EXPLANATORY STATEMENT

EXPLANATOR STATEMENT INTRODUCTION As part of an internal reorganisation of the RSA Group s operations in the United Kingdom, it is proposed that certain general insurance and/or reinsurance business written or assumed by certain UK insurance companies in the RSA Group (the RSA Transferors ), including all the policies comprised in the Transferred Business will transfer to Royal & Sun Alliance Insurance plc ( RSAI ) and/or The Marine Insurance Company Limited ( Marine ) and/or Sun Insurance Office Limited ( Sun ) (referred to collectively as the Transferees ) under the terms of the RSAI Scheme, the MIC Scheme and the Sun Scheme respectively. In addition, it is proposed that there will be two other transfers under which PA(GI) Limited ( PAGI ) (a former RSA Group company that is currently a member of the Phoenix Group of companies) will transfer its legacy general insurance business to RSAI and Marine under two separate insurance business transfers (the PAGI (marine business) Scheme and the PAGI (non-marine business) Scheme ) (together the PAGI Schemes ) The RSAI Scheme, the MIC Scheme, the Sun Scheme and the PAGI Schemes are together referred to in this explanatory statement as Transfers and Schemes. The general insurance and/or reinsurance business proposed to be transferred under the Schemes is referred to in this explanatory statement as the Transferred Business. The transfer of the Transferred Business to the relevant Transferees under the Schemes will be effected by way of a number of insurance business transfer schemes pursuant to Part VII of the Financial Services and Markets Act 2000. In order for each of the Schemes to become effective, the High Court of Justice in England and Wales (the Court ) must sanction each of the Schemes. The proposed Transfers are being undertaken as part of a programme to simplify the administration of the RSA Group s UK insurance business and its UK group structure and in preparation for the implementation of new European rules on insurance regulation which are expected to come into force in 2013. PROPOSED TRANSFERS In summary, the transfers proposed under the Schemes are as follows: The Italian branch businesses of The Sea Insurance Company Limited and National Vulcan Engineering Insurance Group Limited will transfer to Sun in accordance with the terms of the Sun Scheme. The legacy marine business of each of the relevant RSA Transferors will transfer to Marine in accordance with the terms of the MIC Scheme. The legacy marine business includes the general insurance business carried on in relation to: (i) the policies comprised in the aviation run-off portfolio comprising policies issued by or on behalf of any RSA Transferor relating to the aviation insurance

2 business and incidental non-aviation exposures underwritten within the aviation policies; (ii) (iii) the policies comprised in the marine run-off portfolio comprising policies issued by or on behalf of any RSA Transferor: (a) on or prior to 31 December 1996 relating to the marine insurance business and incidental non-marine exposures underwritten within the marine policies; and (b) relating to the marine energy book ; and any legacy US Surplus Lines business of the relevant RSA Transferors and any other business of such RSA Transferors requiring a licence from, or registration with, any US State regulator. The legacy marine business of PAGI will transfer to Marine in accordance with the terms of the PAGI (marine business) Scheme. All other general insurance business of the relevant RSA Transferors except for certain retained business of Royal & Sun Alliance Reinsurance Limited and the Italian branch businesses of Sun, National Vulcan Engineering Insurance Group Limited and The Sea Insurance Company Limited, will transfer to RSAI in accordance with the RSAI Scheme. The insurance business transferring under the RSAI Scheme will include insurance liabilities in relation to policies written by or on behalf of each RSA Transferor and assets and liabilities in relation to the Transferred Business written through the active French, German and Italian branches of Royal International Insurance Holdings Limited and the Belgian and Dutch branches of Royal & Sun Alliance Insurance (Global) Limited. All legacy general insurance business of PAGI other than its legacy marine business will transfer to RSAI in accordance with the terms of the PAGI (non-marine business) Scheme. It is intended that the Schemes will all be pursued in parallel. The RSAI Scheme and the MIC Scheme will be inter-conditional. That is, unless the contemplated business transfers under the RSAI Scheme are effected in accordance with the RSAI Scheme the transfers under the MIC Scheme will not become effective and vice versa. The Sun Scheme is not conditional on any of the other Schemes. The PAGI (non-marine business) Scheme and the PAGI (marine business) Scheme will be inter-conditional. That is, unless the contemplated business transfers under the PAGI (non-marine business) Scheme are effected in accordance with the PAGI (non-marine business) Scheme the transfers under the PAGI (marine business) Scheme, will not become effective and vice versa. FURTHER INFORMATION Enclosed with this explanatory statement are a summary of the main provisions of the Schemes a summary of the independent expert s reports prepared in relation to the Schemes, and a table, illustrating the proposed transfers (including former names of the companies involved), which provide further information about the terms and the effect of the proposed transfers. Please read these carefully. The independent expert s reports and (when available) any supplemental independent expert's report(s) can be found on www.transfers.rsagroup.com and are also available on request. If you would like any further information or have any comments or queries about any of the Schemes,

