32) |
Other | (2) |
Total identifiable net assets acquired | 197 |
Goodwill | 326 |
¹ Recorded at fair value based on estimates of future profitability metrics, discounted using information as of the measurement date and
classified in Level 3 of the fair value hierarchy. As at 31 December 2024, the contingent consideration was reassessed to nil.
² Intangible assets are comprised of distribution channels (£188m), trade names (£31m) and acquired technology (£10m).
The intangible assets recognised on acquisition mainly related to distribution networks, amortised over a 15-year period, and
trade names, amortised over an 8-year period.
The fair value of the acquired distribution networks was determined using discounted cash flows with the key estimates and
assumptions as follows:
i.
cash flow projections, including estimated growth rates and profitability, broker attrition rates, synergies and
contributory asset charges such as capital required to operate; and
ii.
the discount rate was based on the weighted-average cost of capital for comparable companies with similar activities.
Trade names were determined using the relief-from royalty method, an income approach using a projection of growth to which a
royalty rate is applied. The key estimates and assumptions are the growth rate, the useful life, the royalty rate and the discount
rate.
Goodwill reflects new business growth, tax synergies and the quality of the acquired businesses.
Goodwill is not deductible for
tax purposes.
The Group recognised integration costs in Integration and restructuring costs in relation to the DLG acquisition of
£34m
in the
year ended 31 December 2024 (year ended 31 December 2023: £5m).
5.2 Disposals completed in 2024
UK Personal lines
In 2023, the Group exited the UK Personal lines market (motor, Home and Pet), including the announcement of both the sale of
its direct Home and Pet operations to Admiral Group plc (Admiral), and its decision to transfer the Home and Pet partnerships to
other parties or to let them expire over time. UK Personal Lines forms part of the UK operating segment and is included in
continuing operations because it does not represent a separate major line of business or geographical area of operation.
The sale to Admiral closed on 31 March 2024 for an initial cash consideration of £85m, received on 2 April 2024, with potential
for up to a further £33m subject to the fulfilment of certain retention thresholds. The sale included the transfer of new business
franchise, certain operations, data, renewal rights, brands, and employees on 31 March 2024. The transfer of new business and
policy renewals started in July 2024. The Group will retain claims related to business it has written. The sale resulted in a gain of
£85m which was recognised in Other net gains (losses) in the year ended 31 December 2024 and the Group assesses a
contingent consideration of nil as at 31 December 2024.
The Group recognised restructuring costs in Integration and restructuring costs in relation to the exit of the UK Personal Lines
market of
£92m
in the year ended 31 December 2024 (year ended 31 December 2023: £89m).
5.3 Material accounting judgements, estimates and assumptions
Upon initial recognition, the acquiree’s assets and liabilities and the contingent consideration (if any) have been included in the
Consolidated statement of financial position at fair value. Management determined the fair values using estimates of future cash
flows and discount rates. However, actual results can be different from those estimates. During the measurement period
58
following the acquisition, the changes in the estimates that relate to new information obtained about facts and circumstances
that existed as of the acquisition date, would have an impact on the amount of goodwill or gain on bargain purchase recognised.
6.1 Classification of investments
| FVTPL | ||||||
Total | ||||||
| Designated | Classified as | Measured as | Amortised | carrying | ||
as FVTPL | FVTPL | FVTPL | FVTOCI | cost | amount | |
As at 31 December 2024 | £m | £m | £m | £m | £m | £m |
Cash and cash equivalents | - | - | - | - | 221 | 221 |
Debt & fixed income securities | 1,969 | 302 | - | 2,891 | - | 5,162 |
Equity securities | - | 501 | - | - | - | 501 |
Loans | - | - | - | - | 283 | 283 |
Investment property | - | - | 317 | - | - | 317 |
1,969 | 803 | 317 | 2,891 | 504 | 6,484 | |
| FVTPL | ||||||
Designated | Classified as | Measured as | Amortised | Total carrying | ||
| as FTVPL | FVTPL | FVTPL | FVTOCI | cost | amount | |
£m | £m | £m | £m | £m | £m | |
As at 31 December 2023 | ||||||
Cash and cash equivalents | - | - | - | - | 320 | 320 |
Debt & fixed income securities | 1,739 | 314 | - | 2,843 | - | 4,896 |
Equity securities | - | 199 | - | - | - | 199 |
Loans | - | - | - | - | 391 | 391 |
Investment property | - | - | 285 | - | - | 285 |
1,739 | 513 | 285 | 2,843 | 711 | 6,091 | |
6.2 Carrying amounts of investments
The following tables analyse the cost/amortised cost, gross unrealised gains and losses, and fair value of financial assets.
FVTPL | Total | |||||
investments | Other investments | investments | ||||
Cost/ | ||||||
Carrying | amortised | Unrealised | Unrealised | Carrying | Carrying | |
amount | cost | gains | losses | amount | amount | |
As at 31 December 2024 | £m | £m | £m | £m | £m | £m |
Cash and cash equivalents | - | 221 | - | - | 221 | 221 |
Debt & fixed income securities | 2,271 | 2,994 | 11 | (114) | 2,891 | 5,162 |
Equity securities | 501 | - | - | - | - | 501 |
Loans | - | 283 | - | - | 283 | 283 |
Investment property | 317 | - | - | - | - | 317 |
3,089 | 3,498 | 11 | (114) | 3,395 | 6,484 | |
59
As at 31 December 2023 | ||||||
Cash and cash equivalents | - | 320 | - | - | 320 | 320 |
Debt & fixed income securities | 2,053 | 2,957 | 26 | (140) | 2,843 | 4,896 |
Equity securities | 199 | - | - | - | - | 199 |
Loans | - | 391 | - | - | 391 | 391 |
Investment property | 285 | - | - | - | - | 285 |
2,537 | 3,668 | 26 | (140) | 3,554 | 6,091 |
The following table summarises the investment-related collateral:
2024 | 2023 | |
As at 31 December | £m | £m |
Collateral pledged | 1,425 | 1,379 |
Collateral accepted | 244 | 451 |
The Group has pledged financial assets as collateral for liabilities or potential liabilities, mainly consisting of debt and cash and cash
equivalents. The cash receivable is recognised in Other assets. The terms and conditions of the collateral pledged are market standard
and are in relation to letter of credit facilities and derivative transactions.
The Group has accepted collateral mainly consisting of debt securities. The terms and conditions of the collateral accepted are market
standard and are in relation to securities loaned and derivative transactions. The collateral cannot be sold or re-pledged externally by
the Group unless the counterparty defaults on its financial obligations. The obligation to repay the cash is recognised in Other liabilities.
Collateral accepted is mainly related to securities loaned which as at 31 December 2024 had a fair value of
£217m
(31 December
2023: £451m). The related collateral accepted represents approximately
104%
of the fair value of security loaned as at 31 December
6.4 Market neutral equity investment strategy
2024 | 2023 | |||
Fair value | Collateral | Fair value | Collateral | |
As at 31 December | £m | £m | £m | £m |
Long positions - reported in Equity securities | 113 | - | - | - |
Short positions - reported in Financial liabilities related to | ||||
| investments (note 15.2) | (115) | 119 | - | - |
60
7.1 Types of derivatives used
The Group generally uses derivatives for economic hedging purposes and to improve the risk profile of its investment portfolio,
provided the resulting exposures remain within the guidelines of its investment policy.
In certain circumstances, these
derivatives also meet the requirements for hedge accounting. Risk management strategies eligible for hedge accounting have
been designated as net investment hedges in foreign operations, cash flow hedges and fair value hedges. The following table
summarises the types of derivatives that may be used by the Group.
Derivatives | Description | Objective | Designation |
Forwards | Contractual obligation to exchange: | ||
Currency | One currency for another at a predetermined | Mitigate risk arising from foreign currency | |
future date | fluctuations on: | ||
i. foreign currency cash inflows | Not designated | ||
and outflows impacting the | |||
Group’s operations; and | |||
ii. the Group’s net investment in | Net investment | ||
foreign operations. | hedge | ||
Swaps | Over-the-counter contracts: | ||
Interest rate | In which two counterparties exchange a | Modify or mitigate exposure to interest | Fair value |
stream of future interest payment for | rate fluctuations | hedge | |
another, based on a specified principal | |||
amount | |||
Cross | In which two counterparties exchange a | Modify or mitigate exposure to interest | Cash flow |
currency | stream of future interest payment for | rate and foreign currency fluctuations | hedge and Fair |
interest rate | another, based on a specified principal | value hedge | |
amount and in two different currencies | |||
Equity | In which two counterparties exchange a | Mitigate exposure to equity market | Not designated |
series of cash flow based on a basket of | fluctuations | ||
stocks, applied to a notional amount | |||
Inflation | In which two parties transfer inflation risk | Modify exposure to inflation risk | Not designated |
from one party to another |
The following table presents the notional amount by remaining term to maturity and fair value of the derivatives held by the
Group based on their designation in qualifying hedge accounting relationships.
61
7.2 Fair value and notional amount of derivatives
Term to maturity (notional amount) | Fair Value | |||||||
Less | From 1 | |||||||
than 1 | to 5 | Over 5 | ||||||
As at 31 December 2024 | year | years | years | Total | Asset | Liability | ||
Type of hedge | Risk Hedged | Instrument type | £m | £m | £m | £m | £m | £m |
Designated for hedge accounting | ||||||||
Net investment hedges | Currency | Currency forwards | 143 | - | - | 143 | 2 | - |
Cash flow hedges | Currency and interest rate | Cross currency interest swaps | - | - | - | - | - | - |
Fair value hedges | Currency and interest rate | Cross currency interest swaps | - | - | - | - | - | - |
Fair value hedges | Interest rate | Interest rate swaps | - | - | - | - | - | - |
143 | - | - | 143 | 2 | - | |||
Not designated for hedge accounting | ||||||||
Currency forwards | 330 | - | - | 330 | 1 | 4 | ||
Equity swaps | - | - | - | - | - | - | ||
Cross currency interest swaps | 1 | - | - | 1 | - | - | ||
Inflation swaps | - | - | 120 | 120 | 30 | 10 | ||
331 | - | 120 | 451 | 31 | 14 | |||
474 | - | 120 | 594 | 33 | 14 | |||
Term to maturity (notional amount) | Fair Value | |||||||
Less | From 1 | |||||||
than 1 | to 5 | Over 5 | ||||||
As at 31 December 2023 | year | years | years | Total | Asset | Liability | ||
Type of hedge | Risk hedged | Instrument type | £m | £m | £m | £m | £m | £m |
Designated for hedge accounting | ||||||||
Net investment hedges | Currency | Currency forwards | 148 | - | - | 148 | - | - |
Cash flow hedges | Currency and interest rate | Cross currency interest swaps | 3 | 25 | 16 | 44 | - | 5 |
Fair value hedges | Currency and interest rate | Cross currency interest swaps | - | 3 | - | 3 | - | 1 |
Fair value hedges | Interest rate | Interest rate swaps | - | - | 54 | 54 | 17 | - |
151 | 28 | 70 | 249 | 17 | 6 | |||
Not designated for hedge accounting | ||||||||
Currency forwards | 438 | - | - | 438 | 8 | 2 | ||
Equity swaps | 96 | - | - | 96 | 1 | 4 | ||
Inflation swaps | - | - | 120 | 120 | 33 | 13 | ||
534 | - | 120 | 654 | 42 | 19 | |||
685 | 28 | 190 | 903 | 59 | 25 | |||
7.3 Amounts subject to enforceable netting arrangements
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting
arrangements. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all
transactions outstanding in the same currency are aggregated into a single net amount that is payable by one counterparty to the
other. In certain circumstances, such as a credit default, all outstanding transactions under the agreement are terminated, the
termination value is assessed and only a single net amount is payable in settlement of all transactions.
The ISDA agreements do not meet the criteria for offsetting in the statement of financial position. This is because the Group does not
have any current legally enforceable right to offset recognised amounts, because the right to offset is enforceable only on the
occurrence of future events. The tables below provide information on the impact of the netting arrangements.
62
| Amounts subject to enforceable netting arrangements | ||||||
Effect of offsetting in balance sheet | Related items not offset | |||||
Gross | Amounts | Net amounts | Financial | Financial | ||
amounts | offset | reported | instruments | collateral | Net amount | |
As at 31 December 2024 | £m | £m | £m | £m | £m | £m |
Derivative financial assets | 33 | - | 33 | (11) | (22) | - |
Derivative financial liabilities | 14 | - | 14 | (11) | (3) | - |
As at 31 December 2023 | ||||||
Derivative financial assets | 59 | - | 59 | (23) | (32) | 4 |
Derivative financial liabilities | 25 | - | 25 | (23) | - | 2 |
The fair value of financial instruments on initial recognition is normally the transaction price, being the value of the consideration.
After initial recognition, the fair value of financial instruments is based on available information and categorised according to a
three-level fair value hierarchy.
Fair value hierarchy
The three-level fair value hierarchy comprises:
i.
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities;
ii.
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
iii.
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. Market traded securities only reflect the possible impact of climate change to the extent that
this is built into the market price at which securities are trading.
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.
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 other indices.
Cash and cash equivalents, loans, other assets and other liabilities and issued debt
For cash and cash equivalents, loans, commercial paper, other assets, liabilities, accruals and issued debt, carrying amounts
are reasonable approximations of their fair values. Loans represent direct lending for investment purposes.
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
63
expected after the end of each lease. The valuations reflect yield ranges between
5.5% to 12%
and a weighted average of
6.5%
as at 31 December 2024 (5.4% to 12.1% and 6.4%, respectively, as at 31 December 2023).
Private fund structures
Debt and equity private 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 31 December 2024 range from
2.8% to 7.6%
and have a weighted average of
5.3%
(31 December 2023: 4.2% to
9.5% and 6.7%, respectively). In some cases, the Group discusses each fund’s pricing with the fund manager throughout the
year. In the event the Group believes that its estimate of the NAV differs from that reported by the fund due to illiquidity or other
factors, the Group will adjust the fund’s reported NAV to more appropriately represent the fair value of its interest in the
investment.
The items presented in the following table are measured in the Consolidated statement of financial position at fair value. The
table does not include financial assets and liabilities not measured at fair value for which the carrying value is a reasonable
approximation of fair value.
8.1 Categorisation of fair value
Level 1 | Level 2 | Level 3 | ||
Valued using models | ||||
Valued using | ||||
quoted | without | |||
(unadjusted | with observable | observable | ||
market prices) | inputs | inputs | Total | |
As at 31 December 2024 | £m | £m | £m | £m |
Debt & fixed income securities | 1,060 | 3,800 | 302 | 5,162 |
Equity securities | 452 | - | 49 | 501 |
Investment property | - | - | 317 | 317 |
Derivative assets | - | 33 | - | 33 |
Total assets measured at fair value | 1,512 | 3,833 | 668 | 6,013 |
Derivative liabilities | - | 14 | - | 14 |
Total liabilities measured at fair value | - | 14 | - | 14 |
As at 31 December 2023 | ||||
Debt & fixed income securities | 1,019 | 3,563 | 314 | 4,896 |
Equity securities | 130 | - | 69 | 199 |
Investment property | - | - | 285 | 285 |
Derivative assets | - | 59 | - | 59 |
Total assets measured at fair value | 1,149 | 3,622 | 668 | 5,439 |
Derivative liabilities | - | 25 | - | 25 |
Total liabilities measured at fair value | - | 25 | - | 25 |
8.2 Reconciliation of fair value measurement of Level 3 financial assets and investment property
| FVTPL | ||||
Investment | ||||
| Debt securities | Equity securities | property | Total | |
For the year ended 31 December 2024 | £m | £m | £m | £m |
Balance, beginning of year | 314 | 69 | 285 | 668 |
Gains (losses) 1 | (2) | (1) | 3 | - |
Purchases | 70 | - | 33 | 103 |
Disposals | (80) | (19) | (4) | (103) |
Balance, end of year | 302 | 49 | 317 | 668 |
1
Includes £2m of gains in relation to securities and property recognised on the Consolidated statement of financial position at 31 December
2024. These losses are recognised in the Consolidated income statement.
64
FVTPL | ||||
Investment | ||||
Debt securities | Equity securities | property | Total | |
£m | £m | £m | £m | |
For the year ended 31 December 2023 | ||||
Balance, beginning of year | 285 | 90 | 291 | 666 |
Gains (losses) 1 | 1 | (3) | (9) | (11) |
Purchases | 127 | - | 12 | 139 |
Disposals | (87) | (17) | (9) | (113) |
Exchange adjustment | (12) | (1) | - | (13) |
Balance, end of year | 314 | 69 | 285 | 668 |
1
Includes £15m losses in relation to securities and property recognised on the Consolidated statement of financial position at 31 December
2023.
These losses are recognised in the Consolidated income statement.
8.3 Fair value sensitivity (Level 3 assets)
The following table shows the Level 3 financial assets and investment property carried on the Consolidated statement of
financial position at fair value as at 31 December 2024 and 31 December 2023; the main assumptions used in the valuation of
these instruments; and decreases in fair value based on reasonably possible alternative assumptions.
Reasonably possible alternative | |||||
| assumptions¹ | |||||
2024 | 2023 | ||||
Increase/ | Decrease | ||||
Current | (decrease) | Current | |||
fair value | in fair | fair value | in fair | ||
value | |||||
value | |||||
Financial assets and investment property | Main assumptions | £m | £m | £m | £m |
Level 3 FVTPL financial assets: | |||||
Equity securities | Cash flows; discount rate | 49 | (1) | 69 | (1) |
Debt & fixed income securities | Cash flows; discount rate | 302 | (5) | 314 | (5) |
Investment property | Cash flows; discount rate | 317 | (22) | 285 | (20) |
Total | 668 | (28) | 668 | (26) | |
1
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 for these instruments have been determined using an increase of 50bps in the credit spread used in the valuation (31
December 2023: 50bps). Reasonably possible alternative assumptions for property have been determined using an increase of 50bps in the
The Group has a comprehensive risk management framework and internal control procedures designed to manage and monitor
various risks, including the use of derivative financial instruments for the purpose of reducing its exposure to adverse
fluctuations in interest rates, foreign exchange rates and long-term inflation. The Group does not use derivatives to leverage its
exposure to markets and does not hold or issue derivative financial instruments for speculative purposes. The use of derivatives
is governed by the Group Investment Policy.
The current geopolitical environment increases uncertainty in financial markets.
Refer to note 4.2 - Geopolitical risk for more
details.
65
Financial risk includes the following risks:
Market risk | Credit risk | Liquidity risk | |
Risk definition | Risk that the fair value or future | Risk that counterparties may | Risk that the Group will |
cash flows of a financial | not be able to meet payment | encounter difficulty in raising | |
instrument or investment property | obligations when they become | funds to meet obligations | |
will fluctuate because of market | due. | associated with financial | |
changes in equity market prices, | liabilities. | ||
interest rates or credit spreads, | |||
foreign exchange rates, property | |||
prices or commodity market. | |||
Reference | Note 9.1 | Note 9.2 | Note 9.3 |
Market risk is the risk of adverse financial impact resulting, directly or indirectly, from fluctuations in equity and property prices, interest
rates and foreign currency exchange rates. Market risk arises in assets and liabilities measured at fair value although these risks may
be mitigated by matching the duration of these assets and liabilities. Market risk also includes the risk that interest rate cash flows
fluctuate due to changes in market interest rates. At Group level, it also arises in relation to the international businesses, through
foreign currency risk. Market risk is subject to the BRC’s risk management framework, which is subject to review and approval by the
Board.
Market risk can be broken down into three key components:
Equity and property risk
At 31 December 2024 the Group held investments classified as equity securities FVTPL of
£501m
(2023: FVTPL equity securities
£199m). These include interests in structured entities (as disclosed in note 32) and other investments where the price risk arises from
interest rate risk rather than from equity market price risk. The Group considers that within equity securities, investments with a fair
value of
£452m
(2023: £129m) may be more affected by equity index market price risk than by interest rate risk.
£113m
of these
securities are held as part of a market neutral equity investment strategy (2023: £nil).
Refer to note 6.4 for further information. A 15%
fall in the value of equity index prices would result in the recognition of losses of
51m
(2023: £3m) in the Consolidated income
statement, net of equity hedges and securities held as part of the market neutral equity strategy.
In addition, the Group holds investments in properties which are subject to property price risk. A decrease of 15% in property prices
would result in the recognition of losses of
£48m
(2023: £43m) in the Consolidated income statement and
£3m
(2023: £3m) in OCI.
This analysis assumes that there is no correlation between interest rate and property market rate risks. It also assumes that all other
assets and liabilities remain unchanged and that no management action is taken. Actual results may differ materially from these
estimates for a variety of reasons and therefore these sensitivities should be considered as directional estimates.
This analysis is presented gross of the corresponding tax impact as the tax position is affected by other factors, including current year
profitability and the ability to recognise deferred tax assets.
Interest rate risk
Interest rate risk arises primarily from the Group’s investments in long-term debt and fixed income securities and their movement
relative to the value placed on insurance liabilities. This impacts both the fair value and amount of variable returns on existing assets as
well as the cost of acquiring new fixed maturity investments.
Given the composition of the Group’s investments as at 31 December 2024, the table below illustrates the impact to the Consolidated
income statement and OCI of a hypothetical 100bps change in interest rates on fixed income securities and cash that are subject to
interest rate risk.
The sum of the impacts shown below on the Consolidated income statement and OCI provides the equivalent equity
impact.
