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Name | Symbol | Market | Type |
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Ecclesiastl.8fe | LSE:ELLA | London | Preference Share |
Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
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0.00 | 0.00% | 132.00 | 131.00 | 133.00 | 132.50 | 132.00 | 132.50 | 58,466 | 08:00:12 |
TIDMELLA
RNS Number : 6808J
Ecclesiastical Insurance Office PLC
20 August 2019
2019 INTERIM RESULTS
Ecclesiastical Insurance Office plc 20 August 2019
Ecclesiastical Insurance Office plc ("Ecclesiastical"), the specialist financial services group, today announces its 2019 interim results. A copy of the 2019 interim results will be available on the Company's website at www.ecclesiastical.com
Highlights
-- Gross written premiums (GWP) up 7% from the same period last year at GBP185.0m (H1 2018: GBP172.7m), supported by strong retention, new propositions and benefiting from favourable foreign exchange
-- Profit before tax of GBP42.8m (H1 2018: GBP19.4m)
-- Investment returns of GBP42.0m (H1 2018: GBP17.7m), where markets have recovered since the end of 2018
-- Continuing to see steady measured progress in our insurance business with underwriting profits* of GBP9.5m giving a combined operating ratio (COR) of 91.4% (H1 2018: profit of GBP8.0m, COR 92.3%)
-- We will grant a further GBP5m to our charitable owner in September to give to good causes. This will take us to GBP70m towards our target of GBP100m in charitable donations by the end of 2020.
Mark Hews, Group Chief Executive Officer of Ecclesiastical, said: "Our purpose at Ecclesiastical is to contribute to the greater good of society. By delivering sustainable, profitable, long-term growth, we are able to support thousands of good causes across the UK through our charitable giving. I'm very proud that in April we launched the Movement for Good Awards, giving away GBP1m to charities in 2019.
"Alongside this we're announcing today a further GBP5m will be granted to our charitable owner in September. This will bring us to GBP70m towards our target of GBP100m by the end of 2020.
"This giving is made possible thanks to the hard work and dedication of everyone at Ecclesiastical. I'm delighted to report a positive financial performance in the first half of 2019, underpinned by continued strong underwriting performance. This is a result of our disciplined underwriting approach, and a benign environment in the first half of the year. Positive growth in global stock markets has also delivered strong investment returns, demonstrating the benefit of our long term equity investment strategy.
"Our strategic goal is to be the most trusted and ethical specialist financial services group and we continue to win external accolades for the way we do business.
"Ecclesiastical home insurance was once again rated first by Fairer Finance overall and came first for trust and first for customer happiness. Ecclesiastical Canada was awarded Top Employer for Young people 2019 for the seventh consecutive year.
"Our reputation for claims excellence was also enhanced with our UKGI business being the only insurer to win multiple awards at the Insurance Post Claims Awards."
*The Group uses APMs to help explain performance. More information on APMs is included in note 12.
Key Financial Performance Data
H1 2019 H1 2018 Gross written premiums GBP185.0m GBP172.7m Group underwriting result* GBP9.5m GBP8.0m Group combined operating ratio* 91.4% 92.3% Investment return GBP42.0m GBP17.7m Profit before tax GBP42.8m GBP19.4m 30 June 2019 31 Dec 2018 Net asset value GBP617m GBP586m Solvency II capital cover (solo) 226% 215%
*The Group uses APMs to help explain performance. More information on APMs is included in note 12.
Interim Management Report
It has been a good first half of the year with a stable underwriting performance and strong investment returns, with stock markets recovering from the falls seen at the end of 2018. We report a profit before tax of GBP42.8m (H1 2018: GBP19.4m).
Our strategy over the medium term continues to deliver moderate GWP growth, by maintaining our strong underwriting discipline and focusing on profit over growth. We have deep specialist capabilities, which we continue to develop through investment in technology and innovation, and by providing appealing customer propositions and excellent service.
We have delivered good growth and steady underwriting profits in the first half with underwriting profit of GBP9.5m (H1 2018: GBP8.0m). This reflects improved current year performance which benefited from benign weather and favourable large loss experience in most of our territories compared with previous years with the COR of 91.4% (H1 2018: 92.3%).
Gross written premiums grew by 7.1% to GBP185.0m (H2 2018: GBP172.7m), benefiting from strong retention, new business wins and favourable currency movements.
Investment markets have partially recovered from a poor Q4 2018 where worldwide markets fell but remain around 3% below half year 2018 levels. Interest rates have been held and there has been less volatility from quarter to quarter than in the prior year. The unrealised investment losses we suffered at the end of 2018 were partially recovered as we have benefited from unrealised gains in H1 2019. Our overall investment return for the first half of the year was above our expectations at GBP42.0m (H1 2018: GBP17.7m). We are expecting further volatility in the second half of the year as the uncertainty around Brexit and global economic conditions continues.
These positive half-year results allow us to make a grant of GBP5m (H2 2018: GBP5m) to our charitable owner, Allchurches Trust, which has been approved by the Board and will be paid in September 2019.
Strategic Update
Investment in both our business and our people continues under a broad range of initiatives. Within the UK, a new private client product has been launched to help capitalise on growth opportunities available in this market. In May we launched a series of enhancements to our education proposition with a redesigned survey report, e-learning support, cyber guidance and a lesson kit for teachers to assist with the promotion of digital resilience with primary and secondary pupils. Investment in our staff continues to take place through our General Insurance Academy and as part of this a national training plan has been created, focusing on the continued development of our underwriters.
Investment in new technology is also progressing well: our new policy administration system for the UK and Ireland is under development; the UK's new claims workflow and document repository system is expected to go live shortly; and our Australian subsidiary has begun development of its new policy administration system. Our UK broking business has completed a successful trial of a new claims portal and will begin to roll this out more widely during 2019.
Our work in innovation and loss prevention continues. The UK has successfully piloted thermal imaging equipment that identifies electrical faults before they can cause a fire, with the rollout of training and equipment now underway. Work continues on the use of drones and their potential to support our risk management proposition. The UK has undertaken a series of trial drone flights. This will enable us to develop our understanding of how this technology can be embedded within our current survey approach. We are exploring how connected technology can prevent common losses thus saving the customer time and expense on the cost of property maintenance, including a trial of a smart water leak detector and equipping a heritage property with a wide range of sensors to identify potential risks.