3 you can contact us by email on RSAtransfers@Equiniti.com, in writing at RSA Transfers, Royal & Sun Alliance Insurance plc, One Plantation Place, 30 Fenchurch Street, London EC3M 3BD or by calling the Transfers helpline on 0845 600 9044 (from the UK) or 00 44 121 415 0211 (from overseas).

SUMMAR OF THE SCHEMES 1. Effective Date The proposed transfer of the Transferred Business (including the transferring policies) of each of the transferor insurance companies will become effective after the Court makes an order sanctioning the relevant Scheme, subject to the Court having made an order sanctioning any related Scheme with which that Scheme is inter-conditional. It is proposed that the Effective Date of the Schemes will be 1 January 2012. 2. Transfer of Assets On and with effect from the Effective Date 1 all assets comprised in the Transferred Business of each transferor insurance company shall automatically transfer and vest in the relevant Transferee. 3. Transfer of the Transferring Policies On and with effect from the Effective Date 1 the rights, benefits and powers of each transferor insurance company under or by virtue of the transferring policies and all rights and claims against any third party in relation to the Transferred Business or arising as a result of any of the transferor insurance companies having carried on the Transferred Business, will be transferred to and be vested in the relevant Transferee by the order of the Court. Holders of any of the transferring policies shall from the Effective Date become entitled, to the exclusion of any rights which they may have had against any of the transferor insurance companies under any of the transferring policies, to the same rights against the relevant Transferee as were available to them against any of the transferor insurance companies under such transferring policies and shall account to the relevant Transferee for any further or additional premiums or other sums attributable or referable thereto as and when they become due and payable. All premiums and other amounts attributable or referable to the transferring policies shall, on and with effect from the Effective Date 1, be payable to the relevant Transferee. The relevant Transferee shall be entitled to any and all defences, claims, counterclaims and rights of set-off under the transferring policies which would have been available to any of the transferor insurance companies prior to the Effective Date. 4. Transfer of Liabilities On and with effect from the Effective Date 1, the liabilities of each of the transferor insurance companies under or in respect of the transferring policies or attributable to the Transferred Business shall, by order of the Court, automatically be transferred from each of the transferor insurance companies to the relevant Transferee and so become liabilities of the relevant Transferee, and shall cease to be liabilities of the transferor insurance companies. 1. Subject to Paragraph 7 (residual assets and residual liabilities)

