Direct Line Insurance : Shareholder Circular and Notice of General Meeting

THIS DOCUMENT AND THE ACCOMPANYING FORM OF PROXY ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under FSMA, if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

If you sell or otherwise transfer, or have sold or otherwise transferred, all your Ordinary Shares in the Company, please forward this document, but not the accompanying personalised Form of Proxy, as soon as possible to the purchaser or the transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected, for transmission to the purchaser or the transferee. If you sell or have sold or otherwise transferred only part of your holding of Ordinary Shares, you should retain these documents and consult the bank, stockbroker or other agent through whom the sale or transfer was effected. If you receive this document from another Shareholder, as a purchaser or transferee, please contact the Registrar for a personalised Form of Proxy.

Direct Line Insurance Group plc

(Incorporated in England and Wales with registered number 02280426)

Proposed sale of the Brokered Commercial Insurance Business of Direct Line Group to

Royal & Sun Alliance Insurance Limited

Circular to Shareholders

and

Notice of General Meeting

This document should be read as a whole. Your attention is drawn to the letter from the Chair of the Board of the Company which is set out in Part 1 (Letter from the Chair of the Board of Direct Line Insurance Group plc) of this document and which contains a recommendation from the Directors that you vote in favour of the Resolution to be proposed at the General Meeting. The Transaction will not take place unless the Resolution is passed at the General Meeting.

Notice of the General Meeting, to be held at 10 a.m. at Riverbank House, 2 Swan Lane, London, EC4R 3AD on 19 October 2023, is set out in Part 8 (Notice of General Meeting) of this document. Whether or not you intend to be present at the General Meeting, you are asked to complete and return the Form of Proxy in accordance with the instructions printed on it to the Company's Registrar, Computershare Investor Services PLC, as soon as possible and, in any event, so as to be received by no later than 10 a.m. on 17 October 2023 (being 48 hours before the time fixed for the holding of the meeting with no account being taken for non-working days) (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). Shareholders wishing to appoint a proxy online should visit www.investorcentre.co.uk/eproxy and follow the instructions. To use this service, you will require the control number, your unique PIN and Shareholder Reference Number.

If you hold your Ordinary Shares in CREST, and you wish to appoint a proxy or proxies through the CREST electronic proxy appointment service, you may do so by using the procedures described in the CREST Manual (available via www.euroclear.com). In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST Proxy Instruction must be properly authenticated in accordance with Euroclear UK & International Limited's specifications, and must contain the information required for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the Registrar (ID number 3RA50), not later than 10 a.m. on 17 October 2023.

The completion and return of a Form of Proxy will not prevent you from attending the General Meeting and voting in person should you so wish and be so entitled.

Morgan Stanley & Co. International plc ("Morgan Stanley"), which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Prudential Regulation Authority and the Financial Conduct Authority, is acting exclusively as joint sponsor and lead financial adviser to Direct Line Insurance Group plc and no one else in connection with the Transaction and the matters described in this document and will not be responsible to anyone other than Direct Line Insurance Group plc for providing the protections afforded to clients of Morgan Stanley nor for providing advice in relation to the Transaction or any other matters, transactions or arrangements referred to in this document. Neither Morgan Stanley nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Morgan Stanley in connection with this document, any statement contained herein or otherwise.

RBC Europe Limited ("RBC"), which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Prudential Regulation Authority and the Financial Conduct Authority, is acting exclusively as joint sponsor and financial adviser to Direct Line Insurance Group plc and no one else in connection with the Transaction and the matters described in this document and will not be responsible to anyone other than Direct Line Insurance Group plc for providing the protections afforded to clients of RBC nor for providing advice in relation to the Transaction or any other matters, transactions or arrangements referred to in this document. Neither RBC nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of RBC in connection with this document, any statement contained herein or otherwise.

Apart from the responsibilities and liabilities, if any, which may be imposed upon Morgan Stanley or RBC by FSMA or the regulatory regime established thereunder, neither Morgan Stanley nor RBC, nor any of their respective subsidiary undertakings or any of their respective partners, directors, officers, employees, advisers, agents or any other person, accept any responsibility or liability whatsoever or make any representation or warranty, express or implied, concerning the contents of this document (or whether any information has been omitted from this document), including its truth, accuracy, completeness, fairness or verification, or concerning any other statement made or purported to be made by it, or on its behalf, in connection with the Company, its subsidiaries or associated companies, the Ordinary Shares in the Company or the Transaction, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available, and nothing in this document is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Morgan Stanley and RBC accordingly each disclaim, to the fullest extent permitted by law, all and any duty, responsibility and liability whether direct or indirect and whether arising in tort, contract, under statute or otherwise (save as referred to herein) which it might otherwise have in respect of this document or any such statement.

This document is a circular relating to the Transaction which has been prepared in accordance with the Listing Rules and approved by the FCA. For a discussion of the risks relating to the Transaction, please see the discussion of risks and uncertainties set out in Part 2 (Risk Factors) of this document.