Our purpose is to contribute to the greater good of society. Earlier this year we launched our GBP1m Movement for Good Awards, and recently announced awards of GBP1,000 each to 500 charities. Further grants totalling GBP500,000 to 10 charities will be announced during September. We continue to be motivated by our target to donate GBP100m to charity by the end of 2020 - after the GBP5m grant, we will have donated GBP70m towards this goal. Together with our customers and business partners, we are building a movement for good - championing a more caring, ethical and trusted way of doing business.
General Insurance - UK and Ireland
UK and Ireland report an underwriting profit of GBP9.2m and a net combined ratio of 87.8% (H1 2018: GBP11.8m profit, COR 83.8%). The property result has been better than expected in the first half of the year due to unusually benign weather and lower than average large loss experience. The strong performance of our liability business has continued into 2019 with the current year liability claims experience similar to last year, but with levels of reserve releases less than last year. We expect to see this trend of a reduction in the level of these releases continue as the run-off of claims in respect of the unprofitable business we exited in 2012 and 2013 is now well progressed.
UK and Ireland GWP grew by 4% to GBP124m in the six months to 30 June 2019 (H1 2018: GBP119.3m). This is driven by particularly strong growth in our Art & Private Client, Real Estate and Schemes business together with continued growth in our Heritage business as we demonstrate our position as a leading insurer of heritage, listed and period properties.
General Insurance - Canada
Canada reports GWP of GBP25.5m (H1 2018: GBP22.4m), an increase of 12.5% in local currency. Good progress continues to be made in strengthening the existing portfolio through rate and retention. New business production is behind the prior year as we continued to focus on profitability over growth.
Canada delivered an underwriting profit of GBP0.4m with a net combined operating ratio of 98.0% (H1 2018: GBP3.7m loss, COR 119.1%) which represented an improved performance in large loss and catastrophe events compared with both 2018 and 2017 where underwriting losses were delivered. Although the first few months saw a higher level of claims from the adverse winter weather, the last few months have seen the benefit of the rating action and a return to more normal weather experience.
General Insurance - Australia
Our Australian business continues to be successful in generating new business which has been a key driver of an 18% increase in GWP in local currency. After the negative effects of exchange, reported GWP was up 15% to GBP33.7m (H1 2018: GBP29.4m). We expect to see growth continue into the second half of the year although the market is becoming more competitive.
The underwriting loss for the period has remained relatively stable at GBP0.4m with a net combined ratio of 103.3% (H1 2018: GBP0.3m loss, COR 103.0%). Australia's gross underwriting results were significantly impacted by the Townsville floods however, these events were substantially reinsured and made a minimal impact on the net results. The small loss is in line with expectations.
Group Investment Returns
Investment performance has performed above our expectations in the first half of the year, with the markets recovering from a poor Q4 2018 where worldwide markets fell. There has been less volatility from quarter to quarter than in the prior year.
Our investment portfolio delivered profit of GBP42.0m (H1 2018: GBP17.7m). The returns were predominantly driven by fair value gains and dividend and interest income.
We discount some of our liability claims reserves. The reserves relate to liability policies, written over many decades, and represent very long-tail risks. The movement in yields from the year end has resulted in a negative impact of GBP8.5m in the first six months of the year, which partially offset the fair value gains on our financial investments.
We remain cautious on our expectations for investment returns given continued uncertainty around the UK's exit from the EU and the US's international trade disputes. Our approach to the management of risks resulting from the Group's exposure to financial markets is outlined in note 4 to our latest annual report.
Asset Management - EdenTree
Fee income grew by 1% reflecting positive market movements and new flows. Our strategic investment in people and technology has resulted in lower overall profitability, with EdenTree reporting a small loss less than GBP0.1m (H1 2018: GBP0.8m).
Total assets under management (AUM) increased by 4% over the six months to stand at almost GBP2.9bn (H1 2018: GBP2.8bn).
Despite positive market movements, investors remained cautious during the early part of the year as the industry reported weak retail inflows and particularly hard hit has been UK equity sector with many groups suffering net outflows. Against this background EdenTree were pleased to report OEIC pooled funds delivered positive flows of GBP24m (H1 2018: GBP94m) into our pooled fund products. Net inflows were driven by our multi asset product and bond funds.
Overall net inflows from all sources was GBP25m (H1 2018: GBP125m).
Broking and Advisory - SEIB Insurance Brokers
SEIB general commission and fees, excluding profit share commission, has increased by 6% in the first half of the year. Retention rates remain high but new business in some sectors is proving to be challenging. SEIB continues to deliver stable returns to the Group, reporting a half year profit before tax of GBP1.6m (H1 2018: GBP1.8m).
Life Business
Our life insurance business, which is closed to new business, reported a profit before tax of GBP0.2m at the half year (H1 2018: GBP0.4m). Assets and liabilities are well matched, and the small profit is in line with what we would expect as the business runs off.
Balance Sheet and Capital Position
Total shareholders' equity increased by GBP30.8m to GBP616.8m in the first six months of the year. Profits in the period were partially offset by actuarial losses on retirement benefit plans and a small exchange loss on overseas operations.
We paid the normal first-half dividend to preference shareholders of GBP4.6m (H1 2018: GBP4.6m) and also expect to make a grant of GBP5m (H1 2018: GBP5m) to our charitable owner in September 2019.
Our Solvency II regulatory capital position remains strong. Own funds increased in line with profits and our estimated internal model capital requirement has also increased in line with the growth in our business. Overall, the level of Solvency II cover is ahead of the position at the end of 2018 (226% vs 215%), in line with our expectations.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Group and our approach to managing them are outlined in our latest annual report and in note 1 to these condensed financial statements.
Group Outlook
We remain confident about future profitability and have delivered a fifth consecutive year of strong underwriting profits at the half year, with a greater contribution coming from the current year performance than we have seen in more recent years. Our short term underwriting results can be subject to volatile items such as weather and large losses and we recognise that there is the potential for challenges in the period ahead.
In the first half of the year we have seen a strong performance in our investment result, reflecting the recovery seen in investment markets since the start of the year. We recognise that there is continued political and economic uncertainty and this has the potential to create short term volatility in the second half of the year. We remain well placed to withstand any such volatility and have substantial headroom over our Solvency II capital requirement.
Core to our purpose is to deliver strong and sustainable returns to our ultimate shareholder, and to benefit not only our customers but also the wider communities we serve. We do this through our deep understanding and management of risks; by providing trusted specialist expertise and by maintaining the strength of our capital base. We benefit from the diversity within our financial services group which gives us the opportunity us to grow both organically and inorganically within our chosen markets and remain well placed to deliver sustainable profitable growth.