5 5. Reinsurance and Retrocession Contracts The Transferees will take steps to notify the relevant reinsurers and retrocessionaires of the Schemes. On and with effect from the Effective Date 2, all rights, benefits and powers conferred or vested in each transferor insurance company, as well as all liabilities imposed on each transferor insurance company by or under the transferring reinsurance or retrocession contracts, will be transferred to the relevant Transferee who shall be substituted as a party in place of each transferor insurance company from inception in so far and to the extent that any such reinsurance or retrocession contracts relate to the Transferred Business. The Schemes provide that the reinsurers or retrocessionaires of the transferring policies will have no greater or lesser liability to the relevant Transferee under any reinsurance or retrocession agreement relating to the Transferred Business than they would have had to any of the transferor insurance companies (under that same reinsurance or retrocession agreement) in the absence of the Schemes. The RSAI Scheme, the MIC Scheme and the Sun Scheme (but not the PAGI Schemes) contain provisions designed to cater for difficulties that may be encountered in transferring outward contracts of reinsurance. Where any such reinsurance contract is not transferred any direct policy of insurance underwritten by a transferor insurance company, to the extent that it gives rise to rights under that reinsurance contract, may, at the sole discretion of the relevant Transferee, be deemed not to have transferred. The relevant Transferee will be required to perform the relevant transferor insurance company s obligations under that policy and the reinsurance policy and will be required to indemnify the transferor insurance company against any liability arising under either of them. If the relevant Transferee exercises the discretion referred to above then the relevant transferor insurance company would hold its rights under the relevant reinsurance policy and the relevant underlying policies on trust for the relevant Transferee. If the outward reinsurance is subsequently transferred, the policy or policies protected by it would then also transfer. 6. Continuity of Proceedings On and with effect from the Effective Date, any judicial, quasi-judicial, disciplinary, administrative or arbitration proceedings which have been commenced by or against any of the transferor insurance companies in connection with the Transferred Business which transfers on the Effective Date, shall be continued by or against the relevant Transferee and the relevant Transferee shall be entitled to all defences, claims, counterclaims and rights of set-off that would have been available to the transferor insurance companies and such transferor insurance companies shall have no liability under those proceedings. 7. Residual Assets and Residual Liabilities It is possible that certain of the policies, reinsurance or retrocession contracts, assets, mandates, proceedings or liabilities that would otherwise be included in the Transferred Business may not transfer on the Effective Date (for example, because of legal steps that are 2 Subject to Paragraph 7 (residual assets and residual liabilities)

6 required to be taken in other jurisdictions; the Court determines not to transfer certain assets or liabilities on the Effective Date; or the relevant Transferee and the relevant transferor insurance company agree, prior to the Effective Date, that certain assets and liabilities should not transfer under the relevant Scheme) and will remain with the transferor insurance companies.. In this case, each such transferor insurance company will retain them for the account of the relevant Transferee until their transfer occurs as provided under the terms of the relevant Scheme. The relevant Transferee will have irrevocable authority to act as the attorney of the relevant transferor insurance company in respect of such policies, reinsurance or retrocession contracts, assets, mandates, proceedings and liabilities. 8. Costs and Expenses All costs and expenses incurred in connection with each Scheme (including the independent expert's fees, counsel's fees and the fees of the UK Financial Services Authority) shall be borne by Royal & Sun Alliance Insurance plc.

SUMMAR OF THE INDEPENDENT EXPERT S SCHEME REPORTS ABOUT THE INDEPENDENT EXPERT I, Gary Wells, am a Principal of Milliman, Inc. one of the world s largest independent actuarial and consulting firms. I am a Fellow of the Institute and Faculty of Actuaries with more than 25 years experience of working in the insurance industry. This document is a summary of the Independent Expert's Scheme Reports (the Reports ) that I have prepared following my appointment: by Royal & Sun Alliance Insurance plc ( RSAI ) in relation to RSA Group companies; and by Phoenix Group in relation to one of its group companies, PA(GI) Limited ( PAGI ). Each appointment was approved by the Financial Services Authority. The Reports consider the three transfer schemes proposed by RSA Group to simplify its legal structure, as well as two transfer schemes proposed by RSA Group and Phoenix Group by which PAGI s entire general insurance business is to be transferred to RSA Group companies (together the Schemes ). This summary is subject to the same limitations on its use as those set out in the Reports. This summary of the Reports must be considered in conjunction with the full Reports and reliance must not be placed solely on this summary. In the event of any conflict between the summary and the Reports, the Reports shall prevail. Copies of the full Reports can be obtained at [website address to be confirmed] or by writing to [contact details to be provided] at the address provided. INTRODUCTION The proposed Schemes involve transferring insurance business from 21 1 transferor companies to three transferee companies and require the approval of the High Court of Justice in England (the Court ). The companies which will be party to the Schemes are shown in the table on page 3. The Reports and this summary apply equally to the Schemes. The Schemes are as follows: Sun Scheme: under this scheme, the Italian branch business of The Sea Insurance Company Limited ( Sea ) and National Vulcan Engineering Insurance Group Limited ( National Vulcan ) will be transferred to Sun Insurance Office Limited ( Sun ); MIC Scheme: under this scheme the US Surplus Lines business, legacy marine and aviation business (together with related portfolios) of each transferor company will be transferred to The Marine Insurance Company Limited ( Marine ); RSAI Scheme: under this scheme all non-marine and non-us business of each transferor company will be transferred to RSAI, except for the Italian branch business of Sun, Sea and National Vulcan, which will be transferred to/or retained in Sun; and PAGI Schemes: RSA Group has agreed to the transfer of the general insurance business of PAGI 2 to RSAI and Marine under the PAGI Schemes. This agreement coincides with the RSA Group s own restructuring to simplify its legal structure. Under two schemes, PAGI will transfer its US Surplus Lines business, legacy marine and aviation business (together with related portfolios) to Marine (the PAGI (marine business) Scheme ) and all other remaining general insurance business of PAGI will transfer to RSAI (the PAGI (non-marine business) Scheme ). 1 Twenty of the transferor companies are wholly-owned subsidiaries of RSA Insurance Group plc. PAGI is a subsidiary of the Phoenix Group. 2 PAGI s general insurance liabilities are 100% reinsured by RSAI (a wholly-owned subsidiary of RSA Insurance Group plc) since the sale of the business by RSA Group in 2004. 1

