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Ecclesiastical
Annual Report & Accounts
2019
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Each day
together
we are
capable of
more than
you can
imagine
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Each day we help inspire the thinkers of the future
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Each day we help millions of people celebrate their beliefs
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Each day we help thousands of charities make a difference
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information G
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Each day we help protect the irreplaceable
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Each day we help support the unstoppable
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Contents
Section One About Us
Building a movement for good
Ecclesiastical at a glance
Our businesses
Section Two Strategic Report
Chairman’s Statement
A trusted business
Chief Executive’s Report
Transforming lives
Global trends in financial services
Our business model and strategy
Strategy in action
Key Performance Indicators
Financial Performance Report
Risk Management Report
Principal risks
Corporate Responsibility Report
Non-Financial Information Statement
Strategic Report approval
Section Three Governance
Board of Directors
Directors’ Report
Corporate Governance
Section Four Financial Statements
Independent Auditor’s Report
Consolidated statement of profit or loss
Consolidated and parent statement of comprehensive income
Consolidated and parent statement of changes in equity
Consolidated and parent statement of financial position
Consolidated and parent statement of cash flows
Notes to the financial statements
Section Five Other Information
Directors, executive management and company information
United Kingdom regional centres
United Kingdom business division and international branches
Insurance subsidiaries and agencies
Notice of meeting
Notes
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Ecclesiastical Annual Report & Accounts 2019Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 2
Section One
About Us
Building a movement for good
Ecclesiastical at a glance
Our businesses
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Section OneEcclesiastical Annual Report & Accounts 2019About Us – Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Section One
About Us – Building a Movement for Good
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Ecclesiastical Annual Report & Accounts 2019
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5
Each day, since the day our business
was founded in 1887, we’ve wanted
to do business differently. To work
in a way that makes a difference to
society and to the lives of others.
Owned by a charity, we’re a commercial
business with a purely charitable
purpose. We manage a successful,
ethically run portfolio of businesses
and give a significant proportion of
our profits to our owner, Allchurches
Trust, which donates independently
to good causes. We make our own
considerable donations. And we help
our customers and partners address
the issues that matter to them.
Our strongly held values, together with
deep expertise in our chosen markets,
give us a competitive edge. This has
helped us deliver robust financial
returns which in turn help change
people’s lives for the better. So by
daring to be different – and working
in a way that’s good, not just a little
less bad – everyone benefits.
Each day we are capable of more
than you can imagine. Together we’re
building a movement for good.
Section OneEcclesiastical Annual Report & Accounts 2019About Us – Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Section One
About Us – Ecclesiastical at a glance
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Ecclesiastical Annual Report & Accounts 2019
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Ecclesiastical
at a glance
Who we are
An independent,
specialist financial
services group
owned by a charity
132
years’ experience
Established in 1887
to provide fire protection
to Anglican churches
£100m
Our aim is to give £100m to good causes by the
end of 2020 – we’ve made great progress donating
£96.5m so far*
*Cumulative total 2016 – 2019
One of the
UK’s largest
charitable
donors
S&P Rating
Excellent
A- Stable
(last affirmed July 2019)
£3.1bn
Funds under management
(£2.7bn in previous year)
Award
winning
We are proud that our
group’s people, products
and services continue to
achieve industry acclaim
What we do
Main insurer for
the UK’s Grade I
listed buildings
Leading
insurer for
the Anglican
church
in all our territories
Since the 1880s
Ecclesiastical has
been providing specialist
insurance and risk
management support
to its customers
Award winning
ethical investment
Moneyfacts ‘Best Ethical Investment Provider’
for 11th successive year (2009 to 2019)
Trusted by
independent
schools for
over 55 years
A leading
multi-faith insurer
Protecting churches,
synagogues,
mosques and Hindu,
Sikh and Buddhist
temples across our
territories
50,000+
charities and not for profit
organisations insured in the
UK alone
Gold standard
Home Insurance
Awarded 1st place Gold
Ribbon by Fairer Finance
as most trusted provider
– 10th time in a row
Section OneEcclesiastical Annual Report & Accounts 2019About Us – Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information About Us – Ecclesiastical at a glance
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Trusted to do the right thing
97% +
UK overall customer satisfaction
across all the sectors we measure
CII Chartered Status
Ecclesiastical UK & Ireland and Lycetts have
been awarded Corporate Chartered status by
the Chartered Insurance Institute*
*A corporate Chartered title is a commitment to an overall
standard of excellence and professionalism, and evidence
of commitment to customers, partners and employees
98%
of our UK customers
satisfied with how their
claim is handled
98% in UK
97%
of key brokers satisfied
with our service
Rated best insurer by UK brokers
in the charity, commercial heritage,
education and faith sectors*
*Independent survey by FWD
Making a difference
£32.5m
given to charity
in 2019
(£18.8m in previous year)
£30m to our charitable owner and
£2.5m Ecclesiastical Group giving
Movement for Good
We launched our biggest ever giving campaign
– through our Movement for Good Awards we gave
£1 million to help change people’s lives.
Over 7,000 charities
have benefitted from
our giving
60%+
of our employees
volunteer
A different kind of business
We are a financial
services group that
exists to give its
profits to charity
Best for developing
young people
Ecclesiastical
Canada recognised
as Top 100 Employer
for Young people
for the 8th
consecutive year
83%
of staff are positive about
the statement ‘I am proud
to work for this company’
Leading the way in
Health and Safety
First insurer to register
commitment to Health
and Safety Executive (HSE)
‘Helping Great Britain
Work Well’ strategy
Our aim is to be
the most trusted
and ethical
specialist financial
services group
Our financial performance
£73.3m
profit before tax
(£15.4m in previous year)
£394.0m
gross written premium
(£357.0m in previous year)
91.1%
combined operating ratio
(86.4% in previous year)
Section OneEcclesiastical Annual Report & Accounts 2019About Us – Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Section One
About Us – Our businesses
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Ecclesiastical Annual Report & Accounts 2019
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Our businesses
We are organised into three divisions:
Specialist Insurance; Investment
Management; and Broking and
Advisory. All are underpinned
by a reputation for delivering an
outstanding service to our customers.
We provide products and services
to businesses, organisations and
retail customers, both directly and
through intermediaries. Operating
primarily from the UK, our divisions
and their associated companies are:
Specialist Insurance
Ecclesiastical UK / Ansvar UK / Ansvar Australia / Ecclesiastical Canada /
Ecclesiastical Ireland
Our insurance businesses offer insurance products and risk management services
to customers in the faith, heritage, charity, education and real estate markets.
We have particular expertise in valuing and protecting distinctive properties
both old and new – from cathedrals to concert halls, schools to stately homes
and iconic modern buildings to youth hostels.
We also provide a discrete range of specialist products including household
insurance for churches and congregations and fine art insurance to the
high net worth market.
Investment Management
EdenTree Investment Management (EdenTree)
Our multi-award-winning Investment Management team manages and sells ethically
screened and non-screened investment products to institutional customers,
including the charity and faith markets, and to retail customers through the advisory
market. EdenTree also manages the majority of the Group’s financial investments.
Broking and Advisory
SEIB Insurance Brokers (SEIB) / Ecclesiastical Financial Advisory Services
(EFAS) / Ecclesiastical Planning Services Ltd* (EPSL) / Lycetts Insurance
Brokers* (Lycetts) / Lycetts Financial Services*
Our specialist brokers, SEIB and Lycetts, provide tailored insurance products
for customers, particularly those in the high net worth, farming and rural estates,
equine, animal trades, and specialist motor insurance sectors.
EFAS and Lycetts Financial Services offer financial advice to businesses
and individual customers including Church of England clergy. EPSL markets
and administers prepayment funeral plans under the Perfect Choice brand.
* These businesses are owned by Ecclesiastical Insurance Group plc (EIG) which is the parent company of
Ecclesiastical Insurance Office plc (EIO). This Annual Report and Accounts for EIO does not include the results
of EIG. Where helpful, we’ve included some additional information about these busineses.
Section OneEcclesiastical Annual Report & Accounts 2019About Us – Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Ecclesiastical UK
Cracking down on cyberbullying
For children growing up in a digital world, the threat of cyberbullying is
ever-present. So as a leading insurer of schools, we felt it was our responsibility
to take action. Our free lesson kit, Cyber Ready, was designed to help teachers
show their students how to stay safe online and was intended as an extension
to existing teaching activities.
In creating the kit, it was important
to fully understand the problems and
issues children faced. So we spoke to
pupils, parents, and teachers to build
up a clear picture. From talking to
teachers, it was soon obvious that many
teaching resources were out of date
and unappealing. Teachers felt under
pressure to meet 2020 government-led
safety measures to protect children
from online harm.
We took our proposed solution into
the classroom to get frank, constructive
feedback before refining the final
design. By taking a collaborative
approach and coming up with innovative
problem-solving techniques, our lesson
plan succeeded in engaging pupils
and driving home important safety
messages. In recognition of its success,
Cyber Ready won the CIR 2019 Risk
Management Award for Public Safety,
demonstrating our understanding of the
challenges faced by schools and our
commitment to helping solve them.
“ I’ve taught internet safety over the last
two decades. As a busy classroom
teacher, it has always been a tough task
to keep up with constant technological
advances, as well as ensure that
you are as knowledgeable about the
benefits and risks of online safety.
To support yourself and your pupils,
this resource by Ecclesiastical
Insurance provides a free toolkit for
primary and secondary teachers.”
@TeacherToolkit
“ I love this resource. My class had been
having safeguarding problems outside
of school using WhatsApp. This was
a great platform to sort out and share
their issues. The resources are ready to
use. Saved me lots of time. Thank you.”
Primary school teacher
TES Five Star review
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Section Two
Strategic Report
Chairman’s Statement
A trusted business
Chief Executive’s Report
Transforming lives
Global trends in financial services
Our business model and strategy
Strategy in action
Key Performance Indicators
Financial Performance Report
Risk Management Report
Principal risks
Corporate Responsibility Report
Non-Financial Information Statement
Strategic Report approval
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Chairman’s
Statement
My first year
This is my first annual statement as Chairman and it’s been a pleasure and privilege
to have led the Group following my appointment in March 2019. Over the past year,
I’ve enjoyed visiting our businesses across the UK and also in Canada and Ireland, and am
looking forward to visiting our Australia business this year. I’ve had the opportunity to meet
some of our customers and talented colleagues and I have been thoroughly impressed to
see, at firsthand, just how much our customers value our expertise. We put customers at
the heart of everything we do and because of that, I am delighted to say it’s been another
successful year. My heart-felt thanks to everyone who has worked so hard to deliver these
significant financial results that enable us to recycle our profits back into the communities
in which we do our business. The more we make, the more we can give away.
A strong set of results
It is our unique charitable purpose that
makes us special. Our charitable ownership
continuously influences the way we do our
business and our approach to growth.
We believe in taking the long-term view
and we believe growth must be sustainable.
It is a business model that works, and
I am delighted that the Group’s strong
performance has allowed us to donate
£30m to our charitable owner, and over
£2m to the good causes we support directly,
through our Corporate Social Responsibility
programme. We ended 2019 having given
over £96m in total to good causes since
2016, and are now only a short way from
reaching our £100m target by the end
of 2020.
Achievements and reflections
In the past few years, the Group has been
through a period of change. This change
programme has continued to strengthen
our core insurance business as well as expand
our other portfolios and specialisms. In 2019,
our immediate parent, Ecclesiastical Insurance
Group plc, expanded the broking business
with investments in Robertson-McIsaac
and Lloyd & Whyte, which both offer niche
specialist insurance services.
In late 2020, we will relocate our Gloucestershire
head office to a purpose-built unit which
will house all of our people in the area.
I am pleased that sustainability, energy
efficiency and environmental impacts have
been a significant consideration for this
development.
We have also invested in the development of
a new system for the UK General Insurance
business to provide our customers and
brokers with an enhanced experience and
give us better processes and capacity.
We ended
2019 having
given over
£96m in total
to good causes
since 2016,
and are now
only a short
way from
reaching our
£100m target
by the end
of 2020.
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Board developments
and governance
In 2019, we were delighted to welcome
Denise Cockrem, the Group’s Chief Financial
Officer, as an Executive Director to the
Board. We were also delighted to welcome
Angus Winther and Francois-Xavier
Boisseau to the Board as Non-Executive
Directors during the year and Neil Maidment
as a Non-Executive Director in January
2020. Their diversity of skills and experience
across the insurance and financial services
sector adds to the constructive challenge
and support the Board provides to the
executive management team.
The Board and I were also delighted that
Tim Carroll, who has served on the Board
since 2013, has now taken up the position
of Chairman of our charitable parent company,
Allchurches Trust Limited. We thank Tim for
his service to the Ecclesiastical Group and
look forward to working with him in his
new role.
We are also committed to supporting our
people right across the business, at every
level and from every background, so we can
develop a sustainable pool of talent and
allow them to develop their careers with us.
The future
As the Board looks towards the next
chapter for Ecclesiastical, it is especially
critical that we respond to broader issues
of sustainability and climate change.
Our people are often on the frontline of
flooding and other natural catastrophes,
and it has never been more important to
focus on our risk management services
and try to prevent disaster before it happens.
Given the depth of our expertise, we are
well-placed to play our part in making a
better, safer future for all. Added to that,
we believe we are also proving that a
different way of doing business is possible.
A way that makes returns beyond
conventional shareholders to a broader,
diverse group of stakeholders, including
the most vulnerable and needy in society.
Nothing would please us more than to
encourage others to join us and create
a movement for good.
David Henderson
Chairman
We believe
we are also
proving that
a different
way of doing
business is
possible.
‘It is our unique
charitable purpose that
makes us special.
Our charitable
ownership continuously
influences the way we
do our business and our
approach to growth.’
Ecclesiastical Annual Report & Accounts 2019Section TwoStrategic Report – Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Ecclesiastical UK
Preservation for the next generation
As the leading insurer of Grade I listed buildings in the UK, we know how
important traditional craft skills are in keeping these unique buildings looking
their best. That’s why we’ve pledged £225,000 to The Prince’s Foundation
over three years to enable 36 students to take part in the charity’s
Building Craft Programme (BCP).
For more than ten years we’ve insured
Dumfries House in Ayrshire, headquarters
of The Prince’s Foundation. We’ve been
supporting their Building Craft
Programme for the last two years.
Established to help preserve valuable
craft skills, which are gradually
being lost, the BCP takes place at
The Prince’s Foundation’s training
facilities in Shoreditch, London and
Dumfries House, Ayrshire – where
students complete a live build project.
Many of the skills, such as stonemasonry
and lime plastering, aren’t taught in college
but are learnt through years of exposure
working alongside masters of the art.
After the programme, most students
secure work in the heritage sector
or go on to undertake further training,
with around 90% starting careers
in craft skills immediately after
completing the course.
and skills required to design, build
and preserve our local communities.”
Simon Sadinsky, Deputy Executive
Director of Education
The Prince’s Foundation
The Prince’s Foundation is giving
students a unique opportunity,
equipping them with the craft skills
and techniques needed to help
preserve some of our irreplaceable
buildings for generations to come.
“ Ecclesiastical’s support will help
us to continue to equip our young
craftspeople with the education
“ There’s only so much you can get from
the literature, it’s the firsthand experience
that is so priceless. On this course
they really take you under their wing.”
Esme Walker, Student
Prince’s Foundation
Building Craft Programme
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A trusted business
Here are a selection of the awards our Group received for the way we do business
Our UKGI business won
• Commercial Lines Team
• Rising Star
at the Insurance Post Claims Awards
Best Ethical
Investment Provider
EdenTree won
Moneyfacts Best
Ethical Investment
Provider award for
the 11th year running
Ecclesiastical Canada
was recognised as a
Greater Toronto
Top Employer
Top Employer
for Young People
Ecclesiastical Canada
was awarded Top
Employer for Young
People status for the
8th consecutive year
SEIB won
Personal Lines
Broker of the
Year at the British
Claims Awards
Top of the
Fairer Finance tables
For the 10th time running,
Ecclesiastical UK Home Insurance
was once again placed top for
customer trust
Ecclesiastical
Canada won the
CNA Canada
Award for
Excellence in
Philanthropy
and Community
Service
SEIB won
Insurance Broker of the Year
at the Women in Insurance awards
Our UKGI business won
the Public Safety Award at the
CIR Risk Management Awards
EFAS won
Best Firm,
South West
at the NatWest
Local Hero Awards
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Chief Executive’s
Report
A unique business with a clear and caring purpose
In the world of financial services, Ecclesiastical treads a very different path.
Over 130 years ago, our founders created a commercial company with a charitable
purpose. Today, we are one of the largest corporate donors to charity in the UK,
contributing to thousands of good causes in this country and abroad.
“To work
together
to be the
most trusted
and ethical
specialist
financial
services group,
giving £100m
to charity.”
Owned by a charity, we are not driven by the
need to grow at any cost in order to satisfy
short-term shareholder demands. Instead
we are driven to build a sustainable, ethical,
values-driven business that supports and
cares for its customers, their communities
and society as a whole. We do this by using
our specialist expertise to provide products,
cover and service that customers value
and trust.
We seek to provide insurance that you can
believe in rather than cheap insurance that
may not provide the cover you expected at
your time of need.
It is for this reason that we continue to be
trusted to protect and preserve so much
of the country’s irreplaceable heritage and
history, covering many of the nation’s most
iconic palaces, castles, estates, World
Heritage Sites, churches and cathedrals.
In fact, we are a leading insurer of Grade I
listed buildings in England, including places
like St Paul’s Cathedral and Westminster
Abbey that are recognised by millions of
people around the world.
Building a Movement for Good,
thanks to your support
In 2016, we announced a new strategic
goal for the Group that built on our ethical
foundations. It was clear, stretching and
inspirational.
“To work together to be the most trusted
and ethical specialist financial services
group, giving £100m to charity.”
Thanks to the incredible support of our
customers, brokers, business partners,
employees and all our supporters, I am
pleased to report that in 2019, together,
we donated over £32m to charities.
This takes our total donations to over £96m
and we have now supported over 7,000
charities worldwide. With this wide-ranging
support, we are now within short reach of
our £100m target and hope to achieve it
by the end of 2020.
Of course, whilst it is easy to focus on
the impressive numbers that headline this
achievement, it is the positive impact these
donations have made to so many people’s
lives which is truly inspiring. We are very
proud to have supported charities tackling
so many different and important issues.
Their work is lifting people out of poverty,
making society more inclusive and
strengthening communities. But their work
also shares a common aim – to change lives
for the better and make a positive impact.
Looking at all the charities we’ve supported,
and the many thank you letters received,
is a humbling and uplifting experience. It
is an experience that inspires us all to get
behind our charitable purpose and build and
widen our movement for good so that more
people can benefit.
Always learning
from our customers
As a business, we strive to do the right thing;
it is part of our DNA. But we are only human
and, given the breadth and depth of our
global Group, it is inevitable there will be times
– hopefully few and far between – when we
fall short of our own high standards. When this
happens, it is important that we learn from this
and recognise where we can do things better.
Over the years, this approach of continuous
learning has led to exceptionally high UK
customer satisfaction levels, at 97%-99%
across all sectors.
Overall, we successfully deal with thousands
of claims every year and I am pleased to
report that 98% of surveyed customers
were satisfied with how we handled their
claim last year, and 93% being very and
extremely satisfied, which is consistent
with previous years.
However, there have been a few claims
relating to historical sexual abuse over
30 years ago, which have been difficult to
handle to the satisfaction of all concerned.
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I am speaking here of claims for physical
and sexual abuse, which represent a very
small percentage of our total claims (less
than 0.4%), but are particularly traumatic
and challenging for victims and survivors and
must therefore be conducted with sensitivity,
empathy and compassion. Sadly, for a very
small number of survivors, the experience
of bringing a claim has been a difficult
and painful process, not helped by the
adversarial nature of the civil justice system
within which we must all work.
To this end, we welcome the work of the
Independent Inquiry into Child Sexual Abuse,
IICSA, and have contributed positively to
the Inquiry’s consideration of how the civil
justice system can better deliver reparations
to victims and survivors. Ecclesiastical works
hard to settle claims fairly on a full and final
basis with the agreement of its claimants
and with the benefit of such claimants
normally having received independent
legal advice. While we do not always get
everything right, Ecclesiastical Insurance
Office itself strives for the highest standards
in the industry and we were the first insurer
to introduce and publish clear guiding
principles having obtained survivors input.
We have also taken a lead in working with
a number of claimant solicitors to improve
the claims experience within the current
civil justice system and have introduced
several positive changes including offering
the services of psychological rehabilitation
specialists Moving Minds to offer counselling
support for every claimant.
That said, it is clearly impossible to turn back
time and undo the damage of childhood
abuse, and so we all continue to learn
how best to support and help those who
have experienced it within the Church
or elsewhere. Moreover, we encourage
and support the Church and many of our
customers on the implementation of strong
safeguarding practices so that childhood
abuse is prevented in the first place.
Striving for continual improvement is
essential for any business, but is vital for
1 2019 Edelman Trust Barometer Global Report
one with a purpose like ours. I am delighted
that these efforts have led to external
recognition on a wide front.
Delivering for society
and our customers
We recognise there remains a lack of trust
in businesses, and every year the leading
global trust survey shows the financial
services sector as having the lowest level
of trust1. Against this background,
I am especially pleased that some of our
businesses were positively recognised by
independent bodies for their exceptional
contributions. Of note, in 2019:
• Ecclesiastical was rated as the
‘Most Trusted’ home insurer in the UK
by Fairer Finance. It also scored top for
customer happiness
• Ecclesiastical won the ‘Public Safety Award’
at the CIR Risk Management Awards for
their Cyber Ready toolkit
• Our UK General Insurance business
claimed two Insurance Post ‘Claims Awards’,
recognising the exceptional service and
lengths our teams go to in order to ensure
our customers are in safe hands
• Ecclesiastical Canada was recognised as
a ‘Top Employer in Greater Toronto’ and
for the 8th consecutive year as one of
Canada’s ‘Top Employers for Young People’
• EdenTree, our pioneering Investment
Management business picked up the
Moneyfacts ‘Best Ethical Investment
Provider’ for the 11th year running
• Ecclesiastical Financial Advisory Services
was recognised as the ‘Best Firm, South
West’ in the Local Hero Mortgage Awards
• SEIB, our broking business, won ‘Personal
Lines Broker of the Year’ at the British
Claims Awards.
We continued
to focus on
delivering
profits that are
sustainable
for the
long-term,
so we can
continue to
deliver our
charitable
purpose.
And recognising our focus is on more than just
providing outstanding service to our customers:
• Ecclesiastical won the ‘Best Corporate
Communications Campaign’ and ‘Best Low
Budget Campaign’ for the Movement for
Good Awards PR campaign at the
CIPR Awards
• Ecclesiastical Canada won ‘Excellence
in Philanthropy and Community Service’
at the Insurance Business Awards
Of course, awards such as these only transpire
following years and years of focus by dedicated
individuals working hard to do the right thing.
A few deserve a special mention this year:
• Our SEIB Deputy CEO was awarded
‘Insurance Broker of the Year’ at the
Women in Insurance Awards
• Our EdenTree Chief Investment Officer
once again made it to the ‘FE Alpha
Manager Hall of Fame’ for long-term
performance and consistency
• One of our talented claims team won
the ‘New Professional of the Year’ award
from the Chartered Insurance Institute.
The trust placed in us is not something
we take for granted and we will continue
to invest and work hard to ensure our
customers receive exceptional service
and performance.
A sustainable
and resilient business
I am pleased to report that we concluded
2019 in a position of financial strength,
reporting a pre-tax profit of £73.3m (2018:
£15.4m) and have benefitted from the more
favourable investment markets in 2019.
This robust performance has not only enabled
us to make a £30m charitable grant, it has
further strengthened our capital position
which provides us with both security today
and flexibility for the future.
Taking a long-term perspective, together
with maintaining our strong solvency ratio,
continues to enable us to hold a greater
proportion of higher-risk investment assets
which are designed to deliver greater
returns. Notwithstanding the uncertainty
in the external environment which affected
the markets during the latter parts of 2018
and the majority of 2019, our long-term
investment approach remained consistent,
resulting in investment income in the year
of £34.8m (2018: £35.3m) and fair value
gains of £52.1m (2018: fair value losses
of £35.4m). Underwriting results in the
year were strong across the Group at
£20.0m (2018: £29.2m) and reflected the
anticipated reduction in reserve releases
compared with prior year.
Our diverse portfolio of companies, not
least in the core insurance businesses,
have supported our objective for delivering
sustainable and profitable growth for the
long term.
Group Gross Written Premium (GWP) has
grown 10.4% to £394m (2018: £357m).
During the year, we continued to focus on
delivering profits that are sustainable for the
long term, so we can continue to deliver our
charitable purpose.
Our strategy
for a sustainable future
Over the last few years, we have made
good progress on our journey to become
the most trusted and ethical specialist
financial services group and have given
significantly to good causes. We empowered
and invested in our people who have
transformed the Group with an ambitious
change programme, which continues to gain
momentum. As such, we now enter 2020
from a position of strength. We still have
our sights firmly set on reaching £100m
to charity in 2020 and believe we are well
positioned to capture the opportunities that
lie ahead.
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Our depth
of expertise,
reputation
and focus on
doing the right
thing for our
customers put
us in a position
of strength.
A year or so ago, at around the time of our
130th year as ‘Ecclesiastical’, we took the
decision to take a fresh look at our brand.
At a time when businesses continue to come
under scrutiny for questionable behaviours,
we concluded that it has never been so important
to celebrate our charitable ownership and
the unique business model that differentiates
us from others. Over the coming years,
while keeping faithful to our origins, we will
be introducing some changes to our brand
to better reflect the diversity of financial
businesses within the Ecclesiastical Group.
In addition to investing in our people and
brand, we have also continued to invest in
new systems and technology, helping our
businesses to innovate with purpose and
increase our agility and efficiency. Some of
these projects will span over a number of
years, not least the development of a new
strategic UK General Insurance system which,
once live, will help us to provide our customers
and brokers with an enhanced experience
and give us better processes and capacity.
The insurance market remains a highly
competitive one, and we see this continuing.
However, we are confident we can continue
to confront such challenges as our depth
of expertise, reputation and focus on doing
the right thing for our customers put us in a
position of strength. Coupled with our financial
strength and an ethical approach, this provides
the foundation on which we will continue to
build our business and deliver our vision.
In early 2020, the existence of a new
coronavirus, now known as COVID-19, was
confirmed and since this time it has spread
across the globe and is now characterised
by the World Health Organisation as a
pandemic. We are managing the impact of
COVID-19, utilising business continuity and risk
management processes where appropriate.
Our capital resources can withstand significant
short-term temporary market disruption. Whilst
there is the potential for the outbreak to impact
on our day to day operations, we have plans in
place to ensure that we can continue to provide
critical services to our customers. Serving our
customers and the health, safety and well-being
of our employees will be our priority throughout
the duration of the outbreak.
Working together
for the greater good
With our £100m charitable target within our near
term grasp, we remain energised and inspired to
work together for our customers and society.
The progress we have made and the speed
we have done it would not be possible were
it not for the dedication of our specialist
teams worldwide. As such, the Board and I
say “Thank you” to our exceptional colleagues
who, no matter where they might be in the
business, will always put doing what is right
for our customers and our charitable purpose
at the centre of everything they do. And thank
you all for helping those who need it most
with your tireless fundraising, volunteering
and nomination of good causes.
Moreover, thank you to our customers, brokers
and business partners for trusting us with their
business and allowing us to champion the
many worthwhile causes they care about.
To those who are reading about Ecclesiastical
for the first time, I invite you to join us, whether
as a colleague, customer or business partner,
and experience for yourself how it is possible
to do business differently. Because I believe
that, together, we are creating something very
special – a movement for good that touches
and transforms lives in our homes, in our
communities, in this country and abroad.
Each day, we each make a small step
forward – helping our customers or
beneficiaries. Each day, we’re building a
movement for good. And, together, we are
capable of more than you can imagine.
By order of the Board
Mark Hews
Group Chief Executive
‘With our £100m
charitable target within
our near term grasp,
we remain energised
and inspired to work
together for our
customers and society.’
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Each day, together, we transform lives
We are proud of our ambition to give £100m to good causes by the end of 2020.
To date, our Group has given £96.5m in grants and donations, helping to tackle the
big issues in society and changing people’s lives for the better. Here are some of the
people whose lives we have changed. You can read more about these stories in our
Impact Report, available on our website www.ecclesiastical.com/impactreport
I’ve now got a roof over
my head for my family
Mark and his family now have
a brighter future thanks to the
work of Focus Ireland, a charity
that aims to prevent families,
young people and individuals
from becoming homeless.
Ecclesiastical Ireland raised
over €15,000 to support their
vital work.
I’ve seen the darkest
sides of life imaginable
but Street Talk saved me
Amina* is a victim of trafficking
and just one of the women
helped by charity Street Talk,
a vital counselling and art
therapy service, which received
a £10,000 grant from our ethical
investment business EdenTree.
*Name changed to protect ‘Amina’.
I’ve been able to
break down barriers
around disability
Christopher has a rare condition
called microcephaly. Lycetts has
helped to build Christopher’s
confidence through a work
placement – part of their support
for specialist education and care
charity Learning for Life.
I’ve stopped feeling
dreadfully lonely – now I
have something to look
forward to
Anne is just one of many older
people whose lives have been
transformed by Linking Lives UK,
a charity working to reduce social
isolation, which received a £1,500
grant from Allchurches Trust.
I’ve helped give homeless
girls and their babies a
safe place to call home
Michelle has seen firsthand
the positive benefits of Ansvar
Australia’s support to the
Lighthouse Foundation,
a charity dedicated to ending
youth homelessness.
I’ve had the chance
to learn from master
craftspeople
Esme has benefitted from a
Building Crafts Apprenticeship
– an initiative to equip students
with specialist craft skills,
helping to preserve these
valuable techniques for future
generations. Ecclesiastical UK
has supported The Prince’s
Foundation by pledging
£225,000 over three years.
I’ve seen a real difference
in our schoolchildren
– they’re happier and
more positive
Tim, a primary school deputy
head, has experienced firsthand
the noticeable difference made
by Ansvar UK’s ongoing support
to Coram Life Education
– a charity dedicated to
ensuring that primary school
children stay strong and safe in
their most formative years.
I’ve got my life
back on track with
help from Phoenix
Chris is just one of the many
young people Phoenix has
helped to become more
independent and find their place
in life. Ecclesiastical Canada
has supported the life-changing
work of Phoenix through their
impact grant.
I’ve seen what a huge
difference education makes
to the welfare of horses
Gemma has seen how the
£50,000 grant, given by SEIB
to The British Horse Society,
is boosting their essential equine
welfare work – helping to prevent
cases of cruelty and neglect.
The BHS is dedicated to improving
the lives of horses across the UK.
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Getting a model railway club back on track
Voluntary groups, charities and churches are just some of our areas of specialist
insurance knowledge. So, when in May 2019, the Market Deeping Model
Railway Club was the victim of extraordinary vandalism – which made headlines
worldwide – we went full steam ahead.
The very next day, we appointed
our specialist to meet with club
representatives and help them with the
claim process. It was immediately clear
that this was a complex loss. Despite
this, we settled the claim in full the
same day.
The club had set up for its annual show
when vandals struck, destroying the
painstakingly built models – one of
which had taken 25 years to make.
Talking about repairing the damage,
Peter Davies, club Chairman, pointed
out, ‘Some of us simply don’t have that
amount of time left in our lives’.
To raise additional funds, the club set
up a JustGiving page, which raised
£107,947 including a £10,000 donation
from Sir Rod Stewart. Now established
as a registered charity, the Market
Deeping Model Railway Club aims to
create youth projects, fund new model
railway clubs and raise awareness of
underinsurance across the modelling
world. So, while club members were
deeply affected by the vandalism, the
incident has enabled them to make a
real difference in the community.
“ I was staggered by Ansvar’s service.
We expected to be fighting for
settlement based upon our knowledge
of the industry, so we were really
surprised by how they responded to
our claim.”
Mr Davies, Chairman
Market Deeping Model Railway Club
“ By taking a pragmatic approach to a
complex claim, we were able to put
the customer at ease and ensure they
immediately had access to funds.”
Natasha Baugh, Team Leader,
Claims Department, Ansvar UK
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Global trends in
financial services
As part of our everyday business management, we monitor a number of global trends
that we believe have the potential to impact our business in the future. Our insight into
these trends is shown over the next few pages and our response is demonstrated
within Strategy in action (page 44).
Trend
Our perspective
Trend
Our perspective
Low trust in financial
services
Geopolitical
landscape
The financial services sector continues to rebuild its reputation, with trust in financial services at
its highest since the Edelman Trust Barometer (ETB) started tracking by sector. Financial services
remains the least trusted global business sector and is significantly less trusted than the technology,
automotive and entertainment sectors. Among the global population, trust in financial services has
increased over the past five years, reaching a neutral position rather than one of trust. Despite this
improvement, only the institutions of media and government are less trusted than financial services.
The ETB is now in its twentieth year and recognises that trust is built on competence and ethics.
Only non-governmental organisations are seen as ethical due to their focus on protecting the
environment, civil and human rights, and addressing poverty, illiteracy and disease. The ETB sees
ethical behaviour as being driven by being purpose-driven, honest, with a vision, and fair. There
is a clear opportunity for ethical and trusted businesses to demonstrate a proven track record in
upholding high standards.
Ecclesiastical aims to be the most trusted and ethical financial services group. This distinct
positioning is supported by our business model which drives our behaviours – and is evidenced
by a high level of trust that is rare amongst financial services businesses. As shown in Strategy
in action (page 44) this trusted and ethical ethos is recognised: our UK insurance business is the
consumer’s most trusted provider for the tenth consecutive time; our investment business has a
market-leading reputation both as the best ethical investment provider (receiving this award for the
eleventh consecutive year) and as an ethical investor raising awareness of environmental, social and
governance issues; and our financial advice business has been recognised as a ‘local hero’ for their
outreach and advocacy.
In addition to environmental concerns referenced in the previous section, uncertainty and volatility
prevail in the wider geopolitical landscape. There is significant turbulence across the world, with
challenges ahead: international power-play politics; friction in trade with increased protectionism,
tariffs and trade wars; escalating tensions in the Middle East (especially the growing isolation of Iran) and
the weakness of Europe. There are concerns around the potential for fragmentation of long-standing
alliances with Europe appearing more divided and fragile than at any time in recent history.
Governmental approaches to economic and social issues have led to disapproval and public
concern, provoking protests around the world. This is magnified by domestic political polarisation,
which reinforces feelings of discontent and uncertainty in many countries.
Ecclesiastical is mindful of these global trends and all our businesses continue to monitor the global
landscape, to understand and respond to the potential impacts from uncertainty.
Climate change
The world’s climate has changed over the past decade, with average temperatures continuing
to rise and setting new records. This is expected to lead to less predictable and more extreme
weather events (such as hurricanes, severe freezes, floods, extreme heatwaves and droughts).
Rising urbanisation is placing pressure on natural defences, leaving increasing numbers of people
vulnerable to rising sea levels. These factors are likely to result in a greater concentration of
insurance losses and will require changes in the way risk is evaluated and managed.
For the first time, the World Economic Forum’s Global Risks Report is dominated by the environment,
and specifically the climate emergency. The world’s leading economists now believe the top five
global risks in terms of likelihood are all environmental, with extreme weather events as the top
global risk. In terms of impact, climate inaction is the top global risk. There is growing recognition
that governments need to do more to respond to these environmental risks.
Our responsible investment business, EdenTree, has continued its work on climate change, especially
engaging with companies on the risks and opportunities in this area. Our insurance businesses
continue to investigate and trial innovative tools to help our customers prevent losses from occurring,
as shown in Strategy in action (page 44).
The UN Intergovernmental Panel on Climate Change (IPCC) has warned that global warming must
be kept to a maximum of 1.5°C within 12 years; after this, even a 0.5°C increase will increase the
risk of extreme weather leading to floods, drought and poverty for hundreds of millions of people.
Meeting this ambitious 1.5°C target could also prevent the eradication of corals and suppress the
changes to the Arctic which is seeing more pronounced changes than other parts of the globe.
In 2019, climate change became significantly more visible with increased momentum to address the
challenge. There are clear examples of growing concern: the environmental activist Greta Thunberg
was awarded Personality of the Year by Time magazine; children boycotted school across several
countries; bridge-blocking protests were organised; and the UK House of Commons approved a vote
to declare an environment and climate emergency. This year’s Australian bushfires are unprecedented
and provide a strong insight into the potential impact on the world if insufficient action is taken by
governments and people. The next decade will be crucial in tackling global warming.
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Trend
Our perspective
Trend
Our perspective
Regulation
In 2019, regulators have continued to focus on governance, culture and accountability. In the UK,
further insights into the Insurance Distribution Directive (IDD) were provided in several key reports
from the Financial Conduct Authority (FCA). The Senior Managers and Certification Regime
(SM&CR) became applicable to insurers in 2018 and to almost all UK regulated firms in 2019.
Changing demographics
and social trends
Since the turn of the twenty-first century, there has been significant change in demographics across
our key markets and territories. Populations are ageing in much of the developed world, leading
to a fall in the working population and delayed retirement for workers, although some pressure is
being relieved by higher immigration. Workers also face the threat of increased automation which is
removing some lower-skilled roles and increasing productivity.
While the Financial Conduct Authority’s regulations only apply in the UK, other regulators have
already introduced similar regimes or are consulting on their introduction. These jurisdictions
include Australia, Hong Kong, the Republic of Ireland and Singapore. Often, new regulations are
implemented first within banks before being extended to other financial services organisations.
Strong governance is seen as critical alongside good culture and conduct within financial
institutions. Individual accountability is now being applied by several regulators – its introduction
provides significant indication of potential outcomes where failings are identified.
The IDD focuses on the needs of the customer and requires judgement from financial organisations
as to how they can best meet the regulatory requirements while taking into account their particular
customer demographic and their own operating model. The rule requiring firms to act in the best
interests of the customer is gaining focus, as regulators begin to assess and collate evidence from
firms as to how they have adapted to these requirements both before and since the introduction
of the IDD.
Technology is another area of focus for regulators. Systems used by financial institutions continue to
be scrutinised to ensure operational resilience. Harnessing technology is seen as essential given the
evolving methods used to perpetrate financial crime in an increasingly digitalised and interconnected
world. This is intrinsically linked to data management – financial organisations must make best
use of this key asset. Ongoing data management and monitoring of controls is essential for
financial organisations. This criticality has been reinforced by the application of large fines imposed
on worldwide organisations following the implementation of the EU’s General Data Protection
Regulation (GDPR).
The basis of the UK’s withdrawal from the European Union (Brexit) remains unresolved in terms
of transitional arrangements, but is likely to have a significant impact on insurance and investment
management businesses.
Ecclesiastical and its businesses have prepared for potential outcomes arising from Brexit.
Ecclesiastical has one business based in the EU, its Ireland branch. An application has been made
to the Central Bank of Ireland for approval of the Ireland business as a Third Country Branch, to
substitute for the current approach that enables passporting of UK authorisation. This has been
agreed in principle to commence from the point existing EU law ceases to apply.
Contingency plans have been made for the transfer of data between the UK and the Ireland branch.
Appropriate action has been taken so that our businesses continue to operate in a lawful manner,
continuing to support our clients and business partners whatever the transition scenario.
These actions will safeguard our ability to trade in the Republic of Ireland.
Developments in
technology, data
and analytics
Migration is likely to lead to greater ethnic diversity which in turn will provide new opportunities for
businesses, particularly those operating in faith markets. Alongside Ecclesiastical’s roots in the
Anglican Church, our faith customers span a broad spectrum of risks including sacred places of
worship for Muslims, Hindus and Jews.
Young people are showing strong appetite for ethical employers and businesses. Increased
standards in public life are influencing expectations from businesses with customers and business
partners actively seeking proven ethical and trusted providers. Additionally, the pace of change
(particularly in technology) leads to increased expectations from customers and business partners,
who are seeking tailored propositions that meet their specific needs with enhanced levels of service.
As trusted providers, our businesses continue to attract and retain prestigious customers across our
geographies, as shown in Strategy in action (page 44).
There is an increasingly held view that data has now surpassed oil as the world’s most valuable
asset. The insurance industry is a key consumer of this incredibly valuable asset with an increasing
number of insurers adopting data-driven strategies. This allows them to create a competitive
advantage and improve their operating ratios. By embedding powerful analytical tools in their
infrastructure, recruiting data scientists or partnering with experts, they are able to capture data
and convert it into insights in real time to optimise pricing, create new business models, improve risk
selection and automate some underwriting tasks, especially in the SME sector.
Data is not only used to improve operating ratios. Insurers are moving towards customer-led
propositions that can offer tailored products or provide timely, personalised guidance to consumers
who have become accustomed to a personalised service in other parts of their digital lives.
Insurers are also now remodelling fundamental processes through the deployment of Robotic
Process Automation (RPA). The use of bots to automate tasks from email administration, customer
services and bordereaux processing to claims handling is on the rise – specific robotics positions
have been created to manage these processes. The integration of various forms of machine
learning with robotics, such as text and handwriting recognition, will increase the effectiveness
of this technology, which can open up new opportunities to insurers, including the integration of
unstructured data which may sit in a wide range of documents stored in legacy systems.
The ability to work with current and emerging technologies or become a customer-centric
organisation requires the adoption of new tools and mind-sets to make insurers more nimble,
responsive to customers’ needs and able to accelerate the execution of ideas. The adoption of
techniques such as Design Thinking have allowed insurers to rapidly test new ideas with customers
and validate their assumptions before committing resource to a course of action.
The World Economic Forum’s Global Risks Report identifies cyber-attacks as a key global risk.
As the global dependency on technology continues to increase, cyber security is of paramount
importance to businesses. Cyber-attacks have the potential to have far-reaching implications and
present significant risks to governments, businesses and individuals. Our businesses continue to
raise awareness of this risk, as shown in Strategy in action (page 44).
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Building on our strong faith foundation
Our clients value the unique understanding and deep expertise we bring to the
faith sector. And last year saw us win significant new faith clients – one of these
new clients was the Brothers of Charity Services Ireland, who provide valuable
support to vulnerable young people with mental health needs, and who we were
proud to begin working with early in 2019.
Since 1883, the Brothers of Charity
Services Ireland has been providing
a variety of services and support to
people with mental health issues who
are in danger of being marginalised.
Today, they support approximately
6,500 people with an intellectual
disability or autism, along with
their families, throughout Counties
Clare, Cork, Galway, Kerry, Limerick,
Roscommon, Tipperary and Waterford.
Through our relationship with their
broker, we secured the Brothers of
Charity Services Ireland’s business.
They are a registered charity with a
portfolio that includes a large number
of heritage buildings and four schools,
so we were able to leverage our
different areas of specialism.
Another step towards building
a wider book of faith risks in Ireland
was securing, through their broker,
significant religious order the
Redemptorists. A congregation of
brothers, most of whom are priests
living in the community, Redemptorists
are passionate about preaching the
Gospel, especially to those living on
the edges of church and society.
While the broker, at that time,
didn’t hold the risk, they had a strong
connection with the key decision-maker.
We proposed a meeting with the client
and the broker, believing this to be
the best way to get all the relevant
underwriting facts and to build more
trust and familiarity with our specialist
proposition. Following our meeting, we
received an instruction, demonstrating
how critical our trilateral approach is in
building confidence in all parties.
“ Ecclesiastical provided the expertise
and support we needed, enabling us
to present a viable and competitive
alternative.”
Caeva O’Callaghan, Managing
Director, O’Callaghan Insurance
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Our business
model and strategy
We are a commercial business with a charitable owner and purpose, with a distinctive
positioning that sets us apart from other businesses in the financial services sector.
Our purpose is to deliver growing financial returns to our shareholder and owner,
which are then distributed to charitable causes and communities, contributing to society’s
greater good. We use our distinctive proposition to create competitive advantage.
Fulfil our
charitable purpose
– we’re owned
by a charity
Deliver growing
financial returns
to our owner
Provide products
and services that
our customers
value and trust
Contribute to society’s
greater good
Develop
deep specialist
understanding
and expertise
Strive to be the
most trusted and
ethical financial
services group
Build enduring
relationships,
based on trust
The most trusted specialist insurer
Our aim is to be the most trusted specialist insurer, offering unrivalled
expertise and knowledge in our core markets, with appealing customer
propositions and an excellent claims service that meet the concerns and
needs of our customers and business partners
The most trusted specialist adviser
We aim to be the most trusted specialist adviser in our chosen markets,
providing our customers with the best independent and impartial insurance
or financial advice in order to meet their needs
The best ethical investment provider
We aim to be the best ethical investment provider and thought leader
on socially responsible investment. Building on an impressive track
record, we will continue to enhance our proposition and our ethical
credentials, leading the debate on the ethical investment issues that matter
to our customers
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Section Two
Strategic Report
Strategy in action
44
Our charitable purpose drives our strategic goal of being the most trusted and ethical
business in our chosen markets. It shapes the way we do business, particularly our
focus on doing the right thing for our customers and business partners. It creates
an environment where sustainable, long-term value generation is prized over
short-term results.
Thanks to our long-term approach, we have built long-standing relationships with
our customers and brokers, as demonstrated by their high levels of trust, loyalty and
engagement with our business. These enduring relationships have helped us build deep
understanding and expertise within our sectors, allowing us to provide highly valued
products and services.
These factors combine to support our drive to deliver sustainable and growing returns over
the long term, creating long-term value for our shareholders and demonstrating that a distinctly
ethical, specialist financial services group can succeed in competitive markets.
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Strategy in action
Our strategic goal is:
Most trusted specialist insurer
To be the most trusted and ethical specialist financial services group, giving £100m
to charity by the end of 2020.
We achieve
this by being
Customer focused – keeping customers at
the heart of our business and aiming to deliver
exceptional customer service
Real specialists – building a deep knowledge
and expertise in our specialist areas of financial
services
Our business has made considerable progress towards this target: during 2019, £32.5m
was donated to good causes and the total now stands at £96.5m. This achievement
has been made possible through the endeavours of all our businesses across the
Ecclesiastical Insurance Group, which are focused on meeting the needs of their
customers and business partners.
This charitable purpose underpins our business strategy. Our business continues to be
the only insurer in the UK’s top ten corporate donors. The GivX Community Investment
Index shows that Ecclesiastical has market-leading levels of employee-led community
investment: our charitable ethos is demonstrated by a wide variety of activities including
volunteering, employee-nominated charitable grants and employee fundraising.
We have continued to deliver the key elements of our strategy while investing in our
businesses and delivering value to our customers.
Disciplined in our underwriting – having
a well-defined risk appetite that supports
profitability and sustainability in our business mix
Focused on relationships – building strong,
lasting relationships, with a focus on trilateral
relationships between brokers, customers
and ourselves
Prepared to invest – investing in our
operational capability, to create the best
possible experience for our customers,
our business partners and our people
Strategy in action
• Attracted and retained prestigious customers
across all our segments in all our territories
• Recognised externally for our expertise and
ethical approach, with an 83% Net Promoter
Score for Ecclesiastical UK Claims and 98%
overall satisfaction for our claims service
• 100% of brokers that place business with
Ecclesiastical UK rate us as trusted and
100% believe we are an ethical business
• Sponsored key skills in aligned trades
including The Prince’s Foundation Building
Craft programme
• Sponsored awards including The Governor
General’s History Award for Excellence in
Museums (Canada) and Anglicare Awards
(Australia)
• Launched Cyber Ready, our award-winning
lesson plan to help schools to manage digital
resilience and prevent cyberbullying
• Deepened relationships with our Church
customers through our team of Church
Insurance Consultants (CICs)
• Supported over 5,000 brokers, affinity groups
and customers on specialist topics via our
Ansvar regional forums (Australia)
• Seeking new methods to prevent theft of
metal, using modern sensors to develop a
more affordable option for church customers
to deter and detect the removal of lead
• Testing new technologies in a joint project
with English Heritage at Kenwood House,
a 17th century property in London, to provide
advance identification of electrical fires and
machinery breakdown
• Investing in a new office building to
accommodate all Gloucester-based people
in a fresh, flexible and modern working
environment from late 2020
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Most trusted specialist insurer
Best ethical investment provider
Awards and
accreditations
UK
Canada
We achieve this by
• Fairer Finance: most trusted home insurer
• Top Employers for Young People (for the 8th
(for the 10th consecutive time)
consecutive year)
• CIR Risk Management Awards: Public
• Greater Toronto’s Top Employer 2019
Safety award
• CIPR PRide Awards: Best Corporate and
Philanthropy and Community Service
• Insurance Business Awards, Excellence in
Business Communications Campaign
• CIPR PRide Awards: Best Low Budget
Campaign
• Insurance Claims Awards: Commercial
Lines Team of the Year
• Insurance Claims Awards: Rising Star
Award
• Chartered Insurance Institute: New
Professional of the Year
• Insurance Institute of Cheltenham and
Gloucester: Achiever of the Year
• Insurance Institute of Cheltenham and
Gloucester: Lifetime Achievement Award
Strategy in action
Promoting socially responsible investment
– we have an industry-leading reputation for
our socially responsible investment funds and
investment thought leadership
Delivering long-term performance – we use
a consistent, proven approach to deliver long-term
investment success
Developing our products – we are
developing and deepening our fund offering
with particular focus on institutional investors
and charities
• Recognised for responsible and sustainable
investment with a strong long-term
performance record
• Acknowledged as a pioneer and thought
leader in our markets
• Established regional IFA Client Forums to get
a greater understanding of client needs
• Engaged across the responsible investment
landscape with membership of IIGCC
(Institutional Investors Group on Climate
Change), BBFAW (Business Benchmark on
Farm Animal Welfare) and The 30% Club
• Made accelerated progress in building our
institutional business client base and asset
gathering
Listening to our clients – we have implemented
a client feedback programme to create greater
proximity to our clients and their evolving needs
Enhancing our infrastructure – we are
building a platform for growth and increased
processing efficiency
• Published our acclaimed specialist Amity
Insights research with topics including
Sustainability, The Life Code and Economic
Inequality
• Reinforced our thought leadership position
with responsible investment expert briefings
on topics ranging from The How and Why of
Voting to Oppressive Regimes
• Continued to strengthen our capabilities
including investing in our back-office
systems and began scoping a new customer
relationship management (CRM) solution
Awards and
accreditations
• Retained Tier I Status under the Stewardship
• Moneyfacts Best Ethical Investment Provider
Code
(11th consecutive award)
• Sustained A+ rating for the UN Principles of
Responsible Investment (UN PRI)
• Financial Express Alpha Manager Hall of
Fame 2019, EdenTree Chief Investment
Officer
• Gained seventh accreditation under the
European SRI Transparency Code
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Section Two
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Key Performance Indicators
Financial
Non-financial
49
50
52
Strategic Report – Strategy in action
48
Most trusted specialist adviser
We achieve this by
Providing excellent service – building
long-term sustainable relationships with our
customers and their insurers
Building our business – delivering growth by
developing new offerings and schemes which
complement our existing niche markets
Strengthening our proposition – deepening
our expertise further in our chosen markets,
cementing our position as market leaders in
these areas
Working more closely together – developing
closer operational links across the Group to offer
solutions that meet our customers’ needs
Strategy in action
• High levels of customer satisfaction in broking
with 96% of customers extremely or very
satisfied with the service (SEIB) and 92% of
customers extremely or very satisfied with the
service (EFAS)
• Created new schemes in response to
understanding specialist client needs such as
property management companies
• Launched an online tool to enhance access to
risk management support for funeral directors
(SEIB in collaboration with Ecclesiastical)
• Continued to meet the key financial concerns
of clergy and church-related people and
offered financial support seminars in a number
of dioceses (EFAS)
• Collaborated to present a larger portfolio
to carriers in common (SEIB/Lycetts*)
• Competed in the 2019 British Insurance
Broking Association (BIBA) hackathon
with our Group Head of Innovation as
a hackathon mentor
• Held a ‘Best Livery Yard’ competition for
the equestrian sector with awards for best
full livery yard, best riding school and best
do-it-yourself (DIY) livery yard (SEIB)
Awards and
accreditations
• NatWest Local Mortgage Hero Awards, Best
• British Claims Awards, Personal Lines Broker
Firm South West (EFAS)
of the Year (SEIB)
• Women in Insurance, Broker of the Year (SEIB)
* part of Ecclesiastical Insurance Group (EIG)
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Key Performance Indicators
Financial
Measure
Performance
Measure
Performance
Donations
The amount donated by
Ecclesiastical to charities,
including our charitable
owner, each year. This is the
main measure of our ambition,
which is to give £100m to
charity by the end of 2020.
An improved investment return together with
a good underwriting result1 has enabled us
to increase our charitable giving to its highest
level ever. £32.5m of donations were made
to good causes in 2019.
This includes grants of £30.0m to our
charitable owner, Allchurches Trust Limited,
and takes the total amount of giving towards
our £100m target up to £96.5m.
Regulatory capital1
The Group’s regulatory capital
requirements are defined under
the Solvency II directive as
issued by the European Union
and adopted by the Prudential
Regulation Authority (PRA).
As the Group assessment
is conducted at the level
of Ecclesiastical Insurance
Group plc, the following refers
to the regulatory capital
of Ecclesiastical Insurance
Office plc (Ecclesiastical
Insurance Office Group’s
parent company) and
excludes the impact of
Ecclesiastical Life Limited
and Ansvar Insurance Limited.
The Solvency Capital
Requirement (SCR) is a risk-
based statistical calculation
that quantifies risks specific
to our business. The Group
sets a target level of capital
that is in excess of the SCR to
ensure ongoing compliance.
Ecclesiastical’s capital cover under Solvency
II has remained stable in 2019.
Investment assets have grown over the year,
which has increased capital but has also
raised the SCR due to an increase in Market
Risk. Equity returns have been strong in
2019, increasing exposure to future market
falls. Capital cover has remained constant
as the increases in the SCR have been
partially offset by a change in the basis used
to calculate the loss absorbing capacity of
deferred tax. Approval of the methodology by
the PRA has enabled us, to a greater extent,
to recognise a reduction in the net deferred
tax liabilities following a loss event.
The figures for 2019 are based on the
information provided to the Board as part of
their ongoing management of the business
and are unaudited.
We continue to balance the need to retain
profit within the business, to support our
strategy for future growth and investment in
technology and innovation, with our aspiration
to meet charitable giving targets.
(£m)
40 -
30 -
20 -
10 -
0 -
(£m)
600 -
500 -
400 -
300 -
200 -
100 -
0 -
32.5
27.5
24.7
20.6
18.8
2015 2016 2017 2018 2019
Solvency II capital cover
(unaudited)
198
285
199
278
269
292
295
257
306
264
(%)
- 250%
- 200%
- 150%
- 100%
- 50%
- 0 %
2015 2016
(i)
2017
(i)
2018
(ii)
2019
SCR (£m)
Excess own funds (£m)
Capital cover (%)
(i) the 2016 and 2017 figures are audited and
reflect figures from the Company’s published
Solvency and Financial Condition Report which
is available via the Company’s website
(ii) the 2018 own funds are audited and reflect
figures from the Company’s published Solvency
and Financial Condition Report, which is available
via the Company’s website
Profit before tax
The Group’s profit before
deduction of tax.