Capitalised terms have the meaning ascribed to them in Part 7 (Definitions) of this document.

A summary of action to be taken by Shareholders is set out on page 13 of this document and in the Notice of General Meeting set out in Part 8 (Notice of General Meeting) of this document.

This document is dated 3 October 2023.

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IMPORTANT NOTICES

Information regarding forward looking statements

This document contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature. All statements other than statements of historical fact are forward-looking statements. They are based on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects", "is expected", "is subject to", "budget", "scheduled", "estimates", "forecasts", "goals", "intends", "anticipates", "believes", "targets", "aims" or "projects". Words or terms of similar substance or the negative thereof, are forward-looking statements, as well as variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.

Forward-looking statements include statements relating to: (a) future capital expenditures, expenses, revenues, earnings, economic performance, indebtedness, financial condition, net insurance margin, dividend policy, losses and future prospects; (b) business and management strategies and the expansion and growth of the Company's operations; and (c) the effects of global and/or local economic conditions on the Company's business.

Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of the Company to differ materially from the expectations of the Company, include, among other things, general business and economic conditions globally, industry trends, competition, changes in government and changes in regulation and policy and changes in interpretation of regulations, law or policy, including in relation to the environment, health and safety and taxation, labour relations and work stoppages, interest rates and currency fluctuations and inflation, changes in its business strategy, political and economic uncertainty and other factors discussed in Part 2 (Risk Factors) of this document. Such forward-looking statements should therefore be construed in light of such factors.

Neither the Company nor any of its Directors, officers or advisers provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this document will actually occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as at the date of this document.

No person has been authorised to give any information or to make any representations other than those contained in this document and, if given or made, such information or representations must not be relied on as having been authorised by the Company, the directors or Morgan Stanley or RBC.

The contents of this document are not to be construed as legal, business, financial or tax advice. Each Shareholder should consult its own legal adviser, business adviser, financial adviser or tax adviser for legal, business financial or tax advice respectively.

Other than in accordance with its legal or regulatory obligations (including under the Listing Rules, the Disclosure Guidance and Transparency Rules and the Market Abuse Regulation), the Company is not under any obligation and the Company expressly disclaims any intention or obligation (to the maximum extent permitted by law) to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this document.

The above explanatory wording regarding forward-looking statements does not in any way seek to qualify the statement regarding working capital that can be found at paragraph 11 of Part 6 (Additional Information) of this document.

No profit forecast

No statement contained or referred to in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per Ordinary Share for the current or future financial years will necessarily match or exceed the historical published earnings per Ordinary Share.

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Financial information

References to "£", "GBP", "pounds", "pounds sterling", "sterling", "p", "penny" and "pence" are to the lawful currency of the United Kingdom. References to "CAD" or "CAD$" are to the lawful currency of Canada. Historic exchange rates have been used to convert CAD$ to £ where relevant.

Figures provided in this document in respect of exchange rates have been provided to zero decimal places.

Incorporation by reference

Certain information in relation to the Company is incorporated by reference into this document. Further information is set out in paragraph 14 of Part 6 (Additional Information) of this document. Without limitation, unless expressly stated herein, the contents of the websites of the Company, and any links accessible through the website(s) of the Company, are not incorporated into and do not form part of this document.

No offer or solicitation

This document is not a prospectus and is not intended to, and does not constitute or form part of, any offer or invitation to purchase, acquire, subscribe for, sell, dispose of or issue, or any solicitation of any offer to sell, dispose of, purchase, acquire or subscribe for, any security.

Shareholder helpline

If you have any questions about this document, the General Meeting or on the completion and return of the Form of Proxy, please callthe Computershare Investor Services PLC shareholder helpline between

8.30 a.m. and 5:30 p.m. (London (UK) time) Monday to Friday (except UK public holidays) on [phone] (calls to this number from the United Kingdom are charged at the standard national rate plus network extras). Calls outside the United Kingdom are charged at the applicable international rate. The helpline also contains automated self-service functionality which is available 24 hours a day, 7 days a week.

Please note that calls may be monitored or recorded and the helpline cannot provide financial, legal or tax advice or advice on the merits of the Transaction.

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CONTENTS
	Page
EXPECTED TIMETABLE OF PRINCIPAL EVENTS	5
DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS	6
PART 1: LETTER FROM THE CHAIR OF THE BOARD OF DIRECT LINE INSURANCE
GROUP PLC	7
PART 2: RISK FACTORS	15
PART 3: PRINCIPAL TERMS AND CONDITIONS OF THE TRANSACTION	23
PART 4: FINANCIAL INFORMATION RELATING TO THE BROKERED COMMERCIAL
INSURANCE BUSINESS	30
PART 5: UNAUDITED PRO FORMA STATEMENT OF NET ASSETS OF THE CONTINUING
GROUP	33
PART 6: ADDITIONAL INFORMATION	38
PART 7: DEFINITIONS	46
PART 8: NOTICE OF GENERAL MEETING	51

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