The RSAI Scheme and the MIC Scheme are inter-conditional, meaning that if either of these schemes does not take effect, the other scheme will not take effect. The two PAGI Schemes are similarly interconditional on each other while the Sun Scheme is not conditional on any other scheme taking effect. An Independent Expert s report is required under section 109 of the Financial Services and Markets Act 2000 in order that the Court may properly assess the impact of the proposed Schemes. The Reports describe the proposed transfers of business under the Schemes and consider the potential impact on all affected policyholders, including the security of their policies and the levels of service that policyholders could expect to receive after the transfer. RSA GROUP RSA Group is a multinational insurance group operating in 33 countries and covering risks in over 130 countries, with the vast majority of its business being written in the UK, Scandinavia (including the Baltic States) and Canada. RSAI is the principal UK insurer and the largest insurance operation in the RSA Group. As at 31 December 2010, the RSA Group had surplus economic capital of around 1.1billion. The economic capital assessment is the RSA Group s own assessment of the capital needed to meet its obligations given the RSA Group s risk profile. The RSA Group is rated A (positive outlook) by Standard & Poor s at the time of writing this summary. PURPOSE OF THE SCHEMES The primary purpose of the proposed Schemes is to simplify the legal structure of RSA's general insurance business in the UK. There will also be a reduction in the complexity of regulatory compliance (compared to that anticipated with the current structure of the RSA Group) following the implementation of the Solvency II regime in the UK 3. WHO WILL BE AFFECTED B THE SCHEMES? The movements of policyholder groups between the legal entities as a result of the Schemes are summarised in the table on page 3. As a result of the proposed Schemes: A. Sun Scheme: the Italian branch policyholders of Sea and National Vulcan will become policyholders of Sun; B. MIC Scheme and PAGI (marine business) Scheme: all US Surplus Lines policyholders and legacy marine and aviation policyholders of the transferor companies will become policyholders of Marine; and C. RSAI Scheme and PAGI (non-marine business) Scheme: other than the existing policyholders of the Italian branch businesses of Sun, Sea and National Vulcan and certain business being retained by Royal & Sun Alliance Reinsurance Limited ( RSA Re ), all other policyholders of the active or legacy business of the transferor companies not transferred under (A) and (B) will become policyholders of RSAI. Marine is a UK-based insurer whose liabilities will consist of marine and aviation business, including US Surplus Lines business, following the Schemes taking effect. Sun is a UK-based insurer whose business following the implementation of the Schemes will consist of Italian branch business. RSAI is a UK-based insurer that will remain the main operating company for the RSA Group s UK general insurance business. 3 Certain aspects of the implementation of Solvency II may be delayed to 1 January 2014 pursuant to Omnibus II proposals issued in June 2011. 2