Each year, refreshed targets
are set in relation to the
Group’s business plans for
profit before tax. Details of
the target that was set for
2019 can be found in the
Group Remuneration Report
on page 134. Our short-term
target is to generate sufficient
profit to enable us to meet
our targets for charitable
donations.
Combined operating
ratio1 (COR)
The sum of Ecclesiastical’s
general insurance incurred
losses and expenses divided
by earned premiums for each
financial year.
Each year, refreshed targets
are set in relation to the
Group’s business plans for
the Group COR. Details of
the target that was set for
2019 can be found in the
Group Remuneration Report
on page 134. Our target over
the longer term is to achieve
a 95% COR.
Total profit before tax increased to £73.3m
in 2019, benefitting from the more favourable
investment markets.
Our Broking and Advisory business continued to
contribute consistent profits to the Group result
while our Investment Management business
reported a small loss due to continued investment
to deliver future growth plans.
More information on underwriting performance1
is given below.
See the Financial Performance Report on page
54 for more details.
The COR has increased in 2019. This reflects
the anticipated reduction in reserve releases
compared to prior year from the run-off of the
liability business we exited in 2012 and 2013.
The Group continues to keep underwriting and
pricing discipline at the centre of its strategy,
prioritising profit over growth in the competitive
business environment.
In 2019, the ratio continued to outperform
our longer-term target, supported by prior year
releases due to favourable developments in
liability claims.
For a breakdown of how COR is calculated,
see note 36 on page 244.
See the Financial Performance Report on page
54 for more details.
(£m)
100 -
80 -
62.5
60 -
53.6
82.2
73.3
40 -
20 -
0 -
(%)
105 -
100 -
95 -
90 -
85 -
80 -
15.4
2015 2016 2017 2018 2019
PBT
Underwriting profit1
92.0
89.8
91.1
86.9
86.4
2015 2016 2017 2018 2019
Longer-term target
1 Alternative performance measure, refer to note 36 to the financial statements for further explanation.
1 Alternative performance measure, refer to note 36 to the financial statements for further explanation.
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Measure
Performance
Financial Performance Report
54
Section Two
Strategic Report
(%)
100 -
80 -
60 -
40 -
20 -
0 -
(£m)
250 -
200 -
150 -
100 -
50 -
0 -
-50 -
46.1 51.5 53.6
54.5 53.0
2015 2016 2017 2018 2019
225
181
121
15
-28
2015 2016 2017 2018 2019
Net expense ratio1
(NER)
Total expenses as
a proportion of the net
premium earned in the
year. These expenses
include acquisition costs,
administration costs,
the movement in deferred
acquisition costs and
commission paid less
commission received.
Our aim is to make
year-on-year improvements
in the NER. However, in the
short term we expect NER
to reflect a planned increase
in strategic investment.
Net inflows1
(Investment
Management)
Net inflows are the difference
between the funds invested
and the funds withdrawn
during the period by third
parties in the range of funds
our Investment Management
division offers.
Net inflows contribute to
funds under management
which is a key driver of the
division’s revenue.
Each year, refreshed targets
are set which take into
account current market
conditions and potential
new initiatives.
Our NER decreased in 2019 to 53% driven
by a 6% increase in net earned premium.
Our programme of strategic investment in
technology, innovation and in our people has
continued in 2019 but there was no repeat of
the one-off costs in the prior year in relation
to the announced closure to future accrual of
the UK defined benefit pension scheme and
the Lloyd’s Bank court ruling on Guaranteed
Minimum Pension equalisation.
For a breakdown of how NER is calculated,
see note 36 on page 244.
Despite political and economic challenges
during the year, global equities delivered robust
gains in 2019. Bond markets also produced
positive returns over the period, benefitting from
safe haven status as trade war escalation and
weaker economic growth dampened investor risk
appetite. UK equities and sterling were boosted
in the final month of the year following a decisive
general election outcome signalling some relief
around Brexit uncertainty.
2019 saw record gross new money inflows at
over £0.5bn. Total net new inflows recorded
the highest ever level at £225m, driven by our
institutional business. The Charity pooled funds
made excellent progress over the year and overall
our pooled funds saw positive net inflows of
£38m, driven by strong sales of our bond funds
and mixed asset fund.
1 Alternative performance measure, refer to note 36 to the financial statements for further explanation.
Key Performance Indicators
Non-Financial
We place equal importance on financial and non-financial key performance indicators.
Details of the non-financial performance indicators can be found within our Strategy
in action section starting on page 44 and our Corporate Responsibility Report starting
on page 80.
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Financial
Performance Report
Our 2019 results have delivered a pre-tax profit of £73.3m (2018: £15.4m) and are
a demonstration of our long-term objective to deliver sustainable profitable growth.
We continue to be a trusted partner to our brokers and customers, and this is reflected
in our high retention and satisfaction levels, which supports our growth in revenue.
Our business is managed for a long-term view of risk and, as a result, we have a strong
capital position that can withstand short-term volatility.
The recovery of the market from Q4 2018
and subsequent favourable investment
market conditions resulted in fair value gains
on financial instruments of £56.0m (2018:
losses of £35.5m) and our underwriting profit
remained strong at £20.0m, (2018: £29.2m).
To support our growth and sustainability
ambitions, we have continued to invest in
our people, technology and our real estate.
The development of our new general
insurance underwriting platform is
progressing well and has been designed
to provide an outstanding customer,
broker and employee experience.
We made charitable grants of £32.5m
(2018: £18.8m) for the year as part of our
commitment towards the £100m target
by 2020 and have seen the positive and
substantial impact this charitable giving
makes to people’s lives.
General insurance
Our underwriting performance1 for the year
was in line with expectations and returned
a profit of £20.0m (2018: £29.2m profit),
and a Group COR1 of 91.1% (2018: 86.4%).
We delivered good growth and steady
underwriting profits. We’ve seen the results
of strengthening reserves in the Australian
and Canadian businesses and began to see
the impacts of anticipated lower prior year
releases.
United Kingdom
and Ireland
The UK and Ireland reported an
underwriting profit of £20.4m (2018:
£29.4m profit) and a COR of 86.8%
(2018: 80.2%). This represents another
good performance with a favourable result
on the liability account and a solid outturn
on the property book. As expected, the level
of prior year releases in 2019 was
significantly lower than in 2018 and this
has resulted in an overall reduction in the
underwriting result in 2019. We anticipate
this reduction to continue, with a greater
contribution coming from our current year
underwriting performance.
The underwriting result on the property
account was similar to 2018 due to an
absence of large weather events, although
we experienced an increase in theft and
subsidence claims during 2019. The current
year loss ratios are better than expectations
due to the absence of catastrophe events.
The underwriting result from the liability
account continues to perform favourably.
The claims releases that we have seen this
year have come from historical claims that
have settled more favourably than expected.
The run-off of unprofitable business
exited in 2012 and 2013, combined with
the prudent approach to reserving have
positively impacted the overall result over
the last four years.
In 2019, GWP grew by 6.2% to £257m
(2018: £242m). Trading conditions across
the year remained competitive and we expect
they will continue to be so. The education
sector was particularly competitive, although
we observed some market hardening in
property, specifically for risks with large
exposures such as heritage buildings.
We have continued to achieve high levels of
retention across our UK and Ireland business
whilst also carrying positive rate change,
which demonstrates the strength of our
proposition and reputation for exceptional
service. Our Real Estate and Art & Private
Client business delivered particularly strong
growth. GWP in respect of our Faith business
remained in line with the prior year, reflecting
a good result in a competitive market.
We expect the market to continue to
harden in property, and casualty may
follow. Education is likely to remain a key
competitive area as the Government’s risk
protection arrangement (RPA) now attracts
local authority maintained schools in addition
to academies. This has left the independent
schools sector exposed to competition from
all education insurers.
This hardening of certain parts of the
property market provides us with the
opportunity to improve overall rate strength
and to acquire good-quality new business
at profitable rates.
1 Alternative performance measures, refer to note 36 to the financial statements for further information.
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Our strategy over the medium term
is to deliver moderate GWP growth,
while maintaining our strong underwriting
discipline and our philosophy to seek profit
over growth. We will continue to deepen our
specialist capabilities through investment
in technology and innovation, and to provide
propositions that our customers value and
excellent service.
Ansvar Australia
Our Australian business reported an
underwriting loss of AUD$6.0m resulting in
a COR of 114.1% (2018: AUD$2.5m profit,
COR of 93.7%). The liability account was
adversely impacted by the strengthening of
physical and sexual abuse (PSA) reserves.
We saw a higher than expected number
of claims, a strengthening across industry
as the process for claimants evolves
following the conclusion of the Royal
Commission, together with development
in some high-profile cases. The property
account was also adversely impacted by
higher claims handling expenses and risk
margins following the Townsville flood event.
GWP grew by 24.6% in local currency to
AUD$126.5m (2018: AUD$101.6m) with
strong retention and rate increases.
Canada
Our Canadian business continued its
track record of delivering premium
growth, reporting a 17% increase in the
branch’s contribution towards Group GWP
at CAD$109.5m (2018: CAD$93.5m)
supported by strong retention, growth in
new business and rating increases.
Canada reported underwriting profit of
CAD$3.4m resulting in a COR of 95.1%
(2018: CAD$4.5m loss, COR of 106.5%).
The property book performed well with good
current year experience driven by fewer
large losses and the favourable development
of prior year claims, helping to offset the
impact of a series of weather events during
the first and third quarters. The underwriting
result from the liability account was adverse
as reserves were strengthened in older
years for PSA claims.
Other insurance operations
General insurance profits benefitted from
favourable releases of prior year reserves
from our businesses in run-off resulting
in an overall profit of £0.6m (2018: £1.0m
profit). As expected, the level of prior year
reserve releases in 2019 was lower than
experienced in 2018.
Investments
We saw a far less volatile end to 2019
compared with 2018, with strong returns in
UK and worldwide stock markets resulting
in a net investment return of £74.4m (2018:
£4.0m). Income from financial assets
remained stable at £26.2m (2018: £27.0m)
reflecting the continued low interest rate
environment and downwards pressure
on yields. Fair value gains on financial
instruments of £56.0m contrasted with
losses of £35.5m in 2018, as both equities
and bonds strengthened over the year,
with the UK market in particular benefitting
latterly from renewed confidence. In spite
of this strong 2019 result, there remains
as ever political and economic uncertainty
which could impact the performance of
our investments, and as for all businesses,
we are subject to the consequences of
disruption that events such as the current
Coronavirus outbreak can have on financial
markets. Nevertheless we remain confident
in our long-term value investment philosophy,
and are relatively defensively positioned
and well diversified across a broad range
of asset classes.
Within our UK equity portfolio, the mid-cap
bias proved beneficial as the FTSE 250
index outperformed the FTSE All-Share
index by 10%, driven in large part by fourth
quarter strength as the election of a majority
Government reduced Brexit uncertainty.
Our directly-held sterling bond
portfolio underperformed the FTSE Gilts
benchmark by 2.8% due to our greater
exposure to short dated bonds, which we
hold for liability matching and liquidity
management purposes. In the final quarter,
as yields improved, we saw the benefit of
our shorter dated portfolio in our portfolio’s
performance. The fixed interest portfolio
also benefitted as a result of allocation to
corporate bonds where narrowing credit
spreads drove higher returns relative
to gilts.
The downward movement in bond yields
led to a decrease in the discount rate
applied to long-tail general insurance
liabilities. The change in discount rate on
those liabilities resulted in a £12.4m loss
recognised within investment returns
(2018: £4.1m profit).
Investment Management
The Group’s Investment Management
business, EdenTree, continued to develop
its presence in the charity and institutional
markets. Net inflows of £219m
(2018: £181m) were the highest in
EdenTree’s history.
Global equity markets delivered double
digit returns over the year and coupled
with strong net fund inflows resulted in
total funds under management increasing
by 14% to £3.1bn (2018: £2.7bn).
Fee income was marginally ahead at
£12.8m (2018: £12.6m). Overheads have
increased by 13% in the year primarily
from our continued investment in people
and technology to support delivery of future
growth plans. As a result, our Investment
Management business reported a loss
before tax of £0.3m (2018: profit before
tax £0.9m).
Long-term insurance
Our life insurance business, which is closed
to new business, reported a profit before tax
of £0.3m for the year (2018: £1.6m). Assets
and liabilities are well matched, and the small
profit is in line with our expectations for this
business as it runs off.
Broking and advisory
Overall, broking and advisory had modest
growth in income and profit, reporting a
profit before tax of £2.1m (2018: £2.0m).
This area of our business includes our
insurance broker, South Essex Insurance
Brokers (SEIB), our financial advisory
businesses, Ecclesiastical Financial
Advisory Services (EFAS) and Ansvar
Risk Management Services (ARMS).
SEIB reported an increase in profit before
tax to £2.6m (2018: £2.4m). EFAS
reported a loss of £0.4m in the year
(2018: £0.2m loss).
Outlook
The Group takes a long-term view to
managing and investing in the business
and our 2019 financial results, including
our strong capital position is reflective of this
approach. The decisions we take are also
made with a focus on delivering sustainable
profitability and our vision to be the most
trusted and ethical financial services group.
As we look forward to 2020 and beyond, we
will exercise caution where our businesses
may need to operate around uncertainty and
market disruption. We will continue to focus
on delivering sustainable profit growth and
remain optimistic about the opportunities
to continue to evolve our business for
the greater good of society and to make
a positive impact on people’s lives.
Denise Cockrem
Group Chief Financial Officer
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Keeping horse welfare moving
With over 50 years’ experience in the equestrian industry, we remain one
of the leaders in this specialist field. Horse owners ourselves, we understand
the unique issues that can arise. So, when we got a call from the British Horse
Society (BHS) telling us that their healthcare vehicle had been stolen,
we knew the consequences for ill and neglected horses could be serious.
We also knew we had to get straight to work.
Horse welfare is one of the key roles of
the BHS. And their healthcare vehicle,
purchased using a £50,000 grant in
2018 through our SEIB Giving charity
campaign, enables them to move vital
equipment as well as to transport
horses to veterinary hospitals.
After consulting the BHS PR department,
we both decided to spread the news
of the stolen healthcare vehicle across
social platforms. Within a few hours of
the posts going live, it was found just
a few miles from where it was stolen.
vehicle with their own vehicles to
block it in until the police arrived,
demonstrating the strength of loyalties
within the equestrian community.
Sadly, the healthcare vehicle was
damaged in the incident but we were able
to get it repaired fast. We also persuaded
our insurer partners to supply a suitable
hire vehicle for the BHS welfare team
to use on their pre-arranged missions.
In short, we went all out to ensure that
the vital work of the BHS wasn’t halted
because of the theft.
bespoke healthcare vehicle was
stolen, ransacked and vandalised.
In a far from straightforward situation
for us, involving specialist equipment
and the healthcare vehicle itself,
we experienced a sensitive, sensible
and personal service from SEIB who
simplified the complicated process
of dealing with multiple insurers,
loss adjusters, engineers and suppliers
throughout the claims process.”
Duncan Snook, Finance Director
and Company Secretary
The British Horse Society
The equestrian community in the local
area even surrounded the healthcare
“ The British Horse Society welfare
team was devastated when our
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Strategic Report – Financial Performance Report
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Section Two
Strategic Report
Risk Management Report
Principal risks
61
62
68
‘We will continue
to deepen our specialist
capabilities through
investment in technology
and innovation, and
to provide propositions
that our customers value
and excellent service.’
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Risk Management
Report
Introduction
Strong governance is fundamental to what we do and drives the ongoing embedding
of our enterprise-wide risk management framework. This provides the tools, guidance,
policies, standards and defined responsibilities to enable us to achieve our strategy and
objectives and ensure that individual and aggregated risks to our objectives are identified
and managed on a consistent basis.
Risk
strategy
Risk appetite
Risk policies and standards
Internal model
Stress and
scenario
testing
ORSA
R
i
s
k
r
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Values and culture
People, systems and processes
Governance
Key to the successful operation of the
internal control framework is the deployment
of a strong Three Lines of Defence
Model whereby:
• 1st Line (Business Management)
is responsible for strategy execution,
performance and identification and
management of risks and application
of appropriate controls
• 2nd Line (Reporting, Oversight and
Guidance) is responsible for assisting
the Board in formulating risk appetite,
establishing minimum standards,
developing appropriate reporting, oversight
and challenge of risk profiles and risk
management activities within each of the
business units. This includes Executive
Risk Management Committees (Insurance,
Market and Investment and Operational,
Regulatory and Conduct Risk) and is
subject to oversight and challenge by
the GRC
• 3rd Line (Assurance) provides
independent and objective assurance
of the effectiveness of the Group’s systems
of internal control. This activity principally
comprises the Internal Audit function
which is subject to oversight and challenge
by the Group Audit Committee.
The risk management framework is
integrated into the culture of the Group and
is owned by the Board. Responsibility for
implementation and oversight is delegated
via the Group Chief Executive to the Group
Risk Function, led by the Group Chief Risk
Officer (CRO).
The risk management process demands
accountability and is embedded in
performance measurement and reward,
thus promoting clear ownership for risk
and operational efficiency at all levels. On
an annual basis, the Group Risk Committee
(on behalf of the Board) carries out a formal
review of the key strategic risks for the Group
with input from the Group Management
Board (GMB) and the Strategic Business
Units (SBUs). The Group Risk Committee
(GRC) allocates responsibility for each of
the risks to individual members of the
Group’s executive management team.
Formal monitoring of the key strategic risks
is undertaken quarterly, including progress
of risk management actions, and is overseen
by the Executive Risk Committees.
Ecclesiastical has clearly defined the
accountabilities, roles and responsibilities
of all key stakeholders in implementing
and maintaining its Risk Management
Framework. These are defined, documented
and implemented through the terms of
reference (TORs) of board sub-committees,
management and executive forums, position
descriptions and functional charters.
The Group’s Risk Management
Framework itself is part of a wider
Internal Control Framework. Systems of
internal control are designed to manage
rather than eliminate the risk of failure to
achieve business objectives, and provide
reasonable, but not absolute assurance as
to the prevention and detection of financial
misstatements, errors, fraud or violation
of law or regulations.
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We seek to develop and improve our risk
management framework and strategy on an
ongoing basis to ensure it continues to support
the delivery of our strategy and objectives.
The Group risk appetite defines the level
of risk-taking that the Board feels is
appropriate for the Group as we pursue
our business objectives. It is defined in line
with the different categories of risk that the
Group faces, and provides the backdrop
against which the business plan is developed
and validated. This ensures that the risk
profile resulting from the business plan is
in line with the risk-taking expectations of
the Board. Compliance with the risk appetite
is formally monitored every quarter and
reported to the GRC at each meeting.
The risk appetite is formally reviewed
annually with approval and sign-off
by the Board and there are ongoing
assessments to ensure its continued
appropriateness for the business.
The Own Risk and Solvency Assessment
(ORSA) process is carried out at least
once a year and is a key part of the business
management and governance structure.
This integrates the risk management,
business planning and capital management
activities and ensures that risk, capital and
solvency considerations are built into the
development and monitoring of the Group’s
business strategy and plans and all key
decision-making.
The Company has regulatory approval for the
use of an Internal Model to determine our
regulatory capital requirement. In addition,
the Internal Model’s capability to quantify
material risks and assess the impacts on
capital requirements across a range of
scenarios allows us to gain a deeper insight
into the relationship between risk and capital
management.
The Internal Model is used extensively to
inform key business decisions across the
Group, including setting business strategies
and objectives, producing risk profiles and
capital requirements for different scenarios,
informing risk-taking guidelines, informing
and defining the Group risk appetite and
Investment Strategy, and determining risk
mitigation mechanisms and responses to
regulatory capital requirements.
Risk environment
The risk environment is monitored on an
ongoing basis and key areas of concern
are escalated to the GRC.
The uncertainty around Brexit continued
during 2019 although reduced by year end.
The main risk identified for the Group as a
result of Brexit was the loss of its ability to
carry out business in the Republic of Ireland
using the freedom to provide services
currently afforded by the UK’s membership
of the EU. This risk has been mitigated,
as during 2019 approval in principle was
obtained for the Ireland branch to become
regulated by the Central Bank of Ireland
as a Third Country branch after Brexit.
The Group has no other material business
elsewhere in the EU. The remaining
uncertainty of the outcome of Brexit has
the potential to result in adverse economic
conditions and affect the value of our
investments and our customers. We have
not identified any further material risks to
our business as a result of Brexit and we
continue to monitor this position as well
as the potential impact of other risks such
as global trade disputes.
During 2019, we maintained our existing
investment approach and made no material
changes to our asset mix. We continue
to hold a diversified portfolio of assets
including equities which we believe remain
a good prospect for long-term returns.
Consequently, we take a relatively high level
of market risk which is well understood
and closely managed. The defined benefit
pension scheme was closed to future
accrual from June 2019 which will enable
further reductions in the risk associated
with the scheme.
impact on our service to customers as well
as sizeable regulatory fines and reputational
damage. The increased societal focus on
data security and appropriateness of use,
through regulations such as GDPR, results
in increased scrutiny and prominence.
The Group aims to be the most trusted,
specialist insurer and, therefore, maintaining
a positive reputation is critical. Our reputation
could potentially be damaged as a result of
a range of factors including poor business
practices and behaviours. High standards of
conduct are a core part of the Group’s brand,
values and culture, and there is an ongoing
focus on ensuring this is maintained.
Climate change presents increasing levels
of risk to our businesses and our customers.
Whilst the greatest impacts of these risks
are expected to materialise in the medium
to long term, we are considering the actions
that we should be taking to mitigate and
manage these risks now. Our potential
exposures include transition risk, primarily
related to our investment portfolio, and
physical risk affecting the insurance risks
that we cover.
The Group considers COVID-19 a new
emerging risk. The Group has business
continuity plans in place and a crisis
management team has been active in
preparing for responses to this event.
The Group will continue to monitor the
situation and the advice from Governments
and relevant health authorities in the
countries we operate in as the outbreak
evolves and will take appropriate action.
Within the insurance businesses of the
Group and in the wider markets, firms
continue to enhance their analytical skills
and deepen their portfolio knowledge.
Therefore, high-quality technical
underwriting standards, pricing and portfolio
management abilities are increasingly
important to ensure business written and
retained is profitable. Our strategy is to
achieve controlled and profitable growth
within our defined niches.
The potential for adverse development
of long-tail liability claims, particularly
in respect of PSA claims, remains
a key risk that we continue to actively
manage. The Independent Inquiry into
Child Sexual Abuse in the UK is
progressing and we have participated
in one of the investigations during 2019.
We are monitoring this inquiry, and also
developments in the other territories
in which we operate to determine the
potential impacts on these claims.
Competitor activity is an ever-present
risk across all our business operations
and chosen niches. This could have an
adverse impact on our ability to charge the
appropriate price for a risk, threaten our
growth plans or even lead to a decline in
scale with resultant adverse financial impact.
Regulatory change continued during
2019 including the extension of the Senior
Managers and Certification Regime to
additional companies within the Group.
Management of change in the regulatory
environment continues to be a focus to
ensure that we operate within relevant
legal, regulatory and consumer protection
requirements and guidelines and that our
people maintain the highest standards
of conduct.
Cyber risk continues to evolve at a pace.
We hold customer data and therefore any
event involving a significant loss of such data
could result in harm to the data subjects,
significant operational disruption and an
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Evolution with conviction
The responsible investment market is changing fast, and as a pioneer in this
space for over 30 years EdenTree remains at the forefront of this movement.
Our expertise and agility keeps us a step ahead, enabling us to respond to the
challenges and opportunities of a growing market, whilst our commitment to
integrity and our resolve in managing client funds with trust remains unshakable.
This year, we’ve taken the important step of better defining what we do,
calling it ‘responsible and sustainable’ investment.
A key part of this process in 2019 was
the publication of our Amity Insight:
Sustainability report, which set out how
we define and integrate sustainability
into our investment process in order
to be clear and transparent.
Steps like these keep us at the forefront
of the increasingly vibrant conversation
around responsible and sustainable
investing. We continue to embrace
that role and it’s clear that our clients
look up to us as a firm that can lead by
example. In September we took home
the award for ‘Best Ethical Investment
Provider’ at the Investment Life &
Pensions Moneyfacts Awards 2019,
for the eleventh consecutive year.
Proof perhaps, that after 30 years of
innovation we’re still leading the charge,
bringing responsible and sustainable
investing into the mainstream.
“ We see the increased appetite for
sustainable investing as a huge
opportunity – however we also believe
that this brings significant challenges
and risks. And we continue to act as a
respected and authoritative voice in the
market, addressing these concerns.”
Sue Round, Chief Executive Officer
EdenTree Investment Management
“ We are witnessing a sea change in
attitudes towards responsible and
sustainable investing. Most clients no
longer view performance as a barrier.
While this is welcome news for us,
we believe that much more needs to be
done to explain the nuances of ethical
and responsible investing. A failure to
communicate effectively makes the
industry vulnerable to greenwashing
and mis-selling.”
Neville White, Head of RI Policy & Research
EdenTree Investment Management
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Principal risks
There is an ongoing risk assessment process which has identified the current principal risks for the Group as follows:
Insurance risk
The risk that arises from the fluctuation in the timing, frequency and severity of insured events
relative to the expectations of the firm at the time of underwriting.
Risk detail
Key mitigants
Change from last year*
Risk detail
Key mitigants
Change from last year*
Underwriting risk1
The risk of failure to
price insurance products
adequately and failure
to establish appropriate
underwriting disciplines.
The premium charged
must be appropriate for the
nature of the cover provided
and the risk presented
to the Group. Disciplined
underwriting is vital to ensure
that only business within risk
appetite and desired niches
is written.
Reserving risk1
Reserving risk is the risk
of actual claims payments
exceeding the amounts we
are holding in reserves.
This arises primarily from our
long-tail liability business.
Failure to interpret emerging
experience or fully understand
the risks written could
result in the Group holding
insufficient reserves to meet
our obligations.
• A robust pricing process is in place
• The Underwriting Licencing process has been refreshed
• A documented underwriting strategy and risk appetite
is in place together with standards and guidance and monitored
by SBUs
• This is supported by formally documented authority
levels for all underwriters which must be adhered to.
Local checking procedures ensure adherence
• Monitoring of rate strength compared with technical rate
is undertaken on a regular basis within SBUs
• There are ongoing targeted underwriting training programmes
in place
There have not been material
changes to this risk during the
year. We continue to focus
on managing our portfolios
through various initiatives
in order to mitigate this risk
as our insurance business
develops.
• Claims development and reserving levels are closely monitored
by the Group Reserving team
• For statutory and financial reporting purposes, prudential
margins are added to a best estimate outcome to allow
for uncertainties
• Claims reserves are reviewed and signed-off by the Board
acting on the advice and recommendations of the Group Chief
Actuary following review by the Reserving Committee.
An independent review is also conducted by the Actuarial
Function Director
This risk is not considered
to have changed materially
during the year. No significant
developments have impacted
this risk.
Catastrophe risk1
The risk of large-scale
extreme events giving
rise to significant insured
losses. Through our general
insurance business we are
exposed to significant natural
catastrophes in the territories
in which we do business.
• Modelling is undertaken to understand the risk profile and
inform the purchase of reinsurance
• There is a comprehensive reinsurance programme in place to
protect against extreme events. All placements are reviewed
and approved by the Group Reinsurance Board
• A Catastrophe Risk Management Group provides oversight and
sign-off of reinsurance modelling
• The Group Risk Appetite specifies the reinsurance purchase
levels and retention levels for such events
• Local risk appetite limits have been established to manage
concentrations of risk and these are monitored by SBUs
• Exposure monitoring is undertaken on a regular basis
There have been no
material changes to this risk.
We continue to monitor our
aggregations and exposures
to such events and ensure
careful management utilising
appropriate protections.
Reinsurance risk
The risk of failing to access
and manage reinsurance
capacity at a reasonable
price. Reinsurance is a central
component of our business
model, enabling us to insure
a portfolio of large risks in
proportion to our capital base.
• We take a long-term view of reinsurance relationships
to deliver sustainable capacity
• A well-diversified panel of reinsurers is maintained for each
The level of this risk has
remained broadly similar since
last year.
element of the programme
• A Group Reinsurance Board is in place which approves all
strategic reinsurance decisions
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Other financial risks
The risk that proceeds from financial assets are not sufficient to fund the obligations arising from
insurance contracts.
Risk detail
Key mitigants
Change from last year*
Risk detail
Key mitigants
• An investment strategy is in place which is reviewed annually
and signed-off by the Finance and Investment Committee (F&I).
This includes consideration of the Group’s liabilities and capital
requirements
• A Market and Investment Risk Committee is in place and
provides oversight and challenge of these risks and the
agreed actions. There is a formalised escalation process
to the Group Management Board (GMB) and F&I in place
• There are risk appetite metrics in place which are agreed by
the Board and include limits on exposures and counterparties
• Derivative instruments are used to hedge elements
of market risk, notably equity and currency. Their use
is monitored to ensure effective management of risk
• There is tracking of risk metrics to provide early warning
indicators of changes in the market environment
Overall, the market risk profile
has not materially changed
and we remain invested for
the long term. We continue
to monitor the remaining
uncertainty from the outcome
of Brexit as well as the
potential impact of other risks
such as global trade disputes.
Since the end of 2019
markets have shown
increased uncertainty due to
the COVID-19 outbreak and
we are continuing to monitor
the situation.
Further information on this risk is given in note 4
to the financial statements on page 197.
• Strict ratings criteria are in place for the reinsurers that we
contract with and a Reinsurance Security Committee approves
all of our reinsurance partners
• Group Reinsurance monitors the market to identify changes in
the credit standing of reinsurers
• There are risk appetite limits in place in respect of reinsurance
counterparties which are agreed by the Board
• Strong credit control and risk management processes are in
place to manage broker exposures, policyholder exposures and
other elements of credit risk
Further information on this risk is given in note 4 to the financial
statements on page 197.
The level of this risk is
materially unchanged from
last year.
Market and investment
risk1
The risk of adverse
movements in net asset
values arising from a change
in interest rates, equity and
property prices, credit spreads
and foreign exchange rates.
This principally arises from
investments held by the Group.
We actively take such risks
to seek enhanced returns on
these investments.
The Group’s balance sheet
is also exposed to market
risk within the defined
benefit pension fund.
Credit risk1
The risk that a counterparty,
for example a reinsurer,
fails to perform its financial
obligations to the Group or
does not perform them in
a timely manner resulting in
a loss for the Group.
The principal exposure
to credit risk arises from
reinsurance, which is central
to our business model.
Other elements are our
investment in debt securities,
cash deposits and amounts
owed to us by intermediaries
and policyholders.
Liquidity risk
The risk that the Group,
although solvent, either does
not have sufficient financial
resources available to enable
it to meet its obligations as
they fall due, or can secure
them only at excessive cost.
We may need to pay significant
amounts of claims at short
notice if there is a natural
catastrophe or other large
event in order to deliver on
our promise to our customers.
Climate change
The financial risks arising
through climate change.
The key impacts for the Group
are the long-term impact on
the risks insured, particularly
through changes to the nature,
scale and frequency of future
catastrophe events; and the
impacts on the investment
portfolio due to developments
in how the firms invested
in respond to movements
towards a lower carbon
economy.
• We hold a high proportion of our assets in readily realisable
investments to ensure we could respond to such a scenario
• We maintain cash balances that are spread over several banks
• We have arrangements within our reinsurance contracts for
reinsurers to pay recoverables on claims in advance of the
claim settlement
Change from last year*
There have been no material
changes to this risk since
last year.
• There is an established ethical and responsible investment
policy in place for our funds and property investments
• We are developing catastrophe modelling with reinsurers
to support better understanding of climate risk
This risk has been added
to the Group Risk Register
during 2019. A programme
of work is underway to
fully analyse the risks and
develop an appropriate risk
management response.
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Operational risk1
The risk of loss arising from inadequate or failed internal processes, people and systems,
or from external events.
Risk detail
Key mitigants
Change from last year*
Risk detail
Key mitigants
Change from last year*
• Systems monitoring is in place together with regular systems
and data backups
• A strategic systems programme is underway to deliver improved
systems, processes and data
• Business recovery plans are in place for all critical systems
and are tested according to risk appetite
During 2019, a new claims
system was implemented and
strategic systems programme
continued to make progress.
The scale and complexity
of this programme results
in heightened change risk
during the development
and implementation period.
• A number of security measures are deployed to ensure
protected system access
• Security reviews and assessments are performed on
an ongoing basis
• There is ongoing maintenance and monitoring of our systems
and infrastructure in order to prevent and detect cyber
security attacks
Although the threats continue
to evolve, we proactively review
and update our controls and
therefore the overall residual
level of risk is unchanged but
we acknowledge the need for
vigilance and strong security
measures.
• We ensure that there is adequate resourcing for change
projects using internal and external skills where appropriate
• A Group Development Director is in place with responsibility
for overseeing the delivery of all strategic initiatives
• A Change Board and change governance processes have
been established and are operated on an ongoing basis
• The GMB undertakes close monitoring and oversight of
the delivery of the strategic initiatives and key Group
change programmes
The level of this risk has
not materially changed.
There continues to be a
significant volume of change
within the business which
is monitored closely.
Systems risk
The risk of inadequate, ageing
or unsupported systems and
infrastructure and system
failure preventing processing
efficiency. Systems are
critical to enable us to provide
excellent service to our
customers.
Cyber risk
The risk of criminal or
unauthorised use of electronic
information, either belonging to
the Group or its stakeholders
e.g. customers, employees etc.
Cyber security threats from
malicious parties continue
to increase in both number
and sophistication across all
industries.
Change risk
The risk of failing to manage
the change needed to
transform the business.
A number of strategic
initiatives are underway
under six themes, including
a transformation of our core
system and key processes,
which will deliver significant
change for the company over
the next few years. There
are a number of material
risks associated with major
transformation, not only on the
risks to project delivery itself,
but the potential impacts on
business as usual.
• A recovery and resilience framework is in place aligned to the
delivery of customer services
• Recovery exercises including IT systems are regularly
performed across the Group with actions identified addressed
within an agreed timescale
• All suppliers are subject to ongoing due diligence
• There is ongoing maintenance and monitoring of our systems
and infrastructure in order to prevent and detect issues
This risk has changed
materially since 2019 year
end. The COVID-19 outbreak
has the potential to result in
significant operational impact.
This is being managed closely
and developments monitored.
A Crisis Management Team
has been active in preparing
for required responses in line
with advice from Governments
and relevant health authorities
for the countries we operate
within.
• Group Data Governance and Group Data Management
and Information Security Policies are in place
• A Group Data Optimisation Programme is in place which is
responsible for ensuring the delivery of the data strategy and
all aspects relating to the governance, management, use and
control of the Group’s data in line with regulatory requirements
The level of this risk is
materially unchanged from
last year. It is being monitored
and managed in the context
of major change programmes.
Operational Resilience
The risk that the Group
does not anticipate, prepare
for, respond and adapt to
incremental change and
sudden disruptions resulting
in an inability to continue
to deliver customer critical
services.
The Group provides a wide
range of services to a diverse
customer base and has a
reputation for delivering
excellent service. Therefore,
we seek to minimise the
potential for any such
disruption that would impact
on the service provided to
our customers.
Data Management
and Governance
The risk that the confidentiality,
integrity and/or availability of
Data held across the Group
is compromised, or Data is
misused. The Group holds
significant amounts of customer
and financial data and there
could be significant implications
if this is compromised or is
found to be inaccurate.
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Regulatory and conduct risk
The risk of regulatory sanction, operational disruption or reputational damage from
non-compliance with legal and regulatory requirements or the risk that Ecclesiastical’s behaviour
may result in poor outcomes for the customer.
Risk detail
Key mitigants
Change from last year*
Reputation risk
The risk that our actions lead to reputational damage in the eyes of customers, brokers or other
key stakeholders.
Risk detail
Key mitigants
• We undertake close monitoring of regulatory developments
and use dedicated project teams supported by in-house and
external legal experts to ensure appropriate actions
to achieve compliance
• An ongoing compliance monitoring programme is in place
across all our SBUs
• Regular reporting to the Board of regulatory compliance issues
and key developments is undertaken
There continues to be
a significant volume of
regulatory change. We remain
focused on the management
of regulatory change and
therefore the overall risk level
is unchanged.
• Ongoing staff training to ensure that customer outcomes are
fully considered in all business decisions
• Customer charters have been implemented in all SBUs
• Conduct Risk Reporting to relevant governing bodies is
undertaken on a regular basis
• Customer and conduct measures are used to assess
remuneration
The level of this risk is
unchanged from last year.
Regulatory risk
The risk of regulatory
sanction, operational
disruption or reputational
damage from non-
compliance with legal and
regulatory requirements.
We operate in a highly
regulated environment which
is experiencing a period
of significant change.
Conduct risk
The risk of unfair outcomes
arising from the Group’s
conduct in the relationship
with customers, or in
performing our duties and
obligations to our customers.
We place customers at
the centre of the business,
aiming to treat them fairly and
ethically, while safeguarding
the interests of all other key
stakeholders.
• There is ongoing training of core customer facing staff to
ensure high skill levels in handling sensitive claims
• We adopt a values led approach to ensure customer-centric
outcomes
• Dedicated Marketing and PR function responsible for the
implementation of the marketing and communication strategy
• Ongoing monitoring of various media to ensure appropriate
responses
Brand
and reputation risk
The Group aims to be the
most trusted specialist insurer
and, as a consequence,
this brings with it high
expectations from all of
our stakeholders, be they
consumers, regulators or
the wider industry.
Whilst we aim to consistently
meet and where possible
exceed these expectations,
increasing consumer
awareness and increased
regulatory scrutiny across
the sector exposes the
Group to an increased risk of
reputational damage should
we fail to meet them, for
example as a consequence of
poor business practices and
behaviours.
Change from last year*
Maintaining a positive
reputation is critical to
the Group’s vision of being
the most trusted and ethical
specialist financial
services group.
Risks to our brand and
reputation are inherently
high in an increasingly
interconnected environment,
with the risks of external
threats such as cyber
security attacks, and viral
campaigns through social
media always present. The
ongoing IICSA inquiry and
related PSA issues continue
to be a key area of executive
management focus.
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Section Two
Strategic Report
Corporate Responsibility Report
2019 highlights
Overview
Our workplace
Our community
Our marketplace
Our environment
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Longer-term viability statement
It is fundamental to the Group’s longer-term
strategy that the directors manage and
monitor risk taking into account all key
risks the Group faces, including longer-term
insurance risks, so that it can continue to
meet its obligations to policyholders.
The Group is also subject to extensive
regulation and supervision including Solvency
II. Against this background, the directors
have assessed the prospects of the Group
in accordance with Provision 31 of the
2018 UK Corporate Governance Code, with
reference to the Group’s current position and
prospects, its strategy, risk appetite, and the
potential impact of the principal risks and
how these are managed.
The risks presented by COVID-19 have been
considered. The Group has business continuity
plans in place that support the continued
operation of business activity and has capital
resources that can withstand significant
temporary market disruption. At this stage
there is no perceived material risk to the
Group’s viability resulting from the COVID-19
outbreak. The risks presented by Brexit have
been considered and at this stage there is no
perceived material risk to the Group’s viability.
The assessment of the Group’s prospects
by the directors covers the three years to
2022 and is underpinned by management’s
2020-22 business plans which make
assumptions relating to: the prevailing
economic climate and global economy;
the structural challenges facing the financial
services sector; and the costs associated
with delivering the Group’s strategy.
They also include projections of the Group’s
capital, liquidity and solvency. While the
directors have no reason to believe the
Group will not be viable over a longer
period, a three-year outlook period has
been selected. Given the rate of change in
the markets in which the Group operates,
three years provides an appropriate balance
between the period of outlook and degree of
clarity over specific, foreseeable risk events
that could impact on the viability of the
Group. Stress and scenario analysis has been
performed with reference to the principal
risks of the Group, which are documented on
pages 68 to 75. The stresses are designed
to be severe, but plausible, and assess the
impact of certain events on the Group’s
profitability and capital strength.
They include:
Scenario
Increase in attritional claims
1 in 50 year deterioration in PSA reserves
10% reduction in GWP year on year
Principal risks
Underwriting risk
Reserving risk
Underwriting risk
CAT windstorm combined with reinsurer default
Catastrophe and credit risk
10% increase in annual operating expenses
Operational risk
Combined 1 in 20 investment market fall and CAT windstorm Market and investment risk, and catastrophe risk
Scenario testing found that the combined 1 in
20 investment market fall and CAT windstorm
scenario puts most strain on capital but does
not result in a direct breach of regulatory
requirements. A range of plausible mitigating
actions has been identified and documented.
The solvency position of the Group has
been projected as part of the Own Risk and
Solvency Assessment (ORSA), which is a
private, internal, forward-looking assessment
of own risk, required as part of the Solvency II
regime. The forward-looking emphasis of the
ORSA ensures that business strategy and
plans are formulated with full recognition of
the risk profile and future capital needs.
The analysis confirms that the Group has
sufficient capital resources to cover its
capital requirements for the period of the
business plan.
The directors have also considered the
Group’s ability to service its preference share
borrowing and the dividend expectations
of its owner. The Group has fixed annual
dividend payments of £9.2m in respect of
its non-cumulative irredeemable preference
shares. The Group makes regular grants to
its ultimate charitable owner, Allchurches
Trust Limited. There is a regular cycle of
discussion with Allchurches Trust Limited
to determine the appropriate level of grants,
in which the Group’s capital position and future
business needs are taken into account.
Confirmation of viability
Based on the Group’s strong capital position,
the strong risk management framework in
place and the Group’s resilience to the variety
of adverse circumstances as demonstrated in
the results of the stress testing and potential
mitigating actions, the directors confirm that
they have a reasonable expectation that the
Group will continue in operation and be able
to meet its liabilities as they fall due over the
next three years.
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Restoring hope
Protecting churches from the risk of fire was what Ecclesiastical was set
up to do back in 1887. And while the risks we manage may have changed,
fire remains an ever-present threat. In June 2018, the 114-year-old St Paul
Church in Bas-Caraquet, New Brunswick, Canada, was engulfed in flames
and totally destroyed. Since the church was at the heart of this small town,
the community was devastated, so we knew it was important to respond
fast to try and lift their spirits.
Our claims team swiftly met with
church representatives, architects,
engineers and others to discuss
plans for a new church. And it quickly
became apparent that it needed to
retain some of the character of the
much-loved original.
One of the saddest losses was
St Paul’s beautiful stained-glass
windows, so our claims team
immediately set to work to try and
find replacements. After painstaking
research, they managed to track down
some wonderful old stained-glass
windows from churches that were due
for closure. They were also fortunate
enough to be able to acquire an altar,
tabernacle, chairs, candelabra and
other items from churches that were
no longer in use.
At a meeting to show the community
these lucky finds – along with the
new-build plans – feedback was
extremely positive. The meeting was
also a great opportunity for us to show
how we really listen to our customers
and to demonstrate the lengths we’re
prepared to go to when dealing with
claims. The architect of this new project
quickly understood the importance of
keeping certain memories of the old
place of worship.
“ They love their church, it’s a very
intimate part of their community, so to
bring some of their features forward
and to include them in the design was
very important.”
Foster MacKenzie
Habermehl Contracting
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Corporate Responsibility Report
2019 highlights
Our workplace
>30%
of senior management roles globally
filled by women (2018: 29.9%)
83%
of staff are positive about
the statement ‘I am proud
to work for this company’
(2018: 86%)
3rd cohort of global
leadership development
programme delivered
People Leaders
Academy launched
in the UK
Our community
£32.5m
total charitable giving
(2018: £18.8m)
100,000
nominations for 7,000 charities during
our Movement for Good Awards
60%
of employees
took up volunteering
time (2018: 60%)
90%+
of employees
engaged in giving
(2018: 90%)
Our marketplace
70%
of suppliers paid within 30
days, published as part of
the Payment Practices and
Performances Reporting
(2018: 69%)
Winner of Best Ethical
Investment Provider
and Fairer Finance
Gold standard for
more than a decade
Advisory Panels set up to
listen to customer groups
Our environment
87%
electricity from renewable
sources (2018: 78%)
Carbon
footprint
of all EdenTree equity funds better
than their respective benchmarks
CO2
ClimateWise
1,425 tonnes
member of voluntary
industry initiative
total carbon emissions,
Scopes 1-3 (2018: 1,118 tonnes)
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We use a materiality approach to drive
our strategy, responding to new responsible
business challenges which impact our
customers, partners and communities.
Key issues we continue to focus on include
climate change, cyber security, charitable
giving, diversity and governance.
Overview
Corporate responsibility at Ecclesiastical
has an established structure and
governance which includes Board visibility
and responsibility for overarching strategy;
a senior-level Steering Group providing
leadership; and local business ownership
of activity.
Independent assessment and accreditation
is an important aspect of maintaining and
raising standards. We continue to hold
standards including Living Wage, Women in
Finance and the Fairer Finance Gold Ribbon
and we are a member of ClimateWise.
Our ethical investment business EdenTree
maintains a number of memberships
including the UK Sustainable Investment
and Finance Association, UN Principles for
Responsible Investment and the Institutional
Investors Group on Climate Change.
Gender by level
Group Management Board*
Senior Leader
Manager
Team Member
Total
Gender pay gap
Male
4
72
246
382
704
Female
4
31
174
618
827
Total
8
103
420
1000
1531
Fixed pay gap mean/median
Bonus pay gap mean/median
27.6% / 22.4%
50.1% / 32.4%
30.6% / 23.5%
55.8% / 36.5%
30.7% / 25.0%
53.5% / 33.1%
2019
2018
2017
Ethnicity
White
1259
* Includes Executive Directors
Prefer not to say
192
BME
80
Total
1531
Our workplace
We believe in supporting diversity and development
and building an open and responsible culture.
A higher proportion of our senior roles are
being filled by women resulting in a falling
pay gap. Three years since signing up to
the Women in Finance Charter, women now
make up 30% of our senior management
roles globally.
We continued to uphold Living Wage status
in the UK. Ecclesiastical Canada was
included in Canada’s Top 100 Employers
for Young People for the eighth consecutive
year. Employee engagement across the
Group remains high, with 83% positive
about the statement ‘I am proud to work
for this company’.
Leadership and culture development
activities in 2019 included continuing our
global Leadership Development Programme
which has now supported nearly 50 senior
and aspiring leaders. All of our leadership
population benefitted from ‘leadership
masterclasses’ covering emotional
intelligence and high performance.
We continued to support a range of
professional and technical qualifications
and training including adherence to the
Senior Managers and Certification Regime
and Conduct rules. We launched a ‘People
Leaders Academy’ in the UK and Ireland
for all managers and rolled out ‘confident
conversations’ workshops to over 200
managers to support with management
responsibilities.
To continue to drive and develop our culture
we relaunched an updated Code of Conduct,
achieving 96% employee signup. We also
established an ‘Office Life Network’ of
employees at our head office to help prepare
and plan for our move to a new build.
We involved employees in designing the
working environment, planning travel and
facilities. We have committed to design it
to a Fitwel Standard to support greater
employee wellbeing.
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Our community
Our marketplace
We believe business should give more and we’re proud
to support thousands of charities through our giving.
We believe in putting customers and partners at the
heart of everything we do, focusing on good governance,
service and support.
We have always been a different kind of
business, but over recent years we have
challenged ourselves to give even more to
good causes and champion corporate giving.
We have now given £96.5m towards our
target of £100m by 2020 and continue to
be a leading corporate giver to charity.
In 2019, our ambition was boosted by our
biggest ever giving campaign. We launched
the Movement for Good Awards in the UK,
giving £1m to good causes. We wanted
to reach the greatest possible number of
charities, and we achieved this. Five hundred
charities received £1,000 donations with
nearly 100,000 nominations from supporters
for around 7,000 charities. We also wanted
to support charities with substantial multi-year
funding for innovative and exciting projects
really making a difference, and we achieved
this. We gave ten £50,000 grants to charity
projects which supported causes including
survivors of modern slavery, tackling loneliness
and isolation among older people and bringing
greater support to young carers.
Giving led by our employees and partners
continues to be a cornerstone of our activity.
Employee giving was sustained at high levels
in 2019, with every part of our Group getting
behind charity fundraising, volunteering and
giving efforts. In tota,l this generated over
£350,000. We work closely with a number
of brokers in the UK and, through our ‘Select’
programme, we gave nearly £100,000 to
charities our brokers care about. In our
#12days of Giving campaign 120 charities
received £1,000 donations at Christmas
thanks to nominations from employees,
partners, brokers and supporters.
Across our Group, giving is directed at
causes close to our businesses and charities
making a difference in communities
local to them. In Australia, for example,
the Community Education Programme
reaches neglected young people through
the Lighthouse Foundation. In Ireland,
we’re helping the homeless through the
charity Focus. In Canada, our Impact Grants
Programme supports vital services for young
people provided by the charity Phoenix.
Our ethical investment business, EdenTree,
helps trafficked women through the charity
Street Talk. UK brokers Lycetts support
people with disabilities working with Learning
for Life and SEIB are improving equine
welfare through funding for the British
Horse Society. Read our Impact Report on
www.ecclesiastical.com to find out more.
Allchurches Trust, our charitable owner,
gave a record amount in grants in 2019
– more than £17.8 million – benefitting
more than 1,200 good causes across the
UK and Ireland. At the heart of the Trust’s
giving is making a positive difference in
partnership. As well as supporting churches
and charities who play a vital role in tackling
social isolation, giving hope to those in need
and supporting young people to flourish,
Allchurches provides funding to protect and
preserve heritage buildings and traditional
skills. Under the auspices of Allchurches
Trust, our Australian and Canadian
businesses also offered grants programmes
that changed lives and communities for the
better. Find out more about Allchurches
Trust’s giving on their website at
www.allchurches.co.uk
We uphold good practices regarding human
rights, anti-corruption and anti-bribery
through a range of measures including
robust risk management, employee Code of
Conduct and employee regulatory training on
topics such as data protection. We continue
to submit our Modern Slavery Act declaration
and are pleased that the Payment Practices
and Performance Reporting demonstrates
our commitment to fair payment for all
our suppliers.
Our outstanding commitment to customers
and partners was reflected in numerous
awards across our Group in 2019.
They include recognition for our claims,
risk management, financial advice and
investment service and expertise. Our people
won Achiever and Lifetime Achievement
awards from the Chartered Insurance
Institute in the UK and our Canadian
business was recognised for excellence
in philanthropy and community service.
We’re proud of the number of awards we’ve
won, but we’re equally proud of winning
consistently year-on-year. Notably, we have
won Best Employer for Young People in
Canada eight times, and we’ve been Best
Ethical Investment Provider and top of the
Fairer Finance table for a decade.
Understanding and listening to our customers
underpins this positive recognition. As well
as surveying and feedback programmes,
in the UK we’ve also gathered together
sector representatives to establish advisory
groups. We convened groups from the
education and heritage sectors to discuss
risk and responded by launching a cyber
risk toolkit and scenario planner for schools.
Our partnerships with sector bodies in all of
the markets and geographies we operate
continue to help us understand and connect
with our customers, ensuring our products
and services truly deliver.
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Our environment
We believe in running our business in a sustainable way
to tackle climate change and encourage others to do more.
In our continuing efforts to reduce our
direct impact on the environment,
we increased the proportion of our UK
electricity sourced from renewables to 87%.
We benchmarked the carbon footprint of
EdenTree’s equity funds once again and they
all continue to report a lower carbon intensity
than their respective benchmarks, reflecting
the thorough screening process and an
active process to look for companies with
strong environmental practices.
We incorporated sustainable thinking
into our new UK head office planning
– committing to the Building Research
Establishment Environmental Assessment
Method, installing solar panels and
completing employee travel engagement.
In 2019, we completed voluntary
ClimateWise reporting to assess our
performance and provide challenge for
improvement. The report is aligned to the
Taskforce on Climate-related Financial
Disclosures (TCFD) and is summarised
in the graphic here. The positive action
we are taking includes:
• An established ethical and responsible
investment policy for our funds and
property investments
• Approaches to scenario analysis in our risk
management process to assess the impact
of climate change on our business
• Carbon footprint disclosure and third-party
verification
• Developing catastrophe modelling with
reinsurers to support better understanding
of climate risk
• Specific products and policy conditions
reflecting climate change – including
a crop failure product for example
• Informing our customers and partners
through flood advice and a series of
thought leadership publications on topics
including energy, sustainable cities and
fossil fuel divestment
• Transparent responsibility for, and reporting
of, climate change risk, in particular in
response to the PRA’s requirements for
greater visibility on the financial impacts
of climate change.
Enhance
reporting
ClimateWise
membership
and including
climate
change in
CR
reporting
Be
accountable
Recognising
climate
change in our
Group Risk
Framework,
assigning
management
responsibility
and reporting
to the Board
Our Group
climate change
response
An overview of our Group’s
2019 ClimateWise report
The size of the sectors reflects
the weighting applied by
ClimateWise
Strategies
and investments
Including climate
change in our strategic
emerging risk and
scenario analysis
processes; adhering to
our Group ethical and
responsible investment
and property
investment policies
Customer/client
awareness
Informing customers
and partners through
key communications
– for example, flood
advice for insurance
customers or thought
leadership publications
on ethical issues for
advisers and investors
Informing
public policy
Supporting industry
initiatives and bodies
such as FloodRe, ABI,
CDP, IIGCC, Montreal
Pledge; working with
reinsurance partners to
develop modelling
Our
own
impact
Disclosing
a verified
footprint and
working to
reduce it
Managing
climate risk
Managing climate
risk through business
activity including
responsible investment
strategy and
screening/engagement
approach; product
development and
innovation
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Ansvar Australia
Helping to identify and manage faith-specific risk
As the leading faith insurer in Australia, Ansvar has in-depth understanding
of the sector’s unique needs and risks. And through our risk division,
Ansvar Risk, our risk management services build capability, governance
expertise and sustainability of organisations to support vulnerable people
to improve their lives. It was this expertise that our client Churches of Christ
in Queensland, Australia, were looking for in 2019.
Churches of Christ in Queensland,
Australia provides care and social
services to some of the most vulnerable
people in their communities.
Their operational complexity has
increased significantly, so they
contacted us to see if we could help
them strengthen their approach to
enterprise risk management, to ensure
they would have effective governance.
Our Senior Risk Consultant worked
closely with Churches of Christ’s Board
Directors, Executives and a selection of
Senior Managers – in specially devised
workshops – to identify key risk themes
against the organisation’s strategic
objectives. These workshops were key
in helping them to launch and roll out
their new strategic plan.
Ansvar worked with Churches of Christ
to implement a comprehensive review
and change management process
that systematically enhanced the
risk management framework of the
organisation. And the fact that they chose
to renew their insurance with us was
largely down to the quality of Enterprise
Risk Management work provided and
the confidence in Ansvar Risk and the
trusted relationships we’ve built.