Changes in the Consolidated income statement and OCI:
Decrease in income | ||||
statement | Decrease in OCI | |||
2025 | 2024 | 2025 | 2024 | |
For the years ended 31 December | £m | £m | £m | £m |
Increase in interest rate markets: | ||||
Impact on fixed income securities and cash of an increase in interest rates | ||||
| of 100bps | (68) | (55) | (81) | (70) |
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.
Refer to note 10.5 - Sensitivity analysis
for sensitivity information in respect of the liability for incurred claims.
66
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 January 2025 and 1 January 2024 on the following year’s Consolidated income statement
and OCI.
The analysis on the table above is presented gross of the corresponding tax impact as the tax position is affected by other factors,
including current year profitability and the ability to recognise deferred tax assets.
Currency risk
The Group incurs exposure to currency risk as follows:
i.
operational currency risk – by holding investments and other assets and by underwriting and incurring liabilities in
currencies other than the currency of the primary environment in which the operating segments operate, the Group is
exposed to fluctuations in foreign exchange rates that can impact both its profitability and the reported value of such assets
and liabilities; and
ii.
structural currency risk – by investing in overseas subsidiaries the Group is exposed to the risk that fluctuations in foreign
exchange rates impact the reported profitability of foreign operations to the Group, and the value of its net investment in
foreign operations.
The material foreign currency denominated subsidiaries are denominated in EUR.
Operational currency risk is principally managed within the Group’s individual operations by broadly matching assets and liabilities by
currency and liquidity. However, operational currency risk overall is not significant.
Structural currency risk is managed at a Group level through currency derivatives within predetermined limits set by the Board. In
managing structural currency risk, the needs of the Group’s subsidiaries to maintain net assets in local currencies to satisfy local
regulatory solvency and internal risk-based capital requirements are taken into account.
2024 | 2023 | |
EUR | EUR | |
As at 31 December | £m | £m |
Consolidated net assets of foreign operations | 269 | 270 |
Less: foreign-currency derivatives, notional amount | (143) | (148) |
Total net currency exposure | 126 | 122 |
Equity attributable to shareholders is stated after taking account of the effect of currency forwards, swaps and foreign exchange
options.
The table below illustrates the impact of a hypothetical 10% change in the EUR exchange rate on equity attributable to
shareholders when retranslating into sterling.
10% strengthening in | ||
Pounds Sterling against | 10% weakening in Pounds | |
Euro | Sterling against Euro | |
£m | £m | |
Movement in equity attributable to shareholders at 31 | ||
December 2024 | (11) | 14 |
Movement in equity attributable to shareholders at 31 | ||
December 2023 | (11) | 14 |
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
Credit risk is the risk of loss resulting from the failure of a counterparty to honour its financial or contractual obligations to the Group.
The Group’s credit risk exposure is largely concentrated in its predominantly investment grade fixed income investment portfolio
reducing the risk of default. To a lesser extent, credit risk also exists in its premium receivables and reinsurance assets, loans and cash
and cash equivalents.
Credit risk is managed at both a Group level and at an operational level. Local operations are responsible for assessing and monitoring
the creditworthiness of their counterparties (e.g. brokers and policyholders). Local credit committees are responsible for ensuring that
these exposures are within the risk appetite of the local operations. Exposure monitoring and reporting for fixed income investments
and premium receivables is embedded throughout the organisation with aggregate credit positions reported and monitored at Group
level. In addition, the Credit Ratings Review Committee reviews the credit ratings of material investment exposures and unrated
investments.
The Group’s credit risk appetite and credit risk policy are reviewed by the BRC and approved by the Board on an annual basis, to
ensure limits remain within its quantitative appetite
.
This is done through the setting of Group policies, procedures and limits.
67
In defining its appetite for credit risk the Group looks at exposures at both an aggregate and operating segment level, distinguishing
between credit risks incurred as a result of offsetting insurance risks or operating in the insurance market (e.g. reinsurance credit risks
and risks to receiving premiums due from policyholders and intermediaries) and credit risks incurred for the purposes of generating a
return (e.g. invested assets’ credit risk).
Limits are set at both a portfolio and counterparty level based on likelihood of default, derived from the credit rating of the counterparty,
to ensure that the Group’s overall credit profile and specific concentrations are managed and controlled within risk appetite.
The Group’s investment management strategy primarily focuses on debt instruments of investment grade issuers and seeks to limit the
overall credit exposure with respect to any one issuer by ensuring limits have been based upon credit quality. Restrictions are placed
on the Group’s core fixed income investment manager as to the level of exposure to various credit rating categories including unrated
securities.
The Group is also exposed to credit risk from the use of reinsurance in the event that a reinsurer fails to settle its liability to the Group.
The Reinsurance Credit Committee oversees the management of credit risk arising from the reinsurer failing to settle its liability to the
Group. Group standards are set such that reinsurers that have a financial strength rating of less than ‘A-’ with Standard & Poor’s, or a
comparable rating, are rarely used and are excluded from the Group’s list of approved reinsurers. The exceptions are fronting
arrangements for captives, where some form of collateral is generally obtained, and some global network partners. At 31 December
2024 the extent of collateral held by the Group against reinsurance contract assets was
£40m
(2023: £39m), which in the event of a
default would be called and recognised on the balance sheet. This collateral consists of letters of credit and security agreements.
The Group’s use of reinsurance is sufficiently diversified that it is not concentrated on a single reinsurer, or any single reinsurance
contract. The Group monitors its aggregate exposures by reinsurer group, being total exposure (as defined in the Reinsurance Risk
Management Policy (RRMP)) as a percentage of IFC’s shareholders’ equity; the maximum percentages allowed depend on various
factors including the Reinsurer’s financial credit rating. The three active reinsurance groups to which the Group has the largest
reinsurance asset recoverable are Berkshire Hathaway, Lloyds of London and Swiss Re (2023: Berkshire Hathaway, Lloyd’s of
London and Fairfax Financial holdings). At 31 December 2024 the reinsurance asset recoverable from each of these groups does not
exceed
5.5%
(2023: 7.8%) of the Group’s total financial assets.
On 27 February 2023, the Group announced that the Trustees of its two major UK DB pension plans (the plans) entered into an
agreement with Pension Insurance Corporation (PIC), a specialist insurer of DB pension plans, to purchase annuity buy-in insurance
contracts (the buy-ins), as part of their de-risking strategy. The buy-ins transferred the remaining economic and demographic risks
associated with the plans to PIC and removed the volatility in relation to the plans from the Group’s consolidated statement of financial
position. The principal risk remaining is the counterparty risk in respect of PIC. This risk will remain until such time as the Schemes
discharge their obligations to their members. A secondary risk relates to potential changes to those obligations that may arise from
ongoing data cleanse activities. As part of the transaction with PIC, extensive data cleansing and testing has already been undertaken
without any material adjustment to the Schemes’ liabilities expected to be required. However, until the exercise has concluded there
remains the possibility of further adjustments.
68
Credit Quality
The Group’s risk management strategy, for public fixed income, is to invest in high quality issuers and to limit the amount of credit
exposure within respect to any one issuer by imposing limits based on credit quality. The Group’s public fixed income investment
portfolio has over
99%
invested in investment grade securities. This excludes indirect investment through private funds. For private
funds, specific policy limits apply to manage the overall exposure. Management monitors subsequent credit rating changes on a
regular basis.
The following table presents the credit quality of the Group’s debt and fixed income securities:
As at 31 December | 2024 | 2023 |
AAA | 33% | 33% |
AA | 20% | 24% |
A | 29% | 25% |
BBB | 17% | 17% |
<BBB | 1% | 1% |
100% | 100% |
Credit exposure
The table below presents the Group’s maximum exposure to credit risk without considering any collateral held or other credit
enhancements available to the Group to mitigate this risk.
Maximum exposure to credit risk is defined as the carrying amount of the
asset.
2024 | 2023 | |
As at 31 December | £m | £m |
Cash and cash equivalents | 221 | 320 |
Debt & fixed income securities | 5,162 | 4,896 |
Loans | 283 | 391 |
Reinsurance contract assets | 1,310 | 1,756 |
Other financial assets¹ | 167 | 650 |
Credit risk exposure | 7,143 | 8,013 |
¹ Mainly includes other receivables and recoverables, financial assets related to investments and accrued investment income.
Impairment assessment
The Group’s ECL assessment and measurement method is set out below.
The Group assesses the possible default events within 12 months for the calculation of the 12mECL for investments in stage 1
of the ECL. Given the investment policy, the probability of default for new instruments acquired is generally determined to be
minimal. Lifetime ECL is required to be calculated for instruments in stages 2 or 3. In all instances, the expected loss given
default is based on external historical data.
Significant increase in credit risk and default
The Group continuously monitors all assets subject to ECLs. To determine whether an instrument or a portfolio of instruments is
subject to 12mECL or LTECL, the Group assesses whether there has been a significant increase in credit risk since
initial recognition.
The Group considers that there has been a significant increase in credit risk when any contractual payments are more than 30
days past due. In addition, the Group also considers a variety of instances that may indicate unlikeliness to pay by assessing
whether there has been a significant increase in credit risk. Such events include:
i.
the internal rating of the counterparty indicating default or near-default;
ii.
the counterparty having past due liabilities to public creditors or employees;
iii.
the counterparty (or any legal entity within the debtor’s group) filing for bankruptcy application/protection; and
iv.
the counterparty’s listed debt or equity suspended at the primary exchange because of rumours or facts about
financial difficulties.
The Group considers a financial instrument credit impaired for ECL calculations in all cases when the counterparty becomes 90
days past due on its contractual payments. The Group may also consider an instrument to be in default when internal or
external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full. In such cases, the
Group recognises a LTECL.
Forward-looking information
In its ECL models, the Group relies on a broad range of forward-looking information as economic inputs, such as GDP growth,
unemployment, equity markets indexes and other economic inputs.
The Group’s debt instruments measured at FVTOCI and loans measured at amortised cost are in stage 1 of the ECL model.
69
Liquidity risk refers to the risk of loss to the Group due to assets not being available in a form that can immediately be converted into
cash, and therefore not being able to pay its obligations when due. To help mitigate this risk, the BRC sets limits on assets held by the
Group designed to match the maturities of its assets to that of its liabilities.
A large proportion of investments are maintained in short-term (less than one year) highly liquid securities, which are used to manage
the Group’s operational requirements based on actuarial assessment and allowing for contingencies.
The Group maintains additional liquidity facilities for contingency purposes. These facilities included uncommitted overdraft
arrangements in key operating entities, as well as the ability to enter repurchase agreements to cover short-term fluctuations in cash
and liquidity requirements.
The following table summarises the contractual maturity dates. Provision for losses and loss adjustment expenses are presented and
are analysed by remaining estimated duration until settlement.
Financial assets and investment property by contractual maturity
Less than one | From one to | Over five | No specific | ||
year | five years | years | maturity | Total | |
As at 31 December 2024 | £m | £m | £m | £m | £m |
Cash and cash equivalents | 221 | - | - | - | 221 |
Debt & fixed income securities | 797 | 2,425 | 1,638 | 302 | 5,162 |
Equity securities | - | - | - | 501 | 501 |
Loans | 15 | 93 | 175 | - | 283 |
Investment property | - | - | - | 317 | 317 |
1,033 | 2,518 | 1,813 | 1,120 | 6,484 | |
As at 31 December 2023 | |||||
Cash and cash equivalents | 320 | - | - | - | 320 |
Debt & fixed income securities | 644 | 2,606 | 1,332 | 314 | 4,896 |
Equity securities | - | - | - | 199 | 199 |
Loans | 48 | 90 | 253 | - | 391 |
Investment property | - | - | - | 285 | 285 |
1,012 | 2,696 | 1,585 | 798 | 6,091 |
Financial liabilities by contractual maturity
Carrying | |||||
value in the | |||||
statement of | |||||
Less than one | From one to | Over five | financial | ||
year | five years | years | Total | position | |
As at 31 December 2024 | £m | £m | £m | £m | £m |
Debt outstanding 1 | - | 7 | 120 | 127 | 127 |
Borrowings | - | - | - | - | - |
Derivative liabilities | 4 | - | 10 | 14 | 14 |
Lease liabilities 1,2 | 13 | 31 | 41 | 85 | 72 |
Other financial liabilities 2 | 387 | 14 | 4 | 405 | 405 |
Total | 404 | 52 | 175 | 631 | 618 |
Interest on Debt outstanding 3 | 8 | 42 | 154 | 204 |
70
As at 31 December 2023 | |||||
Debt outstanding 1 | - | - | 126 | 126 | 126 |
Borrowings | 8 | - | - | 8 | 8 |
Derivative liabilities | 25 | - | - | 25 | 25 |
Lease liabilities 1 | 11 | 30 | 38 | 79 | 67 |
Other financial liabilities | 275 | 18 | 5 | 298 | 298 |
Total | 319 | 48 | 169 | 536 | 524 |
Interest on Debt outstanding 4 | 9 | 10 | - | 19 |
1
Maturity profile shown on an undiscounted basis.
2
Lease liabilities of £31m from one to five years are between £7m and £9m in each year within this period. Other financial liabilities of £14m
from one to five years includes £12m in relation to the period between one to two years.
3
The capital and interest payable on the Debt outstanding have been included up to maturity, see note 16.
4
The interest payable on the Debt outstanding in 2023 have been included until the earliest dates on which the Group has the option to call the
instruments and the interest rates are reset. For further information on terms of the debt, see note 16.
Insurance and reinsurance contracts by maturity
The following table summarises the maturity profile of portfolios of insurance and reinsurance contracts based on the
undiscounted future cash flows expected to be paid out in the periods presented.
Less than | One to two | Two to | Three to | Four to five | Over five | ||
one year | years | three years | four years | years | years | Total | |
£m | £m | £m | £m | £m | £m | £m | |
As at 31 December 2024 | |||||||
Insurance contract liabilities¹ | (2,392) | (1,064) | (639) | (405) | (251) | (1,070) | (5,821) |
Reinsurance contract assets¹ | 505 | 261 | 154 | 92 | 55 | 409 | 1,476 |
As at 31 December 2023 | |||||||
Insurance contract liabilities¹ | (2,748) | (1,143) | (628) | (372) | (221) | (639) | (5,751) |
Reinsurance contract assets¹ | 838 | 351 | 181 | 101 | 57 | 193 | 1,721 |
1
Excludes the liability for remaining coverage under the PAA.
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Contracts measured under PAA | 4,283 | 3,877 |
Contracts measured under the GMM | ||
Amounts related to changes in liability for remaining coverage | ||
Risk adjustment recognised for the risk expired | 2 | 3 |
Expected incurred claims and other insurance service expense | 59 | 107 |
Total insurance revenue | 4,344 | 3,987 |
10.2 Reconciliation of carrying amounts
The following reconciliations show how the net carrying amounts of insurance and reinsurance contracts changed during the
period as a result of cash flows and amounts recognised in the Consolidated income statement.
The Group presents a table that separately analyses movements in the liability for remaining coverage and the liability for
incurred claims and reconciles these movements to the line items in the Consolidated income statement.
71
A second reconciliation is presented for contracts measured under the GMM, which separately analyses changes in the
estimates of the present value of future cash flows, the risk adjustment and the contractual service margin.
Insurance contracts analysis by remaining coverage and incurred claims
LRC | LIC | |||||
Contracts under PAA | ||||||
Present | ||||||
value of | ||||||
Excluding | Contracts | future | ||||
loss | Loss | under | cash | Risk | ||
component | component | GMM | flows | adjustment | Total | |
For the year ended 31 December 2024 | £m | £m | £m | £m | £m | £m |
Insurance contract balances, beginning of year | (381) | (59) | (25) | (5,297) | (208) | (5,970) |
Changes in comprehensive income: | ||||||
Insurance revenue | 4,344 | - | - | - | - | 4,344 |
Incurred claims and other insurance service | ||||||
| expense | - | 28 | (58) | (3,012) | (51) | (3,093) |
Amortisation of insurance acquisition cash | ||||||
| flows | (733) | - | - | - | - | (733) |
Losses and reversal on onerous contracts | - | (2) | - | - | - | (2) |
Adjustments to liabilities for incurred claims | - | - | - | 238 | 78 | 316 |
Insurance service expense | (733) | 26 | (58) | (2,774) | 27 | (3,512) |
Insurance service result from insurance | ||||||
| contracts | 3,611 | 26 | (58) | (2,774) | 27 | 832 |
Insurance finance income, net | 14 | 1 | 1 | (153) | (7) | (144) |
Exchange rate differences | 1 | - | - | 11 | 1 | 13 |
Total changes in comprehensive income | 3,626 | 27 | (57) | (2,916) | 21 | 701 |
Cash flows | ||||||
Premium received | (4,497) | - | - | - | - | (4,497) |
Claims and other insurance service expense | ||||||
| paid | - | - | 68 | 2,937 | - | 3,005 |
Insurance acquisition cash flows | 913 | - | - | - | - | 913 |
Total cash flows | (3,584) | - | 68 | 2,937 | - | (579) |
Insurance contract balances, end of year | (339) | (32) | (14) | (5,276) | (187) | (5,848) |
72
LRC | LIC | |||||
Contracts under PAA | ||||||
Excluding | Contracts | Present value | ||||
loss | Loss | under | of future cash | Risk | ||
component | component | GMM | flows | adjustment | Total | |
For the year ended 31 December 2023 | £m | £m | £m | £m | £m | £m |
Insurance contract balances, beginning of year | (446) | (100) | (29) | (5,050) | (196) | (5,821) |
Changes in comprehensive income: | ||||||
Insurance revenue | 3,987 | - | - | - | - | 3,987 |
Incurred claims and other insurance service | ||||||
| expense | - | 84 | (85) | (2,967) | (77) | (3,045) |
Amortisation of insurance acquisition cash | ||||||
| flows | (727) | - | - | - | - | (727) |
Losses and reversal on onerous contracts | - | (43) | - | - | - | (43) |
Adjustments to liabilities for incurred claims | - | - | - | 79 | 71 | 150 |
Insurance service expense | (727) | 41 | (85) | (2,888) | (6) | (3,665) |
Investment component | 71 | - | - | (71) | - | - |
Insurance service result from insurance | ||||||
| contracts | 3,331 | 41 | (85) | (2,959) | (6) | 322 |
Insurance finance income (net) | 6 | - | - | (178) | (7) | (179) |
Exchange rate differences | - | - | - | 8 | 1 | 9 |
Total changes in comprehensive income | 3,337 | 41 | (85) | (3,129) | (12) | 152 |
Cash flows | ||||||
Premium received | (4,175) | - | - | - | - | (4,175) |
Claims and other insurance service expense | ||||||
| paid | - | - | 89 | 2,882 | - | 2,971 |
Insurance acquisition cash flows | 894 | - | - | - | - | 894 |
Total cash flows | (3,281) | - | 89 | 2,882 | - | (310) |
Disposal of business 1 | (12) | - | - | - | - | (12) |
Amounts transferred from insurance acquisition | ||||||
| cashflows | 21 | - | - | - | - | 21 |
Insurance contract balances, end of year | (381) | (59) | (25) | (5,297) | (208) | (5,970) |
¹Includes the write
-off of insurance acquisition cash flows related to the UK Personal lines exit. Refer to note 5.2 - Disposals for more details.