Various distinct policyholder groups are directly affected by the proposed Schemes, including transferring policyholders and those remaining in RSAI, Marine and Sun. These policyholder groups include active policyholders in EU branches, reinsurance policyholders, policyholders with policies whose insured risks are short term in nature, as well as policyholders whose claims, if any, may not emerge for many years. I have assessed the change in circumstances, security and levels of service of each group of policyholders separately. Movements of policyholder groups between legal entities as a result of the Schemes: After transfer Before transfer Sun Marine RSAI Entities to be de-authorised after the Schemes are implemented Alliance Assurance Company Limited B C British and Foreign Marine Insurance Company Limited B C Century Insurance Company Limited B C Liverpool Marine and General Insurance Company Limited B C London Guarantee & Reinsurance Company Limited B C National Vulcan Engineering Insurance Group Limited A C PA(GI) Limited B C Royal & Sun Alliance Insurance (Global) Limited B C Royal Insurance (U.K.) Limited B C Royal International Insurance Holdings Limited B C Sun Alliance and London Insurance plc B C Sun Alliance Insurance International Limited B C Sun Alliance Insurance UK Limited B C The Globe Insurance Company Limited B C The London Assurance B C The Northern Maritime Insurance Company Limited B C The Sea Insurance Company Limited A B C The Union Marine and General Insurance Company Limited B C Surviving insurance entities Royal & Sun Alliance Insurance plc B Sun Insurance Office Limited B C The Marine Insurance Company Limited (not a transferor company) Royal & Sun Alliance Reinsurance Limited B C Policyholders post transfer? Key: A The Italian branch business of the Sea and National Vulcan will be transferred to Sun; B The US Surplus Lines business and the legacy marine and aviation business (together with related portfolios) of each transferor company will be transferred to Marine; and C Other than Sun s Italian branch business and business being retained by RSA Re, all other business of each transferor company not transferred under (A) and (B) will be transferred to RSAI. PA(GI) Limited is shaded yellow in table above simply to identify it as a non RSA Group company. 3

EXISTING MUTUAL SUPPORT ARRANGEMENTS - DEED OF MUTUAL GUARANTEE Currently all companies party to the Schemes (except PAGI) are also party to a Deed of Mutual Guarantee ( DMG ). The DMG has in practice been treated as a support of last resort under which, in effect, each party agrees to provide financial support in the event another party is unable to pay its policyholders from its own resources. Upon the Schemes becoming effective, it is proposed that the DMG will be terminated. Separately, most of the insurance business of the transferor companies, together with certain noninsurance assets, is currently treated as having been transferred to, and accounted for in, RSAI and RSAI has assumed responsibility, on an indemnity basis, for discharging liabilities of those transferor companies. These arrangements are referred to collectively as hive-up arrangements. The hive-up arrangements were not formal statutory transfers and accordingly, the liabilities associated with the insurance policies remain with the relevant transferor companies. The purpose of these hive-up arrangements was to simplify the statutory accounting of the RSA Group following various mergers and internal reorganisations. It is intended that the hive-up arrangements be terminated immediately prior to the Schemes taking effect. To provide continued security to policyholders, it is proposed that, from the time when the Schemes take effect, RSAI will wholly reinsure the surviving UK insurance subsidiaries remaining after the Schemes (Marine, Sun and RSA Re) under a series of reinsurance agreements (net of reinsurance that these subsidiaries have in place). These reinsurance arrangements will involve an aggregate excess of loss agreement relating to reinsurance of past liabilities and there will also be a quota share agreement for liabilities going forward which will be in effect for 2012 and thereafter will be subject to annual renewal. Prior to the Schemes taking effect, all transferor and/or transferee companies (except PAGI) are party to the DMG and this provides some additional security to the policyholders of these companies. In practice, these companies have not placed any reliance on the DMG for their security. After the Schemes take effect, it is proposed that Marine, Sun and RSA Re have the benefit of the reinsurance agreements with RSAI referred to above. I am satisfied that no group of policyholders will be materially adversely impacted by the termination of the DMG and its replacement with the Schemes and the series of RSAI reinsurance agreements. I have considered the impact of the Schemes on the security of each affected policyholder group, including the change in the nature of the security afforded to each policyholder group within each of the transferor and transferee companies and the consequent change in the likelihood that policyholders will be paid in full. I have considered the impact of the termination of the DMG, and the effects the reinsurance agreements with RSAI referred to above will have. IS THERE AN IMPACT ON SECURIT OF POLICHOLDERS TRANSFERRING TO OR REMAINING IN SUN? Two distinct policyholder groups (namely the policyholders of the Italian branches of Sea and National Vulcan) are transferring into Sun and the existing Italian branch policyholders of Sun will remain in Sun. As a result of the Schemes, in conjunction with the proposed RSAI reinsurance agreements referred to above, the security of the policyholders transferring into Sun and that of the policyholders remaining in Sun will not be materially adversely affected, i.e. the likelihood that the claims of these policyholders will be paid in full will for practical purposes be the same before and after the Schemes come into effect. 4