By order of the Board
Mark Hews
Group Chief Executive
20 August 2019
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the 6 months to 30 June 2019
30.06.19 30.06.18 31.12.18 6 months 6 months 12 months GBP000 GBP000 GBP000 (Unaudited) (Unaudited) (Audited) Revenue Gross written premiums 185,002 172,729 356,971 Outward reinsurance premiums (71,172) (66,924) (137,640) Net change in provision for unearned premium (4,351) (877) (5,241) Net earned premiums 109,479 104,928 214,090 ------------ ------------ ---------- Fee and commission income 30,582 28,994 62,996 Other operating income 339 1,039 1,039 Net investment return 42,017 17,739 3,994 Total revenue 182,417 152,700 282,119 ------------ ------------ ---------- Expenses Claims and change in insurance liabilities (78,962) (67,054) (111,873) Reinsurance recoveries 31,512 19,493 26,188 Fees, commissions and other acquisition costs (35,165) (32,192) (66,346) Other operating and administrative expenses (56,705) (53,227) (114,388) Total operating expenses (139,320) (132,980) (266,419) ------------ ------------ ---------- Operating profit 43,097 19,720 15,700 Finance costs (324) (297) (329) Profit before tax 42,773 19,423 15,371 Tax expense (6,309) (2,301) (958) ------------ ------------ ---------- Profit for the financial period from continuing operations attributable to equity holders of the Parent 36,464 17,122 14,413 ------------ ------------ ----------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months to 30 June 2019
30.06.19 30.06.18 31.12.18 6 months 6 months 12 months GBP000 GBP000 GBP000 (Unaudited) (Unaudited) (Audited) Profit for the period 36,464 17,122 14,413 ------------ ------------ ---------- Other comprehensive income Items that will not be reclassified subsequently to profit or loss: Fair value gains on property - - 105 Actuarial (losses)/gains on retirement benefit plans (1,113) 7,949 4,288 Attributable tax 189 (1,351) (747) (924) 6,598 3,646 Items that may be reclassified subsequently to profit or loss: Gains/(losses) on currency translation differences 1,213 (2,380) (3,082) (Losses)/gains on net investment hedges (1,643) 1,614 1,692 Attributable tax 292 (436) (187) (138) (1,202) (1,577) ------------ ------------ ---------- Other comprehensive income (1,062) 5,396 2,069 ------------ ------------ ---------- Total comprehensive income attributable to equity holders of the Parent 35,402 22,518 16,482 ------------ ------------ ----------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 6 months to 30 June 2019
Translation Share Share Revaluation and hedging Retained capital premium reserve reserve earnings Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 2019 (Unaudited) At 1 January 120,477 4,632 565 19,071 441,259 586,004 Profit for the period - - - - 36,464 36,464 Other comprehensive income - - - (138) (924) (1,062) --------- -------- ------------ ------------ --------- --------- Total comprehensive income - - - (138) 35,540 35,402 Dividends on preference shares - - - - (4,591) (4,591) At 30 June 120,477 4,632 565 18,933 472,208 616,815 --------- -------- ------------ ------------ --------- --------- 2018 (Unaudited) At 1 January 120,477 4,632 478 20,648 446,238 592,473 Profit for the period - - - - 17,122 17,122 Other comprehensive income - - - (1,202) 6,598 5,396 --------- -------- ------------ ------------ --------- --------- Total comprehensive income - - - (1,202) 23,720 22,518 Dividends on preference shares - - - - (4,591) (4,591) At 30 June 120,477 4,632 478 19,446 465,367 610,400 --------- -------- ------------ ------------ --------- --------- 2018 (Audited) At 1 January 120,477 4,632 478 20,648 446,238 592,473 Profit for the year - - - - 14,413 14,413 Other comprehensive income - - 87 (1,577) 3,559 2,069 --------- -------- ------------ ------------ --------- --------- Total comprehensive income - - 87 (1,577) 17,972 16,482 Dividends on preference shares - - - - (9,181) (9,181) Gross charitable grant - - - - (17,000) (17,000) Tax credit on charitable grant - - - - 3,230 3,230 At 31 December 120,477 4,632 565 19,071 441,259 586,004 --------- -------- ------------ ------------ --------- ---------
The revaluation reserve represents cumulative net fair value gains on owner-occupied property. Further details of the translation and hedging reserve are included in note 8.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2019
30.06.19 30.06.18 31.12.18 GBP000 GBP000 GBP000 (Unaudited) (Unaudited) (Audited) Assets Goodwill and other intangible assets 33,517 28,288 30,064 Deferred acquisition costs 34,113 30,488 33,907 Deferred tax assets 1,807 1,666 1,749 Retirement benefit asset 14,815 26,823 16,131 Property, plant and equipment 22,214 8,209 8,391 Investment property 152,046 152,238 152,182 Financial investments 851,780 855,366 798,974 Reinsurers' share of contract liabilities 156,359 157,803 140,346 Current tax recoverable 688 222 59 Other assets 169,612 161,225 153,630 Cash and cash equivalents 94,657 90,507 109,417 Total assets 1,531,608 1,512,835 1,444,850 ------------ ------------ ----------- Equity Share capital 120,477 120,477 120,477 Share premium account 4,632 4,632 4,632 Retained earnings and other reserves 491,706 485,291 460,895 Total shareholders' equity 616,815 610,400 586,004 ------------ ------------ ----------- Liabilities Insurance contract liabilities 752,525 750,202 720,049 Lease obligations 14,370 1,592 1,379 Provisions for other liabilities 7,329 7,133 5,216 Retirement benefit obligation 6,102 10,626 5,813 Deferred tax liabilities 35,332 39,886 31,665 Current tax liabilities 585 2,637 2,905 Deferred income 20,623 18,955 19,900 Other liabilities 77,927 71,404 71,919 Total liabilities 914,793 902,435 858,846 ------------ ------------ ----------- Total shareholders' equity and liabilities 1,531,608 1,512,835 1,444,850 ------------ ------------ -----------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 months to 30 June 2019
30.06.19 30.06.18 31.12.18 6 months 6 months 12 months GBP000 GBP000 GBP000 (Unaudited) (Unaudited) (Audited) Profit before tax 42,773 19,423 15,371 Adjustments for: Depreciation of property, plant and equipment 2,665 1,219 2,437 Revaluation of property, plant and equipment - - (85) Loss/(profit) on disposal of property, plant and equipment 94 (11) (3) Amortisation of intangible assets 501 459 949 Net fair value (gains)/losses on financial instruments and investment property (34,542) 3,138 35,506 Dividend and interest income (14,263) (13,575) (27,107) Finance costs 324 297 329 Adjustment for pension funding 511 750 2,931 (1,937) 11,700 30,328 Changes in operating assets and liabilities:
Net increase/(decrease) in insurance contract liabilities 28,790 (12,990) (42,161) Net (increase)/decrease in reinsurers' share of contract liabilities (15,497) (673) 16,431 Net decrease/(increase) in deferred acquisition costs 141 414 (3,078) Net increase in other assets (15,005) (12,074) (5,388) Net increase in operating liabilities 2,012 3,050 5,838 Net increase/(decrease) in other liabilities 3,224 1,654 (286) Cash generated/(used) by operations 1,728 (8,919) 1,684 Purchases of financial instruments and investment property (76,741) (61,197) (125,739) Sale of financial instruments and investment property 64,644 62,794 149,562 Dividends received 5,396 5,002 9,790 Interest received 8,292 8,278 17,347 Tax paid (5,189) (2,538) (4,998) Net cash (used by)/from operating activities (1,870) 3,420 47,646 ------------ ------------ ---------- Cash flows from investing activities Purchases of property, plant and equipment (3,593) (566) (1,822) Proceeds from the sale of property, plant and equipment - 54 55 Purchases of intangible assets (3,823) (393) (2,371) Acquisition of business, net of cash acquired - - (225) Net cash used by investing activities (7,416) (905) (4,363) ------------ ------------ ---------- Cash flows from financing activities Interest paid (324) (297) (329) Payment of principal element of lease liabilities (1,447) (169) (346) Dividends paid to Company's shareholders (4,591) (4,591) (9,181) Donations paid to ultimate parent undertaking - - (17,000) Net cash used by financing activities (6,362) (5,057) (26,856) ------------ ------------ ---------- Net (decrease)/increase in cash and cash equivalents (15,648) (2,542) 16,427 Cash and cash equivalents at the beginning of the period 109,417 93,767 93,767 Exchange gains/(losses) on cash and cash equivalents 888 (718) (777) Cash and cash equivalents at the end of the period 94,657 90,507 109,417 ------------ ------------ ----------
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS
1. General information
The information for the year ended 31 December 2018 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor reported on those accounts: its report was unqualified, did not draw attention to any matters by way of emphasis without qualifying the report, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The condensed consolidated interim financial statements were approved by the Board on 20 August 2019. These condensed consolidated interim financial statements have been reviewed, not audited.
The principal risks and uncertainties of the Group are in respect of insurance risk and financial risk. The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount and timing of the resulting claim. Factors such as the business and product mix, the external environment including market competition and reinsurance capacity all may vary from year to year, along with the actual frequency, severity and ultimate cost of claims and benefits. The Group's underwriting strategy is designed to ensure that the underwritten risks are well diversified in terms of type and amount of risk and geographical spread. In all operations, pricing controls are in place, underpinned by sound statistical analysis, market expertise and appropriate external consultant advice. Gross and net underwriting exposure is protected through the use of a comprehensive programme of reinsurance using both proportional and non-proportional reinsurance and supported by proactive claims handling. The overall reinsurance structure is regularly reviewed and modelled to ensure that it remains optimum to the Group's needs. The optimum reinsurance structure provides the Group with sustainable, long-term capacity to support its specialist business strategy, with effective balance sheet and profit and loss protection at a reasonable cost.
The Group derives insurance premiums from a range of geographical locations and classes of business. Depending on the location and class of the risk, there may be a seasonal pattern to the incidence of claims. However, given the mix of business that the Group writes, overall the consolidated interim financial statements are not subject to any significant impact arising from the seasonality or cyclicality of operations.
The most important components of financial risk are interest rate risk, credit risk, currency risk and equity price risk. The Group is exposed to equity price risk because of financial investments held by the Group which are stated at fair value through profit or loss. The Group mitigates this risk by holding a diversified portfolio across geographical regions and market sectors, and through the use of derivative contracts from time to time which would limit losses in the event of a fall in equity markets. The Group's exposure to interest rate risk arises primarily from movements on financial investments that are measured at fair value and have fixed interest rates, which represent a significant proportion of the Group's assets, and from those insurance liabilities for which discounting is applied at a market interest rate. The Group's investment strategy is set in order to control the impact of interest rate risk on anticipated cash flows and asset and liability values. The fair value of the Group's investment portfolio of fixed income securities reduces as market interest rates rise as does the present value of discounted insurance liabilities, and vice versa. These principal risks and uncertainties, together with details of the financial risk management objectives and policies of the Group, are disclosed in the latest annual report.
The Directors have assessed the going concern of the Group. The directors have considered the Group's plans and forecasts, financial resources, investment portfolio and solvency position. Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated interim financial statements.
2. Accounting policies
Ecclesiastical Insurance Office plc (hereafter referred to as the "Company"), a public limited company incorporated and domiciled in England, together with its subsidiaries (collectively the "Group") operates principally as a provider of general insurance and in addition offers a range of financial services, with offices in the UK & Ireland, Australia and Canada.
The annual financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in the 2019 interim results has been prepared in accordance with IAS 34, Interim Financial Reporting.
Other than those detailed below, the same accounting policies and methods of computation are followed in the consolidated interim financial statements as applied in the Group's latest audited annual financial statements.
IFRS 16, Leases
The Group has adopted IFRS 16 from 1 January 2019 using the modified retrospective approach, as permitted by the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019. Comparative figures for the 2018 reporting period have not been restated, as permitted under the specific transitional provisions in the standard. There was no impact on the Group's opening equity.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17, Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 January 2019. The Group's weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 4.0%.
2019 GBP000 Operating lease commitments disclosed as at 31 December 2018 19,605 Contract elements reassessed as service agreements (1,579) Payments due in periods covered by extension options that are included in the lease term 957 Leases committed but not yet commenced at 31 December 2018 (4,969)
Short-term leases, sales taxes and other (1,451) Discounted using the lessee's incremental borrowing rate at the date of initial application (1,480) Finance liabilities recognised as at 31 December 2018 1,379 Lease liability recognised as at 1 January 2019 12,462 --------
Right-of-use assets have been measured at 1 January 2019 at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018.
For leases previously classified as finance leases the Group recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and the lease liability at the date of initial application.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
-- the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
-- the accounting for operating leases with a remaining term of less than 12 months as at 1 January 2019 as short-term leases;
-- the exclusion of initial direct costs for the measurement of right-of-use assets at the date of initial application; and
-- the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.