73
Insurance contracts analysis by measurement component – Contracts measured under the GMM
| 2024 | 2023 | |||||
Present | Present | |||||
value of | value of | |||||
future cash | Risk | future cash | Risk | |||
flows | adjustment | Total | flows | adjustment | Total | |
For the years ended 31 December | £m | £m | £m | £m | £m | £m |
Insurance contract liabilities, beginning of year | (218) | (6) | (224) | (320) | (9) | (329) |
Changes in comprehensive income: | ||||||
Changes that relate to current services: | ||||||
Risk adjustment recognised for the risk expired | - | 2 | 2 | - | 4 | 4 |
Experience adjustments | 23 | - | 23 | 41 | - | 41 |
Changes that relate to future services: | ||||||
Changes in estimates that do not adjust the | ||||||
| contractual service margin | (2) | 1 | (1) | (28) | (1) | (29) |
Insurance service result from insurance contracts | 21 | 3 | 24 | 13 | 3 | 16 |
Insurance finance income | 3 | - | 3 | - | - | - |
Total changes in comprehensive income | 24 | 3 | 27 | 13 | 3 | 16 |
Cash flows: | ||||||
Claims and other insurance service expenses paid | 68 | - | 68 | 89 | - | 89 |
Total cash flows | 68 | - | 68 | 89 | - | 89 |
Insurance contract liabilities, end of year | (126) | (3) | (129) | (218) | (6) | (224) |
10.3 Insurance contract liabilities
Insurance contract liabilities analysed between insurance contract balances and assets for insurance acquisition cash flows
2024 | 2023 | |
As at 31 December | £m | £m |
Insurance contract liabilities | ||
Insurance contract balances | 5,848 | 5,970 |
Assets for insurance acquisition cash flows | - | (2) |
5,848 | 5,968 |
Movement in assets for insurance acquisition cash flows
2024 | 2023 | |
As at 31 December | £m | £m |
Assets for insurance acquisition cash flows, beginning of year | 2 | 15 |
Amounts incurred during the year | (2) | 8 |
Amounts derecognised and included in the measurement of insurance contracts | - | (21) |
Assets for insurance acquisition cash flows, end of year | - | 2 |
74
Reinsurance contracts analysis by remaining coverage and incurred claims
ARC | AIC | ||||
Contracts under PAA | |||||
Excluding | Present | ||||
loss | Loss | value of | |||
recovery | recovery | future cash | Risk | ||
component | component | flows | adjustment | Total | |
For the year ended 31 December 2024 | £m | £m | £m | £m | £m |
Reinsurance contract assets, beginning of year | (16) | - | 1,721 | 51 | 1,756 |
Changes in comprehensive income: | - | ||||
Expense from reinsurance contracts | (566) | - | - | - | (566) |
Amounts recoverable for incurred claims and other | |||||
| expenses | - | - | 200 | 6 | 206 |
Adjustments to assets for incurred claims | - | - | (93) | (22) | (115) |
Changes in non-performance risk of reinsurers | - | - | 3 | - | 3 |
Income from reinsurance contracts | - | - | 110 | (16) | 94 |
Net expense from reinsurance contracts | (566) | - | 110 | (16) | (472) |
Reinsurance finance income (expense) | (1) | - | 49 | 2 | 50 |
Exchange rate differences | 1 | - | (6) | - | (5) |
Total changes in comprehensive income | (566) | - | 153 | (14) | (427) |
Cash flows | |||||
Premium paid | 579 | - | - | - | 579 |
Amounts received | - | - | (598) | - | (598) |
Total cash flows | 579 | - | (598) | - | (19) |
Reinsurance contract assets, end of year | (3) | - | 1,276 | 37 | 1,310 |
ARC | AIC | ||||
Contracts under PAA | |||||
Excluding | Loss | Present value | |||
loss recovery | recovery | of future cash | Risk | ||
component | component | flows | adjustment | Total | |
For the year ended 31 December 2023 | £m | £m | £m | £m | £m |
Reinsurance contract assets, beginning of year | (77) | 5 | 1,737 | 53 | 1,718 |
Changes in comprehensive income: | |||||
Expense from reinsurance contracts | (808) | - | - | - | (808) |
Amounts recoverable for incurred claims and other | |||||
| expenses | - | (5) | 672 | 14 | 681 |
Adjustments to assets for incurred claims | - | - | (26) | (17) | (43) |
Changes in non-performance risk of reinsurers | - | - | (7) | - | (7) |
Income from reinsurance contracts | - | (5) | 639 | (3) | 631 |
Net expense from reinsurance contracts | (808) | (5) | 639 | (3) | (177) |
Reinsurance finance expense | (2) | - | 61 | 1 | 60 |
Exchange rate differences | - | - | (5) | - | (5) |
Total changes in comprehensive income | (810) | (5) | 695 | (2) | (122) |
Cash flows | |||||
Premium paid | 871 | - | - | - | 871 |
Amounts received | - | - | (711) | - | (711) |
Total cash flows | 871 | - | (711) | - | 160 |
Reinsurance contract assets, end of year | (16) | - | 1,721 | 51 | 1,756 |
75
Reinsurance contracts analysis by measurement component – Contracts measured under the GMM
| 2024 | 2023 | |||||
Present | Present | |||||
value of | value of | |||||
future | Risk | future cash | Risk | |||
cash flows | adjustment | Total | flows | adjustment | Total | |
For the years ended 31 December | £m | £m | £m | £m | £m | £m |
Reinsurance contract assets, beginning of | - | 4 | 4 | 2 | 11 | 13 |
year | ||||||
Changes in comprehensive income: | ||||||
Changes that relate to future services | ||||||
Changes in estimates that do not adjust | ||||||
| the contractual service margin | - | (2) | (2) | (2) | (8) | (10) |
Net expense from reinsurance contracts | - | (2) | (2) | (2) | (8) | (10) |
Reinsurance finance income | - | - | - | - | 1 | 1 |
Total changes in comprehensive income | - | (2) | (2) | (2) | (7) | (9) |
Reinsurance contract assets, end of year | - | 2 | 2 | - | 4 | 4 |
Liability for incurred claims - Estimate of undiscounted future cash flows
The Group establishes claims liabilities to cover the estimated liability for the cash flows associated with incurred losses,
including loss adjustment expenses incurred with respect to insurance contracts underwritten and reinsurance contracts placed
by the Group. The ultimate cost of claims liabilities is estimated using a range of standard actuarial claims projection techniques
in accordance with generally accepted actuarial methods.
The main assumption underlying these techniques is that the Group’s past claims development experience can be used to
project expected future claims development and hence ultimate claims costs. As such, these methods extrapolate the
development of paid and incurred losses, average costs per claim (severity) and average number of claims (frequency) based
on the observed development of earlier years and, where relevant, expected loss ratios. Historical claims development is
analysed by accident period, geographical area, as well as significant business line and claim type. Catastrophic events are
separately addressed, either by being reserved at the face value of loss adjuster estimates in the case of very large reported
losses, or separately projected to reflect their future development from using relevant judgements.
Additional qualitative judgment is used to assess the extent to which past trends may not apply in the future (e.g., to reflect one-
off occurrences, changes in external or market factors such as economic conditions, geopolitical uncertainty, levels of claims
inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling
procedures) to arrive at the estimated ultimate cost of claims that represents the probability weighted best estimate expected
value outcome per selected actuarial technique from the range of projections, taking account of all the uncertainties involved.
A particular area of consideration during the year ended 31 December 2024 has been the continued high inflationary trends.
The Group has observed inflation driven increases to the assessed cost of claims across many different lines of business and
types of claims, consistent with the general economic environment and geopolitical uncertainty and the wider insurance
industry. Focus has been placed on reviewing changes in inflation assumptions, updating methodologies to project the ultimate
cost of claims given the changing trends, ensuring consistency of reserving assumptions with other areas of the business and
running sensitivity tests to understand the impact of alternative assumptions in order to gain comfort over the final selections.
Whilst Inflationary trends are now in the main included within the data and reserve models for short tail damage classes, it is
likely to remain as a key area of risk and uncertainty for long tail liability classes for the purpose of estimating the ultimate cost
of claims during 2025. Clarity has been provided by the Ogden discount rate decisions for the UK nations published in
September and December 2024, which impact the lump sum payments in settlement of UK bodily injury claims. The new Ogden
discount rate for all the UK nations of +0.5% is higher than the previous rates. This leads to a reduction in the associated claims
costs.
Discount rates
The liability for incurred claims under the PAA and GMM and the liability for remaining coverage under the PAA, when onerous,
and under the GMM, are calculated by discounting expected future cash flows at a risk-free rate, plus an illiquidity premium
where applicable. Risk-free rates are determined by reference to the yields of highly liquid sovereign securities in the currency
of the insurance contract liabilities. The illiquidity premium is determined by reference to observable market rates of investment
grade bonds that the Group believes reflect the nature of the liabilities and are a suitable proxy for assessing the value of the
illiquidity.
Discount rates applied for discounting of future cash flows are listed below:
76
Yield curves used to discount cash flows for insurance and reinsurance contracts for major currencies
| 2024 | 2023 | |||||||
As at 31 December | 1 year | 3 years | 5 years | 10 years | 1 year | 3 years | 5 years | 10 years |
GBP | 4.9% | 4.8% | 4.9% | 5.3% | 5.0% | 4.5% | 4.4% | 4.5% |
EUR | 2.6% | 2.8% | 3.0% | 3.3% | 3.5% | 3.2% | 3.1% | 3.2% |
CAD | 3.3% | 3.5% | 3.7% | 4.1% | 4.9% | 4.3% | 4.2% | 4.2% |
USD | 4.6% | 4.7% | 4.9% | 5.2% | 5.2% | 4.7% | 4.6% | 4.7% |
Periodic payment orders | 4.0% | 4.0% | 4.0% | 4.0% | 4.0% | 4.0% | 4.0% | 4.0% |
Risk adjustment
The risk adjustment is the compensation that the Group requires for bearing the uncertainty about the amount and timing of the
cash flows of groups of insurance contracts. It reflects an amount the Group would rationally pay to remove the uncertainty that
future cash flows will exceed the expected value amount.
The main non-financial risks considered in determining the risk adjustment are:
i.
the level of uncertainty in the best estimate;
ii.
the variability of key claims inflation assumptions; and
iii.
possible economic and legislative changes.
The Group has estimated the risk adjustment based on the loss distribution from the Group’s approved economic capital model.
The loss distribution is estimated using standard statistical techniques in accordance with generally accepted actuarial
principles. Percentile estimates for loss distributions are highly uncertain. They contain a large number of judgements on
possible future outcomes. This may mean that the percentile moves year on year whilst our approach to calibrating the loss
distribution remains consistent. The Group estimates that the net risk adjustment, which relates to the risk retained by the Group
after reinsurance, is at the
76th
percentile of the assessed loss distribution at 31 December 2024 (31 December 2023: 76th
percentile).
The main assumptions underlying these techniques are:
i.
historical claims development can be used to generate the full range of potential outcomes; and
ii.
expert judgments to allow for the correlation between line of business and region.
Additional qualitative judgment is used to assess the extent to which there are events not included in the historic data.
Liability for remaining coverage under the PAA (when onerous) and GMM - Estimate of undiscounted future cash flows
The Group calculates the best estimate of the future cash flows which represents an expected mean, taking into account the
likely scenarios.
When estimating future cash flows, the Group includes all cash flows on a mean basis that are within the contract boundary.
The Group incorporates, in an unbiased way, all reasonable and supportable information available without undue cost or effort
10.5 Sensitivity analysis
The liability for incurred claims’ sensitivity to certain key assumptions is outlined below. It is not possible to quantify the
sensitivity to certain assumptions such as legislative changes or uncertainty in the estimation process. The analysis is
performed for possible movements in the assumptions with all other assumptions held constant, showing the impact on the
Consolidated income statement. Movements in these assumptions may be non-linear and may be correlated with one another.
Sensitivity analysis (liability for incurred claims) – Impact on the Consolidated income statement
As at 31 December | 2024¹ | 2023¹ | ||||||
Gross of | ||||||||
reinsurance² | Net of reinsurance³ | Gross of reinsurance² | Net of reinsurance³ | |||||
Reserves | Discount | Reserves | Discount | Reserves | Discount | Reserves | Discount | |
rate 4 | rate 4 | rate 4 | rate 4 | |||||
+5% | +1% | +5% | +1% | +5% | +1% | +5% | +1% | |
Liability for incurred | ||||||||
claims | (296) | 108 | (215) | 70 | (318) | 112 | (201) | 65 |
¹ Decreases in reserves and discount rates would produce symmetrical sensitivity values.
² Represents the liability for incurred claims excluding net payables included in incurred claims and including claims reported under the GMM.
³ Represents the net liability for incurred claims excluding net payables included in incurred claims and including net claims reported under the
GMM.
77
4
Excludes periodic payment orders. A change of +0.5% in the discount rate of the gross periodic payment orders would increase net profit in
the Consolidated income statement by
£22m
as at 31 December 2024 (2023: £22m). A change of +0.5% in the discount rate of net periodic
payment orders would increase net profit in the Consolidated income statement by
£12m
as at 31 December 2024 (2023: £12m).
10.6 Reconciliation of the liability for incurred claims to undiscounted value
| 2024 | 2023 | |||||
Direct | Ceded | Net | Direct | Ceded | Net | |
As at 31 December | £m | £m | £m | £m | £m | £m |
Undiscounted value | (5,320) | 1,179 | (4,141) | (5,504) | 1,610 | (3,894) |
Effect of time value of money | 386 | (90) | 296 | 389 | (113) | 276 |
Undiscounted risk adjustment | (201) | 43 | (158) | (225) | 65 | (160) |
Periodic payment orders ¹ | (250) | 117 | (133) | (247) | 110 | (137) |
Liability for incurred claims before net | ||||||
| payables | (5,385) | 1,249 | (4,136) | (5,587) | 1,672 | (3,915) |
Net payables included in incurred claims | (206) | 66 | (140) | (142) | 104 | (38) |
Reclass of claims reported under the GMM | 116 | (2) | 114 | 199 | (4) | 195 |
Liability for incurred claims | (5,475) | 1,313 | (4,162) | (5,530) | 1,772 | (3,758) |
1
The net periodic payment orders are net of the discount and risk adjustment of
£199m
as at 31 December 2024 (2023: £205m).
10.7 Prior-year claims development
The claims development table below demonstrates the extent to which the original claim cost estimates in any one accident
year has subsequently developed favourably (lower than originally estimated) or unfavourably. This table illustrates the
variability and inherent uncertainty in estimating the claims estimate on a yearly basis. The ultimate claims cost for any accident
year is not known until all claims payments have been made. For property insurance, payout of claims liabilities generally occurs
shortly after the occurrence of the loss. For casualty (long-tailed) coverages, the loss may not be paid, or even reported, until
well after the loss occurred. The estimated ultimate claims payments at the end of each subsequent accident year demonstrate
how the original estimate has been revised over time.
The following table presents the estimates of cumulative incurred claims after reinsurance with subsequent developments
during the periods and together with cumulative payments to date.
78
2014 | ||||||||||||
& | ||||||||||||
2024 | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | Prior | Total | |
As at 31 December | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
Estimates of undiscounted net cumulative claims | 1,581 | 1,375 | 1,184 | 1,014 | 972 | 1,017 | 1,253 | 1,410 | 1,058 | 1,340 | ||
Revised estimates | ||||||||||||
One year later | 1,287 | 1,225 | 1,029 | 955 | 1,020 | 1,280 | 1,374 | 1,047 | 1,306 | |||
Two years later | 1,193 | 1,013 | 989 | 1,009 | 1,258 | 1,365 | 1,060 | 1,250 | ||||
Three years later | 999 | 974 | 1,013 | 1,251 | 1,395 | 1,072 | 1,245 | |||||
Four years later | 955 | 1,002 | 1,252 | 1,385 | 1,087 | 1,245 | ||||||
Five years later | 1,021 | 1,250 | 1,397 | 1,079 | 1,256 | |||||||
Six years later | 1,250 | 1,391 | 1,077 | 1,223 | ||||||||
Seven years later | 1,398 | 1,071 | 1,220 | |||||||||
Eight years later | 1,070 | 1,215 | ||||||||||
Nine years later | 1,230 | |||||||||||
Current estimate | 1,581 | 1,287 | 1,193 | 999 | 955 | 1,021 | 1,250 | 1,398 | 1,070 | 1,230 | ||
Cumulative net claims paid to date | (510) | (719) | (673) | (685) | (858) | (1,131) | (1,312) | (1,007) | (1,193) | |||
Undiscounted net claims | 1,581 | 777 | 474 | 326 | 270 | 163 | 119 | 86 | 63 | 37 | 245 | 4,141 |
Effect of time value of money | (296) | |||||||||||
Undiscounted risk adjustment | 158 | |||||||||||
Periodic payment orders | 133 | |||||||||||
Net liability for incurred claims before net payables | 4,136 | |||||||||||
| and claims reported under the GMM | ||||||||||||
Net payables included in incurred claims | 140 | |||||||||||
Reclass of claims reported under the GMM¹ | (114) | |||||||||||
Net liability for incurred claims² | 4,162 |
1
Includes the acquired claims and retroactive reinsurance reclassifications from liability for incurred claims to liability for remaining coverage.
2
Refer to Note 10.6 - Reconciliation of the liability for incurred claims to undiscounted value for reconciliation with the aggregate net carrying
amounts of the Groups of insurance contracts.
The original reserve estimates are evaluated quarterly for redundancy or deficiency. The evaluation is based on actual payment
in full or partial settlement of claims and current estimates of claims liabilities for claims still open or claims still unreported.
To eliminate the distortion resulting from changes in foreign currency rates, all amounts denominated in currencies other than
The Group underwrites general insurance contracts. The Group's exposure to concentration of insurance risk in terms of the
geographical area in which risks have been underwritten is provided in note 27 - Operating segments.
Most of the insurance risk to which the Group is exposed is of a short-tail nature. Policies generally cover a 12-month period.
The following table presents the average duration of the net liability for incurred claims in years:
As at 31 December | 2024 | 2023 |
Net liability for incurred claims¹ | 2.5 | 2.6 |
¹ Represents the net liability for incurred claims excluding net payables included in incurred claims and including net claims reported under the
GMM. Includes the duration of periodic payment orders of 19.7 years as at 31 December 2024 (19.5 years as at 31 December 2023).
Insurance risk is the risk of a loss that arises from the following factors:
i.
underwriting and pricing risk (Note 11.1);
ii.
fluctuation in the timing, frequency and severity of claims relative to expectations (Note 11.2);
iii.
large, unexpected losses arising from a single event such as a catastrophe (Note 11.3);
iv.
risk related to the liability for incurred claims (Note 11.4); and
v.
inadequate reinsurance protection (Note 12).
Insured events can occur at any time during the coverage period and can generate losses of variable amounts. An objective of
the Group is to ensure that a sufficient liability for incurred claims is established to cover future insurance claim payments
related to past insured events. The Group’s success depends upon its ability to accurately assess the risk associated with the
insurance contracts underwritten by the Group. The Group establishes a liability for incurred claims to cover the estimated
79
liability for the payment of all losses incurred with respect to insurance contracts underwritten by the Group.
The liability for incurred claims is the Group’s best estimate of its expected ultimate cost of resolution and administration of
claims. Expected claim cost inflation is considered when estimating the liability for incurred claims, thereby mitigating inflation
risk. The composition of the Group’s insurance risk, as well as the methods employed to mitigate risks, are described below.
11.1 Underwriting and pricing risk
Underwriting risk refers to the risk that claims arising are higher (or lower) than assumed in pricing due to bad experience including
catastrophes, weakness in controls over underwriting or portfolio management, claims management issues or policy wording
interpretation issues.
The majority of underwriting risk to which the Group is exposed is of a short-term nature, and generally does not exceed 12 months.
Annual policies allow the Group to respond to changing weather patterns when managing the global catastrophe risk. The Group’s
underwriting strategy aims to ensure that the underwritten risks are well diversified in terms of the type, amount of risk, and geography
in order to ensure that the Group minimises the volatility of its insurance result.
Underwriting limits are in place to enforce appropriate risk selection criteria and pricing with all of the Group’s underwriters having
specific licences that set clear parameters for the business they can underwrite, based on their expertise.
The Group has developed enhanced methods of recording exposures and concentrations of risk and has a centrally managed Global
Underwriting Forum looking at Group underwriting issues, reviewing and agreeing underwriting direction and setting policy and
directives where appropriate. The Group has a portfolio management process across all its operating segments where key risk
indicators are tracked to monitor emerging trends, opportunities and risks. This provides greater control of exposures in high risk areas
as well as enabling a prompt response to adverse claims development.
Pricing for the Group’s products is generally based upon historical claim frequencies and claim severity averages, adjusted for inflation
and modelled catastrophes, trended forward to recognise anticipated changes in claim patterns after making allowance for other costs
incurred by the Group, conditions in the insurance market and a profit loading that adequately covers the cost of capital. For climate
risk exposures, weather peril models and geolocation tools are employed to support sophisticated risk assessments and underwriting
of residential and commercial properties.
Passing elements of our insurance risk to reinsurers is another key strategy employed in managing the Group’s exposure to insurance
risk, including protection against losses from severe weather events. The Group Board determines a maximum level of risk to be
retained by the Group as a whole. The net retained risk is distributed across the Group in accordance with Group and local risk
appetite. The strategy is dependent on being able to secure reinsurance cover on appropriate commercial and contractual terms and
the nature of the programme presents risks in that recoveries are contingent on the particular pattern of losses and aggregation across
the Group.
The Group remains primarily liable as the direct insurer on all risks reinsured, although the reinsurer is liable to the Group to the extent
of the insurance risk it has contractually accepted responsibility for.
80
Concentration by lines of business
Insurance revenue for the years ended 31 December and net liability for incurred claims as at 31 December are presented by line
of business in the table below:
2024 | 2023 | |||
Net liability for | Net liability for | |||
Insurance revenue | incurred claims¹ | Insurance revenue | incurred claims¹ | |
Personal lines | 38% | 31% | 37% | 33% |
Commercial lines | 62% | 69% | 63% | 67% |
¹ Represents the net liability for incurred claims excluding net payables included in incurred claims and including net claims reported under the
GMM.
11.2 Risk related to the timing, frequency and severity of claims
With the occurrence of claims being unforeseeable, the Group is exposed to the risk that the number and the severity of claims
could exceed the estimates.
Strict claim review policies are in place to assess all new and ongoing claims. Regular detailed reviews of claims handling
procedures and frequent investigations of possible fraudulent claims reduce the Group’s risk exposure. Further, the Group
enforces a policy of actively managing and promptly pursuing claims, to reduce its exposure to unpredictable future
developments that could negatively impact the business. The Group regularly reviews large losses and contentious matters to
ensure that an appropriate liability for incurred claims is established and approved.
11.3 Catastrophe risk
Catastrophe risk is the risk of occurrence of a catastrophe defined as any one claim, or group of claims related to a single event
such as a natural disaster or any climatic, environmental, technological, political, or geopolitical risk. Catastrophes can have a
significant impact on the underwriting income of an insurer. Changing climate conditions may add to the unpredictability,
frequency and severity of natural disasters and create additional uncertainty as to future trends and exposures.
Catastrophic events include natural disasters and unnatural events:
i.
there are a wide variety of natural disasters including but not limited to earthquakes, hurricanes, windstorms,
hailstorms, rainstorms, ice storms, floods, solar storms, severe winter weather and wildfires; and
ii.
unnatural catastrophe events include but are not limited to hostilities, terrorist acts, riots, explosions, crashes and
derailments, and wide scale cyber-attacks.