IS THERE AN IMPACT ON SECURIT OF POLICHOLDERS TRANSFERRING TO OR REMAINING IN MARINE? Twenty distinct policyholder groups are transferring into Marine and all the existing policyholders of Marine will remain in Marine. As a result of the Schemes, all policyholder groups impacted by the MIC Scheme will experience some change in the security of their policies. Policyholders of RSAI transferring to Marine will experience some reduction in their security although this will not have a material impact; hived-up policyholders in RSAI transferring to Marine will experience largely no change in their security; and policyholders of PAGI transferring to Marine will experience some improvement in their security although this will not have a material impact. Overall therefore, allowing for the effect of the proposed reinsurance agreements with RSAI, the likelihood that the claims of these policyholders will be paid in full will for practical purposes be the same before and after the Schemes come into effect. IS THERE AN IMPACT ON SECURIT OF POLICHOLDERS TRANSFERRING TO OR REMAINING IN RSAI? Twenty distinct policyholder groups are transferring into RSAI and the majority of existing policyholders will remain in RSAI. As a result of the Schemes, the security of the policyholders transferring into RSAI and that of the policyholders remaining in RSAI will not be materially adversely affected, i.e. the likelihood that the claims of these policyholders will be paid in full will for practical purposes be the same before and after the Schemes come into effect. IS THERE AN IMPACT ON SECURIT OF POLICHOLDERS TRANSFERRING FROM PAGI? Under the PAGI Schemes policyholders will transfer either to Marine or to RSAI. The security of the policyholders transferring from PAGI to Marine or to RSAI under the Schemes will not be materially adversely affected as described in one or other of the preceding two paragraphs, as applicable. IS THERE AN IMPACT ON SECURIT OF POLICHOLDERS REMAINING IN RSA RE? The principal business of RSA Re is the reinsurance of other RSA Group companies; however, a group of external policyholders of RSA Re will transfer to either RSAI or Marine under the Schemes. As a result of the Schemes, in conjunction with the proposed RSAI reinsurance agreements referred to above, the security of the policyholders transferring into RSAI or Marine (as applicable) and that of the policyholders remaining in RSA Re will not be materially adversely affected, i.e. the likelihood that the claims of these policyholders will be paid in full will for practical purposes be the same before and after the Schemes come into effect. I HAVE CONCLUDED THAT THE SCHEMES DO NOT IMPACT TO AN MATERIALL ADVERSE EXTENT THE SECURIT OF AFFECTED POLICHOLDERS. TRANSFER OF REINSURANCE While the Schemes provide for the transfer of existing reinsurance assets and all existing arrangements with reinsurers in respect of the policies transferring under the Schemes (other than the whole account reinsurance of PAGI by RSAI which will terminate when the PAGI Schemes take effect) there is a risk that some overseas reinsurers may not recognise, or may seek not to recognise, the Schemes. I HAVE CONSIDERED THE IMPACT OF THE PROPOSED TRANSFERS ON THE REINSURANCE ASSETS AND ARRANGEMENTS TO BE TRANSFERRED UNDER THE SCHEMES AND CONSIDER THAT POLICHOLDERS WILL NOT BE MATERIALL ADVERSEL AFFECTED AS A RESULT OF THE SCHEMES TAKING EFFECT IN THIS REGARD, NOTWITHSTANDING THAT THERE IS A RISK THAT SOME OVERSEAS REINSURERS MA NOT RECOGNISE, OR MA SEEK NOT TO RECOGNISE, THE SCHEMES. 5