The change in accounting policy affected the following items on the balance sheet on 1 January 2019:
31.12.18 Adjustment 01.01.19 GBP000 GBP000 GBP000 Property, plant and equipment 8,391 10,353 18,744 Other assets 153,630 (447) 153,183 Lease obligations (1,379) (11,083) (12,462) Provisions for other liabilities (5,216) (503) (5,719) Other liabilities (71,919) 1,680 (70,239)
From 1 January 2019, leases are recognised as a right-of use-asset and a corresponding liability at the date at which the lease asset is available for use by the Group. Each lease payment is deducted from the lease liability. Finance costs are charged to the profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Lease liabilities include the net present value of:
-- fixed payments less any lease incentives receivable; -- variable lease payments that are based on an index or rate; -- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of an option if the lessee is reasonably certain to exercise that option; and
-- payments and penalties from terminating the lease, if the lease term reflects the lessee exercising that option.
Right-of-use assets are measured at cost comprising:
-- the amount of the initial measurement of lease liability;
-- any lease payment made at or before the commencement date, less any lease incentives received;
-- any initial direct costs; and -- restoration costs.
Right-of-use assets are presented within property, plant and equipment in the statement of financial position.
Payments associated with short term leases are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Other standards adopted since the year end are either outside the scope of Group transactions or do not significantly impact the Group.
The following standards were in issue but not yet effective and have not been applied to these condensed financial statements.
IFRS 9, Financial Instruments, which provides a new model for the classification and measurement of financial instruments, is effective for periods beginning on or after 1 January 2018. However the Group has taken the option available to insurers to defer the application of IFRS 9 as permitted by IFRS 4, Insurance Contracts. The Group qualifies for the temporary exemption, which is available until annual periods beginning on or after 1 January 2021, since at 31 December 2015 greater than 90% of the Group's liabilities were within the scope of IFRS 4. There has been no significant change to the Group's operations since that date and, as a result, the Group continues to apply IAS 39, Financial Instruments.
IFRS 17, Insurance Contracts, was issued in May 2017 and is effective for periods beginning on or after 1 January 2021. A one-year deferral has tentatively been proposed by the International Accounting Standards Board (IASB) subject to due process. The standard establishes revised principles for the recognition, measurement, presentation and disclosure of insurance contracts. The Group has progressed implementation of the standard in line with expectations.
3. Segment information
The Group segments its business activities on the basis of differences in the products and services offered and, for general insurance, the underwriting territory. Expenses relating to Group management activities are included within 'Corporate costs'. This reflects the management and internal Group reporting structure.
The activities of each operating segment are described below.
- General business United Kingdom and Ireland The Group's principal general insurance business operation is in the UK, where it operates under the Ecclesiastical and Ansvar brands. The Group also operates in the Republic of Ireland, underwriting general insurance business across the whole of Ireland. Australia The Group has a wholly-owned subsidiary in Australia underwriting general insurance business under the Ansvar brand. Canada The Group operates a general insurance Ecclesiastical branch in Canada. Other insurance operations This includes the Group's internal reinsurance function and operations that are in run-off or not reportable due to their immateriality. - Investment management The Group provides investment management services both internally and to third parties through EdenTree Investment Management Limited. - Broking and Advisory The Group provides insurance broking through South Essex Insurance Brokers Limited, financial advisory services through Ecclesiastical Financial Advisory Services Limited and risk advisory services through Ansvar Risk Management Services Pty Limited which operates in Australia. - Life business Ecclesiastical Life Limited provides long-term insurance policies to support funeral planning products. It is closed to new business. - Corporate costs This includes costs associated with Group management activities.
Inter-segment and inter-territory transfers or transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third parties.
Segment revenue
The Group uses gross written premiums as the measure for turnover of the general and life insurance business segments. Turnover of the non-insurance segments comprises fees and commissions earned in relation to services provided by the Group to third parties. Segment revenues do not include net investment return or general business fee and commission income, which are reported within revenue in the consolidated statement of profit or loss.
Revenue is attributed to the geographical region in which the customer is based. Group revenues are not materially concentrated on any single external customer.
6 months ended 6 months ended 30.06.19 30.06.18 Gross Non- Gross Non- written insurance written insurance premiums services Total premiums services Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 General business United Kingdom and Ireland 123,957 - 123,957 119,292 - 119,292 Australia 33,652 - 33,652 29,420 - 29,420 Canada 25,481 - 25,481 22,353 - 22,353 Other insurance operations 1,911 - 1,911 1,660 - 1,660 Total 185,001 - 185,001 172,725 - 172,725 Life business 1 - 1 4 - 4 Investment management - 6,270 6,270 - 6,185 6,185 Broking and Advisory - 4,776 4,776 - 4,972 4,972 --------- ---------- --------- --------- ---------- --------- Group revenue 185,002 11,046 196,048 172,729 11,157 183,886 --------- ---------- --------- --------- ---------- --------- 12 months ended
31.12.18 Gross Non- written insurance premiums services Total GBP000 GBP000 GBP000 General business United Kingdom and Ireland 242,339 - 242,339 Australia 56,946 - 56,946 Canada 54,158 - 54,158 Other insurance operations 3,507 - 3,507 Total 356,950 - 356,950 Life business 21 - 21 Investment management - 12,601 12,601 Broking and Advisory - 9,049 9,049 --------- ---------- --------- Group revenue 356,971 21,650 378,621 --------- ---------- ---------
Segment result
General business segment results comprise the insurance underwriting profit or loss, investment activities and other expenses of each underwriting territory. The Group uses the industry standard net combined operating ratio (COR) as a measure of underwriting efficiency. The COR expresses the total of net claims costs, commission and underwriting expenses as a percentage of net earned premiums. Further details on the underwriting profit or loss and COR, which are alternative performance measures that are not defined under IFRS, are detailed in note 12.
The life business segment result comprises the profit or loss on insurance contracts (including return on assets backing liabilities in the long-term fund), shareholder investment return and other expenses.
All other segment results consist of the profit or loss before tax measured in accordance with IFRS.