Despite the use of sophisticated models, the incidence and severity of catastrophic events are inherently unpredictable. The
extent of losses from a catastrophic event is a function of both the total amount of insured exposure in the area affected by the
event and the severity of the event.
The Group manages its exposure to catastrophe risk by imposing limits of insurance, deductibles, exclusions and strong
underwriting guidelines on contracts, as well as by using reinsurance arrangements. The placement of ceded reinsurance is
almost exclusively on an excess-of-loss basis (per event or per risk), but some proportional cessions are performed on specific
portfolios. Ceded reinsurance complies with regulatory guidelines. Retention limits for the excess-of-loss reinsurance vary by
product line
.
11.4 Liability for incurred claims risk
The principal assumption underlying the liability for incurred claims estimates is that the Group’s future claims development will
follow a similar pattern to past claims development experience. Liability for incurred claims estimates are also based on various
quantitative and qualitative factors, including, where relevant:
i.
average claim costs, including claim handling costs (severity);
ii.
average number of claims by accident period (frequency);
iii.
trends in claim severity and frequency;
iv.
payment patterns;
v.
claims inflation including social inflation;
vi.
other factors, for example changes in business mix, changes in claims handling or in the wider claims environment
such as the expected level of insurance fraud;
vii. discount rate; and
viii. risk adjustment (refer to Note 10.4 – Significant accounting judgments, estimates and assumptions for more details).
Refer to Note 10.5 – Sensitivity analysis for the liability for incurred claims’ sensitivity to certain key assumptions.
Most or all the qualitative factors are not directly quantifiable, particularly on a prospective basis, and the effects of these and
unforeseen factors could negatively impact the Group’s ability to accurately assess the risk of insurance contracts that the
Group underwrites. There will be a lag, in some cases significant, between the occurrence of the insured event and the time it is
reported to the Group and additional lags between the time of reporting and final settlement of claims.
The Group’s Reserving Committee provides regional actuaries a forum to present their estimates to business stakeholders and
get their feedback to ensure consistency across divisions within each region on key assumptions. Additionally, the Chief Actuary
81
being a member of each regional Reserving Committee ensures that macro-level assumptions are considered consistently
In the ordinary course of business, the Group reinsures certain risks with reinsurers to limit its maximum loss in the event of
catastrophic events or other significant losses.
The catastrophe reinsurance programme for the Group is provided on a combined basis with IFC's operations in Canada and
the US. The following table summarises the net retention and coverage limits for multi-risk events and catastrophes for UK and
Europe located events.
Reinsurance net retention and coverage limits
2024 | 2023 | |
As of 1 January | £m | £m |
Retention¹ | 150 | 125 |
Coverage limits² | 2,100 | 1,600 |
¹ Excludes reinstatement premiums and co-participations between the retention level and coverage limits.
² Represents the ground up limits before co-participations.
Effective 1 January 2024, the Group increased its retention and coverage limits to £150m and £2.1bn respectively, to reflect the
impact of the DLG acquisition.
Effective 1 January 2025 the Group maintained the same retention at £150m and reduced its coverage limits from £2.1bn to
£1.8bn.
Effective 1 July 2025, the coverage limits will be reduced to £1.65bn to reflect the reducing exposure from UK Personal
Lines as it continues to run-off.
13.1 Summary of goodwill and intangible assets
Internally | Trade names and | ||||
developed | customer | Distribution | |||
Goodwill | software | relationships | networks | Total | |
£m | £m | £m | £m | £m | |
For the year ended 31 December 2024 | |||||
Cost | |||||
Balance, beginning of the year | 397 | 776 | 35 | 187 | 1,395 |
Additions | - | 81 | - | - | 81 |
Derecognised | - | (11) | (3) | - | (14) |
Exchange adjustment | (3) | (2) | - | - | (5) |
Balance, end of the year | 394 | 844 | 32 | 187 | 1,457 |
Accumulated amortisation | |||||
Balance, beginning of the year | - | 446 | 3 | 2 | 451 |
Amortisation charge | - | 110 | 6 | 12 | 128 |
Amortisation on derecognitions | - | (4) | (3) | - | (7) |
Exchange adjustment | - | (1) | - | - | (1) |
Balance, end of the year | - | 551 | 6 | 14 | 571 |
Accumulated impairment | |||||
Balance, beginning of the year | 47 | - | - | - | 47 |
Exchange adjustment | (2) | - | - | - | (2) |
Balance, end of the year | 45 | - | - | - | 45 |
Carrying amount, end of the year | 349 | 293 | 26 | 173 | 841 |
82
For the year ended 31 December 2023
Cost | |||||
Balance, beginning of the year | 73 | 699 | 3 | - | 775 |
Additions 1 | 326 | 129 | 32 | 187 | 674 |
Derecognised 2 | - | (52) | - | - | (52) |
Exchange adjustment | (2) | - | - | - | (2) |
Balance, end of the year | 397 | 776 | 35 | 187 | 1,395 |
Accumulated amortisation | |||||
Balance, beginning of the year | - | 393 | 2 | - | 395 |
Amortisation charge | - | 56 | 1 | 2 | 59 |
Amortisation on derecognition | - | (3) | - | - | (3) |
Balance, end of the year | - | 446 | 3 | 2 | 451 |
Accumulated impairment | |||||
Balance, beginning of the year | 49 | - | - | - | 49 |
Exchange adjustment | (2) | - | - | - | (2) |
Balance, end of the year | 47 | - | - | - | 47 |
Carrying amount, end of the year | 350 | 330 | 32 | 185 | 897 |
1
Goodwill of £326m and intangible assets of £229m were acquired during the year ended 31 December 2023 in relation to the DLG acquisition.
2
Mainly related to the UK Personal Lines exit.
Refer to note 5.2 - Disposals for more details.
The carrying value of intangible assets not yet available for use at 31 December 2024 is
£87m
(31 December 2023: £136m). This
primarily relates to the implementation of strategic software assets in the UK and Ireland.
Amortisation expense of
£57m
(2023: £36m) has been charged to Insurance service expense,
£52m
recognised in Integration and
restructuring costs (2023: £20m) and the remaining
£19m
Allocation of goodwill to the CGUs
Goodwill is allocated to the CGUs, or group of CGUs, that are expected to benefit from the business combination in which they
arose.
2024 | 2023 | |
As at 31 December | £m | £m |
UK | 326 | 326 |
International (Ireland) | 23 | 24 |
Total goodwill | 349 | 350 |
Impairment testing
The Group determines whether goodwill and intangible assets are impaired at least annually and whenever events or changes
in circumstances indicate that the recoverable amounts may not be recoverable at the CGU level or group of CGUs level.
The
annual impairment test for the UK and International were performed as at 31 December 2024.
The UK and International CGUs, which correspond to the Group’s operating segments, were tested for impairment by
comparing their carrying value to their recoverable amount, which has been determined based on a value in use calculation
using the following key estimates and assumptions:
i.
cash flow projections for the next three years are based on operational plans approved by the Board of Directors and
determined using budgeted margins based on past performance and management expectations for the CGUs and their
industry;
ii.
cash flow projections beyond the three year period are extrapolated using estimated growth rates, based mainly on
inflation, as well as demographic or gross domestic product growth perspectives; and
iii.
pre-tax discount rate is based on the weighted-average cost of capital for comparable companies whose activities are
similar to the CGUs.
Key assumptions used are as follows:
83
Pre-tax discount rate | Long term growth rate | |||
As at 31 December | 2024 | 2023 | 2024 | 2023 |
UK | 11% | 15% | 0% | 4% |
International | 11% | 8% | 2% | 2% |
No goodwill or intangible asset impairment loss has been recognised for these CGUs for the years ended 31 December 2024
and 2023.
Sensitivities
The key assumptions used to determine the recoverable amount of each group of CGUs were tested for sensitivity by applying
1% changes to the discount rate and long term growth rates. These are reasonably possible changes and neither of which
would result in an impairment.
Change in recoverable amount less carrying value | ||||
Recoverable | ||||
amount less | Long term growth rate - | |||
Goodwill | carrying value | Discount rate +1% | 1% | |
£m | £m | £m | £m | |
UK | 326 | 865 | (276) | (185) |
International (Ireland) | 23 | 306 | (51) | (31) |
Total goodwill | 349 | 1,171 | (327) | (216) |
Property and equipment is comprised of property and equipment owned, and right-of-use assets, as follows:
2024 | 2023 | |
As at 31 December | £m | £m |
Property and equipment owned (see below) | 54 | 62 |
Right-of-use assets (note 31) | 51 | 46 |
Total property and equipment | 105 | 108 |
Right-of-use assets relate to leased properties and other equipment. Further information can be found in note 31.
84
Property and equipment owned
| 2024 | 2023 | |||||
Group | ||||||
occupied | Group | |||||
property - | occupied | |||||
land and | property - land | |||||
buildings | Other 1 | Total | and buildings | Other | Total | |
For the years ended 31 December | £m | £m | £m | £m | £m | £m |
Cost | ||||||
Balance, beginning of the year | 19 | 132 | 151 | 18 | 134 | 152 |
Additions | 2 | 7 | 9 | 5 | 7 | 12 |
Disposals | - | (40) | (40) | - | (10) | (10) |
Revaluation adjustments | (4) | - | (4) | (4) | - | (4) |
Exchange adjustment | - | (1) | (1) | - | 1 | 1 |
Balance, end of the year | 17 | 98 | 115 | 19 | 132 | 151 |
Accumulated depreciation | ||||||
Balance, beginning of the year | - | 77 | 77 | - | 77 | 77 |
Depreciation charge | 1 | 11 | 12 | - | 10 | 10 |
Depreciation on disposals | - | (30) | (30) | - | (10) | (10) |
Revaluation adjustments | (1) | - | (1) | - | - | - |
Balance, end of the year | - | 58 | 58 | - | 77 | 77 |
Accumulated impairment | ||||||
Balance, beginning of the year | - | 12 | 12 | - | 10 | 10 |
Impairment charge | - | - | - | - | 2 | 2 |
Impairment on disposals | - | (9) | (9) | - | - | - |
Balance, end of the year | - | 3 | 3 | - | 12 | 12 |
Carrying value, end of the year | 17 | 37 | 54 | 19 | 43 | 62 |
1
Other includes fixtures, fittings and other equipment.
The carrying amount of Group occupied property that would have been recognised had the assets been carried under the cost model
at 31 December 2024 is
£11m
(31 December 2023: £10m). The Group occupied property reserve at 31 December 2024 is
£6m
(31
85
15.1. Other assets
2024 | 2023 | |
As at 31 December | £m | £m |
Financial assets related to investments | 61 | 62 |
Other debtors | 45 | 73 |
Pension plans in a surplus position (note 26) | 25 | 23 |
Accrued investment income | 65 | 51 |
Prepayments | 37 | 42 |
Total other assets | 233 | 251 |
Financial assets related to investments | ||
Amounts receivable from investment brokers on unsettled trades | 25 | 2 |
Derivative financial assets (note 7.1) | 33 | 59 |
Collateral assets | 3 | 1 |
61 | 62 | |
To be settled within 12 months | 166 | 205 |
To be settled after 12 months | 67 | 46 |
2024 | 2023 | |
As at 31 December | £m | £m |
Financial liabilities related to investments | 179 | 75 |
Other creditors | 39 | 79 |
Accruals | 162 | 173 |
Deferred income | 1 | 4 |
Lease liabilities | 72 | 67 |
Pension plans in a deficit position and unfunded plans (note 26) | 11 | 22 |
Provisions | 39 | 34 |
Bank overdraft | - | 8 |
Total other liabilities | 503 | 462 |
Financial liabilities related to investments | ||
Accounts payable to investment brokers on unsettled trades | 28 | 17 |
Derivative financial liabilities (note 7.1) | 14 | 25 |
Collateral liabilities | 22 | 33 |
Equities sold short positions | 115 | - |
179 | 75 | |
To be settled within 12 months | 407 | 349 |
To be settled after 12 months | 96 | 113 |
16.1. Summary of debt outstanding
Amortised cost | |||||||
Initial | 2024 | 2023 | |||||
Maturity | term | Coupon | Principal | ||||
As at 31 December | date | (years) | Fixed rate | payment | amount | £m | £m |
GBP notes | Oct-45 | 31 | 5.13% | Oct. | £120m | 120 | 119 |
US bonds | Oct-29 | 30 | 8.95% | Apr. & Oct. | $9m | 7 | 7 |
Total debt outstanding | 127 | 126 | |||||
The dated guaranteed subordinated notes were issued on 10 October 2014 at a fixed rate of 5.125%. The notes, with a
remaining nominal value of £120m, have a maturity date of 10 October 2045. The Group has the right to redeem the notes in
whole on specific dates from 10 October 2025 at a redemption price equal to the principal amount, together with accrued and
86
unpaid interest. If the notes are not repaid on that date, the rate of interest will be reset to 3.852% plus the appropriate
benchmark gilt for a further five year period.
In June 2023, notes with a nominal value of £40m were repurchased and cancelled.
The subordinated guaranteed US$ 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 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.
There have been no defaults on any bonds or notes during the year.
16.2 Movement in debt outstanding
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Balance, beginning of year | 126 | 166 |
Repayment of debt | - | (40) |
Amortisation of debt | 1 | - |
Balance, end of year | 127 | 126 |
16.3 Movement in accrued interest payable on issued debt
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Balance, beginning of year | 2 | 2 |
Interest paid | (7) | (7) |
Interest charged | 7 | 7 |
Balance, end of year¹ | 2 | 2 |
The issued share capital of the parent company is fully paid and is summarised in the following table:
2024 | 2023 | |||
As at 31 December | Number | £m | Number | £m |
Ordinary Shares of £1 each | 1,563,286,980 | 1,563 | 1,563,286,979 | 1,563 |
Preference shares of £1 each | - | - | 125,000,000 | 125 |
1,563,286,980 | 1,563 | 1,688,286,979 | 1,688 | |
The movement of Ordinary Shares in issue, their nominal value and the associated share premiums during the period are as
follows:
Number of shares | Nominal value | Share premium | |
For the year ended 31 December 2024 | £m | £m | |
Balance, beginning of the year | 1,563,286,979 | 1,563 | 1,366 |
Capital injection from 2283485 Alberta Limited | 1 | - | 154 |
Capital reduction | - | - | (1,520) |
Balance, end of the year | 1,563,286,980 | 1,563 | - |
For the year ended 31 December 2023 | |||
Balance, beginning of the year | 1,563,286,973 | 1,563 | 282 |
Capital injection from 2283485 Alberta Limited | 6 | - | 1,084 |
Balance, end of the year | 1,563,286,979 | 1,563 | 1,366 |
On 12 June 2024, the Group’s Preference Shareholders were invited to tender their preferred shares. This transaction was part
of the Group’s on-going process of optimising its capital structure, as these perpetual instruments would have lost their
regulatory eligibility in 2026 and would no longer have satisfied the purpose for which they were originally issued.
Following the shareholders’ approval on 16 July 2024, all 125,000,000 preferred shares were cancelled at an offer price of
£1.22 per preferred share plus voting and transaction fees for total cash consideration of approximately £155m. The preferred
87
shares of £125m were derecognised and a loss of approximately £30m was recorded in retained earnings. In addition, £3m of
dividends were accrued and paid to the preferred shareholders related to this transaction.
On 16 July 2024 at a General Meeting of shareholders, a resolution was passed to implement a reduction of capital in the
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Ordinary shares | 182 | - |
Preferred shares | 8 | 9 |
190 | 9 |
On 19 July 2024, an ordinary interim dividend of £82m was paid by the Group to 2283485 Alberta Limited.
On 25 November 2024, an ordinary interim dividend of £100m was paid by the Group to 2283485 Alberta Limited.
The Group’s Preference Shareholders received a dividend at the rate of 7.375% per annum until the cancellation of the
preferred shares on 16 July 2024.
19.1 Capital management
It is a key regulatory requirement that the Group maintains sufficient capital to support its exposure to risk. Accordingly, the
Group’s capital management strategy is closely linked to its monitoring and management of risk. The Group’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.
The Group’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, the Group aims to
hold sufficient capital so as to maintain its single ‘A’ credit rating.
The Group holds an appropriate level of capital to satisfy all applicable regulations. Compliance with regulatory requirements is
embedded within the BRC mandate, for the protection of the Group’s policyholders and the continuation of the Group’s ability to
underwrite.
19.2 Regulatory solvency position during 2024
The Group operates a Prudential Regulation Authority (PRA) approved Solvency UK Internal Model which forms the basis of the
primary Solvency UK solvency capital ratio (SCR) measure. The internal model is used to support, inform and improve the
Group’s decision making. It is used to inform the Group’s optimum capital structure, its investment strategy, its reinsurance
programme and target returns for each portfolio.
The Group has been subject to regulatory supervision throughout 2024. As at 31 December 2024, the Group’s unaudited
estimated coverage of its Solvency UK SCR is approximately
1.8 times
(31 December 2023: 1.7 times).
19.3 Tangible net asset value (TNAV)
TNAV is one of many capital metrics used by the Group and reconciles to IFRS net assets as follows:
2024 | 2023 | |
As at 31 December | £m | £m |
Equity attributable to shareholders | 2,767 | 2,812 |
Less: preference share capital | - | (125) |
Less: goodwill and intangibles | (841) | (897) |
TNAV | 1,926 | 1,790 |
88
The key movements in TNAV are as follows:
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Balance, beginning of the year | 1,790 | 2,040 |
Profit / (loss) after tax¹ | 307 | (33) |
Exchange gains net of tax | 1 | 6 |
Fair value gains net of tax | 2 | 66 |
Pension fund losses net of tax | (34) | (742) |
Dividends (note 18) | (190) | (9) |
Goodwill and intangible additions and disposals | (74) | (622) |
Share issue (note 17) | 154 | 1,084 |
Cancellation of preference shares | (30) | - |
Balance, end of the year | 1,926 | 1,790 |
¹ Profit (loss) after tax excludes amortisation and impairment of intangible assets.
19.4 Own risk and solvency assessment (ORSA)
The Group defines its ORSA as a series of interrelated activities by which it establishes:
i.
the quantity and quality of the risks which it seeks to assume or to which it is exposed;
ii.
the level of capital required to support those risks; and
iii.
the actions it will take to achieve and maintain the desired levels of risk and capital.
The assessment considers both the current position and the positions that may arise during the planning horizon of the Group
(typically the next three years). It looks at both the expected outcome and the outcome arising when the plan assumptions do not
materialise as expected.
The assessments of how much risk to assume and how much capital to hold are inextricably linked.
In some situations, it may be
desirable to increase the amount of risk assumed or retained in order to make the most efficient use of capital available or else to
return excess capital to capital providers. In other situations, where the risks assumed give rise to a capital requirement that is
greater than the capital immediately available to support those risks, it will be necessary either to reduce the risk assumed or to
obtain additional capital.
The assessment of risk and solvency needs is in principle carried out continuously. In practice, the assessment consists of a range
of specific activities and decisions carried out at different times of the year as part of an annual cycle, supplemented as necessary
by ad hoc assessments of the impact of external events and developments and of internal business proposals.
Papers are presented to the Board throughout the year dealing with individual elements that make up the ORSA. The information
contained in those papers and the associated decisions taken are summarised in an annual ORSA report, which is submitted to the
Group’s regulators as part of the normal supervisory process. The ORSA is reviewed by the BRC and approved by the Board.
The ORSA report was delivered to the Board in November 2024. This outlined the balance sheet resilience to market stresses
through the consideration of reverse stress testing, based on market and pensions impacts. The report concluded that RSA
89
20.1 Net investment return and net insurance financial result
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Net investment income | 251 | 185 |
Net (losses) gains on investment portfolio | (119) | 5 |
Net investment return | 132 | 190 |
Net insurance financial result | (94) | (119) |
Net investment return and net insurance financial result | 38 | 71 |
20.2 Net investment income
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Interest income calculated using the effective interest method: | ||
Debt securities classified as FVTOCI | 111 | 64 |
Loans and cash and cash equivalents at amortised cost | 28 | 25 |
Interest and similar income on securities classified or designated as FVTPL | 93 | 82 |
Interest income | 232 | 171 |
Dividend income on FVTPL equity securities | 11 | 11 |
Investment property rental income | 17 | 12 |
Investment income | 260 | 194 |
Investment expense | (9) | (9) |
Net investment income | 251 | 185 |
20.3 Net gains (losses) on investment portfolio
| 2024 | 2023 | |||||
Fixed | Equity and | Fixed | Equity and | |||
income | property | Total | income | property | Total | |
For the years ended 31 December | £m | £m | £m | £m | £m | £m |
Net gains (losses) from: | ||||||
Financial instruments: | ||||||
Classified as FVTOCI | 5 | - | 5 | 92 | - | 92 |
Classified or Designated as FVTPL | (33) | 2 | (31) | 56 | 7 | 63 |
(28) | 2 | (26) | 148 | 7 | 155 | |
Derivatives¹ | - | 4 | 4 | - | - | - |
Investment property | - | 3 | 3 | - | (9) | (9) |
Net foreign currency gains (losses) | (94) | - | (94) | (47) | 1 | (46) |
ECL expense² | (1) | - | (1) | (1) | - | (1) |
(123) | 9 | (114) | 100 | (1) | 99 | |
Recognised in: | ||||||
Profit (loss) | (128) | 9 | (119) | 8 | (1) | 7 |
OCI | 5 | - | 5 | 92 | - | 92 |
Total gains (losses) on investment portfolio | (123) | 9 | (114) | 100 | (1) | 99 |
¹ Excluding foreign currency contracts, which are recognised in Net foreign currency gains (losses) on investments. Derivatives are mandatorily
measured at FVTPL, except when part of a documented hedging arrangement.