WILL THE SCHEMES AFFECT LEVELS OF SERVICE? I have considered the effect of the Schemes on service levels experienced by policyholders. There will be no change to the administration of claims and policies as a result of any of the proposed Schemes and the service standards will continue following the implementation of the Schemes. AS A RESULT, NO GROUP OF POLICHOLDERS AFFECTED B THE SCHEMES WILL SUFFER AN REDUCTION IN SERVICE STANDARDS AS A RESULT OF THE SCHEMES. CONCLUSION I have been provided with access to all material facts that I consider relevant in order to assess the proposals under the Schemes. I have had many discussions with senior members of staff at RSA to evaluate the potential impact of the proposals on all policyholders under the Schemes. All Schemes Take Effect In the preceding commentary I have considered the impact on policyholder security and servicing levels of the proposed Schemes on the basis that the Schemes are all sanctioned by the Court, and my conclusions are set out above. In summary, I am satisfied that the proposed Schemes do not affect in a materially adverse way either the security or the policy servicing levels of the policyholders of RSAI, Marine, Sun, RSA Re and the transferor companies (including PAGI), notwithstanding the termination of the DMG. No Schemes Take Effect If the Schemes were not implemented, the policyholders of RSAI, Marine, Sun, RSA Re and the transferor companies would remain with their present companies, each of which has a satisfactory solvency position. Further, as the DMG would continue to operate the RSA Group companies would continue to benefit from the mutual support in relation to their respective general insurance business liabilities provided by each of the parties to the DMG. Only Sun Scheme Takes Effect If the Schemes were partially implemented because only the Sun Scheme was sanctioned, the policyholders of RSAI, Marine, RSA Re and the transferor companies (excluding the policyholders of Sea and National Vulcan transferring under the Sun Scheme) would remain with their present companies each of which has a satisfactory solvency position. Further, since the DMG would continue to operate, the policyholders of Sun (including those transferring from Sea and National Vulcan) would continue to enjoy a satisfactory solvency position, with Sun having the benefit of the DMG, and unchanged service levels. The policyholders of PAGI would continue to be reinsured by RSAI under PAGI s existing reinsurance arrangements and would continue to enjoy a satisfactory solvency position with unchanged service levels. I therefore conclude that the security position and policy servicing levels enjoyed by the policyholders of Sun, RSAI, Marine, RSA Re and the transferor companies would not be materially adversely affected under this scenario. Only Sun Scheme Fails To Take Effect If the Schemes were partially implemented because only the Sun Scheme was not sanctioned, the reinsurance agreements with RSAI referred to above would be put in place (and would be extended to include Sea and National Vulcan as cedants). Therefore, the policyholders of RSAI, Marine, RSA Re, Sun and the transferor companies would still benefit from the protection provided by RSAI (either as direct policyholders or as policyholders of reinsured transferee companies). They would therefore have a strong level of security for their policies and unchanged service levels. I therefore conclude that the security position and policy servicing levels enjoyed by the policyholders of RSAI, Marine, Sun, RSA Re and the transferor companies would not be materially adversely affected under this scenario notwithstanding the termination of the DMG. 6