“ Ansvar’s history, knowledge and
expertise within these segments was
important to our decision to continue
our long-term relationship as we look
to ensure we not only have the best
policies in place but also a befitting
Risk Management programme.
Greg McLean,
National Insurance Manager
Churches of Christ Australia
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Strategic Report – Non-Financial Information Statement
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91
Non-Financial
Information Statement
Non-financial information
The Non-Financial Reporting requirements contained in sections 414CA and 414CB of the
Companies Act 2006 are addressed below:
Non-financial information
Disclosure
Section
Pages
Business model
Our business model and
information on how we do
business differently
Strategic report
– Our Business model
and strategy
Key performance indicators
(KPIs)
Our KPIs set out how we are
doing against our strategic goal
Strategic report
– Strategy in action
Principal risks
Our policies
Strategic report
– Principal risks
See below
Our key risks and their
management
We have a range of policies and
guidance in place to support the
key outcomes for our stakeholders.
These also ensure consistent
governance on environmental
matters, our employees, social
matters, human rights and
anti-bribery and corruption
40
44
68
Our key policies /
statements of intent
Environmental matters
• We are committed to running the business
in a sustainable way to tackle climate
change and encourage others to do more.
• We assess performance against
ClimateWise reporting which is aligned
to Taskforce on Climate-related Financial
Disclosures (TFCD) reporting.
• We aim to reduce our direct impact on the
environment and seek to use renewable
sources of energy.
• Other information on environmental
matters is included within the
Our environment section of the Corporate
responsibility report on page 80.
Employees
• Our Code of Conduct policy is centred
on ‘Doing the right thing’ and sets the
standards of conduct and behaviour
expected from employees.
• The Board aims to ensure it is comprised
of persons who are fit and proper to direct
the business. The Board’s diversity policy
sets out the approach to diversity in the
leadership population.
• Other information on our commitments
to supporting diversity and development
is included in the workplace section of the
Corporate responsibility report on page 80.
Also included within the Corporate
Governance report on page 106 is
information about the composition
and diversity of the Board.
Social matters
• We were founded over 130 years ago with
a charitable purpose and this remains what
motivates us today. We believe business
has a social responsibility and should give
more to support charities and communities.
More information about how we support
our communities can be found in the
Corporate responsibility report on page
80. The Group does not make political
donations.
• Our tax strategy supports our group
strategy and the ethical way we do
business. We are committed to managing
all aspects of tax transparently and in
accordance with current legislation.
We work to achieve the spirit of legislation
and not just the letter of the law in each tax
jurisdiction. Our tax strategy is available on
www.ecclesiastical.com
Human rights, anti-bribery
and anti-corruption
• The Board is committed to operating with
honesty and integrity in all of our business
activities and promoting and anti-bribery
and corruption culture across the Group.
• We have established and uphold good
practices regarding human rights,
anti-corruption and anti-bribery through
a range of measures including robust risk
management, employee Code of Conduct
and employee training on topics such as
data protection and vulnerable customers.
• We comply with relevant legislation
concerning our supply chain – the Modern
Slavery Act 2015 and the Payment
Practices and Performance regulations
– to drive good practice and transparency.
• The marketplace section of our Corporate
responsibility report contains more
information including our commitment to
putting customers and partners at the heart
of everything we do, focusing on good
governance, service and support.
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Strategic Report – Strategic Report approval
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93
Section 172 Statement
This section of the Strategic Report describes how the directors have had regard to the
matters set out in section 172(1) (a) to (f), and forms the directors’ statement required
under section 414CZA, of the Companies Act 2006. The Directors recognise that the
long-term success of the Group is dependent on having regard to the interests of its
stakeholders. The Board has identified and documented its stakeholders in the Group
Governance Framework. Key stakeholders include its shareholder, employees, customers
and clients, regulators and intermediary partners (including brokers and other suppliers).
Stakeholder engagement is considered as part of the decision making process of the
Board. Given the new disclosure requirements, board and committee papers templates
were updated to better focus on stakeholder interest, which has been embedded across
the Group.
Strategic Report approval
The Strategic Report, outlined on pages 24 to 92, incorporates the Chief Executive’s
Review, the Business Model and Strategy, the Key Performance Indicators, reviews of
Financial Performance and Position and Risk Management, the Corporate Responsibility
Report and the Section 172 Statement and, when taken as a whole, is considered by
the directors to be fair, balanced and understandable.
By order of the Board
Mark Hews
Group Chief Executive
17 March 2020
‘Key issues we continue
to focus on include
climate change, cyber
security, charitable giving,
diversity and governance.’
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Section Three
Governance
Board of Directors
Directors’ Report
Corporate Governance
95
96
100
106
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Board of Directors
Key to membership
of Group Board Committees
(a) Group Finance and Investment
(b) Group Nominations
(c) Group Risk
(d) Group Audit
(e) Group Remuneration
David Henderson (a) (b) (e)
Chairman, Independent Non-Executive Director
David Henderson was appointed to the Board in April
2016. David began his career specialising in personal
tax and UK trusts. He spent ten years as a banker with
Morgan Grenfell and, following that, 11 years in financial
services executive recruitment with Russell Reynolds
Associates. He joined the Board of Kleinwort Benson
Group plc as Personnel Director in 1995. He was
appointed Chief Executive of Kleinwort Benson Private
Bank Ltd (now Kleinwort Benson) in June 1997.
He was Chairman of Kleinwort Benson from 2004
to 2008 and a Senior Adviser to the Bank until 2019.
He holds several external Non-Executive Directorships.
Denise Cockrem
Group Chief Financial Officer
Denise Cockrem was appointed Group Chief Financial Officer
on 10 December 2018 and joined EIO Board on 6 September
2019. Denise is a Chartered Accountant with significant industry
experience, predominantly in financial services. She spent her early
career in corporate finance and banking roles for EY, Barclays,
RBS and Direct Line. She then joined RSA as Group Financial
Controller, spending 9 years with them in various roles culminating
in UK & Western Europe Finance Director. Denise most recently
held the position of Chief Financial Officer at Good Energy Group
plc, an AIM-listed renewable energy company who provide 100%
renewable electricity and carbon neutral gas. Denise is also a
Non-Executive Director of the Skipton Building Society and a Trustee
of MacIntyre Academy Trust, which provides special schools and
specialist alternative provision for children and young people.
Chris Moulder (b) (c) (d)
Senior Independent Non-Executive Director
Chris Moulder was appointed to the Board in
September 2017. Chris is also a director of the
company’s ultimate parent, Allchurches Trust Limited.
Chris retired in 2017 after five years at the Bank
of England as Director of General Insurance at the
Prudential Regulation Authority. Prior to this he had
spent 26 years with KPMG as a partner in its Financial
Sector practice. He is also a Director of the Insurance
Board of Lloyds Banking Group and of Tokio
Marine Kiln.
Caroline Taylor (a) (b) (e)
Independent Non-Executive Director
Caroline Taylor was appointed to the Board in September
2014. Until May 2012, she was an Executive Director
of Goldman Sachs Asset Management International
and was previously a Director of Goldman Sachs
Luxembourg and Dublin-based SICAV Funds, having
spent her executive career in financial services,
principally in asset management. She is currently
a Non-Executive Director of Brewin Dolphin Holdings
plc and Floors Castle Outdoor Events Ltd.
Mark Hews
Group Chief Executive
Mark Hews was appointed Group Chief Executive in
May 2013 and was previously the Group Chief Financial
Officer. He was appointed to the Board in June
2009 and appointed to the Board of MAPFRE RE in
December 2013 and became a Trustee of The Windsor
Leadership Trust in November 2017. He was formerly a
Director of HSBC Life and Chief Executive of M&S Life.
Prior to this he was Finance Director at Norwich Union
Healthcare. He started his financial career at Deloitte
(formerly Bacon and Woodrow) as a consultant
and actuary.
Andrew McIntyre (c) (d)
Independent Non-Executive Director
Andrew McIntyre was appointed to the Board in April
2017. Andrew is the Senior Independent Director
of C. Hoare & Co where he chairs the Audit, Risk
and Compliance Committee, and an independent
Non-Executive Director of Lloyds Bank Corporate
Markets plc, where he also chairs the Audit Committee.
He is an Independent Non-Executive Director of
National Bank of Greece S.A. and chairs its Audit
Committee. Previously, Andrew was for 24 years a
partner in EY, and was for nine years Chairman of the
Board of Southern Housing Group, one of the largest
housing associations in the UK.
S. Jacinta Whyte
Deputy Group Chief Executive
Jacinta Whyte was appointed Deputy Group Chief
Executive and joined the Board in July 2013 with
responsibility for the Group’s General Insurance
business globally. She was also appointed to the
Ansvar Australia Board during 2013. Jacinta joined
Ecclesiastical in 2003 as a General Manager
and Chief Agent of the Group’s Canadian business.
Having commenced her career as an underwriter for
RSA in Dublin in 1974, she moved with them to Canada
in 1988, holding a number of senior executive positions
in both Ireland and Canada.
Angus Winther (a) (e)
Independent Non-Executive Director
Angus Winther was appointed to the Board in March 2019.
Angus co-founded Lexicon Partners, a London-based
investment banking advisory firm, where he specialised
in advising clients in the insurance and financial
services sectors. He was closely involved in Lexicon
Partners’ leadership until it was acquired by Evercore
in 2011 and served as a senior Adviser at Evercore until
October 2016. He is currently a Non-Executive Director
and Chair of the audit committee at Trinity Exploration
& Production plc and a Non-Executive director of
Lloyd’s managing agent, Hiscox Syndicates Limited.
Angus is also Churchwarden of Holy Trinity Brompton,
Deputy Chair of the Church Revitalisation Trust and
a trustee of the St Paul’s Theological Centre.
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Key to membership
of Group Board Committees
(a) Group Finance and Investment
(b) Group Nominations
(c) Group Risk
(d) Group Audit
(e) Group Remuneration
Board diversity
The Very Reverend Christine Wilson (b) (e)
Independent Non-Executive Director
Christine Wilson was appointed to the Board in June
2012 and has served for 20 years in ordained ministry.
She was Archdeacon of Chesterfield in the Diocese
of Derby until October 2016, when she was installed
as Dean of Lincoln. She was a member of the Church
of England General Synod from 2010 to 2015.
From December 2013 to 2016, she was participant
observer on the House of Bishops. She is a member
of The University of Lincoln Court. She has also been
Chair of a number of charities.
Francois-Xavier Boisseau (c) (d)
Independent Non-Executive Director
Francois-Xavier Boisseau was appointed to the Board
in March 2019. Francois-Xavier has more than 30 years’
experience working in the insurance industry, 25 years
in the UK. He was CEO Insurance Ageas (UK) until
December 2018. Prior to that, Francois-Xavier was CEO
of Groupama and CEO of GUK Broking Services as well
as being Non-Executive Chairman of Lark, Bollington
and Carole Nash. He is also a Non-Executive Director
of Argo Managing Agency Ltd.
Neil Maidment (c) (d) (e)
Independent Non-Executive Director
Neil Maidment was appointed to the Board in January
2020. Neil is an Independent Non-Executive Director
at Lloyd’s of London. He has over 35 years’ experience
in the insurance market. He was previously a Director
of Beazley plc and was Chief Underwriting Officer
of the company and Active Underwriter of its Lloyd’s
syndicates from 2008 to 2018. He was Chairman of
the Lloyd’s Market Association from 2016 to 2018 and
served as an elected working member of the Council
of Lloyd’s during the same period.
John Hylands resigned as a director on 19 March 2019.
Tim Carroll resigned as a director on 31 December 2019.
Balance of Non-Executive Directors
and Executive Directors
Non-Executive Directors : Executive Directors
Gender Balance
Male : Female
Length of Tenure
(Chairman and Non-Executive Directors)
0 – 3 years
3 – 6 years
6 – 9 years
10 years +
Geographical Mix
United Kingdom
Rest of Europe
North America
Rest of World
Age
35 – 45
45 – 55
55 – 65
65 +
2019
2018
8:3
7:2
7:4
6:3
5
2
1
0
9
1
1
0
0
2
8
1
3
2
1
1
7
1
1
0
0
1
6
2
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Directors’
Report
The directors submit their Annual Report and Accounts for Ecclesiastical Insurance Office
plc, together with the consolidated financial statements for the year ended 31 December
2019. The Group Chief Executive’s Review, Strategic Report and Corporate Governance
section (this includes Board Governance, the Group Finance and Investment Committee
Report, the Group Nominations Committee Report, the Group Risk Committee Report,
the Group Audit Committee Report, and the Group Remuneration Report) are all
incorporated by reference into this Directors’ Report.
In line with the Financial Reporting Council’s
(FRC) 2018 UK Corporate Governance
Code (the Code), the Board has voluntarily
chosen to comply with the recommended
annual re-election of directors. With the
exception of Christine Wilson who will
retire at the annual general meeting (AGM),
all directors who have served since the
last AGM will be proposed for re-election
at the forthcoming AGM. Mrs Cockrem
and Mr Maidment will be recommended
for election at the forthcoming AGM
following recommendation from the Group
Nominations Committee.
The Company has made qualifying third-party
indemnity provisions for the benefit of its
directors and directors of any associated
company. These were in place throughout
the year and remain in force at the date
of this report.
Neither the directors nor their connected
persons held any beneficial interest in any
Ordinary shares of the Company during the
year ended 31 December 2019. There has
been no change in this position since the
end of the financial year and the date of
this report.
Principal activities
The Group operates principally as a provider
of general insurance in addition to offering a
range of financial services, with offices in the
UK, Ireland, Canada, and Australia. A list of
the Company’s subsidiary undertakings are
given in note 34 to the financial statements
on page 242 and details of international
branches are shown on page 251.
Ownership
At the date of this report, the entire issued
Ordinary share capital of the Company
and 3.16% of the issued 8.625%
Non-Cumulative Irredeemable Preference
Shares of £1 each (‘Preference shares’)
were owned by Ecclesiastical Insurance
Group plc. In turn, the entire issued Ordinary
share capital of Ecclesiastical Insurance
Group plc was owned by Allchurches Trust
Limited, the ultimate parent of the Group.
Board of directors
The directors of the Company during the
year and up to the date of this report are
stated on pages 96 to 98.
John Hylands resigned as a director and
Chairman of the Company on 19 March
2019 and was succeeded by David
Henderson as Chairman.
Tim Carroll resigned as a Non-Executive Director
on 31 December 2019. Francois-Xavier Boisseau
and Angus Winther were appointed as
Non-Executive Directors on 19 March 2019.
In addition, Neil Maidment was appointed as
a Non-Executive Director on 6 January 2020.
Denise Cockrem, Group Chief Financial
Officer was appointed as an Executive
Director on 6 September 2019.
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The following directors of the Company, and their connected persons, held Preference shares
in the capital of the Company at 31 December 2019:
Director
Nature of interest
Number of Non-Cumulative
Irredeemable Preference
Shares held
Mark Hews
Connected person
75,342
There have been no changes to their holdings between the end of the financial year and the
date of this report.
No contract of significance existed during or at the end of the financial year in which a director
was or is materially interested.
Dividends
Dividends paid on the Preference shares
were £9,181,000 (2018: £9,181,000).
The directors do not recommend a final
dividend on the Ordinary shares (2018:
£nil), and no interim dividends were paid in
respect of either the current or prior year.
Charitable and
political donations
Charitable donations made in the year
amounted to £32.5 million (2018: £18.8
million).
During the last 10 years, a total of
£188.2 million (2018: £165.0 million)
has been provided by Group companies
for church and charitable purposes.
It is the Company’s policy not to make
political donations. No political donations
were made in the year (2018: £nil).
Financial instruments
Information about the use of financial
instruments by the Group is given in note 23
to the financial statements.
Employees
The Group is committed to nurturing a
culture and work environment in which
all employees can fulfil their potential.
Our Equality and Diversity Standard and
Guidance sets our expectations for an open
and inclusive workplace and we place the
care and wellbeing of our employees at the
heart of our employment policies.
Information on engaging and involving
employees is provided on page 109.
Throughout the employee lifecycle from
recruitment onwards, we carefully consider
adjustments to our processes and practices
and look for solutions to remove barriers
for those employees with disabilities.
When needed, we engage with third-party
and Occupational Health specialists who
provide us with expert advice and ensure
we are offering the best support we can.
Through our adjusted work approach, we
provide an environment in which disabled
employees can fully participate in all
opportunities provided by the Group from
continued employment to training, job moves
and promotions.
In 2019, we gave additional focus to mental
health. Partnering with a mental health charity,
we conducted an audit of our approach to
supporting employees who face mental health
issues to identify where improvements could
be made. We also provided specialist training to
managers to help support positive management
of mental health issues in our workplace.
Principal risks
and uncertainties
The directors have carried out a robust
assessment of the principal risks facing
the Group including those that threaten
its business model, future performance,
solvency and liquidity. The principal risks and
uncertainties, together with the financial risk
management objectives and policies of the
Group, are included in the Risk Management
section of the Strategic Report and can be
found on page 62.
Events after the
reporting period
Note 37 to the financial statements contains
disclosures of events after the reporting period.
Going concern
The Financial Performance section on
page 54 and Risk Management section of
the Strategic Report starting on page 62
provide a review of the Group’s business
activities and describe the principal risks
and uncertainties, including exposures
to insurance financial risk, operational
and strategic risk.
The Group has considerable financial
resources: financial investments of £857.9m,
91% of which are liquid (2018: financial
investments of £799.0m, 92% liquid), cash
and cash equivalents of £74.8m and no
borrowings (2018: cash and cash equivalents
of £109.4m and no borrowings). Liquid
financial investments consist of listed equities
and open-ended investment companies,
government bonds and listed debt.
The Group also has a strong risk
management framework and solvency
position, is well placed to withstand
significant short-term market disruption
and has proved resilient to stress testing.
As a consequence, the directors have a
reasonable expectation that the Group
is well placed to manage its business risks
successfully and continue in operational
existence for at least 12 months from
the date of this report. Accordingly, they
continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
Auditor and the disclosure of
information to the auditor
So far as each person who was a director
at the date of approving this report is aware,
there is no relevant audit information that the
auditor is unaware, that could be needed by
the auditor in order to prepare their report.
Having made enquiries of fellow directors
and the Group’s auditor, each director
has taken all the steps that they ought to
have taken as a director, in order to make
themselves aware of any relevant audit
information, and to establish that the auditor
is aware of that information.
This confirmation is given and should be
interpreted in accordance with the provisions
of Section 418 of the Companies Act 2006.
The Group Audit Committee reviews
the appointment of the auditor, including the
auditor’s effectiveness and independence,
and recommends the auditor’s reappointment
and remuneration to the Board. Further
details are disclosed in the Group Audit
Committee Report on page 124.
In accordance with Section 489 of the
Companies Act 2006, a resolution proposing
that PricewaterhouseCoopers LLP be
appointed as auditor of the Group will be
put to the forthcoming AGM.
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Section Three
Governance
Corporate Governance
Group Finance and Investment Committee Report
Group Nominations Committee Report
Group Risk Committee Report
Group Audit Committee Report
Group Remuneration Report
106
114
116
122
124
134
the Companies Act 2006. They are also
responsible for safeguarding the assets
of the Company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our
knowledge:
• The financial statements, prepared in
accordance with IFRS, give a true and
fair view of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole.
• The Strategic Report (which is incorporated
into this Directors’ Report) includes a fair
review of the development and performance
of the business and the position of the
Company and the undertakings included in
the consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face.
• The Annual Report and financial
statements, taken as a whole, are fair,
balanced and understandable, and provide
the information necessary for shareholders
to assess the Company’s position and
performance, business model and strategy.
By order of the Board
David Henderson Mark Hews
Chairman
17 March 2020
Group Chief Executive
17 March 2020
Directors’ responsibilities
The directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulations.
Company law requires the directors
to prepare financial statements for each
financial year. Under that law, the directors
are required to prepare the Group financial
statements in accordance with International
Financial Reporting Standards (IFRSs) as
adopted by the European Union and Article
4 of the International Accounting Standards
(IAS) Regulation and have also chosen
to prepare the parent company financial
statements under IFRSs as adopted by
the European Union. Under company law,
the directors must not approve the accounts
unless they are satisfied that they give
a true and fair view of the state of affairs
of the Company and of the profit or loss
of the Company for that period.
In preparing these financial statements, IAS 1
requires that directors:
• properly select and apply accounting
policies;
• present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information;
• provide additional disclosures when
compliance with the specific requirements
in IFRSs are insufficient to enable users
to understand the impact of particular
transactions, other events and conditions
on the Company’s financial position and
financial performance; and
• make an assessment of the Company’s
ability to continue as a going concern.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and enable them to ensure
that the financial statements comply with
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Corporate
Governance
The Board of directors is committed to applying the highest standards of corporate
governance and believe that the affairs of the Company should be conducted in
accordance with best business practice. Accordingly, although the Company does not
have shares with a premium listing on the London Stock Exchange and, therefore, does
not need to adhere to requirements, the Company has voluntarily chosen to comply with
the Principles and Provisions of the 2018 UK Corporate Governance Code (the Code)
throughout the year ended 31 December 2019 where relevant. A copy of the Code can
be found on the FRC’s website. The Corporate Governance Statement also includes the
reports from Group Audit Committee, the Group Finance and Investment Committee,
the Group Nominations Committee, Group Remuneration Committee and the
Group Risk Committee.*
The following aspects of the Code are not
considered appropriate for the Company
given ownership structure:
• provisions relating to outcomes from
shareholder votes (Provision 4)
• shareholding requirements for Executive
Directors (Provision 36).
During the year, the Company did not comply
with the following provision of the Code:
• with the exception of the GCEO, pension
contribution rates for Executive Directors
are aligned to those available to the
wider workforce (Provision 38). Further
information is contained in the Directors’
Remuneration Report. Given current
market practice, the Group Remuneration
Committee is currently content with
the contribution rates for all Executive
Directors. This will be monitored as part
of the Committee’s review of market
developments.
Board leadership
and company purpose
Role of the Board
The Board is responsible to the Group’s
shareholders for the long-term success
of the Group, its purpose, values, strategy,
culture and its governance. Great importance
is placed on a well-informed and decisive
Board, and Board meetings are scheduled
and held regularly throughout the year.
A one-year rolling plan of business for
discussion is reviewed and agreed by the
Board annually to ensure that the Board is
focused on the right issues at the right times
and sufficient time is allowed for appropriate
consideration and debate.
The Board sets annual objectives for each
year in addition to setting the Group’s
strategic direction. These are implemented
through approval and regular assessment
of the business plan and strategy process.
* Committees of the Company also perform the same Committee functions for Ecclesiastical Insurance Group plc, the Company’s immediate parent undertaking.
At each Board meeting, the directors discuss
strategic and business matters, financial,
operational and governance issues, and other
relevant business items that arise. Following
Committee meetings, the Board receives
oral reports from the Chairman of each
Committee at the next Board meeting.
Purpose, value and strategy
The Group’s purpose is to contribute to
the greater good of society. In particular,
the Group strives to improve the lives of
customers, beneficiaries and society as
a whole. This is achieved by managing a
portfolio of businesses that operates on the
highest ethical principles. It seeks to diversify
and bring an ethical dimension to more
aspects of society; and all of its businesses
need to set a high bar, putting its customers
first and setting an example to others.
See page 40 for more details.
It is the Board’s policy to record any
unresolved concerns about the running of
the Company or any proposed action in the
Board minutes. During 2019, no director
had any such concerns.
Culture
The Board is responsible for setting the right
values and culture within the Group and
ensuring the fair treatment of customers.
The target culture is described below.
This is embedded across the Group’s
employee lifecycle, from recruitment
through performance management and our
behaviour model, personal development and
communications. The Board monitors cultural
alignment through the MySay survey results.
Our Target Culture
Ambitious and driven...
We outperform
our business goals
Working collaboratively
We value our diversity
and work well together
...For the greater good
We contribute to the
greater good of society
Inspiring each other
We energise each
other to deliver
Passionate about customers
We offer unrivalled high
standards of customer
relationships and care
Empowered to deliver
We trust our colleagues
to make decisions
Ethical and trusted
We can be trusted
to do the right thing
Innovative in our thinking
We are bold, pro-active
and creative, always improving
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Board activity
During 2019, the Board made decisions
on the following business issues and routine
matters:
Strategic matters
Group Chief Executive’s Reports
Group Chief Financial Officer’s Report
Financial performance and statements
Charitable donations and gift aid
Performance, strategic and business plans
for the Group
Views from the Shareholder
Broker Acquisition Strategy
Ansvar Australia Update
Routine matters
Board’s annual objectives
Risk management, appetite, and registers
Dividends
Setting and reviewing budgets
Committee reports and recommendations
Directors’ Conflicts of Interests
Operational matters
Internal Model
Group reinsurance arrangement
Health and Safety
Employee engagement
Directors and Officers Liability Insurance
Group Technical Provisions
GI Claims Reserves Adequacy
Projects and other matters
Directors’ travel and expenses policy
Project Horizon (UK and Irish GI IT and
transformation programme)
IICSA
Governance and regulatory matters
Board and Committee composition and delegation
Board Diversity Policy
Capital requirements, solvency position and ORSA
Determining NEDs’ fees for recommendation
at a general meeting
Audit Tender
Stakeholder engagement
The Board recognises the importance of
engaging with stakeholders, understanding their
views and interests in order to be successful
over the long term. Dialogue with stakeholders
can help the Board to understand significant
changes in the landscape, predict future
developments and trends, and re-align strategy.
The Board has identified its stakeholders
and associated engagement mechanisms.
Employees, customers, shareholders,
suppliers, reinsurers, external auditors,
regulators, credit rating agencies, banks and
other creditors, trade unions and community
groups have been identified as current
stakeholders. Further information is provided
in the Corporate Responsibility Report.
Shareholder engagement
Ecclesiastical Insurance Group plc owns
the entire issued Ordinary share capital
of Ecclesiastical Insurance Office plc.
The directors of the Boards of both companies
are identical. Ecclesiastical Insurance Group
plc in turn is wholly owned by Allchurches
Trust Limited with whom the Board has an
open and constructive relationship.
Protocols for the exchange of information
between Allchurches Trust Limited and
Ecclesiastical Insurance Group plc and its
subsidiaries (including Ecclesiastical Insurance
Office plc) are in place and cover performance,
operations and financial position. There is at
least one “Common Director” (i.e. a Director who
is a member of the Boards of Allchurches Trust
Limited, Ecclesiastical Insurance Group plc and
Ecclesiastical Insurance Office plc) who
is expected to attend every Board Meeting.
Tim Carroll and Chris Moulder (until the former’s
resignation from the Company on 31 December
2019) were appointed as “Common Directors”.
The Common Directors present a summary
of highlights from Allchurches Trust Limited
Board meetings to the Directors. There is also
engagement between respective Board and
Committee Chairmen and the Group Chief
Executive Officer. Moreover regular dialogue
takes place on Allchurches Trust Limited’s
expectations of the Group, strategy for the
development of business and the grant from
the Group.
This ensures that the views of Allchurches
Trust Limited are communicated to the Board
as a whole, which enables Allchurches Trust
Limited to effectively communicate its views
and expectations to the Board. In turn, the
Common Directors are able to support the
directors of Allchurches Trust Limited to
understand the performance and strategic
issues faced by the Company.
A conflict of interest policy which sets out
how actual and perceived conflicts of interest
between the two companies are managed is
in place.
As was done in August and November
2019, when determining if it is appropriate to
make a distribution in the form of a grant to
the company’s ultimate parent undertaking,
Allchurches Trust Limited, the Board considers
advice from the Group Chief Financial Officer.
A key area for the Board’s deliberation is the
company’s capital position and the affordability
of the grant based on a range of stressed
circumstances as well as the views of the
Chairman of Allchurches Trust Limited.
Employee engagement
The Board recognises employees as the
Group’s biggest asset given their specialist
skills and knowledge and propensity to
go above and beyond. Members of the
management team and subject matter
experts are invited to Board and Committee
meetings to present on items and input into
discussion. Directors also visit subsidiaries
and other SBUs and Project teams to gain
a good understanding of employees’ views.
In order to engage, involve and inform
employees, the following methods are used:
• Caroline Taylor was appointed as the
designated Non-Executive Director for
employee engagement on 4 February 2020.
The designated Non-Executive Director
is briefed on employee survey results and
feedback and reports relevant findings to
the Board;
• a variety of communication channels including
intranet, all staff emails (including weekly
news, results, achievements and changes),
briefings, conferences and publishing of
financial reports and feedback and discussion
is adopted (including to make employees
aware of financial and economic factors
affecting the performance of the company);
• an engagement survey (MySay survey)
is conducted twice a year across all
companies and territories in the Group.
The survey allows the tracking of
engagement and provides employee views
on a range of matters affecting them.
The results are reviewed at both Board
and Group level and are cascaded to
individual teams. Managers discuss local
results with employees and create action
plans to respond to concerns;
• whistleblowing policy and procedures;
• direct engagement and consultation
through employee representative forums
including the Group’s recognised Union
and informal Employee Working Groups
(such as ‘The Explainers’ and ‘The Office
Life Network’) is encouraged;
• ‘Town Hall’ meetings are hosted by senior
management where employees can ask
questions and provide feedback;
• a performance-related bonus scheme is
operated, which directly links individual
objectives and business performance to
encourage employees to participate in the
overall financial success of the Group; and
• a range of training, development and
volunteering activities are available to
employees, including technical courses,
mentoring, coaching and community
opportunities.
Customer engagement
Customers are the lifeblood of the Group.
The Board considers that customers should
be at the heart of everything we do, ensuring
any actions or decisions demonstrate our
passion for customers and make us first
choice for customers both today and in the
future. During the year, the Board received
updates on customer issues via the Group
Chief Executives’ Report and reports on
strategic initiatives. In addition, the Board
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considered customers’ needs, knowledge
and expectations as part of the development
of the next chapter for the Group and
as part of Project Horizon (the GI IT and
Transformational Programme).
Regular meetings are held between
management and key customers to understand
their needs and perspectives. In addition,
the Group has regular engagement with
customers (including conducting listening
exercises, surveys, holding focus or consultative
groups, monitoring customer complaints and
satisfaction data) and key outcomes are shared
with the Board. Our commitment to customers
and clients is further demonstrated by the
tailored Customer Promises that have been
developed for key SBUs.
Supplier engagement
The importance of the role that suppliers
play in ensuring a reliable service is delivered
to customers is recognised by Directors.
Consequently, the Group Risk Committee
oversees the Procurement, Purchasing and
Outsourcing Policy and receives regular
updates on the Group’s material outsourcing
contracts.
In addition, Executive Directors hold regular
meetings with key suppliers to understand
their perspectives.
Community and environment
Executive Directors have considered an initial
plan to address climate change requirements
across the Group on a consolidated basis.
Moreover, recognising the importance of
climate change, the Board agreed to add it as
a separate risk to the Group Risk Register.
During the year, the Board has considered
the payment of grants to Allchurches Trust
Limited for charitable purposes. It also
monitors outcomes from the Greater Good
Programme strategic initiative and is proud
that the Group continues to retain its leading
position as a corporate donor: Ecclesiastical
is the UK’s fourth largest corporate donor
and the only insurer in the top ten¹.
For employee-led community investment,
the Group ranks second in the UK².
The Group is focused on long-term and
strategic charitable giving by tackling
the shortage of heritage skills working
with a number of partners including the
Prince’s Foundation. A key priority for the
Group’s giving is to support young people’s
mental health and has been working with the
oldest children’s charity, Coram. The Group’s
businesses continue to support causes
which are important to their customers
and contribute to their local communities.
Employees are supported to give to
causes they care about through MyGiving.
This enables them to offer support with
volunteering, small grants and fundraising
matching to create direct involvement and
help to drive charitable giving at a local level.
Regulators
The Board recognises the importance of
open and honest dialogue with regulators
(including those in the UK, Australia, Canada
and the Republic of Ireland). It has discussed
outcomes and the response to the PRA’s
Periodic Summary Meeting. In addition,
the Board (via its Committees) has received
regular updates on legal, regulatory and
compliance matters.
Whistleblowing
The Board (via the Group Audit Committee)
is responsible for reviewing the Group’s
whistleblowing procedures and receives
regular updates.
The Group’s approach to whistleblowing is set
out in a Standard and Guidance Document
(which is available internally on the Group’s
intranet). The Chairman of the Group Audit
Committee is designated the Group’s
‘Whistleblowing Champion’ having responsibility
to ensure the independence, autonomy and
effectiveness of the Group’s policies and
procedures on whistleblowing including the
procedures for protection of staff that raise
concerns from detrimental treatment.
1 Directory for Social Change, the UK Guide to Corporate Giving 2018-19
2 GivX, community investment benchmark 2019
The responsibility for ensuring the
effectiveness of internal whistleblowing
arrangements, including arrangements for
protecting whistleblowers against detrimental
treatment (on behalf of the Whistleblowing
Champion) has recently transferred to Group
HR; including ownership of the associated
policy and guidance documents.
During the year, Group Internal Audit
undertook a review of whistleblowing
arrangements. The output from this work will
be taken forward by Group HR. This includes
developing reportable metrics, providing line
managers with material to help recognise
potential instances of whistleblowing and
providing training to the whistleblowing
contacts named in the policy to ensure
they can handle a whistleblowing incident
correctly.
Conflicts of Interest
A Register of Directors’ Conflicts is
maintained by the Group Company Secretary
to monitor and manage any potential conflicts
of interest. Training on the Companies Act
2006 has been given to all directors and
directors are regularly reminded of their
duties. Any conflicts are declared at the
first Board meeting at which the director
becomes aware of a potential conflict and
then recorded in the Conflicts Register. The
Board considers all conflicts in line with the
provisions set out in the Company’s Articles.
The directors are required to review their
interests recorded in the Conflicts Register
on a biannual basis.
In addition, the Board oversees the procedure
for managing actual and potential conflicts
of interest in the trading relationship
with owned brokers (Lycetts and SEIB
/ Lansdown) and the general insurance
business. It is underpinned by the desire to
put the customer interest at the forefront of
their dealings and seek to deliver the best
customer outcome.
It is the Board’s policy to record any
unresolved concerns about the running of
the Company or any proposed action in the
Board minutes. During 2019, no director had
any such concerns.
Division of responsibilities
The responsibilities of the Board, its
Committees, Chairman, Group CEO and SID
are set out in writing and are available on the
Company’s website.
The Chairman and the
Group Chief Executive
The roles of the Chairman and the Group
Chief Executive are undertaken by separate
individuals. The Chairman, David Henderson,
is responsible for leadership of the Board.
The day-to-day management of the
business is undertaken by the Group Chief
Executive, Mark Hews, assisted by the Group
Management Board.
Senior Independent Director
Chris Moulder was appointed as the Senior
Independent Director (SID) on 14 January
2020. The SID supports and acts as a
sounding board for the Chairman and is
responsible for overseeing the governance
practices of the Company and leading the
directors in their appraisal of the Chairman.
Along with the Chairman, the SID is the
primary contact for the shareholder and they
meet regularly with the shareholder to share
and understand views.
Non-Executive Directors
Non-Executive Directors have a responsibility
to uphold high standards of integrity and
probity including acting as both internal
and external ambassador of the Company.
As part of their role as members of a unitary
board, Non-Executive Directors should
constructively challenge and help develop
proposals on strategy.
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Ecclesiastical Board of Directors
Group Finance and
Investment Committee
Group Nominations
Committee
Group Risk
Committee
Group Audit
Committee
Group Remuneration
Committee
Board Committees
The Group has five Board Committees which
are shown above.
Details of all the Board Committees are
contained within their respective reports that
follow: the Group Finance and Investment
Committee Report on page 114; the Group
Nominations Committee Report on page
116; the Group Risk Committee Report
on page 122; the Group Audit Committee
Report on page 124; and the Group
Remuneration Report on page 134.
Attendance at meetings
Directors are required to attend all Board
meetings and strategy days as well as
Committee meetings where they are
members. In 2019, the Board held five
scheduled meetings, three ad hoc meetings
and a strategy day. In addition, the Board
participated in regular training sessions.
David Henderson met with the Non-
Executive Directors without the Executive
Directors present on a number of occasions
throughout the year.
Below is a record of the directors’ attendance for the Board meetings (including the strategy
day) during 2019:
Board attendance table
Executive Directors
Director since
Meetings eligible
to attend
Meetings
attended
Mark Hews
S. Jacinta Whyte
Denise Cockrem
June 200 9
July 2013
September 2019
9
9
2
9
8
2
Non-Executive Directors
Director since
Meetings eligible
to attend
Meetings
attended
David Henderson (Chairman)
Francois-Xavier Boisseau
Tim Carroll
Andrew McIntyre
Chris Moulder
Caroline Taylor
Christine Wilson
Angus Winther
John Hylands (former Chairman) September 2007
April 2016
March 2019
April 2013
April 2017
September 2017
September 2014
June 2012
March 2019
9
7
9
9
9
9
9
7
2
8¹
6³
8¹
8¹
8¹
7¹
2²
6¹
2
1 It had been agreed in advance that only the quorum of the Board (namely two members) needed to attend a telephone
Board Meeting considering custody arrangements. All members of the Board were given opportunity to provide feedback
on the business of the meeting ahead of the call.
2 The Very Reverend Christine Wilson did not attend seven meetings due to taking a leave of absence from the Group for
personal reasons from April 2019.
2 Mr Boisseau was unable to attend an ad hoc Board Meeting called at the last minute to consider the potential
Ecclesiastical Insurance Group plc investment in the Lloyd and Whyte Group Limited.
Systems of internal control are designed
to manage rather than eliminate the risk of
failure to achieve business objectives, and
can provide reasonable, but not absolute
assurance as to the prevention and detection
of financial misstatements, errors, fraud or
violation of law or regulations.
By order of the Board
Mrs. R. J. Hall
Group Company Secretary
17 March 2020
Company Secretary
The Company Secretary is responsible for
compliance with board procedures, advising
the Board on all governance matters,
supporting the Chair and helping the Board
and its Committees to function efficiently.
All Directors have access to the advice of
the Company Secretary.
Internal Controls
The Board is ultimately responsible for the
systems of risk management and internal
control maintained by the Group and reviews
their appropriateness and effectiveness
annually. The Board views the management
of risk as a key accountability and is the
responsibility of all management and believes
that, for the period in question, the Group has
maintained an adequate and effective system
of risk management and internal control that
complies with the Code. Further details are
set out in the Risk Management Report on
page 62.
The Group embeds risk management into
its strategic and business planning activities
whereby major risks that could affect the
business in the short and long term are
identified by the relevant management
together with an assessment of the
effectiveness of the processes and controls
in place to manage and mitigate these risks.
The Group’s internal control framework
is vital in setting the tone for the Group
and in creating a high degree of control
consciousness in all employees.
A Code of Conduct and a Code of Ethics are
embedded into the culture of the Group and
is accessible to all staff via the intranet.
Assurance on the adequacy and
effectiveness of internal control systems
is obtained through management reviews,
control self-assessment and internal audits.
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Group Finance
and Investment
Committee Report
Chairman’s introduction
I am pleased to present this report, my first as Committee Chair, describing the work
undertaken by the Committee during the past year. I was appointed as Chair of the
Committee on 1 January 2020, having been a member since April 2019. I take this
opportunity to thank Tim Carroll, who stepped down from the Committee on 31 December
2019, for his Chairmanship since 2014. Mark Hews stepped down from the Committee
on 27 November 2019 and we are grateful for his contribution.
Membership
The members of the Group Finance and Investment Committee and their attendance during the
year are shown below:
Committee member
Member since
Meetings eligible to attend Meetings attended*
Tim Carroll (Chairman)**
Caroline Taylor
David Henderson
Mark Hews***
Angus Winther****
August 2013
March 2016
June 2016
August 2018
April 2019
7
7
7
7
5
7
7
7
6
4
* Mark Hews and Angus Winther were unable to attend a meeting called at short notice
** Tim Carroll was the Chair and a member of the Committee until 31 December 2019
*** Mark Hews was a member of the Committee until 27 November 2019
**** Angus Winther was appointed to the Committee on 3 April 2019 and was appointed Chair on 1 January 2020
Committee meetings
The Committee comprised the directors
shown in the table above who were
appointed by the Board.
The Committee held four scheduled and
three ad hoc meetings during the year.
The Committee’s key responsibility is to
ensure that, within designated financial limits,
the management of the Group’s financial
assets, including its investment portfolio, is
properly governed, controlled and performing
as expected. The Committee also considers
and approves major financial decisions
including acquisitions and disposals on
behalf of the Board.
During the year, the Committee reviewed
the Group’s business plan investment
assumptions; and the overall investment
strategy. The latter included consideration
of the ongoing use of equity derivatives;
the approach and classification of listed
infrastructure; concentration risk and the
management of cash.
The Committee also reviewed a major
investment proposal for Ecclesiastical
Insurance Group plc, which was subsequently
agreed by the Board.
The Committee considered the outlook for
the financial markets and in particular the
likely impact of the UK’s withdrawal from the
European Union on the Group’s investment
portfolio. Together with the Group Risk
Committee, the Committee also oversaw a
review of the Group’s Authorities Framework.
The Committee also reviewed its Terms of
Reference and made recommendations
to the Board. In addition, the Committee
undertook a review of its own performance
and set objectives.
By order of the Board
Angus Winther
Chairman of the Group Finance
and Investment Committee
17 March 2020
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Group Nominations
Committee Report
Dear Stakeholder
I am pleased to present to you the report of the work of the Group Nominations
Committee for 2019. I was appointed as Chair of the Committee on 14 January 2020
having been a member of the Board since September 2017. Caroline Taylor and I were
appointed as members of the Committee in November 2019. I would like to take the
opportunity to thank The Very Reverend Christine Wilson and David Henderson for their
leadership of the Committee during 2019. John Hylands and Tim Carroll stepped down
from the Committee during the year and we are grateful for their contribution.
Committee Composition
The members of the Group Nominations Committee and their attendance at meetings during
the year are shown below:
Committee member
Member since
Meetings eligible
to attend
Meetings
attended
Chris Moulder1
Christine Wilson2
David Henderson
Caroline Taylor3
John Hylands4
Tim Carroll5
November 2019
March 2016
January 2019
November 2019
May 2013
January 2019
0
4
4
0
2
4
1 Chris Moulder was appointed to the Committee on 27 November 2019.
2 The Very Reverend Christine Wilson did not attend two meetings due to taking
a leave of absence from the Group for personal reasons from 18 April 2019.
3 Caroline Taylor was appointed to the Committee on 27 November 2019.
4 John Hylands was a member of the Committee until 19 March 2019.
5 Tim Carroll was a member of the Committee until 31 December 2019.
0
2
4
0
2
4
Meetings of the Committee
The Committee held three scheduled
meetings in 2019 (in February, June and
October) which were attended by the
Group Chief Executive and Group Company
Secretary (2018: three meetings). In addition
an ad hoc meeting was held in January to
consider an update on NED recruitment.
Composition of the Board
and senior management
The Committee considered the composition of
the Board and its Committees, subsidiaries and
senior management (including members of the
GMB, heads of SBUs and senior functions).
This included consideration of skills, knowledge,
and experience, length of tenure, independence
and diversity in the context of the Group’s
long-term strategic priorities.
During the year, the Committee recommended
that only independent NEDs should be
members of the Board Committees,
which was accepted by the Board.
Board diversity
Ecclesiastical recognises the benefits of
having a diverse Board. It is committed
to improving diversity on the Board in the
broadest sense and acknowledges that
diversity both improves performance of the
Board and strengthens the business.
The Board’s objective, by 2020, was to
meet the targets set out in the ‘Hampton-
Alexander Review’, being 33% of women
on boards. As at 17 March 2020, the Board
had appointed four female members in a
current membership of 11, which meets
the 2020 targets. The Board via the Group
Nominations Committee will consider the
progression of women to key roles including
Chair, Senior Independent Director and
Executive Directors as part of its regular
review of succession planning. In addition,
the Board has agreed to have regard to
the Parker Review by 2020 looking across
the composition of the various Boards
of Directors that comprise the wider
Ecclesiastical Group. This target has been met.
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Ecclesiastical aspires to having a Board
that is diverse and encourages external
search firms to identify and present
candidates from all backgrounds, and
with diverse skills and personal qualities.
As demonstrated in the Board Diversity
table, the Company has a balanced and
diverse Board. All Board appointments are
made on merit, in the context of the overall
requirements for Board diversity in terms
of the skills, experience, background, age,
disability, gender and ethnic diversity
required for the Board to be effective.
The Board will take the opportunity,
as and when appropriate, to further improve
diversity in the wider sense and from all
backgrounds as part of its Board recruitment
practice. The Board has also committed to
meeting the targets set out in the ‘Hampton-
Alexander Review’ being to extend the 33%
women on boards target to leadership teams
in the FTSE 250 by 2020. Given various
changes planned to the Board in 2020,
it is recognised that female representation
on the Board will decrease in the short term.
The Committee will actively seek to address
this matter during the course of 2020.
At 17 March 2020, female representation
on the Group Management Board stands
at 43%.
The Company was a founding signatory
to the Women in Finance Charter and has
appointed Denise Cockrem, as a Senior
Executive responsible for diversity. During
the year, the Company reported publicly on
progress made against the initiative. Further
information is provided in the Corporate
Responsibility Report.
Further information on diversity is provided
on page 82.
Directors’ length of service
The Committee monitors the length of
tenure of all directors as shown in the table
on page 99.
Skills and experience
on the Board
The skills and experience of Board members
is provided on page 96.
Independence and time
commitment
The Board believes that all the NEDs were
independent throughout 2019. Independence
is reviewed as part of each director’s annual
appraisal, considered by the Committee,
and agreed by the Board annually. In 2019,
one NED, John Hylands, served for more
than nine years on the Board and retired
in March 2019 and Christine Wilson has
served for more than six years and will retire
in June 2020. In addition, two directors,
Tim Carroll and Chris Moulder were directors
of Allchurches Trust Limited. The Committee
has considered the circumstances and
relationships of all NEDs and, following
rigorous review, the Committee confirmed
to the Board that all NEDs remained
independent in character and judgement.
No individual participated in the discussions
relating to their own independence.
The Committee evaluates the time NEDs
spend on the Company’s business annually
and is satisfied that, in 2019, the NEDs
continued to be effective and fulfilled their
time commitment as stated in their letters of
appointment.
External directorships are considered to
be valuable in terms of broadening the
experience and knowledge of Executive
Directors, provided there is no actual
or potential conflict of interest, and the
commitment required is not excessive. All
appointments are subject to approval by the
Board, and the Conflicts Register maintained
by the Group Company Secretary is used
to monitor external interests. Any monetary
payments received by Executive Directors
from outside directorships are paid over to
and retained by the Group.
Succession planning
The Committee considered the Group’s Board
and Leadership succession plan to ensure
that a rigorous and phased approach is
adopted, taking into account the challenges
and opportunities facing the Group.
In respect of each leadership role,
emergency, short-term and long-term
succession plans are considered and
challenged to ensure that appropriate skills
are in place to support the Group’s short
and long-term strategy and ensure a diverse
pipeline of talent is in place.
Appointments to the Board
Chairman
John Hylands resigned as Chairman on
19 March 2019. David Henderson was
appointed Chairman on the same date.
He was independent on appointment as
Chairman. An explanation on the associated
appointment process is provided in the 2018
Annual Report and Accounts on page 109.
Senior Independent Director,
Chris Moulder
During the year, the Board agreed that
Mr Chris Moulder would be appointed Senior
Independent Director to succeed Dean Wilson.
Non-Executive Directors
Francois-Xavier Boisseau
and Angus Winther.
An Appointments Panel comprising Christine
Wilson, Tim Carroll, David Henderson and
Mark Hews was formed to commence the
recruitment of two additional Non-Executive
Directors, one from an insurance and
broking background and the other from an
investment or corporate finance background.
Spencer Stuart & Associates Ltd (which
had no other connection to the Group and
which is a signatory to the Voluntary Code
of Conduct on gender diversity and best
practice) assisted the Appointments
Panel with the recruitment. Following an
external search and a series of interviews,
two preferred candidates were identified
and recommended to the Group Nominations
Committee. After consideration, the Group
Nominations Committee recommended the
appointment of the two candidates to the
Board and Mr Boisseau and Mr Winther were
appointed as Non-Executive Directors at the
conclusion of the Board Meeting held on
19 March 2019.
Neil Maidment
Following his retirement as an Executive
Director from Beazley plc Neil Maidment was
recommended to the Company as a potential
candidate to succeed Mr Carroll. An extensive
interview process was undertaken with the
Board. Neil Maidment was appointed to the
Board on 6 January 2020.
Common Directors, Chris Moulder
A joint Company and Allchurches Trust
Limited Nominations Committee Meeting
is held on an annual basis, amongst other
things to consider the appointment of
common directors.
Group Chief Financial Officer,
Denise Cockrem
Ian Campbell resigned as Chief Financial
Officer in August 2018. Denise Cockrem
joined the Group as Group Chief Financial
Officer and was appointed as an Executive
Director on 6 September 2019.
Induction and training
All new directors undertake a formal,
comprehensive and tailored induction to the
Group upon joining the Board. This includes
sessions with the Group Company Secretary,
Group Compliance, Group Finance, Group
Risk, Actuarial, Group Strategy, Human
Resources and heads of the Group’s trading
businesses. New directors also meet
individually with the Chairman of Allchurches
Trust Limited, the Group Chairman, the
Senior Independent Director, and each of the
Executive Directors. This is to ensure they
understand the significant risks, strategic and
commercial issues affecting the Group and
the markets in which it operates as well as
their duties and responsibilities as a director.
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A desk-based review was undertaken
including consideration of the Group’s
Governance Framework and Board and
Committee packs. In addition, questionnaires
were completed by directors and one-to-one
interviews held. Grant Thornton also attended
Board and Committee Meetings in Q1 2020
to enable them to evaluate the Board’s
processes and behaviours.
All directors receive an annual appraisal from
the Chairman. The Chairman is appraised by
the Board, in his absence, led by the Senior
Independent Director.
By order of the Board
Chris Moulder
Chairman of the Group Nominations
Committee
17 March 2020
The Group Company Secretary maintains
annual CPD records for all directors, which
the Chairman reviews as part of their annual
appraisal. Training and development needs
of Board members are also reviewed by the
Committee. In 2019 a number of training
sessions took place and covered the 2018
UK Corporate Governance Code (by Ernst
& Young), Investment Training – Actions in
a volatile market (by the Actuarial Function
Director), Group Catastrophe (by the Claims
Director) Management and Innovation
in Insurance (by the Head of Business
Improvement and Innovation). In 2020
sessions have been planned on the Internal
Model (by the Group Chief Actuary) and
Safeguarding (by the Claims Director).
Board evaluation
It is the Board’s policy for its evaluations to
be facilitated every two years.
The Committee led an external evaluation
of the Board and Committees, assisted by
the Company Secretariat. An external board
evaluation provider, Grant Thornton (which
acts as our co-source provider for internal
audit on UK and Canada and has no other
connection with the Group), conducted this
evaluation. The outcome of the evaluation
will be considered by the Board at their
meeting on 17 March 2020. The Committee
will monitor the implementation of all
recommendations arising from the review.
‘Ecclesiastical recognises
the benefits of having
a diverse Board. It is
committed to improving
diversity on the Board
in the broadest sense
and acknowledges that
diversity both improves
performance of the
Board and strengthens
the business.’
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123
Group Risk
Committee Report
Chairman’s introduction
I am pleased to present this report, describing the work undertaken by the Group Risk Committee
during the past year. The Group has voluntarily chosen to include a Group Risk Committee
Report in addition to the disclosures in the Risk Management Report and Principal Risks sections
starting on page 62. Francois-Xavier Boisseau was appointed as a member of the Committee
in April 2019. We also welcome Neil Maidment, who joined as a member of the Committee on
2 March 2020. Jacinta Whyte and Tim Carroll stepped down from the Committee in November
and December 2019, respectively. John Schofield was appointed Group Compliance Director in
December 2019 following John Titchener’s retirement. Debra Weekes has resigned as Group
Chief Risk Officer and will leave the business in July 2020. The process to recruit her successor
is underway and the Group Head of Risk will act as Chief Risk Officer in the interim if required.
Membership
The members of the Group Risk Committee and their attendance at meetings during the year
are shown below:
Committee member
Member since
Meetings eligible
to attend
Meetings
attended
Chris Moulder (Chairman)
S. Jacinta Whyte*
Tim Carroll**
Andrew McIntyre
Francois-Xavier Boisseau*** April 2019
September 2017
February 2014
August 2013
August 2017
5
5
5
5
4
5
5
5
5
4
Jacinta Whyte stepped down from the Committee on 27 November 2019
*
** Tim Carroll stepped down from the Committee on 31 December 2019
*** Francois-Xavier Boisseau was appointed to the Committee on 3 April 2019
Committee meetings
The Group Risk Committee comprised the
directors shown in the table above who were
appointed by the Board.
The Committee held five meetings during
the year, which were attended by the Group
Chairman, Group Chief Risk Officer, Group
Chief Financial Officer, Group Chief Actuary
and Group Compliance Director.
The Committee’s key responsibility is to assist
the Board in monitoring the appropriateness
and effectiveness of the Group’s risk strategy,
appetite and profile; and risk management
culture and framework. In addition, the
Committee oversees the material risks of the
Group. The Committee is also responsible for
reviewing Group capital management and
Internal Model scope, governance and validation.
The Group’s principal risks and uncertainties
are set out on pages 68 to 75. The
Committee has reviewed these in detail
and is comfortable that the business has
addressed them appropriately within its
ongoing operating model and identification
of strategic priorities.
A focus of the Committee’s work this year has
been to ensure transition of the Internal Model
post-regulatory approval. This has included
monitoring the ongoing development,
governance, methodology and calibration of
the Internal Model; overseeing the validation
cycle; agreeing Management Actions and
reviewing the Profit and Loss Attribution.
The Committee also oversaw the successful
application of a major model change in the
year. Finally, the Committee continues to review
the Group’s ongoing capital and solvency
requirements and other key Model uses.
Another key focus for the Committee in
2019 was to oversee a review of the Board’s
risk appetite. This has included reviewing the
Group Chief Risk Officer’s recommendations
to define those appetites which are
reserved for the Board and delegate the
remainder to the Group Management Board
(including allowing the Group Management
Board to directly own some of the less
material measures). This work concluded in
November, culminating in a recommendation
to the Board, which was approved.
Additionally, during the year, the Committee
has overseen the ongoing development of
the Group’s data management model; the Own
Risk and Solvency Assessment and Control
Risk Self-Assessment processes;
and monitored material outsourcing risks.
The Committee has received regular reports
on compliance monitoring and breaches,
fraud and financial crime, business continuity,
cyber security, information security and the
Money Laundering Reporting Officer’s Report.
Together with the Group Finance and
Investment Committee, the Committee
also oversaw a review of the Group’s
Authorities Framework. The Committee also
reviewed its Terms of Reference and made
recommendations to the Board. In addition,
the Committee undertook a review of its own
performance and set objectives.