² ECL expense is not significant due to the high credit quality of the investment portfolio.
90
20.4 Net insurance financial result
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Change in the carrying amount of insurance contracts due to: | ||
Unwind of discount | (223) | (226) |
Changes in discount rates and other financial assumptions | (6) | (28) |
Net foreign currency gains | 85 | 75 |
Insurance finance expense | (144) | (179) |
Change in the carrying amount of reinsurance contracts due to: | ||
Unwind of discount | 59 | 71 |
Changes in discount rates and other financial assumptions | (2) | 7 |
Net foreign currency losses | (7) | (18) |
Reinsurance finance income | 50 | 60 |
Net insurance financial result | (94) | (119) |
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Gain (loss) on disposal of business¹ | 95 | (6) |
Other net foreign currency gains (losses) | 2 | (1) |
Other 2 | 3 | - |
100 | (7) |
¹Mainly relates to the sale of the UK direct Home and Pet operations completed on 31 March 2024.
Refer to note 5 - Business combinations
and disposals for further information.
2
21.2 Other income and other expense
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Other income 1 | 1 | 30 |
Other expense 2 | (130) | (86) |
(129) | (56) |
1
Includes pension interest income.
2
91
Amortisation of | Other | |||
insurance | insurance | |||
acquisition | service | Other | ||
cash flows | expense | expenses | Total | |
For the year ended 31 December 2024 | £m | £m | £m | £m |
Claims and adjustment expenses | - | 2,458 | - | 2,458 |
Risk adjustment | - | (27) | - | (27) |
Losses on onerous contracts¹ | - | (26) | - | (26) |
Commissions | 465 | - | - | 465 |
Premium taxes and levies | 1 | - | - | 1 |
Allocated indirect expenses² | 267 | 374 | 71 | 712 |
Amortisation of acquired intangible assets 3 | - | - | 19 | 19 |
Administration and other expenses | - | - | 40 | 40 |
733 | 2,779 | 130 | 3,642 | |
Represented by: | ||||
Insurance service expense | 733 | 2,779 | - | 3,512 |
Other expense | - | - | 130 | 130 |
733 | 2,779 | 130 | 3,642 | |
For the year ended 31 December 2023 | ||||
Claims and adjustment expenses | - | 2,650 | - | 2,650 |
Risk adjustment | - | 6 | - | 6 |
Losses on onerous contracts¹ | - | (41) | - | (41) |
Commissions | 467 | - | - | 467 |
Premium taxes and levies | 1 | - | - | 1 |
Allocated indirect expenses² | 259 | 323 | 68 | 650 |
Amortisation of acquired intangible assets 3 | - | - | 3 | 3 |
Administration and other expenses | - | - | 15 | 15 |
727 | 2,938 | 86 | 3,751 | |
Represented by: | ||||
Insurance service expense | 727 | 2,938 | - | 3,665 |
Other expense | - | - | 86 | 86 |
727 | 2,938 | 86 | 3,751 |
1
Includes the initial recognition of losses on onerous contract, any subsequent reversals, and the amortisation of the loss component.
2
Mainly includes salaries, rent and technology costs.
3
Integration costs include restructuring costs related to acquisitions by the Group and to the Group being acquired, including
redundancy costs, retention bonuses and system integration. Restructuring and other costs include restructuring costs not
related to acquisitions by the Group or to the Group being acquired, including impairment expenses and expenses related to the
implementation of significant new accounting standards.
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Integration costs | (60) | (54) |
Restructuring and other costs | (104) | (108) |
(164) | (162) |
92
24.1 Income tax expense recognised in the Consolidated income statement
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Current tax: | ||
Charge for the year | 37 | 35 |
Adjustments in respect of prior years | 9 | (1) |
Total current tax | 46 | 34 |
Deferred tax: | ||
Charge (credit) for the year | (19) | 36 |
Adjustments in respect of prior years | (11) | - |
Total deferred tax | (30) | 36 |
Total tax charge | 16 | 70 |
24.2 Effective income tax rate
2024 | 2023 | |
For the years ended 31 December | £m | £m |
(Profit) loss on ordinary activities before tax | (195) | 19 |
Tax at the UK rate of 25% (2023: 23.5%) | 49 | (4) |
Tax effect of: | - | |
Income / gains not taxable (or taxed at lower rate) | (2) | (1) |
Expenses not deductible for tax purposes | 3 | 2 |
Non-taxable loss (gain) on sale of subsidiaries | - | 5 |
Increase (Decrease) of current tax in respect of prior periods | 9 | (1) |
Increase (Decrease) of deferred tax in respect of prior periods | (11) | - |
(Recognition) de-recognition of prior year deferred tax assets | (33) | 35 |
Different tax rates of subsidiaries operating in other jurisdictions | (3) | - |
IFRS 17 transitional adjustment | - | 42 |
Other | 4 | (8) |
Income tax expense | 16 | 70 |
Effective tax rate | 8% | (368)% |
The main drivers of the Group’s tax charge for year ended 31 December 2024 are as follows:
i.
the significant contributions paid to the UK pension plans in 2023 in respect of the buy-ins meant that the tax relief for a
portion of these contributions was deferred and becomes deductible in years 2024-26. These deferred contributions created
a new deferred tax asset recognised in OCI, where the buy-in transactions are accounted for. Due to restrictions on UK
deferred tax asset recognition, as the new OCI deferred tax asset unwinds it is replaced by previously displaced temporary
differences in the income statement. This re-recognition results in a £27m deferred tax credit in the Consolidated income
statement, with an offsetting £27m deferred tax charge in OCI. There is no change in the net deferred tax asset on the
Consolidated statement of financial position.
ii.
the recognised deferred tax asset increased by £11m (predominantly in the UK, £10m), due to increased forecast future
taxable profits. £6m of this increase is recognised in the Consolidated income statement in the year (with the balance in OCI).
See the deferred tax disclosures below for further details.
iii.
an adjustment in respect of prior years arose for current tax and deferred tax in the UK on the gain on disposal of the direct
personal home and pet business lines to Admiral. A portion of the gain on sale was taxable when the business transfer
agreement was signed (in December 2023) rather than in 2024 when it arose for accounting purposes. As a consequence,
the current tax expense relating to 2023 was increased (£9m) and a new deferred tax asset (£10m) recognised for the timing
difference. The net overall impact is a c£1m reduction in the 2024 tax charge as a consequence of the tax rate difference.
93
24.3 Income tax recognised in OCI
Current Tax | Deferred Tax | Total | ||||
2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
For the years ended 31 December | £m | £m | £m | £m | £m | £m |
Fair value gains and losses | - | - | - | 22 | - | 22 |
Remeasurement of net defined benefit pension liability | (43) | (29) | (23) | (89) | (20) | (118) |
Total credited to OCI | (43) | (29) | (23) | (67) | (20) | (96) |
Foreign exchange arising on the revaluation of current and deferred tax balances is reported through OCI within the foreign currency
translation reserve.
The Group applies judgement in identifying uncertainties over income tax treatments under IAS 12 and IFRIC 23. Provisions for
uncertain tax treatments are based on our assessment of probable outcomes which take into consideration many factors, including
interpretations of tax law and prior experience. At the end of the reporting period, provisions recognised in respect of uncertain tax
positions for the Group totalled
less than £10m
(2023: less than £10m).
24.4 Tax rates
The table below provides a summary of the current tax and deferred tax rates for the year in respect of the largest jurisdictions
in which the Group operates.
2024 | 2023 | |||
For the years ended 31 December | Current Tax | Deferred Tax | Current Tax | Deferred Tax |
UK | 25.00% | 25.00% | 23.50% | 25.00% |
Ireland | 12.50% | 12.50% | 12.50% | 12.50% |
Tax assets and liabilities are recognised based on tax rates that have been enacted or substantively enacted at the balance sheet
date.
Current tax
Asset | Liability | |||
2024 | 2023 | 2024 | 2023 | |
As at 31 December | £m | £m | £m | £m |
To be settled within 12 months | - | 1 | (2) | (2) |
To be settled after 12 months | 1 | 1 | - | - |
Current tax position | 1 | 2 | (2) | (2) |
Deferred tax
Asset | Liability | |||
2024 | 2023 | 2024 | 2023 | |
As at 31 December | £m | £m | £m | £m |
Deferred tax position | 275 | 266 | 2 | - |
There is a
£7m increase
in net deferred tax assets during the period (2023: £1m decrease).
Tax assets and liabilities are recognised based on tax rates that have been enacted or substantively enacted at the balance
sheet date.
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. Key assumptions in the forecast are subject to sensitivity
testing which, together with additional modelling and analysis, support management’s judgement that the carrying value of
deferred tax assets continues to be supportable. The recognition approach is consistent with that applied at 31 December 2023.
The majority of the deferred tax asset recognised based on future profits is in respect of the UK. The evidence for the future
taxable profits is a five-year forecast based on the three-year operational plans prepared by the relevant businesses and a
further two years of extrapolation, which are subject to internal review and challenge, including by the Board. An additional
£11m of deferred tax assets was recognised during the period due to an increase in forecast taxable profits; £10m of which was
in the UK with the balance in Ireland (£1m). The recognition of UK deferred tax assets was of previously unrecognised tax
losses and therefore the recognition was in the Consolidated income statement and in OCI in the proportion in which the losses
had arisen (45%:55%).
The UK forecast profits for DTA purposes are prudent and therefore assume no UK premium growth and no overseas premium
growth post year 3 in the projection. The base forecasts also incorporate a contingency of
£35m per annum
(31 December
94
2023: £55m per annum). Whilst contingency has been built into the base forecasts for DTA purposes, the increase in
recognised UK DTA due to future profits was based on a further stressed scenario which included a 1% deterioration in COR, a
decline in return of investment income of 100 basis points and a number of other prudent expense assumptions. The UK DTA
recognition will be reassessed in 2025 once the NIG integration journey is more advanced, the UK personal line exits and run-
offs are more progressed and continued improvement in UK profitability is demonstrated.
The value of the deferred tax asset is sensitive to assumptions in respect of forecast profits. Further stress and scenario tests
are also run over the level of DTA supported by UK forecast profits to assess their impact on the recognised DTA. The impact is
summarised below. These sensitivities are run on the base case scenario and their impact is already included in the scenario
selected for DTA recognition. 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.
Deferred tax sensitivities
2024 | 2023 | ||
As at 31 December | Change in assumption | £m | £m |
Change in COR 1 across all 5 years | 1% increase | (23) | (22) |
1% decrease | 21 | 22 | |
Forecast modelling period | 1 year reduction | (69) | (66) |
Change in bond yields | 50 basis points increase | (10) | (6) |
50 basis points decrease | 10 | 6 |
1
COR is a measure of underwriting performance and is the ratio of underwriting costs expressed in relation to earned premiums.
A deferred tax asset of
£21m
is recognised in respect of temporary differences arising from unrealised losses on the FVTOCI
bond portfolio (31 December 2023: £21m). On adoption of IFRS 9 on 1 January 2023, a portion of the OCI bond portfolio was
re-designated as FVTPL, triggering a tax transitional adjustment. The £34m deferred tax asset previously recognised on the
unrealised losses on these bonds in the AFS reserve was transferred to retained earnings on 1 January 2023 and now forms a
new deferred tax asset for the transitional adjustment which unwinds over 10 years via the income statement.
The tax relief for a portion of the pension contributions paid to RSA's pension schemes in 2023 under the buy-in transaction was
deferred under UK tax rules and is deductible in years 2024-26 (on a straight-line basis). The deferred contributions created a
new category of deferred tax asset which was recognised in OCI. The original recognition in 2023 (£81m with a 3 year unwind)
displaced previously recognised temporary differences in the Consolidated income statement. As the deferred tax asset
unwinds (£27m in 2024) it is replaced by unrecognised temporary differences in the Consolidated income statement. This
results in no change in the net UK deferred tax asset on the Consolidated statement of financial position.
In 2024, the UK group has recognised a £30m deferred tax liability arising from the acquisition of the DLG broker commercial
lines business due to differences between the accounting and tax value of acquired intangible assets (refer to note 5 for further
detail). The deferred tax liability is unwinding over 15 years. This deferred tax liability is partially offset by the recognition of
additional deferred tax assets (£15m).
Movement in the net deferred tax assets
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Balance, beginning of the year | 266 | 267 |
Amounts credited (charged) to the Consolidated income statement | 30 | (36) |
Amounts (charged) credited to OCI | (23) | 67 |
Amounts arising on business combination | - | (32) |
Balance, end of the year | 273 | 266 |
95
Major deferred tax assets (liabilities) recognised by the Group
Charged to | |||||
Charged to | Consolidated | ||||
Balance, | Consolidated | Charged to | statement of | ||
beginning of | income | Consolidated | financial | Balance, end | |
the year | statement | OCI | position | of the year | |
For the year ended 31 December 2024 | £m | £m | £m | £m | £m |
Net unrealised losses (gains) on investments | 21 | - | - | - | 21 |
Tax losses and unused tax credits | 34 | 6 | 5 | - | 45 |
Other deferred tax reliefs | 91 | 22 | - | - | 113 |
Net insurance contract liabilities | (2) | (1) | - | - | (3) |
Retirement benefit obligations | 80 | - | (28) | - | 52 |
Capital allowances | 70 | - | - | - | 70 |
Provisions and other temporary differences | (28) | 3 | - | - | (25) |
Net deferred tax asset | 266 | 30 | (23) | - | 273 |
For the year ended 31 December 2023 | |||||
Net unrealised losses (gains) on investments | 43 | - | (22) | - | 21 |
Tax losses and unused tax credits | 15 | 11 | 8 | - | 34 |
Other deferred tax reliefs | 162 | (71) | - | - | 91 |
Net insurance contract liabilities | 2 | (4) | - | - | (2) |
Retirement benefit obligations | (1) | - | 81 | - | 80 |
Capital allowances | 91 | (21) | - | - | 70 |
IFRS 17 transitional adjustment | (42) | 42 | - | - | - |
Provisions and other temporary differences | (3) | 7 | - | (32) | (28) |
Net deferred tax asset | 267 | (36) | 67 | (32) | 266 |
Unrecognised tax assets
At the end of the reporting period, the Group had the following unrecognised tax assets:
2024 | 2023 | |||
Gross | Gross | |||
amount | Tax effect | amount | Tax effect | |
As at 31 December | £m | £m | £m | £m |
Trading tax losses | 2,114 | 502 | 2,087 | 489 |
Deductible temporary differences | 415 | 104 | 501 | 125 |
Capital tax losses | 1,284 | 321 | 1,274 | 319 |
Unrecognised tax assets | 3,813 | 927 | 3,862 | 933 |
The Group’s unrecognised trading losses are located in the UK, Ireland, France, and Luxembourg and represent losses which are not
expected to be utilised within the forecast profit period. The Group’s unrecognised deductible temporary differences are predominantly
located in the UK. Unrecognised capital losses mainly relate to the UK (£1,284m), with the remainder in Ireland, and have not been
recognised as it is not considered probable that they will be utilised in the future as most UK and Ireland capital gains are exempt from
tax.
£3m
(31 December 2023: £2m) of the gross trading tax losses are attributable to Luxembourg and will expire in 2036.
24.6 Pillar 2
In May 2023, the IASB issued International Tax Reform - Pillar two Model Rules, which amended IAS 12, Income Taxes (IAS
12) for fiscal years beginning as of 31 December 2023. The amendments, which the Group has applied, include a mandatory
temporary exception from recognising and disclosing deferred tax assets and liabilities related to Pillar Two income taxes. This
exception will allow entities time to assess the implications of the new rules and to avoid diverse interpretations of IAS 12 which
could result in inconsistent applications until the IASB can complete further work.
The Group has prepared its financial statements to consider enacted and substantively enacted Pillar Two legislation, with an
effective date of 1 January 2024, in jurisdictions in which it operates. There was no material impact on the Consolidated
96
The total amount included within staff costs in the Consolidated income statement in respect of all share scheme plans in
2024
is set
out below.
25.1 Analysis of share scheme costs
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Long term incentive plan (LTIP) | 11 | 7 |
Save as you earn (SAYE) | 7 | 3 |
Total | 18 | 10 |
25.2 Analysis of awards
2024 | 2023 | |||
Awarded | ||||
during the | Total value | Awarded during | Total | |
year | granted | the year | value granted | |
For the years ended 31 December | £m | £m | £m | £m |
LTIP | 8 | 22 | 8 | 22 |
SAYE | - | 9 | - | 2 |
Total | 8 | 31 | 8 | 24 |
The balance of the value of the awards will be charged to the Consolidated income statement during the remaining vesting
periods.
25.3 Long-term incentive plan - IFC shares
Executive directors, other selected executives and senior managers are eligible to participate in the LTIP to enable them to own
shares in the ultimate parent company, IFC. Participants are awarded notional share units referred to as Performance Stock
Units (PSUs) and Restricted Stock Units (RSUs). The PSU payout is subject to the achievement of specific targets with regards
to:
i.
IFC’s estimated ROE outperformance versus an industry benchmark, based on a three-year average; or
ii.
the three-year average combined ratio of the UK & International operations compared to a specific target.
RSUs ordinarily vest three years from the year of the grant. Vesting for RSUs is not linked to the Group’s performance.
If an employee resigns from the Group, then unvested PSUs and RSUs lapse at the date of leaving the Group.
For Executive Directors and other specified roles, the Remuneration Committee defers a portion of an individual’s gross bonus
into an award over RSUs, which are also not subject to performance conditions.
Shares are purchased in the market to settle the awards.
The awards are initially estimated and valued at the weighted average fair value on the grant date, which corresponds to the
total estimated charge at the grant date, divided by the total shares in issuance, as provided by IFC.
As the Group has the obligation to settle the liabilities of LTIP awards, which grant rights to receive shares in the ultimate parent
company, IFC, it is accounted for as a cash-settled plan. This means
the cost of the awards is recognised as an expense over
the vesting period and the liability is remeasured at each reporting period based on the number of awards that are expected to
vest and the current share price, with any fluctuations in the liability also recorded as an expense until it is settled.
97
Outstanding units and weighted-average fair value at grant date by performance cycle
As at 31 December | 2024 | 2023 | ||||
Weighted | ||||||
average | Weighted | |||||
fair value | average fair | |||||
Number of | at grant | Number of | value at | |||
units | date | Total | units | grant date | Total | |
Performance cycles | £ | £m | £ | £m | ||
2021 - 2023 | - | - | - | 44,681 | 94.17 | 4 |
2022 - 2024 | 52,479 | 102.66 | 5 | 55,777 | 102.66 | 6 |
2022 - 2026 | 12,723 | 102.66 | 1 | 12,723 | 102.66 | 1 |
2023 - 2025 | 49,681 | 118.40 | 6 | 54,428 | 118.40 | 6 |
2024 - 2026 | 57,537 | 116.04 | 7 | - | - | |
Special cycles | 27,162 | 112.66 | 3 | 18,339 | 110.67 | 2 |
Integration cycles | - | - | - | 29,227 | 94.17 | 3 |
199,582 | 111.79 | 22 | 215,175 | 104.41 | 22 | |
Movement in LTIP shares
2024 | 2023 | |
For the years ended 31 December | (in units) | (in units) |
Outstanding, beginning of year | 210,940 | 167,264 |
Awarded | 64,121 | 54,503 |
Net change in estimate of units outstanding | (9,818) | (10,271) |
Units settled | (83,245) | (556) |
Outstanding, end of year | 181,998 | 210,940 |
25.4 Save as you earn IFC shares
Employees can elect to make monthly savings for a period of three years. In exchange, employees are granted an option to
buy ordinary shares in the IFC at the end of the savings period with a pre-set option price, typically at a 20% discount.
As the Group has the obligation to settle the liabilities of SAYE awards, it is accounted for as a cash-settled plan on the same
basis as the Long-term incentive plan IFC shares.
Movement in SAYE shares
2024 | 2023 | |||
(in units) | (in units) | |||
For the years ended 31 December | Sharesave | Sharebuild | Sharesave | Sharebuild |
Outstanding, beginning of year | 220,407 | 3,562 | 177,989 | 2,213 |
Granted | 90,464 | 2,378 | 61,111 | 1,865 |
Exercised | (4,808) | (170) | (3,426) | (286) |
Cancelled | (6,403) | - | (8,725) | - |
Forfeited | (7,980) | (286) | (6,150) | (230) |
Expired | (2,376) | - | (392) | - |
Outstanding, end of year | 289,304 | 5,484 | 220,407 | 3,562 |
25.5 Assumptions used
The key assumptions used in the calculation of the fair value of share options on the date of grant using the Black-Scholes
option pricing model were as follows:
98
Values | |
Fair value at valuation date | |
2021 - 2024 | £67.94 |
2022 - 2025 | £59.10 |
2023 - 2026 | £31.42 |
2024 - 2027 | £29.03 |
Exercise price¹ | |
2021 - 2024 | £79.79 |
2022 - 2025 | £89.82 |
2023 - 2026 | £88.70 |
2024 - 2027 | £116.12 |
Share price at valuation date | £150.29 |
Expected life² | 3.2 years |
Risk-free interest rate | 2.94% |
Expected volatility³ | 16.58% |
Dividend yield | 2.12% |
1
The exercise price represents the weighted average trading price for the three-week period preceding the grant date.
²
The maturity date of the options outstanding varies between December 2025 and December 2027.