6 months ended Combined 30 June 2019 operating Insurance Investments Other Total ratio GBP000 GBP000 GBP000 GBP000 General business United Kingdom and Ireland 87.8% 9,198 33,345 (158) 42,385 Australia 103.3% (354) 677 (37) 286 Canada 98.0% 434 993 (84) 1,343 Other insurance operations 186 - - 186 ---------- ------------ --------- --------- 91.4% 9,464 35,015 (279) 44,200 Life business 241 4,327 - 4,568 Investment management - - (18) (18) Broking and Advisory - - 1,425 1,425 Corporate costs - - (7,402) (7,402) Profit before tax 9,705 39,342 (6,274) 42,773 ---------- ------------ --------- --------- 6 months ended Combined 30 June 2018 operating Insurance Investments Other Total ratio GBP000 GBP000 GBP000 GBP000 General business United Kingdom and Ireland 83.8% 11,826 12,782 (258) 24,350 Australia 103.0% (337) 847 (39) 471 Canada 119.1% (3,653) 569 - (3,084) Other insurance operations 212 - - 212 ---------- ------------ --------- --------- 92.3% 8,048 14,198 (297) 21,949 Life business 429 770 - 1,199 Investment management - - 745 745 Broking and Advisory - - 1,593 1,593 Corporate costs - - (6,063) (6,063) Profit before tax 8,477 14,968 (4,022) 19,423 ---------- ------------ --------- --------- 12 months ended Combined 31 December 2018 operating Insurance Investments Other Total ratio GBP000 GBP000 GBP000 GBP000 General business United Kingdom and Ireland 80.2% 29,426 (1,836) (252) 27,338 Australia 93.7% 1,400 2,073 (77) 3,396 Canada 106.5% (2,599) 1,655 - (944) Other insurance operations 963 - - 963 ---------- ------------ --------- --------- 86.4% 29,190 1,892 (329) 30,753 Life business 1,642 (3,181) - (1,539) Investment management - - 941 941 Broking and Advisory - - 2,045 2,045 Corporate costs - - (16,829) (16,829) Profit before tax 30,832 (1,289) (14,172) 15,371 ---------- ------------ --------- ---------
4. Tax
Income tax for the six month period is calculated at rates representing the best estimate of the average annual effective income tax rate expected for the full year, applied to the pre-tax result of the six month period.
5. Dividends
Interim dividends paid on the 8.625% Non-Cumulative Irredeemable Preference shares amounted to GBP4.6m (H1 2018: GBP4.6m).
6. Financial instruments' held at fair value disclosures
IAS 34 requires that interim financial statements include certain of the disclosures about the fair value of financial instruments set out in IFRS 13, Fair Value Measurement and IFRS 7, Financial Instruments Disclosures.
The fair value measurement basis used to value those financial assets and financial liabilities held at fair value is categorised into a fair value hierarchy as follows:
Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities. This category includes listed equities in active markets, listed debt securities in active markets and exchange-traded derivatives.
Level 2: fair values measured using inputs 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). This category includes listed debt or equity securities in a market that is not active and derivatives that are not exchange-traded.
Level 3: fair values measured using inputs for the asset or liability that are not based on observable market data (unobservable inputs). This category includes unlisted debt and equities, including investments in venture capital, and suspended securities. Where a look-through valuation approach is applied, underlying net asset values are sourced from the investee, translated into the Group's functional currency and adjusted to reflect current market conditions.
There have been no transfers between investment categories in the current period.
Fair value measurement at the end of the reporting period based on -------------------------------- Level 1 Level Level Total 2 3 30 June 2019 GBP000 GBP000 GBP000 GBP000 Financial assets at fair value through profit or loss Financial investments Equity securities 279,806 197 63,108 343,111 Debt securities 494,523 1,200 260 495,983 Derivative securities - 2,022 - 2,022 Total financial assets at fair value 774,329 3,419 63,368 841,116 ----------- --------- -------- --------- Financial liabilities at fair value through profit or loss Financial liabilities Derivative securities - (4,261) - (4,261) - (4,261) - (4,261) ----------- --------- -------- --------- Financial liabilities at fair value through other comprehensive income Other liabilities
Derivative securities - (2,560) - (2,560) Total financial liabilities at fair value - (6,821) - (6,821) ----------- --------- -------- --------- 30 June 2018 Financial assets at fair value through profit or loss Financial investments Equity securities 287,383 245 43,725 331,353 Debt securities 509,468 1,282 259 511,009 Derivative securities - 3,053 - 3,053 796,851 4,580 43,984 845,415 --------- -------- -------- --------- Financial assets at fair value through other comprehensive income Financial investments Derivative securities - 47 - 47 --------- -------- Total financial assets at fair value 796,851 4,627 43,984 845,462 --------- -------- -------- --------- Financial liabilities at fair value through profit or loss Financial liabilities Derivative securities - (1,115) - (1,115) - (1,115) - (1,115) --------- -------- -------- --------- Financial liabilities at fair value through other comprehensive income Other liabilities Derivative securities - (2,356) - (2,356) Total financial liabilities at fair value - (3,471) - (3,471) --------- -------- -------- --------- 31 December 2018 Financial assets at fair value through profit or loss Financial investments Equity securities 241,115 246 44,773 286,134 Debt securities 495,348 1,233 261 496,842 Derivative securities - 5,331 - 5,331 736,463 6,810 45,034 788,307 --------- -------- -------- --------- Financial assets at fair value through other comprehensive income Financial investments Derivative securities - 737 - 737 Total financial assets at fair value 736,463 7,547 45,034 789,044 --------- -------- -------- ---------
The derivative liabilities of the Group at the end of the prior year were measured at fair value through profit or loss and categorised as level 2.
Fair value measurements in level 3 consist of financial assets, analysed as follows:
Financial assets at fair value through profit or loss ---------------------------------- Equity Debt securities securities Total GBP000 GBP000 GBP000 2019 At 1 January 44,773 261 45,034 Total gains recognised in profit or loss 4,342 (1) 4,341 Purchases 13,993 - 13,993 At 30 June 63,108 260 63,368 ----------- ----------- -------- Total gains for the period included in profit or loss for assets held at the end of the reporting period 4,342 (1) 4,341 ----------- ----------- -------- 2018 At 1 January 42,279 125 42,404 Total gains recognised in profit or loss 1,580 - 1,580 Transfers (134) 134 - At 30 June 43,725 259 43,984 ----------- ----------- -------- Total gains for the period included in profit or loss for assets held at the end of the reporting period 1,608 - 1,608 ----------- ----------- -------- 2018 At 1 January 42,279 125 42,404 Total gains recognised in profit or loss 2,628 5 2,633 Transfers (134) 134 - Disposal proceeds - (3) (3) At 31 December 44,773 261 45,034 ----------- ----------- -------- Total gains for the period included in profit or loss for assets held at the end of the reporting period 2,656 5 2,661 ----------- ----------- --------
All the above gains included in profit or loss for the period are presented in net investment return within the statement of profit or loss.
The valuation techniques used for instruments categorised in Levels 2 and 3 are described below.