The Group Chief Risk Officer reports to the
Committee and has direct access to the
Committee Chairman and the Non-Executive
Directors. The Committee ensures that it
meets with the Group Chief Risk Officer at
least annually without management present.
The Director of Group Compliance also
reports to the Committee regularly and meets
with the Committee at least once a year
without management present.
By order of the Board
Chris Moulder
Chairman of the Group Risk Committee
17 March 2020
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Group Audit
Committee Report
Chairman’s overview
I am pleased to be able to report on the Group Audit Committee’s safeguarding of the
interests of Ecclesiastical for the benefit of its shareholder. The Committee plays a crucial
role in oversight and scrutiny of the Group’s financial reporting, internal and external audit
arrangements, internal control environment and risk management.
Francois-Xavier Boisseau joined the
Committee in April 2019. We also welcome
Neil Maidment, who joined as a member of
the Committee on 2 March 2020. Tim Carroll
stepped down at the end of 2019 after serving
on the Committee since April 2013. Members
of the Committee were delighted that Tim
Carroll has taken up the position of Chairman
at our ultimate parent company and charity,
Allchurches Trust Limited. Dan O’Loughlin was
confirmed as the Group’s Chief Internal Auditor
in June 2019, having been appointed on an
acting basis in January 2019.
The Committee has considered the processes
underpinning the production and approval of
this year’s Annual Report & Accounts.
The significant accounting and reporting issues
considered in detail by the Committee are set
out on pages 130 to 131.
The Committee seeks to ensure that the
identification and management of significant
risks is embedded across all areas of the
business, with continued and effective
oversight from the Group Management Board
(GMB). We remain satisfied that the business
has maintained a robust risk management
and internal controls culture, supported by
strong overall governance processes.
In 2019 we completed a rigorous external
auditor tender process. This resulted in the
selection of PricewaterhouseCoopers LLP
(PwC) who will be the Group’s statutory auditor
for the year ending 31 December 2020.
The Committee has overseen the start of
preparations for the auditor transition and look
forward to working with PwC. I would like to
thank Deloitte LLP for the audit service they
have provided the Group with over the past
22 years.
During 2019, we have overseen the successful
implementation of the new leases accounting
standard, IFRS 16 and preparation is underway
for the new insurance contracts standard,
IFRS 17.
Andrew McIntyre
Chairman of the Group Audit Committee
Members of the Committee
Committee members have been selected with the aim of providing the wide range of financial,
risk, control and commercial expertise necessary to fulfil the Committee’s duties. Further
information about the experience of each member of the Committee can be found on page 96.
The Board considers that Andrew McIntyre has recent and relevant financial experience and
accounting competence and that the Committee as a whole is appropriately competent in the
sectors within which the Group operates. The members of the Group Audit Committee who
were appointed by the Board and their attendance at the nine meetings held during the year
are shown below. Francois-Xavier Boisseau, Tim Carroll and Chris Moulder were unable
to attend one or more unscheduled meetings called at short notice.
Committee member
Member since
Meetings eligible
to attend
Meetings
attended
Andrew McIntyre (Chairman)
Francois-Xavier Boisseau
Tim Carroll*
Chris Moulder
Caroline Taylor
April 2017
March 2019
April 2013
September 2017
February 2018
9
7
9
9
9
* Tim Carroll was a member of the Committee until 31 December 2019
** Caroline Taylor stepped down from the Committee on 27 November 2019.
9
5
8
8
9
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Committee meetings
In addition to the members of the Committee,
the Chairman of the Board, the Group Chief
Executive, the Group Chief Financial Officer,
the Deputy Group Chief Executive and the
Group Chief Internal Auditor attend meetings
by invitation. Other relevant people from the
business are invited to attend certain meetings
in order to provide insight into key issues and
developments. The Group’s external auditor is
invited to attend meetings and, during 2019,
attended all six scheduled meetings.
During the year, the Committee met privately
with the Group Chief Internal Auditor and the
Group’s external auditors without management
present. The Committee reviews its terms of
reference, its performance and activities over
the previous year as part of an annual cycle
to confirm that its activities were in line with
its remit.
The Committee’s key responsibilities include:
• monitoring the integrity of the financial
statements;
• challenging the Group’s financial reporting, and
reporting upon anything that it is not satisfied
with;
• reviewing regulatory reports;
• reviewing tax strategy and policies;
• reviewing the Committee’s effectiveness
annually;
• reviewing the Group’s whistleblowing
arrangements;
• reviewing the Group’s audit arrangements,
both externally and internally; and
• reviewing the effectiveness of the Group’s
systems of internal controls and the risk
management.
A summary of the main activities of the
Committee during the year is set out below:
Auditor appointment,
independence and
non-audit services
The Committee has primary responsibility
for overseeing the relationship with, and
performance of, the external auditor.
This includes making the recommendation
on the appointment, reappointment and
removal of the external auditor, assessing their
independence on an ongoing basis and for
agreeing the audit fee.
Deloitte were initially appointed as the
Group’s external auditor in 1998 and were
re-appointed in 2015 following a formal
tender process. The external audit has been
led by the Deloitte senior statutory auditor
Paul Stephenson for five years. The Company
confirms that it complied with the provisions of
the Competition and Markets Authority’s Order
for the financial year under review.
Both the Board and the external auditor have
safeguards in place to protect the independence
and objectivity of the external auditor.
The Committee is responsible for the
development, implementation and monitoring
of the Group’s policy on the provision of non-
audit services by the external auditor.
The policy is reviewed annually by the
Committee. The purpose of the policy is to
safeguard the independence and objectivity
of the external auditor and to comply with the
ethical standards of the Financial Reporting
Council (FRC).
The Committee oversees the plans for the
external audit to ensure it is comprehensive,
risk based and cost effective. Deloitte drafted
their audit plan for the 2019 audit and
presented it for review by the Committee at
its November meeting. The plan described the
proposed scope of the work and the approach
to be taken, and also proposed the materiality
levels to be used which are described on page
169. In order to focus the audit work on the
right areas, the auditors identify particular risk
issues based on various factors, including
their knowledge of the business and operating
environment, discussions with management
and the half-year review. The fee for the audit
is also proposed as part of this discussion.
For the year ended 31 December 2019, the
Group was charged £676,000 (ex VAT) by
Deloitte for audit services. The fees for other
assurance services required by legislation
and/or regulation amounted to £164,000,
making total fees from Deloitte of £840,000.
There were no other non-audit services
provided by Deloitte during the year. More
detail can be found in note 12 to the financial
statements on page 213.
Audit tender
Last year’s Committee report referred to
a decision to commence an audit tender
process in 2019 to take effect for the
financial year ending 31 December 2020.
The tender was completed in 2019
and resulted in the proposal, subject to
shareholder approval at the 2020 AGM, to
appoint PricewaterhouseCoopers LLP (PwC)
as external auditor.
The scope of the tender consisted of
Ecclesiastical Insurance Office plc, its
immediate parent Ecclesiastical Insurance
Group plc, along with statutory audits of
subsidiaries of Ecclesiastical Insurance Group
plc. The scope excluded dormant companies
and those exempt from statutory audit.
The purpose of the audit tender was to select
the most appropriate auditor in terms of
audit quality and value. The Committee had
ultimate authority over the competitive tender
process and the evaluation of firms, and for
making the recommendation for appointment
to the Board. To ensure a transparent and
robust selection process, the Committee
was responsible for overseeing the design
and execution of the tender and selecting
the evaluation criteria. The Committee was
supported by the Group Chief Financial Officer
and members of Group Finance team.
Firms were evaluated using the following
selection criteria:
- Audit firm and auditor independence
including the firm’s practices that would
ensure compliance with independence
requirements and freedom from any
conflicts of interest.
- Strength of the audit team, including
relevant industry experience and
working style of the lead partner,
actuarial partner and senior members
of the audit team.
- Technical criteria, including the proposed
audit approach, including transition, and use
of tools in the audit.
- Track record of audit quality, including
reviews and findings from the Financial
Reporting Council’s Audit Quality Reviews.
- Ability to provide insight and challenge.
- Cultural fit, including whether the firm’s
value and ethics are consistent with
Ecclesiastical’s.
- Audit fees that provide value for money
without compromising audit quality.
There were several stages in the audit
tender process. First, an assessment of
the audit market was made to identify firms
to be invited to tender, which resulted in
expressions of interest being sought from
six firms. Shortlisted firms were invited
to put forward proposals to provide audit
services. A data room was opened for
firms to receive information and responses
to questions. Firms were invited to meet
with Ecclesiastical’s key business leaders,
including the Group Chief Executive Officer,
Deputy Group Chief Executive Officer,
Group Chief Financial Officer and Group
Chief Risk Officer. Firms were also given
the opportunity to meet with Committee
members and certain members of
management who work with the
Group’s auditors.
Firms were asked to respond to and provide
views on some topical and technical areas
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In respect of these annual financial
statements, the Committee paid particular
attention to the significant judgements
set out below, the going concern and
viability statements, review of the corporate
governance disclosures and monitoring of
the external audit process.
The Committee reviewed and challenged the
Group’s annual regulatory submissions under
Solvency II in the second quarter of the year.
The Committee focused on the reporting
requirements of the publicly filed SFCR and
QRTs and privately filed RSR Annual Update.
The significant areas of focus considered
by the Committee in relation to the 2019
accounts, and how these were addressed,
are outlined below. These were discussed
and agreed with management during the
course of the year, and also discussed with
Deloitte at both the half year and year end.
The nature of these issues and how they are
mitigated is explained in more detail in the
Risk Management Report on page 62, and
also note 2 to the financial statements on
page 191.
to allow them to demonstrate their technical
capability relevant to the Ecclesiastical
audit. Written proposals were then received
and firms gave final oral presentations of
their proposal to certain members of the
Committee, including the Group Chief
Financial Officer and key members of
management in attendance.
The Committee evaluated the performance
of firms across the entire tender process and
concluded that each shortlisted firm had the
experience and competencies required to
carry out an effective audit. The Committee
recommended a preference for PwC due to
their demonstration of actuarial expertise
and depth of knowledge of the business
and industry the Group operates in. This
recommendation made to the Board resulted
in a resolution by the Board to recommend
PwC to shareholders at the 2020 AGM.
The Committee and the Group’s Finance
teams have been and will be working closely
with Deloitte and PwC during the 2020
financial year to ensure an efficient and
orderly transition of the external audit.
External audit effectiveness
The Committee assesses the effectiveness
of the external auditor annually against a
number of criteria including, but not limited
to, accessibility and knowledgeability of audit
team members, the efficiency of the audit
process including the effectiveness of the
audit plan, and the quality of improvements
recommended.
The Committee reviewed a report based
on questionnaires completed by senior
management, business unit leaders and
those members of staff most involved in
the external audit process. The Committee
recognised the strengths of the external
auditor and provided challenge to the auditor
for areas that could be improved.
The process demonstrated to the Committee
that the external auditor continued to perform
independently, effectively and to provide
robust challenge. Following the review,
the Committee recommended to the Board
that Deloitte be re-appointed under the
current external audit contract as auditor
for the 2019 financial year.
Examination
of acquisition activity
The Committee is also constituted as a
committee of the Company’s immediate
parent Ecclesiastical Insurance Group plc
and provides the same functions. During the
year, the Company, Ecclesiastical Insurance
Group plc, acquired a non-controlling equity
interest in the specialist insurance broker
Lloyd & Whyte. The Committee considered
and examined various matters in relation
to this transaction including the expected
earnings contribution, application of IFRS
control principles and financial reporting
impacts further acquisition steps are
expected to have.
Appropriateness of
the Group’s external
financial reporting
The primary role of the Committee in relation
to financial reporting is to review, challenge
and agree the appropriateness of the half-
year and annual financial statements and
annual regulatory reporting under Solvency II,
concentrating on, amongst other matters:
• the quality and acceptability of the Group’s
accounting policies and practices;
• the clarity of the disclosures and
compliance with financial and regulatory
reporting standards, and relevant financial
and governance reporting requirements;
• material areas in which significant
judgements have been made by the Group
or there has been discussion with the
external auditor;
• whether the Group’s Annual Report and
Accounts, taken as a whole, are fair,
balanced and understandable and provide
the information necessary for shareholders
to assess the Group’s position and
performance, business model and strategy;
• any correspondence from regulators in
relation to financial reporting.
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Matter considered
Action
Matter considered
Action
General insurance
reserves
The estimation of the liability
arising from claims under
general business insurance
contracts is a critical
accounting estimate.
There is uncertainty as to
the total number of claims
on each class of business,
the amounts that such claims
will be settled for and the
timings of any payments.
Life insurance reserves
The calculation of the Group’s
life insurance reserves
requires management to
make significant judgements
about bond yields,
discount rates, credit risk,
mortality rates and current
expectations of future
expense levels.
The Committee considered detailed reports provided by the Group’s Reserving Actuary
on the adequacy of the Group’s general insurance reserves at both the half year and the
full year and discussed and challenged management across a wide range of assumptions
and key judgements.
This is a major area of audit focus and Deloitte also provided detailed reporting on these matters
to the Committee.
The Committee considered in detail the favourable development of prior years’ reserves for the
liability accounts and acknowledged the key drivers to be favourable experience on larger claims
than expected. Taking into account the Group Reserving Actuary’s assessment of the sufficiency
of these reserves, the Committee challenged management on whether the proposed releases were
reasonable and that the reserves remained appropriately prudent.
The Committee continues to maintain a focus on the longer-term reserves relating to asbestos and
PSA claims and reviewed actual claims experience against expectations throughout the year.
The Committee noted and supported management’s decision to continue to hold an additional
margin in respect of future PSA claims as the IICSA investigations develop.
Following all of our reviews and discussions, the Committee’s opinion was that the reserving process
and outcomes were robust and well managed and that the overall reserves set were reasonable as
disclosed in notes 9 and 28 to the financial statements.
The Committee considered a report from the Chief Actuary of Ecclesiastical Life Limited (‘ELL’)
(the Group’s life business) which set out recommendations for the basis and methodology to apply for:
• the valuation of policy liabilities for inclusion in the report and accounts of ELL at 31 December
2019, and
• the calculation of technical provisions in accordance with Solvency II regulations at 31 December
2019.
The Committee noted that no material changes in methodology were proposed, for either
the accounts or Solvency II reporting basis, from those used for the valuations at 31 December
2018.
The Committee reviewed the work done by the Chief Actuary to assess whether the methodology
remained appropriate, with a particular focus on mortality assumptions, interest and inflation rate
assumptions.
Following its review, and after consideration of Deloitte’s report, the Committee was satisfied that
the assumptions proposed were appropriate and overall the judgements made in respect of the
reserves were reasonable. The assumptions are disclosed in note 28(b) to the financial statements.
Carrying value
of goodwill
This is an area of focus for
the Committee given the
materiality of the Group’s
goodwill balances (£23m as
at 31 December 2019) and
the inherent subjectivity in
impairment testing.
The judgements in relation to
goodwill impairment continue
to relate primarily to the
assumptions underlying the
calculation of the value in use
of the business, being the
achievability of the business
plans and the macroeconomic
and related modelling
assumptions underlying the
valuation process.
Valuation of defined
benefit pension
scheme liability
Although the Group’s defined
benefit scheme is in surplus,
the liabilities of the scheme
are material in comparison
to the Group’s net assets
and the valuation requires
many actuarial assumptions,
including judgements in
relation to long-term interest
rates, inflation, longevity and
investment returns.
Judgement is applied in
determining the extent to
which a surplus in the Group’s
defined benefit scheme can
be recognised as an asset.
The Committee received detailed reporting from management and challenged the appropriateness
of the assumptions made, including:
• the consistent application of management’s methodology;
• the achievability of the business plans;
• assumptions in relation to long-term growth in the businesses at the end of the plan period; and
• discount rates.
The Committee paid particular attention to the business plans and management’s proposed cash
flows attributable to each Cash Generating Unit (CGU), and the determination of the discount rate
used in the calculation. Detailed support for these assumptions was provided by management.
The Committee considered the proposal and provided robust challenge to the assumptions,
notably the evidence to support the discount rate and the appropriateness of the future cashflow
assumptions.
After its reviews, the Committee concluded that the assumptions were reasonable.
Goodwill is disclosed in note 17 to the financial statements.
During 2019, the Committee received reports from management on the proposed approach to the
valuation of the pension scheme. As the pension scheme is sensitive to changes in key assumptions,
management completed an assessment as to the appropriateness of the assumptions used, taking
advice from independent actuarial experts and including where appropriate, benchmark data, and
reported its findings to the Committee. Following this review, management concluded that in addition
to updating assumptions to reflect economic market conditions at 31 December 2019, the gap
between CPI and RPI measures of inflation should be reduced to reflect the potential for changes to
the RPI measure of inflation.
The Committee requested management update the assumption used for future improvements in
mortality annually. Following consideration, the Committee concluded that the assumptions proposed
were appropriate and in line with normal market practice.
After careful consideration of the requirements of International Financial Reporting Interpretations
Committee 14 (IFRIC 14), the Committee concluded that recognition of the full surplus in the Group’s
main defined benefit scheme was appropriate.
The impact of updating assumptions to reflect those in force at the balance sheet date on the
valuation at 31 December 2019 are explained in note 19 to the financial statements on page 219.
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Fair, balanced
and understandable
At the request of the Board, the Committee
has considered whether in its opinion, the
2019 Annual Report and Accounts were fair,
balanced and understandable and provided
the information necessary for shareholders to
assess the Group’s position and performance,
business model and strategy. The Committee
has reviewed and provided feedback on early
drafts of the Annual Report and Accounts,
highlighting any areas where further clarity
was required in the final version.
The Committee was provided with
comprehensive verification of all the
information and facts in the Annual Report
and Accounts, and any statements of belief
were highlighted and considered separately
by the Committee. When forming its opinion,
the Committee reflected on information it
had received and its discussions throughout
the year as well as our own knowledge of
the business and its performance. A suitably
qualified employee of the Group, who does
not work in a financial or actuarial area and is
not involved in the production of the Annual
Report and Accounts or financial results,
reviewed a near-final draft and gave their
opinion on whether they consider it to be
fair, balanced and understandable. Guidance
on what is meant by these statements and
aspects the employee might wish to consider
when forming an opinion was provided.
The employee produced a written report
for the Committee which gave an overall
opinion on the Annual Report and Accounts
and also set out their view of the strengths
and any areas for development. Following
a review, the Committee was of the opinion
that the 2019 Annual Report and Accounts
was representative of the year and was fair,
balanced and understandable.
Oversight of the Group’s
systems of internal control
including the internal
audit function
Assessment of internal controls
The Group’s approach to internal control and
risk management is set out in the Corporate
Governance Report on page 106.
In reviewing the effectiveness of the system
of internal control and risk management
during 2019, the Committee has:
• reviewed the findings and agreed
management actions arising from both
external and internal audit reports issued
during the year;
• monitored management’s responsiveness
to the findings and recommendations of the
Group Chief Internal Auditor;
• met with the Group Chief Internal Auditor
once during the year without management
being present to discuss any issues arising
from internal audits carried out; and
• considered a report prepared by the Group
Chief Internal Auditor giving his assessment
of the strength of the Group’s internal
controls based on internal audit activity
during the year.
Internal control over financial reporting
Internal control over financial reporting is
a process designed to provide reasonable,
but not absolute, assurance regarding the
reliability of management and financial
reporting in accordance with generally
accepted accounting principles. Controls over
financial reporting policies and procedures
include controls to ensure that:
• through clearly defined role profiles and
financial mandates, there is effective
delegation of authority;
• there is adequate segregation of duties in
respect of all financial transactions;
• commitments and expenditure are
appropriately authorised by management;
• records are maintained which accurately
and fairly reflect transactions;
• any unauthorised acquisition, use or disposal
of the Group’s assets that could have a
material effect on the financial statements
should be detected on a timely basis;
• transactions are recorded as required
to permit the preparation of financial
statements; and
• the Group is able to report its financial
statements in compliance with IFRS.
Due to inherent limitations, internal control
over financial reporting may not prevent or
detect misstatements. Risk management and
control systems provide reasonable assurance
that the financial reporting does not contain
any material inaccuracies. Through its review
of reports received from management, along
with those from internal and external auditors,
the Committee did not identify any material
weaknesses in internal controls over financial
reporting during the year. The financial
systems are deemed to have functioned
properly during the year under review, and
there are no current indications they will not
continue to do so in the forthcoming period.
Group Internal Audit (GIA)
GIA is monitored by the Committee and
provides independent, objective assurance
to the Board that the governance processes,
management of risk and systems of internal
control are adequate and effective to mitigate
the most significant risks to the Group. GIA
operates a co-sourcing arrangement in the
UK and Ireland where specialist resource is
required to supplement existing resources.
In addition, GIA oversees and monitors the
outsourced internal audit arrangements in
Australia and Canada.
The Committee has oversight responsibility
for GIA and is satisfied that GIA has the
appropriate resources. In January 2019, the
Committee appointed Dan O’Loughlin as
Acting Group Chief Internal Auditor and, in
July 2019, his permanent appointment was
confirmed. The Group Chief Internal Auditor
is accountable to the Committee Chairman
and has access to the Chairman of the Board.
GIA’s annual programme of work is risk
based and designed to cover areas of
higher risk or specific focus across the Group.
The plan is approved annually in advance
by the Committee and is regularly reviewed
throughout the year to ensure that
it continues to reflect areas of higher priority.
Where necessary, changes to the agreed
plan are identified as a consequence of the
Group’s changing risk profile. All proposed
changes to the agreed internal audit plan are
reviewed, challenged and approved by the
Committee during the year.
Throughout the year, GIA submitted quarterly
reports to the Committee summarising
findings from audit activity undertaken and
the responses and action plans agreed with
management. During the year, the Committee
monitored progress of the most significant
management action plans to ensure that
these were completed in a timely manner
and to a satisfactory standard.
Legal and regulatory
developments
The Committee receives regular reports and
considers the impact of legal and regulatory
developments on the UK Group to control
legal and regulatory risk. It monitors the
application and impact of any actions required
by the business or organisation through to
completion. Reports are shared with relevant
business areas, and with relevant subsidiary
Boards and Board Committees.
The year ahead
In 2020, the Committee will continue to
provide oversight of financial reporting and
internal controls of the Group. A key area of
focus for the Committee will be the effective
transition of the incoming statutory auditor
to ensure that PwC is able to make effective
preparations to become Ecclesiastical’s auditor.
The Committee remains committed to its vital
role in overseeing the integrity of financial
reporting and effectiveness of controls.
By order of the Board
Andrew McIntyre
Chairman of the Group Audit Committee
17 March 2020
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Group Remuneration
Report
Group Remuneration Committee Chair’s statement
As Chair of the Group Remuneration Committee (the Committee), I am pleased to introduce
the Group Remuneration Report for 2019 and to highlight some of the key aspects of the
Committee’s work during the financial year. I was appointed as Chair of the Committee on
21 June 2019, having been a member of the Committee since 2014. I would like to take
this opportunity to thank David Henderson for his leadership of the Committee during
2018 and his ongoing support of the Committee’s work. This year, Angus Winther joined
the Committee in April 2019 and Chris Moulder stepped down from the Committee in
November 2019. I would also like to welcome Neil Maidment, who became a member of
the Committee and of the Group Risk and Group Audit Committees on 2 March 2020.
2019 performance and incentive
outcomes
As described in the Strategic Report starting
on page 16, the Group has delivered another
strong set of results, with a robust set of
underwriting results1 across the Group of
£20.0m (2018: £29.4m) and GWP growth
of 10.4% to £394.0m (2018: £357.0m).
Investment returns were particularly strong,
with an investment income in the year of
£34.8m (2018: £35.3m) and fair value
gains of £52.1m (2018: fair value losses
of £35.4m), resulting in pre-tax profits of
£73.3m (2018: £15.4m).
In considering the annual bonus outcomes
for Executive Directors, the Committee
reflected on the financial, strategic, customer
and conduct performance of the Group,
including the very strong performance
against Group PBT and COR targets, and
the strong delivery against the Group’s
strategic change programme and customer
and conduct targets. The Committee
additionally gave consideration to the Group's
contribution to the Independent Inquiry into
Child Sexual Abuse, IICSA, as set out in the
Chief Executive's report on page 24. Further
details of performance against the targets
set for 2019 are disclosed on page 152 of
this report. In its assessment of individual
performance during the year, the Committee
recognised the excellent performance
against Executive Directors’ personal
financial, strategic and wider objectives.
Annual bonus awards for 2019 are 96%
of maximum for the Group Chief Executive,
96% for the Deputy Group Chief Executive
and 90% for the Group CFO reflecting the
very strong performance of the Group during
the year. In line with the Group’s deferral
policy, bonuses above 75% of the maximum
are deferred for three years.
The long-term incentive plan (LTIP) granted
in 2017 vested at 86%, reflecting the
Group’s very strong performance against the
financial, strategic, customer and conduct
targets over the 2017-2019 period.
Discretion
To ensure that results have been achieved
within the Group’s risk appetite and to
inform the Committee’s judgements in
relation to any risk adjustment of awards,
the Committee, supported by the Group
Chief Risk Officer (CRO), considered risk
management outcomes across the Group
as part of its deliberations. Following this
review, the Committee did not consider risk
adjustment of the awards to be necessary.
The Committee further agreed that the bonus
and LTIP awards were a fair reflection of the
overall performance achieved and, having
considered all relevant factors, determined
that no discretionary adjustment of awards
was necessary.
Base salary
Executive Directors’ salaries are reviewed
at the same time as other employees.
After careful consideration, the Committee
decided that the base salaries of Executive
Directors would be increased by 2.5%
(effective 1 April 2020).
Key Committee activities during the year
During the year, the Committee reviewed the
Group’s Remuneration Policy and determined
that it remains effective and continues
to drive the sustained and long-term
performance of the Group. The Committee
determined that the remuneration packages
of Executive Directors remain appropriately
aligned with the Group’s strategic objectives
and reflective of the experience and track
record of the Executive Directors and
comparative benchmarking.
As announced in September 2019, Denise
Cockrem, Group CFO, was appointed to
the Board. The Committee gave careful
consideration to the remuneration package
for the Group CFO, in line with the Group’s
Remuneration Policy. Her remuneration for
the period she served as a Director during
the year is included in this report.
1 Alternative performance measure, refer to note 36 to the financial statements for further explanation
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2019 also saw a number of changes
within the wider leadership of the Group.
In relation to these changes, the Committee
considered the remuneration package for
the Group Chief Actuary on his appointment
to the Group Management Board.
Also the packages for the Group Director
of Broking and Advisory and Group Chief
Internal Auditor on their appointments.
The Managing Director, UKGI announced
his intention to retire in 2020 and the
Committee considered the remuneration
package for his successor, who joined the
Group in February 2020, as well as for the
newly appointed President of the Group’s
Canadian business. The Committee also
considered the contractual entitlements
applicable to the Group Compliance Director
on his retirement and to the Group Brand
and Communications Director.
in nature this has contributed to our median
gender pay gap reducing to 22.4% from
25.0% in 2017. The Group continues to be
committed to promoting diversity and gender
balance at every level in the business and
ensuring that all employees have a fair and
equal pay opportunity appropriate to
their role.
2019 saw the introduction of disclosures on
the pay ratio of the CEO to UK employees
for listed companies. While our Group
structure does not require us to comply with
the regulations governing the disclosure
of executive remuneration to which quoted
companies are subject, we have chosen
to disclose the ratio of the Group Chief
Executive’s pay to that of other UK employees
in order to provide greater transparency and
further details are set out on page 155.
The Committee continued to oversee the
development and application of remuneration
policy and incentive scheme design across
the wider Group, continuing to align reward
policies across all Group entities with the
Group’s strategic objectives and financial
targets. The Committee also considered
the changes arising from the 2018 UK
Corporate Governance Code and Companies
(Miscellaneous Reporting) Regulations,
further details of which are set out in
this report.
Conclusion
Finally, I value the continued support from our
charitable owner and ultimate shareholder
Allchurches Trust Limited, and remain mindful
of our responsibilities to drive sustained and
improved performance over the long term
through our remuneration strategy, policy
and principles.
Caroline Taylor
Chair of the Group Remuneration Committee
17 March 2020
Fees for NEDs and the Chairman were
reviewed by the Board and the Committee
respectively during 2019, in line with
its two-year review cycle. The increases
(set out on page 159) reflect the demands
and responsibilities of the NED roles and
will ensure that the Group will continue to
be able to attract NEDs with the range of
experience and skill levels required.
The Group’s gender pay report for 2019
showed a continuing downward trend in the
Group’s gender pay gap. We are pleased
to see that the actions we have taken have
resulted in a higher proportion of women
filling senior roles and that whilst many of the
actions we have put in place are long term
Committee member
Member since
Meetings eligible
to attend
Meetings
attended
David Henderson1
Caroline Taylor2
The Very Reverend Christine Wilson3
Chris Moulder4
Angus Winther5
September 2016
November 2 014
February 2018
June 2018
April 2019
6
6
6
6
4
6
6
2
5
3
1 David Henderson relinquished the chairmanship of the Committee with effect from 19 March 2019 on his appointment
as Group Chairman.
2 Caroline Taylor was appointed Chairman of the Committee on 21 June 2019.
3 The Very Reverend Christine Wilson did not attend four meetings due to taking a leave of absence from the Group for
personal reasons from April 2019. Dean Wilson had previously been a member of the Committee from April 2013 to
September 2016.
4 Chris Moulder was a member of the Committee until 27 November 2019. Mr Moulder was unable to attend one meeting
during the year because of a prior commitment with another Board.
5 Angus Winther was appointed to the Committee on 3 April 2019. Mr Winther was unable to attend a meeting as it was
called at short notice.
Group Remuneration
Committee
Purpose and membership
The Committee is responsible for
recommending to the Board the Remuneration
Policy for Executive Directors and for setting
the remuneration packages for each Executive
Director, members of the Group Management
Board (GMB), Material Risk Takers and heads
of Strategic Business Units. None of the
Executive Directors were involved in discussions
relating to their own remuneration. The
Committee also has overarching responsibility
for the Group-wide Remuneration Policy.
During 2019, the Committee held six
meetings in total. The Group Remuneration
Committee members and their attendance
at meetings during the year are set out in the
table above. All members are independent
NEDs and have the necessary experience
and expertise to meet the Committee’s
responsibilities. There was cross membership
of the Group Risk Committee and the
Committee to promote alignment of the
Group’s Risks and Remuneration Policies
and consideration of risk management and
outcomes in setting reward.
Advisers to the Committee
During the year, the Committee received
external advice from Aon in relation to
the review of the Group’s Remuneration
Policy; the determination of appropriate
remuneration packages for Executive
Directors, members of the GMB and heads
of Strategic Business Units and remuneration
market trends and regulation. Aon also acts
in the capacity of Actuary to EIO Trustees
Ltd in respect of the Group’s legacy defined
benefit pension scheme. The Committee
also had access to benchmarking reports
from Willis Towers Watson and McLagan,
each of which also provides data to support
the determination of pay and conditions
throughout the Group.
Fees paid to Aon during 2019 for
professional advice to the Committee were
£48,722 (2018: £54,808). The Committee
is satisfied that the advice received during
2019 from Aon was impartial, as Aon is a
signatory to the voluntary code of conduct
of the Remuneration Consultants Group.
Where appropriate, the Committee received
input from the Chairman Group Risk
Committee, Group Chief Executive, Group
HR Director, CRO and Group Reward
Director. Such input, however, never relates
to their own remuneration.
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Directors’ Remuneration Policy
The Directors’ Remuneration Policy (the
‘Policy’) described in this part of the report is
intended to apply for the year from January
to December 2020. The Policy is aligned to
delivery of the Group’s strategic objectives
and establishes a set of principles which
underpin the Group’s reward structures for
all Group employees:
• Reward structures will promote the delivery
of long-term sustainable returns. As such,
the performance measures in the annual
bonus and LTIP will reflect and support the
Group’s underlying strategic goals and risk
appetite and are comprised of both financial
and non-financial targets.
• Reward payments will be performance-
related, reflecting individual and business
performance, including both what has
been delivered and the way in which such
deliveries have been achieved. However, the
Group will adopt a prudent and considered
approach when determining what portion
of an employee’s package should be
performance-linked and/or variable so as
to ensure that irresponsible conduct and
behaviours are neither encouraged nor
rewarded and that customer experience is
not prejudiced in any way by the operation
of its pay arrangements.
• Reward structures will be straightforward
and simple for everyone to understand.
• Remuneration packages will be set by
reference to levels for comparable roles
in comparable organisations. However,
benchmark data will be only one of a
number of factors that will determine
remuneration packages.
• Reward structures will deliver an appropriate
balance of fixed to variable pay in order
to foster a performance culture, with the
proportion of ‘at risk’ pay typically increasing
with seniority. However, high levels of
leverage are not appropriate for the Group.
• Reward structures will achieve a balance
between short- and long-term incentives,
supporting the overall aim of the Group’s
Remuneration Policy of promoting the long-term
success of the Group. The balance between
short- and long-term incentive pay is largely
driven by role and seniority, with generally
a greater contribution to reward provided
by long-term incentives for more senior
employees.
• Ecclesiastical is committed to ensuring that
all employees have a fair and equal pay
opportunity appropriate to their role.
• The Group will strive to adhere to the
highest standards of remuneration-related
regulatory compliance and best practice
guidelines, while ensuring that the Group’s
remuneration policies are appropriately
tailored to its circumstances, challenges
and strategic goals.
When determining the remuneration policy
for Executive Directors, the Committee
considers the following factors, which are
embedded in the above principles:
• Clarity and simplicity – that remuneration
arrangements are straightforward and
simple for everyone to understand,
providing transparency for executives and
our shareholder regarding the business
and individual performance sought
• Risk – that incentive plans are designed to
manage and mitigate the reputational and
other risks that can arise from excessive
rewards, together with the behavioural risks
• Predictability – that the range of possible
values of reward for performance
outcomes together with the limits and
discretion applicable to the remuneration
arrangements are identified and clearly
explained
• Proportionality – that the link between
individual remuneration outcomes and
the delivery of the Group’s strategy and
long-term performance is clear and that
remuneration outcomes are proportionate
and do not reward poor performance
• Alignment to culture – that remuneration
arrangements drive behaviours consistent
with the Group’s purpose, values, culture
and strategy, with remuneration outcomes
reflecting both what has been delivered
and the way in which such deliveries
have been achieved.
The Committee reviews the Group’s
Remuneration Policy annually to ensure that it
remains aligned with the needs of the Group
and its longer-term strategy and that it remains
appropriately aligned with the external market.
Balancing short- and long-term
remuneration
The Committee has established the
remuneration elements set out in this report
in line with the Group’s Remuneration Policy
principles described above. Fixed annual
elements, including salary, pension and
benefits, are set in order to recognise the
responsibility and experience of the Group’s
Executive Directors and to ensure current and
future market competitiveness. The annual
and long-term incentives are set in order to
incentivise and reward the Group’s Executive
Directors for making the Group successful
on a sustainable basis.
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Future policy table (Executive Directors)
The following table provides a summary of the key components of the remuneration package
for the Executive Directors.
How the element supports the
Group’s strategic objectives
Operation of the element
Maximum potential value and payment
at threshold
Performance measures used,
weighting and time period applicable
Change from 2019
Salary
To provide a core reward at
the level needed to attract
and retain the required level
of talent.
Benefits
To provide a market-
competitive reward package
and promote the wellbeing of
employees.
Salaries are paid in 12 equal monthly instalments during the year.
Salaries are reviewed annually with changes taking effect from
1 April each year.
Benefits normally comprise a car allowance, a private healthcare
scheme, income protection and medical assessments. Executive
Directors also receive life assurance cover on the same basis as
the wider employee population and in the case of the Deputy Group
Chief Executive, health and dental cover and accidental death and
dismemberment cover on the same basis as the wider employee
population in the Group’s Canadian branch.
Pension
To aid retention and provide
a market competitive provision
for post-retirement income.
UK Defined Contribution Scheme: UK-based Executive
Directors are eligible to participate in the Group Personal Pension
plan. Contributions are made by the employee and employer.
Canadian EIO plc Defined Contribution Pension plan:
the Canadian Defined Contribution plan is applicable to
Ecclesiastical’s Canadian staff. The Deputy Group Chief
Executive participates under this plan and does not participate in
the UK Defined Contribution Scheme. Contributions are made by
the employer.
Group annual
bonus scheme
To incentivise the Executive
Directors to achieve key
financial and strategic goals
and targets for the financial
year. Deferral provides further
alignment with shareholders’
interests and promotes
retention.
This cash bonus is paid annually, normally three months after the
end of the financial year to which it relates. Targets are set annually
and award levels are determined by the Committee based on
performance against these targets.
Any bonus earned in excess of 75% of an individual’s maximum
bonus opportunity is deferred over a period of three years.
When the annual review is conducted various
factors are taken into account, including Group and
individual performance, relevant market information
and levels of pay increases in the wider UK or
relevant territory population.
Benefits are set at a level taking into account
benefit packages offered by comparable
organisations for comparable roles; benefits
offered to the wider employee population and with
the overall objective of promoting the wellbeing
of employees. The costs are those relating to
providing the benefit.
The level of pension contribution is set at a level taking
into account pension benefits offered by comparable
organisations for comparable roles and benefits offered
to the wider employee population.
The employer contribution rate to the UK Defined
Contribution Scheme for existing Executive Directors is
15% and for new Executive Directors is 12% of basic salary,
in line with the wider employee population.
The employer contribution rate to the Canadian EIO
plc Defined Contribution Pension plan is 12% of basic
salary subject to the Government’s annual contribution
limits. Amounts in excess are contributed to a SERP.
Maximum opportunity of 100% of salary of which
50% is payable for a target level of performance.
Group and individual performance
None
Not applicable
None
Not applicable
None
The Group annual bonus is subject to a
range of challenging metrics linked to key
strategic priorities. For 2020, these are:
• Ecclesiastical Insurance Group (EIG) PBT
(including fair value investment gains/losses)
None
• Group COR
• Strategic targets
• Customer and conduct targets
• Personal performance targets
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Future policy table (Executive Directors) continued
How the element supports the
Group’s strategic objectives
Operation of the element
Group LTIP
To focus the executives and
incentivise the achievement
of the Group’s long-term
objectives; to align the
Executive Directors’ interests
with those of shareholders
and to promote attraction
and retention of talented
individuals.
Cash awards under the Group LTIP vest dependent on
the Committee’s assessment of performance against the
performance conditions over the relevant three-year period.
Targets are set annually for each successive three-year LTIP
period.
Notes to policy table
Performance measures and targets
The Committee selected the performance
conditions used for the annual bonus and
long-term incentives because they are central
to the Group’s overall strategy and are key
metrics used in measuring the performance
of the Group. The performance conditions are
reviewed and set annually by the Committee,
following consultation with the CRO, including
on the extent to which the schemes operate
within the Group’s risk appetite.
The Committee is of the opinion that the
performance targets are commercially
sensitive to the Group and that disclosure at
the beginning of the financial year may be
detrimental to its interests. The Committee
will keep this under review, meanwhile targets
will be disclosed at the end of the relevant
financial year in that year’s Remuneration
Report provided they are not considered
commercially sensitive at that time.
Remuneration Committee discretion,
malus and clawback provisions
The Committee has discretion to reduce
any annual bonus and LTIP prior to award
in certain circumstances, including (but not
limited to): (i) issues regarding the Group’s
underlying financial strength and position;
(ii) actual or potential regulatory censure;
(iii) if the Group is in material breach of its
risk policies (including conduct risk) and/or
its values/ethics; and (iv) a material diminution
in the regard by which the Group is held by
its customer base as a result of executive
mismanagement.
Bonus already paid or deferred, LTIP already
vested and any unvested LTIP are subject to
malus/clawback in certain circumstances,
including (but not limited to): (i) misstatement
of performance; (ii) regulatory censure,
material reputational damage and/or material
non-adherence to the Group’s risk tolerances;
and (iii) misconduct. A three-year time limit
applies in respect of clawback from the date
of bonus payment and LTIP vesting.
Maximum potential value and payment
at threshold
Performance measures used,
weighting and time period applicable
Change from 2019
Under the rules of the LTIP, awards can be made
of up to 150% of salary in the case of the Group
Chief Executive and of up to 100% of salary in the
case of other Executive Directors.
At on-target performance, a target opportunity
of 50% of the award applies. Threshold business
performance results in vesting of no more than
20% of the award. The Group LTIP plan granted
in respect of 2018-2020 and 2019-2021 will
continue to vest under the previously applicable
policy.
None
The Group LTIP is subject to a range
of challenging conditions linked to key
strategic priorities. For 2020 awards
relating to the performance period
2020-2022, the following performance
conditions will apply:
• Group EIG PBT (excluding fair value
investment gains/losses)
• Group EIG PBT (including fair value
investment gains/losses)
• Group COR
• Strategic targets and
• Customer and conduct targets.
a Group entity and the individual regulatory
requirements applying thereto.
All employees of the Group are entitled
to a salary, benefits, pension and annual
bonus. However, remuneration for Executive
Directors is more heavily weighted towards
variable rewards, through a higher annual
bonus opportunity and participation in the
Group LTIP. Such variable remuneration
is conditional on the achievement of
performance targets that are linked to
the successful delivery of the Group
strategy. The greater weighting towards
variable remuneration thereby aligns the
interests of Executive Directors with those
of shareholders.
Due to the Group’s ownership structure, in
particular that its ultimate parent company is
a charity, it is not possible to deliver variable
remuneration in the form of shares. Cash
awards under the Group Annual Bonus and
Group LTIP arrangements are not subject to
a post-vesting holding period.
Changes to the Policy from that
operating in 2019
No changes were made to the Policy from
that operating in 2019.
Remuneration arrangements
elsewhere in the Group
The Group’s approach to Executive Director
and wider employee remuneration is based
on the common set of principles set out in
the Group’s Remuneration Policy on page
145. However, given the size of the Group
and the range of its operations, the manner
in which these principles are implemented
varies with seniority and, where appropriate,
with the nature of the business transacted by
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Remuneration scenario charts
Notes to the charts:
The remuneration scenario charts below
illustrate what each Executive Director could
earn in respect of the policy for 2020, under
different performance scenarios:
• Minimum: fixed pay only (being basic
salary, pension or cash in lieu of pension
and benefits) with no annual bonus and no
vesting of the LTIP;
• On target: fixed pay (being basic salary,
pension or cash in lieu of pension and
benefits) with annual bonus of 50% of basic
salary and 50% vesting of the LTIP;
• Maximum: fixed pay (being basic salary,
pension or cash in lieu of pension and
benefits) with maximum bonus of 100% of
basic salary and 100% vesting of the LTIP.
• Fixed pay is base salary for 2020 plus the
value of pension and benefits.
• Base salary is the aggregate of the salary
applicable at 1 January 2020 for January
to March 2020 and the salary applicable
at 1 April 2020 for April to December 2020.
• The value of pension is calculated as
described in the Future Policy table.
• The value of benefits in-kind is taken from
the single figure table for 2019, (pro-rated to
the full year value in the case of the Group
CFO), which can be found on page 151.
• The Group operates a cash LTIP scheme for
the reasons set out above. No share price
appreciation has therefore been included in
the remuneration scenario charts.
Approach to recruitment remuneration
Ecclesiastical is a specialist financial services
group competing for talent across a variety
of markets.
The Committee’s approach is to pay a fair
market value to attract appropriate candidates
to the role, taking into consideration their
individual skills and experience and the ethos
of the Group.
Where it is thought necessary to compensate
for an individual’s awards resulting from
previous employment, the Committee may, as
far as practicable, seek to match the expected
value of such awards through the use of the
Group’s existing incentive arrangements.
Where this is not possible, it may be necessary
to offer some form of ‘buy-out’ award,
the size of which will, in the normal course of
events, reflect the commercial value of the
award foregone (and the vesting timetable
of the awards foregone) and will also (where
possible) be subject to some form of clawback
if the individual leaves Ecclesiastical within
a set timeframe.
Any new Executive Director’s package would
include the same elements and generally be
subject to the same constraints as existing
Executive Directors.
Mark Hews: Effect of the application of this policy in financial year 2020
Element of Remuneration
Maximum percentage of salary
Salary
Annual bonus
LTIP
Pension contribution/allowance
-
100%
150% – Group Chief Executive
100% – Deputy Group Chief Executive and Group CFO
12% UK Defined Contribution Scheme
12% Canadian EIO plc Defined Contribution Pension Plan
subject to the Government’s annual contribution limits.
Amounts in excess are contributed to a SERP.
Minimum
100%
Total £547k
On-Target
Maximum
48%
32%
21%
31%
Total £1,132k
28%
40%
Total £1,717k
S. Jacinta Whyte: Effect of the application of this policy in financial year 2020
Minimum
100%
Total £461k
On-Target
Maximum
54%
37%
23%
23%
Total £850k
32%
31%
Total £1,239k
D. Cockrem: Effect of the application of this policy in financial year 2020
Minimum
100%
Total £350k
On-Target
Maximum
54%
37%
23%
23%
Total £654k
32%
31%
Total £958k
Fixed Pay
Annual Variable
LTIP
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Service contracts and policy on payment
for loss of office
Service contracts and policy on payment
for loss of office continued
Standard provision
Policy
Details
Standard provision
Policy
Details
Notice periods in Executive
Directors’ service contracts
Twelve months by the Group
or Executive Director for the
Group Chief Executive and
six months by the Group or
Executive Director for the
Deputy Group Chief Executive
and Group CFO.
Executive Directors may be
required to work through their
notice period, or may be paid
in lieu of notice if they are
not required to work the full
notice period.
Payment in lieu of notice
Severance payment for
Deputy Group Chief Executive
The Group may decide if it
wishes to make a payment in
lieu of notice of an amount
prescribed under the contract,
comprising of salary (and in
the case of the Group Chief
Executive, benefits) for the
balance of the notice period,
excluding bonus and accrued
holiday entitlement.
The Deputy Group Chief
Executive’s pre-existing
contract of employment
before her appointment as
Deputy Group Chief Executive
contained severance
provisions in line with
Canadian law and practice.
The policy of the Group
has been to honour these
commitments insofar as they
relate to accrued service up
to the date of her appointment
to her new role, but not in
respect of service after
that date.
Payable as a lump sum within
14 days of termination date in
the case of the Group Chief
Executive. Payable in monthly
instalments over the balance
of the notice period in the
case of the Deputy Group
Chief Executive and Group
CFO.
The Executive’s entitlement
arises in the case of any
termination by the Group for
‘No Cause’ as defined and
represents the sum of £512k
and the provision of dental and
health insurance cover and life
assurance cover for a period of
21 months after the termination
date of her employment.
The sums due may be made in
monthly instalments to allow for
mitigation.
In addition, any sums otherwise
due under the rules of any
bonus or cash incentive plan
in respect of the bonus year in
which the termination date falls
or in any subsequent year are
only payable to the extent that
they would otherwise exceed
£151k.
Mitigation
Except in the case of the
Group Chief Executive,
Executive Directors’ service
contracts expressly provide
for mitigation on termination
by allowing for payment in
instalments over the balance
of the notice period.
The Committee will take
account of the circumstances
of the termination and the
director’s performance during
the period of qualifying
service to determine whether
the exercise of any discretion
is appropriate.
Treatment of annual bonus
on termination or change of
control under plan rules
Treatment of long-term
incentive awards on
termination or change of
control under plan rules
No payment is to be made
unless the executive is
employed on the date of
bonus payment except for
‘good leavers’ as defined in
the plan rules (e.g. death,
ill health, redundancy,
retirement) and other
circumstances at the
Committee’s discretion.
If there is a change of control
event, then an early payment
can be calculated and made.
All awards lapse except for
‘good leavers’ as defined in
the plan rules (e.g. death,
ill health, redundancy,
retirement) and other reasons
at the discretion of the
Committee.
If there is a change of control
event, then an early payment
can be made at the discretion
of the Committee.
Good leavers are entitled to a
bonus payment subject to the
achievement of bonus criteria
which is pro-rated down to
reflect their service during the
performance year unless the
Committee determines that a
higher amount is justified.
A similar provision would apply
if there were a change of
control event. Bonus payments
for good leavers are subject to
deferral, malus and clawback.
For good leavers, vesting is
determined based on the
application of the performance
conditions and any award is
then pro-rated down based on
the proportion of the 36-month
performance period that the
employee has served since
the grant date unless the
Committee determines that
a higher amount is justified.
A similar provision would apply
if there were a change of
control event. For good leavers,
grants vest on the original
anniversary date.
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Service contracts and policy on payment
for loss of office continued
Standard provision
Policy
Details
Exercise of discretion
Discretion is intended to be
relied upon only in certain
circumstances as set out on
page 142.
The Committee’s
determination will take into
account the circumstances
of the Executive Director’s
departure and the recent
performance of the Group
when using discretion in
relation to short- or long-term
bonus payments.
NEDs’ fees policy
How the element supports
the Group’s strategic
objectives
To attract NEDs who have a
range of experience and skills
to oversee the implementation
of the Group’s Strategy
Other matters
Non-Executive Directors
The Group’s policy is to
honour commitments
made under contractual
arrangements that may
have been entered into with
an employee prior to them
becoming a director.
There are no other provisions
for termination payments
or payments for loss of office
in standard directors’
service contracts.
Each NED is appointed for
an initial three-year term and
is subject to election by the
shareholder at the first AGM
following their appointment.
In addition, the Board has
agreed that all directors
(including NEDs) will be
subject to annual re-election
by the shareholder at each
AGM.
NEDs are entitled to receive
a pro-rata proportion of their
fees that they have accrued
up to the date of termination
of their contract.
Operation of the element
Maximum potential value and
payment at threshold
Performance measures used,
weighting and time period
applicable
Current fee levels are
shown in the section on
implementation of policy.
NEDs are not eligible
to participate in any
performance-related
arrangements.
NEDs’ fees, including the
Committee Chairman’s fees,
are approved by the Board
and at a general meeting,
following recommendation by
the Chairman and Executive
Directors.
NEDs take no part in the
discussion relating to their own
fees. The Chairman’s and the
SID’s fees are considered and
approved by the Board in the
absence of the Chairman and
SID.
Fees are paid in 12 equal
monthly instalments during the
year. Fees are reviewed every
two years against those for
NEDs in companies of a similar
scale and complexity.
NEDs are not eligible to
receive benefits and do not
participate in incentive or
pension plans.
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Annual Report
on Remuneration*
This section of the Directors’ Remuneration
Report sets out how the above Remuneration
Policy was implemented in 2019 and the
resulting payments each Executive Director
received. The financial information contained
in this report has been audited where
indicated.
Single total figure of remuneration for
Executive Directors (audited)
The table on the following page shows a
single total figure of remuneration received
in respect of qualifying services for the 2019
financial year for each Executive Director,
together with comparative figures for 2018.
* The information in the previous part of the Directors'
Remuneration Report is not subject to audit and is only
subject to audit from this point onwards where stated in
the section header.
Consideration of employment
conditions elsewhere in the Group
The remuneration of employees across the
Group is a key consideration when setting
the policy and determining outcomes for
Executive Directors and the Committee
is mindful of the importance of aligning
executive and wider employee pay
and conditions. As part of its work, the
Committee has oversight of pay, incentive
arrangements and conditions applicable to
employees more widely and oversees the
incentive plans and material changes to
employee pay and conditions across the
Group’s businesses. The level of the pay
review for UK Ecclesiastical employees is
a key consideration in setting the level of
any salary increase for Executive Directors.
When reviewing and setting the performance
measures, targets and deferral arrangements
for Executive Directors’ annual bonuses and
LTIPs, the Committee considers the extent
to which these should be cascaded to other
employees. The Committee additionally has
oversight of the remuneration arrangements
for designated senior managers and material
risk-takers below the Executive Directors.
The Group consults with its recognised
Union, Unite, regarding remuneration for
employees within relevant UK businesses.
Additionally, employees can provide feedback
on the Group’s remuneration policies via the
Group’s employee engagement survey and
to their managers or HR. The Group HR
Director attends the Committee meetings
and advises the Committee in relation to HR
strategy, including the effectiveness of the
Group’s remuneration policies and how they
are viewed by employees.
Consideration of shareholder views
The Committee, through the Board, consults
with the shareholder on any changes to this
policy in order to understand expectations with
regard to Executive Directors’ remuneration
and any changes in the shareholder’s views.
The Committee consults with the shareholder
in respect of Non-Executive Director and the
Chairman’s fees.
Executive
Director
Fixed pay
(£000)
Variable pay
(£000)
Salary
Benefits1
Annual bonus2
LTIP3
Pension
(£000)
Pension
benefit4
Total remuneration
(£000)
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Mark Hews
S. Jacinta Whyte5
Ian Campbell7
Denise Cockrem8
461
382
0
95
449
373
200
0
14
22
0
4
Total
938
1,022
41
14
22
18
0
54
444
369
0
86
380
306
0
0
510
298
0
0
339
296
0
0
60
576
0
10
899
686
808
635
126
58
586
26
0
142
2019
1,489
1,127
0
196
2018
1,240
1,056
244
0
2,812
2,540
1 Benefits include items such as a car allowance and private medical insurance which are valued at their taxable value. They also include travel and accommodation
benefits, valued at their grossed-up tax and NI value. Provision of benefits during 2019 was in line with the previous year and the Directors’ Remuneration Policy,
and no exceptional benefits were paid.
2 In line with the deferral policy, annual bonus earned in excess of 75% of the maximum bonus opportunity is deferred over a period of three years. In 2019, the
value of Executive Directors’ annual bonuses that were deferred is: £97k (Group Chief Executive), £80k (Deputy Group Chief Executive) and £46k (Group CFO).
3 LTIP represents the amount payable in respect of the three-year LTIP performance period 2017-2019 for 2019 and 2016-2018 for 2018. The Group operates a
cash LTIP scheme, therefore no part of the award was attributable to share price appreciation. All Executive Directors hold unvested LTIP awards in accordance
with the rules of the LTIP plan.
4 The Group Chief Executive and Group CFO received a cash allowance in lieu of pension, in line with company policy that a cash allowance of 15% (Group Chief
Executive) or 12% (Group CFO) of salary (net of NI contributions) can be paid to UK-based Executive Directors where continued company contributions would
result in a breach of the HMRC annual and/or lifetime allowance.
5 An average 2019 exchange rate of 1.6981 Canadian dollars to 1 GBP has been used in respect of both 2019 and 2018.
6 Contributions to the Canadian pension plan that are above the Canadian Revenue Agency’s prescribed limit are paid into a SERP. These contributions for the
Deputy Group Chief Executive are included in the figures shown.
7 Ian Campbell resigned from the Board on 31 August 2018.
8 Denise Cockrem was appointed to the Board on 6 September 2019. Her remuneration for the period she served as a Director during the year is included in the
above table.
Mark Hews is a NED for MAPFRE RE and was appointed to their Board in December 2013. The fee of £33k (2018: £30k)
that Mark Hews earns in respect of this role is paid directly to the Group by MAPFRE RE and is not received by Mark Hews.
