TIDMELLA
RNS Number : 7630W
Ecclesiastical Insurance Office PLC
21 August 2020
2020 INTERIM RESULTS
Ecclesiastical Insurance Office plc 20 August 2020
Ecclesiastical Insurance Office plc ("Ecclesiastical"), the
specialist financial services group, today announces its 2020
interim results. A copy of the 2020 interim results will be
available on the Company's website at www.ecclesiastical.com
Group overview
-- During March the Group announced that it had made a record
GBP32m donation to charity for the previous calendar year, almost
double our original expectations. Since then the Group has
continued to support charities and communities during the pandemic.
Notably in the first half of the year the GBP1m Movement for Good
awards were launched again and GBP500,000 distributed; the Group
has also responded to coronavirus response appeals initiated by the
National Emergencies Trust, Disasters Emergencies Committee and
Association of British Insurers with donations totalling
GBP200,000.
-- The Group has now donated over GBP97m to charity since 2016
and is just short of its enhanced target of giving more than
GBP100m by September 2021. This giving has enabled the Group and
its parent charity, Allchurches Trust, to accelerate its giving to
churches and charities most in need.
-- Following a strong year in 2019, in the first half of 2020 we
report a loss before tax of GBP59.7m (H1 2019: profit before tax
GBP42.8m) due to COVID-19's impact on financial markets, including
an investment loss of GBP48.9m.
-- Gross written premium (GWP) up 9% to GBP202m (H1 2019:
GBP185m), supported by strong retention and rate increases in
hardening markets.
-- Underwriting loss of GBP1.3m (H1 2019: profit GBP9.5m),
giving a Group COR* of 101.1% (H1 2019: 91.4%). This includes
GBP14m for the provision of COVID-19 related claims where there is
confirmed cover. Excluding these, the Group's COR is 89.5%.
-- We have prioritised the health and wellbeing of our people,
successfully adapting to new ways of working and providing a
seamless service to our customers.
-- Continued external recognition of the Group as a trusted and
specialist financial services organisation. This included being
named as the UK's best and most trusted insurer for the 11th time
by independent ratings agency Fairer Finance, and our Canada team
was once again awarded Top Employer for Young People.
*The Group uses APMs to help explain performance. More
information on APMs is included in note 15.
Mark Hews, Group Chief Executive Officer of Ecclesiastical,
said:
"The first half of 2020 was uniquely challenging due to the
significant impact of COVID-19. However, we remain true to our core
purpose and have continued to give to church, charities and
communities most in need.
"Whilst our headline loss before tax is disappointing, in the
main it has been driven by unrealised fair value losses on our
investment portfolio. These are investments that are being held for
the long term and on which we have already seen some recovery. We
expect this to continue over the months and years ahead, and we
continue to take a long-term view and look beyond the current
pandemic.
"Our underlying performance is resilient and we are starting to
see activity returning to normal levels. We are proud of the way
that our colleagues rose to the challenge and continued to serve
our customers throughout this difficult period while themselves
adapting to new ways of working.
"We recognise and understand that the coronavirus pandemic has
created a worrying and uncertain time for many customers and
businesses and we recognise the challenges they have faced. As an
ethical insurer, we are driven by a desire to help our customers in
their moment of need and we have continued to pay claims where
cover was offered, quickly and fairly. We have also offered
enhanced cover, free of charge, to many of our customers alongside
a range of additional support measures.
"We also recognise that some customers have been disappointed
that their policy has not provided business interruption cover
during the pandemic, in common with much of the market. As a
result, we were pleased to participate, alongside seven other
leading insurers, in the Financial Conduct Authority's Test Case.
We hope that this will provide maximum clarity for all concerned in
the shortest amount of time. We expect to hear the outcome, which
may be subject to appeal, later in the year.
"Recognising the impact COVID-19 has had on communities, we've
continued our programme of giving during this difficult time.
Following the GBP32m record grant we announced in March, we
launched our GBP1m Movement for Good awards for the second year and
distributed GBP500,000. We also responded to coronavirus response
appeals initiated by the National Emergencies Trust, Disasters
Emergencies Committee and Association of British Insurers by
donating GBP200,000.
"We also continue to invest in the future of our business. Our
new head office building was completed at the end of June and fit
out work is now underway. We are expecting to move into the new
building during the first quarter of next year. We are also
continuing to invest in new systems to improve our efficiency and
improve the customer experience.
"While it has been a difficult period, we delivered a resilient
set of results in the first half of 2020 from our operating
businesses. We maintained steady progress in our underlying
underwriting performance, despite the impact of adverse weather
events in Australia and Canada, and gross written premium (GWP) was
up 9% to GBP202m, supported by strong retention and rate increases.
However the overall underwriting result was impacted as we reserved
GBP14m for COVID-19 related claims where there is confirmed cover.
Ecclesiastical, itself, has a comprehensive programme of
reinsurance to mitigate any further claim development that may be
incurred over the months ahead.
"The adverse market conditions in the first half affected our
investment returns, with a loss of GBP48.9m, primarily on equity
holdings. Although they have stabilised over recent months, there
is still a level of uncertainty in markets. As we look ahead, we
remain confident about our long-term value investment philosophy,
and are relatively defensively positioned and well diversified
across a broad range of asset classes.
"Our investment management business EdenTree is recognised for
its responsible and sustainable approach and has benefited as we
have seen investor confidence starting to return. EdenTree was
pleased to report net new external money of GBP57.8m in exceptional
market conditions.
