PROSPECTUS dated 25 April 2012 22MAR201216223744 Direct Line Insurance Group plc (incorporated in England and Wales with limited liability with registered number 02280426) £500,000,000 Fixed/Floating Rate Guaranteed Subordinated Notes due 2042 guaranteed by U K Insurance Limited (incorporated in England and Wales with limited liability with registered number 01179980) Issue Price: 99.200 per cent. The £500,000,000 Fixed/Floating Rate Guaranteed Subordinated Notes due 2042 guaranteed by U K Insurance Limited (the ‘‘Guarantor’’ or ‘‘U K Insurance’’) on a subordinated basis (the ‘‘Notes’’) will be issued by Direct Line Insurance Group plc (the ‘‘Issuer’’ or the ‘‘Company’’ and, together with its consolidated subsidiaries, the ‘‘Group’’) (formerly RBS Insurance Group Limited) on or about 27 April 2012 (the ‘‘Issue Date’’). The Notes will bear interest from (and including) the Issue Date to (but excluding) 27 April 2022 (the ‘‘First Call Date’’) at a fixed rate of 9.250 per cent. per annum and thereafter at a floating rate of 7.910 per cent. per annum above the six month London interbank offered rate. Interest will be payable on the Notes semi-annually in arrear on each Interest Payment Date, commencing 27 October 2012, provided that the Issuer may defer payments of interest on any Optional Interest Payment Date, and must defer payments of interest (i) on any Mandatory Interest Deferral Date and/or (ii) if such payment could not be made in compliance with the Issuer Solvency Condition. Any interest which is deferred (and not paid by the Guarantor) will, for so long as it remains unpaid, constitute ‘‘Arrears of Interest’’. Arrears of Interest will not themselves bear interest, and will be payable as provided in Condition 6. Subject to the following proviso, the Notes will (unless previously redeemed or purchased and cancelled) mature on the Interest Payment Date falling in April 2042 (the ‘‘Maturity Date’’), and may be redeemed at the option of the Issuer on any Interest Payment Date falling on or after the First Call Date, or prior to such date (i) following the occurrence of (or if the Issuer satisfies the Trustee that there will occur within six months) a Capital Disqualification Event or a Ratings Methodology Event (provided that, in the case of a Ratings Methodology Event, the Notes will not be redeemed prior to the fifth anniversary of the Issue Date) or (ii) in the event of certain changes in the tax treatment applicable to the Notes, provided that redemption of the Notes on the Maturity Date or any other date set for redemption of the Notes shall be deferred if (a) a Regulatory Deficiency Redemption Deferral Event has occurred and is continuing on such date, or would occur if the Notes were to be redeemed, or (b) the Notes could not be redeemed in compliance with the Issuer Solvency Condition. The Issuer may, alternatively, following the occurrence of (or if the Issuer satisfies the Trustee that there will occur within six months) a Capital Disqualification Event or a Ratings Methodology Event or in the event of certain changes in the tax treatment applicable to the Notes, vary or substitute the Notes in the circumstances described in Condition 8. Any substitution or variation of the Notes, and any redemption or purchase of the Notes prior to the Maturity Date, will be subject to satisfaction of the Regulatory Clearance Condition and continued compliance with applicable Regulatory Capital Requirements as published by the Financial Services Authority (or any successor authority, the ‘‘FSA’’), all as more particularly described in Condition 8.9. Application has been made to the FSA in its capacity as competent authority under the Financial Services and Markets Act 2000 (as amended, the ‘‘FSMA’’) for the Notes to be admitted to the official list of the UK Listing Authority (the ‘‘Official List’’) and to the London Stock Exchange plc (the ‘‘London Stock Exchange’’) for the Notes to be admitted to trading on the London Stock Exchange’s Regulated Market (the ‘‘Market’’). References in this Prospectus to the Notes being ‘‘listed’’ (and all related references) shall mean that the Notes have been admitted to the Official List and have been admitted to trading on the Market. The Market is a regulated market for the purposes of Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments. Potential investors should read the whole of this document, in particular the ‘‘Risk Factors’’ set out on pages 13 to 42. The Notes have been rated BBB+ by Standard & Poor’s Credit Market Services Europe Limited (‘‘Standard & Poor’s’’) and Baa1 by Moody’s Investors Service Limited (‘‘Moody’s’’). Standard & Poor’s and Moody’s are each credit rating agencies established in the European Union and registered under Regulation (EC) No 1060/2009 and each of them is included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with such Regulation. A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Structuring Adviser THE ROYAL BANK OF SCOTLAND Joint Bookrunners & Joint Lead Managers CITIGROUP HSBC THE ROYAL BANK OF SCOTLAND This Prospectus comprises a prospectus for the purposes of Article 5.3 of Directive 2003/71/EC (the ‘‘Prospectus Directive’’). The Issuer and the Guarantor (the ‘‘Responsible Persons’’) accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Issuer and the Guarantor (each having taken all reasonable care to ensure that such is the case) the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. The Accountant’s Report set out on pages F-3 to F-4 of this Prospectus (the ‘‘Accountant’s Report’’) has been prepared by Deloitte LLP, Chartered Accountants, at the request of the Issuer. Deloitte LLP has given and has not withdrawn its written consent to the inclusion in this Prospectus of the Accountant’s Report in the form and context in which it appears in this Prospectus and has authorised those parts of this Prospectus which comprise its Accountant’s Report for the purposes of item 5.5.4R(2)(f) of the Prospectus Rules. Neither the Managers (as described under ‘‘Subscription and Sale’’ below) nor the Trustee have independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Managers or the Trustee as to the accuracy or completeness of the information contained or incorporated in this Prospectus or any other information provided by the Issuer or the Guarantor in connection with the offering of the Notes. No Manager or the Trustee accepts any liability in relation to the information contained in this Prospectus or any other information provided by the Issuer or the Guarantor in connection with the offering of the Notes or their distribution. No person is or has been authorised by the Issuer, the Guarantor, the Managers or the Trustee to give any information or to make any representation not contained in or not consistent with this Prospectus or any other information supplied in connection with the offering of the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the Guarantor, any of the Managers or the Trustee. Neither this Prospectus nor any other information supplied in connection with the offering of the Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer, the Guarantor, any of the Managers or the Trustee that any recipient of this Prospectus or any other information supplied in connection with the offering of the Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and the Guarantor. Neither this Prospectus nor any other information supplied in connection with the offering of the Notes constitutes an offer or invitation by or on behalf of the Issuer or the Guarantor, any of the Managers or the Trustee to any person to subscribe for or to purchase any Notes in any jurisdiction where such offer or invitation is not permitted by law. Neither the delivery of this Prospectus nor the offering, sale or delivery of the Notes shall in any circumstances imply that the information contained herein concerning the Issuer and/or the Guarantor is correct at any time subsequent to the date hereof or that any other information supplied in connection with the offering of the Notes is correct as of any time subsequent to the date indicated in the document containing the same. The Managers and the Trustee expressly do not undertake to review the financial condition or affairs of the Issuer or the Guarantor during the life of the Notes or to advise any investor in the Notes of any information coming to their attention. Neither the Notes nor the guarantee in respect thereof have been nor will be registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’). Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United States or to U.S. persons. For a further description of certain restrictions on the offering and sale of the Notes and on distribution of this document, see ‘‘Subscription and Sale’’ below.