Denise Cockrem is a NED for Skipton Building Society and was appointed to their Board in September 2015. The fee that
Denise Cockrem earns in respect of this role is paid directly to the Group by Skipton Building Society and is not received by
Denise Cockrem. The fee received in respect of the period since her appointment to the Ecclesiastical Board on 6 September
2019 was £16.2k.
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Additional requirements in respect
of the single total figure table
Annual bonus outcomes for 2019 (audited)
The annual bonuses payable to Executive
Directors in respect of 2019 are assessed
taking into account both Group and individual
performance.
Individual performance is subject to delivery
of personal performance objectives and
performance in line with the Group’s
behavioural competency framework for
strategic leaders. A personal performance
percentage of between 0% and 75% may
be awarded in respect of this element of the
annual bonus. The personal performance
percentage is reviewed and agreed by
the Committee.
Group performance is subject to the four
performance conditions which together form
the Group performance multiplier.
For 2019, these were Group COR (40%);
Group EIG PBT (including fair value
investment gains and losses) (30%); delivery
of Group strategic initiatives in line with the
Group’s strategic plan (15%); and Customer
and Conduct performance (15%). Results in
respect of each performance condition are
assessed against the required performance
levels set at threshold, target and maximum,
in order to calculate the aggregate Group
performance multiplier as shown in the
second table below.
The overall bonus outturn for each Executive
Director is the product of the personal
performance percentage and the aggregate
Group performance multiplier. The maximum
opportunity under the annual bonus plan is
100% of salary.
The targets relating to the Group annual
bonus for the financial year 2019 were:
Performance condition
Group COR
Group EIG PBT
Strategic Targets
Customer and Conduct
Threshold
(0.5x)
98.6%
£10.9m
50%
85%
Target
(1.0x)
93.6%
£33.5m
75%
90%
Maximum
(1.5x)
89.5%
£71.0m
100%
100%
Weighting
40%
30%
15%
15%
The results relating to the Group annual bonus for the financial year 2019, and the resultant aggregate
Group performance multiplier, are shown below.
Performance condition
Result
Multiplier
Weighting
Group COR
Group EIG PBT1
Strategic Targets
Customer and Conduct
91.1%
£70.8m
90.4%
97.0%
1.3
1.5
1.3
1.4
40%
30%
15%
15%
Aggregate Group performance multiplier
Weighted
multiplier
0.52
0.45
0.20
0.20
1.37
The Strategic Targets performance condition measures delivery of the Group’s change programme.
The agreed priorities for 2019 continued the strategic programme of change launched in 2016,
in support of the Group’s strategic goal to be the most trusted and ethical specialist financial services
group, giving £100m to charity by the end of 2020. As set out in more detail in the Strategy in
Action report on pages 44 to 48, the Group has continued to deliver across a wide front through
its strategic programme of change, investing in its businesses and enabling it to sustain and build
on the distinctive position it occupies in its markets. Considerable progress has been made on the
second phase of the Group’s change programme, resulting in an outturn of 90.4% being achieved
against the strategic targets measure for 2019.
In line with the Group’s commitment to delivering exceptional customer service and the highest
standards of conduct, the Customer and Conduct performance condition measures delivery against
the high standards set across a range of customer and conduct metrics and across all Group
businesses. The Group delivered an outturn of 97.0% against the customer and conduct metrics for
2019 reflecting the Group’s strong customer and conduct culture and effective systems of control.
Targets in respect of customer satisfaction; claims service; complaints handling; data security;
regulatory feedback; compliance with the Group’s risk appetite and timely resolution of internal audit
and compliance findings were met by all businesses. The Group’s rolling programme of product
reviews was achieved by the majority of businesses.
Bonuses are earned in respect of the financial year and are paid in March following the end of the
financial year. Any proportion of a bonus outcome above 75% of the maximum bonus outcome is
deferred over three years, in cash. All annual bonus outcomes are subject to malus and clawback
as set out on page 142.
LTIP outcomes in 2019 (audited)
The LTIP amount included in the single total figure of remuneration is the cash award resulting from
the Group LTIP grant in 2017 for the period 2017-2019. Vesting was dependent on performance
over the three financial years ending on 31 December 2019 and continued service until March 2020.
The 2017-2019 Group LTIP is subject to the five performance conditions: Group COR (20%); Group
EIG PBT (excluding fair value investment gains and losses) (20%); Group EIG PBT (including fair
value investment gains and losses) (20%); delivery of Group strategic initiatives in line with the
Group’s strategic plan (20%); and Customer and Conduct performance (20%). Results in respect of
each performance condition are assessed against the required performance levels set at threshold,
target and maximum as shown below.
Performance
condition
Threshold –
20% vesting
Target –
50% vesting
Maximum –
100% vesting
Actual
Vesting
(% of maximum
for performance
condition)
Group COR
Group PBT
(excluding fair
value investment
gains/losses)1
Group PBT
(including fair
value investment
gains/losses)1
Strategic Targets
Customer and
Conduct
Total
98.7%
£74.4m
93.5%
91.5%
88.2%
£115.9m
£139.2m
£125.2m
100%
70%
£64.4m
£110.3m
£159.2m
£171.7m
100%
50%
80%
75%
90%
100%
100%
91.6%
95.3%
83%
77%
86.0%
1 Audited to EIO Group level
1 Audited to EIO Group level
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The Group LTIP outcome that vests in respect of each executive director in respect of
2017-2019 is shown below.
Mark Hews
S. Jacinta Whyte1
Ian Campbell2
LTIP grant
% of salary
150%
100%
100%
Total LTIP vesting
% of maximum
86.0%
86.0%
0%
£000
510
298
0
1 An average 2019 exchange rate of 1.6981 Canadian dollars to 1 GBP has been used in respect of 2019.
2 Ian Campbell resigned from the Board on 31 August 2018
Scheme interests awarded during 2019 (audited)
During 2019, awards comprising of a cash sum were granted under the 2019-2021 Group
LTIP to each Executive Director as set out below. These awards will vest, and the cash sum
will be transferred to the award holder, in March 2022, to the extent that the applicable
performance targets are met. The vesting date for these awards is the date on which the
Group’s 2021 results are announced, anticipated to be during March 2022.
Executive
director
Award
date
Face value
of award
at grant
£000s
Maximum
cash sum
subject to
the award
(% base
salary)
Cash award
if threshold
performance
achieved
(% base
salary)
End of the
period over
which the
performance
targets
have to be
fulfilled
Performance
measures2
2019-2021 Group LTIP
Mark Hews
13 Aug
2019
150%
678
20%
31 December
2021
S. Jacinta
Whyte1
13 Aug
2019
100%
375
20%
31 December
2021
Denise
Cockrem2
13 Aug
2019
100%
230
20%
31 December
2021
• Group COR
25%
• Group
EIG PBT
(excluding
fair value
investment
gains/losses)
25%
• Group EIG
PBT (including
fair value
investment
gains/losses)
25%
• Strategic
targets 15%
• Customers
and conduct
targets 10%
1 An average 2019 exchange rate of 1.6981 Canadian dollars to 1 GBP has been used.
2 Denise Cockrem was appointed to the Board on 6 September 2019.
3 Vesting occurs on a straight line basis between pre-determined milestones set in relation to threshold, target and
maximum performance. These will be disclosed on a retrospective basis in the Directors’ Remuneration Report for the
year for which the Group LTIP awards vest.
The information provided in this part of the Annual Report on Remuneration is not subject
to audit
Chief Executive pay ratio
The Group structure means that it does not have to comply with the regulations governing the
disclosure of executive remuneration to which quoted companies are subject. The Group has
nonetheless chosen to disclose the ratio of the Group Chief Executive’s pay to that of other UK
employees in the Group in order to provide greater transparency.
The table below sets out the ratio between the Group Chief Executive’s salary and total
remuneration and that of the 25th percentile (P25), median (P50) and 75th percentile (P75)
UK-based employees of Ecclesiastical Insurance Office plc (excluding SEIB), which constitute
the large majority of the UK workforce. Total remuneration reflects all remuneration received
by the individual in the relevant year, including base salary, benefits, pension, annual bonus and,
where relevant, the long-term incentive that vests, but excludes taxable company car benefits
in 2019 for administrative reasons. Of the three available calculation methods, the Group has
chosen to apply Option A as described under the regulations for listed companies, as the most
accurate way of identifying employees at the 25th percentile, median and 75th percentile.
Calculations have been carried out on a full-time equivalent basis as at 31 December 2019.
Year
Methodology
used
Pay Element
P25
(lower quartile)
P50
(median)
P75
(upper quartile)
Pay Ratio
40:1
29:1
21:1
2019
Option A
Total
Remuneration
£37,675
£51,015
£71,632
Salary
£29,389
£39,596
£50,814
The Committee is satisfied that the individuals identified appropriately reflect the employee
remuneration profile at the lower, median and upper quartile and that the overall picture
presented by the ratios is consistent with the Group’s wider policies pay, reward and progression
policies for the Group’s UK-based employees. The CEO is paid 29 times the median employee.
The Committee has reviewed this and is confident that this is consistent with the remuneration
policy and market positioning for the firm’s employees. It will keep the position under review on
an ongoing basis.
Percentage change in remuneration of Group Chief Executive
The table below shows the percentage year-on-year change in salary, benefits and annual
bonus (from 2018 to 2019) for the Group Chief Executive compared with UK-based
employees1. The Committee has selected this comparator group as being the most appropriate
because the composition and structure of remuneration for this group most closely reflects that
of the Group Chief Executive.
Group Chief Executive
% change
Average UK-based employees1
% change
Salary
Taxable benefits2
Annual bonus
2.6%
1.5%
17.0%
4.2%
1.5%
31.9%
1 UK-based employees of Ecclesiastical Insurance Office plc; excluding employees in SEIB; matched sample basis.
2 Based on contractual P11D taxable benefits for the tax year ending 5 April in the relevant year.
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Relative importance of spend on pay
The table below sets out, for 2019 and 2018, the actual costs of employee remuneration,
grants paid to Allchurches Trust Limited, and dividends paid to Preference shareholders.
PBT in each year is provided for context.
Remuneration paid to all Group employees
Gross charitable grants to the ultimate parent company,
Allchurches Trust Limited
2019
£000
2018
£000
% change
88,137
84,335
30,000
17,000
5%1
176%
Non-Cumulative Irredeemable Preference share dividend
9,181
9,181
Nil
PBT
73,264
15,371
477%
1 The increase in staff remuneration costs in 2019 reflects the higher number of employees and salary inflation. In 2018
there was a one-off company contribution to pension costs following closure of the defined benefit pension plan to
future accrual. See note 13 to the financial statements on page 214.
Group Chief Executive pay for performance comparison
As Ecclesiastical does not have equity shares traded on a regulated market, total equity shareholder
funds growth over time as reported each year (plus the grant to Allchurches Trust Limited) have been
used in the performance graph compared with the FTSE All-Share. Total equity excludes Preference
shareholders’ capital since this is not attributable to Allchurches Trust Limited.
Ecclesiastical Insurance Office plc 10 year to 2019
TSR performance against the FTSE All-Share
250 -
200 -
150 -
100 -
50 -
0 -
Dec
’09
Dec
’10
Dec
’11
Dec
’12
Dec
’13
Dec
’14
Dec
’15
Dec
’16
Dec
’17
Dec
’18
Dec
’19
FTSE Allshare Total Return
Ecclesiastical Total Shareholder Return
The table below shows the single figure of total remuneration for the incumbent, Mark Hews,
and prior Group Chief Executive, Michael Tripp, for the ten years to 31 December 2019.
Financial
year
Group Chief
Executive1
2010 2011 2012 2013 2014 2015
2016
2017 2018
2019
Financial year ending 31 December
Total
remuneration
(single
figure) £000
Annual
bonus
received
(% of
maximum)
Long-term
incentive
vesting (%
of maximum)
Mark Hews
N/A
N/A
N/A
569
907
1,089 1,370 1,212 1,240 1,489
Michael
Tripp
430
416
390
330
162
N/A
N/A
N/A
N/A
N/A
Mark Hews
N/A
N/A
N/A
45% 78% 88% 97% 99% 84% 96%
Michael
Tripp2
Mark
Hews3
Michael
Tripp4
23% 0% 0% N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4% 60% 70% 88% 75% 88% 86%
27% 34% 0%
4% 47% N/A
N/A
N/A
N/A
N/A
1 Michael Tripp resigned from the Board on 21 May 2013 and Mark Hews was appointed Group Chief Executive on 1 May 2013, having
previously held the position of Group Chief Financial Officer. The total remuneration single figure value for both Michael Tripp and Mark Hews
is shown for 2013.
2 Michael Tripp received no payment under the annual bonus or the Executive Director’s LTIP for performance in 2013. He did, however,
receive a payment (£100k) under the terms of a discretionary arrangement put in place to incentivise the delivery of a smooth transition
of the management to the successor in the role of Group Chief Executive. The maximum opportunity was capped at three months’ salary.
3 The LTIP vesting relevant to Mark Hews represents the amount vesting in respect of the three-year LTIP performance period 2012-2014 for
2014; 2013-2015 for 2015 and 2014-2016 for 2016, together with the amounts vesting in respect of the Group Chief Executive’s three-year
incentive plan in 2014, 2015 and 2016 respectively. The Group Chief Executive’s three-year incentive plan concluded at the end of 2016. LTIP
vesting in 2017 and subsequent years represent the amounts vesting in respect of the relevant three-year LTIP performance period only.
4 Michael Tripp received a 2013 LTIP payment in respect of performance in the years 2011 and 2012 (only) under the 2011-2013 LTIP.
He received a 2014 LTIP payment in respect of performance in 2012 (only) under the 2012-2014 LTIP.
l
i
g
n
d
o
h
0
0
1
£
l
a
c
i
t
e
h
t
o
p
y
h
f
o
e
u
a
V
l
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Single total figure of remuneration
for NEDs (audited)
NEDs do not participate in any of the Group’s
incentive arrangements nor do they receive
any benefits.
The Board believes that it is appropriate
that the level of fees paid to NEDs should
reflect equivalent fees paid by organisations
of similar size and complexity whilst being
mindful that the Group is owned by a charity.
This will enable the Group to attract NEDs
of the calibre required to help the Group to
implement its future strategy.
NED fees were last reviewed by the Board
in November 2019 with increased fees
becoming effective from 1 January 2020.
The fees set out below are commensurate
with the demands and responsibilities of the
NED roles.
Statement of directors’ shareholdings
and share interests
Directors’ shareholdings and share interests
are set out in the Directors’ Report on page
122. Due to the Group’s ownership structure,
in particular that its ultimate parent company
is a charity, it is not possible to deliver
variable remuneration in the form of shares.
Directors’ shareholdings are not subject to
post-employment shareholding requirements.
Directors’ service agreements
Mark Hews has a service contract which
provides for a notice period of 12 months by
the Company. S. Jacinta Whyte and Denise
Cockrem have service contracts which
provides for a notice period of six months
by the Company. No NED has a service
contract.
Payments for loss of office (audited)
No termination payments were made to
Executive Directors in 2019.
Early vesting of LTIP award
There is no early vesting of the Executive
Directors’ LTIP.
Non-Executive Directors
David Henderson2
The Very Revd Christine Wilson3
Andrew McIntyre4
Chris Moulder5
Caroline Taylor6
Francois-Xavier Boisseau7
Angus Winther7
Tim Carroll8
John Hylands9
Anthony Latham10
Denise Wilson11
Total
Fees
(£000) 2019
118
Fees
(£000) 2018
68
Benefits
(£000) 2019
1
Benefits
(£000) 2018
1
65
65
65
59
41
41
63
29
-
-
545
-
65
60
53
-
-
63
133
29
41
510
5
0
2
5
0
0
1
9
-
-
23
0
0
2
6
-
-
2
21
3
4
39
1 Benefits include travel and accommodation benefits, valued at their grossed up tax and NI value, in accordance with Group’s travel and
expenses policy.
2 David Henderson was appointed as Chairman on 19 March 2019. Prior to this Mr Henderson was Chairman of the Group Remuneration
Committee and a NED of EdenTree Investment Management Limited (EIM). David Henderson waived his fee as Chairman of the Group
Remuneration Committee and received an additional fee of £15k in 2018 and £3k in 2019 for his services as a NED of EIM.
3 The Very Revd Christine Wilson was appointed as Senior Independent Director on 1 November 2017. Christine Wilson chose to donate
her fee to charity in 2019. No fee has been paid in 2018 to Christine Wilson as she waived her right to a fee. The Group chose to donate
£65k to charity in 2018.
4 Andrew McIntyre was appointed as a NED and Chairman of the Group Audit Committee on 4 April 2017.
5 Chris Moulder was appointed as a NED on 27 September 2017 and became Chairman of the Group Risk Committee on 1 June 2018.
6 Caroline Taylor was appointed as Chairman of the Group Remuneration Committee on 21 June 2019.
7 Francois-Xavier Boisseau and Angus Winther were appointed as a NEDs on 19 March 2019.
8 Tim Carroll retired from the Board on 31 December 2019.
9 John Hylands retired as Chairman of the Group and from the Board on 19 March 2019.
10 Anthony Latham retired from the Board on 14 June 2018.
11 Denise Wilson resigned from the Board on 21 August 2018.
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The information provided in this part of the Annual Report on Remuneration is not
subject to audit
Total aggregate emoluments of directors
The total aggregate remuneration of the directors in respect of qualifying services during 2019
was £2,446k (2018: £2,311k). After inclusion of amounts receivable under long-term incentive
schemes and pension benefits, the total aggregate emoluments of the directors was £3,379k
(2018: £3,088k).
EdenTree
EdenTree has been subject to the FCA Remuneration Code since 1 January 2011. EdenTree
operates a remuneration policy which is compliant with the Remuneration Code, details of which
can be found in the EdenTree Pillar 3 statement on EdenTree’s website (www.edentreeim.com).
Statement of implementation of Remuneration Policy in 2020
The implementation of the remuneration policy will be consistent with that outlined in
the Directors’ Remuneration Policy above. Details of how this policy will apply in 2020
are set out below.
Salary (Executive Directors)
Executive Directors’ salaries are reviewed annually in line with the Directors’ Remuneration
Policy. The following salaries will apply from 1 April 2020.
Name
Mark Hews
S. Jacinta Whyte1
Denise Cockrem2
Salary
(£000)
Salary
(£000)
Percentage
increase
1 April 2020
1 April 2019 2
475
394
308
463
384
300
2.5%
2.5%
2.5%
1 An average 2019 exchange rate of 1.6981 Canadian dollars to 1 GBP has been used.
2 Denise Cockrem was appointed to the Board on 6 September 2019. Her salary was increased to £300k with effect
from 1 July 2019 upon her taking up her wider responsibilities as Group CFO and Executive Director.
Annual bonus for 2020
The annual bonus performance conditions and targets have been set in accordance with the
Directors’ Remuneration Policy above, on the same basis as 2019.
As in 2019, the annual bonuses payable to Executive Directors in respect of 2020 will be
assessed based on both Group and individual performance. Individual performance is subject
to delivery of personal performance objectives and performance in line with the Group’s
behavioural competency framework for strategic leaders. Group performance is subject to the
four performance conditions which together form the Group performance multiplier. For 2020,
these will continue to be Group COR (40%); Group EIG PBT (including fair value investment
gains and losses) (30%); delivery of Group strategic initiatives in line with the Group’s strategic
plan (15%); and Customer and Conduct performance (15%). The overall bonus outturn for
each Executive Director is the product of personal performance percentage and the aggregate
Group performance multiplier. The maximum opportunity under the annual bonus plan in 2020
is unchanged at 100% of salary. Annual bonuses in respect of 2020 will be subject to deferral,
over a period of three years, of any bonus earned in excess of 75% of an Executive Director’s
maximum bonus opportunity.
LTIP for 2020-2022
The 2020-2022 LTIP performance conditions and targets have been set in accordance with
the Directors’ Remuneration Policy above. The 2020-2022 Group LTIP will be subject to
the following performance conditions (which are unchanged from 2019): Group EIG PBT
(excluding fair value investment gains and losses) (25%); Group EIG PBT (including fair value
investment gains and losses) (25%); Group COR (25%); delivery of Group strategic initiatives
in line with the Group’s strategic plan (15%); and Customer and Conduct performance (10%).
Awards under the 2020-2022 Group LTIP will be up to 150% of salary in the case of the
Group Chief Executive and up to 100% of salary in the case of the Deputy Group Chief
Executive and Group CFO.
Fees (Non-Executive Directors)
The following fee structure will apply from 1 January 2020.
All-inclusive fee for the Group Chairman
All-inclusive fee for the Senior Independent Director
Basic fee for a NED (including Committee Membership)
Fee for chairing the Group Audit Committee
Fee for chairing the Group Remuneration Committee
Fee for chairing the Group Risk Committee
Fee for chairing the Group Finance and Investment Committee
Fee for chairing the Group Nominations Committee1
Fees (£000)
145
75
55
13
13
13
11
11
1 The fee for chairing the Group Nominations Committee is included within the all-inclusive fee for the Senior
Independent Director for 2019
By order of the Board
Caroline Taylor
Chair of the Group Remuneration Committee
17 March 2020
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163
Section Four
Financial Statements
Independent Auditor’s Report
Consolidated statement of profit or loss
Consolidated and parent statement of comprehensive income
Consolidated and parent statement of changes in equity
Consolidated and parent statement of financial position
Consolidated and parent statement of cash flows
Notes to the financial statements
164
176
177
178
179
180
181
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165
Independent
Auditor’s Report
The financial reporting framework that
has been applied in their preparation is
applicable law and IFRSs as adopted by the
European Union and, as regards the parent
company financial statements, as applied
in accordance with the provisions of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described in
the auditor’s responsibilities for the audit of the
financial statements section of our report.
We are independent of the group and the
Parent Company in accordance with the
ethical requirements that are relevant to our
audit of the financial statements in the UK,
including the Financial Reporting Council’s
(the ‘FRC’s’) Ethical Standard as applied to
listed public interest entities, and we have
fulfilled our other ethical responsibilities
in accordance with these requirements.
We confirm that the non-audit services
prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent
company.
We believe that the audit evidence we have
obtained is sufficient and appropriate to
provide a basis for our opinion.
Report on the audit
of the financial statements
Opinion
In our opinion:
• the financial statements of Ecclesiastical
Insurance Office plc (the ‘parent company’)
and its subsidiaries (the ‘group’) give a true
and fair view of the state of the group’s and
of the Parent Company’s affairs as at 31
December 2019 and of the group’s profit for
the year then ended;
• the group financial statements have been
properly prepared in accordance with
International Financial Reporting Standards
(IFRSs) as adopted by the European Union;
• the parent company financial statements
have been properly prepared in accordance
with IFRSs as adopted by the European
Union and as applied in accordance with the
provisions of the Companies Act 2006; and
• the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the
IAS Regulation.
We have audited the financial statements
which comprise:
• the consolidated statement of profit or loss;
• the consolidated and parent statement
of comprehensive income;
• the consolidated and parent statement
of changes in equity;
• the consolidated and parent statement
of financial position;
• the consolidated and parent statement
of cash flows; and
• the related notes 1 to 37 excluding the
capital adequacy disclosures in Note 4.i
calculated in accordance with the Solvency II
regime which are marked as unaudited.
Summary of our audit approach
Key audit matters
Materiality
Scoping
The materiality that we
used for the group financial
statements was £11.6m which
was determined on the basis
of 2% of total shareholders’
equity. It was capped at
95% of the Ecclesiastical
Insurance Group materiality.
As in the prior year, our
group audit included the
audit of subsidiary entities
and branches in the United
Kingdom and in Australia, as
well as the parent company’s
branches in Canada, Northern
Ireland and the Republic of
Ireland.
The key audit matters that we
identified in the current year
were:
• General insurance reserves;
and
• Life insurance reserves.
Within this report, key audit
matters are identified as
follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Significant changes
in our approach
During 2019, we reassessed
the key audit matter identified
in the prior year in relation to
the valuation of the defined
benefit scheme liability for
the employees of the parent
company. As a result, we
concluded that this was no
longer considered a key audit
matter in the current year
and have consequently not
included this in our auditor’s
report.
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167
During 2019, we reassessed the key audit
matter identified in the prior year in relation
to the valuation of the defined benefit
scheme liability for the employees of EIO.
We concluded that since the scheme was
closed to future accrual in July 2019,
the calculation of the liability is less complex
than in 2018. Therefore, this was no longer
considered a key audit matter in the current
year and consequently we have not included
a key audit matter in respect of valuation of
the defined benefit scheme liability in our
auditor’s report.
Conclusions relating to going concern
We are required by ISAs (UK) to report in
respect of the following matters where:
• the directors’ use of the going concern
basis of accounting in preparation of the
financial statements is not appropriate; or
• the directors have not disclosed in the
financial statements any identified material
uncertainties that may cast significant doubt
about the group’s or the parent company’s
ability to continue to adopt the going
concern basis of accounting for a period
of at least 12 months from the date when
the financial statements are authorised
for issue.
We have nothing to report in respect
of these matters.
Key audit matters
Key audit matters are those matters that,
in our professional judgement, were of most
significance in our audit of the financial
statements of the current period and include
the most significant assessed risks of
material misstatement (whether or not due
to fraud) that we identified. These matters
included those which had the greatest effect
on: the overall audit strategy; the allocation
of resources in the audit; and directing the
efforts of the engagement team.
These matters were addressed in the context
of our audit of the financial statements as a
whole, and in forming our opinion thereon,
and we do not provide a separate opinion on
these matters.
General insurance reserves
Key audit matter description
How the scope of our audit responded to the key audit matter
Key observations
Overall we consider that
the methodology applied
and significant assumptions
used by management in the
2019 general insurance
IBNR reserving process are
reasonable and consistent
with the prior year.
We reviewed management’s general insurance reserving
papers for the 2019 year-end as presented to the
Group Audit Committee.
Key assumptions used within the calculation of the UK PSA
and asbestos IBNR reserves such as claims frequency,
severity, inflation and discounting, as well as models and
methodologies applied in projecting claim amounts were
challenged with the assistance of our general insurance
specialists, taking into account market trends and claims
development patterns. We also applied our wider industry
knowledge, taking into account factors specific to the Group’s
PSA and asbestos portfolios.
Uncertainty and management margins applied to these classes
of business individually, and in total, were challenged with the
assistance of our general insurance specialists, considering
current legal, market and industry developments, as well as
consistency of application of such margins.
We obtained an understanding of relevant controls governing
the actuarial assumption setting process.
We have performed direct testing over the underlying claims and
premiums data extracted from the policy administration system,
as well as testing the design and implementation and operating
effectiveness of relevant reconciliation controls over this data
from input to output of the reserving modelling software.
We reconciled the output of the actuarial reserving process to
the general ledger and the financial statements.
The general insurance reserves
remain the largest single area
of judgement within the group’s
financial statements. Gross
provisions for outstanding claims
and incurred but not reported
(‘IBNR’) claims amount to £482m
(2018: £457m), as set out in note
28 to the financial statements.
The accounting policies and
critical accounting estimates
and judgements are set out in
notes 1 and 2 respectively, with
insurance risk being discussed
in note 3. Due to the high level
of judgement and estimates
involved, we have identified this
key audit matter as a fraud risk
to our financial statement audit.
We have pinpointed our key audit
matter to certain assumptions
used in the valuation models of
UK liability IBNR reserves for
physical and sexual abuse (‘PSA’)
and asbestos claims, as referred
to by the Group Audit Committee
in their report on page 130.
Management judgement and
estimates, including in respect
of actuarial assumptions, are
required when setting these
technical reserves. The value
of these long-tailed technical
reserves is sensitive to the
movement in discount rates,
which can be volatile as a result
of uncertain market conditions.
Discounting and future inflation
assumptions, claims frequency
and claims severity have a material
impact on the valuation of these
portfolios. In particular, claims
frequency is difficult to predict for
both PSA and asbestos cases.
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Life insurance reserves
Key audit matter description
How the scope of our audit responded to the key audit matter
Key observations
Overall, we are satisfied
that the assumptions used
and the judgements applied
in the 2019 valuation are
reasonable and have been set
consistently with the Group’s
reserving methodology.
We reviewed management’s life reserving papers as presented to
the Group Audit Committee.
We challenged the key judgements within the calculation of
the life insurance reserves by working with our life insurance
actuarial specialists, to specifically assess the movements from
prior year reserves and material changes in methodology and
assumptions applied.
The key assumptions (valuation rate of interest, mortality rates
and expenses assumptions) were assessed for appropriateness
and consistency with input from our specialists, and benchmarked
using our wider industry knowledge as well as taking into account
any factors specific to the group’s funeral plan book.
We also obtained an understanding of relevant controls
governing the actuarial models, assumption setting process and
data flows.
In 2019, management used OAC plc for the actuarial modelling
of the reserves. We assessed the competence, capability and
objectivity of OAC plc.
We performed direct testing of the completeness and accuracy
of key underlying data used in the life reserving process, in
particular policyholder data, expense data as well as data in
relation to the assets backing the life insurance reserves.
We reconciled the output of the actuarial reserving process to
the general ledger and the financial statements.
The life book comprises
prepaid funeral plan business
and continues to be closed
to new business; however,
the Group retains long-term
exposure in respect of funeral
plan life insurance business
written in the past. In arriving
at the technical provision,
there are a number of key
actuarial assumptions applied,
in particular:
• Valuation rate of interest;
• Mortality rates; and
• Expense assumptions.
Due to the inherently uncertain
nature of these assumptions,
they are subject to significant
management estimates and,
due to the size of the balance
(2019: £79.2m, 2018: £81.9m)
as set out in note 28 to the
financial statements, could
materially affect the financial
statements if incorrectly or
inconsistently determined
or applied. The accounting
policies and critical accounting
estimates and judgements
are set out in notes 1 and 2
respectively, with insurance risk
being discussed in note 3.
Due to the high level of
judgement and estimates
involved, we have identified this
key audit matter as a fraud risk
to our financial statement audit.
The Group Audit Committee
refers to this key audit matter in
their report on page 130.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that
makes it probable that the economic decisions of a reasonably knowledgeable person would
be changed or influenced. We use materiality both in planning the scope of our audit work
and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements
as a whole as follows:
Group financial statements
Parent company financial
statements
Materiality
£11.6m (2018: £11.6m)
£9.9m (2018: £9.8m)
Basis for determining
materiality
2% of group total shareholders’
equity (2018: 2% total shareholders’
equity), which is capped at 95%
of Ecclesiastical Insurance Group
materiality.
2% of the parent company’s
shareholders’ equity (2018:
2% shareholders’ equity),
which is capped at 85% of
group materiality.
Rationale for the
benchmark applied
We have used total shareholders’ equity as a benchmark for our materiality
to reflect the group’s strategic ambition to deliver longer-term value and to
support charitable giving. By using total shareholders’ equity as a basis, our
judgement on materiality is in line with the focus and risk profile of both the
group and parent company, taking into account the regulated status of the
parent as an insurer as well as the unusual ownership structure of the group,
with the ultimate Parent Company being a UK registered charity.
Shareholders’ equity £608m
Group materiality £11.6m
Component
materiality range
£9.9m to £4.9m
Audit Committee reporting
threshold £0.6m
Shareholders’ equity
Group materiality
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171
Performance materiality
We set performance materiality at a
level lower than materiality to reduce the
probability that, in aggregate, uncorrected
and undetected misstatements exceed the
materiality for the financial statements as
a whole. Group performance materiality
was set at 70% of group materiality for the
2019 audit (2018: 70%). In determining
performance materiality, we considered the
following factors:
a. the quality of the control environment and
the fact that we were able to rely on key
controls for some business processes;
b. the consistency of operations even with
the turnover of finance personnel in the
last two years; and
c. the low level of corrected and uncorrected
misstatements identified in previous audits.
Error reporting threshold
We agreed with the Group Audit Committee
that we would report to the Group Audit
Committee all audit differences in excess of
£580k (2018: £579k), as well as differences
below that threshold that, in our view,
warranted reporting on qualitative grounds.
We also report to the Group Audit Committee
on disclosure matters that we identified when
assessing the overall presentation of the
financial statements.
An overview of the scope
of our audit
Identification and scoping of components
Our Group audit was scoped by obtaining
an understanding of the group and its
environment, including group-wide controls,
and assessing the risks of material
misstatement at the group level.
Based on that assessment, we focused our
group audit scope primarily on the audit work
for the general and life insurance businesses
in the UK, Australia and Canada, as well as
the UK insurance broker and investment
management subsidiaries, tailoring our
procedures depending on the financial
significance of the component to the group.
All financially significant components of
the group were subject to full scope audit
procedures, which were executed to the
lower of group component materiality ranging
from £4.9m to £9.9m, or their respective
statutory materiality.
At group level we tested the consolidation
process and carried out analytical procedures
to confirm our conclusion that there were no
significant risks of material misstatement of
the aggregated financial information of the
remaining components that were not subject
to full scope audit or subject to audit of
specified account balances.
Working with other auditors
The group audit team follows a programme
of planned visits that has been designed
so that a senior member of the group audit
team visits each of the locations where the
group audit scope is focused at least once
every three years. Our most recent visit to
the overseas component in Australia took
place in 2017 for the 2016 year-end audit
whilst the Canadian component was last
visited in 2017 for the 2017 year-end audit.
The Group Audit Engagement Partner is also
the Audit Partner for the Group’s UK-based
components and subsidiaries.
In 2019 we reassessed the three year
rotational plan and the risks presented within
each component and determined that a
visit to Australia in the current year was not
necessary.
During the 2019 audit, we included the
component audit teams in our team
briefings, discussed their risk assessments,
remotely reviewed key audit work papers
and documentation of findings from their
work, and senior members of the group
engagement team attended local audit
committees via telephone conference
where concluded to be necessary. Regular
conference calls are held with overseas
component audit teams, including the
Component Audit Partners and the Group
Audit Partner.
Revenue
Profit before tax
Net assets
0.4%
99.6%
1.7%
98.3%
0.1%
99.9%
Responsibilities
of directors
As explained more fully in the Directors’
Responsibilities Statement, the directors
are responsible for the preparation of the
financial statements and for being satisfied
that they give a true and fair view, and
for such internal control as the directors
determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the
group’s and the parent company’s ability to
continue as a going concern, disclosing as
applicable, matters related to going concern
and using the going concern basis of
accounting unless the directors either intend
to liquidate the group or the parent company
or to cease operations, or have no realistic
alternative but to do so.
Full audit scope
Review at group level
Other information
The directors are responsible for the other
information. The other information comprises
the information included in the annual report,
other than the financial statements and our
auditor’s report thereon.
Our opinion on the financial statements does
not cover the other information and, except
to the extent otherwise explicitly stated in
our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read the
other information and, in doing so, consider
whether the other information is materially
inconsistent with the financial statements
or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If we identify such material inconsistencies
or apparent material misstatements, we
are required to determine whether there
is a material misstatement in the financial
statements or a material misstatement of
the other information. If, based on the work
we have performed, we conclude that there
is a material misstatement of this other
information, we are required to report
that fact.
We have nothing to report in respect
of these matters.
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Independent Auditor’s Report
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173
Auditor’s responsibilities
for the audit of the financial
statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will
always detect a material misstatement when it
exists. Misstatements can arise from fraud or
error and are considered material if, individually
or in the aggregate, they could reasonably be
expected to influence the economic decisions
of users taken on the basis of these financial
statements.
Details of the extent to which the audit was
considered capable of detecting irregularities,
including fraud and non-compliance with
laws and regulations are set out below.
A further description of our responsibilities
for the audit of the financial statements is
located on the FRC’s website at: www.frc.org.
uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Extent to which the audit
was considered capable
of detecting irregularities,
including fraud
We identify and assess the risks of material
misstatement of the financial statements,
whether due to fraud or error, and then
design and perform audit procedures
responsive to those risks, including obtaining
audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
Identifying and assessing potential risks
related to irregularities
In identifying and assessing risks of material
misstatement in respect of irregularities,
including fraud and non-compliance with laws
and regulations, we considered the following:
• the nature of the industry and sector,
control environment and business
performance including the design of the
Group’s remuneration policies, key drivers
for directors’ remuneration, bonus levels
and performance targets;
• the group’s own assessment of the risks
that irregularities may occur either as a
result of fraud or error that was approved by
the board;
• results of our enquiries of management,
Group Internal Audit, and the Group Audit
Committee about their own identification
and assessment of the risks of irregularities;
• any matters we identified having obtained
and reviewed the group’s documentation of
their policies and procedures relating to:
– identifying, evaluating and complying with
laws and regulations and whether they were
aware of any instances of non-compliance;
– detecting and responding to the risks of
fraud and whether they have knowledge of
any actual, suspected or alleged fraud;
– the internal controls established to
mitigate risks of fraud or non-compliance
with laws and regulations;
• the matters discussed among the audit
engagement team including significant
component audit teams and involving
relevant internal subject matter experts
and specialists, including tax, pensions,
IT, and actuarial specialists regarding how
and where fraud might occur in the financial
statements and any potential indicators of
fraud.
As a result of these procedures, we
considered the opportunities and incentives
that may exist within the organisation for
fraud and identified the greatest potential
for fraud in the valuation of general and life
insurance reserves. In common with all audits
under ISAs (UK), we are also required to
perform specific procedures to respond to
the risk of management override.
We also obtained an understanding of the
legal and regulatory framework that the
Group operates in, focusing on provisions
of those laws and regulations that had a
direct effect on the determination of material
amounts and disclosures in the financial
statements. The key laws and regulations we
considered in this context included the UK
Companies Act and relevant tax legislation.
estimates are indicative of a potential bias;
and evaluating the business rationale of any
significant transactions that are unusual or
outside the normal course of business.
We also communicated relevant identified
laws and regulations and potential fraud risks
to all engagement team members including
internal specialists and significant component
audit teams, and remained alert to any
indications of fraud or non-compliance with
laws and regulations throughout the audit.
In addition, we considered provisions of
other laws and regulations that do not have a
direct effect on the financial statements but
compliance with which may be fundamental
to the Group’s ability to operate or to avoid
a material penalty. These included laws
and regulations issued by the Financial
Conduct Authority (‘FCA’) and the Prudential
Regulation Authority (‘PRA’), including
the Group’s regulatory solvency capital
requirements.
Audit response to risks identified
As a result of performing the above, we
identified general insurance reserves and
life insurance reserves as key audit matters
related to the potential risk of fraud. The key
audit matters section of our report explains
the matters in more detail and also describes
the specific procedures we performed in
response to those key audit matters.
In addition to the above, our procedures
to respond to risks identified included the
following:
• reviewing the financial statement
disclosures and testing to supporting
documentation to assess compliance with
provisions of relevant laws and regulations
described as having a direct effect on the
financial statements;
• enquiring of management, the Group Audit
Committee and in-house legal counsel
concerning actual and potential litigation
and claims;
• performing analytical procedures to identify
any unusual or unexpected relationships
that may indicate risks of material
misstatement due to fraud;
• reading minutes of meetings of those
charged with governance, reviewing internal
audit reports and reviewing correspondence
with HMRC, the FCA, and the PRA;
• engaging actuarial specialists to assess the
assumptions, methodology and judgement
used in calculating the general and life
insurance reserves and the pension
obligation; and
• in addressing the risk of fraud through
management override of controls, testing
the appropriateness of journal entries and
other adjustments; assessing whether the
judgements made in making accounting
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Independent Auditor’s Report
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175
Report on other legal and
regulatory requirements
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion, based on the work undertaken
in the course of the audit:
• the information given in the strategic report
and the directors’ report for the financial
year for which the financial statements are
prepared is consistent with the financial
statements; and
• the strategic report and the directors’ report
have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding
of the group and the parent company and
their environment obtained in the course of
the audit, we have not identified any material
misstatements in the strategic report or the
directors’ report.
Matters on which
we are required to
report by exception
Adequacy of explanations received
and accounting records
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
• we have not received all the information and
explanations we require for our audit; or
• adequate accounting records have not been
kept by the parent company, or returns
adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements
are not in agreement with the accounting
records and returns.
We have nothing to report in respect
of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also
required to report if in our opinion certain
disclosures of directors’ remuneration have
not been made.
We have nothing to report in respect
of this matter.
Other matters
Auditor tenure
Following the recommendation of the Group
Audit Committee, we were appointed by the
group’s Board of Directors on 1 November
1998 to audit the financial statements for
the year ended 31 December 1998 and
subsequent financial periods. The period of
total uninterrupted engagement including
previous renewals and reappointments of the
firm is 22 years, covering the years ended 31
December 1998 to 31 December 2019.
Consistency of the audit report with
the additional report to the Group
Audit Committee
Our audit opinion is consistent with the
additional report to the Group Audit
Committee we are required to provide in
accordance with ISAs (UK).
Use of this report
This report is made solely to the company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken
so that we might state to the company’s
members those matters we are required
to state to them in an auditor’s 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 and the company’s members
as a body, for our audit work, for this report,
or for the opinions we have formed.
Paul Stephenson BA FCA
Senior statutory auditor
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
17 March 2020
‘We use a materiality
approach to drive our
strategy, responding to
new responsible business
challenges which impact
our customers, partners
and communities.’
Ecclesiastical Annual Report & Accounts 2019Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Consolidated statement of profit or loss
Consolidated statement of profit or loss
for the year ended 31 December 2019
for the year ended 31 December 2019
Consolidated and parent statement of comprehensive income
Consolidated and parent statement of comprehensive income
for the year ended 31 December 2019
for the year ended 31 December 2019
176
Revenue
Gross written premiums
Outward reinsurance premiums
Net change in provision for unearned premiums
Net earned premiums
Fee and commission income
Other operating income
Net investment return
Total revenue
Expenses
Claims and change in insurance liabilities
Reinsurance recoveries
Fees, commissions and other acquisition costs
Other operating and administrative expenses
Total operating expenses
Operating profit
Finance costs
Profit before tax
Tax expense
Profit for the year (attributable to equity holders of the Parent)
Notes
5, 6
6
6
7
8
9
9
10
5
14
11
2019
£000
2018
£000
393,952
(152,886)
(15,080)
225,986
71,240
544
74,438
372,208
(157,808)
52,800
(72,740)
(120,577)
(298,325)
73,883
(620)
73,263
(11,450)
61,813
356,971
(137,640)
(5,241)
214,090
62,996
1,039
3,994
282,119
(111,873)
26,188
(66,346)
(114,388)
(266,419)
15,700
(329)
15,371
(958)
14,413
Notes
2019
2018
Group
£000
61,813
Parent
£000
70,151
Group
£000
14,413
Profit for the year
Other comprehensive income
Items that will not be reclassified to profit or loss:
Fair value gains on property
Actuarial (losses)/gains on retirement benefit plans
Attributable tax
Items that may be reclassified subsequently to profit or loss:
(Losses)/gains on currency translation differences
Gains/(losses) on net investment hedges
Attributable tax
19
27
27
27
Net other comprehensive (expense)/income
Total comprehensive income attributable to equity holders of the
Parent
-
(7,049)
1,198
(5,851)
(1,368)
640
(19)
(747)
(6,598)
-
(7,049)
1,198
(5,851)
525
(649)
110
(14)
(5,865)
105
4,288
(747)
3,646
(3,082)
1,692
(187)
(1,577)
2,069
55,215
64,286
16,482
177
Parent
£000
15,662
105
4,288
(747)
3,646
(833)
453
(77)
(457)
3,189
18,851
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Share
premium
£000
Revaluation
reserve
£000
Translation
and hedging
reserve
£000
Retained
earnings
£000
Consolidated and parent statement of changes in equity
Consolidated and parent statement of changes in equity
for the year ended 31 December 2019
for the year ended 31 December 2019
Group
Notes
At 1 January 2019
Profit for the year
Other net expense
Total comprehensive (expense)/income
Dividends
Gross charitable grant
Tax relief on charitable grant
At 31 December 2019
At 1 January 2018
Profit for the year
Other net income/(expense)
Total comprehensive income/(expense)
Dividends
Gross charitable grant
Tax relief on charitable grant
At 31 December 2018
15
15
15
15
15
15
Parent
At 1 January 2019
Profit for the year
Other net income/(expense)
Total comprehensive income
Dividends
Gross charitable grant
Tax relief on charitable grant
Group tax relief in excess
of standard rate
At 31 December 2019
At 1 January 2018
Profit for the year
Other net income/(expense)
Total comprehensive income/(expense)
Dividends
Gross charitable grant
Tax relief on charitable grant
Group tax relief in excess
of standard rate
At 31 December 2018
Share
capital
£000
120,477
-
-
-
-
-
-
120,477
120,477
-
-
-
-
-
-
120,477
120,477
-
-
-
-
-
-
-
120,477
120,477
-
-
-
-
-
-
-
120,477
4,632
-
-
-
-
-
-
4,632
4,632
-
-
-
-
-
-
4,632
4,632
-
-
-
-
-
-
-
4,632
4,632
-
-
-
-
-
-
-
4,632
565
-
-
-
-
-
-
565
478
-
87
87
-
-
-
565
565
-
-
-
-
-
-
-
565
478
-
87
87
-
-
-
-
565
19,071
-
(747)
(747)
-
-
-
18,324
20,648
-
(1,577)
(1,577)
-
-
-
19,071
7,578
-
(14)
(14)
-
-
-
-
7,564
8,035
-
(457)
(457)
-
-
-
-
7,578
178
Total
£000
586,004
61,813
(6,598)
55,215
(9,181)
(30,000)
5,497
607,535
592,473
14,413
2,069
16,482
(9,181)
(17,000)
3,230
586,004
494,847
70,151
(5,865)
64,286
(9,181)
(30,000)
4,920
441,259
61,813
(5,851)
55,962
(9,181)
(30,000)
5,497
463,537
446,238
14,413
3,559
17,972
(9,181)
(17,000)
3,230
441,259
361,595
70,151
(5,851)
64,300
(9,181)
(30,000)
4,920
(115)
391,519
(115)
524,757
365,474
15,662
3,559
19,221
(9,181)
(17,000)
3,230
499,096
15,662
3,189
18,851
(9,181)
(17,000)
3,230
(149)
361,595
(149)
494,847
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 27.
Consolidated and parent statement of financial position
Consolidated and parent statement of financial position
at 31 December 2019
at 31 December 2019
179
Assets
Goodwill and other intangible assets
Deferred acquisition costs
Deferred tax assets
Pension assets
Property, plant and equipment
Investment property
Financial investments
Reinsurers' share of contract liabilities
Current tax recoverable
Other assets
Cash and cash equivalents
Total assets
Equity
Share capital
Share premium account
Retained earnings and other reserves
Total shareholders' equity
Liabilities
Insurance contract liabilities
Lease obligations
Provisions for other liabilities
Retirement benefit obligations
Deferred tax liabilities
Current tax liabilities
Deferred income
Other liabilities
Total liabilities
Notes
2019
Group
£000
Parent
£000
2018
Group
£000
Parent
£000
17
18
30
19
20
21
22
28
24
25
26
28
32
29
19
30
31
31
38,651
38,199
2,203
8,505
20,322
148,146
857,913
159,556
4,211
178,358
74,775
1,530,839
120,477
4,632
482,426
607,535
763,977
12,923
4,867
5,998
35,649
123
22,815
76,952
923,304
11,914
31,133
-
8,505
16,700
148,146
697,153
106,701
2,732
133,793
42,248
1,199,025
120,477
4,632
399,648
524,757
556,272
10,328
4,695
5,998
34,428
-
16,981
45,566
674,268
30,064
33,907
1,749
16,131
8,391
152,182
798,974
140,346
59
153,630
109,417
1,444,850
120,477
4,632
460,895
586,004
720,049
1,379
5,216
5,813
31,665
2,905
19,900
71,919
858,846
4,849
27,812
-
16,131
7,372
152,182
636,688
100,238
10
116,328
72,775
1,134,385
120,477
4,632
369,738
494,847
531,439
1,379
5,059
5,813
31,070
2,243
15,280
47,255
639,538
Total shareholders' equity and liabilities
1,530,839
1,199,025
1,444,850
1,134,385
The financial statements of Ecclesiastical Insurance Office plc, registered number 24869, on pages 176 to 245 were approved and authorised
for issue by the Board of Directors on 17 March 2020 and signed on its behalf by:
David Henderson
Chairman
Mark Hews
Group Chief Executive
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Consolidated and parent statement of cash flows
Consolidated and parent statement of cash flows
for the year ended 31 December 2019
for the year ended 31 December 2019
Notes to the financial statements
Notes to the financial statements
180
181
Notes
2019
2018
Profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Revaluation of property, plant and equipment
Loss/(profit) on disposal of property, plant and equipment
Amortisation and impairment of intangible assets
Impairment of shares in subsidiary undertakings
Net fair value (gains)/losses on financial instruments and
investment property
Dividend and interest income
Finance costs
Adjustment for pension funding
Changes in operating assets and liabilities:
Net increase/(decrease) in insurance contract liabilities
Net (increase)/decrease in reinsurers' share of contract liabilities
Net increase in deferred acquisition costs
Net increase in other assets
Net increase in operating liabilities
Net increase/(decrease) in other liabilities
Cash generated by operations
Purchases of financial instruments and investment property
Sale of financial instruments and investment property
Dividends received
Interest received
Tax paid
Net cash from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Proceeds from the sale of property, plant and equipment
Purchases of intangible assets
Acquisition of business, net of cash acquired
Acquisition of shares issued by subsidiary
Net cash used by investing activities
Cash flows from financing activities
Interest paid
Payment of lease liabilities
Payment of group tax relief in excess of standard rate
Dividends paid to Company's shareholders
Charitable grant paid to ultimate parent undertaking
Net cash used by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange (losses)/gains on cash and cash equivalents
Cash and cash equivalents at end of year
16
22
25
Group
£000
73,263
5,081
-
171
1,016
-
(52,091)
(26,218)
620
815
49,537
(21,265)
(4,553)
(25,272)
11,153
784
13,041
(156,760)
148,308
9,605
16,293
(8,296)
22,191
(4,394)
-
(9,613)
(40)
-
(14,047)
(620)
(2,787)
-
(9,181)
(30,000)
(42,588)
(34,444)
109,417
(198)
74,775
Parent
£000
80,552
4,222
-
84
589
610
(45,136)
(33,243)
504
815
25,501
(6,543)
(3,307)
(16,724)
2,371
825
11,120
(122,792)
107,414
22,512
10,351
(5,787)
22,818
(4,117)
-
(7,615)
-
-
(11,732)
(504)
(2,185)
-
(9,181)
(30,000)
(41,870)
(30,784)
72,775
257
42,248
Group
£000
15,371
2,437
(85)
(3)
949
-
35,506
(27,107)
329
2,931
(42,161)
16,431
(3,078)
(5,388)
5,838
(286)
1,684
(125,739)
149,562
9,790
17,347
(4,998)
47,646
(1,822)
55
(2,371)
(225)
-
(4,363)
(329)
(346)
-
(9,181)
(17,000)
(26,856)
16,427
93,767
(777)
109,417
Parent
£000
15,762
2,212
(60)
-
699
-
29,557
(24,307)
329
2,931
(29,729)
9,514
(2,364)
(1,763)
6,950
(309)
9,422
(96,461)
118,173
13,146
11,153
(3,140)
52,293
(1,538)
43
(2,060)
-
(274)
(3,829)
(329)
(346)
(174)
(9,181)
(17,000)
(27,030)
21,434
51,399
(58)
72,775
1 Accounting policies
1 Accounting policies
Ecclesiastical Insurance Office plc (hereafter referred to as the ‘Company’, or ‘Parent’), 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 principal accounting policies adopted in preparing the
International Financial Reporting Standards (IFRS) financial statements of the Group and Parent are set out below.
Basis of preparation
The Group’s consolidated and Parent's financial statements have been prepared using the following accounting policies, which are in
accordance with IFRS applicable at 31 December 2019 issued by the International Accounting Standards Board (IASB) and endorsed by the
European Union (EU). The financial statements have been prepared on the historical cost basis, except for the revaluation of properties and
certain financial instruments.
As stated in the Director's Report, the directors consider that it is appropriate to continue to adopt the going concern basis in preparing the
accounts.
In accordance with IFRS 4, Insurance Contracts, on adoption of IFRS the Group applied existing accounting practices for insurance and
participating investment contracts, modified as appropriate to comply with the IFRS framework and applicable standards, introducing changes
only where they provide more reliable and relevant information.
Items included in the financial statements of each of the Group’s entities are measured in the currency of the primary economic environment in
which that entity operates (the 'functional currency'). The consolidated financial statements are stated in sterling, which is the Group’s functional
and presentation currency.
As permitted by Section 408 of the Companies Act 2006, a separate profit and loss account for the Company is not presented.
New and revised standards
The Group has adopted the following standards and amendments with effect from 1 January 2019:
- IFRS 16, Leases
The Group and Parent have adopted IFRS 16 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 or Parent’s opening equity.
On adoption of IFRS 16, the Group and Parent 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%. The Parent’s weighted average lessee’s incremental borrowing rate applied to
the lease liabilities on 1 January 2019 was 3.9%. The following table reconciles the operating lease commitments at 31 December 2018 to the
lease liability recognised on 1 January 2019 following the adoption of IFRS 16.
Operating lease commitments disclosed as at 31 December 2018
Contract elements reassessed as service agreements
Payments due in periods covered by extension options that are included in the lease term
Leases committed but not yet commenced at 31 December 2018
Short-term leases, sales taxes and other
Discounted using the lessee’s incremental borrowing rate at the date of initial application
Finance liabilities recognised as at 31 December 2018
Lease liability recognised as at 1 January 2019
2019
£000
19,605
(1,579)
957
(4,969)
(1,451)
(1,480)
1,379
12,462
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
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.
The following standards were in issue but were either not yet effective or have been deferred and therefore have not been applied in these
financial statements.
182
183
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 adoption of IFRS 16 affected the following items on the balance sheet:
Group
Property, plant and equipment
Other assets
Lease obligations
Provisions for other liabilities
Other liabilities
Parent
Property, plant and equipment
Other assets
Lease obligations
Provisions for other liabilities
Other liabilities
At 31 December
2018
£000
8,391
153,630
(1,379)
Adjustment
£000
10,353
(447)
(11,083)
(5,216)
(71,919)
(503)
1,680
At 31 December
2018
£000
7,372
116,328
(1,379)
Adjustment
£000
7,132
(427)
(7,940)
(5,059)
(47,255)
(445)
1,680
At 1 January
2019
£000
18,744
153,183
(12,462)
(5,719)
(70,239)
At 1 January
2019
£000
14,504
115,901
(9,319)
(5,504)
(45,575)
The other standards adopted in the year do not significantly impact the Group.
IFRS 9, 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 its liabilities
were within the scope of IFRS 4. The Parent qualifies for the temporary exemption since at 31 December 2015 greater than 80% of its
liabilities were within the scope of IFRS 4 and it does not engage in significant activities unconnected with insurance. Other liabilities of the
Parent include employment benefit and tax liabilities which arise solely because the Parent insures, or fulfils obligations arising from insurance
contracts. There has been no significant change to the Group or Parent's operations since 31 December 2015 and as a result, the Group and
Parent continue to apply IAS 39, Financial Instruments.