"Our broking and advisory businesses contributed GBP1.4m profit
in the first half of the year despite the difficult trading
conditions. Positively, June income levels had returned to 2019
levels.
"Despite the challenging environment, we remain in a strong
capital position with S&P recently affirming its credit rating
of "A-" and with "stable" outlook. As we head into the second half
of the year we recognise the challenges in the economic environment
but are energised by the clarity of our charitable purpose and are
optimistic about the opportunities ahead.
"On behalf of all our charitable beneficiaries, I would like to
thank all those who continue to support the Group's work, enabling
it to give to so many worthy causes at a time when the need has
never been higher. Together, we are supporting charities,
communities and improving lives."
Key Financial Performance Data
H1 2020 H1 2019
Gross written premiums GBP202.5m GBP185.0m
Group underwriting (loss)/profit* (GBP1.3m) GBP9.5m
Group combined operating ratio* 101.1% 91.4%
Investment (losses)/return (GBP48.9m) GBP42.0m
(Loss)/profit before tax (GBP59.7m) GBP42.8m
30 June 31 Dec 2019
2020
Net asset value GBP539m GBP608m
Solvency II capital cover (solo) 206% 216%
*The Group uses APMs to help explain performance. More
information on APMs is included in note 15.
Interim Management Report
The environment in the first half of 2020 has been
unprecedented. COVID-19 has caused extensive worldwide economic
impacts resulting in significant Government and regulatory
responses. Notwithstanding this exceptional set of circumstances
our businesses have responded well by continuing to support our
customers, delivering robust underlying results and continuing our
giving programme.
Indeed, during March the Group announced that it had made a
record GBP32m donation to charity for the previous calendar year,
almost double our original expectations. Since then, the Group has
continued to support charities and communities during the pandemic.
Notably in the first half of the year the GBP1m Movement for Good
awards were launched again and GBP500,000 distributed to date; the
Group has also responded to coronavirus response appeals initiated
by the National Emergencies Trust, Disasters Emergencies Committee
and Association of British Insurers.
The Group has now donated over GBP97m to charity since 2016 and
is just short of its enhanced target of giving more than GBP100m by
September 2021. This giving has enabled the Group and its parent
charity, Allchurches Trust, to help people, organisations and
communities flourish despite the challenges presented by the
pandemic, and to help build resilience and encourage hope.
Following a strong year in 2019, the reported loss before tax of
GBP59.7m in the first half of the year (H1 2019: profit before tax
GBP42.8m) was principally due to GBP48.9m of investment losses
following significant market falls in March, partially offset by
moderate but steady gains towards the later part of the period. The
Group's underwriting businesses reported a small loss of GBP1.3m
(H1 2019: profit GBP9.5m) after setting aside GBP14m for COVID-19
claims where there is confirmed cover and following a number of
weather events in the period, both of which have resulted in an
increase in claims incurred. Ecclesiastical, itself, has a
comprehensive programme of reinsurance to mitigate any further
claim development that may be incurred over the months ahead.
Our strategy over the medium term continues to deliver moderate
GWP growth, by maintaining our strong underwriting discipline and
focusing on profit over growth. Gross written premiums grew by 9.5%
to GBP202.5m (H1 2019: GBP185.0m) supported by strong retention and
rate increases. 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.
Investment losses of GBP48.9m in the first half of the year were
driven by unrealised fair value losses as markets reacted to the
impact of the coronavirus in March but were unable to assess the
full impact. As markets now look beyond the immediate impact of the
coronavirus we have seen a moderation across markets and an
increase in equity valuations. Whilst the global economy is not out
of the woods yet, and we may see further stock market volatility
this year, we manage the business with a long-term view of risk and
have a strong capital position that can withstand short term
volatility. As such we will continue to take a long-term view and
look well beyond the current pandemic.
Strategic Update
Despite the many challenges the coronavirus pandemic has
presented, we have continued to make good progress on our journey
to become the most trusted and ethical specialist financial
services group. Our charitable purpose continues to define our
strategy and in the first half of the year we have continued to
invest in our business and our people under our broad range of
initiatives. Our resilience and financial strength are important
pillars that support our strategy.
In the first half of the year, the Board and management decided
to respond to changed circumstances by enhancing its strategy and
increasing its ambitions for charitable giving. Whilst being the
most trusted and ethical specialist financial services provider
continues to be central to our strategy, we have refocussed and
developed this around the following three themes. Within these
themes, we also have a number of more short-term priorities which
includes our coronavirus response.
Support and protect
Ecclesiastical will support and protect our colleagues,
customers, communities and the businesses we serve. This includes a
focus on our teams, colleagues and their well-being and creating a
supportive environment ensuring ongoing flexibility and compassion.
Also, as part of our coronavirus response, we have started a
programme of essential commercial and business activity to support
customers and our core purpose.
In these difficult times, our charitable purpose has never been
more important, and therefore we have been creating an environment
that actively encourages all of us to undertake acts of kindness
across all our communities. We're funding projects aimed at
supporting communities through the pandemic and charities facing
financial difficulties because of it. We hope our giving will help
today and, crucially, we are determined to help in the future as
charities build their work back up.
Innovate and grow
As the world changes, we are innovating to find new ways to
position the business to meet the needs of our customers and
communities. We are building new propositions, developing our risk
management and loss-prevention solutions and providing the
infrastructure to support our growth ambitions. As our general
insurance businesses deepen their understanding of our portfolio
this will also drive underwriting actions and improve
profitability.