³
The expected volatility was determined by using the Group’s own historical volatility on a daily basis, calculated over a period corresponding to
26.1 Defined contribution pension plans
Costs of
£40m
(2023: £38m) were recognised in respect of defined contribution plans by the Group.
26.2 DB pension plans
Funded status
The DB obligation, net of the fair value of plan assets, is recognised on the Consolidated statement of financial position as an
asset when the plan is in a surplus position, or as a liability when the plan is in a deficit position. This classification is determined
on a plan-by-plan basis.
| 2024 | 2023 | |||||
UK | Other | Total | UK | Other | Total | |
As at 31 December | £m | £m | £m | £m | £m | £m |
DB obligation (funded) | (4,895) | (54) | (4,949) | (5,459) | (59) | (5,518) |
DB obligation (unfunded) | (3) | - | (3) | (4) | - | (4) |
Fair value of plan assets | 4,898 | 70 | 4,968 | 5,449 | 76 | 5,525 |
- | 16 | 16 | (14) | 17 | 3 | |
Other net surplus remeasurements | (2) | - | (2) | (2) | - | (2) |
Net DB asset (liability) | (2) | 16 | 14 | (16) | 17 | 1 |
Recognised in: | ||||||
Other assets - plans in a surplus position | 9 | 16 | 25 | 6 | 17 | 23 |
Other liabilities - plans in a deficit position and unfunded plans | (11) | - | (11) | (22) | - | (22) |
(2) | 16 | 14 | (16) | 17 | 1 | |
UK plans
The major DB pension plans are in the UK. The UK DB plans were closed to new entrants in 2002 and subsequently closed to
future accruals with effect from 31 March 2017. UK plans in surplus have been reduced for the 25% (35% as at 31 December
2023) tax cost of an authorised return of surplus, classified as Other net surplus remeasurements. The Group’s opinion is that
the authorised refund tax charge is not an income tax within the meaning of IAS 12 and so the surplus is recognised net of this
tax charge rather than the tax charge being included within deferred taxation.
Accrued benefits are revalued up to retirement in accordance with government indices for inflation. A cap of 2.5% per annum
applies to the revaluation of benefits accrued post March 2010 (a cap of 5% per annum applies for benefits which accrued prior
to this date). After retirement, pensions in payment are increased each year based on the increases in the government indices
for inflation. A cap of 2.5% applies to benefits accrued post 31 December 2005 (a cap of 5% applies to benefits in excess of
Guaranteed Minimum Pension prior to this date).
99
The UK plans are managed through trusts with independent Trustees responsible for safeguarding the interests of all members.
The plan funds are legally separated from the Group and controlled by the Trustees. The Trustees meet regularly with Group
management to discuss the funding position and any proposed changes to the plans. The plans are regulated by The Pensions
Regulator.
The Group is exposed to risks through its obligation to fund the plans. These risks include market risk, inflation risk and
longevity risk. However the completion of the buy-ins during 2023 removed all significant risk exposures for the two main UK DB
plans. Refer to note 26.6 - Purchase of annuity buy-in insurance contracts for more details.
The profile of the members of the two main UK DB plans at 30 June 2022 (the latest date at which full information is available) is as
follows:
Deferred members - members no longer accruing and not yet receiving benefits | 20,950 |
Pensioners - members and dependants receiving benefits | 19,340 |
Total members | 40,290 |
Funding and Contributions
Each plan is subject to triennial valuations, which are used to determine the future funding of the plans by the Group including
funding to repair any funding deficit. The funding valuations, which determine the level of cash contributions payable into the
plans and which must be agreed between the Trustees and the Group, are typically based on a prudent assessment of future
experience with the discount rate reflecting a prudent expectation of returns based on actual investment strategy. This differs
from IAS 19, which requires that future benefit cash flows are projected on the basis of best-estimate assumptions and
discounted in line with high-quality corporate bond yields. The Trustees’ funding assumptions are updated only every three
years, following completion of the triennial funding valuations.
The effective date of the most recent valuations of the main UK plans is 31 March 2021. At that date, the main UK plans had an
aggregate funding deficit of £138 million, equivalent to a funding level of 98%. The Company and the Trustees agreed on
funding plans to eliminate the funding deficits by 2025.
For the two main UK plans, the level of contributions in 2024 was
£80m
(2023: £611m), including contributions required for
payment of the remaining deferred annuity premium, the termination of the plans’ longevity swaps, and ongoing expenses.
Total contributions paid over 2023 were above those required to clear the funding deficits, and so as agreed with the Trustees of
the UK plans following the buy-ins, the Group will not be required to make any additional deficit funding contributions, but will
continue to meet ongoing expenses of the plans and any residual payments relating to the final annuity premium (see Note 26.6
-
Purchase of annuity buy-in insurance contracts
for more details).
Expected contributions to the main UK plans for the year ending 31 December 2025 are approximately
£15m
, clearing the
remaining deficit as well as covering ongoing expenses and regulatory levies.
The maturity profile of the undiscounted cash flows of the two main UK DB plans is shown below:
0
50000000
100000000
150000000
200000000
250000000
300000000
350000000
2025
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
2047
2049
2051
2053
2055
2057
2059
2061
2063
2065
2067
2069
2071
2073
2075
2077
2079
2081
2083
2085
2087
2089
2091
2093
2095
2097
2099
Cashflow - total liability
Deferred
Pensioner
The weighted average duration of the defined benefit obligation of the two main UK plans at the end of the reporting period is
12 years
(2023: 13 years).
100
Non-UK plans
The Group also operates a DB plan in Ireland.
All plans
The estimated discounted present values of the accumulated obligations are calculated in accordance with the advice of
independent, qualified actuaries.
26.3 Movement in the DB obligation and fair value of plan assets
Other net | ||||
Present | Fair value | surplus | ||
value of | of plan | remeasure | Net surplus | |
obligations | assets | ments | (deficit) | |
For the year ended 31 December 2024 | £m | £m | £m | £m |
Balance, beginning of year | (5,522) | 5,525 | (2) | 1 |
Interest income (expense) | (244) | 245 | - | 1 |
Administration costs | - | (13) | - | (13) |
Total income (expenses) recognised in income statement | (244) | 232 | - | (12) |
Return on plan assets less amounts in interest income¹ | - | (569) | - | (569) |
Effect of changes in financial assumptions | 560 | - | - | 560 |
Experience losses | (44) | - | - | (44) |
Investment expenses | - | (1) | - | (1) |
Remeasurements recognised in OCI | 516 | (570) | - | (54) |
Employer contribution | - | 81 | - | 81 |
Benefit payments | 297 | (297) | - | - |
Exchange adjustment | 3 | (3) | - | - |
Balance, end of year | (4,950) | 4,968 | (2) | 16 |
Deferred tax | - | - | - | - |
IAS 19 net surplus net of deferred tax | (4,950) | 4,968 | (2) | 16 |
For the year ended 31 December 2023 | ||||
Balance, beginning of year | (5,461) | 5,792 | (110) | 221 |
Interest income (expense) | (258) | 298 | - | 40 |
Administration costs | - | (10) | - | (10) |
Total income (expenses) recognised in income statement | (258) | 288 | - | 30 |
Return on plan assets less amounts in interest income | - | (13) | - | (13) |
Annuity buy-in insurance contracts² | - | (854) | - | (854) |
Effect of changes in financial assumptions | (179) | - | - | (179) |
Effect of changes in demographic assumptions | 103 | - | - | 103 |
Experience losses | (17) | - | - | (17) |
Investment expenses | - | (9) | - | (9) |
Other net surplus remeasurements | - | - | 108 | 108 |
Remeasurements recognised in OCI | (93) | (876) | 108 | (861) |
Employer contribution | - | 611 | - | 611 |
Benefit payments | 288 | (288) | - | - |
Exchange adjustment | 2 | (2) | - | - |
Balance, end of year | (5,522) | 5,525 | (2) | 1 |
Deferred tax | - | - | - | - |
IAS 19 net surplus net of deferred tax | (5,522) | 5,525 | (2) | 1 |
¹The Group terminated longevity swaps resulting in a net actuarial loss of £33m in OCI.
Refer to note 26.7 - Asset and longevity swaps for
more details.
² The buy-ins completed on 27 February 2023 resulted in a net impact of £727 million, composed of a remeasurement loss on plan assets of
£854 million included in annuity buy-in insurance contracts and the derecognition of a tax expense on surplus of £127 million included in other
net surplus remeasurements. Refer to note 26.6 - Purchase of annuity buy-in insurance contracts for more details.
26.4 Composition of pension plan assets
The pension plan assets are mainly composed of annuity buy-in insurance contracts. The composition of the fair value of
pension plan assets by category and quoted and unquoted is shown below:
101
| 2024 | 2023 | |||||
Quoted | Unquoted | Total | Quoted | Unquoted | Total | |
As at 31 December | £m | £m | £m | £m | £m | £m |
Cash and cash equivalents | 22 | - | 22 | 33 | - | 33 |
Government debt securities | 49 | - | 49 | 60 | - | 60 |
Non-government debt securities | 15 | 4 | 19 | 14 | 3 | 17 |
Debt securities | 64 | 4 | 68 | 74 | 3 | 77 |
Equity securities | 15 | - | 15 | 15 | - | 15 |
Annuity buy-in insurance contracts | - | 4,860 | 4,860 | - | 5,445 | 5,445 |
Derivative financial instruments | - | (3) | (3) | - | (8) | (8) |
Investment property | 1 | - | 1 | 1 | - | 1 |
Other | - | 5 | 5 | - | 69 | 69 |
Total investments | 102 | 4,866 | 4,968 | 123 | 5,509 | 5,632 |
Deferred annuity premium | - | - | - | - | (107) | (107) |
Total assets | 102 | 4,866 | 4,968 | 123 | 5,402 | 5,525 |
26.5 Accounting judgements, estimates and assumptions
Actuarial Assumptions
Independent actuaries calculate the value of the defined benefit obligations for the larger plans by applying the projected unit credit
method. The future expected cash outflows (calculated based on assumptions that include inflation and mortality) are discounted to
present value, using a discount rate determined at the end of each reporting period by reference to current market yields on high
quality corporate bonds (AA rated) identified to match the currency and term structure of the obligations.
The actuarial valuation involves making assumptions about discount rates, future inflation, the employees’ age upon termination and
retirement, mortality rates and future pension increases.
If actual experience differs from the assumptions used, the expected obligation could increase or decrease in future years. Due to the
complexity of the valuation and its long-term nature, the defined benefit obligation is highly sensitive to changes in the assumptions.
Assumptions are reviewed at each reporting date. As such, the IAS 19 valuation of the liability is highly sensitive to changes in bond
rates. However, fluctuations in the liabilities are now largely offset by equal and offsetting impacts on the fair value of plan assets
following the buy-ins (refer to note 26.6 -
Purchase of annuity buy-in insurance contracts
for further details).
The weighted average principal actuarial assumptions used are:
UK | Other | |||
2024 | 2023 | 2024 | 2023 | |
For the years ended 31 December | % | % | % | % |
Assumptions used in calculation of retirement benefit obligations: | ||||
Discount rate | 5.46 | 4.54 | 3.75 | 3.55 |
Annual rate of inflation (RPI) | 3.18 | 3.05 | - | - |
Annual rate of inflation (CPI) | 2.63 | 2.45 | 2.20 | 2.40 |
Annual rate of increase in pensions 1 | 3.01 | 2.91 | 2.20 | 2.40 |
Assumptions used in calculation of pension net interest costs for | ||||
the year: | ||||
Discount rate | 4.54 | 4.86 | 3.55 | 4.25 |
¹ For the UK the annual rate of increase in pensions shown is the rate that applies to pensions that increase at RPI subject to a cap of 5%.
Mortality rate
The mortality assumptions are set following investigations of the main plans’ recent experience carried out by independent actuaries as
part of the most recent funding valuations. The core mortality rates assumed for the main UK plans follow industry-standard tables with
percentage adjustments to reflect the plans’ recent experience compared with that expected under these tables.
Reductions in future mortality rates are allowed for by using the CMI 2023 tables (2023: CMI 2022 tables) with a long-term
improvement rate of
1.25%
(2023: 1.25%). The weighted average assumptions imply the following expected future lifetimes:
As at 31 December | 2024 | 2023 |
Life expectancy (in years) for pensioners at the age of 60: | ||
Male | 26.7 | 26.7 |
Female | 28.6 | 28.5 |
102
Life expectancy (in years) for future pensioners in 15 years' time at the age of 60:
Male | 27.6 | 27.6 |
Female | 29.7 | 29.6 |
Sensitivity analysis
Sensitivities for the defined benefit obligations of the two main UK plans are shown below. Following the buy-ins, changes in the
value of the defined benefit obligations are largely matched by equal and offsetting changes in the fair value of plan assets.
2024 | 2023 | ||
As at 31 December | Change in assumption | £m | £m |
Discount rate | Increase by 0.25% | (135) | (167) |
Decrease by 0.25% | 141 | 176 | |
Increase by 1.00% | (503) | (619) | |
Decrease by 1.00% | 609 | 762 | |
RPI/CPI 1 | Increase by 0.25% | 90 | 114 |
Decrease by 0.25% | (90) | (112) | |
Core mortality rates 2 | Decrease by 13% | 164 | 198 |
Increase by 13% | (165) | (198) | |
Long-term future improvements to mortality rates | Increase by 0.25% | 22 | 31 |
Decrease by 0.25% | (22) | (31) |
1
The impact shown is for the appropriate increase in the revaluation of deferred pensions and the increases to pensions in payment resulting
from the specified increase in RPI and CPI.
2
Reducing the core mortality rates by 13% is broadly equivalent to increasing the life expectancy of a male aged 60 years by 1 year at 31
December 2024.
26.6 Purchase of annuity buy-in insurance contracts
On 27 February 2023, the Group announced that the Trustees of its two major UK DB pension plans (the plans) entered into an
agreement with Pension Insurance Corporation (PIC), a specialist insurer of DB pension plans, to purchase annuity buy-in
insurance contracts (the buy-ins), as part of their de-risking strategy. The buy-ins transferred the remaining economic and
demographic risks associated with the plans to PIC and removed the volatility in relation to the plans from the Group’s
consolidated statement of financial position. The principal risk remaining is the counterparty risk in respect of PIC. This risk will
remain until such time as the Schemes discharge their obligations to their members.
A secondary risk relates to potential changes to those obligations that may arise from ongoing data cleanse activities.
As part of
the transaction with PIC, extensive data cleansing and testing has already been undertaken without any material adjustment to
the Schemes’ liabilities expected to be required.
However, until the exercise has concluded there remains the possibility of
further adjustments.
The Group has monitored developments regarding a Court of Appeal ruling in 2024, upholding a High
Court decision, which ruled that certain past amendments to a scheme contracted out of the state second pension were invalid,
due to the lack on an appropriate actuarial confirmation under the Pension Schemes Act 1993.
The Group has considered this
ruling and continues to believe the plans were appropriately administered, that the plans’ liabilities are materially correct and has
determined that the most material amendments made to the plans were carried out appropriately.
Further legal cases are likely
to be brought, and the Group will monitor these to determine what, if any, further action needs to be taken and what, if any,
impact there may be on the plans’ liabilities.
At the transaction date, the plans transferred the majority of their assets and an upfront contribution of £481m to PIC. Of the
total buy-in premium of £6.3 billion, an amount of £550m was deferred and subsequently paid during 2023 and 2024 through the
sale of certain less liquid assets that were initially retained by the plans, but were liquidated by the end of 2023.
During the year
ended 31 December 2023, the plans paid £457m of the deferred annuity premium. The remaining portion of the deferred
annuity premium was paid during the year ended 31 December 2024. In addition, the plans retained longevity swaps that were
already in place. Refer to note 26.7 - Asset and longevity swaps for more details.
The buy-ins comprised various contracts which were considered in aggregate as one single contract because they form a
structure designed to collectively match the exact amount and timing of all the benefits payable by the plans. The Group was not
legally relieved of the primary responsibility for the obligation, and the benefit payments continue to be payable by the UK plans.
The contracts provide the option to convert the buy-ins into individual policies which would transfer the UK plan assets and
obligation to PIC (known as a buy-out).
While this course of action may be considered in the future, a separate decision would
be required, and certain significant conditions would need to be met before any buy-out could be executed. Consequently, the
transaction was considered a buy-in as opposed to a buy-out under IAS 19. As a result, an initial actuarial loss of £727m was
recognised in OCI during the year ended 31 December 2023. The fair value of annuity buy-in insurance contracts subsequently
fluctuates based on changes in the value of the associated DB obligation.
The buy-ins were funded through the injection of share capital from the Group’s immediate parent company, 2283485 Alberta
Limited, of £480m.
103
26.7 Asset and longevity swaps
In 2009, the UK DB pension plans entered into an arrangement that provided coverage against longevity risk for 55% of the
retirement obligations relating to pensions in payment from the plans at that time. The arrangement provided for reimbursement
of the covered pension obligations in return for the contractual return receivable on a portfolio made up of quoted government
debt which was offset by asset swaps and longevity swaps held by the pension funds. On the buy-in transaction date, the
portfolio and asset swaps were novated to PIC and the longevity swaps remained in place as plan assets of the plans. In
combination with the other buy-in insurance policies purchased from PIC, these longevity swaps were accounted for as
qualifying insurance policies at the buy-in transaction date, based on the value of the associated DB obligation under IAS 19.
On 11 November 2024, the Group agreed to terminate the longevity swaps and, simultaneously, to adjust the buy-ins acquired
in 2023 from PIC to receive replacement cover. This termination enhances the Group’s strategic flexibility in managing its
pension obligations. As a result, on the agreement’s effective date of 15 November 2024, the Group recognised a net actuarial
loss of £33m in OCI. The net actuarial loss reflects a combination of the termination fees due and differences in the latest view
27.1 Reportable segments
The Group’s primary operating segments comprise UK, International and Central Functions. The primary operating segments
are based on geography and, during 2024, were engaged in providing personal and commercial general insurance services.
During 2023, the Group announced its intention to exit from the UK Personal lines general insurance market. This forms part of
the UK operating segment. Refer to note 5 - Business combinations and disposals for further information on this exit.
International comprises operating segments based in Ireland and Europe. Central Functions includes the Group’s internal
reinsurance function, which includes reinsurance with the wider IFC group. Each operating segment is managed by individuals
who are accountable to the Chief Executive and the Board of Directors, who together are the chief operating decision makers in
respect of the operating activities of the Group. The UK is the Group’s country of domicile and one of its principal markets.
27.2 Segment operating performance
The Group uses the following key measures to assess the performance of its operating segments:
i.
Net written premiums
ii.
Underwriting result
Net written premiums is a key measure of revenue used in internal reporting.
Underwriting result is the key internal measure of profitability of the operating segments.
Net written premiums and underwriting result are APMs. Refer to note 36 for a reconciliation to the nearest IFRS measure.
Transfers or transactions between segments are entered into under normal commercial terms and conditions that would also be
available to unrelated third parties.
Central | ||||
UK | International | Functions | Total | |
For the year ended 31 December 2024 | £m | £m | £m | £m |
Net written premiums (management basis note 36) | 2,435 | 534 | 1,018 | 3,987 |
Underwriting result (note 36) 1, 2 | 147 | 68 | 76 | 291 |
Net investment income (note 20) | 251 | |||
Central costs and other activities (note 36) | (29) | |||
Business operating result (management basis) | 513 | |||
Realised losses | (6) | |||
Net insurance finance result, foreign exchange and gains (losses) | ||||
on FVTPL investments | (205) | |||
Finance costs (note 36) | (10) | |||
Amortisation of intangible assets 1 | (19) | |||
Pension net interest and administration costs (note 26) | (12) | |||
Integration and restructuring costs (note 23) 1 | (164) | |||
Profit on disposal of business | 98 | |||
Profit before tax | 195 | |||
Tax on operations (note 24) | (16) | |||
Profit after tax | 179 |
1
Amortisation expense of
£128m
relates to the UK segment (
£125m
) and the International segment (
£3m
). The expense has been charged to
Underwriting result (£57m), Integration and restructuring costs (£52m) and Amortisation of intangible assets (£19m).
2
Depreciation expense of
£12m
relates to the UK segment (
£10m
) and the International segment (
£2m
). The expense has been charged to
Underwriting result.
104
For the year ended 31 December 2023 | ||||
Net written premiums (management basis note 36) | 2,478 | 526 | 343 | 3,347 |
Underwriting result (note 36) | (2) | 62 | 17 | 77 |
Net investment income (note 20) | 185 | |||
Central costs and other activities (note 36) | (15) | |||
Business operating result (management basis) | 247 | |||
Net insurance finance result, foreign exchange and gains (losses) | ||||
| on FVTPL investments | (115) | |||
Finance costs (note 36) | (10) | |||
Amortisation of intangible assets | (3) | |||
Pension net interest and administration costs (note 26) | 30 | |||
Integration and restructuring costs (note 23) | (162) | |||
Loss on disposal of business | (6) | |||
Loss before tax | (19) | |||
Tax on operations (note 24) | (70) | |||
Loss after tax | (89) |
27.3 Selected segment assets and liabilities
Central | ||||
UK | International | Functions | Total | |
As at 31 December 2024 | £m | £m | £m | £m |
Investments (note 6) | 5,652 | 294 | - | 5,946 |
Net liability for incurred claims (note 10) | 2,686 | 939 | 511 | 4,136 |
As at 31 December 2023 | ||||
Investments (note 6) | 5,189 | 297 | - | 5,486 |
Net liability for incurred claims (note 10) | 2,390 | 1,109 | 416 | 3,915 |
27.4 Non current assets by geographical area
Non current assets represent goodwill and intangible assets, property and equipment, investment property and prepayments
with an expected maturity of greater than 12 months.