Certain entities within the Group do not qualify for the temporary exemption from the requirements of IFRS 9. Further information
detailing the adoption of IFRS 9 is disclosed in the statutory financial statements of these entities.
Standard
Key requirements
Expected impact on financial statements
Effective date
IFRS 9, Financial
Instruments
Provides a new model for
the classification and
measurement of financial
instruments, a single,
forward-looking ‘expected
loss’ impairment model
and a reformed approach
to hedge accounting.
It is expected that equity instruments will continue to be
measured at fair value through profit or loss. There is a
possibility that the measurement of certain debt instruments will
change to amortised cost or fair value through other
comprehensive income. No changes are expected from the more
principles-based hedge accounting requirements. The Group is
eligible for, and has applied, the deferral approach, which gives a
temporary exemption from applying IFRS 9 until the effective
date of 'IFRS 17, Insurance contracts'.
Annual periods beginning
on or after 1 January
2018. Although can be
deferred until 2021 for
insurers. A further one-
year deferral for insurers
has tentatively been
proposed subject to due
process.
IFRS 17,
Insurance
Contracts
Requires insurance
liabilities to be measured
at a current fulfilment
value and provides a more
uniform measurement and
presentation approach for
all insurance contracts.
These requirements are
designed to achieve the
goal of a consistent,
principle-based accounting
for insurance contracts.
IFRS 17 is a comprehensive new accounting standard for
insurance contracts covering recognition and measurement,
presentation and disclosure. The standard was issued in May
2017 as replacement for IFRS 4, Insurance Contracts and the
impact of the standard on the financial statements is still being
assessed. The Group's long-term business is expected to be the
most affected by the new standard. The company 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. Amendments to IFRS
17 were tentatively proposed by the IASB in January 2019, the
outcome of which is being monitored.
Applicable to annual
reporting periods
beginning on or after 1
January 2021 (subject to
EU endorsement).
A one-year deferral has
tentatively been proposed
by the IASB subject to due
process.
Other standards in issue but not yet effective are not expected to materially impact the Group.
Use of estimates
The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities,
and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on
management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. Those estimates which
have the most material impact on the financial statements are disclosed in note 2.
Basis of consolidation
Subsidiaries
Subsidiaries are those entities over which the Company, directly or indirectly, has control, with control being achieved when the Company has
power over the investee, is exposed to variable return from its involvement with the investee and has the ability to use its power to affect its
returns. The results and cash flows relating to subsidiaries acquired or disposed of in the year are included in the consolidated statement of
profit or loss, and the consolidated statement of cash flows, from the date of acquisition or up to the date of disposal. All inter-company
transactions, balances and cash flows are eliminated.
In the Parent statement of financial position, subsidiaries are accounted for within financial investments at cost less impairment, in accordance
with International Accounting Standard (IAS) 27, Separate Financial Statements.
The Group uses the acquisition method of accounting to account for business combinations. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or assumed at the acquisition date. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Non-
controlling interests are measured either at fair value or at a proportionate share of the identifiable net assets of the acquiree. Goodwill is
measured as the excess of the aggregate of the consideration transferred, the fair value of contingent consideration, the amount of non-
controlling interests and, for an acquisition achieved in stages, the fair value of previously held equity interest over the fair value of the
identifiable net assets acquired. If the cost of acquisition is less than the fair value of the net assets acquired, the difference is recognised
directly through profit or loss.
For business combinations involving entities or businesses under common control, the cost of the acquisition equals the value of net assets
transferred, as recognised by the transferor at the date of the transaction. No goodwill arises on such transactions.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
184
185
Foreign currency translation
The assets and liabilities of foreign operations are translated from their functional currencies into the Group's presentation currency using year-
end exchange rates, and their income and expenses using average exchange rates for the year. Exchange differences arising from the
translation of the net investment in foreign operations are taken to the currency translation reserve within equity. On disposal of a foreign
operation, such exchange differences are transferred out of this reserve, along with the corresponding movement on net investment hedges,
and are recognised in the statement of profit or loss as part of the gain or loss on sale.
Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the date of the transactions.
Exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities
denominated in foreign currencies, are recognised through profit or loss.
Product classification
Contracts under which the Group accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the
policyholder or other beneficiary if a specified uncertain future event (the insured event) adversely affects the policyholder are classified as
insurance contracts. Contracts that do not transfer significant insurance risk are classified as investment or service contracts. All of the Group's
life business contracts are classified as insurance contracts.
Both insurance and investment contracts may contain a discretionary participating feature, which is defined as a contractual right to receive
additional benefits as a supplement to guaranteed benefits. The Group does not have any such participating contracts (referred to as with-profit
contracts). The Group's long-term business contracts are referred to as non-profit contracts in the financial statements.
Premium income
General insurance business
Premiums are shown gross of commission paid to intermediaries and accounted for in the period in which the risk commences. Estimates are
included for premiums not notified by the year end ("pipeline premiums") and provision is made for the anticipated lapse of renewals not yet
confirmed. Those proportions of premiums written in a year which relate to periods of risk extending beyond the end of the year are carried
forward as unearned premiums.
Net investment return
Net investment return consists of dividends, interest and rents receivable for the year, realised gains and losses, unrealised gains and losses on
financial investments and investment properties. Dividends on equity securities are recorded as revenue on the ex-dividend date. Interest and
rental income is recognised as it accrues.
Unrealised gains and losses are calculated as the difference between carrying value and original cost, and the movement during the year is
recognised through profit or loss. The value of realised gains and losses includes an adjustment for previously recognised unrealised gains or
losses on investments disposed of in the accounting period.
The impact of discount rate changes on insurance contract liabilities is also presented within net investment return in order to match with the
corresponding movements of assets backing the liabilities.
Claims
General insurance claims incurred include all losses occurring during the year, whether reported or not, related handling costs, a reduction for
the value of salvage and other recoveries, and any adjustments to claims outstanding from previous years.
Claims handling costs include all internal and external costs incurred in connection with the negotiation and settlement of claims.
Life business claims and death claims are accounted for when notified.
Insurance contract liabilities
General insurance provisions
(i) Outstanding claims provisions
General insurance outstanding claims provisions are based on the estimated ultimate cost of all claims incurred but not settled at the year-end
date, whether reported or not, together with related claims handling costs. Significant delays are experienced in the notification and settlement
of certain types of general insurance claims, particularly in respect of liability business, the ultimate cost of which cannot be known with
certainty at the year-end date. An estimate is made representing the best estimate plus a risk margin within a range of possible outcomes.
Designated insurance liabilities are remeasured to reflect current market interest rates.
Premiums written include adjustments to premiums written in prior periods and estimates for pipeline premiums and are shown net of insurance
premium taxes.
(ii) Provision for unearned premiums
Life business
Insurance contract premiums are recognised as income when receivable, at which date the liabilities arising from them are also recognised.
Fee and commission income
Fee and commission income consists primarily of reinsurance commissions and reinsurance profit commissions which are accounted for in
accordance with IFRS 4, Insurance contracts. It also includes income from the Group's insurance broking activities, investment fund
management fees, distribution fees from mutual funds and commission revenue from the sale of mutual fund shares which are accounted for in
accordance with IFRS 15, Revenue from contracts with customers.
As with general insurance premiums, reinsurance commissions are accounted for in the period in which the risk commences. Those proportions
of reinsurance commissions written in a year which relate to periods of risk extending beyond the end of the year, are carried forward as
deferred income. Reinsurance profit commissions are recognised at the point in time when the amount of commission can be accurately
estimated.
Income generated from the Group's insurance broking activities is recognised at the point at which the performance obligation is satisfied,
being the inception date of the insurance cover, or, where this income is variable, the point at which it is reasonably certain that no significant
reversal of the amount recognised would occur. An estimate is made for the amount of fees and commission that may be clawed back as a
result of policy cancellations or amendments in relation to performance obligations satisfied in the year. This is deducted from fee and
commission income and recognised in provisions. Where commission or fees are received in advance of the inception date of cover, deferred
income is recognised. Receivables are recognised in other debtors on inception date of cover in respect of fees or commissions that the Group
has an unconditional right to receive.
Fees charged for investment management services are variable based on funds under management and are recognised over time as the
services are provided, once it is reasonably certain that no significant reversal of the amount recognised would occur. Fees charged for
investment management services for institutional and retail fund management are also recognised on this basis.
Other operating income
Other operating income consists of the return of surplus reserves from a government-backed reinsurance scheme. It is recognised when the
distribution is declared.
The proportion of written premiums, gross of commission payable to intermediaries, attributable to subsequent periods is deferred as a provision
for unearned premiums. The change in this provision is taken to profit or loss in order that revenue is recognised over the period of risk.
(iii) Liability adequacy
At each reporting date, the Group reviews its unexpired risks and carries out a liability adequacy test for any overall excess of expected claims
and deferred acquisition costs over unearned premiums, using the current estimates of future cash flows under its contracts. Unexpired risks
are assessed separately for each class of business.
Surpluses and deficits are offset where business classes are considered to be managed together and a provision is held for any net deficit.
Life business provisions
Under current IFRS requirements, insurance contract liabilities are measured using accounting policies consistent with those adopted
previously. The life business provision is held in respect of funeral plans and determined using methods and assumptions approved by the
directors based on advice from the Chief Actuary.
Reinsurance
The Group assumes and cedes reinsurance in the normal course of business, with retention limits varying by line of business. Premiums on
reinsurance assumed are recognised as revenue in the same manner as direct business. Outwards reinsurance premiums are accounted for in
the same accounting period as the related premiums for the direct or inwards reinsurance business being reinsured. Estimates are included for
premiums not notified by the year end and provision is made for the anticipated lapse of renewals not yet confirmed. The proportion of
premiums ceded in a year which relates to periods of risk extending beyond the current year is carried forward as unearned. The Group does
not reinsure its life business.
Reinsurance assets primarily include balances due from both insurance and reinsurance companies for ceded insurance liabilities. Amounts
recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provisions or the settled claims associated with
the reinsured policies and in accordance with the relevant reinsurance contract.
Further details on insurance contract liabilities are included in note 28.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
186
187
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets and liabilities acquired at the date of
acquisition. Goodwill on acquisitions prior to 1 January 2004 (the date of transition to IFRS) is carried at book value (original cost less
amortisation) on that date, less any subsequent impairment. Where it is considered more relevant, the Group uses the option to measure
goodwill initially at fair value, less any subsequent impairment.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating
units for the purpose of impairment testing. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to
the entity sold.
Computer software
Computer software is carried at historical cost less accumulated amortisation and impairment, and amortised over a useful life of between
three and ten years, using the straight-line method. The amortisation and impairment charge for the period is included in the statement of
profit or loss within other operating and administrative expenses.
Other intangible assets
Other intangible assets consist of acquired brand, customer and distribution relationships, and are carried at cost at acquisition less
accumulated amortisation and impairment after acquisition. Amortisation is on a straight-line basis over the weighted average estimated
useful life of intangible assets acquired. The amortisation and impairment charge for the period is included in the statement of profit or loss
within other operating and administrative expenses.
Property, plant and equipment
Owner-occupied properties are stated at open market value and movements are taken to the revaluation reserve within equity, net of
deferred tax. When such properties are sold, the accumulated revaluation surpluses are transferred from this reserve to retained earnings.
Where the market value of an individual property is below original cost, any revaluation movement arising during the year is recognised
within net investment return in the statement of profit or loss. Valuations are carried out at least every three years by external qualified
surveyors. All other items classed as property, plant and equipment within the statement of financial position are carried at historical cost
less accumulated depreciation and impairment.
Land is not depreciated. No depreciation is provided on owner-occupied properties since such depreciation would be immaterial.
Depreciation is calculated to write down the cost of other assets to their residual values over their estimated useful lives as follows:
Computer equipment
Motor vehicles
Fixtures, fittings and office equipment
Right-of-use assets
3 - 5 years straight line
4 years straight line or 27% reducing balance
3 - 10 years or length of lease straight line
Over the term of the lease
Where the carrying amount of an item carried at historical cost less accumulated depreciation is greater than its estimated recoverable
amount, it is written down to its recoverable amount by way of an impairment charge to profit or loss.
Repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Investment property
Investment property comprises land and buildings which are held for long-term rental yields. It is carried at fair value with changes in fair
value recognised in the statement of profit or loss within net investment return. Investment property is valued annually by external qualified
surveyors at open market value.
Financial instruments
IAS 39, Financial Instruments: Recognition and Measurement requires the classification of certain financial assets and liabilities into separate
categories for which the accounting requirements differ.
The classification depends on the nature and purpose of the financial assets and liabilities, and is determined at the time of initial recognition.
Financial instruments are initially measured at fair value. Their subsequent measurement depends on their classification:
-
-
Financial instruments designated as fair value through profit or loss, those held for trading, and hedge accounted derivatives under IFRIC 16,
Hedges of a Net Investment in a Foreign Operation, are subsequently carried at fair value. To the extent to which they are effective, changes
to the fair value of hedging instruments are recognised in other comprehensive income, with all other fair value changes recognised through
profit or loss in the period in which they arise.
All other financial assets and liabilities are measured at amortised cost, using the effective interest method (except for short-term
receivables and payables when the recognition of interest would be immaterial).
Offset of financial assets and financial liabilities
Financial assets and liabilities are offset, and the net amount reported in the statement of financial position, when there is a legally enforceable
right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability
simultaneously.
Financial investments
The Group accounts for financial assets under IAS 39 and classifies its financial investments as either financial assets at fair value through
profit or loss (designated as such or held for trading), as financial assets at fair value through other comprehensive income or as loans and
receivables.
(a) Financial assets at fair value through profit or loss
Financial investments are classified into this category if they are managed, and their performance evaluated, on a fair value basis. Purchases
and sales of these investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the assets, at
their fair value adjusted for transaction costs. Financial investments within this category are classified as held for trading if they are derivatives
that are not accounted for as a net investment hedge or are acquired principally for the purpose of selling in the near term.
The fair values of investments are based on quoted bid prices. Where there is no active market, fair value is established using a valuation
technique based on observable market data where available.
Derivative financial instruments and hedging
Derivative financial instruments include foreign exchange contracts and other financial instruments that derive their value from underlying equity
instruments.
All derivatives are initially recognised in the statement of financial position at their fair value, which usually represents their cost, including any
premium paid. They are subsequently remeasured at their fair value, with the method for recognising changes in the fair value depending on
whether they are designated as hedges of net investments in foreign operations. All derivatives are carried as assets when the fair values are
positive and as liabilities when the fair values are negative.
The notional or contractual amounts associated with derivative financial instruments are not recorded as assets or liabilities in the statement of
financial position as they do not represent the fair value of these transactions. Collateral pledged by way of cash margins on futures contracts is
recognised as an asset in the statement of financial position within cash and cash equivalents.
Certain Group derivative transactions, while providing effective economic hedges under the Group’s risk management positions, do not qualify
for hedge accounting under the specific IFRS rules and are therefore treated as derivatives held for trading. Their fair value gains and losses are
recognised immediately in net investment return. The fair value gains and losses for derivatives which are hedge accounted in line with IFRIC 16
are recognised in other comprehensive income.
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Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
188
189
(b) Financial assets at fair value through other comprehensive income
Derivative instruments for hedging of net investments in foreign operations
On the date a foreign exchange contract is entered into, the Group designates certain contracts as a hedge of a net investment in a foreign
operation (net investment hedge) and hedges the forward foreign currency rate.
Hedge accounting is used for derivatives designated in this way, provided certain criteria are met. At the inception of the transaction, the Group
documents the relationship between the hedging instrument and the hedged item, as well as the risk management objective and the strategy
for undertaking the hedge transaction. The Group also documents its assessment of whether the hedge is expected to be, and has been, highly
effective in offsetting the risk in the hedged item, both at inception and on an ongoing basis.
Gains and losses on the hedging instrument, relating to the effective portion of the net investment hedge, are recognised in other
comprehensive income and accumulated in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in
profit or loss, and is included in net investment return.
Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the foreign currency translation
reserve are reclassified to profit or loss on disposal of the related investment.
(c) Loans and receivables
Loans and receivables, comprising loans and cash held on deposit for more than three months, are carried at amortised cost using the effective
interest method. Loans are recognised when cash is advanced to borrowers. To the extent that a loan or receivable is uncollectable, it is written
off as impaired. Subsequent recoveries are credited to profit or loss.
Deferred acquisition costs
General insurance business
For general insurance business, a proportion of commission and other acquisition costs relating to unearned premiums is carried forward as
deferred acquisition costs or, with regard to reinsurance outwards, as deferred income. Deferred acquisition costs are amortised over the period
in which the related revenues are earned. The reinsurers’ share of deferred acquisition costs is amortised in the same manner as the underlying
asset.
Life business
For life insurance contracts, acquisition costs comprise direct costs such as initial commission and the indirect costs of obtaining and
processing new business. Acquisition costs which are incurred during a financial year are deferred and amortised over the period during which
the costs are expected to be recoverable, if applicable.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original
maturities of three months or less and bank overdrafts.
Insurance broking debtors and creditors
Where the Group acts as an agent in placing the insurable risks of clients with insurers, debtors arising from such transactions are not included
in the Group's assets. When the Group receives cash in respect of resultant premiums or claims, a corresponding liability is established in other
creditors in favour of the insurer or client. Where the Group provides premium finance facilities to clients, amounts due are included in other
debtors, with the amount owing for onward transmission included in other creditors.
Leases
Group as a lessee
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;
-
- payments and penalties from terminating the lease, if the lease term reflects the lessee exercising that option.
the exercise price of an option if the lessee is reasonably certain to exercise that option; and
Right-of-use assets are initially measured at cost and subsequently measured as cost less accumulated depreciation and comprises:
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.
In the prior period, leases, where a significant portion of the risks and rewards of ownership was retained by the lessor, were classified as
operating leases. Payments made as lessees under operating leases were charged to profit or loss on a straight-line basis over the period of
the lease. Rental income received as a lessor under operating leases was credited to profit or loss on a straight-line basis over the period of the
lease. Lease incentives were recognised on a straight-line basis over the period of the lease.
Leases, where a significant portion of the risks and rewards of ownership was transferred to the Group, were classified as finance leases.
Assets obtained under finance lease contracts were capitalised as property, plant and equipment and were depreciated over the period of the
lease. Obligations under such agreements were included within liabilities net of finance charges allocated to future periods. The interest
element of the lease payments was charged to profit or loss over the period of the lease. Assets held under finance leases were not significant
to these financial statements.
Group as a lessor
The Group enters into lease agreements as a lessor with respect to some of its investment properties. The Group also sublets property no
longer occupied by the Group.
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all
the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublease is classified
as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group’s net investment in the leases.
Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment
outstanding in respect of the leases.
Provisions and contingent liabilities
Provisions are recognised when the Group has a present legal or constructive obligation, as a result of past events, and it is probable that an
outflow of resources, embodying economic benefits, will be required to settle the obligation, and a reliable estimate of the amount of the
obligation can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only
when it is virtually certain that the reimbursement will be received.
The Group recognises a provision for onerous contracts when the expected benefits to be derived from a contract are less than the unavoidable
costs of meeting the obligations under the contract.
Contingent liabilities are disclosed if there is a possible future obligation as a result of a past event, or if there is a present obligation but either
an outflow of resources is not probable or the amount cannot be reliably estimated.
Employee benefits
Pension obligations
The Group operates a number of defined benefit and defined contribution plans, the assets of which are held in separate trustee-administered
funds.
For defined benefit plans, the pension costs are assessed using the projected unit credit method. Under this method, the cost of providing
pensions is charged to profit or loss so as to spread the regular cost over the service lives of employees. The pension obligation is measured as
the present value of the estimated future cash outflows using a discount rate based on market yields for high-quality corporate bonds. The
resulting pension plan surplus or deficit appears as an asset or obligation in the statement of financial position. Any asset resulting from this
calculation is limited to the present value of economic benefits available in the form of refunds from the plan or reductions in future employer
contributions to the plan. Independent actuarial valuations are carried out at the end of each reporting period.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 190
Notes to the financial statements
191
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
In accordance with IAS 19, Employee Benefits, current and past service costs, gains and losses on curtailments and settlements and net
interest expense or income (calculated by applying a discount rate to the net defined benefit liability or asset) are recognised through profit or
loss. Actuarial gains or losses are recognised in full in the period in which they occur in other comprehensive income.
Contributions in respect of defined contribution plans are recognised as a charge to profit or loss as incurred.
Other post-employment obligations
Some Group companies provide post-employment medical benefits to their retirees. The expected costs of these benefits are accrued over the
period of employment using an accounting methodology similar to that for defined benefit pension plans. Interest expense (calculated by
applying a discount rate to the net obligations) is recognised through profit or loss. Actuarial gains and losses are recognised immediately in
other comprehensive income. Independent qualified actuaries value these obligations annually.
Other benefits
Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the
estimated liability for annual leave and long service leave as a result of services rendered by employees up to the year-end date.
Taxation
Income tax comprises current and deferred tax. Income tax is recognised in the statement of profit or loss except to the extent that it relates to
items recognised in other comprehensive income, in which case it is recognised in the statement of comprehensive income.
Current tax is the expected tax payable on the taxable result for the period, after any adjustment in respect of prior periods.
Notes to the financial statements
2 Critical accounting estimates and judgements in applying accounting
policies
2 Critical accounting estimates and judgements in applying
The Group makes estimates and judgements that affect the reported amounts of assets and liabilities. Estimates and judgements are regularly
reviewed and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under
accounting policies
the circumstances.
(a) Critical judgements in applying the Group’s accounting policies
The following are the critical judgements, apart from those involving estimations which are dealt with separately below, that the directors have
made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the
financial statements:
Pension and other post-employment benefits
The Group's pension and other post-employment benefit obligations are discounted at a rate set by reference to market yields at the end of the
reporting period on high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to
maturity approximating the terms of the related pension liability. Judgement is required when setting the criteria for bonds to be included in the
population from which the yield curve is derived. The most significant criteria considered for the selection of bonds includes the nature and
quality of the corporate bonds and the identification of outliers which are excluded. Further details are disclosed in note 19.
The Group also applies judgement in determining the extent to which a surplus in a defined benefit plan can be recognised in the statement of
financial position. Judgement is required in determining the maximum future economic benefit available in the form of a refund or as a reduction
in future contributions in accordance with International Financial Interpretations Committee Interpretation 14 (IFRIC 14).
Deferred tax is provided in full on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for tax purposes. Deferred tax is measured using tax rates expected to apply when the related deferred tax asset is
realised, or the deferred tax liability is settled, based on tax rates and laws which have been enacted or substantively enacted at the year-end
date.
Unlisted equity securities
The value of unlisted equity securities, where there is no active market and therefore no observable market price, are classified as level 3
financial assets. This requires the Group to make judgements in respect of the most appropriate valuation technique to apply. Further details,
including the amounts recognised within the financial statements which are impacted by these judgements are shown in note 4(b).
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
Appropriations
Dividends
Dividends on Ordinary shares are recognised in equity in the period in which they are declared and, for the final dividend, approved by
shareholders. Dividends on Non-Cumulative Irredeemable Preference shares are recognised in the period in which they are declared and
appropriately approved.
Charitable grant to ultimate parent undertaking
Payments are made via Gift Aid to the ultimate parent company, Allchurches Trust Limited, a registered charity. The Group does not regard
these payments as being expenses of the business and, as such, recognises them net of tax in equity in the period in which they are approved.
Use of Alternative Performance Measures (APM)
As detailed in the Strategic Report, the Group uses certain key performance indicators which, although not defined under IFRS, provide useful
information and aim to enhance understanding of the Group's performance. The key performance indicators should be considered
complementary to, rather than a substitute for, financial measures defined under IFRS. Note 36 provides details of how these key performance
indicators reconcile to the results reported under IFRS.
Goodwill impairment
Goodwill is allocated to a cash-generating unit (CGU) and assessed annually for impairment. The CGU is defined in accordance with IAS 36.
Judgement is required when assessing which assets and liabilities form part of the CGU, particularly in assessing the level of excess cash held
above the working capital requirements of the CGU.
Leases
In determining the lease term, consideration is given to all facts and circumstances that create an economic incentive to exercise an extension
option or not exercise a termination option. Extension options are only included in the lease term if the lease is reasonably certain to be
extended.
Most extension options have not been included in the lease liability because the Group could replace the assets without significant cost or
business disruption.
The lease term is reassessed if an option is exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise) it. The
assessment of reasonable certainty is only revised if a significant event or change in circumstances occurs, which affects this assessment and
is within the control of the Group.
(b) Key sources of estimation uncertainty
In applying the Group’s accounting policies various transactions and balances are valued using estimates or assumptions. All estimates are
based on management’s knowledge of current facts and circumstances, assumptions based on that knowledge and their predictions of future
events and actions.
There is uncertainty as to the economic effect that Brexit will have in both the short and long term. The key estimates and assumptions set out
below include variables which may be impacted (either positively or negatively) by Brexit. These include but are not limited to discount rate,
inflation, long-term economic growth rate and investment market returns. Given the range of possible outcomes of Brexit, management have
not altered any key estimates or assumptions for a specific Brexit scenario.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 192
193
Notes to the financial statements
Notes to the financial statements
2 Critical accounting estimates and judgements in applying accounting policies (continued)
2 Critical accounting estimates and judgements in applying accounting policies
(continued)
Unlisted equity securities
The valuation of unlisted equity securities requires estimates to be made for the price-to-book ratio, illiquidity discount and credit rating
discount. Further details, including the sensitivity of the valuation to these inputs, are shown in note 4(b).
Carrying value of goodwill
Goodwill is tested annually for impairment as detailed in the Group’s accounting policies. In order to calculate the value in use under this policy,
the Group is required to make an estimation of the future cash flows expected to arise from the business unit, an appropriate long-term growth
rate to apply to the cash flows and a suitable discount rate to calculate the present value. Further details on these estimates and sensitivities of
the carrying value of goodwill to these estimates are provided in note 17.
Notes to the financial statements
Notes to the financial statements
2 Critical accounting estimates and judgements in applying accounting policies
2 Critical accounting estimates and judgements in applying accounting policies (continued)
(continued)
The following items are considered key estimates and assumptions which, if actual results differ from those predicted, may have significant
impact on the following year’s financial statements:
The ultimate liability arising from claims made under general business insurance contracts
The estimation of the ultimate liability arising from claims made under general business insurance contracts is a critical accounting estimate.
There is uncertainty as to the total number of claims made on each business class, the amounts that such claims will be settled for and the
timing of any such payments. There are various sources of estimation uncertainty as to how much the Group will ultimately pay with respect to
such contracts. Such uncertainty includes:
whether a claim event has occurred or not and how much it will ultimately settle for;
-
- variability in the speed with which claims are notified and in the time taken to settle them, especially complex cases resolved through the
courts;
changes in the business portfolio affecting factors such as the number of claims and their typical settlement costs, which may differ
significantly from past patterns;
new types of claim, including latent claims, which arise from time to time;
changes in legislation and court attitudes to compensation, including the discount rate applied in assessing lump sums, which may apply
retrospectively;
the way in which certain reinsurance contracts (principally liability) will be interpreted in relation to unusual/latent claims where aggregation
of claimants and exposure over time are issues; and
whether all such reinsurances will remain in force over the long term.
-
-
-
-
-
The uncertainties surrounding the estimates of claims payments for the various classes of business are discussed further in note 3, and where
discount rates have been applied these are disclosed in note 28(a). General business insurance liabilities include a margin for risk and
uncertainty in addition to the best estimates for future claims. The sensitivity of profit or loss to changes in the ultimate settlement cost of
claims reserves is presented in note 28(a).
Future benefit payments arising from life insurance contracts
The determination of the liabilities under life insurance contracts is dependent on estimates made by the Group.
Estimates are made as to the expected number of deaths for each of the years in which the Group is exposed to risk. The Group bases these
estimates on standard industry and national mortality tables, adjusted to reflect recent historical mortality experience of the Group's portfolio,
with allowance also being made for expected future mortality improvements where prudent. The estimated mortality rates are used to determine
forecast benefit payments net of forecast premium receipts.
Estimates are also made as to future investment returns arising from the assets backing life insurance contracts. These estimates are based on
current market returns as well as expectations about future economic and financial developments.
In addition to the best estimates of future deaths, inflation, investment returns and administration expenses, margins for risk and uncertainty are
added to these assumptions in calculating the liabilities of life insurance contracts. The sensitivity of profit or loss to changes in the assumptions
is presented in note 28(b)(iii).
Pension and other post-employment benefits
The cost of these benefits and the present value of the pension and other post-employment benefit liabilities depend on factors that are
determined on an actuarial basis using a number of assumptions. The assumptions used in determining the charge to profit or loss for these
benefits include the discount rate and, in the case of the post-employment medical benefits, expected medical expense inflation. Any changes
in these assumptions will impact profit or loss and may affect planned funding of the pension plans.
The effect of movements in the actuarial assumptions during the year, including discount rate, mortality, inflation, salary and medical expense
inflation assumptions, on the pension and other post-employment liabilities are recognised in other comprehensive income. An explanation of
the actuarial gains recognised in the current year is included in note 19. The Group determines an appropriate discount rate at the end of each
year, to be used to determine the present value of estimated future cash outflows expected to be required to settle the pension and other post-
employment benefit obligations.
The expected rate of medical expense inflation is determined by comparing the historical relationship of medical expense increases over a
portfolio of UK-based post-retirement medical plans with the rate of inflation, making an allowance for the size of the plan and actual medical
expense experience. Other key assumptions for the pension and post-employment benefit costs and credits are based in part on current market
conditions. Additional information including the sensitivity of pension and post-employment medical benefit scheme liabilities to changes in the
key assumptions is disclosed in note 19.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
3 Insurance risk (continued)
3 Insurance risk (continued)
194
195
3 Insurance risk
3 Insurance risk
Through its general and life insurance operations, the Group is exposed to a number of risks, as summarised in the Risk Management
section of the Strategic Report. 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. This subjects the Group to underwriting and pricing risk (the risk of failing to ensure disciplined risk selection and to obtain the
appropriate premium), claims reserving risk (the risk of actual claims payments exceeding the amount we are holding in reserves) and
reinsurance risk (the risk of failing to access and manage reinsurance capacity at a reasonable price).
(a) Risk mitigation
Statistics demonstrate that the larger and more diversified the portfolio of insurance contracts, the smaller the relative variability in the
expected outcome will be. 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, 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.
Catastrophe protection is purchased following an extensive annual modelling exercise of gross and net (of proportional reinsurance)
exposures. In conjunction with reinsurance brokers the Group utilises the full range of proprietary catastrophe models and continues to
develop bespoke modelling options that better reflect the specialist nature of the portfolio. Reinsurance is purchased in line with the Group's
risk appetite.
(b) Concentrations of risk
The core business of the Group is general insurance, with the principal classes of business written being property and liability. The
miscellaneous financial loss class of business covers personal accident, fidelity guarantee and loss of money, income and licence. The other
class of business includes cover of legal expenses and also a small portfolio of motor policies, but this has been in run-off in the United
Kingdom since November 2012. The Group's whole-of-life insurance policies support funeral planning products.
The table below summarises written premiums for the financial year, before and after reinsurance, by territory and by class of business:
2019
Group
Territory
United Kingdom and Ireland
Australia
Canada
Total
Parent
Territory
United Kingdom and Ireland
Canada
Total
General insurance
Life insurance
Property
£000
Liability
£000
Miscellaneous
financial
loss
£000
Other
£000
Funeral plans
£000
Total
£000
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
185,567
100,233
42,331
5,083
44,079
30,902
271,977
136,218
185,567
100,233
44,079
30,902
229,646
131,135
56,323
53,773
24,412
21,053
20,378
18,898
101,113
93,724
56,323
53,773
20,378
18,898
76,701
72,671
15,534
9,147
1,245
1,198
-
-
16,779
10,345
15,534
9,147
-
-
15,534
9,147
3,227
622
869
170
-
-
4,096
792
3,227
611
-
-
3,227
611
(13)
(13)
-
-
-
-
(13)
(13)
-
-
-
-
-
-
260,638
163,762
68,857
27,504
64,457
49,800
393,952
241,066
260,651
163,764
64,457
49,800
325,108
213,564
2018
Group
Territory
United Kingdom and Ireland
Australia
Canada
Total
Parent
Territory
United Kingdom and Ireland
Canada
Total
General insurance
Life insurance
Property
£000
Liability
£000
Miscellaneous
financial
loss
£000
Other
£000
Funeral plans
£000
Total
£000
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
172,191
92,337
34,681
3,550
36,560
25,854
243,432
121,741
172,233
92,337
36,559
25,852
208,792
118,189
53,949
51,490
20,141
17,289
17,598
16,246
91,688
85,025
53,949
51,490
17,598
16,246
71,547
67,736
16,922
10,657
1,115
1,073
-
-
18,037
11,730
16,922
10,657
-
-
16,922
10,657
2,784
645
1,009
169
-
-
3,793
814
2,784
645
-
-
2,784
645
21
21
-
-
-
-
21
21
-
-
-
-
-
-
245,867
155,150
56,946
22,081
54,158
42,100
356,971
219,331
245,888
155,129
54,157
42,098
300,045
197,227
(c) General insurance risks
Property classes
Property cover mainly compensates the policyholder for damage suffered to their property or for the value of property lost. Property insurance
may also include cover for pecuniary loss through the inability to use damaged insured commercial properties.
For property insurance contracts, there can be variability in the nature, number and size of claims made in each period.
The nature of claims may include fire, business interruption, weather damage, escape of water, explosion (after fire), riot and malicious damage,
subsidence, accidental damage and theft. Subsidence claims are particularly difficult to predict because the damage is often not apparent for
some time. The ultimate settlements can be small or large with a risk of a settled claim being reopened at a later date.
The number of claims made can be affected in particular by weather events, changes in climate, economic environment, and crime rates.
Climate change may give rise to more frequent and extreme weather events, such as river flooding, hurricanes and drought, and their
consequences, for example, subsidence claims. If a weather event happens near the end of the financial year, the uncertainty about ultimate
claims cost in the financial statements is much higher because there is insufficient time for adequate data to be received to assess the final
cost of claims.
Individual claims can vary in amount since the risks insured are diverse in both size and nature. The cost of repairing property varies according to
the extent of damage, cost of materials and labour charges.
Contracts are underwritten on a reinstatement basis or repair and restoration basis as appropriate. Costs of rebuilding properties, of
replacement or indemnity for contents and time taken to bring business operations back to pre-loss levels for business interruption are the key
factors that influence the cost of claims. Individual large claims are more likely to arise from fire, storm or flood damage. The greatest likelihood
of an aggregation of claims arises from earthquake, weather or major spreading fire events.
Claims payment, on average, occurs within a year of the event that gives rise to the claim. However, there is variability around this average with
larger claims typically taking longer to settle and business interruption claims taking much longer depending on the length of the indemnity
period involved.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
3 Insurance risk (continued)
3 Insurance risk (continued)
Notes to the financial statements
Notes to the financial statements
196
197
Liability classes
The main exposures are in respect of liability insurance contracts which protect policyholders from the liability to compensate injured employees
(employers' liability) and third parties (public liability).
Claims that may arise from the liability portfolios include damage to property, physical injury, disease and psychological trauma. The Group has a
different exposure profile to most other commercial lines insurance companies as it has lower exposure to industrial risks. Therefore, claims for
industrial diseases are less common for the Group than injury claims such as slips, trips and back injuries.
The frequency and severity of claims arising on liability insurance contracts can be affected by several factors. Most significant are the
increasing level of awards for damages suffered, legal costs and the potential for periodic payment awards.
The severity of bodily injury claims can be influenced particularly by the value of loss of earnings and the future cost of care. The settlement
value of claims arising under public and employers' liability is particularly difficult to predict. There is often uncertainty as to the extent and type
of injury, whether any payments will be made and, if they are, the amount and timing of the payments, including the discount rate applied for
assessing lump sums. Key factors driving the high levels of uncertainty include the late notification of possible claim events and the legal
process.
Late notification of possible claims necessitates the holding of provisions for incurred claims that may only emerge some years into the future.
In particular, the effect of inflation over such a long period can be considerable and is uncertain. A lack of comparable past experience may
make it difficult to quantify the number of claims and, for certain types of claims, the amounts for which they will ultimately settle. The legal and
legislative framework continues to evolve, which has a consequent impact on the uncertainty as to the length of the claims settlement process
and the ultimate settlement amounts.
Claims payment, on average, occurs about three to four years after the event that gives rise to the claim. However, there is significant variability
around this average.
Provisions for latent claims
The public and employers’ liability classes can give rise to very late reported claims, which are often referred to as latent claims. These can vary
in nature and are difficult to predict. They typically emerge slowly over many years, during which time there can be particular uncertainty as to
the number of future potential claims and their cost. The Group has reflected this uncertainty and believes that it holds adequate reserves for
latent claims that may result from exposure periods up to the reporting date.
Note 28 presents the development of the estimate of ultimate claim cost for public and employers' liability claims occurring in a given year. This
gives an indication of the accuracy of the estimation technique for incurred claims.
(d) Life insurance risks
The Group provides whole-of-life insurance policies to support funeral planning products, for most of which the future benefits are linked to
inflation and backed by index-linked assets. Although assets are well matched to liabilities, there is a risk that returns on assets held to back
liabilities are insufficient to meet future claims payments, particularly if the timing of claims is different from that assumed. This is not one of the
Group's principal risks and new policies are no longer being written in the life fund, with only minimal premiums now being received each year.
Uncertainty in the estimation of the timing of future claims arises from the unpredictability of long-term changes in overall levels of mortality.
The Group bases these estimates on standard industry and national mortality tables and its own experience. The most significant factors that
could alter the expected mortality rates profile are epidemics, widespread changes in lifestyle and continued improvement in medical science
and social conditions. The primary risk on these contracts is the level of future investment returns on the assets backing the liabilities over the
life of the policyholders. The interest rate and inflation risk within this has been largely mitigated by holding index-linked assets of a similar term
to the expected liabilities profile. The main residual risk is the spread risk attached to corporate bonds held to match the liabilities. The small
mortality risk is retained by the Group.
4 Financial risk and capital management
4 Financial risk and capital management
The Group is exposed to financial risk through its financial assets, financial liabilities, reinsurance assets and insurance liabilities. In particular,
the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from its insurance contracts.
The most important components of financial risk are interest rate risk, credit risk, equity price and currency risk.
There has been no change from the prior period in the nature of the financial risks to which the Group is exposed. Brexit has continued to result
in greater uncertainty in relation to the economic risks to which the Group is exposed, including equity price volatility, movements in exchange
rates and long-term UK growth prospects. The Group's management and measurement of financial risks is informed by either stochastic
modelling or stress testing techniques.
(a) Categories of financial instruments
(i) Categories applying IAS 39
Group
At 31 December 2019
Financial investments
Other assets
Cash and cash equivalents
Finance lease obligations
Other liabilities
Net other
Total
At 31 December 2018
Financial investments
Other assets
Cash and cash equivalents
Finance lease obligations
Other liabilities
Net other
Total
Parent
At 31 December 2019
Financial investments
Other assets
Cash and cash equivalents
Finance lease obligations
Other liabilities
Net other
Total
At 31 December 2018
Financial investments
Other assets
Cash and cash equivalents
Finance lease obligations
Other liabilities
Net other
Total
Financial assets
Financial liabilities
Designated Held for
trading
at fair value
£000
£000
Loans and
receivables
£000
Hedge
accounted
derivatives
£000
Held for
trading
£000
Financial
Other assets
liabilities* and liabilities
£000
£000
Total
£000
848,573
-
-
-
-
-
848,573
782,976
-
-
-
-
-
782,976
638,088
-
-
-
-
-
638,088
570,353
-
-
-
-
-
570,353
3,061
-
-
-
-
-
3,061
5,331
-
-
-
-
-
5,331
3,311
-
-
-
-
-
3,311
5,823
-
-
-
-
-
5,823
5,770
173,996
74,775
-
-
-
254,541
9,930
149,119
109,417
-
-
-
268,466
5,766
130,220
42,248
-
-
-
178,234
9,928
112,569
72,775
-
-
-
195,272
509
-
-
-
-
-
509
737
-
-
-
-
-
737
259
-
-
-
-
-
259
245
-
-
-
-
-
245
-
-
-
-
-
-
-
-
-
-
-
(2,306)
-
(2,306)
-
-
-
-
-
-
-
-
-
-
-
(2,306)
-
(2,306)
-
-
-
(12,923)
(65,634)
-
(78,557)
-
-
-
(1,379)
(60,969)
-
(62,348)
-
-
-
(10,328)
(36,543)
-
(46,871)
-
-
-
(1,379)
(37,994)
-
(39,373)
-
4,362
-
-
(11,318)
(413,636)
(420,592)
857,913
178,358
74,775
(12,923)
(76,952)
(413,636)
607,535
-
4,511
-
-
(8,644)
(402,719)
(406,852)
798,974
153,630
109,417
(1,379)
(71,919)
(402,719)
586,004
49,729
3,573
-
-
(9,023)
(292,543)
(248,264)
697,153
133,793
42,248
(10,328)
(45,566)
(292,543)
524,757
50,339
3,759
-
-
(6,955)
(282,310)
(235,167)
636,688
116,328
72,775
(1,379)
(47,255)
(282,310)
494,847
* Financial liabilities are held at amortised cost.
The carrying value of those financial assets and liabilities not carried at fair value in the financial statements is considered to approximate to
their fair value.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
198
199
(ii) Categories of financial assets applying IFRS 9
As disclosed in note 1, the Group has chosen to defer application of IFRS 9 and classifies and measures financial instruments using IAS 39.
To facilitate comparison with entities applying IFRS 9, the table below sets out the Group's financial assets at the balance sheet date, split
between those which have contractual cash flows that are solely payments of principal and interest on the principal outstanding (SPPI),
other than those which are held for trading or whose performance is evaluated on a fair value basis, and all other financial assets.
Group
SPPI financial
assets
2019
Other financial
assets
Total financial
assets
SPPI financial
assets
2018
Other financial
assets
Total financial
assets
£000
£000
£000
£000
£000
£000
Financial investments
Cash and cash equivalents
Other financial assets
Total fair value
5,770
74,775
852,143
-
857,913
74,775
9,930
109,417
789,044
-
798,974
109,417
173,996
254,541
-
852,143
173,996
1,106,684
149,119
268,466
-
789,044
149,119
1,057,510
Parent
SPPI financial
assets
2019
Other financial
assets
Total financial
assets
SPPI financial
assets
2018
Other financial
assets
Total financial
assets
£000
£000
£000
£000
£000
£000
Financial investments
Cash and cash equivalents
Other financial assets
Total fair value
5,766
42,248
641,658
-
647,424
42,248
9,928
72,775
576,421
-
586,349
72,775
130,220
178,234
-
641,658
130,220
819,892
112,569
195,272
-
576,421
112,569
771,693
There has been a £13,925,000 decrease (2018: £19,269,000 increase) in the fair value of SPPI financial assets of the Group, and a
£63,099,000 increase (2018: £60,766,000 decrease) in the fair value of other financial assets of the Group during the reporting period.
There has been a £17,038,000 decrease (2018: £22,711,000 increase) in the fair value of SPPI financial assets of the Parent, and a
£65,237,000 increase (2018: £50,138,000 decrease) in the fair value of other financial assets of the Parent during the reporting period.
(b) Fair value hierarchy
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 bid 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 illiquidity where appropriate, with the fair values disclosed being directly sensitive to this input.
There have been no transfers between investment categories in the current year.
Analysis of fair value measurement bases
Group
At 31 December 2019
Financial assets at fair value through profit or loss
Financial investments
Equity securities
Debt securities
Derivatives
Financial assets at fair value through other comprehensive
income
Financial investments
Derivatives
Total financial assets at fair value
At 31 December 2018
Financial assets at fair value through profit or loss
Financial investments
Equity securities
Debt securities
Derivatives
Financial assets at fair value through other comprehensive
income
Financial investments
Derivatives
Total financial assets at fair value
Fair value measurement at the
end of the reporting period based on
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
289,165
490,911
-
780,076
190
1,200
3,061
4,451
66,703
404
-
67,107
356,058
492,515
3,061
851,634
-
780,076
509
4,960
-
67,107
509
852,143
241,115
495,348
-
736,463
246
1,233
5,331
6,810
44,773
261
-
45,034
286,134
496,842
5,331
788,307
-
736,463
737
7,547
-
45,034
737
789,044
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
200
201
Parent
At 31 December 2019
Financial assets at fair value through profit or loss
Financial investments
Equity securities
Debt securities
Derivatives
Financial assets at fair value through other comprehensive
income
Financial investments
Derivatives
Total financial assets at fair value
At 31 December 2018
Financial assets at fair value through profit or loss
Financial investments
Equity securities
Debt securities
Derivatives
Financial assets at fair value through other comprehensive
income
Financial investments
Derivatives
Total financial assets at fair value
Fair value measurement at the
end of the reporting period based on
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
263,478
306,661
-
570,139
190
832
3,311
4,333
66,523
404
-
66,927
330,191
307,897
3,311
641,399
-
570,139
259
4,592
-
66,927
259
641,658
209,834
314,389
-
524,223
246
852
5,823
6,921
44,771
261
-
45,032
254,851
315,502
5,823
576,176
-
524,223
245
7,166
-
45,032
245
576,421
The derivative liabilities of the Group and Parent in the prior year were measured at fair value through profit or loss and categorised as level 2
(see note 23).
Fair value measurements based on level 3
Fair value measurements in level 3 for both the Group and Parent consist of financial assets, analysed as follows:
Group
At 31 December 2019
Opening balance
Total gains recognised in profit or loss
Purchases
Closing balance
Total gains for the period included in profit or loss for assets
held at the end of the reporting period
At 31 December 2018
Opening balance
Total gains recognised in profit or loss
Transfers
Disposal proceeds
Closing balance
Total gains for the period included in profit or loss for assets
held at the end of the reporting period
Financial assets at fair value
through profit and loss
Equity
securities
£000
Debt
securities
£000
44,773
7,538
14,392
66,703
7,539
42,279
2,628
(134)
-
44,773
261
143
-
404
143
125
5
134
(3)
261
Total
£000
45,034
7,681
14,392
67,107
7,682
42,404
2,633
-
(3)
45,034
2,656
5
2,661
Parent
At 31 December 2019
Opening balance
Total gains recognised in profit or loss
Purchases
Closing balance
Total gains for the period included in profit or loss for assets
held at the end of the reporting period
At 31 December 2018
Opening balance
Total gains recognised in profit or loss
Transfers
Disposal proceeds
Closing balance
Total gains for the period included in profit or loss for assets
held at the end of the reporting period
Financial assets at fair value
through profit and loss
Equity
securities
£000
Debt
securities
£000
44,771
7,539
14,213
66,523
7,539
42,277
2,628
(134)
-
44,771
261
143
-
404
143
125
5
134
(3)
261
Total
£000
45,032
7,682
14,213
66,927
7,682
42,402
2,633
-
(3)
45,032
2,656
5
2,661
All the above gains or losses included in profit or loss for the period (for both the Group and Parent) 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 +/-£7m (2018: +/-£5m).
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.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
202
203
(c) Interest rate risk
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.
Interest rate risk concentration is reduced by adopting asset-liability duration matching principles where appropriate. Excluding assets held to
back the life business, the average duration of the Group’s fixed income portfolio is three years (2018: two years), reflecting the relatively short-
term average duration of its general insurance liabilities. The mean term of discounted general insurance liabilities is disclosed in note 28(a)(iv).
For the Group’s life business, consisting of policies to support funeral planning products, benefits payable to policyholders are independent of
the returns generated by interest-bearing assets. Therefore, the interest rate risk on the invested assets supporting these liabilities is borne by
the Group. This risk is mitigated by purchasing fixed interest investments with durations that match the profile of the liabilities. For funeral plan
policies, benefits are linked to the Retail Prices Index (RPI). Assets backing these liabilities are also linked to the RPI, and include index-linked
gilts and corporate bonds. For practical purposes it is not possible to exactly match the durations due to the uncertain profile of liabilities (e.g.
mortality risk) and the availability of suitable assets, therefore some interest rate risk will persist. The Group monitors its exposure by comparing
projected cash flows for these assets and liabilities and making appropriate adjustments to its investment portfolio.
The table below summarises the maturities of life business assets and liabilities that are exposed to interest rate risk.
Group life business
At 31 December 2019
Assets
Debt securities
Cash and cash equivalents
Liabilities (discounted)
Life business provision
At 31 December 2018
Assets
Debt securities
Cash and cash equivalents
Liabilities (discounted)
Life business provision
Within
1 year
£000
6,066
2,584
8,650
Maturity
Between
1 & 5 years
£000
After
5 years
£000
Total
£000
28,732
-
28,732
65,093
-
65,093
99,891
2,584
102,475
5,517
19,223
54,472
79,212
4,380
4,527
8,907
26,428
-
26,428
67,630
-
67,630
98,438
4,527
102,965
5,728
19,988
56,248
81,964
Group financial investments with variable interest rates, including cash and cash equivalents, and insurance instalment receivables are subject
to cash flow interest rate risk. This risk is not significant to the Group.
(d) Credit risk
The Group has exposure to credit risk, which is the risk of non-payment of their obligations by counterparties and financial markets borrowers.
Areas where the Group is exposed to credit risk are:
-
-
-
-
counterparty default on loans and debt securities;
deposits held with banks;
reinsurers’ share of insurance liabilities (excluding provision for unearned premiums) and amounts due from reinsurers in
respect of claims already paid; and
amounts due from insurance intermediaries and policyholders.
The Group is exposed to minimal credit risk in relation to all other financial assets.
The carrying amount of financial and reinsurance assets represents the Group's maximum exposure to credit risk. The Group structures the
levels of credit risk it accepts by placing limits on its exposure to a single counterparty. Limits on the level of credit risk are regularly reviewed.
Where available the Group also manages its exposure to credit risk in relation to credit risk ratings. Investment grade financial assets are
classified within the range of AAA to BBB ratings, where AAA is the highest possible rating. Financial assets which fall outside this range are
classified as sub-investment grade. ‘Not rated’ assets capture assets not rated by external ratings agencies.
The following table provides information regarding the credit risk exposure of financial assets with external credit ratings from Standard &
Poors or an equivalent rating from a similar agency. This includes financial assets that meet the definition of 'solely payments of principal and
interest' (SPPI), as detailed in note 4(a)(ii).
Group
At 31 December 2019
AAA
AA
A
BBB
Below BBB
Not rated
At 31 December 2018
AAA
AA
A
BBB
Below BBB
Not rated
Cash and cash
equivalents*
Reinsurance
debtors
Other financial
assets
Total SPPI Debt securities
SPPI
Non-SPPI
£000
-
19,760
17,269
42,713
-
7
79,749
-
23,316
55,090
40,826
91
7
119,330
£000
-
1,286
8,856
3
-
1,032
11,177
-
2,788
8,058
3
-
763
11,612
£000
-
-
-
-
-
163,615
163,615
-
-
-
-
-
137,524
137,524
£000
-
21,046
26,125
42,716
-
164,654
254,541
-
26,104
63,148
40,829
91
138,294
268,466
£000
113,359
138,341
132,419
89,563
9,537
9,296
492,515
126,227
142,426
115,026
91,471
12,197
9,495
496,842
*Cash includes amounts held on deposit classified within financial investments and disclosed in note 22. Cash balances which are not rated relate to cash amounts in
hand.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
204
205
Parent
At 31 December 2019
AAA
AA
A
BBB
Below BBB
Not rated
At 31 December 2018
AAA
AA
A
BBB
Below BBB
Not rated
Cash and cash
equivalents*
Reinsurance
debtors
Other financial
assets
Total SPPI Debt securities
SPPI
Non-SPPI
£000
-
8,540
14,748
23,927
-
7
47,222
-
10,682
50,599
21,310
91
7
82,689
£000
-
783
2,865
3
-
272
3,923
-
1,704
2,658
3
-
763
5,128
£000
-
-
-
-
-
127,089
127,089
-
-
-
-
-
107,455
107,455
£000
-
9,323
17,613
23,930
-
127,368
178,234
-
12,386
53,257
21,313
91
108,225
195,272
£000
72,366
73,979
97,184
51,712
4,560
8,096
307,897
90,548
72,006
77,011
61,317
7,197
7,423
315,502
*Cash includes amounts held on deposit classified within financial investments and disclosed in note 22. Cash balances which are not rated relate to cash amounts
in hand.
For financial assets meeting the SPPI test that do not have low credit risk, the carrying amount disclosed above is an approximation of their fair
value.
Group cash balances are regularly reviewed to identify the quality of the counterparty bank and to monitor and limit concentrations of risk.
The debt securities portfolio consists of a range of mainly fixed interest instruments including government securities, local authority issues,
corporate loans and bonds, overseas bonds, preference shares and other interest-bearing securities. Limits are imposed on the credit ratings of
the corporate bond portfolio and exposures regularly monitored. Group investments in unlisted securities represent less than 1% of this
category in the current and prior year.
The Group’s exposure to counterparty default on debt securities is spread across a variety of geographical and economic territories, as follows:
2019
Group
£000
301,225
84,726
86,293
20,271
492,515
Parent
£000
201,333
-
86,293
20,271
307,897
UK
Australia
Canada
Europe
Total
2018
Group
£000
317,137
82,901
72,301
24,503
496,842
Parent
£000
218,698
-
72,301
24,503
315,502
UK
Australia
Canada
Europe
Total
Reinsurance is used to manage insurance risk. This does not, however, discharge the Group's liability as primary insurer. If a reinsurer fails to
pay a claim for any reason, the Group remains liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on a
regular basis through the year by reviewing their financial strength. The Group Reinsurance Security Committee assesses, monitors and
approves the creditworthiness of all reinsurers, reviewing relevant credit ratings provided by the recognised credit rating agencies, as well as
other publicly available data and market information. The Group Reinsurance Security Committee also monitors the balances outstanding from
reinsurers and maintains an approved list of reinsurers.
The Group's credit risk policy details prescriptive methods for the collection of premiums and control of intermediary and policyholder debtor
balances. The level and age of debtor balances are regularly assessed via monthly credit management reports. These reports are scrutinised to
assess exposure by geographical region and counterparty of aged or outstanding balances. Any such balances are likely to be major
international brokers that are in turn monitored via credit reference agencies and considered to pose minimal risk of default. The Group has no
material concentration of credit risk in respect of amounts due from insurance intermediaries and policyholders.
(e) 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 concentration of equity price risk by geographical listing, before the mitigating effect of derivatives, to which the Group and Parent are
exposed is as follows:
2019
Group
£000
289,566
66,302
190
356,058
Parent
£000
263,699
66,302
190
330,191
UK
Europe
Hong Kong
Total
2018
Group
£000
241,116
44,821
197
286,134
Parent
£000
209,833
44,821
197
254,851
UK
Europe
Hong Kong
Total
(f) Currency risk
The Group operates internationally and its main exposures to foreign exchange risk are noted below. The Group's foreign operations generally
invest in assets and purchase reinsurance denominated in the same currencies as their insurance liabilities, which mitigates the foreign
currency exchange rate risk for these operations. As a result, foreign exchange risk arises from recognised assets and liabilities denominated in
other currencies and net investments in foreign operations. The Group mitigates this risk through the use of derivatives when considered
necessary.