Transform and thrive
We have continued our investment in new technology, our people
and our premises, helping our businesses to transform and thrive,
increase our efficiency and safeguard data. Some of this investment
spans a number of years, not least the on-going development of a
new strategic UK General Insurance system. Once live, this new
system will help to offer an enhanced experience to customers and
brokers and provide improved processes and capacity.
General Insurance - UK and Ireland
UK and Ireland GWP grew by 8% to GBP134m in the six months to 30
June 2020 (H1 2019: GBP124m). This is driven by particularly strong
growth in our Real Estate business together with continued growth
in our Heritage business as we demonstrate our position as a
leading insurer of heritage, listed and period properties.
The business reported an underwriting profit of GBP2.7m and a
net combined ratio of 96.7% (H1 2019: GBP9.2m profit, COR 87.8%)
after reserving GBP11.6m for COVID-19 related claims. This
represents another good performance with a greater contribution
from current year underwriting performance as expected.
The property result has been better than expected in the first
half of the year despite storm and flood weather events and the
reduced economic activity. Our liability business has continued to
perform well into 2020 with prior year claims in line with
expectations and current year claims experience similar to last
year. As anticipated, reserve releases are lower than last year as
we see a continued run-off of claims in respect of the unprofitable
business we exited in 2012 and 2013.
General Insurance - Canada
The Canadian business has continued its track record of
delivering premium growth, supported by strong retention and
reported an increase in GWP of 10.9% to GBP28.3m (H1 2019:
GBP25.5m).
Several weather events in Canada resulted in a small
underwriting profit of GBP0.1m (H1 2019: GBP0.4m) after reserving
GBP1.8m for COVID-19 related claims. Our Canadian business has
continued to see rate strengthening and underwriting discipline
drive good performance across its portfolios. The Property
portfolio was also supported by the favourable development of prior
year claims helping offset the impact of this year's weather
events.
General Insurance - Australia
Our Australian business continues to be successful in generating
new business and strengthening rate, with premium growth of 13.7%.
The business reported an underwriting loss of GBP2.1m (H1 2019:
GBP0.4m). The result was adversely impacted by GBP2.1m for the
January hail storm event in south eastern Australia and the
February East Coast Low event.
Investment Returns
Like many other businesses, Ecclesiastical is not immune to the
market disruption caused by COVID-19. This disruption caused the
Group's net investment return to report a loss of GBP48.9m (H1
2019: GBP42.0m profit) predominantly driven by unrealised fair
value losses. Despite the significant market disruption, the
long-term investment philosophy and defensively positioned and well
diversified asset classes resulted in the Group's UK fund
outperforming benchmarks.
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 resulted in a negative impact of GBP6.4m in the first six
months of the year.
We remain cautious about our expectations for investment returns
for the remainder of 2020, even as markets show signs of recovery
and some stability. 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
Our investment management business, EdenTree, reported a small
loss of GBP0.2m (H1 2019: GBP0.1m). Fee income of GBP6.2m was
marginally down (H1 2019: GBP6.3m) reflecting the market impacts
from COVID-19. Against this background, EdenTree were pleased to
report net new money for funds not held by the Group of
GBP57.8m.
Broking and Advisory - SEIB Insurance Brokers
SEIB has performed well in the first half of the year as the
business quickly adapted to the coronavirus. Customers were
supported with changes to the cover they required, or in some
cases, cover they no longer needed. SEIB continues to deliver
stable returns to the Group and reported a half year profit before
tax of GBP1.4m (H1 2019: GBP1.4m).
Life Business
Our life insurance business, which is not currently writing new
business, reported a loss before tax of GBP0.2m at the half year
(H1 2019: GBP0.2m profit). Assets and liabilities are well matched,
though we expect small variances as the margins in the reserves
unwind.
Balance Sheet and Capital Position
Total shareholders' equity decreased by GBP68.4m to GBP539.2m in
the first six months of the year. Losses in the period were
primarily due to a loss in investment return. There were also
actuarial losses, net of tax of GBP12.3m, on retirement benefit
plans (see note 3 to these condensed financial statements for more
information).
The normal first-half dividend to preference shareholders of
GBP4.6m was paid in June 2020 (H1 2019: GBP4.6m).
Our Solvency II regulatory capital position remains above
regulatory requirements and the risk appetite set by the Group.
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 4 to these condensed financial statements.
Group Outlook
In common with many businesses, the first half of 2020 has been
significantly impacted by COVID-19 but has shown us just how
important our charitable purpose is. Owned by a charity,
Ecclesiastical is a commercial business with a purely charitable
purpose.
We are dedicated to doing all we can to supporting our
customers, partners, communities and employees through this period
of uncertainty caused by the coronavirus. In common with much of
the market, the vast majority of our insurance cover does not
include pandemics. However, we appreciate that the Financial
Conduct Authority (FCA) received a number of questions and concerns
from customers across the insurance industry where their business
interruption policies do not cover COVID-19 losses. As such, we
agreed to participate alongside many other leading insurers in a
'Test Case' with the FCA, which was heard by the High Court in
July, to provide clarity and certainty to customers in as short a
time frame as possible. The outcome, which may be subject to
appeal, is expected to be known later in the year. More information
can be found in note 16 to the consolidated interim financial
statements.
Ecclesiastical responded quickly and effectively to the COVID-19
challenge and is both operationally and financially resilient.