2024 | 2023 | |
As at 31 December | £m | £m |
UK | 1,218 | 1,246 |
International | 57 | 63 |
Total Group | 1,275 | 1,309 |
105
28.1 Supplementary information on cash flows from operating activities
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Adjustments for non-cash items | ||
Net losses (gains) on investment portfolio | 23 | (66) |
Depreciation and impairment of property and equipment | 23 | 25 |
Amortisation and impairment of intangible assets | 128 | 59 |
Amortisation of investments | (32) | 4 |
Pension net interest and admin costs (note 26) | 12 | (30) |
Gain on disposal of business | (95) | - |
Derecognition and disposal of intangibles and property and equipment | 8 | 49 |
Foreign exchange loss | 15 | 5 |
Other | (3) | - |
79 | 46 | |
Changes in other operating assets/liabilities | ||
Contributions to the defined benefit pension plans | (81) | (611) |
Changes in insurance and reinsurance contracts | 411 | 187 |
Other operating assets | 39 | 12 |
Other operating liabilities | 62 | 35 |
431 | (377) | |
Other relevant cash flow disclosures - operating activities | ||
Interest paid | (10) | (10) |
Interest received | 186 | 184 |
Dividends received | 10 | 11 |
186 | 185 |
28.2 Composition of cash and cash equivalents, net of bank overdraft
2024 | 2023 | |
As at 31 December | £m | £m |
Cash | 164 | 208 |
Cash equivalents | 57 | 112 |
Cash and cash equivalents | 221 | 320 |
Bank overdraft, recorded in Other liabilities | - | (8) |
Cash and cash equivalents, net of bank overdraft | 221 | 312 |
29.1 Transactions with parent company
The Group’s parent company is 2283485 Alberta Limited (2023: Alberta Limited), a wholly owned subsidiary of IFC, the ultimate
controlling party.
During the year ended 31 December 2024, the following related party transactions have taken place with 2283485 Alberta
Limited:
i.
on 16 July, the Group received a capital injection of £154m to fund the cancellation of the Group’s preferred shares;
ii.
on 19 July, the Group paid an ordinary dividend of £82m;
iii.
on 24 November, the Group paid an ordinary dividend of £100m.
During the year ended 31 December 2023, the following related party transactions took place with 2283485 Alberta Limited:
106
i.
on 3 March, the Group received a capital injection of £444m to fund contributions to the Group’s two UK defined benefit
pension plans;
ii.
on 23 March, the Group received a capital injection of £36m to fund contributions to the Group’s two UK defined benefit
pension plans;
iii.
on 5 June, the Group received a capital injection of £39m to fund the repurchase of issued debt; and
iv.
on 26 October, the Group received a capital injection of £565m to fund the acquisition and integration of the brokered
Commercial lines operations of DLG.
29.2 Other related party transactions
The Group has a reinsurance arrangement with Unifund Assurance Company (Unifund), a member of the IFC Group. Under the
terms of the arrangement the insurance risk of the proportion of Unifund’s business covered by the quota share agreement is
transferred to the Group. The Group pays a reinsurance commission in relation to the quota share agreement and the
agreement covers 60% of Unifund’s existing insurance liabilities. On 1 January 2024, the Group entered into a new reinsurance
arrangement with Belair, also a member of the IFC group. Under the terms of this arrangement, the insurance risk of a
proportion of Belair’s business covered by the quota share agreement is transferred to the Group. The Group pays a
reinsurance commission in relation to the quota share agreement and the agreement covers 40% of Belair’s insurance business
at the same date and new written premiums for all lines of business. Collateral assets, comprising assets held in trust and a
letter of credit, have been pledged by the Group as security against the outstanding balances for the Unifund and Belair quota
shares.
The Group also has other reinsurance arrangements (some of which are secured by pledging collateral assets) and fronting
transactions with entities that are part of the IFC group. Under these arrangements, risk is transferred to or from the Group on a
risk-by-risk basis.
The amounts relating to the above related party transactions included in the Consolidated income statement are provided in the
table below:
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Income (expenses) recognised in: | ||
Insurance revenue | 621 | 393 |
Insurance service expenses | (570) | (367) |
Income from reinsurance contracts | 8 | 22 |
Expenses from reinsurance contracts | (44) | (53) |
Net investment income | (1) | (1) |
The amounts relating to the above related party transactions included in the Consolidated statement of financial position are
provided in the table below:
2024 | 2023 | |
As at 31 December | £m | £m |
Assets (liabilities) recognised in: | ||
Debt and fixed income securities | 942 | 960 |
Equity securities | 7 | 1 |
Reinsurance contract assets | 32 | 96 |
Other assets | 7 | - |
Insurance contract liabilities | (996) | (631) |
Other liabilities | (26) | (19) |
Key management personnel comprise members of the Group’s Operating Committee, executive directors and non-executive
directors. The compensation of key management personnel is set out below.
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Short term employee benefits (salaries, bonuses, allowances or other benefits) | 9 | 9 |
Share-based awards | 5 | 3 |
14 | 12 |
A number of the directors and other key managers, and their close families, have general insurance policies with the Group.
Such policies were available at discounted rates to all employees, including executive directors however, following the exit of
107
The Group has capital commitments in respect of intangible assets (£12m at 31 December 2024), property and equipment (£3m
at 31 December 2024), and investment property (£1m at 31 December 2024). Capital commitments at 31 December 2023 were
£20m, £7m and £1m respectively. The remaining life of these commitments is less than one year.
The future commitments to structured entities are disclosed in note 32 - Interests in structured entities. In addition, the Group
has committed to invest
£247m
(2023: £121m) in other classes of investment.
Refer to Note 9.2
-
Market risk - financial liabilities by contractual maturity and note 15.2 - Other liabilities for details on lease
Other contingent liabilities
The Group receives liability claims and becomes involved in actual or threatened litigation during the ordinary course of its
business operations. The Group reviews and, in the opinion of the directors, maintains sufficient provisions, capital and reserves
in respect of such claims.
In addition, the Group has given guarantees, indemnities and warranties in relation to the disposals of its businesses and
business interests to external parties. These are kept under review and, in the opinion of the directors, no material loss will arise
31.1 Leases as a lessee
The Group leases land and buildings and other assets such as vehicles, IT equipment, servers and mainframes (reported as
other) to operate its business in each of its core regions. The remaining lease terms for the main office premises range from 1 to
15 years.
The Group also leases office equipment such as laptops and printers and for which certain leases are short term (1 year or less)
and/or for low value items. The Group has elected to apply recognition exemptions as permitted by IFRS 16 for these leases
(see note 3 for accounting policy).
Information about leases for which the Group is a lessee is presented below.
Right-of-use assets
Land and | |||
buildings | Other | Total | |
For the year ended 31 December 2024 | £m | £m | £m |
Balance, beginning of the year | 44 | 2 | 46 |
Depreciation charge for the year | (10) | (1) | (11) |
Additions to right-of-use assets | 15 | 1 | 16 |
Remeasurements | 1 | - | 1 |
Other 1 | - | (1) | (1) |
Balance, end of the year | 50 | 1 | 51 |
For the year ended 31 December 2023 | |||
Balance, beginning of the year | 53 | 2 | 55 |
Depreciation charge for the year | (8) | (1) | (9) |
Additions to right-of-use assets | 4 | 1 | 5 |
Remeasurements | (1) | - | (1) |
Impairments | (4) | - | (4) |
Balance, end of the year | 44 | 2 | 46 |
1
Other includes transfers to Investment property in respect of subleases and foreign exchange.
108
Lease liabilities
Lease liabilities of
£72m
(2023: £67m) are included within Other liabilities in the Consolidated statement of financial position
(see note 15). The maturity analysis of this balance is provided in note 9 – Financial risk.
A reconciliation of lease liabilities is presented below.
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Balance, beginning of the year | 67 | 71 |
Lease payments | (14) | (11) |
Additions to lease liabilities | 16 | 5 |
Remeasurements | 1 | - |
Interest on lease liabilities | 3 | 3 |
Foreign exchange | (1) | (1) |
Balance, end of the year | 72 | 67 |
Other amounts recognised in the Consolidated income statement
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Interest on lease liabilities | 3 | 3 |
Expenses relating to short-term leases | 1 | - |
Expenses relating to variable lease payments | - | 11 |
Amounts recognised in the Consolidated statement of cash flows
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Total cash outflow for leases | 15 | 23 |
Total cash outflow for leases primarily relates to lease payments, with the principal and interest portion recognised separately
within financing activities in the Consolidated statement of cash flows. It also includes payments for leases of low value assets
and variable lease payments which are reported within operating activities.
31.2 Leases as a lessor
The Group leases out its investment property consisting of freehold and leasehold land and buildings. All leases are classified
as operating leases from a lessor perspective with the exception of sub-leases, which the Group has classified as finance sub-
leases. Finance sub-leases are not material to the Group.
Operating leases
The Group leases out its investment property and has classified these leases as operating leases because they do not transfer
substantially all of the risks and rewards incidental to the ownership of the assets.
During 2024, the Group recognised
£18m
of rental income within its net investment return (2023: £12m).
The following table provides a maturity analysis of lease receivables, showing the undiscounted lease payments to be received
after the reporting date.
2024 | 2023 | |
As at 31 December | £m | £m |
Less than one year | 19 | 16 |
One to two years | 17 | 16 |
Two to three years | 16 | 14 |
Three to four years | 15 | 13 |
Four to five years | 12 | 10 |
More than five years | 65 | 46 |
Total | 144 | 115 |
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who
controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by
means of contractual arrangements.
The Group does not securitise any of its investments in financial instruments and does not create, promote or administer
structured entities on behalf of third party investors. The Group therefore considers that it does not act as a sponsor for any
structured entity.
109
However, the Group invests in entities created by and managed by external specialist investment managers where investments
are pooled within an investment vehicle to provide a diversified exposure to particular classes of underlying investments. The
use of these products allows the Group to broaden the diversification of its investment portfolio in a cost-efficient manner.
The Group is exposed to the risks of the underlying investments of the investment vehicles. The investment return from the
structured entities is expected to reflect the returns from the underlying investments of the entity.
In addition, the Group has commitments for future undrawn subscriptions limited to the amounts set out in the subscription
agreements. The Group has no obligations to provide any other additional funding or other financial support to these entities.
The Group has determined that its maximum exposure to structured entities is the sum of the carrying value and the undrawn
commitments. These exposures as at 31 December 2024 and 31 December 2023 are summarised in the table below:
2024 | 2023 | ||||
Carrying | Carrying | ||||
value | Exposure | value | Exposure | ||
Nature of the underlying | |||||
Class of investments | investments of the vehicle | £m | £m | £m | £m |
Mortgage backed securities | Mainly consists of domestic | 11 | 11 | 11 | 11 |
mortgage backed securities | |||||
| Collateralised debt | Structured debt security backed by | 207 | 207 | 235 | 235 |
obligations | bonds | ||||
Cash money market funds | Mainly short term cash deposits | 57 | 57 | 105 | 105 |
| Collective investment | Mainly consists of property funds | 51 | 51 | 72 | 72 |
undertakings | |||||
326 | 326 | 423 | 423 | ||
Structured entities are not consolidated and are included as follows in the Consolidated statement of financial position:
2024 | 2023 | |
As at 31 December | £m | £m |
Financial assets - Equity securities | 51 | 72 |
Financial assets - Debt and fixed income securities | 218 | 246 |
Cash and cash equivalents | 57 | 105 |
326 | 423 |
Staff costs for all employees comprise:
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Wages and salaries | 296 | 280 |
Redundancy costs | 15 | 10 |
Social security costs | 41 | 36 |
Pension costs | 55 | 8 |
Share-based payments to directors and employees | 18 | 10 |
Total staff costs | 425 | 344 |
The average number of employees during the year is as follows:
For the years ended 31 December | 2024 | 2023 |
UK | 4,990 | 5,163 |
International | 831 | 826 |
Total average employees | 5,821 | 5,989 |
Further information on pension obligations of the Group can be found in note 26 – Employee future benefits. Further information
110
The aggregate emoluments of the Group's directors are as follows:
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Short term benefits (salaries, bonuses, allowances and other benefits) | 3.5 | 3.0 |
The criteria for making bonus awards is based on targeted levels of business sector profit and specific business objectives.
At the end of 2024 one director had accrued retirement benefits under a defined benefit pension scheme of
£103,775
(2023:
£89,331). No contributions were made to defined contribution pension schemes during the year ended 31 December 2024 (year
ended 31 December 2023: £nil).
During the year ended 31 December 2024, no directors (2023: no directors) exercised share options; one director (2023: no
directors) had share awards vesting under long term incentive schemes in respect of ordinary shares of the Company; one
director (2023: one director) and two non-executive director (2023: one non-executive director) had Performance Share Units
(PSUs), and one non-executive director (2023: one non-executive director) had Restricted Share Units (RSUs) vesting in the
Group’s ultimate parent company, IFC, as part of their remuneration for service as executives of IFC; and one non-executive
directors (2023: two non-executive directors) had Deferred Share Units (DSUs) vesting in IFC, as part of their fee for their role
on the IFC Board of Directors. The DSUs are redeemed upon director retirement or termination and are settled for cash
afterwards.
The emoluments of the highest paid director are as follows:
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Short term benefits | 1.5 | 1.3 |
During 2024, no retirement benefits were accrued under defined benefit pension schemes (2023: £nil) and no contributions
were made to defined contribution schemes (2023: £nil) for the highest paid director.
During 2024 the highest paid director had no share awards vesting under long term incentive schemes in respect of ordinary
2024 | 2023 | |
For the years ended 31 December | £m | £m |
Fees payable to EY LLP for audit of the Company's annual accounts | 1.7 | - |
Fees payable to EY LLP and its associates for other services: | ||
The audit of the Company's subsidiaries, pursuant to legislation | 3.7 | - |
Non-audit services: | ||
Audit related assurance services 1 | 1.0 | - |
6.4 | - | |
Fees payable to the previous auditor for audit of the Company's annual accounts | 0.3 | 2.2 |
Fees payable to the previous auditor and its associates for other services: | ||
The audit of the Company's subsidiaries, pursuant to legislation | 1.2 | 6.3 |
Non-audit services: | ||
Audit related assurance services 1 | - | 1.3 |
1.5 | 9.8 | |
Total auditor's remuneration | 7.9 | 9.8 |
1
Included in the Audit related assurance services for 2024 is
£0.6m
(2023: £0.7m) of assurance work in respect of UK and Ireland Solvency reporting.
The remainder of
£0.4m
(2023: £0.6m) represents in aggregate
7%
(2023: 7%) of the Group IFRS audit fee of
£5.5m
(2023: £8.5m).
EY was appointed as the Group’s external auditor in 2023, effective for the year ended 31 December 2024. The 2024 fees included in
relation to the previous auditor are related to the year-ended 31 December 2023 audits. All 2023 fees relate to the previous external
111
Reconciliation of the IFRS financial result to the management result
For the year ended 31 December 2024
Other | |||||||
Business | income | ||||||
Underwriting | Investment | Central | operating | and | Profit | ||
£m | IFRS | result | result | costs | result | charges | before tax |
Insurance revenue | 4,344 | 4,344 | 4,344 | 4,344 | |||
Insurance service expenses | (3,512) | (3,512) | (3,512) | (3,512) | |||
Insurance service result from insurance | |||||||
| contracts | 832 | ||||||
Expense from reinsurance contracts | (566) | (566) | (566) | (566) | |||
Income from reinsurance contracts | 94 | 94 | 94 | 94 | |||
Net expense from reinsurance contracts | (472) | ||||||
Insurance service result | 360 | ||||||
Net investment income | 251 | 251 | 251 | 251 | |||
Net losses on investment portfolio | (119) | (119) | (119) | ||||
Net investment return | 132 | ||||||
Insurance finance expense | (144) | (144) | (144) | ||||
Reinsurance finance income | 50 | 50 | 50 | ||||
Net insurance financial result | (94) | ||||||
Other net gains | 100 | 100 | 100 | ||||
Other income and expense | (129) | (69) | (29) | (98) | (31) | (129) | |
Integration and restructuring costs | (164) | (164) | (164) | ||||
Finance costs | (10) | (10) | (10) | ||||
Profit before tax | 195 | 291 | 251 | (29) | 513 | (318) | 195 |
Income tax expense | (16) | ||||||
Profit | 179 |
Reconciliation of Insurance revenue to Net written premiums
For the year ended 31 December 2024 | £m |
Insurance revenue | 4,344 |
Movement in gross earned premium | 163 |
Other income | (20) |
Reinsurance written premiums | (638) |
Revenue for internal contracts | 199 |
Revenue measured under GMM | (61) |
Net written premiums (note 27) | 3,987 |
112
Reconciliation of the IFRS financial result to the management result
For the year ended 31 December 2023
Business | Other | ||||||
Underwriting | Investment | Central | operating | income and | Profit | ||
£m | IFRS | result | result | costs | result | charges | before tax |
Insurance revenue | 3,987 | 3,987 | 3,987 | 3,987 | |||
Insurance service expense | (3,665) | (3,665) | (3,665) | (3,665) | |||
Insurance service result from insurance | 322 | ||||||
| contracts | |||||||
Expenses from reinsurance contracts | (808) | (808) | (808) | (808) | |||
Income from reinsurance contracts | 631 | 631 | 631 | 631 | |||
Net expense from reinsurance contracts | (177) | ||||||
Insurance service result | 145 | ||||||
Net investment income | 185 | 185 | 185 | 185 | |||
Net gains on investment portfolio | 5 | 5 | 5 | ||||
Net investment return | 190 | ||||||
Insurance finance (expense) income | (179) | (179) | (179) | ||||
Reinsurance finance income (expense) | 60 | 60 | 60 | ||||
Net insurance financial result | (119) | ||||||
Net investment return and net insurance | 71 | ||||||
| financial result | |||||||
Other net (losses) gains | (7) | (7) | (7) | ||||
Other income and expense | (56) | (68) | (15) | (83) | 27 | (56) | |
Integration and restructuring costs | (162) | (162) | (162) | ||||
Finance costs | (10) | (10) | (10) | ||||
Loss before tax | (19) | 77 | 185 | (15) | 247 | (266) | (19) |
Income tax expense | (70) | ||||||
Loss | (89) |
Reconciliation of Insurance revenue to Net written premiums
For the year ended 31 December 2023 | £m |
Insurance revenue | 3,987 |
Movement in gross earned premium | (260) |
Other income | (74) |
Reinsurance written premiums | (291) |
Revenue for internal contracts | 95 |
Revenue measured under GMM | (110) |
Net written premiums (note 27) | 3,347 |
Effective 1 January 2025, the Group entered into a commutation and release agreement and terminated the retrospective quota
share agreement with Unifund, an insurance company based in Canada that is also a subsidiary of IFC, for an approximate
amount of £115m. Under the terms of this agreement, Unifund was ceding 60% of its obligations (net of reinsurance) with
effective dates prior to 1 January 2022 to the Group. Further information in respect of the quota share agreements with IFC
Accounting standards issued but not yet effective
38.1 IFRS 18 - Presentation and Disclosure in Financial Statements
In April 2024, the IASB issued IFRS 18 - Presentation and Disclosure in Financial Statements (IFRS 18) to improve reporting of
financial performance.
IFRS 18 replaces IAS 1; however, it carries forward many requirements from IAS 1 unchanged. IFRS 18
will be effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. IFRS 18
introduces specified subtotals in the income statement, new disclosures for management-defined performance measures, and
additional requirements for the aggregation and disaggregation of information.
113
The Group is currently assessing the impact of this new standard on the presentation and disclosure of its financial statements.
38.2 Amendments to the classification and measurement of financial instruments
In May 2024, the IASB published Amendments to the Classification and Measurement of Financial Instruments - Amendments
to IFRS 9 and IFRS 7 to address matters identified during the post-implementation review of IFRS 9. The amendments clarify
the classification of certain financial assets as well as the derecognition of a financial liability and introduce an accounting policy
option for the derecognition of financial liabilities settled through electronic transfer if certain conditions are met. The
amendments also add disclosure requirements for certain financial instruments.
The amendments are effective for annual reporting periods beginning on or after 1 January 2026, with earlier application
permitted, and will apply retrospectively. The Group is currently assessing the impact of these amendments on its financial
114
Appendix A: Subsidiaries and associates
Unless otherwise stated, the share capital disclosed comprises ordinary shares (or equivalent) which are 100% held within the
Group. All of the subsidiaries listed are included in the consolidated accounts. No subsidiary holds a disclosable interest in the
shares of RSA Insurance Group Limited.
The proportion of voting power held equals the proportion ownership interest unless indicated.
Name and country of incorporation
Registered office addresses
Class of shares held
Percentage
Holding (%)
Brazil
Royal & Sun Alliance Insurance Limited -
Escritório de Representação no Brasil Ltda.