Listed debt and equity securities not in active market (Level 2)
These financial assets are valued using third party pricing information that is regularly reviewed and internally calibrated based on management's knowledge of the markets. Where material, these valuations are reviewed by the Group Audit Committee.
Non exchange-traded derivative contracts (Level 2)
The Group's derivative contracts are not traded in active markets. Foreign currency forward contracts are valued using observable forward exchange rates corresponding to the maturity of the contract and the contract forward rate. Over-the-counter equity or index options and futures are valued by reference to observable index prices.
Unlisted equity securities (Level 3)
These financial assets are valued using observable net asset data, adjusted for unobservable inputs including comparable price-to-book ratios based on similar listed companies, and management's consideration of constituents as to what exit price might be obtainable. Where material, these valuations are reviewed by the Group Audit Committee.
The valuation is most sensitive to the level of underlying net assets, the Euro exchange rate, the price-to-book ratio chosen, an illiquidity discount and a credit rating discount applied to the valuation to account for the risks associated with holding the asset. If the price-to-book ratio, illiquidity discount and credit rating discount applied changes by +/-10%, the value of unlisted equity securities could move by +/-GBP7m (H1 2018: +/-GBP5m). The range is higher than the half year due to the increase in value.
The increase in value during the period is the result of a purchase of additional shares in the current holding and an increase in the underlying net assets.
Unlisted debt (Level 3)
Unlisted debt is valued using an adjusted net asset method whereby management uses a look-through approach to the underlying assets supporting the loan, discounted using observable market interest rates of similar loans with similar risk, and allowing for unobservable future transaction costs. Where material, these valuations are reviewed by the Group Audit Committee.
The valuation is most sensitive to the level of underlying net assets, but it is also sensitive to the interest rate used for discounting and the projected date of disposal of the asset, with the exit costs sensitive to an expected return on capital of any purchaser and estimated transaction costs. Reasonably likely changes in unobservable inputs used in the valuation would not have a significant impact on shareholders' equity or the net result.
7. Changes in estimates
The estimation of the ultimate liability arising from claims made under general insurance business contracts is a critical accounting estimate. There are various sources of uncertainty as to how much the Group will ultimately pay with respect to such contracts. There is uncertainty as to the total number of claims made on each class of business, the amounts that such claims will be settled for and the timing of any payments.
During the six month period, changes to claims reserve estimates made in prior years as a result of reserve development resulted in a net release of GBP13.0m (H1 2018: GBP16.8m) offset by a GBP8.5m increase (H1 2018: GBP2.3m decrease) in reserves due to discount rate movements.
The estimation of the ultimate liability arising from claims made under life insurance business contracts is also a critical accounting estimate. Estimates are made as to the expected number of deaths in each future year until claims have been paid on all policies, as well as expected future real investment returns from assets backing life insurance contracts. During the six month period there was a GBP2.7m increase (H1 2018: GBP1.0m decrease) in reserves due to discount rate movements.
8. Translation and hedging reserve
Translation Hedging reserve reserve Total GBP000 GBP000 GBP000 2019 At 1 January 14,940 4,131 19,071 Gains on currency translation differences 1,213 - 1,213 Losses on net investment hedges - (1,643) (1,643) Attributable tax - 292 292 At 30 June 16,153 2,780 18,933 ------------ -------- -------- 2018 At 1 January 18,022 2,626 20,648 Losses on currency translation differences (2,380) - (2,380) Gains on net investment hedges - 1,614 1,614 Attributable tax - (436) (436) At 30 June 15,642 3,804 19,446 ------------ -------- -------- 2018 At 1 January 18,022 2,626 20,648 Losses on currency translation differences (3,082) - (3,082) Gains on net investment hedges - 1,692 1,692 Attributable tax - (187) (187) At 31 December 14,940 4,131 19,071 ------------ -------- --------
The translation reserve arises on consolidation of the Group's foreign operations. The hedging reserve represents the cumulative amount of gains and losses on hedging instruments in respect of net investments in foreign operations.
9. Insurance contract liabilities and reinsurers' share of contract liabilities
30.06.19 30.06.18 31.12.18 6 months 6 months 12 months GBP000 GBP000 GBP000 Gross Claims outstanding 481,747 492,359 457,319 Unearned premiums 188,624 173,888 180,766 Life business provision 82,154 83,955 81,964 Total gross insurance contract liabilities 752,525 750,202 720,049 --------- --------- ---------- Recoverable from reinsurers Claims outstanding 92,354 98,874 78,731 Unearned premiums 64,005 58,929 61,615 Total reinsurers' share of contract liabilities 156,359 157,803 140,346 --------- --------- ---------- Net Claims outstanding 389,393 393,485 378,588 Unearned premiums 124,619 114,959 119,151 Life business provision 82,154 83,955 81,964 Total net insurance liabilities 596,166 592,399 579,703 --------- --------- ----------
10. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
Charitable grants to the ultimate parent company are disclosed in the condensed consolidated statement of changes in equity.
There have been no material related party transactions in the period or changes thereto since the latest annual report which require disclosure.
11. Holding company
The ultimate holding company is Allchurches Trust Limited, a company limited by guarantee and a registered charity incorporated in the United Kingdom.
12. Reconciliation of Alternative Performance Measures
The Group uses alternative performance measures (APM) in addition to the figures which are prepared in accordance with IFRS. The financial measures in our key financial performance data include the combined operating ratio (COR). This measure is commonly used in the industries we operate in and we believe it provides useful information and enhances the understanding of our results.
Users of the accounts should be aware that similarly titled APM reported by other companies may be calculated differently. For that reason, the comparability of APM across companies might be limited.
In line with the European Securities and Markets Authority guidelines, we provide a reconciliation of the combined operating ratio to its most directly reconcilable line item in the financial statements.