However, as we still live with coronavirus, we are under no
illusion that there will be more challenges and opportunities
ahead. The global economic downturn and fiscal responses have been
unprecedented, but as we see governments withdraw support and an
easing of protective measures, we expect economic headwinds and
some market volatility to persist.
Some continued uncertainty in the near term outlook is expected,
which will present challenges for us and our customers. However, we
remain confident in our longer-term objective of delivering
sustainable profitable growth. Ecclesiastical is a well-positioned,
diverse financial services group and has proved itself to be
operationally and financially resilient. We will continue to pursue
our long-term charitable objective and provide all the support
necessary for our customers in these uncertain times and look
forward with confidence to the future beyond the pandemic.
In closing, the Board would like to thank all those who continue
to support the Group's work, enabling it to support its customers
and give to so many worthy causes at a time when need has never
been higher. We would also like to thank all our employees; their
combined commitment during this difficult period has been nothing
short of exceptional.
Together, we are supporting charities, communities and improving
lives.
By order of the Board
Mark Hews
Group Chief Executive
20 August 2020
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the 6 months to 30 June 2020
30.06.20 30.06.19 31.12.19
6 months 6 months 12 months
GBP000 GBP000 GBP000
(Unaudited) (Unaudited) (Audited)
Revenue
Gross written premiums 202,487 185,002 393,952
Outward reinsurance premiums (80,313) (71,172) (152,886)
Net change in provision for unearned premium (980) (4,351) (15,080)
Net earned premiums 121,194 109,479 225,986
------------ ------------ ----------
Fee and commission income 33,444 30,582 71,240
Other operating income 1,960 339 544
Net investment return (48,859) 42,017 74,438
Total revenue 107,739 182,417 372,208
------------ ------------ ----------
Expenses
Claims and change in insurance liabilities (139,152) (78,962) (157,808)
Reinsurance recoveries 68,104 31,512 52,800
Fees, commissions and other acquisition costs (38,826) (35,165) (72,740)
Other operating and administrative expenses (57,319) (56,705) (120,577)
Total operating expenses (167,193) (139,320) (298,325)
------------ ------------ ----------
Operating (loss)/profit (59,454) 43,097 73,883
Finance costs (258) (324) (620)
(Loss)/profit before tax (59,712) 42,773 73,263
Tax credit/(expense) 8,275 (6,309) (11,450)
------------ ------------ ----------
(Loss)/profit for the financial period from
continuing operations attributable to equity
holders of the Parent (51,437) 36,464 61,813
------------ ------------ ----------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months to 30 June 2020
30.06.20 30.06.19 31.12.19
6 months 6 months 12 months
GBP000 GBP000 GBP000
(Unaudited) (Unaudited) (Audited)
(Loss)/profit for the period (51,437) 36,464 61,813
------------ ------------ ----------
Other comprehensive expense
Items that will not be reclassified subsequently
to profit or loss:
Actuarial losses on retirement benefit plans (15,433) (1,113) (7,049)
Attributable tax 3,100 189 1,198
(12,333) (924) (5,851)
Items that may be reclassified subsequently
to profit or loss:
Gains/(losses) on currency translation differences 2,283 1,213 (1,368)
(Losses)/gains on net investment hedges (2,653) (1,643) 640
Attributable tax 367 292 (19)
(3) (138) (747)
------------ ------------ ----------
Other comprehensive expense (12,336) (1,062) (6,598)
------------ ------------ ----------
Total comprehensive (expense)/income attributable
to equity holders of the Parent (63,773) 35,402 55,215
------------ ------------ ----------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 6 months to 30 June 2020
Translation
Share Share Revaluation and hedging Retained
capital premium reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
2020 (Unaudited)
At 1 January 120,477 4,632 565 18,324 463,537 607,535
Loss for the period - - - - (51,437) (51,437)
Other net expense - - (14) (3) (12,319) (12,336)
--------- -------- ------------ ------------ --------- ---------
Total comprehensive
expense - - (14) (3) (63,756) (63,773)
Dividends on preference
shares - - - - (4,591) (4,591)
At 30 June 120,477 4,632 551 18,321 395,190 539,171
--------- -------- ------------ ------------ --------- ---------
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 net expense - - - (138) (924) (1,062)
--------- -------- ------------ ------------ --------- ---------
Total comprehensive
(expense)/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
--------- -------- ------------ ------------ --------- ---------
2019 (Audited)
At 1 January 120,477 4,632 565 19,071 441,259 586,004
Profit for the year - - - - 61,813 61,813
Other net expense - - - (747) (5,851) (6,598)
--------- -------- ------------ ------------ --------- ---------
Total comprehensive
(expense)/income - - - (747) 55,962 55,215
Dividends on preference
shares - - - - (9,181) (9,181)
Gross charitable grant - - - - (30,000) (30,000)
Tax credit on charitable
grant - - - - 5,497 5,497
At 31 December 120,477 4,632 565 18,324 463,537 607,535
--------- -------- ------------ ------------ --------- ---------
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 11.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2020
30.06.20 30.06.19 31.12.19
GBP000 GBP000 GBP000
(Unaudited) (Unaudited) (Audited)
Assets
Goodwill and other intangible assets 46,197 33,517 38,651
Deferred acquisition costs 39,075 34,113 38,199
Deferred tax assets 2,973 1,807 2,203
Retirement benefit asset - 14,815 8,505
Property, plant and equipment 18,487 22,214 20,322