The Group exposure to foreign currency risk within the investment portfolios arises from purchased investments that are denominated in
currencies other than sterling.
The Group's foreign operations create two sources of foreign currency risk:
-
the operating results of the Group's foreign branches and subsidiaries in the Group financial statements are translated at the average
exchange rates prevailing during the period; and
-
the equity investment in foreign branches and subsidiaries is translated into sterling using the exchange rate at the year-end date.
The forward foreign currency risk arising on translation of these foreign operations is hedged by the derivatives which are detailed in note 22.
The Group has designated certain derivatives as a hedge of its net investments in Canada and Australia, which have Canadian and Australian
dollars respectively as their functional currency.
The largest currency exposures, before the mitigating effect of derivatives, with reference to net assets/liabilities are shown below, representing
effective diversification of resources.
2019
Group
£000
65,305
41,912
33,722
2,028
176
Parent
£000
65,305
2,282
33,722
2,028
176
Euro
Aus $
Can $
USD $
HKD $
2018
Group
£000
47,838
42,538
31,024
1,043
1,004
Parent
£000
3,388
42,538
31,024
1,043
1,004
Aus $
Euro
Can $
NZ $
USD $
The figures in the table above, for the current and prior years, do not include currency risk that the Group and Parent are exposed to on a ‘look
through’ basis in respect of collective investment schemes denominated in sterling. The Group and Parent enter into derivatives to hedge
currency exposure, including exposures on a ‘look through’ basis. The open derivatives held by the Group and Parent at the year end to hedge
currency exposure are detailed in note 22.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
(g) Liquidity risk
Liquidity risk is the risk that funds may not be available to pay obligations when due. The Group is exposed to daily calls on its available cash
resources mainly from claims arising from insurance contracts. An estimate of the timing of the net cash outflows resulting from insurance
contracts is provided in note 28. The Group has robust processes in place to manage liquidity risk and has available cash balances, other readily
marketable assets and access to funding in case of exceptional need. This is not considered to be a significant risk to the Group.
Non-derivative financial liabilities consist of lease liabilities, for which a maturity analysis is included in note 32, and other liabilities for which a
maturity analysis is included in note 31.
(h) Market risk sensitivity analysis
The sensitivity of profit and other equity reserves to movements on market risk variables (comprising interest rate, currency and equity price
risk), each considered in isolation and before the mitigating effect of derivatives, is shown in the table below. This table does not include the
impact of variables on retirement benefit schemes. Financial risk sensitivities for retirement benefit schemes are disclosed separately in note
19.
Group
Variable
Interest rate risk
Currency risk
Equity price risk
Parent
Variable
Interest rate risk
Currency risk
Equity price risk
Change in
variable
-100 basis points
+100 basis points
-10%
+10%
+/-10%
Change in
variable
-100 basis points
+100 basis points
-10%
+10%
+/-10%
Potential increase/
(decrease) in profit
2019
£000
(6,724)
4,133
6,330
(5,179)
28,841
2018
£000
(4,730)
2,799
4,772
(3,904)
23,177
Potential increase/
(decrease) in profit
2019
£000
(5,267)
3,028
6,331
(5,180)
26,745
2018
£000
(3,558)
2,154
4,772
(3,904)
20,643
Potential increase/
(decrease) in
other equity reserves
2019
£000
(25)
37
7,628
(6,241)
-
2018
£000
-
(3)
7,613
(6,229)
-
Potential increase/
(decrease) in
other equity reserves
2019
£000
(19)
29
3,224
(2,638)
-
2018
£000
(6)
4
2,674
(2,188)
-
The following assumptions have been made in preparing the above sensitivity analysis:
the value of fixed income investments will vary inversely with changes in interest rates, and all territories experience the same
interest rate movement;
-
-
-
-
206
207
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
(i) Capital management
The Group's primary objectives when managing capital are to:
-
-
comply with the regulators' capital requirements of the markets in which the Group operates; and
safeguard the Group's ability to continue to meet stakeholders' expectations in accordance with its corporate mission, vision and
values.
The Group is subject to insurance solvency regulations in all the territories in which it issues insurance and investment contracts, and capital is
managed and evaluated on the basis of both regulatory and economic capital, at a group and parent entity level.
In the UK, the Group and its UK regulated entities are required to comply with rules issued by the Financial Conduct Authority (FCA) and the
Prudential Regulation Authority (PRA).
Capital is assessed at both individual regulated entity and group level. The PRA expects a firm, at all times, to hold Solvency II Own Funds in
excess of its calculated Solvency Capital Requirement (SCR). Group solvency is assessed at the level of Ecclesiastical Insurance Office plc
(EIO)’s parent, Ecclesiastical lnsurance Group plc (EIG). Consequently, there is no directly comparable solvency measure for EIO group. Both
quarterly and annual quantitative returns are submitted to the PRA, in addition to an annual narrative report, the Solvency and Financial
Condition Report (SFCR) which is also published on the company's website. A further report, the Regular Supervisory Report (RSR) is
periodically submitted to the PRA.
The current year figures in the table below are unaudited and based on the latest information provided to management. The prior year figures in
the table below are as disclosed in the Company’s SFCRs, available on the Group’s website. These differ from the figures reported last year as
they were estimated based on information available to management at the time the accounts were signed.
EIO’s Solvency II Own Funds will be subject to a separate independent audit, as part of the Group's process for Solvency II reporting to the PRA.
EIO’s SCR is not subject to audit as it is calculated using an internal model which has been approved for use by the PRA. ELL’s figures are not
subject to an independent audit due to the company falling below the threshold calculation detailed in the PRA policy statement PS25/18
(Solvency II: External audit of the public disclosure requirement). The Group's regulated entities, EIO and ELL, expect to meet the deadline for
submission to the PRA of 7 April 2020 and their respective SFCRs will be made available on the Group's website shortly thereafter. EIG is also
expected to meet its deadline for submission to the PRA of 19 May 2020, with its SFCR also being made available on the Group’s website
shortly after.
Solvency II Own Funds
Solvency Capital Requirement
Own Funds in excess of Solvency Capital Requirement
Solvency II Capital Cover
2019
(unaudited)
Ecclesiastical
Insurance
Office plc
Parent
£000
Ecclesiastical
Life Limited
£000
570,083
(264,251)
305,832
216%
49,120
(15,976)
33,144
307%
2018
(unaudited)*
Ecclesiastical
Insurance
Office plc
Parent
£000
551,857
(256,898)
294,959
215%
Ecclesiastical
Life Limited
£000
52,583
(15,879)
36,704
331%
currency gains and losses will arise from a change in the value of sterling against all other currencies moving in parallel;
*Unaudited with the exception of EIO parent's Solvency II Own Funds.
equity prices will move by the same percentage across all territories; and
change in profit is stated net of tax at the standard rate applicable in each of the Group's territories.
Economic capital is the Group’s own internal view of the level of capital required, and this measure is an integral part of the Own Risk and
Solvency Assessment Report (ORSA) which is a private, internal forward-looking assessment of own risk, as required as part of the Solvency II
regime. Risk appetite is set such that the target level of economic capital is always higher than the regulatory SCR.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
5 Segment information (continued)
5 Segment information (continued)
208
209
5 Segment information
5 Segment information
(a) Operating segments
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 an Ecclesiastical branch in the Republic of Ireland underwriting general 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, adverse development cover 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.
The accounting policies of the operating segments are the same as the Group's accounting policies described in note 1, with the exception of
the investment management and broking and advisory segments. These segments do not qualify for the temporary exemption from IFRS 9
available to insurers and as a result have adopted IFRS 9. Consequently, their accounting policies for financial instruments may differ, but all
other accounting policies are the same as the Group.
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.
Gross
written
premiums
£000
2019
Non-
insurance
services
£000
257,135
68,857
64,457
3,516
393,965
(13)
-
-
393,952
-
-
-
-
-
-
12,795
9,078
21,873
Gross
written
premiums
£000
242,339
56,946
54,158
3,507
356,950
21
-
-
356,971
2018
Non-
insurance
services
£000
-
-
-
-
-
-
12,601
9,049
21,650
Total
£000
257,135
68,857
64,457
3,516
393,965
(13)
12,795
9,078
415,825
Total
£000
242,339
56,946
54,158
3,507
356,950
21
12,601
9,049
378,621
General business
United Kingdom and Ireland
Australia
Canada
Other insurance operations
Total
Life business
Investment management
Broking and Advisory
Group revenue
Group revenues are not materially concentrated on any single external customer.
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 36.
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.
2019
General business
United Kingdom and Ireland
Australia
Canada
Other insurance operations
Life business
Investment management
Broking and Advisory
Corporate costs
Profit/(loss) before tax
Combined
operating
ratio
86.8%
114.1%
95.1%
91.1%
Insurance
£000
Investments
£000
20,412
(3,246)
2,218
634
20,018
335
-
-
-
20,353
59,433
1,815
1,805
-
63,053
6,486
-
-
-
69,539
Other
£000
(292)
(65)
(174)
-
(531)
-
(310)
2,062
(17,850)
(16,629)
Total
£000
79,553
(1,496)
3,849
634
82,540
6,821
(310)
2,062
(17,850)
73,263
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 210
211
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
7 Fee and commission income
7 Fee and commission income
7 Fee and commission income
During the year, the Group recognised £49,065,000 (2018: £41,116,000) fee and commission income in accordance with IFRS 4, Insurance
During the year, the Group recognised £49,065,000 (2018: £41,116,000) fee and commission income in accordance with IFRS 4, Insurance
Contracts and £22,175,000 (2018: £21,880,000) in accordance with IFRS 15, Revenuefromcontractswithcustomers. Fee and commission
Contracts and £22,175,000 (2018: £21,880,000) in accordance with IFRS 15, Revenuefromcontractswithcustomers. Fee and commission
income from contracts with customers was recognised as follows:
income from contracts with customers was recognised as follows:
For the year ended 31 December 2019
For the year ended 31 December 2019
General business
General business
Investment management
Investment management
Broking and advisory
Broking and advisory
For the year ended 31 December 2018
For the year ended 31 December 2018
General business
General business
Investment management
Investment management
Broking and advisory
Broking and advisory
8 Net investment return
8 Net investment return
8 Net investment return
Income from financial assets at fair value through profit or loss
Income from financial assets at fair value through profit or loss
- equity income
- equity income
- debt income
- debt income
Income from financial assets calculated using the effective interest rate method
Income from financial assets calculated using the effective interest rate method
- cash and cash equivalents income
- cash and cash equivalents income
- other income received
- other income received
Other income
Other income
- rental income
- rental income
- exchange movements
- exchange movements
Investment income
Investment income
Fair value movements on financial instruments at fair value through profit or loss
Fair value movements on financial instruments at fair value through profit or loss
Fair value movements on investment property
Fair value movements on investment property
Fair value movements on property, plant and equipment
Fair value movements on property, plant and equipment
Impact of discount rate change on insurance contract liabilities
Impact of discount rate change on insurance contract liabilities
Net investment return
Net investment return
Recognised at
Recognised at
a point in time
a point in time
£000
£000
Recognised
Recognised
over time
over time
£000
£000
302
302
108
108
9,078
9,078
9,488
9,488
230
230
101
101
8,715
8,715
9,046
9,046
-
-
12,687
12,687
-
-
12,687
12,687
-
-
12,500
12,500
334
334
12,834
12,834
2019
£000
2019
£000
9,580
9,580
14,221
14,221
605
605
1,795
1,795
8,519
8,519
60
60
34,780
34,780
55,991
55,991
(3,900)
(3,900)
-
-
(12,433)
(12,433)
74,438
74,438
Total
Total
£000
£000
302
302
12,795
12,795
9,078
9,078
22,175
22,175
230
230
12,601
12,601
9,049
9,049
21,880
21,880
2018
£000
2018
£000
9,794
9,794
15,027
15,027
839
839
1,289
1,289
8,238
8,238
84
84
35,271
35,271
(35,450)
(35,450)
(56)
(56)
85
85
4,144
4,144
3,994
3,994
Included within fair value movements on financial instruments at fair value through profit or loss are gains of £162,000 (2018: £1,873,000 -
Included within fair value movements on financial instruments at fair value through profit or loss are gains of £162,000 (2018: £1,873,000 -
previously reported as a loss of £325,000) in respect of derivative instruments.
previously reported as a loss of £325,000) in respect of derivative instruments.
Notes to the financial statements
5 Segment information (continued)
Notes to the financial statements
Notes to the financial statements
5 Segment information (continued)
5 Segment information (continued)
2018
Combined
operating
ratio
Insurance
£000
Investments
£000
Other
£000
Total
£000
Combined
80.2%
operating
93.7%
ratio
106.5%
General business
2018
United Kingdom and Ireland
Australia
Canada
General business
Other insurance operations
United Kingdom and Ireland
Australia
Life business
Canada
Investment management
Other insurance operations
Broking and Advisory
Corporate costs
Life business
Profit/(loss) before tax
Investment management
Broking and Advisory
Corporate costs
Profit/(loss) before tax
(b) Geographical information
Gross written premiums from external customers and non-current assets, as attributed to individual countries in which the Group operates, are
as follows:
(1,836)
Investments
2,073
£000
1,655
-
(1,836)
1,892
2,073
(3,181)
1,655
-
-
-
1,892
-
(3,181)
(1,289)
-
-
-
(1,289)
29,426
Insurance
1,400
£000
(2,599)
963
29,426
29,190
1,400
1,642
(2,599)
-
963
-
29,190
-
1,642
30,832
-
-
-
30,832
(252)
Other
(77)
£000
-
-
(252)
(329)
(77)
-
-
941
-
2,045
(329)
(16,829)
-
(14,172)
941
2,045
(16,829)
(14,172)
27,338
Total
3,396
£000
(944)
963
27,338
30,753
3,396
(1,539)
(944)
941
963
2,045
30,753
(16,829)
(1,539)
15,371
941
2,045
(16,829)
15,371
80.2%
86.4%
93.7%
106.5%
86.4%
(b) Geographical information
Gross written premiums from external customers and non-current assets, as attributed to individual countries in which the Group operates, are
as follows:
2018
2019
Non-current
assets
£000
2019
Non-current
assets
£000
2018
United Kingdom and Ireland
Australia
Canada
218,119
Non-current
1,279
assets
£000
4,018
223,416
United Kingdom and Ireland
218,119
Australia
1,279
Gross written premiums are allocated based on the country in which the insurance contracts are issued. Non-current assets exclude rights
Canada
4,018
arising under insurance contracts, deferred tax assets, pension assets and financial instruments and are allocated based on where the assets
223,416
are located.
235,859
Non-current
4,348
assets
£000
8,272
248,479
235,859
4,348
8,272
248,479
Gross written premiums are allocated based on the country in which the insurance contracts are issued. Non-current assets exclude rights
arising under insurance contracts, deferred tax assets, pension assets and financial instruments and are allocated based on where the assets
6 Net insurance premium revenue
are located.
6 Net insurance premium revenue
6 Net insurance premium revenue
For the year ended 31 December 2019
Gross written premiums
Outward reinsurance premiums
Net written premiums
For the year ended 31 December 2019
Gross written premiums
Change in the gross provision for unearned premiums
Outward reinsurance premiums
Change in the provision for unearned premiums, reinsurers' share
Net written premiums
Change in the net provision for unearned premiums
Earned premiums, net of reinsurance
Change in the gross provision for unearned premiums
Change in the provision for unearned premiums, reinsurers' share
For the year ended 31 December 2018
Change in the net provision for unearned premiums
Gross written premiums
Earned premiums, net of reinsurance
Outward reinsurance premiums
Net written premiums
For the year ended 31 December 2018
Gross written premiums
Change in the gross provision for unearned premiums
Outward reinsurance premiums
Change in the provision for unearned premiums, reinsurers' share
Net written premiums
Change in the net provision for unearned premiums
Earned premiums, net of reinsurance
Change in the gross provision for unearned premiums
Change in the provision for unearned premiums, reinsurers' share
Change in the net provision for unearned premiums
Earned premiums, net of reinsurance
General
business
£000
General
business
393,965
£000
(152,886)
241,079
393,965
(23,829)
(152,886)
8,749
241,079
(15,080)
225,999
(23,829)
8,749
(15,080)
356,950
225,999
(137,640)
219,310
356,950
(11,005)
(137,640)
5,764
219,310
(5,241)
214,069
(11,005)
5,764
(5,241)
214,069
Life
business
£000
Life
business
(13)
£000
-
(13)
(13)
-
-
-
(13)
-
(13)
-
-
-
21
(13)
-
21
21
-
-
-
21
-
21
-
-
-
21
Total
£000
Total
393,952
£000
(152,886)
241,066
393,952
(23,829)
(152,886)
8,749
241,066
(15,080)
225,986
(23,829)
8,749
(15,080)
356,971
225,986
(137,640)
219,331
356,971
(11,005)
(137,640)
5,764
219,331
(5,241)
214,090
(11,005)
5,764
(5,241)
214,090
Gross
written
premiums
£000
Gross
260,638
written
68,857
premiums
£000
64,457
393,952
260,638
68,857
64,457
393,952
Gross
written
premiums
£000
Gross
245,867
written
56,946
premiums
£000
54,158
356,971
245,867
56,946
54,158
356,971
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 212
213
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
9 Claims and change in insurance liabilities and reinsurance recoveries
9 Claims and change in insurance liabilities and reinsurance recoveries
9 Claims and change in insurance liabilities and reinsurance recoveries
For the year ended 31 December 2019
For the year ended 31 December 2019
Gross claims paid
Gross claims paid
Gross change in the provision for claims
Gross change in the provision for claims
Gross change in life business provision
Gross change in life business provision
Claims and change in insurance liabilities
Claims and change in insurance liabilities
Reinsurers' share of claims paid
Reinsurers' share of claims paid
Reinsurers' share of change in the provision for claims
Reinsurers' share of change in the provision for claims
Reinsurance recoveries
Reinsurance recoveries
Claims and change in insurance liabilities, net of reinsurance
Claims and change in insurance liabilities, net of reinsurance
For the year ended 31 December 2018
For the year ended 31 December 2018
Gross claims paid
Gross claims paid
Gross change in the provision for claims
Gross change in the provision for claims
Gross change in life business provision
Gross change in life business provision
Claims and change in insurance liabilities
Claims and change in insurance liabilities
Reinsurers' share of claims paid
Reinsurers' share of claims paid
Reinsurers' share of change in the provision for claims
Reinsurers' share of change in the provision for claims
Reinsurance recoveries
Reinsurance recoveries
Claims and change in insurance liabilities, net of reinsurance
Claims and change in insurance liabilities, net of reinsurance
10 Fees, commissions and other acquisition costs
10 Fees, commissions and other acquisition costs
10 Fees, commissions and other acquisition costs
Fees paid
Fees paid
Commission paid
Commission paid
Change in deferred acquisition costs
Change in deferred acquisition costs
Other acquisition costs
Other acquisition costs
Fees, commissions and other acquisition costs
Fees, commissions and other acquisition costs
General
General
business
£000
business
£000
Life
Life
business
£000
business
£000
139,221
139,221
18,260
18,260
-
-
157,481
157,481
(40,808)
(40,808)
(11,992)
(11,992)
(52,800)
(52,800)
104,681
104,681
155,137
155,137
(42,915)
(42,915)
-
-
112,222
112,222
(48,691)
(48,691)
22,503
22,503
(26,188)
(26,188)
86,034
86,034
5,562
5,562
-
-
(5,235)
(5,235)
327
327
-
-
-
-
-
-
327
327
6,111
6,111
-
-
(6,460)
(6,460)
(349)
(349)
-
-
-
-
-
-
(349)
(349)
2019
2019
£000
£000
14
14
62,134
62,134
(4,553)
(4,553)
15,145
15,145
72,740
72,740
Total
£000
Total
£000
144,783
144,783
18,260
18,260
(5,235)
(5,235)
157,808
157,808
(40,808)
(40,808)
(11,992)
(11,992)
(52,800)
(52,800)
105,008
105,008
161,248
161,248
(42,915)
(42,915)
(6,460)
(6,460)
111,873
111,873
(48,691)
(48,691)
22,503
22,503
(26,188)
(26,188)
85,685
85,685
2018
2018
£000
£000
15
15
55,551
55,551
(3,078)
(3,078)
13,858
13,858
66,346
66,346
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
11 Profit for the year
11 Profit for the year
11 Profit for the year
Profit for the year has been arrived at after (crediting)/charging
Profit for the year has been arrived at after (crediting)/charging
Net foreign exchange gains
Net foreign exchange gains
Depreciation of property, plant and equipment
Depreciation of property, plant and equipment
Loss/(profit) on disposal of property, plant and equipment
Loss/(profit) on disposal of property, plant and equipment
Amortisation of intangible assets
Amortisation of intangible assets
Decrease in fair value of investment property
Decrease in fair value of investment property
Employee benefits expense including termination benefits, net of recharges
Employee benefits expense including termination benefits, net of recharges
12 Auditor’s remuneration
12 Auditor's remuneration
12 Auditor's remuneration
Fees payable to the Company's auditor and its associates for the audit of the
Fees payable to the Company's auditor and its associates for the audit of the
Company's annual accounts
Company's annual accounts
Fees payable to the Company’s auditor and its associates for other services:
Fees payable to the Company’s auditor and its associates for other services:
- The audit of the Company's subsidiaries
- The audit of the Company's subsidiaries
Total audit fees
Total audit fees
- Audit-related assurance services
- Audit-related assurance services
- Other assurance services
- Other assurance services
Total non-audit fees
Total non-audit fees
Fees payable to the Company's auditor in respect of associated pension schemes
Fees payable to the Company's auditor in respect of associated pension schemes
- The audit of associated pension schemes
- The audit of associated pension schemes
Total auditor's remuneration
Total auditor's remuneration
2019
2019
£000
£000
(60)
(60)
5,081
5,081
171
171
1,000
1,000
3,900
3,900
86,065
86,065
2018
2018
£000
£000
(84)
(84)
2,437
2,437
(3)
(3)
927
927
56
56
82,811
82,811
2019
2019
£000
£000
2018
2018
£000
£000
497
497
179
179
676
676
164
164
-
-
164
164
17
17
857
857
386
386
152
152
538
538
135
135
-
-
135
135
18
18
691
691
Amounts disclosed are net of services taxes, where applicable. Audit-related assurance services include Prudential Regulatory Authority and
Amounts disclosed are net of services taxes, where applicable. Audit-related assurance services include Prudential Regulatory Authority and
other regulatory audit work.
other regulatory audit work.
The Company's policy on the use of the auditor for non-audit services is detailed in the Group Audit Committee Report in the Corporate
The Company's policy on the use of the auditor for non-audit services is detailed in the Group Audit Committee Report in the Corporate
Governance section of the Annual Report and Accounts.
Governance section of the Annual Report and Accounts.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 214
215
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
13 Employee information
13 Employee information
The average monthly number of full-time equivalent employees of the Group and Parent, including executive directors, during the year by
geographical location was:
14 Tax expense
14 Tax expense
(a) Tax charged/(credited) to the statement of profit or loss
Group
United Kingdom and Ireland
Australia
Canada
Parent
United Kingdom and Ireland
Canada
General
business
No.
781
97
84
962
General
business
No.
781
84
865
2019
Life
business
No.
1
-
-
1
2019
Life
business
No.
1
-
1
General
business
No.
771
96
77
944
General
business
No.
771
77
848
2018
Life
business
No.
1
-
-
1
2018
Life
business
No.
1
-
1
Other
No.
181
-
-
181
Other
No.
82
-
82
Other
No.
173
-
-
173
Other
No.
74
-
74
Average numbers of full-time equivalent employees have been quoted rather than average numbers of employees to give a better reflection of
the split between business areas, as some employees' work is divided between more than one business area.
Key management personnel
Wages and salaries
Social security costs
Pension costs - defined contribution plans
Other employees
Wages and salaries
Social security costs
Pension costs - defined contribution plans
Pension costs - defined benefit plans
Other post-employment benefits
Total staff costs
Staff costs recharged to related undertakings of the Group
Capitalised staff costs
2019
2018
Group
£000
4,713
443
213
5,369
69,657
6,567
4,578
1,812
154
88,137
(1,340)
(1,090)
85,707
Parent
£000
4,713
443
213
5,369
58,255
6,134
3,801
1,812
154
75,525
(8,278)
(1,090)
66,157
Group
£000
4,208
481
235
4,924
62,888
5,821
5,491
4,952
259
84,335
(1,286)
(342)
82,707
Parent
£000
4,208
481
235
4,924
52,178
5,408
4,819
4,952
259
72,540
(7,153)
(342)
65,045
The above Group figures do not include termination benefits of £358,000 (2018: £129,000), none of which was recharged to related
undertakings of the Group (2018: £25,000). The above Parent figures do not include termination benefits of £135,000 (2018: £66,000), of
which £33,000 (2018: £25,000) was recharged to related undertakings of the Parent.
The remuneration of the directors (including non-executive directors), is set out both individually and in aggregate within the Group
Remuneration Report in the Corporate Governance section of this report.
Defined contribution pension costs in 2018 include a one-off contribution of £2,017,000 that was paid by the Company during 2019 following
closure of the defined benefit pension plan to future accrual.
Current tax
Deferred tax
Total tax expense
- current year
- prior year adjustments
- temporary differences
2019
£000
5,893
808
4,749
11,450
2018
£000
8,873
(292)
(7,623)
958
Tax on the Group’s result before tax differs from the United Kingdom standard rate of corporation tax for the reasons set out in the following
reconciliation:
Profit before tax
Tax calculated at the UK standard rate of tax of 19% (2018: 19%)
Factors affecting charge for the year:
Expenses not deductible for tax purposes
Non-taxable income
Life insurance and other tax paid at non-standard rates
Utilisation of tax losses for which no deferred tax asset has been recognised
Adjustments to tax charge in respect of prior periods
Total tax expense
2019
£000
73,263
13,920
463
(3,110)
(198)
(433)
808
11,450
2018
£000
15,371
2,920
(112)
(1,538)
193
(213)
(292)
958
A change in the UK standard rate of corporation tax from 19% to 17% will become effective from 1 April 2020. Deferred tax has been provided
at an average rate of 17% (2018: 17%).
(b) Tax (credited)/charged to other comprehensive income
Current tax charged on:
Fair value movements on hedge derivatives
Deferred tax (credited)/charged on:
Fair value movements on property
Actuarial movements on retirement benefit plans
Fair value movements on hedge derivatives
Total tax (credited)/charged to other comprehensive income
Tax relief on charitable grants of £5,497,000 (2018: £3,230,000) has been taken directly to equity.
2019
£000
2018
£000
129
110
-
(1,198)
(110)
(1,179)
18
729
77
934
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
216
217
15 Appropriations
15 Appropriations
15 Appropriations
Amounts recognised as distributions to equity holders in the period:
Amounts recognised as distributions to equity holders in the period:
Dividends
Dividends
Non-Cumulative Irredeemable Preference share dividend (8.625 pence per share)
Non-Cumulative Irredeemable Preference share dividend (8.625 pence per share)
Charitable grants
Charitable grants
Gross charitable grants to the ultimate parent company, Allchurches Trust Limited
Gross charitable grants to the ultimate parent company, Allchurches Trust Limited
Tax relief
Tax relief
Net appropriation for the year
Net appropriation for the year
16 Acquisition of business
16 Acquisition of business
16 Acquisition of business
2019
2019
£000
£000
9,181
9,181
30,000
30,000
(5,497)
(5,497)
24,503
24,503
2018
2018
£000
£000
9,181
9,181
17,000
17,000
(3,230)
(3,230)
13,770
13,770
On 11 June 2018, South Essex Insurance Brokers Limited acquired certain assets of Equicover Limited and on 30 November 2018 acquired
On 11 June 2018, South Essex Insurance Brokers Limited acquired certain assets of Equicover Limited and on 30 November 2018 acquired
assets of Equestrian World Services from Greenwood Moreland Insurance Brokers. Both acquisitions were in order to further expand equine
assets of Equestrian World Services from Greenwood Moreland Insurance Brokers. Both acquisitions were in order to further expand equine
insurance broking services.
insurance broking services.
The aggregate amounts recognised in respect of the identifiable assets of both acquisitions are set out in the table below.
The aggregate amounts recognised in respect of the identifiable assets of both acquisitions are set out in the table below.
Intangible assets
Intangible assets
Total assets acquired
Total assets acquired
Satisfied by:
Satisfied by:
Cash
Cash
Contingent consideration agreement
Contingent consideration agreement
Total consideration
Total consideration
£000
£000
292
292
292
292
225
225
67
67
292
292
The net cash outflow arising on the acquisitions was £225,000.
The net cash outflow arising on the acquisitions was £225,000.
The fair value of the identifiable intangible assets of £292,000 consists of the value of distributor relationships acquired.
The fair value of the identifiable intangible assets of £292,000 consists of the value of distributor relationships acquired.
The contingent consideration arrangement requires a cash payment to be made on 31 August 2019 and 31 August 2020. The amount paid in
The contingent consideration arrangement requires a cash payment to be made on 31 August 2019 and 31 August 2020. The amount paid in
each case is determined by the number of policies converted in the two consecutive annual 'earn-out' periods which end on 6 June 2020.
each case is determined by the number of policies converted in the two consecutive annual 'earn-out' periods which end on 6 June 2020.
The fair value of contingent consideration at acquisition was £67,000 based on forecast sales for the two 'earn-out' periods. At that time the
The fair value of contingent consideration at acquisition was £67,000 based on forecast sales for the two 'earn-out' periods. At that time the
potential future payment in respect of contingent consideration was between £nil and £90,000.
potential future payment in respect of contingent consideration was between £nil and £90,000.
At the balance sheet date, the fair value of contingent consideration is £23,000 (2018: £63,000) and the movement in the fair value, as shown
At the balance sheet date, the fair value of contingent consideration is £23,000 (2018: £63,000) and the movement in the fair value, as shown
in note 29, is due to amounts paid in the year. Based on the actual policies converted in the period to 31 December 2019 the potential future
in note 29, is due to amounts paid in the year. Based on the actual policies converted in the period to 31 December 2019 the potential future
payment is between £23,000 and £32,000 (2018: £63,000 and £90,000).
payment is between £23,000 and £32,000 (2018: £63,000 and £90,000).
No material acquisition-related costs were incurred in relation to the transaction.
No material acquisition-related costs were incurred in relation to the transaction.
The acquisitions contributed £16,000 revenue and £14,000 to the Group's profit before tax between the dates of acquisition and the prior
The acquisitions contributed £16,000 revenue and £14,000 to the Group's profit before tax between the dates of acquisition and the prior
period balance sheet date.
period balance sheet date.
17 Goodwill and other intangible assets
17 Goodwill and other intangible assets
Group
Cost
At 1 January 2019
Additions
Disposals
Exchange differences
At 31 December 2019
Accumulated impairment losses and amortisation
At 1 January 2019
Amortisation charge for the year
Impairment losses for the year
Disposals
Exchange differences
At 31 December 2019
Net book value at 31 December 2019
Cost
At 1 January 2018
Additions
Disposals
Exchange differences
At 31 December 2018
Accumulated impairment losses and amortisation
At 1 January 2018
Amortisation charge for the year
Impairment losses for the year
Disposals
Exchange differences
At 31 December 2018
Net book value at 31 December 2018
Goodwill
£000
Computer
software
£000
Other
intangible
assets
£000
23,779
-
-
-
23,779
328
-
16
-
-
344
23,435
23,779
-
-
-
23,779
306
-
22
-
-
328
23,451
23,453
9,613
(4)
7
33,069
17,686
838
-
(4)
17
18,537
14,532
21,214
2,371
(11)
(121)
23,453
16,941
797
-
(11)
(41)
17,686
5,767
5,376
-
-
-
5,376
4,530
162
-
-
-
4,692
684
5,084
292
-
-
5,376
4,400
130
-
-
-
4,530
846
Total
£000
52,608
9,613
(4)
7
62,224
22,544
1,000
16
(4)
17
23,573
38,651
50,077
2,663
(11)
(121)
52,608
21,647
927
22
(11)
(41)
22,544
30,064
£16,885,000 of the goodwill balance in the current and prior year relates to the 2008 acquisition of South Essex Insurance Holdings Limited.
£4,392,000 of the current and prior period balance relates to the acquisition of Lansdown Insurance Brokers Limited during 2014.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. The calculations for all recoverable amounts
use cash flow projections based on management-approved business plans, covering a three-year period, with forecast annual cash flows at the
end of the planning period continuing thereafter in perpetuity at the UK long-term average growth rate, usually sourced from the Office for
Budget Responsibility (OBR). The Group selected a rate of 1.6% (2018: 1.6%) as being appropriate, based on medium-term rates published in
the OBR's November report. The pre-tax discount rate of 9.2% (2018: 9.8%) reflects the way that the market would assess the specific risks
associated with the estimated cash flows.
The aggregation of assets for identifying the cash-generating unit (‘CGU’) changed in 2018 to select only the assets which directly impact the
cash flow projections. In the prior year the CGU assets were based on the total shareholders’ equity of the entity containing the CGU. The
reason for the change in basis is to align the cash projections more accurately with the net assets which will produce them.
The recoverable amount of the investment in South Essex Insurance Holdings Limited exceeds its carrying amount by £8.8m (2018: £8.4m). If
the cumulative growth rate between 2020 and 2022 was 4.5% lower than assumed in management-approved business plans, or the discount
rate increased by 2.5%, then the recoverable amount would equal the carrying amount. For the investment in Lansdown Insurance Brokers
Limited, the headroom above the carrying value is significant and reasonably possible changes to the key assumptions do not result in
impairment.
Assumptions used are consistent with historical experience within the business acquired and external sources of information.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
17 Goodwill and other intangible assets (continued)
17 Goodwill and other intangible assets (continued)
17 Goodwill and other intangible assets (continued)
Notes to the financial statements
Notes to the financial statements
218
219
Other intangible assets consist of acquired brand, customer and distribution relationships, which have an overall remaining useful life of one
Other intangible assets consist of acquired brand, customer and distribution relationships, which have an overall remaining useful life of one
year on a weighted average basis (2018: one year).
year on a weighted average basis (2018: one year).
Parent
Parent
Computer software
Computer software
Cost
Cost
At 1 January
At 1 January
Additions
Additions
Disposals
Disposals
Exchange differences
Exchange differences
At 31 December
At 31 December
Amortisation
Amortisation
At 1 January
At 1 January
Charge for the year
Charge for the year
Disposals
Disposals
Exchange differences
Exchange differences
At 31 December
At 31 December
Net book value at 31 December
Net book value at 31 December
18 Deferred acquisition costs
18 Deferred acquisition costs
18 Deferred acquisition costs
At 1 January
At 1 January
Increase in the period
Increase in the period
Release in the period
Release in the period
Exchange differences
Exchange differences
At 31 December
At 31 December
All balances are current.
All balances are current.
2019
2019
£000
£000
21,495
21,495
7,615
7,615
(4)
(4)
57
57
29,163
29,163
16,646
16,646
589
589
(4)
(4)
18
18
17,249
17,249
11,914
11,914
2018
2018
£000
£000
19,567
19,567
2,060
2,060
(11)
(11)
(121)
(121)
21,495
21,495
15,999
15,999
699
699
(11)
(11)
(41)
(41)
16,646
16,646
4,849
4,849
2019
2019
2018
2018
Group
Group
£000
£000
33,907
33,907
38,529
38,529
(33,976)
(33,976)
(261)
(261)
38,199
38,199
Parent
Parent
£000
£000
27,812
27,812
31,283
31,283
(27,976)
(27,976)
14
14
31,133
31,133
Group
Group
£000
£000
31,267
31,267
34,041
34,041
(30,963)
(30,963)
(438)
(438)
33,907
33,907
Parent
Parent
£000
£000
25,628
25,628
27,857
27,857
(25,493)
(25,493)
(180)
(180)
27,812
27,812
19 Retirement benefit schemes
19 Retirement benefit schemes
Defined contribution pension plans
The Group operates a number of defined contribution pension plans, for which contributions by the Group are disclosed in note 13.
Defined benefit pension plans
The Group's defined benefit plan is operated by the Parent in the UK, which includes two discrete sections, the EIO Section and Ansvar Section.
The plan closed to new entrants on 5 April 2006. The terms of the plan for future service changed in August 2011 from a non-contributory final
salary scheme to a contributory scheme in which benefits are based on career average revalued earnings. The scheme closed to future accrual
on 30 June 2019 in line with the Company's announcement in the prior year. Active members in employment at 30 June 2019 retained certain
enhanced benefits after the plan closed to future accrual, including benefits in relation to death in service and ill health retirement. They will also
retain the link to final salary whilst they remain employed by the Parent. From 1 July 2019, active members in employment joined one of the
Group’s defined contribution plans.
The assets of the defined benefit plan are held separately from those of the Group by the Trustee of the Ecclesiastical Insurance Office plc
Staff Retirement Benefit Fund (the 'Fund'). The Fund is subject to the Statutory Funding Objective under the Pensions Act 2004. An
independent qualified actuary appointed by the Trustee is responsible for undertaking triennial valuations to determine whether the Statutory
Funding Objective is met. Pension costs for the plan are determined by the Trustee, having considered the advice of the actuary and having
consulted with the employer. The most recent triennial valuation was at 31 December 2016. As the scheme is closed to future accrual, no
contribution is expected to be paid by the Group in 2020 (2018: £1.3m to 30 June 2019).
Actuarial valuations were reviewed and updated by an actuary at 31 December 2019 for IAS 19 purposes. The announcement of closure to
future accrual from 30 June 2019 limits the maximum surplus that the Parent can recognise in respect of the EIO Section of the Fund as it
does not have an unconditional right to a refund of surplus. At 31 December 2019 the maximum surplus that could be recognised in the EIO
Section is greater than the IAS 19 surplus, therefore the surplus in this Section has been recognised in full in accordance with International
Financial Reporting Interpretations Committee 14 (IFRIC 14). The Parent has an unconditional right to a refund of surplus in the Ansvar Section
of the Fund which has been recognised in full in accordance with IFRIC 14.
In the prior year, there was a High Court ruling relating to Guaranteed Minimum Pensions (GMP) equalisation of the Lloyds Bank pension
scheme which has implications for the EIO section of the Group’s defined benefit plan. The impact of the ruling was estimated at £1.5m and
presented as a past service cost in the statement of profit and loss. There has been no change in the estimated impact of the ruling in the
current year.
In the current year, actuarial losses arising from changes in financial assumptions of £59.7m (2018: actuarial gains of £27.0m) have been
recognised in the statement of other comprehensive income. These losses resulted from a 0.8% decrease in the discount rate partially offset by
favourable movements in inflation.
Actuarial gains of £13.2m have been recognised in the current year (2018: £nil) as a result of changes in demographic assumptions. This is
mainly due to adopting the Continuous Mortality Investigation (CMI) 2018 projections table, in place of the CMI 2016 projections table, to
determine the future improvements in mortality assumption.
The defined benefit plan typically exposes the Group to risks such as:
-
-
-
Investment risk: The Fund holds some of its investments in asset classes, such as equities, which have volatile market values and, while
these assets are expected to provide the best returns over the long term, any short-term volatility could cause funding to be required if a
deficit emerges. Derivative contracts are used from time to time, which would limit losses in the event of a fall in equity markets.
Interest rate risk: Scheme liabilities are assessed using market rates of interest to discount the liabilities and are therefore subject to any
volatility in the movement of the market rate of interest. The net interest income or expense recognised in profit or loss is also calculated
using the market rate of interest. The Group's defined benefit plan holds Liability Driven Investments (LDIs) to hedge part of the exposure of
the scheme's liabilities to movements in interest rates.
Inflation risk: A significant proportion of scheme benefits are linked to inflation. Although scheme assets are expected to provide a good
hedge against inflation over the long term, movements over the short term could lead to a deficit emerging. The Group's defined benefit plan
holds LDIs to hedge part of the exposure of the scheme's liabilities to movements in inflation expectations.
- Mortality risk: In the event that members live longer than assumed the liabilities may be understated originally, and a deficit may emerge if
funding has not adequately provided for the increased life expectancy.
- Currency risk: The Fund holds some of its investments in foreign denominated assets. As scheme liabilities are denominated in sterling,
short-term fluctuations in exchange rates could cause funding to be required if a deficit emerges. Currency derivative contracts are used
from time to time, which would limit losses in the event of adverse movements in exchange rates.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 220
221
Notes to the financial statements
Notes to the financial statements
19 Retirement benefit schemes (continued)
19 Retirement benefit schemes (continued)
The Trustees set the investment objectives and strategy for the Fund based on independent advice and in consultation with the employer. Key
factors addressed in setting strategy include the Fund’s liability profile, funding level and strength of employer covenant. Their key objectives are
to ensure the Fund can meet members’ guaranteed benefits as they fall due, reduce the risk of assets failing to meet its liabilities over the long
term and manage the volatility of returns and overall funding level.
A blend of diversified growth assets (equities and property) and protection assets (bonds, gilts and cash) are deployed to balance the level of
risk to that required to provide, with confidence, a sufficient return and liquidity to continue to meet members' obligations as they fall due. The
Trustees have identified the key risks faced by the Fund in meeting this objective to be falls in bond yields and rising inflation.
Assets include an LDI (‘Liability Driven Investments’) portfolio, structured to increase in value with decreases in interest rates and grow in line
with inflation expectations. This is estimated currently to hedge 60% of the interest rate and inflation rate risk of the guaranteed benefits of the
Fund. Exposure of the Fund's assets to interest rates and inflation counter-balances exposure of the Fund's liabilities to these factors and has
reduced, but not eliminated, volatility in the funding position.
The Trustees will proceed to undertake further analysis and review of the Fund’s investment strategy in the first half of 2020, informed by
refreshed benefits and cashflow projections prepared for the triennial valuation as at 31 December 2019 and reflecting the closure to future
accrual during 2019. Their aim is to establish a Long Term Funding Target in line with guidance from the Pensions Regulator. The Trustees
intend that this long term target will be reached through investment performance only and without requiring further contributions from the
employer.
Group and Parent
The amounts recognised in the statement of financial position are determined as follows:
Present value of funded obligations
Fair value of plan assets
Restrictions on asset recognised
Net defined benefit pension scheme asset in the statement of financial position
Movements in the net defined benefit pension scheme asset recognised in the statement of
financial position are as follows:
At 1 January
Expense charged to profit or loss*
Amounts recognised in other comprehensive income
Contributions paid
At 31 December
The amounts recognised through profit or loss are as follows:
Current service cost
Administration cost
Interest expense on liabilities
Interest income on plan assets
Past service cost
Total, included in employee benefits expense
The amounts recognised in the statement of other comprehensive income are as follows:
Return on plan assets, excluding interest income
Experience losses on liabilities
Gains from changes in demographic assumptions
(Losses)/gains from changes in financial assumptions
Total included in other comprehensive income
2019
£000
2018
£000
(371,179)
379,684
8,505
-
8,505
(325,738)
341,869
16,131
-
16,131
16,131
(2,101)
(6,811)
1,286
8,505
2,130
433
8,628
(9,090)
-
2,101
39,780
(91)
13,192
(59,692)
(6,811)
20,036
(5,542)
(974)
2,611
16,131
4,124
382
8,137
(8,649)
1,548
5,542
(24,354)
(3,601)
-
26,981
(974)
Notes to the financial statements
Notes to the financial statements
19 Retirement benefit schemes (continued)
19 Retirement benefit schemes (continued)
The following is the analysis of the defined benefit pension balances:
Group and Parent
Pension assets
Pension liabilities
The principal actuarial assumptions (expressed as weighted averages) were as follows:
Discount rate
Inflation (RPI)
Inflation (CPI)
Future salary increases
Future increase in pensions in deferment
Future average pension increases (linked to RPI)
Future average pension increases (linked to CPI)
Mortality rate
The average life expectancy in years of a pensioner retiring at age 65, at the year-end date, is as follows:
Male
Female
The average life expectancy in years of a pensioner retiring at age 65, 20 years after the year-end date, is as
follows:
Male
Female
Plan assets are weighted as follows:
Cash and other*
Equity instruments
UK quoted
UK unquoted
Overseas quoted
Liability driven investments
Debt instruments
UK public sector quoted - fixed interest
UK non-public sector quoted - fixed interest
UK quoted - index-linked
Derivative financial instruments
Property
2019
£000
8,505
-
8,505
%
1.90
3.00
2.30
4.30
2.35
2.80
1.50
22.4
23.9
24.1
25.7
£000
21,945
93,519
270
78,282
172,071
41,781
2,411
71,189
24,232
97,832
2,396
43,659
2018
£000
16,131
-
16,131
%
2.70
3.20
2.20
4.20
2.25
3.00
1.50
23.1
24.6
24.9
26.4
£000
22,818
77,179
125
70,397
147,701
37,857
2,440
64,981
23,351
90,772
(1,981)
44,702
379,684
341,869
* Charge to profit or loss includes £289,000 (2018: £590,000) in respect of member salary sacrifice contributions.
*Cash and other includes accrued income, prepayments and other debtors and creditors.
The actual return on plan assets was a gain of £48,870,000 (2018: a loss of £15,705,000).
The underlying assets of the LDIs are primarily UK government bonds and interest rate repurchase agreements at various rates and terms.
The fair value of unquoted securities is measured using inputs for the asset that are not based on observable market data. The fair value is
estimated and approved by the Trustee based on the advice of investment managers. Property is valued annually by independent qualified
surveyors using standard industry methodology to determine a fair market value. All other investments either have a quoted price in active
markets or are valued based on observable market data.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
19 Retirement benefit schemes (continued)
19 Retirement benefit schemes (continued)
Notes to the financial statements
Notes to the financial statements
19 Retirement benefit schemes (continued)
19 Retirement benefit schemes (continued)
222
223
The movements in the fair value of plan assets and the present value of the defined benefit obligation over the year are as follows:
Plan assets
At 1 January
Interest income
Actual return on plan assets, excluding interest income
Pension benefits paid and payable
Contributions paid
At 31 December
Defined benefit obligation
At 1 January
Current service cost
Administration cost
Past service cost
Interest cost
Pension benefits paid and payable
Experience losses on liabilities
Gains from changes in demographic assumptions
Losses/(gains) from changes in financial assumptions
At 31 December
History of plan assets and liabilities
Present value of defined benefit obligations
Fair value of plan assets
Restrictions on asset recognised
Surplus/(deficit)
2019
£000
(371,179)
379,684
8,505
-
8,505
2018
£000
(325,738)
341,869
16,131
-
16,131
2017
£000
(343,143)
363,179
20,036
-
20,036
2019
£000
341,869
9,090
39,780
(12,341)
1,286
379,684
325,738
2,130
433
-
8,628
(12,341)
91
(13,192)
59,692
371,179
2016
£000
(349,570)
329,394
(20,176)
(144)
(20,320)
2018
£000
363,179
8,649
(24,354)
(8,216)
2,611
341,869
343,143
4,124
382
1,548
8,137
(8,216)
3,601
-
(26,981)
325,738
2015
£000
(276,562)
294,498
17,936
(7,283)
10,653
The weighted average duration of the defined benefit obligation at the end of the reporting period is 23 years (2018: 23 years).
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, inflation, expected salary increases
and mortality. The sensitivity analysis below has been determined based on reasonably possible changes in the assumptions occurring at the
end of the reporting period assuming that all other assumptions are held constant.
Assumption
Change in assumption
Discount rate
Inflation
Salary increase
Life expectancy
Increase by 0.5%
Decrease by 0.5%
Increase by 0.5%
Decrease by 0.5%
Increase by 0.5%
Decrease by 0.5%
Increase by 1 year
Decrease by 1 year
Increase/(decrease)
in plan liabilities
2019
£000
2018
£000
(40,500)
47,700
33,300
(27,500)
5,600
(5,400)
15,700
(15,600)
(33,630)
39,390
25,270
(25,070)
4,960
(4,750)
12,780
(12,780)
Post-employment medical benefits
The Parent operates a post-employment medical benefit plan, for which it chooses to self-insure. The method of accounting, assumptions and
the frequency of valuation are similar to those used for the defined benefit pension plans.
The provision of the plan leads to a number of risks as follows:
-
Interest rate risk: The reserves are assessed using market rates of interest to discount the liabilities and are therefore subject to volatility in
the movement of the market rates of interest. A reduction in the market rate of interest would lead to an increase in the reserves required
to be held.
- Medical expense inflation risk: Future medical costs are influenced by a number of factors including economic trends and advances in
medical technology and sciences. An increase in medical expense inflation would lead to an increase in the reserves required to be held.
- Medical claims experience: Claims experience can be volatile, exposing the Company to the risk of being required to pay over and above
the assumed reserve. If future claims experience differs significantly from that experienced in previous years, this will increase the risk to
the Company.
- Spouse and widows' contributions: The self-insured benefit includes a potential liability for members who pay contributions in respect of
their spouse and for widows who pay contributions. There is the possibility that the contributions charged may not be sufficient to cover the
medical costs that fall due.
- Mortality risk: If members live longer than expected, the Company is exposed to the expense of medical claims for a longer period, with
increased likelihood of needing to pay claims.
The amounts recognised in the statement of financial position are determined as follows:
Group and Parent
Present value of unfunded obligations and net obligations in the statement of financial position
Movements in the net obligations recognised in the statement of financial position are as follows:
At 1 January
Total expense charged to profit or loss
Net actuarial losses/(gains) during the year, recognised in other comprehensive income
Benefits paid
At 31 December
The amounts recognised through profit or loss are as follows:
Interest cost
Total, included in employee benefits expense
2019
£000
5,998
5,813
154
238
(207)
5,998
154
154
2018
£000
5,813
10,932
259
(5,262)
(116)
5,813
259
259
The weighted average duration of the net obligations at the end of the reporting period is 13.3 years (2018: 13.5 years).
The main actuarial assumptions for the plan are a long-term increase in medical costs of 7.0% (2018: 7.2%) and a discount rate of 1.9%
(2018: 2.7%). An actuarial loss of £473,000 has been recognised in the current year due to changes in financial assumptions, primarily due to
the fall in discount rate. An actuarial gain of £235,000 has been recognised due to changes in demographic assumptions as explained in
relation to the Group's defined benefit plan. In the prior year, an actuarial review of the assumptions used to measure the net obligation for
post-employment medical benefits was carried out. As a result of this review, the methodology for setting the medical cost inflation assumption
was revised, generating an actuarial gain of £1,760,000. An experience gain of £3,269,000 was recognised as a result of updating for actual
scheme experience. The sensitivity analysis below has been determined based on reasonably possible changes in the assumptions occurring at
the end of the accounting period assuming that all other assumptions are held constant.
Assumption
Change in assumption
Discount rate
Medical expense inflation
Life expectancy
Increase by 0.5%
Decrease by 0.5%
Increase by 1.0%
Decrease by 1.0%
Increase by 1 year
Decrease by 1 year
Increase/(decrease)
in plan liabilities
2019
£000
(371)
409
782
(662)
529
(484)
2018
£000
(360)
397
758
(642)
513
(469)
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 224
225
Notes to the financial statements
Notes to the financial statements
20 Property, plant and equipment
20 Property, plant and equipment
Group
Cost or valuation
At 31 December 2018
IFRS 16 transition adjustment*
At 1 January 2019
Additions
Disposals
Revaluation
Exchange differences
At 31 December 2019
Depreciation
At 31 December 2018
IFRS 16 transition adjustment*
At 1 January 2019
Charge for the year
Disposals
Exchange differences
At 31 December 2019
Net book value at 31 December 2019
Cost or valuation
At 1 January 2018
Additions
Disposals
Revaluation
Exchange differences
At 31 December 2018
Depreciation
At 1 January 2018
Charge for the year
Disposals
Exchange differences
At 31 December 2018
Net book value at 31 December 2018
Land and
buildings
£000
Motor
vehicles
£000
Furniture,
fittings and
equipment
£000
Computer
equipment
£000
Right of
use asset
£000
2,445
-
2,445
-
-
-
-
2,445
-
-
-
-
-
-
-
2,445
2,255
-
-
190
-
2,445
-
-
-
-
-
2,445
2,227
(2,095)
132
14
-
-
-
146
843
(781)
62
25
-
-
87
59
2,426
346
(545)
-
-
2,227
816
373
(346)
-
843
1,384
9,058
74
9,132
1,459
(730)
-
(20)
9,841
6,082
28
6,110
981
(559)
4
6,536
3,305
7,889
1,257
(62)
-
(26)
9,058
5,271
889
(62)
(16)
6,082
2,976
7,914
-
7,914
2,921
(76)
-
(11)
10,748
6,328
-
6,328
1,296
(76)
(9)
7,539
3,209
7,528
489
(77)
-
(26)
7,914
5,239
1,175
(68)
(18)
6,328
1,586
-
12,402
12,402
3,142
(843)
-
(106)
14,595
-
781
781
2,779
(252)
(17)
3,291
11,304
-
-
-
-
-
-
-
-
-
-
-
-
Total
£000
21,644
10,381
32,025
7,536
(1,649)
-
(137)
37,775
13,253
28
13,281
5,081
(887)
(22)
17,453
20,322
20,098
2,092
(684)
190
(52)
21,644
11,326
2,437
(476)
(34)
13,253
8,391
*The Group has adopted IFRS 16 from 1 January 2019 as detailed in note1.
Notes to the financial statements
Notes to the financial statements
20 Property, plant and equipment (continued)
20 Property, plant and equipment (continued)
Parent
Cost or valuation
At 31 December 2018
IFRS 16 transition adjustment*
At 1 January 2019
Additions
Disposals
Revaluation
Exchange differences
At 31 December 2019
Depreciation
At 31 December 2018
IFRS 16 transition adjustment*
At 1 January 2019
Charge for the year
Disposals
Exchange differences
At 31 December 2019
Net book value at 31 December 2019
Cost or valuation
At 1 January 2018
Additions
Disposals
Revaluation
Exchange differences
At 31 December 2018
Depreciation
At 1 January 2018
Charge for the year
Disposals
Exchange differences
At 31 December 2018
Net book value at 31 December 2018
Land and
buildings
£000
Motor
vehicles
£000
Furniture,
fittings and
equipment
£000
Computer
equipment
£000
Right of
use asset
£000
2,045
-
2,045
-
-
-
-
2,045
-
-
-
-
-
-
-
2,045
1,880
-
-
165
-
2,045
-
-
-
-
-
2,045
2,135
(2,095)
40
13
-
-
-
53
799
(781)
18
11
-
-
29
24
2,330
313
(508)
-
-
2,135
761
356
(318)
-
799
1,336
8,470
74
8,544
1,422
(633)
-
(18)
9,315
5,874
28
5,902
893
(528)
3
6,270
3,045
7,424
1,132
(62)
-
(24)
8,470
5,130
821
(62)
(15)
5,874
2,596
7,237
-
7,237
2,680
(76)
-
5
9,846
5,842
-
5,842
1,192
(75)
5
6,964
2,882
6,960
365
(77)
-
(11)
7,237
4,882
1,035
(68)
(7)
5,842
1,395
-
9,181
9,181
3,038
(814)
-
(43)
11,362
-
781
781
2,126
(244)
(5)
2,658
8,704
-
-
-
-
-
-
-
-
-
-
-
-
Total
£000
19,887
7,160
27,047
7,153
(1,523)
-
(56)
32,621
12,515
28
12,543
4,222
(847)
3
15,921
16,700
18,594
1,810
(647)
165
(35)
19,887
10,773
2,212
(448)
(22)
12,515
7,372
*The Parent has adopted IFRS 16 from 1 January 2019 as detailed in note1.