30.06.19 Broking Inv'mnt Inv'mnt and Corporate Insurance return mngt Advisory costs Total ------------------- General Life GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 Revenue Gross written premiums 185,001 1 - - - - 185,002 Outward reinsurance premiums (71,172) - - - - - (71,172) Net change in provision for unearned premiums (4,351) - - - - - (4,351) Net earned premiums [1] 109,478 1 - - - - 109,479 ---------- ------- -------- -------- --------- ---------- ---------- Fee and commission income 19,537 - - 6,269 4,776 - 30,582 Other operating income 339 - - - - - 339 Net investment return - 724 40,865 8 420 - 42,017 Total revenue 129,354 725 40,865 6,277 5,196 - 182,417 ---------- ------- -------- -------- --------- ---------- ---------- Expenses Claims and change in insurance liabilities (78,617) (345) - - - - (78,962) Reinsurance recoveries 31,512 - - - - - 31,512 Fees, commissions and other acquisition costs (34,968) - - (410) 213 - (35,165) Other operating and administrative expenses (37,817) (139) (1,523) (5,885) (3,939) (7,402) (56,705) Total operating expenses (119,890) (484) (1,523) (6,295) (3,726) (7,402) (139,320) ---------- ------- -------- -------- --------- ---------- ---------- Operating profit/(loss) [2] 9,464 241 39,342 (18) 1,470 (7,402) 43,097 Finance costs (279) - - - (45) - (324) ---------- ------- -------- -------- --------- ---------- ---------- Profit before tax 9,185 241 39,342 (18) 1,425 (7,402) 42,773 ---------- ------- -------- -------- --------- ---------- ---------- Underwriting profit [2] 9,464 Combined operating ratio ( = ( [1] - [2] ) / [1] ) 91.4%
The underwriting profit of the Group is defined as the operating profit of the general insurance business.
The Group uses the industry standard net combined operating ratio as a measure of underwriting efficiency. The COR expresses the total of net claims costs, commission and underwriting expenses as a percentage of net earned premiums. It is calculated as
( [1] - [2] ) / [1].
30.06.18 Broking Inv'mnt Inv'mnt and Corporate Insurance return mngt Advisory costs Total ------------------- General Life GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 Revenue Gross written premiums 172,725 4 - - - - 172,729 Outward reinsurance premiums (66,924) - - - - - (66,924) Net change in provision for unearned premiums (877) - - - - - (877) Net earned premiums [1] 104,924 4 - - - - 104,928 ---------- ------- -------- --------- --------- ---------- ---------- Fee and commission
income 17,837 - - 6,185 4,972 - 28,994 Other operating income 1,039 - - - - - 1,039 Net investment return - 1,019 16,302 4 414 - 17,739 Total revenue 123,800 1,023 16,302 6,189 5,386 - 152,700 ---------- ------- -------- --------- --------- ---------- ---------- Expenses Claims and change in insurance liabilities (66,604) (450) - - - - (67,054) Reinsurance recoveries 19,493 - - - - - 19,493 Fees, commissions and other acquisition costs (31,812) - - (468) 88 - (32,192) Other operating and administrative expenses (36,829) (144) (1,334) (4,976) (3,881) (6,063) (53,227) Total operating expenses (115,752) (594) (1,334) (5,444) (3,793) (6,063) (132,980) ---------- ------- -------- --------- --------- ---------- ---------- Operating profit [2] 8,048 429 14,968 745 1,593 (6,063) 19,720 Finance costs (297) - - - - - (297) ---------- ------- -------- --------- --------- ---------- ---------- Profit before tax 7,751 429 14,968 745 1,593 (6,063) 19,423 ---------- ------- -------- --------- --------- ---------- ---------- Underwriting profit [2] 8,048 Combined operating ratio ( = ( [1] - [2] )/ [1] ) 92.3% 31.12.18 Broking Inv'mnt Inv'mnt and Corporate Insurance return mngt Advisory costs Total ------------------------------- General Life GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 Revenue Gross written premiums 356,950 21 - - - - 356,971 Outward reinsurance premiums (137,640) - - - - - (137,640) Net change in provision for unearned premiums (5,241) - - - - - (5,241) Net earned premiums [1] 214,069 21 - - - - 214,090 ---------- ------------------- -------- --------- --------- ---------- ---------- Fee and commission income 41,346 - - 12,601 9,049 - 62,996 Other operating income 1,039 - - - - - 1,039 Net investment return - 1,573 1,600 13 808 - 3,994 Total revenue 256,454 1,594 1,600 12,614 9,857 - 282,119 ---------- ------------------- -------- --------- --------- ---------- ---------- Expenses Claims and change in insurance liabilities (112,222) 349 - - - - (111,873) Reinsurance recoveries 26,188 - - - - - 26,188 Fees, commissions and other acquisition costs (65,687) (15) - (943) 299 - (66,346) Other operating and administrative expenses (75,543) (286) (2,889) (10,730) (8,111) (16,829) (114,388) Total operating expenses (227,264) 48 (2,889) (11,673) (7,812) (16,829) (266,419) ---------- ------------------- -------- --------- --------- ---------- ---------- Operating profit [2] 29,190 1,642 (1,289) 941 2,045 (16,829) 15,700 Finance costs (329) - - - - - (329) ---------- ------------------- -------- --------- --------- ---------- ---------- Profit before tax 28,861 1,642 (1,289) 941 2,045 (16,829) 15,371 ---------- ------------------- -------- --------- --------- ---------- ---------- Underwriting profit [2] 29,190 Combined operating ratio ( = ([1] - [2]) / [1] ) 86.4%
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) the consolidated interim financial statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union;
(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).
The Board of Directors is as per the latest audited annual financial statements, with the following changes:
- A. Winther was appointed as a Non-Executive Director on 19 March 2019 and was appointed to the Finance and Investment Committee and Remuneration Committee on 3 April 2019
- F.X. Boisseau was appointed as a Non-Executive Director on 19 March 2019 and was appointed to the Group Audit Committee and Group Risk Committee on 3 April 2019
- J.F. Hylands resigned as Chairman on 19 March 2019 - R.D.C. Henderson was appointed as Chairman on 19 March 2019 - C.H. Taylor succeeded R.D.C Henderson as Chair of Remuneration Committee on 21 June 2019
- On 13 June 2019, the Board appointed D.P. Cockrem as an Executive Director and Group Chief Financial Officer, subject to regulatory approval
By order of the Board,
Mark Hews David Henderson Group Chief Executive Chairman
20 August 2019
INDEPENT REVIEW REPORT TO ECCLESIASTICAL INSURANCE OFFICE PLC
We have been engaged by the company to review the consolidated interim financial statements in the 2019 interim results report for the six months ended 30 June 2019 which comprises the condensed consolidated statement of profit or loss, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of financial position, the condensed consolidated statement of cash flows and related notes 1 to 12. We have read the other information contained in the 2019 interim results report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the consolidated interim financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review 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 company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The 2019 interim results report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the 2019 interim results report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the company are prepared in accordance with IFRSs as adopted by the European Union. The consolidated interim financial statements included in this 2019 interim results report have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the consolidated interim financial statements in the 2019 interim results report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial statements in the 2019 interim results report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
20 August 2019
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR ZBLFLKVFLBBX
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