Investment property 143,331 152,046 148,146
Financial investments 779,619 851,780 857,913
Reinsurers' share of contract liabilities 210,079 156,359 159,556
Current tax recoverable 7,322 688 4,211
Other assets 226,651 169,612 178,358
Cash and cash equivalents 94,574 94,657 74,775
Total assets 1,568,308 1,531,608 1,530,839
------------ ------------ -----------
Equity
Share capital 120,477 120,477 120,477
Share premium account 4,632 4,632 4,632
Retained earnings and other reserves 414,062 491,706 482,426
Total shareholders' equity 539,171 616,815 607,535
------------ ------------ -----------
Liabilities
Insurance contract liabilities 855,630 752,525 763,977
Lease obligations 11,688 14,370 12,923
Provisions for other liabilities 7,424 7,329 4,867
Pension liabilities 7,226 - -
Retirement benefit obligations 6,166 6,102 5,998
Deferred tax liabilities 24,569 35,332 35,649
Current tax liabilities 1,005 585 123
Deferred income 24,217 20,623 22,815
Other liabilities 91,212 77,927 76,952
Total liabilities 1,029,137 914,793 923,304
------------ ------------ -----------
Total shareholders' equity and liabilities 1,568,308 1,531,608 1,530,839
------------ ------------ -----------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 months to 30 June 2020
30.06.20 30.06.19 31.12.19
6 months 6 months 12 months
GBP000 GBP000 GBP000
(Unaudited) (Unaudited) (Audited)
(Loss)/profit before tax (59,712) 42,773 73,263
Adjustments for:
Depreciation of property, plant and equipment 2,511 2,665 5,081
Loss on disposal of property, plant and equipment - 94 171
Amortisation of intangible assets 477 501 1,016
Net fair value losses/(gains) on financial
instruments and investment property 54,641 (34,542) (52,091)
Dividend and interest income (12,080) (14,263) (26,218)
Finance costs 258 324 620
Adjustment for pension funding 455 511 815
(13,450) (1,937) 2,657
Changes in operating assets and liabilities:
Net increase in insurance contract liabilities 78,161 28,790 49,537
Net increase in reinsurers' share of contract
liabilities (45,280) (15,497) (21,265)
Net (increase)/decrease in deferred acquisition
costs (152) 141 (4,553)
Net increase in other assets (44,557) (15,005) (25,272)
Net increase in operating liabilities 7,142 2,012 11,153
Net increase in other liabilities 2,562 3,224 784
Cash (used)/generated by operations (15,574) 1,728 13,041
Purchases of financial instruments and investment
property (36,735) (76,741) (156,760)
Sale of financial instruments and investment
property 76,313 64,644 148,308
Dividends received 3,940 5,396 9,605
Interest received 7,170 8,292 16,293
Tax paid (2,076) (5,189) (8,296)
Net cash from/(used by) operating activities 33,038 (1,870) 22,191
------------ ------------ ----------
Cash flows from investing activities
Purchases of property, plant and equipment (405) (3,593) (4,394)
Purchases of intangible assets (7,813) (3,823) (9,613)
Acquisition of business, net of cash acquired - - (40)
Net cash used by investing activities (8,218) (7,416) (14,047)
------------ ------------ ----------
Cash flows from financing activities
Interest paid (258) (324) (620)
Payment of principal element of lease liabilities (1,455) (1,447) (2,787)
Dividends paid to Company's shareholders (4,591) (4,591) (9,181)
Donations paid to ultimate parent undertaking - - (30,000)
Net cash used by financing activities (6,304) (6,362) (42,588)
------------ ------------ ----------
Net increase/(decrease) in cash and cash equivalents 18,516 (15,648) (34,444)
Cash and cash equivalents at the beginning
of the period 74,775 109,417 109,417
Exchange gains/(losses) on cash and cash equivalents 1,283 888 (198)
Cash and cash equivalents at the end of the
period 94,574 94,657 74,775
------------ ------------ ----------
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS
1. General information and basis of preparation
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 2020 interim results has been prepared in
accordance with IAS 34, Interim Financial Reporting.
The information for the year ended 31 December 2019 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.
These condensed consolidated interim financial statements were
approved by the Board on 20 August 2020 and were not reviewed by
the Group's statutory auditor and are not audited. Following an
audit tender in 2019, PricewaterhouseCoopers LLP (PwC) were
appointed as the Group's statutory auditor on 18 June 2020 and will
complete their first statutory audit for the 31 December 2020
financial year. The Group chose not to obtain interim review
services from PwC for these interim financial statements to ensure
management's complete support of the transition to new statutory
auditors and PwC's first full year statutory audit as management
and PwC operate in a remote working environment.
The Directors have assessed the going concern status of the
Group. The directors have considered the Group's plans and
forecasts, financial resources, investment portfolio and solvency
position. The directors have also assessed the Group's ability to
continue as a going concern in light of COVID-19 and the consequent
downturn in the UK's economic condition. The Group's forecasts and
projections, taking into account plausible scenarios, show that the
group will have adequate resources to continue operating over a
period of at least 12 months from the approval of the condensed
consolidated interim financial statements. Accordingly, the
Directors continue to adopt the going concern basis in preparing
the consolidated interim financial statements.
2. Accounting policies
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.
The following standards were in issue but not yet effective and
have not been applied to these condensed financial statements.