Only PAGI Schemes Take Effect If the Schemes were partially implemented because only the PAGI Schemes were sanctioned, the policyholders of Sun, Marine, RSAI, RSA Re and the transferor companies (except PAGI) would remain with their present companies each of which has a satisfactory solvency position, and unchanged service levels. Further, the DMG would continue to operate. The policyholders of PAGI would continue to enjoy a satisfactory solvency position, with RSAI and Marine having the benefit of the DMG (to which PAGI was not party), and unchanged service levels. I therefore conclude that the security position and policy servicing levels enjoyed by the affected policyholders of Sun, Marine, RSAI, RSA Re, PAGI and the transferor companies would not be materially adversely affected under this scenario. Only RSAI Scheme and MIC Scheme Take Effect If the Schemes were partially implemented because only the RSAI Scheme and the MIC Scheme were sanctioned, the reinsurance agreements with RSAI referred to above would be put in place (and would be extended to include Sea and National Vulcan as cedants). Therefore, the policyholders of RSAI, Marine, RSA Re, Sun and the transferor companies would benefit from the protection provided by the larger entity, RSAI (either as direct policyholders or as policyholders of reinsured transferee companies). This would include the policyholders of PAGI, as they would continue to be reinsured by RSAI under PAGI s existing reinsurance arrangements with RSAI. The policyholders would have a strong level of security for their policies and unchanged service levels. I therefore conclude that the security position and policy servicing levels enjoyed by the policyholders of RSAI, Marine, Sun, RSA Re and the transferor companies would not be materially adversely affected under this scenario notwithstanding the termination of the DMG. Only RSAI Scheme and MIC Scheme Fail To Take Effect If the Schemes were partially implemented because only the RSAI Scheme and the MIC Scheme were not sanctioned, the policyholders of RSAI, Marine, RSA Re and the transferor companies (excluding policyholders transferring under the PAGI Schemes and policyholders Sea and National Vulcan transferring under the Sun Scheme) would remain with their present companies each of which has a satisfactory solvency position. Further, as the DMG would continue to operate, the policyholders of Sun (including those transferring from Sea and National Vulcan) would continue to enjoy a satisfactory solvency position, with Sun having the benefit of the DMG, and unchanged service levels. The policyholders of PAGI will become policyholders of RSAI or Marine (as applicable) and continue to enjoy a satisfactory solvency position, with RSAI and Marine having the benefit of the DMG (to which PAGI is not party), and unchanged service levels. I therefore conclude that the security position and policy servicing levels enjoyed by the policyholders of Sun, Marine, RSAI, RSA Re, PAGI and the transferor companies would not be materially adversely affected under this scenario. Only PAGI Schemes Fail To Take Effect If the Schemes were partially implemented because only the PAGI Schemes were not sanctioned, the policyholders of PAGI would continue to be reinsured by RSAI under PAGI s existing reinsurance arrangements with RSAI and would continue to enjoy a satisfactory security position with unchanged service levels. I therefore conclude that the security position and policy servicing levels enjoyed by the policyholders of Sun, Marine, RSAI, RSA Re, PAGI and the transferor companies would not be materially adversely affected under this scenario, notwithstanding the termination of the DMG. 7

UPDATE REPORT My analysis has been based upon the material supplied to me, including balance sheets and other information, based on accounting positions as at 31 December 2010 (and in some cases earlier dates). Since the proposed Effective Date for the Schemes is 1 January 2012, I will need to revisit these assumptions closer to the time to confirm that there have been no material changes to the arrangements that I have reviewed that would affect my overall opinion. I will prepare and issue an update report to be made available to the Court prior to the Final Court Hearing. Gary Wells Fellow of the Institute and Faculty of Actuaries Principal, Milliman, Consultants and Actuaries 4 July 2011 8

Transferors (including former names) and the destination of their business under the proposed Schemes Transferors Former Names To RSAI To Marine To Sun Alliance Assurance Company Limited Alliance British and Foreign Life and Fire Assurance Company British and Foreign Marine Insurance Company Limited The United British and Foreign Marine Insurance Company Limited Liverpool Marine and General Insurance Company Limited Liverpool Marine Insurance Company Limited London Guarantee & Reinsurance Company Limited London Guarantee and Accident Company Limited National Vulcan Engineering Insurance Group Limited National Boiler Insurance Company Limited The National Boiler and General Insurance Company Limited Northern Maritime Insurance Company Limited Royal & Sun Alliance Insurance (Global) Limited The London and Lancashire Fire Insurance Company Limited London & Lancashire Insurance Company Limited The London and Lancashire Insurance Company Limited Royal Insurance (Global) Limited Royal Insurance (U.K.) Limited Royal International Insurance Holdings Limited The Liverpool and London and Globe Insurance Company Limited Royal Insurance (Int.) Limited Sun Alliance and London Insurance plc Sun Alliance Insurance Limited Sun Alliance and London Insurance Limited Sun Alliance Insurance International Limited The Planet Assurance Company Limited Sun Alliance Insurance UK Limited The British Law Insurance Company Limited The Century Insurance Company Limited The Sickness and Accident Assurance Association Limited The Sickness Accident and Life Association Limited The Globe Insurance Company Limited The London Assurance The Sea Insurance Company Limited Sea Insurance Company Limited The Union Marine and General Insurance Company Limited The Union Marine Insurance Company Limited Royal & Sun Alliance Insurance plc Royal Insurance Company Limited and Royal Insurance plc Royal & Sun Alliance Reinsurance Limited British Fire Insurance Company Limited Royal Reinsurance Company Limited Sun Insurance Office Limited PA(GI) Limited Phoenix Assurance Company Limited (please note this is not a company within the RSA Group) Phoenix Assurance plc Phoenix Assurance Limited