Avenida Doutor Chucri Zaidan, 296, 23
ᵒ
andar, parte, City of São
Paulo, State of São Paulo, 04583-110, Brazil
Guernsey
Insurance Corporation of the Channel Islands
Limited
No 1 The Plaza, Admiral Park, St Peter Port, GY1 2HU, Guernsey
Insurance Corporation Service Company
Limited
No 1 The Plaza, Admiral Park, St Peter Port, GY1 2HU, Guernsey
India
RSA Actuarial Services (India) Private Limited
First Floor, Building 10 C, Cyber City Complex, DLF Phase II, Gurgaon,
Haryana, 122002, India
Ireland
123 Money Limited
4
RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16,
Ireland
B1 Ordinary, B2
Ordinary, B3 Ordinary,
B4 Ordinary, B5
Ordinary, C Ordinary
123 Money Limited
RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16,
Ireland
Benchmark Underwriting Limited
RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16,
Ireland
EGI Holdings Limited
RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16,
Ireland
RSA Insurance Ireland DAC
RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16,
Ireland
RSA Overseas Holdings (No 1) Unlimited
Company
RSA House, Dundrum Town Centre, Sandyford Road, Dublin 16,
Ireland
RSA Overseas Holdings (No. 2) Unlimited
Company
8
Teneo Restructuring (Ireland) Limited, 3rd Floor, 20 On Hatch Street,
Hatch Street Lower, Dublin 2, Dublin, D02 Xh02, Ireland
RSA Broker Motor Insurance Ireland Limited
(previously Sertus Underwriting Limited)
8
Teneo Restructuring (Ireland) Limited, 3rd Floor, 20 On Hatch Street,
Hatch Street Lower, Dublin 2, Dublin, D02 Xh02, Ireland
Isle of Man
RSA Isle of Man No.1 Limited
33-37 Athol Street, Douglas, IM1 1LB, Isle of Man
Tower Insurance Company Limited
Jubilee Buildings, 1 Victoria Street, Douglas, IM99 1BF, Isle of Man
Luxembourg
RSA Luxembourg S.A.
40 rue du Cure, L-1368 Luxembourg
United Kingdom
Centrium Management Company Limited
3
55 Wells Street, London, England, W1T 3PT
31.45
Punchbowl Park Management Limited
3,5
10 Buckingham Gate, London, SW1E 6LA, United Kingdom
65.09
Polaris U.K. Limited
3
New London House, 6 London Street, London, EC3R 7LP, United
Kingdom
25.38
RSA Northern Ireland Insurance Limited
8
C/O A&L Goodbody Northern Ireland Llp, 42-46 Fountain Street,
Belfast, BT1 5EB
Emersons Green Management Company
3
The Old Council Chambers, Halford Street, Tamworth, England
33
Aztec West Management Limited
3
Minton Place, Station Road, Swindon, SN1 1DA
8.27
Tournament Fields (Warwick) Management
Company Limited
3
Ednaston Park Painters Lane, Ednaston. Ashbourne, Derbyshire,
England, DE6 3FA
5.49
Hempton Court Manco Limited
3,5
Cannon Place, 78 Cannon Street, London, United Kingdom, EC4N
6AG
62.5
Royal Insurance Operational Services (U.K.)
Limited
8
30 Finsbury Square, London, EC2P 2YU
Alliance Assurance Company Limited
St Mark’s Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
Regent Subco Limited
7
St Mark’s Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
115
Non-Destructive Testers Limited
8
C/O Teneo Financial Advisory Limited The Colmore Building, 20
Colmore Circus Queensway, Birmingham, B4 6AT
R&SA Marketing Services Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
Royal & Sun Alliance Insurance Limited
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
Class A Ordinary
Royal & Sun Alliance Insurance Limited
6
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
Class B Ordinary
Royal & Sun Alliance Pension Trustee Limited
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
Royal & Sun Alliance Property Services
Limited
8
C/O Teneo Financial Advisory Limited The Colmore Building, 20
Colmore Circus Queensway, Birmingham, B4 6AT
Royal & Sun Alliance Reinsurance Limited
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
Royal Insurance Holdings Limited
1,7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
Royal Insurance (U.K.) Limited
8
C/O Teneo Financial Advisory Limited The Colmore Building, 20
Colmore Circus Queensway, Birmingham, B4 6AT
Royal International Insurance Holdings
Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
£1.00 Ordinary
Royal International Insurance Holdings
Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
US$1.00 Ordinary
Roysun Limited
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
RSA Accident Repairs Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
RSA Finance
8
C/O Teneo Financial Advisory Limited The Colmore Building, 20
Colmore Circus Queensway, Birmingham, B4 6AT
RSA Law Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
100
Sal Pension Fund Limited
1
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
99.99
Sun Alliance and London Insurance Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
Sun Alliance Insurance Overseas Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
Sun Alliance Mortgage Company Limited
1,8
C/O Teneo Financial Advisory Limited The Colmore Building, 20
Colmore Circus Queensway, Birmingham, B4 6AT
Sun Insurance Office Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
The London Assurance
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
The Globe Insurance Company Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
The Marine Insurance Company Limited
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
UK Investment Management Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
Westgate Properties Limited
7
St Mark's Court, Chart Way, Horsham, West Sussex, RH12 1XL,
United Kingdom
1
Directly owned by the Parent Company RSA Insurance Group Limited.
2
No subsidiary holds a disclosable interest in the shares of RSA Insurance Group Limited.
3
Indicates that the holding represents an Investment or is an Associate of the Group.
4
Indicates ownership of non-voting shares.
5
There is no subsidiary where the Group holds less than 50% of the voting rights. There are no entities where the Group holds more than 50% of the voting rights which are not subsidiaries other
than Punchbowl and Hempton Court Manco.
6
IFC hold 18.04% of the share capital of Royal & Sun Alliance Insurance Limited in non-voting “nil-paid” shares.
7
Denotes the UK subsidiaries that will take advantage of the audit exemption by virtue of section 479A of the Companies Act 2006 for the year ended 31 December 2024.
8
These entities were in liquidation as at 31 December 2024.
116
Appendix B: Jargon Buster
Term
Definition
Affinity
Selling insurance through a partner’s distribution network, usually to a group of similar customers e.g. store-card holders,
alumni groups, unions and utility company customers.
Business Operating Result
Business operating result represents profit before tax adjusted to add back other charges.
Provision for Losses and Loss
Adjustment Expenses
A provision established to cover the estimated cost of claims payments and claims handling expenses that are still to be
settled and incurred in respect of insurance cover provided to policyholders up to the reporting date.
Commission
An amount paid to an intermediary such as a broker for introducing business to the Group.
Customer Retention
A measure of the amount of business that is renewed with us each year.
Financial Conduct Authority
(FCA)
The regulatory authority with responsibility for the conduct of the UK financial services industry.
Investment Result
Investment result is the money we make from our investments on a management basis. It comprises the major component
of net investment return, investment income, in addition to unwind of discount and investment expense.
Large Losses
Single claim or all claims arising from a single loss event with a net cost of £0.5m or higher.
Net Written Premium (NWP)
Premium written or processed in the period, irrespective of whether it has been paid, less the amount shared with
reinsurers.
Other charges
Other charges represents items that are excluded to arrive at business operating result.
Item
Reason for classification
Amortisation of intangible assets
To allow meaningful assessment of segmental performance
where similar internally generated assets are not capitalised.
Pension administration and net interest costs
Costs that are dependent on the level of defined benefit
pension scheme plan funding and arise from servicing past
pension commitments.
Realised and unrealised gains and losses on investments/
foreign exchange gains and losses
To remove the impact of market volatility and investment
rebalancing activity.
Reorganisation, integration and transaction costs
To allow assessment of the performance of ongoing
business activities.
Prudential Regulation Authority
(PRA)
The regulatory authority with responsibility for the prudential regulation and supervision of the UK financial services
industry.
Reinsurance
The practice whereby part or all of the risk accepted is transferred to another insurer (the reinsurer).
Solvency UK / Coverage Ratio
Capital adequacy regime for the European insurance industry which commenced in 2016 and is based on a set of EU wide
capital requirements and risk management standards. The coverage ratio represents total eligible capital as a proportion of
the Solvency Capital Requirement (SCR) under Solvency UK.
Tangible Net Asset Value (TNAV)
Tangible net asset value comprises equity attributable to shareholders, less tier 1 notes, preference share capital and
goodwill and intangible assets.
Underwriting Result
Net earned premium and other insurance income less net claims and underwriting and policy acquisition costs.
Underwriting result is an internal measure of profitability of the operating segments and a key KPI used to assess
performance of the Group. It is an alternative performance measure (APM) and is reconciled to the nearest IFRS measures
in the APM note.
Yield
Rate of return on an investment in percentage terms. The dividend payable on a share expressed as a percentage of the
market price.
117
PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME
2024
2023
For the years ended 31 December
£m
£m
Profit (loss)
322
(371)
Total other comprehensive expense
-
-
Total comprehensive income (expense)
322
(371)
The profit for the year net of tax includes dividend income of
£329m
received from Royal Insurance Holdings Limited (2023:
£273m from Royal Insurance Holdings Limited and £5m from Sun Alliance Mortgage Company Limited) less interest on dated
loan capital of
£7m
(2023: £7m) and a tax credit of
£nil
(2023: £6m tax credit).
118
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
Ordinary
share
capital
Ordinary
share
premium
Preference
shares
Retained
earnings
Total
equity
For the year ended 31 December 2024
£m
£m
£m
£m
£m
Balance as at 1 January 2024
1,563
1,366
125
(101)
2,953
Total comprehensive income for the year
Profit for the year net of tax
-
-
-
322
322
322
322
Dividends payable¹ (note 7)
-
-
-
(190)
(190)
Shares issued for cash (note 10)
-
154
-
-
154
Cancellation of preferred shares
2
-
-
(125)
(30)
(155)
Capital reduction
2
-
(1,520)
-
1,521
1
Balance at 31 December 2024
1563
0
0
1,522
3,085
For the year ended 31 December 2023
Balance at 1 January 2023
1,563
282
125
279
2,249
Total comprehensive income (expense) for the year
Loss for the year net of tax
-
-
-
(371)
(371)
-
-
-
(371)
(371)
Dividends payable¹ (note 7)
-
-
-
(9)
(9)
Shares issued for cash (note 10)
-
1,084
-
-
1,084
Balance at 31 December 2023
1,563
1,366
125
(101)
2,953
1
Refer to note 18 – Dividends paid and proposed of the consolidated financial statements for further information.
2
Following shareholder approval on 16 July 2024 the Company’s preferred shares were cancelled. The Company subsequently reduced its
share capital. Refer to note 17 - Share capital of the consolidated financial statements for further information.
The following explanatory notes form an integral part of these Parent Company financial statements.
119
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
Company number 02339826
2024
2023
As at 31 December
Note
£m
£m
Assets
Investments in subsidiaries
8
3,122
3,005
Amounts owed by subsidiaries
6
137
137
Current tax assets
9
-
7
Other debtors
2
1
Other assets
139
145
Cash and cash equivalents
1
1
Total assets
3,262
3,151
Liabilities
Amounts owed to subsidiaries
6
49
45
Debt outstanding
11
127
126
Other liabilities
1
27
Total liabilities
177
198
Equity
3,085
2,953
Total equity and liabilities
3,262
3,151
The following explanatory notes form an integral part of these Parent Company financial statements.
The profit for the year net of tax was
£322m
(2023: £371m loss).
The Parent Company financial statements were approved on 4 March 2025 by the Board of Directors and are signed on its
behalf by:
Karim Hirji
Chief Financial Officer
120
PARENT COMPANY STATEMENT OF CASH FLOWS
2024
2023
For the years ended 31 December
£m
£m
Cash flows from operating activities
Profit (loss) before income taxes
322
(379)
Income tax credit
-
8
Adjustments for non-cash items and items classified as investing cash flows
(327)
636
Changes in other operating assets and liabilities
(20)
10
Net cash flows provided by operating activities
(25)
275
Cash flows from investing activities
Purchase of shares in subsidiaries
(117)
(1,046)
Net movements in amounts owed to subsidiaries
4
(458)
Dividends received from subsidiaries
329
194
Net cash flows used in investing activities
216
(1,310)
Cash flows from financing activities
Redemption of long-term borrowings
-
(40)
Cancellation of preference shares
(155)
-
Proceeds from issuance of ordinary shares, net
154
1,084
Payment of dividends on ordinary shares and preferred shares
(190)
(9)
Net cash flows (used in) provided by financing activities
(191)
1,035
Cash and cash equivalents at beginning of the year
1
1
Cash and cash equivalents at end of the year
1
1
Composition of cash and cash equivalents
Cash
1
1
Cash and cash equivalents, end of the year
1
1
The following explanatory notes form an integral part of these Parent Company financial statements.
121
Notes to the Parent Company financial statements
1. Basis of preparation
RSA Insurance Group Limited (the Company) is incorporated in England and Wales
the RSA group of companies with IFC being the ultimate Parent Company. The principal activity of the Company is to hold
investments in its subsidiaries and the receipt and payment of dividends.
These Parent Company financial statements have been prepared on a going concern basis and in accordance with the UK-
adopted IAS and the requirements of the Companies Act 2006.
Except where otherwise stated, all figures included in these Parent Company financial statements are presented in millions of
pounds sterling (£m).
In accordance with section 408 of the Companies Act 2006, the Company’s income statement and related notes have not been
presented in these Parent Company financial statements.
2. Significant accounting estimates and judgements
In preparing these Parent Company financial statements, management has made judgements in determining 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.
3. Adoption of new and revised accounting standards
There were no new and revised accounting standards that have or are expected to have an impact on the Company.
4. Significant accounting policies
The accounting policies that are used in the preparation of these Parent Company financial statements are consistent with the
accounting policies used in the preparation of the consolidated financial statements of the Group, as set out in note 4 –
Summary of material accounting policies in the consolidated financial statements.
The accounting policies that are specific to the Parent Company financial statements are set out below.
Investments in subsidiaries
The Company accounts for investments in subsidiaries at cost less accumulated impairment losses. The Company assesses
whether a subsidiary is impaired at the end of the reporting period by comparing its carrying value to its recoverable amount.
Recoverable amount is the higher of value in use and fair value less costs of sale. Charges for impairments are recognised in
the Income statement.
Amounts owed from subsidiaries
The Company accounts for amounts owed from subsidiaries at amortised cost and determines an ECL based on those default
events that are possible within 12 months after the reporting date, or where the credit risk has increased significantly since initial
recognition on the basis of all possible default events over the life of debt. Specifically, the probability of default is considered
together with the expected subsequent loss. It has been concluded that the value of the ECL would be insignificant and so no
ECL is recognised.
Dividend income
Dividend income from investment in subsidiaries is recognised when the right to receive payment is established.
Interest income
Interest income is recognised using the effective interest rate method.
5. Risk and capital management
The Company’s key risks are considered to be the same as those faced by the Group. Details of the main key risks to the Group
are disclosed in the financial risk (note 9) and insurance risk (note 11) notes in the consolidated financial statements.
122
6. Related party transactions
The following transactions were carried out with related parties:
RSA Insurance Group Limited provides benefits to its subsidiary companies operating within the UK and overseas in the form of share
options and share awards to employees of subsidiaries. Costs are charged for annually, based on the underlying value of the awards
granted calculated in accordance with the guidance set out within IFRS 2.
The amounts charged in respect of these services to the Company’s subsidiaries is as per the table below:
6.1 Key management compensation
2024
2023
For the years ended 31 December
£m
£m
Short term employee benefits
9
9
Share-based awards
5
3
Total
14
12
6.2 Transactions with parent company
The Company’s parent company is 2283485 Alberta Limited, a wholly owned subsidiary of IFC, the ultimate controlling party.
During the year ended 31 December 2024, the following related party transactions have taken place with 2283485 Alberta
Limited:
i.
on 16 July, the Company received a capital injection of £154m to fund the redemption of the Company’s preference
shares;
ii.
on 19 July, the Company paid an ordinary dividend of £82m; and
iii.
on 25 November, the Company paid an ordinary dividend of £100m.
During the year ended 31 December 2023, the following related party transactions took place with 2283485 Alberta Limited:
i.
on 3 March, the Company received a capital injection of £444m to fund contributions to the Company’s two UK defined
benefit pension plans;
ii.
on 23 March, the Company received a capital injection of £36m to fund contributions to the Company’s two UK defined
benefit pension plans;
iii.
on 5 June, the Company received a capital injection of £39m to fund the repurchase of issued debt; and
iv.
on 26 October, the Company received a capital injection of £565m to fund the acquisition and integration of the
brokered Commercial lines operations of DLG.
6.3 Other related party transactions
Interest is receivable on interest bearing loans to subsidiaries, which are repayable on 24 hours written notice. The rates of interest
charged during the period are at monthly average SONIA plus 0.80% margin.
Interest is payable on interest bearing loans from subsidiaries, which are repayable on 24 hours written notice. The rates of interest
charged during the period are at monthly average SONIA plus 0.25% margin.
Interest charged by subsidiaries is
£1m
(2023: £2m). During the year, dividends of
£329m
were received from a subsidiary company,
Royal Insurance Holdings Limited (2023: £273m from Royal Insurance Holdings Limited and £5m from Sun Alliance Mortgage
Company Limited).
Royal & Sun Alliance Insurance Limited (RSAI), a subsidiary of the Company, has provided guarantees to the Company’s creditors for
amounts arising from its issued debt agreements and for amounts arising from its committed credit facilities (as set out in note 16 to the
consolidated financial statements). The guarantees relating to the issued debt agreements are subordinated to all other creditors of
RSAI.
123
6.4 Related party balances
Year end balances with related parties are set out below:
2024
2023
As at 31 December
£m
£m
Receivable from related parties:
Receivable from subsidiaries, interest bearing loans and associated interest
136
136
Receivable from subsidiaries, non interest bearing loans
1
1
Total receivable from related parties
137
137
Payable to related parties:
Payable to subsidiaries, interest bearing loans and associated interest
2
13
Payable to subsidiaries, non interest bearing loans
47
32
Total payable to related parties
49
45
7. Dividends
The final dividend is recognised as a liability when approved at the Annual General Meeting. Refer to note 18 – Dividends paid and
proposed of the consolidated financial statements for further information.
8. Investments
Movements in the Company’s investments in subsidiaries are provided below:
2024
2023
For the years ended 31 December
£m
£m
Balance, beginning of the year
3,005
2,595
Purchases¹
117
1,046
Impairment
2
-
(636)
Balance, end of the year
3,122
3,005
1
During 2024, the Company acquired 1 share in a subsidiary entity Royal Insurance Holdings Limited. The company paid £1 for the share,
along with share premium of
£117m
(2023: the Company acquired 4 shares in Royal Insurance Holdings Limited to fund contributions to
the
Group’s two UK defined benefit pension plans. The company paid £1 for each share, along with a share premium of £481m. The Company
subscribed for a further share in Royal Insurance Holdings Limited to fund the acquisition and integration of the brokered commercial lines
operations of DLG. The Company paid £1 for the share along with share premium of £565m).
2
When testing for impairment, the carrying value of the investment is compared to the recoverable amount as determined by a value in use
calculation. Where the value in use is less than the current carrying value of the investment in the Statement of financial position, the investment
is impaired to ensure that the carrying value is not greater than its future value to the Company.
The value in use calculation uses cash flow projections based on operational plans approved by management covering a three year period. The
operational plans use best estimates of future premiums, operating expenses and taxes using historical trends, general geographical market
conditions, industry trends and forecasts and other available information. These plans reflect the Company’s assessment of the current
challenging economic environment and of the financial impacts of climate-related losses associated with the physical risks of changing weather
patterns.
Cash flows beyond the operational plan period are extrapolated using the long term growth rates which management deem appropriate. The
cash flow forecasts are adjusted by appropriate discount rates. The pre-tax discount rate used in the 2024 assessment is
11%
(2023: 12%). The
long term growth rate used in the 2024 assessment is
0%
(2023: 0%).
Full details of the principal subsidiaries of the Company are set out in Appendix A to the consolidated financial statements.
9. Current and deferred tax
Asset
Liability
2024
2023
2024
2023
As at 31 December
£m
£m
£m
£m
To be settled within 12 months
-
7
-
-
The current tax relating to items that are charged directly to equity is
£nil
(2023: £nil).
The Company had no deferred tax assets or liabilities at 31 December 2024 or 31 December 2023.
No deferred tax has been recognised in respect of
£151m
(2023: £156m) of deferred tax reliefs, predominantly relating to tax losses of
£116m
(2023: £120m) and capital expenditure of
£35m
(2023: £35m), due to the unpredictability of future profit streams.
124
10. Share capital
Full details of the share capital of the Company are set out in note 17 to the consolidated financial statements.
11. Debt outstanding
Issued debt is initially measured at the consideration received less transaction costs. Subsequently, issued debt is measured at
amortised cost using the effective interest rate method. Full details of the debt outstanding of the Company are set out in note 16 to the
consolidated financial statements.
12. Additional information on the statement of cash flows
12.1 Supplementary information on cash flows from operating activities
2024
2023
For the years ended 31 December
£m
£m
Adjustments for non-cash items and items classified as investing cash flows
Impairment of investments
-
636
Other
2
-
Dividend income classified as investing cash flows
1
(329)
-
(327)
636
Changes in other operating assets/liabilities
Other operating assets
6
-
Other operating liabilities
(26)
10
(20)
10
Other relevant cash flow disclosures – operating activities
Interest paid
(7)
(10)
Interest received
2
1
1
In 2024, the operating activities cash flow is adjusted to classify dividend income within the investing cash flows. In 2023,
£194m dividend income was included within the Net movements in amounts owed to subsidiaries.
12.2 Composition of cash and cash equivalents
2024
2023
As at 31 December
£m
£m
Composition of cash and cash equivalents
Cash
1
1
Cash and cash equivalents, end of year
1
1