IFRS 17, Insurance Contracts, was issued in May 2017 and is
effective for periods beginning on or after 1 January 2023. The
standard establishes revised principles for the recognition,
measurement, presentation and disclosure of insurance contracts.
The Group's long-term business is expected to be the most affected
by the new standard. The Group expects to be able to use the
simplified premium allocation approach to the majority of its
general business insurance contracts, which applies mainly to
short-duration contracts.
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. The
Group has taken the option available to insurers to defer the
application of IFRS 9 until the implementation of IFRS 17, which is
now on or after 1 January 2023.
Other standards in issue but not yet effective are not expected
to materially impact the Group.
3. Critical accounting estimates and judgements
In preparing these interim financial statements and applying the
Group's accounting policies, the directors have made judgements and
estimates based on their best knowledge of current circumstances
and expectation of future events. The judgements made in applying
the Group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the 31 December
2019 consolidated financial statements. In 2020, the COVID-19
global pandemic has had a significant impact on market conditions
and the business. Estimates and their underlying assumptions
continue to be reviewed on an ongoing basis with revisions to
estimates being recognised prospectively. The following areas are
those where specific consideration has been made in response to
COVID-19:
- Valuation of insurance contract liabilities: the assumptions
used in the estimated ultimate cost of all claims incurred but not
settled at the year-end date have been adjusted for the potential
impact of COVID-19.
- Measurement of pension liabilities: although COVID-19 has
impacted on the key assumptions in the valuation, namely the
discount rate, the methodology used to determine key actuarial
assumptions has remained consistent with the 2019 Annual Report and
Accounts.
- Impairment of goodwill and intangible assets: key assumptions
applied in the valuation of the recoverable amount have been
adjusted to reflect the potential impact of COVID-19. No impairment
has been recognised.
- Valuation of investment properties: the emergence of COVID-19
has increased uncertainty surrounding the valuation of properties
as at the balance sheet date, leading to the valuation of
investment properties to be considered a critical accounting
estimate. The carrying value of investment properties has been
updated as at 30 June 2020 and a loss of GBP4.8m has been
recognised.
4. Risk management
The 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. COVID-19 is a new
emerging risk and one which impacts the existing principal risks
related to market and investment risk and operational risk. The
COVID-19 pandemic and corresponding concerns about the impact of
government intervention has increased market volatility and led to
a reduction in equity asset values. Also in response to COVID-19
all areas of the Group have adapted to working in a remote
environment. Whilst this presents an increased level of operational
risk, all the businesses continue to operate effectively.
5. 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
30.06.20 30.06.19
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 133,735 - 133,735 123,957 - 123,957
Australia 38,263 - 38,263 33,652 - 33,652
Canada 28,255 - 28,255 25,481 - 25,481
Other insurance operations 2,225 - 2,225 1,911 - 1,911
Total 202,478 - 202,478 185,001 - 185,001
Life business 9 - 9 1 - 1
Investment management - 6,238 6,238 - 6,270 6,270
Broking and Advisory - 4,556 4,556 - 4,776 4,776
--------- ---------- --------- --------- ---------- ---------
Group revenue 202,487 10,794 213,281 185,002 11,046 196,048
--------- ---------- --------- --------- ---------- ---------
12 months ended
31.12.19
Gross Non-
written insurance
premiums services Total
GBP000 GBP000 GBP000
General business
United Kingdom and
Ireland 257,135 - 257,135
Australia 68,857 - 68,857
Canada 64,457 - 64,457
Other insurance operations 3,516 - 3,516
Total 393,965 - 393,965
Life business (13) - (13)
Investment management - 12,795 12,795
Broking and Advisory - 9,078 9,078
--------- ---------- ---------
Group revenue 393,952 21,873 415,825
--------- ---------- ---------
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 15.
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 2020 operating Insurance Investments Other Total
ratio GBP000 GBP000 GBP000 GBP000
General business
United Kingdom and Ireland 96.7% 2,680 (48,701) (108) (46,129)
Australia 115.8% (2,054) (213) (16) (2,283)
Canada 99.9% 24 2,037 (91) 1,970
Other insurance operations (1,964) - - (1,964)
---------- ------------ --------- ---------
101.1% (1,314) (46,877) (215) (48,406)
Life business (233) (3,031) - (3,264)
Investment management - - (200) (200)
Broking and Advisory - - 1,373 1,373
Corporate costs - - (9,215) (9,215)
(Loss)/profit before tax (1,547) (49,908) (8,257) (59,712)
---------- ------------ --------- ---------
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/(loss) before tax 9,705 39,342 (6,274) 42,773
---------- ------------ --------- ---------
12 months ended Combined
31 December 2019 operating Insurance Investments Other Total
ratio GBP000 GBP000 GBP000 GBP000
General business
United Kingdom and Ireland 86.8% 20,412 59,433 (292) 79,553
Australia 114.1% (3,246) 1,815 (65) (1,496)
Canada 95.1% 2,218 1,805 (174) 3,849
Other insurance operations 634 - - 634
---------- ------------ --------- ---------
91.1% 20,018 63,053 (531) 82,540
Life business 335 6,486 - 6,821
Investment management - - (310) (310)
Broking and Advisory - - 2,062 2,062
Corporate costs - - (17,850) (17,850)
Profit/(loss) before tax 20,353 69,539 (16,629) 73,263
---------- ------------ --------- ---------
6. 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.
7. Preference shares
Interim dividends paid on the 8.625% Non-Cumulative Irredeemable
Preference shares amounted to GBP4.6m (H1 2019: GBP4.6m). At the
point these dividends were paid, consideration was given to the
distributable reserves and capital position.
8. Financial investments
Financial investments summarised by measurement category are as
follows:
30.06.20 30.06.19 31.12.19
GBP000 GBP000 GBP000
(Unaudited) (Unaudited) (Audited)
Financial investments at fair value through
profit or loss
Equity securities
- listed 238,225 280,004 289,754
- unlisted 47,544 63,107 66,304
Debt securities
- government bonds 152,142 153,602 154,244
- listed 331,195 342,256 338,001
- unlisted 270 125 270
Derivative financial instruments
- options 4,388 2,022 1,562
- forwards - - 1,499
773,764 841,116 851,634
Financial investments at fair value through
other comprehensive income
Derivative financial instruments
- forwards - - 509
Total financial investments at fair value 773,764 841,116 852,143
Loans and receivables
Cash held on deposit 5,032 9,943 4,974
Other loans 823 721 796
Total financial investments 779,619 851,780 857,913
------------ ------------ ----------
9. 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 2020 GBP000 GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Financial investments
Equity securities 237,620 205 47,944 285,769
Debt securities 482,307 898 402 483,607
Derivative securities - 4,388 - 4,388
----------- --------- -------- ---------
Total financial assets at fair value 719,927 5,491 48,346 773,764
----------- --------- -------- ---------
Financial liabilities at fair value
through profit or loss
Financial liabilities
Derivative securities - (3,327) - (3,327)
- (3,327) - (3,327)
----------- --------- -------- ---------
Financial liabilities at fair value
through other comprehensive income
Other liabilities
Derivative securities - (3,194) - (3,194)
Total financial liabilities at fair
value - (6,521) - (6,521)
----------- --------- -------- ---------
30 June 2019
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
----------- --------- -------- ---------
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)
----------- --------- -------- ---------
31 December 2019
Financial assets at fair value through
profit or loss
Financial investments
Equity securities 289,165 190 66,703 356,058
Debt securities 490,911 1,200 404 492,515
Derivative securities - 3,061 - 3,061
780,076 4,451 67,107 851,634
----------- --------- -------- ---------
Financial assets at fair value through
other comprehensive income
Financial investments
Derivative securities - 509 - 509
Total financial assets at fair value 780,076 4,960 67,107 852,143
----------- --------- -------- ---------
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
2020
At 1 January 66,703 404 66,107
Total losses recognised in profit or loss (18,759) (2) (18,761)
At 30 June 47,944 402 48,346
----------- ----------- ---------
Total losses for the period included in profit
or loss for assets held at the end of the
reporting period (18,759) (2) (18,761)
----------- ----------- ---------
2019
At 1 January 44,773 261 45,034
Total gains/(losses) 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/(losses) for the period included
in profit or loss for assets held at the end
of the reporting period 4,342 (1) 4,341
----------- ----------- ---------
2019
At 1 January 44,773 261 45,034
Total gains recognised in profit or loss 7,538 143 7,681
Purchases 14,392 - 14,392
At 31 December 66,703 404 66,107
----------- ----------- ---------
Total gains for the period included in profit
or loss for assets held at the end of the
reporting period 7,538 143 7,681
----------- ----------- ---------
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.
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.
The valuation is 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 illiquidity discount or credit rating discount
applied changes by +/-10%, the value of unlisted equity securities
could move by +/-GBP5m (H1 2019: +/-GBP7m).
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.
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.
10. 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 GBP10.8m (H1 2019: GBP13.0m) offset by a GBP6.5m
increase (H1 2019: GBP8.5m increase) 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 GBP4.5m increase (H1 2019: GBP2.7m increase) in
reserves due to discount rate movements.
11. Translation and hedging reserve
Translation Hedging
reserve reserve Total
GBP000 GBP000 GBP000
2020
At 1 January 13,572 4,752 18,324
Gains on currency translation differences 2,283 - 2,283
Losses on net investment hedges - (2,653) (2,653)
Attributable tax - 367 367
At 30 June 15,855 2,466 18,321
------------ -------- --------
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
------------ -------- --------
2019
At 1 January 14,940 4,131 19,071
Losses on currency translation differences (1,368) - (1,368)
Gains on net investment hedges - 640 640
Attributable tax - (19) (19)
At 31 December 13,572 4,752 18,324
------------ -------- --------
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.
12. Insurance contract liabilities and reinsurers' share of
contract liabilities
30.06.20 30.06.19 31.12.19
6 months 6 months 12 months
GBP000 GBP000 GBP000
Gross
Claims outstanding 565,121 481,747 481,669
Unearned premiums 210,916 188,624 203,096
Life business provision 79,593 82,154 79,212
Total gross insurance contract liabilities 855,630 752,525 763,977
--------- --------- ----------
Recoverable from reinsurers
Claims outstanding 135,565 92,354 89,982
Unearned premiums 74,514 64,005 69,574
Total reinsurers' share of contract liabilities 210,079 156,359 159,556
--------- --------- ----------
Net
Claims outstanding 429,556 389,393 391,687
Unearned premiums 136,402 124,619 133,522
Life business provision 79,593 82,154 79,212
Total net insurance liabilities 645,551 596,166 604,421
--------- --------- ----------
13. 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.
14. Holding company
The ultimate holding company is Allchurches Trust Limited, a
company limited by guarantee and a registered charity incorporated
in England and Wales.
15. 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.
30.06.20
Broking
Invt. Invt. and Corporate
Insurance return mngt Advisory costs Total
-------------------
General Life
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
Gross written premiums 202,478 9 - - - - 202,487
Outward reinsurance premiums (80,313) - - - - - (80,313)
Net change in provision
for unearned premiums (980) - - - - - (980)
Net earned premiums [1] 121,185 9 - - - - 121,194
---------- ------- --------- -------- --------- ---------- ----------
Fee and commission income 22,650 - - 6,238 4,556 - 33,444
Other operating income 1,960 - - - - - 1,960
Net investment return - (660) (48,595) (13) 409 - (48,859)
Total revenue 145,795 (651) (48,595) 6,225 4,965 - 107,739
---------- ------- --------- -------- --------- ---------- ----------
Expenses
Claims and change in insurance
liabilities (139,715) 563 - - - - (139,152)
Reinsurance recoveries 68,104 - - - - - 68,104
Fees, commissions and other
acquisition costs (38,448) - - (535) 157 - (38,826)
Other operating and administrative
expenses (37,050) (145) (1,313) (5,890) (3,706) (9,215) (57,319)
Total operating expenses (147,109) 418 (1,313) (6,425) (3,549) (9,215) (167,193)
---------- ------- --------- -------- --------- ---------- ----------
Operating (loss)/profit [2] (1,314) (233) (49,908) (200) 1,416 (9,215) (59,454)
Finance costs (215) - - - (43) - (258)
---------- ------- --------- -------- --------- ---------- ----------
(Loss)/profit before tax (1,529) (233) (49,908) (200) 1,373 (9,215) (59,712)
---------- ------- --------- -------- --------- ---------- ----------
Underwriting loss [2] (1,314)
Combined operating ratio
( = ( [1] - [2] ) / [1]
) 101.1%
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].
30.06.19
Broking
Invt. Invt. 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/(loss) 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%
31.12.19
Broking
Invt. Invt. and Corporate
Insurance return mngt Advisory costs Total
-------------------
General Life
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
Gross written premiums 393,965 (13) - - - - 393,952
Outward reinsurance premiums (152,886) - - - - - (152,886)
Net change in provision
for unearned premiums (15,080) - - - - - (15,080)
Net earned premiums [1] 225,999 (13) - - - - 225,986
---------- ------- -------- --------- --------- ---------- ----------
Fee and commission income 49,368 - - 12,795 9,077 - 71,240
Other operating income 544 - - - - - 544
Net investment return - 989 72,596 19 834 - 74,438
Total revenue 275,911 976 72,596 12,814 9,911 - 372,208
---------- ------- -------- --------- --------- ---------- ----------
Expenses
Claims and change in insurance
liabilities (157,481) (327) - - - - (157,808)
Reinsurance recoveries 52,800 - - - - - 52,800
Fees, commissions and other
acquisition costs (72,383) (14) - (819) 476 - (72,740)
Other operating and administrative
expenses (78,829) (300) (3,057) (12,305) (8,236) (17,850) (120,577)
Total operating expenses (255,893) (641) (3,057) (13,124) (7,760) (17,850) (298,325)
---------- ------- -------- --------- --------- ---------- ----------
Operating profit/(loss) [2] 20,018 335 69,539 (310) 2,151 (17,850) 73,883
Finance costs (531) - - - (89) - (620)
---------- ------- -------- --------- --------- ---------- ----------
Profit/(loss) before tax 19,487 335 69,539 (310) 2,062 (17,850) 73,263
---------- ------- -------- --------- --------- ---------- ----------
Underwriting profit [2] 20,018
Combined operating ratio
( = ([1] - [2]) / [1]
) 91.1%
16. Events after the balance sheet date
Ecclesiastical is aware that the COVID-19 pandemic is causing an
unprecedented situation for many and business interruption cover is
an important issue for the whole of the insurance industry. In May
2020 the Financial Conduct Authority (FCA) announced that while the
majority of business interruption policies (BI) are focused on
property damage, there were some policies where they considered the
wording to be unclear in how they respond to COVID-19.
Ecclesiastical agreed with the FCA that some relevant policy
wordings are considered as part of an expedited Test Case and
alongside seven other insurers agreed to participate to provide
clarity and certainty to customers. The Test Case was heard by the
High Court between 20-30 July 2020. The judgement on the Test Case
is not expected before the middle of September 2020.
The FCA have stated that inclusion in the Test Case does not
imply that all or any of the policies being tested may provide
cover. The policies are representative across the industry and
enabled a better 'test' to help provide certainty and clarity to
the market. Ecclesiastical carries out thorough claims assessments
for all claims received and the vast majority of insurance cover
does not include pandemics. Consequently claims reserves are not
held in respect of insurance cover that excludes pandemics.
Ecclesiastical is well capitalised and continues to expect to
hold a capital position in excess of regulatory requirements,
regardless of the outcome of the Test Case.
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:
-- Sir Stephen Lamport was appointed as a Non-Executive Director on 23 March 2020
-- The Very Revd Christine Wilson resigned as a Non-Executive Director on 18 June 2020
By order of the Board,
Mark Hews David Henderson
Group Chief Executive Chairman
20 August 2020
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 KBLFLBVLZBBB
(END) Dow Jones Newswires
August 21, 2020 02:00 ET (06:00 GMT)
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