All properties of the Group and Parent were last revalued at 31 December 2018. Valuations were carried out by Cluttons LLP, an independent
professional firm of chartered surveyors who have recent experience in the location and type of properties. Valuations were carried out using
standard industry methodology to determine a fair market value. All properties are classified as level 3 assets.
Movements in market values are taken to the revaluation reserve within equity, net of deferred tax. When such properties are sold, the
accumulated revaluation surpluses are transferred from this reserve to retained earnings. Where the market value of an individual property is
below original cost, any revaluation movement arising during the year is recognised within net investment return in the statement of profit or
loss. There have been no transfers between investment categories in the current year.
The value of land and buildings of the Group on a historical cost basis is £2,444,000 (2018: £2,444,000). The value of land and buildings of the
Parent on a historical cost basis is £2,044,000 (2018: £2,044,000).
Depreciation expense has been charged in other operating and administrative expenses.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Section Four
Section Four
Financial Statements
Financial Statements
226
227
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
21 Investment property
21 Investment property
21 Investment property
Group and Parent
Group and Parent
Fair value at 1 January
Fair value at 1 January
Additions - subsequent expenditure
Additions - subsequent expenditure
Disposals
Disposals
Fair value losses recognised in profit or loss
Fair value losses recognised in profit or loss
Fair value at 31 December
Fair value at 31 December
2019
£000
2019
£000
152,182
152,182
191
191
(327)
(327)
(3,900)
(3,900)
148,146
148,146
2018
£000
2018
£000
152,238
152,238
-
-
-
-
(56)
(56)
152,182
152,182
The Group’s investment properties were last revalued at 31 December 2019 by Cluttons LLP, an independent professional firm of chartered
surveyors who have recent experience in the location and type of properties. Valuations were carried out using standard industry methodology
The Group’s investment properties were last revalued at 31 December 2019 by Cluttons LLP, an independent professional firm of chartered
to determine a fair market value. There has been no change in the valuation technique during the year. All properties are classified as level 3
surveyors who have recent experience in the location and type of properties. Valuations were carried out using standard industry methodology
assets. There have been no transfers between investment categories in the current year.
to determine a fair market value. There has been no change in the valuation technique during the year. All properties are classified as level 3
assets. There have been no transfers between investment categories in the current year.
Investment properties are held for long-term capital appreciation rather than short-term sale. Rental income arising from the investment
properties owned by both the Group and Parent amounted to £8,519,000 (2018: £8,238,000) and is included in net investment return. Other
Investment properties are held for long-term capital appreciation rather than short-term sale. Rental income arising from the investment
operating and administrative expenses include £683,000 (2018: £473,000) relating to investment property, of which £80,000 (2018:
properties owned by both the Group and Parent amounted to £8,519,000 (2018: £8,238,000) and is included in net investment return. Other
£38,000) is in respect of properties not currently generating rental income.
operating and administrative expenses include £683,000 (2018: £473,000) relating to investment property, of which £80,000 (2018:
£38,000) is in respect of properties not currently generating rental income.
22 Financial investments
22 Financial investments
22 Financial investments
Financial investments summarised by measurement category are as follows:
Financial investments summarised by measurement category are as follows:
Financial investments at fair value through profit or loss
Financial investments at fair value through profit or loss
Equity securities
Equity securities
- listed
- listed
- unlisted
- unlisted
Debt securities
Debt securities
- government bonds
- government bonds
- listed
- listed
- unlisted
- unlisted
Derivative financial instruments
Derivative financial instruments
- options
- options
- forwards
- forwards
Financial investments at fair value through other comprehensive
income
Financial investments at fair value through other comprehensive
income
Derivative financial instruments
Derivative financial instruments
- forwards
- forwards
Total financial investments at fair value
Total financial investments at fair value
Loans and receivables
Loans and receivables
Cash held on deposit
Cash held on deposit
Other loans
Other loans
Parent investments in subsidiary undertakings
Parent investments in subsidiary undertakings
Shares in subsidiary undertakings
Shares in subsidiary undertakings
Total financial investments
Total financial investments
Current
Current
Non-current
Non-current
All investments in subsidiary undertakings are unlisted.
All investments in subsidiary undertakings are unlisted.
2019
2019
Group
£000
Group
£000
289,754
289,754
66,304
66,304
154,244
154,244
338,001
338,001
270
270
1,562
1,562
1,499
1,499
851,634
851,634
509
509
852,143
852,143
4,974
4,974
796
796
-
-
857,913
857,913
383,578
383,578
474,335
474,335
Parent
£000
Parent
£000
263,888
263,888
66,303
66,303
91,255
91,255
216,372
216,372
270
270
1,562
1,562
1,749
1,749
641,399
641,399
259
259
641,658
641,658
4,974
4,974
792
792
49,729
49,729
697,153
697,153
346,980
346,980
350,173
350,173
2018
2018
Group
£000
Group
£000
241,361
241,361
44,773
44,773
148,053
148,053
348,664
348,664
125
125
5,331
5,331
-
-
788,307
788,307
737
737
789,044
789,044
9,913
9,913
17
17
-
-
798,974
798,974
343,840
343,840
455,134
455,134
Parent
£000
Parent
£000
210,080
210,080
44,771
44,771
85,470
85,470
229,907
229,907
125
125
5,331
5,331
492
492
576,176
576,176
245
245
576,421
576,421
9,914
9,914
14
14
50,339
50,339
636,688
636,688
300,773
300,773
335,915
335,915
23 Derivative financial instruments
23 Derivative financial instruments
The Group utilises derivatives to mitigate equity price risk arising from investments held at fair value, foreign exchange risk arising from investments
denominated in foreign currencies, and foreign exchange risk arising from investments denominated in Sterling that contain underlying foreign currency
exposure. These 'non-hedge' derivatives either do not qualify for hedge accounting or the option to hedge account has not been taken.
The Group has also formally designated certain derivatives as a hedge of its net investments in Australia and Canada. A gain of £640,000 (2018: gain
of £1,692,000) in respect of these 'hedge' derivatives has been recognised in the hedging reserve within shareholders' equity, as disclosed in note 27.
The Group has formally assessed and documented the effectiveness of derivatives that qualify for hedge accounting in accordance with IAS 39,
Financial Instruments: Recognition and Measurement.
Group
Non-hedge derivatives
Equity/Index contracts
Options
Foreign exchange contracts
Forwards (Euro)
Hedge derivatives
Foreign exchange contracts
Forwards (Australian dollar)
Forwards (Canadian dollar)
2019
Contract/
notional
amount
£000
Fair value
asset
£000
Contract/
notional
amount
£000
2018
Fair value
asset
£000
Fair value
liability
£000
58,588
1,562
63,077
5,331
-
116,603
1,499
87,514
-
2,306
45,411
30,456
251,058
250
259
3,570
57,264
27,157
235,012
492
245
6,068
-
-
2,306
Included with Equity/Index contracts are options with a contract/notional value of £17,997,000 (2018: £22,493,000), and fair value asset of
£734,000 (2018: £2,348,000), which expire in greater than one year. All other derivatives in the current and prior period expire within one year.
The derivative financial instruments of the Parent are the same as the Group, with the exception that the Australian dollar foreign exchange contract is
classified as a non-hedge derivative.
All contracts designated as hedging instruments were fully effective in the current and prior year.
The notional amounts above reflect the aggregate of individual derivative positions on a gross basis and so give an indication of the overall scale of the
derivative transactions. They do not reflect current market values of the open positions.
Derivative fair value assets are recognised within financial investments (note 22) and derivative fair value liabilities are recognised within other liabilities
(note 31).
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 228
229
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
24 Other assets
24 Other assets
24 Other assets
Receivables arising from insurance and reinsurance contracts
Receivables arising from insurance and reinsurance contracts
- due from contract holders
- due from contract holders
- due from agents, brokers and intermediaries
- due from agents, brokers and intermediaries
- due from reinsurers
- due from reinsurers
Other receivables
Other receivables
- accrued interest and rent
- accrued interest and rent
- other prepayments and accrued income
- other prepayments and accrued income
- amounts owed by related parties
- amounts owed by related parties
- debtors arising from broking activities
- debtors arising from broking activities
- net investment in finance leases
- net investment in finance leases
- other debtors
- other debtors
Current
Current
Non-current
Non-current
2019
2019
Group
Group
£000
£000
41,549
41,549
56,549
56,549
11,177
11,177
4,519
4,519
4,526
4,526
39,044
39,044
6,509
6,509
366
366
14,119
14,119
178,358
178,358
136,999
136,999
41,359
41,359
Parent
Parent
£000
£000
41,296
41,296
36,337
36,337
3,923
3,923
3,431
3,431
3,710
3,710
43,239
43,239
-
-
366
366
1,491
1,491
133,793
133,793
90,787
90,787
43,006
43,006
2018
2018
Group
Group
£000
£000
36,709
36,709
47,025
47,025
11,612
11,612
4,696
4,696
4,700
4,700
30,719
30,719
6,236
6,236
-
-
11,933
11,933
153,630
153,630
120,851
120,851
32,779
32,779
Parent
Parent
£000
£000
36,369
36,369
30,770
30,770
5,128
5,128
3,546
3,546
3,901
3,901
35,311
35,311
-
-
-
-
1,303
1,303
116,328
116,328
81,363
81,363
34,965
34,965
The Group has recognised a net credit of £31,000 (2018: net charge of £30,000) in other operating and administrative expenses in the
The Group has recognised a net credit of £31,000 (2018: net charge of £30,000) in other operating and administrative expenses in the
statement of profit or loss for the impairment and reversal of impairment of its trade and other receivables during the year. The Parent has
statement of profit or loss for the impairment and reversal of impairment of its trade and other receivables during the year. The Parent has
recognised a net credit of of £15,000 (2018: net charge of £46,000).
recognised a net credit of of £15,000 (2018: net charge of £46,000).
There has been no significant change in the recoverability of the Group's or Parent's other assets, for which no collateral is held. The directors
There has been no significant change in the recoverability of the Group's or Parent's other assets, for which no collateral is held. The directors
consider that the amounts are recoverable at their carrying values, which are stated net of an allowance for doubtful debts for those debtors
consider that the amounts are recoverable at their carrying values, which are stated net of an allowance for doubtful debts for those debtors
that are individually determined to be impaired.
that are individually determined to be impaired.
Included within amounts owed by related parties of the Parent is £2,744,000 (2018: £3,395,000) pledged as collateral in respect of an
Included within amounts owed by related parties of the Parent is £2,744,000 (2018: £3,395,000) pledged as collateral in respect of an
insurance liability.
insurance liability.
Included within other receivables of the Group is £1,255,000 (2018: £1,210,000) classified as contract assets, and £1,151,000 (2018:
Included within other receivables of the Group is £1,255,000 (2018: £1,210,000) classified as contract assets, and £1,151,000 (2018:
£1,095,000) classified as receivables in accordance with IFRS 15. Included within other receivables of the Parent is £nil (2018: £nil) classified
£1,095,000) classified as receivables in accordance with IFRS 15. Included within other receivables of the Parent is £nil (2018: £nil) classified
as contract assets, and £nil (2018: £nil) classified as receivables in accordance with IFRS 15.
as contract assets, and £nil (2018: £nil) classified as receivables in accordance with IFRS 15.
Movement in the allowance for doubtful debts
Movement in the allowance for doubtful debts
Balance at 1 January
Balance at 1 January
Movement in the year
Movement in the year
Balance at 31 December
Balance at 31 December
2019
2019
Group
Group
£000
£000
168
168
(23)
(23)
145
145
Parent
Parent
£000
£000
69
69
-
-
69
69
2018
2018
Group
Group
£000
£000
188
188
(20)
(20)
168
168
Parent
Parent
£000
£000
69
69
-
-
69
69
Included within other assets of the Group is £8,162,000 (2018: £3,828,000) overdue but not impaired, of which £7,253,000 (2018:
Included within other assets of the Group is £8,162,000 (2018: £3,828,000) overdue but not impaired, of which £7,253,000 (2018:
£3,387,000) is not more than three months overdue at the reporting date. Included within trade receivables of the Parent is £3,688,000 (2018:
£3,387,000) is not more than three months overdue at the reporting date. Included within trade receivables of the Parent is £3,688,000 (2018:
£1,975,000) overdue but not impaired, of which £3,485,000 (2018: £1,874,000) is not more than three months overdue at the reporting date.
£1,975,000) overdue but not impaired, of which £3,485,000 (2018: £1,874,000) is not more than three months overdue at the reporting date.
25 Cash and cash equivalents
25 Cash and cash equivalents
25 Cash and cash equivalents
Cash at bank and in hand
Cash at bank and in hand
Short-term bank deposits
Short-term bank deposits
2019
2019
Group
Group
£000
£000
47,155
47,155
27,620
27,620
74,775
74,775
Parent
Parent
£000
£000
23,781
23,781
18,467
18,467
42,248
42,248
2018
2018
Group
Group
£000
£000
67,373
67,373
42,044
42,044
109,417
109,417
Parent
Parent
£000
£000
40,033
40,033
32,742
32,742
72,775
72,775
Included within short-term bank deposits of the Group and Parent are cash deposits of £1,007,000 (2018: £2,299,000) pledged as collateral
Included within short-term bank deposits of the Group and Parent are cash deposits of £1,007,000 (2018: £2,299,000) pledged as collateral
by way of cash margins on open derivative contracts to cover derivative liabilities.
by way of cash margins on open derivative contracts to cover derivative liabilities.
Included within Group cash at bank and in hand are cash deposits of £3,821,000 (2018: £4,090,000) pledged as collateral by way of cash calls
Included within Group cash at bank and in hand are cash deposits of £3,821,000 (2018: £4,090,000) pledged as collateral by way of cash calls
from reinsurers, and £3,464,000 (2018: £3,206,000) of restricted cash held on an agency basis. Included within Parent cash at bank and in
from reinsurers, and £3,464,000 (2018: £3,206,000) of restricted cash held on an agency basis. Included within Parent cash at bank and in
hand are £nil deposits (2018: £241,000) pledged as collateral and £nil (2018: £nil) restricted cash.
hand are £nil deposits (2018: £241,000) pledged as collateral and £nil (2018: £nil) restricted cash.
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
26 Called up share capital
26 Called up share capital
26 Called up share capital
Ordinary shares of 4p each
Ordinary shares of 4p each
8.625% Non-Cumulative Irredeemable Preference shares of £1 each
8.625% Non-Cumulative Irredeemable Preference shares of £1 each
The number of shares in issue are as follows:
The number of shares in issue are as follows:
Ordinary shares of 4p each
Ordinary shares of 4p each
At 1 January and 31 December
At 1 January and 31 December
8.625% Non-Cumulative Irredeemable Preference shares of £1 each
8.625% Non-Cumulative Irredeemable Preference shares of £1 each
At 1 January and 31 December
At 1 January and 31 December
Issued, allotted and
Issued, allotted and
fully paid
fully paid
2019
2019
£000
£000
14,027
14,027
106,450
106,450
120,477
120,477
2018
2018
£000
£000
14,027
14,027
106,450
106,450
120,477
120,477
350,678
350,678
350,678
350,678
106,450
106,450
106,450
106,450
On winding up, the assets of the Company remaining after payment of its liabilities are to be applied to holders of the Non-Cumulative
On winding up, the assets of the Company remaining after payment of its liabilities are to be applied to holders of the Non-Cumulative
Irredeemable Preference shares in repaying the nominal capital sum paid up on the shares and an amount equal to all arrears of accrued and
Irredeemable Preference shares in repaying the nominal capital sum paid up on the shares and an amount equal to all arrears of accrued and
unpaid dividends up to the date of the commencement of the winding up. The residual interest in the assets of the Company after deducting all
unpaid dividends up to the date of the commencement of the winding up. The residual interest in the assets of the Company after deducting all
liabilities belongs to the Ordinary shareholders.
liabilities belongs to the Ordinary shareholders.
Holders of the Non-Cumulative Irredeemable Preference shares are not entitled to receive notice of, or to attend, or vote at any general meeting
Holders of the Non-Cumulative Irredeemable Preference shares are not entitled to receive notice of, or to attend, or vote at any general meeting
of the Company unless at the time of the notice convening such meeting, the dividend on such shares which is most recently payable on such
of the Company unless at the time of the notice convening such meeting, the dividend on such shares which is most recently payable on such
shares shall not have been paid in full, or where a resolution is proposed varying any of the rights of such shares, or for the winding up of the
shares shall not have been paid in full, or where a resolution is proposed varying any of the rights of such shares, or for the winding up of the
Company.
Company.
27 Translation and hedging reserve
27 Translation and hedging reserve
27 Translation and hedging reserve
Group
Group
At 1 January 2019
At 1 January 2019
Losses on currency translation differences
Losses on currency translation differences
Gains on net investment hedges
Gains on net investment hedges
Attributable tax
Attributable tax
At 31 December 2019
At 31 December 2019
At 1 January 2018
At 1 January 2018
Losses on currency translation differences
Losses on currency translation differences
Gains on net investment hedges
Gains on net investment hedges
Attributable tax
Attributable tax
At 31 December 2018
At 31 December 2018
Parent
Parent
At 1 January 2019
At 1 January 2019
Losses on currency translation differences
Losses on currency translation differences
Gains on net investment hedges
Gains on net investment hedges
Attributable tax
Attributable tax
At 31 December 2019
At 31 December 2019
At 1 January 2018
At 1 January 2018
Losses on currency translation differences
Losses on currency translation differences
Gains on net investment hedges
Gains on net investment hedges
Attributable tax
Attributable tax
At 31 December 2018
At 31 December 2018
Translation
Translation
reserve
reserve
£000
£000
Hedging
Hedging
reserve
reserve
£000
£000
14,940
14,940
(1,368)
(1,368)
-
-
-
-
13,572
13,572
18,022
18,022
(3,082)
(3,082)
-
-
-
-
14,940
14,940
6,605
6,605
525
525
-
-
-
-
7,130
7,130
7,438
7,438
(833)
(833)
-
-
-
-
6,605
6,605
4,131
4,131
-
-
640
640
(19)
(19)
4,752
4,752
2,626
2,626
-
-
1,692
1,692
(187)
(187)
4,131
4,131
973
973
-
-
(649)
(649)
110
110
434
434
597
597
-
-
453
453
(77)
(77)
973
973
Total
Total
£000
£000
19,071
19,071
(1,368)
(1,368)
640
640
(19)
(19)
18,324
18,324
20,648
20,648
(3,082)
(3,082)
1,692
1,692
(187)
(187)
19,071
19,071
7,578
7,578
525
525
(649)
(649)
110
110
7,564
7,564
8,035
8,035
(833)
(833)
453
453
(77)
(77)
7,578
7,578
The translation reserve arises on consolidation of the Group's and Parent's foreign operations. The hedging reserve represents the cumulative
The translation reserve arises on consolidation of the Group's and Parent'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.
amount of gains and losses on hedging instruments in respect of net investments in foreign operations.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four
230
231
Notes to the financial statements
Notes to the financial statements
28 Insurance liabilities and reinsurance assets
28 Insurance liabilities and reinsurance assets
Gross
Claims outstanding
Unearned premiums
Life business provision
Total gross insurance liabilities
Recoverable from reinsurers
Claims outstanding
Unearned premiums
Total reinsurers’ share of insurance liabilities
Net
Claims outstanding
Unearned premiums
Life business provision
Total net insurance liabilities
Gross insurance liabilities
Current
Non-current
Reinsurance assets
Current
Non-current
2019
Group
£000
481,669
203,096
79,212
763,977
89,982
69,574
159,556
391,687
133,522
79,212
604,421
Parent
£000
391,268
165,004
-
556,272
56,174
50,527
106,701
335,094
114,477
-
449,571
2018
Group
£000
457,319
180,766
81,964
720,049
78,731
61,615
140,346
378,588
119,151
81,964
579,703
Parent
£000
381,631
149,808
-
531,439
54,357
45,881
100,238
327,274
103,927
-
431,201
354,977
409,000
282,020
274,252
321,792
398,257
262,780
268,659
115,082
44,474
78,432
28,269
102,788
37,558
74,646
25,592
(a) General business insurance contracts
(i) Reserving methodology
Reserving for non-life insurance claims is a complex process and the Group adopts recognised actuarial methods and, where appropriate, other
calculations and statistical analysis. Actuarial methods used include the chain ladder, Bornhuetter-Ferguson and average cost methods.
Chain ladder methods extrapolate paid amounts, incurred amounts (paid claims plus case estimates) and the number of claims or average cost
of claims, to ultimate claims based on the development of previous years. This method assumes that previous patterns are a reasonable guide
to future developments. Where this assumption is felt to be unreasonable, adjustments are made or other methods such as Bornhuetter-
Ferguson or average cost are used. The Bornhuetter-Ferguson method places more credibility on expected loss ratios for the most recent loss
years. For smaller portfolios the materiality of the business and data available may also shape the methods used in reviewing reserve adequacy.
The selection of results for each accident year and for each portfolio depends on an assessment of the most appropriate method. Sometimes a
combination of techniques is used. The average weighted term to payment is calculated separately by class of business and is based on
historical settlement patterns.
(ii) Calculation of uncertainty margins
To reflect the uncertain nature of the outcome of the ultimate settlement cost of claims, an uncertainty margin is added to the best estimate.
The addition for uncertainty is assessed using actuarial methods including the Mack method and Bootstrapping techniques, based on at least
the 75th percentile confidence level for each portfolio. For smaller portfolios, where these methods cannot be applied, provisions are calculated
at a level intended to provide an equivalent probability of sufficiency. Where the standard methods cannot allow for changing circumstances,
additional uncertainty margins are added and are typically expressed as a percentage of outstanding claims. From time to time, the
management may elect to select an additional margin to reflect short-term uncertainty driven by specific events that are not in data. This
approach generally results in a favourable release of provisions in the current financial year, arising from the settlement of claims relating to
previous financial years, as shown in part (c) of the note.
(iii) Calculation of provisions for latent claims
The Group adopts commonly used industry methods including those based on claims frequency and severity and benchmarking.
Notes to the financial statements
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
28 Insurance liabilities and reinsurance assets (continued)
(iv) Discounting
General insurance outstanding claims liabilities are undiscounted, except for designated long-tail classes of business for which discounted
provisions are held in the following territories:
Discount rate
Mean term of discounted
liabilities (years)
Geographical territory
2019
2018
2019
2018
UK and Ireland
Canada
Australia
1.3% to 2.2%
1.9% to 2.0%
1.2%
1.8% to 3.0%
2.2% to 2.7%
2.3%
17
12
4
17
15
5
Parent consists of UK, Ireland and Canada. Group also includes Australia.
The above rates of interest are based on government bond yields of the relevant currency and term at the reporting date. Adjustments are
made, where appropriate, to reflect portfolio assets held and to allow for future investment expenses. At the year end the undiscounted gross
outstanding claims liability was £516,068,000 for the Group (2018: £505,147,000), and £422,531,000 for the Parent (2018:
£423,097,000).
The impact of discount rate changes on the outstanding claims liability is presented within net investment return (note 8).
At 31 December 2019, it is estimated that a fall of 1% in the discount rates used would increase the Group's net outstanding claims liabilities
by £17,065,000 (2018: £15,432,000). Financial investments backing these liabilities are not hypothecated across general insurance classes
of business. The sensitivity of Group profit or loss and other equity reserves to interest rate risk, taking into account the mitigating effect on
asset values is provided in note 4(h).
(v) Assumptions
The Group follows a process of reviewing its reserves for outstanding claims on a regular basis. This involves an appraisal of each portfolio
with respect to ultimate claims liability for the recent exposure period as well as for earlier periods, together with a review of the factors that
have the most significant impact on the assumptions used to determine the reserving methodology. The work conducted on each portfolio is
subject to an internal peer review and management sign-off process.
The most significant assumptions in determining the undiscounted general insurance reserves are the anticipated number and ultimate
settlement cost of claims, and the extent to which reinsurers will share in the cost. Factors which influence decisions on assumptions include
legal and judicial changes, significant weather events, other catastrophes, subsidence events, exceptional claims or substantial changes in
claims experience and developments in older or latent claims. Significant factors influencing assumptions about reinsurance are the terms of
the reinsurance treaties, the anticipated time taken to settle a claim and the incidence of large individual and aggregated claims.
(vi) Changes in assumptions
There are no significant changes in assumptions.
(vii) Sensitivity of results
The ultimate amount of claims settlement is uncertain and the Group's aim is to reserve to at least the 75th percentile confidence level.
If final settlement of the outstanding claims liability at the year end turns out to be 10% higher or lower than the reserves included in these
financial statements, the following pre-tax Group loss or profit will be realised:
Liability
Property
Motor
- UK
- Overseas
- UK
- Overseas
- UK
2019
2018
Gross
£000
19,700
12,100
7,900
4,900
200
Net
£000
18,500
10,200
4,800
1,900
200
Gross
£000
19,900
10,800
7,200
4,100
200
Net
£000
18,800
9,100
4,200
2,100
200
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
28 Insurance liabilities and reinsurance assets (continued)
Notes to the financial statements
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
28 Insurance liabilities and reinsurance assets (continued)
(viii) Claims development tables
Estimate of ultimate net claims
232
233
The nature of liability classes of business is that claims may take a number of years to settle and before the final liability is known. The tables
below show the development of the undiscounted estimate of ultimate gross and net claims cost for these classes across all territories.
Estimate of ultimate gross claims
2010
£000
84,476
75,550
62,239
66,422
61,330
62,074
61,871
60,155
60,037
59,199
2011
£000
82,095
76,371
71,543
68,587
60,841
59,914
57,950
57,939
57,790
2012
£000
100,612
88,046
78,196
72,516
67,980
62,712
61,213
60,560
2013
£000
81,725
80,027
69,860
66,192
60,174
56,912
54,901
2014
£000
61,901
50,571
48,327
45,495
37,064
34,606
2015
£000
46,464
43,582
40,337
33,804
29,436
2016
£000
2017
£000
2018
£000
2019
£000
Total
£000
48,759
40,461
47,945
51,738
46,073
41,041
38,468
50,736
46,885
41,883
59,199
57,790
60,560
54,901
34,606
29,436
38,468
41,883 40,461
47,945
465,249
(51,938)
(49,973)
(53,237)
(44,655)
(23,826)
(14,559)
(13,481)
(9,152)
(4,973)
(1,478)
(267,272)
7,261
7,817
7,323
10,246
10,780
14,877
24,987 32,731 35,488 46,467
Effect of discounting
Present value
Discounted liability in respect of earlier years
Total discounted gross liability (for liability classes) included in insurance liabilities in the statement of financial position
197,977
(10,192)
187,785
129,852
317,637
2010
£000
69,230
60,202
50,834
53,390
50,526
51,031
48,499
47,523
48,082
47,527
2011
£000
66,864
63,770
62,587
60,653
52,985
50,355
49,127
48,927
49,040
2012
£000
84,511
77,629
69,580
63,068
56,225
51,872
50,791
50,092
2013
£000
71,798
60,950
54,792
50,492
43,910
42,289
40,698
2014
£000
52,350
40,153
39,015
37,158
31,530
30,024
2015
£000
34,769
31,941
30,129
27,287
23,620
2016
£000
2017
£000
2018
£000
2019
£000
Total
£000
34,210 32,992
33,353
28,181
31,463
33,719
37,981
32,541
29,538
28,622
47,527
49,040
50,092
40,698
30,024
23,620
28,622 31,463 28,181 33,719
362,986
(41,151)
(43,269)
(45,065)
(32,875)
(21,076)
(11,692)
(9,450)
(6,546)
(3,097)
(764)
(214,985)
Group
At end of year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Current estimate of
ultimate claims
Cumulative payments
to date
Outstanding liability
Parent
At end of year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Current estimate of
ultimate claims
Cumulative payments
to date
Outstanding liability
6,376
5,771
5,027
7,823
8,948
11,928
19,172 24,917
25,084
32,955
Effect of discounting
Present value
Discounted liability in respect of earlier years
Total discounted gross liability (for liability classes) included in insurance liabilities in the statement of financial position
148,001
(8,126)
139,875
119,950
259,825
Group
At end of year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Current estimate of
ultimate claims
Cumulative payments
to date
Outstanding liability
Parent
At end of year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Current estimate of
ultimate claims
Cumulative payments
to date
Outstanding liability
2010
£000
73,218
64,796
57,758
59,353
55,975
57,012
57,050
55,778
55,827
55,112
2011
£000
75,302
72,336
68,057
66,822
60,314
59,521
57,641
57,591
57,439
2012
£000
88,247
79,272
73,735
69,837
65,872
60,800
59,338
59,061
2013
£000
76,729
66,475
60,075
55,710
51,482
49,196
47,518
2014
£000
59,633
47,690
47,428
41,494
35,164
33,233
2015
£000
42,739
40,397
37,740
32,297
28,506
2016
£000
2017
£000
2018
£000
2019
£000
Total
£000
45,920
41,706
37,797
47,402
41,631
37,740
36,337
44,053
37,456
44,230
55,112
57,439
59,061
47,518
33,233
28,506
36,337 37,797 37,456 44,230
436,689
(47,930)
(49,769)
(51,923)
(37,447)
(22,646)
(14,559)
(13,450)
(9,152)
(4,972)
(1,478)
(253,326)
7,182
7,670
7,138
10,071
10,587
13,947
22,887 28,645 32,484 42,752
Effect of discounting
Present value
Discounted liability in respect of earlier years
Total discounted net liability (for liability classes) included in insurance liabilities in the statement of financial position
183,363
(10,192)
173,171
117,843
291,014
2010
£000
57,135
49,060
48,250
51,827
49,171
49,598
47,783
46,951
47,519
46,965
2011
£000
59,011
59,873
59,997
59,352
52,850
50,189
49,029
48,858
48,977
2012
£000
74,361
69,805
65,297
61,795
55,686
51,766
50,762
50,079
2013
£000
67,690
57,538
51,828
47,942
43,568
42,126
40,587
2014
£000
2015
£000
2016
£000
2017
£000
2018
£000
2019
£000
Total
£000
50,025 33,122
38,944 31,041
38,215
29,494
34,393 26,981
30,252 23,229
28,825
35,882
30,906
28,199
27,493
32,688
33,134 31,981
30,965 27,208
28,854
46,965
48,977
50,079
40,587
28,825
23,229
27,493 28,854 27,208 32,688
354,905
(40,597)
(43,212)
(45,061)
(32,771)
(19,897)
(11,692)
(9,418)
(6,546)
(3,095)
(764)
(213,053)
6,368
5,765
5,018
7,816
8,928
11,537
18,075 22,308
24,113
31,924
Effect of discounting
Present value
Discounted liability in respect of earlier years
Total discounted net liability (for liability classes) included in insurance liabilities in the statement of financial position
141,852
(8,126)
133,726
109,227
242,953
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 234
235
Notes to the financial statements
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
28 Insurance liabilities and reinsurance assets (continued)
(b) Life insurance contracts
(i) Assumptions
The most significant assumptions in determining life reserves are as follows:
Mortality
An appropriate base table of standard mortality is chosen depending on the type of contract. For the only material line of business, the base
tables used are English Life Tables number 16F and English Life Tables number 16M. Where prudent, an allowance is made for future mortality
improvements based on trends identified in population data.
Investment returns
Projected investment returns are based on actual yields for each asset class less an allowance for credit risk, where appropriate. The risk-
adjusted yields after allowance for investment expenses for the current valuation are as follows:
UK and overseas government bonds: non-linked
UK and overseas government bonds: index-linked
Corporate debt instruments: index-linked
2019
0.61%
-2.18%
-1.64%
2018
0.98%
-1.89%
-1.38%
The investment return assumption is determined by calculating an overall yield on all cash flows projected to occur from the portfolio of financial
assets which are assumed to back the relevant class of liabilities.
Funeral plans renewal expense level and inflation
Numbers of policies in force and both projected and actual expenses have been considered when setting the base renewal expense level. The
unit renewal expense assumption for this business is £2.50 per annum (2018: £2.40 per annum). Additionally, now the in-force policy volumes
are expected to fall, much of the expenses of the company have been reserved for in a separate exercise. A reserve for these expenses is held
at £5.7 million (2018: £5.4 million).
Expense inflation is set with reference to the index-linked UK government bond rates of return, and published figures for earnings inflation, and
is assumed to be 4.08% per annum (2018: 4.22%).
Tax
It has been assumed that tax legislation and rates applicable at 1 January 2020 will continue to apply. All in-force business is classed as
protection business and is expected to be taxed on a profits basis.
(ii) Changes in assumptions
Projected investment returns have been revised in line with the changes in the actual yields of the underlying assets. As a result, liabilities have
increased by £2.5 million (2018: £0.3 million).
The assumed future expenses of running the business have been revised based on expenses that are expected to be incurred by the company.
The effect on insurance liabilities of the changes to renewal expense assumptions (described above) was a £0.4 million increase (2018: £1.1
million decrease).
There has been no change in the mortality assumptions.
(iii) Sensitivity analysis
The sensitivity of profit before tax to changes in the key assumptions used to calculate the life insurance liabilities is shown in the following
table. No account has been taken of any correlation between the assumptions.
Variable
Deterioration in annuitant mortality
Improvement in annuitant mortality
Increase in fixed interest/cash yields
Decrease in fixed interest/cash yields
Worsening of base renewal expense level
Improvement in base renewal expense level
Increase in expense inflation
Decrease in expense inflation
Change in
variable
Potential increase/
(decrease) in the result
2019
£000
1,000
(1,100)
500
(600)
(700)
600
(900)
700
2018
£000
900
(1,000)
200
(600)
(600)
600
(900)
700
+10%
-10%
+1% pa
-1% pa
+10%
-10%
+1% pa
-1% pa
Notes to the financial statements
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
28 Insurance liabilities and reinsurance assets (continued)
(c) Movements in insurance liabilities and reinsurance assets
Group
Claims outstanding
At 1 January 2019
Cash (paid)/received for claims settled in the year
Change in liabilities/reinsurance assets
- arising from current year claims
- arising from prior year claims
- change in discount rate
Exchange differences
At 31 December 2019
Provision for unearned premiums
At 1 January 2019
Increase in the period
Release in the period
Exchange differences
At 31 December 2019
Life business provision
At 1 January 2019
Effect of claims during the year
Changes in assumptions
Change in discount rate
Other movements
At 31 December 2019
Gross
£000
Reinsurance
£000
Net
£000
457,319
(139,221)
189,646
(32,165)
10,549
(4,459)
481,669
180,766
204,691
(180,862)
(1,499)
203,096
81,964
(5,733)
364
2,483
134
79,212
(78,731)
40,808
(58,688)
5,888
(599)
1,340
(89,982)
(61,615)
(70,165)
61,416
790
(69,574)
-
-
-
-
-
-
378,588
(98,413)
130,958
(26,277)
9,950
(3,119)
391,687
119,151
134,526
(119,446)
(709)
133,522
81,964
(5,733)
364
2,483
134
79,212
Total insurance contract liabilities and reinsurance assets
763,977
(159,556)
604,421
Claims outstanding
At 1 January 2018
Cash (paid)/received for claims settled in the year
Change in liabilities/reinsurance assets
- arising from current year claims
- arising from prior year claims
- change in discount rate
Exchange differences
At 31 December 2018
Provision for unearned premiums
At 1 January 2018
Increase in the period
Release in the period
Exchange differences
At 31 December 2018
Life business provision
At 1 January 2018
Effect of claims during the year
Changes in assumptions
Change in discount rate
Other movements
At 31 December 2018
509,319
(155,137)
(102,635)
48,691
406,684
(106,446)
175,127
(62,905)
(4,226)
(4,859)
457,319
171,788
181,373
(170,368)
(2,027)
180,766
88,141
(6,250)
(827)
283
617
81,964
(53,855)
27,667
(201)
1,602
(78,731)
(56,573)
(61,854)
56,090
722
(61,615)
-
-
-
-
-
-
121,272
(35,238)
(4,427)
(3,257)
378,588
115,215
119,519
(114,278)
(1,305)
119,151
88,141
(6,250)
(827)
283
617
81,964
Total insurance contract liabilities and reinsurance assets
720,049
(140,346)
579,703
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
28 Insurance liabilities and reinsurance assets (continued)
Notes to the financial statements
Notes to the financial statements
236
237
Parent
Claims outstanding
At 1 January 2019
Cash (paid)/received for claims settled in the year
Change in liabilities/reinsurance assets
- arising from current year claims
- arising from prior year claims
- change in discount rate
Exchange differences
At 31 December 2019
Provision for unearned premiums
At 1 January 2019
Increase in the period
Release in the period
Exchange differences
At 31 December 2019
Claims outstanding
At 1 January 2018
Cash (paid)/received for claims settled in the year
Change in liabilities/reinsurance assets
- arising from current year claims
- arising from prior year claims
- change in discount rate
Exchange differences
At 31 December 2018
Provision for unearned premiums
At 1 January 2018
Increase in the period
Release in the period
Exchange differences
At 31 December 2018
Gross
£000
Reinsurance
£000
Net
£000
29 Provisions for other liabilities and contingent liabilities
29 Provisions for other liabilities and contingent liabilities
381,631
(112,589)
140,367
(25,030)
7,862
(973)
391,268
149,808
165,625
(150,384)
(45)
165,004
421,397
(127,136)
142,769
(49,131)
(5,156)
(1,112)
381,631
141,707
149,959
(141,187)
(671)
149,808
(54,357)
24,498
(27,217)
807
-
95
(56,174)
(45,881)
(50,631)
45,926
59
(50,527)
(67,600)
30,240
(35,207)
18,014
-
196
(54,357)
(42,525)
(45,887)
42,462
69
(45,881)
327,274
(88,091)
113,150
(24,223)
7,862
(878)
335,094
103,927
114,994
(104,458)
14
114,477
353,797
(96,896)
107,562
(31,117)
(5,156)
(916)
327,274
99,182
104,072
(98,725)
(602)
103,927
Group
At 31 December 2018
IFRS 16 transition adjustment*
At 1 January 2019
Additional provisions
Used during year
Not utilised
Exchange differences
At 31 December 2019
Current
Non-current
Parent
At 31 December 2018
IFRS 16 transition adjustment*
At 1 January 2019
Additional provisions
Used during year
Not utilised
Exchange differences
At 31 December 2019
Current
Non-current
Regulatory
and legal
provisions
£000
Contingent
consideration
£000
Other
provisions
£000
3,371
-
3,371
4,778
(5,512)
(72)
-
2,565
2,565
-
3,371
-
3,371
4,778
(5,512)
(72)
-
2,565
2,565
-
63
-
63
-
(40)
-
-
23
23
-
-
-
-
-
-
-
-
-
-
-
1,782
503
2,285
-
-
-
(6)
2,279
1,669
610
1,688
445
2,133
-
-
-
(3)
2,130
1,669
461
Total
£000
5,216
503
5,719
4,778
(5,552)
(72)
(6)
4,867
4,257
610
5,059
445
5,504
4,778
(5,512)
(72)
(3)
4,695
4,234
461
*The Group has adopted IFRS 16 from 1 January 2019 as detailed in note1.
Regulatory and legal provisions
The Group operates in the financial services industry and is subject to regulatory requirements in the normal course of business, including
contributing towards any levies raised on UK general and life business. The provisions reflect an assessment by the Group of its share of the
total potential levies.
In addition, from time to time the Group receives complaints from customers and, while the majority relate to cases where there has been no
customer detriment, we recognise that we have provided, and continue to provide, advice and services across a wide spectrum of regulated
activities. We therefore believe that it is prudent to hold a provision for the estimated costs of customer complaints relating to services provided.
The Group continues to reassess the ultimate level of complaints expected and the appropriateness of the provision, which reflects the
expected redress and associated administration costs that would be payable in relation to any complaints we may uphold.
Contingent consideration
The provision for contingent consideration relates to the acquisition of certain assets of Equicover Limited as disclosed in note 16.
Other provisions
The provision for other costs relates to costs in respect of dilapidations.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 238
239
Notes to the financial statements
Notes to the financial statements
30 Deferred tax
30 Deferred tax
An analysis and reconciliation of the movement of the key components of the net deferred tax liability during the current and prior reporting period is
as follows:
Group
At 1 January 2018
Credited to profit or loss
Charged to other comprehensive income
Exchange differences
At 31 December 2018
Charged/(credited) to profit or loss
Credited to other comprehensive income
Exchange differences
At 31 December 2019
Parent
At 1 January 2018
Credited to profit or loss
(Credited)/charged to other comprehensive income
Exchange differences
At 31 December 2018
Charged/(credited) to profit or loss
Credited to other comprehensive income
Exchange differences
At 31 December 2019
Unrealised
gains on
investments
£000
Net
retirement
benefit
assets
£000
Equalisation
reserve
£000
Other
differences
£000
33,796
(6,244)
-
14
27,566
6,500
-
15
34,081
32,808
(5,534)
-
-
27,274
5,875
-
-
33,149
1,547
(523)
729
-
1,753
(130)
(1,198)
-
425
1,549
(523)
729
-
1,755
(130)
(1,198)
-
427
2,994
(790)
-
-
2,204
(770)
-
-
1,434
2,994
(790)
-
-
2,204
(770)
-
-
1,434
(1,683)
(66)
95
47
(1,607)
(851)
(110)
74
(2,494)
(187)
(53)
95
(18)
(163)
(318)
(110)
9
(582)
Total
£000
36,654
(7,623)
824
61
29,916
4,749
(1,308)
89
33,446
37,164
(6,900)
824
(18)
31,070
4,657
(1,308)
9
34,428
The equalisation reserve was previously required by law and maintained in compliance with insurance companies' regulations. Transfers to this
reserve were deemed to be tax deductible under legislation that applied prior to 1 January 2016 and gave rise to deferred tax. With effect from
the implementation date of Solvency II, 1 January 2016, these reserves become taxable over 6 years under the transition rules set out by HM
Treasury.
Certain deferred tax assets and liabilities have been offset where the Group has a legally enforceable right to do so. The following is the
analysis of the deferred tax balances (after offset) for financial reporting purposes:
Deferred tax liabilities
Deferred tax assets
Current
Non-current
2019
2018
Group
£000
35,649
(2,203)
33,446
2,226
31,220
Parent
£000
34,428
-
34,428
4,438
29,990
Group
£000
31,665
(1,749)
29,916
1,641
28,275
Parent
£000
31,070
-
31,070
3,390
27,680
The Group has unused tax losses of £13,361,000 (2018: £15,832,000) arising from life business and capital transactions, which are available
for offset against future profits and can be carried forward indefinitely. No deferred tax asset has been recognised in respect of these losses
due to the unpredictability of future profit streams.
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
31 Other liabilities and deferred income
31 Other liabilities and deferred income
31 Other liabilities and deferred income
Creditors arising out of direct insurance operations
Creditors arising out of direct insurance operations
Creditors arising out of reinsurance operations
Creditors arising out of reinsurance operations
Derivative liabilities
Derivative liabilities
Creditors arising from broking activities
Creditors arising from broking activities
Other creditors
Other creditors
Amounts owed to related parties
Amounts owed to related parties
Accruals
Accruals
Current
Current
Non-current
Non-current
2019
2019
Group
Group
£000
£000
2,215
2,215
26,652
26,652
-
-
4,258
4,258
18,085
18,085
4
4
25,738
25,738
76,952
76,952
76,533
76,533
419
419
Parent
Parent
£000
£000
1,418
1,418
14,567
14,567
-
-
-
-
10,109
10,109
24
24
19,448
19,448
45,566
45,566
45,566
45,566
-
-
2018
2018
Group
Group
£000
£000
1,183
1,183
23,764
23,764
2,306
2,306
3,992
3,992
15,816
15,816
4
4
24,854
24,854
71,919
71,919
71,560
71,560
359
359
Parent
Parent
£000
£000
416
416
15,351
15,351
2,306
2,306
-
-
9,738
9,738
54
54
19,390
19,390
47,255
47,255
47,255
47,255
-
-
Derivative liabilities are in respect of equity futures contracts and are detailed in note 23.
Derivative liabilities are in respect of equity futures contracts and are detailed in note 23.
Deferred income of the Group and Parent is a current liability in both the current and prior year.
Deferred income of the Group and Parent is a current liability in both the current and prior year.
Included within deferred income of the Group is £278,000 (2018: £112,000) classified as contract liabilities in accordance with IFRS 15.
Included within deferred income of the Group is £278,000 (2018: £112,000) classified as contract liabilities in accordance with IFRS 15.
Included within deferred income of the Parent is £nil (2018: £nil) classified as contract liabilities in accordance with IFRS 15.
Included within deferred income of the parent is £nil (2018: £nil) classified as contract liabilities in accordance with IFRS 15.
32 Leases
32 Leases
32 Leases
Group as a lessee
Group as a lessee
The Group has lease contracts for various items of property, motor vehicles and other equipment used in its operations. Leases of property
The Group has lease contracts for various items of property, motor vehicles and other equipment used in its operations. Leases of property
generally have terms of up to 15 years, while motor vehicles and other equipment generally have lease terms between 2 and 6 years. Lease
generally have terms of up to 15 years, while motor vehicles and other equipment generally have lease terms between 2 and 6 years. Lease
terms are negotiated on an individual basis and contain different terms and conditions, but do not impose any covenants other than security
terms are negotiated on an individual basis and contain different terms and conditions, but do not impose any covenants other than security
interests. The Group's obligations under its leases are secured by the lessor's title to the leased assets, and leased assets may not be used as
interests. The Group's obligations under its leases are secured by the lessor's title to the leased assets, and leased assets may not be used as
security for borrowing purposes.
security for borrowing purposes.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period.
Group
Group
At 31 December 2018
At 31 December 2018
Transition to IFRS 16
Transition to IFRS 16
At 1 January 2019
At 1 January 2019
Additions
Additions
Disposals
Disposals
Depreciation expense
Depreciation expense
Exchange differences
Exchange differences
At 31 December 2019
At 31 December 2019
Parent
Parent
At 31 December 2018
At 31 December 2018
Transition to IFRS 16
Transition to IFRS 16
At 1 January 2019
At 1 January 2019
Additions
Additions
Disposals
Disposals
Depreciation expense
Depreciation expense
Exchange differences
Exchange differences
At 31 December 2019
At 31 December 2019
Land and
Land and
buildings
buildings
£000
£000
-
-
9,962
9,962
9,962
9,962
2,864
2,864
(442)
(442)
(2,336)
(2,336)
(87)
(87)
9,961
9,961
-
-
6,865
6,865
6,865
6,865
2,805
2,805
(442)
(442)
(1,741)
(1,741)
(38)
(38)
7,449
7,449
Motor
Motor
vehicles
vehicles
£000
£000
-
-
1,362
1,362
1,362
1,362
128
128
(128)
(128)
(323)
(323)
(1)
(1)
1,039
1,039
Other
Other
equipment
equipment
£000
£000
-
-
297
297
297
297
150
150
(21)
(21)
(120)
(120)
(1)
(1)
306
306
-
-
1,315
1,315
1,315
1,315
128
128
(128)
(128)
(287)
(287)
-
-
1,028
1,028
-
-
220
220
220
220
105
105
-
-
(98)
(98)
-
-
227
227
Total
Total
£000
£000
-
-
11,621
11,621
11,621
11,621
3,142
3,142
(591)
(591)
(2,779)
(2,779)
(89)
(89)
11,304
11,304
-
-
8,400
8,400
8,400
8,400
3,038
3,038
(570)
(570)
(2,126)
(2,126)
(38)
(38)
8,704
8,704
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 240
241
Notes to the financial statements
Notes to the financial statements
32 Leases (continued)
32 Leases (continued)
Set out below are the carrying amounts of lease obligations:
Current
Non-current
2019
Group
£000
2,985
9,938
12,923
Parent
£000
2,460
7,868
10,328
In the previous year, the Group and Parent only recognised lease liabilities in relation to leases that were classified as finance leases under
IAS 17, Leases.
Group profit for the year has been arrived at after charging the following amounts in respect of lease contracts:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
2019
£000
2,779
584
3,363
The Group had total cash outflows for leases, including interest, of £3,371,000 in 2019. The Parent had total cash outflows for leases, including
interest, of £2,653,000 in 2019. The future cash outflows relating to leases that have not yet commenced are disclosed in note 33.
The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide
flexibility in managing the leased-asset portfolio and align with the Group's business needs. Management exercises significant judgement in
determining whether these extension and termination options are reasonably certain to be exercised, as disclosed in note 2.
At the prior period reporting date the Group had future aggregate minimum lease payments under non-cancellable operating leases as
follows:
Within 1 year
Between 1 & 5 years
After 5 years
Operating lease rentals charged to profit or loss during the year
Total future minimum sublease payments expected to be received under
non-cancellable subleases
2018
Group
£000
3,430
10,743
5,432
19,605
3,428
Parent
£000
2,715
8,929
4,587
16,231
2,201
506
506
Notes to the financial statements
Notes to the financial statements
32 Leases (continued)
32 Leases (continued)
Group as a lessor
Finance leases
The Group has entered into a finance leasing arrangement as a lessor to sublease a commercial office space no longer occupied by the Group.
The term of the finance lease is 3 years. The contract does not include an extension or early termination option.
2019
Group
£000
Parent
£000
Year 1
Year 2
Year 3
Undiscounted lease payments
Less: unearned finance income
Net investment in the lease
Net investment in the lease is recognised in other assets as shown in note 24.
Group profit for the year has been arrived at after crediting the following amounts in respect of finance lease contracts:
Selling profit for finance leases
Finance income on the net investment in finance leases
The Group did not have lessor finance leasing arrangements in 2018.
134
134
111
379
(13)
366
134
134
111
379
(13)
366
2019
£000
21
8
29
Operating leases
The Group has entered into operating leases on its investment property portfolio. These leases have terms of up to 50 years. All leases include
a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. The lessee is also required
to provide a residual value guarantee on the properties. Rental income on these properties recognised by the Group during the year is disclosed
in note 21.
Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows:
Year 1
Year 2
Year 3
Year 4
Year 5
After 5 years
2019
2018
Group
£000
8,220
7,643
6,850
6,455
6,160
29,065
64,393
Parent
£000
8,220
7,643
6,850
6,455
6,160
29,065
64,393
Group
£000
8,000
7,329
6,790
6,056
5,739
32,478
66,392
Parent
£000
8,000
7,329
6,790
6,056
5,739
32,478
66,392
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
242
243
33 Commitments
33 Commitments
33 Commitments
At the year end, the Group and Parent had capital commitments of £2,559,000 (2018: £8,712,000) relating to computer software and no
capital commitments (2018: £1,207,000) relating to furniture, fittings and equipment.
At the year end, the Group and Parent had capital commitments of £2,559,000 (2018: £8,712,000) relating to computer software and no
capital commitments (2018: £1,207,000) relating to furniture, fittings and equipment.
The Group has a lease contract that has not yet commenced as at 31 December 2019. The lease is expected to commence in 2020 and has
a term of 15 years. The expected cash outflow is £1,300,000 per annum.
The Group has a lease contract that has not yet commenced as at 31 December 2019. The lease is expected to commence in 2020 and has
a term of 15 years. The expected cash outflow is £1,300,000 per annum.
34 Related undertakings
34 Related undertakings
34 Related undertakings
Ultimate parent company and controlling party
The Company is a wholly-owned subsidiary of Ecclesiastical Insurance Group plc. Its ultimate parent and controlling company is Allchurches
Ultimate parent company and controlling party
Trust Limited. Both companies are incorporated and operate in the United Kingdom and copies of their financial statements are available from
The Company is a wholly-owned subsidiary of Ecclesiastical Insurance Group plc. Its ultimate parent and controlling company is Allchurches
the registered office as shown on page 248. The parent companies of the smallest and largest groups for which group financial statements
Trust Limited. Both companies are incorporated and operate in the United Kingdom and copies of their financial statements are available from
are drawn up are Ecclesiastical Insurance Office plc and Allchurches Trust Limited, respectively.
the registered office as shown on page 248. The parent companies of the smallest and largest groups for which group financial statements
are drawn up are Ecclesiastical Insurance Office plc and Allchurches Trust Limited, respectively.
Related undertakings
The Company's interest in related undertakings at 31 December 2019 is as follows:
Related undertakings
The Company's interest in related undertakings at 31 December 2019 is as follows:
Company
Company
Subsidiary undertakings
Subsidiary undertakings
Incorporated in the United Kingdom
Incorporated in the United Kingdom
Ecclesiastical Financial Advisory Services Limited *
Ecclesiastical Life Limited *
Ecclesiastical Financial Advisory Services Limited *
EdenTree Investment Management Limited *
Ecclesiastical Life Limited *
E.I.O. Trustees Limited * ^
EdenTree Investment Management Limited *
Ecclesiastical Group Healthcare Trustees Limited *
E.I.O. Trustees Limited * ^
South Essex Insurance Brokers Limited *
Ecclesiastical Group Healthcare Trustees Limited *
South Essex Insurance Holdings Limited *
South Essex Insurance Brokers Limited *
South Essex Insurance Holdings Limited *
Incorporated in Australia
Incorporated in Australia
Ansvar Insurance Limited **
Ansvar Risk Management Services Pty Limited**
Ansvar Insurance Limited **
Ansvar Insurance Services Pty Limited ** †
Ansvar Risk Management Services Pty Limited**
Ansvar Insurance Services Pty Limited ** †
Company
Registration Share
Company
Number
Capital
Registration Share
Capital
Number
Holding of shares by
Company Group Activity
Holding of shares by
Company Group Activity
2046087
0243111
2046087
2519319
0243111
0941199
2519319
10988127
0941199
6317314
10988127
6317313
6317314
6317313
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
007216506 Ordinary
623695054 Ordinary
007216506 Ordinary
162612286 Ordinary
623695054 Ordinary
162612286 Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
-
100%
100%
100%
100%
-
100%
-
Independent financial advisory
Life insurance
Independent financial advisory
Investment management
Life insurance
Trustee company
Investment management
Trustee company
Trustee company
Trustee company
Investment holding company
100% Insurance agents and brokers
100% Insurance agents and brokers
-
-
-
-
-
-
-
-
-
-
-
-
Investment holding company
Insurance
Risk management services
Insurance
100% Dormant company
Risk management services
-
-
-
-
100% Dormant company
*
**
*
^
**
†
^
†
Registered office: Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, United Kingdom
Registered office: Level 5, Southbank Boulevard, Melbourne, VIC 3006, Australia
Registered office: Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, United Kingdom
Exempt from audit under s480 of the Companies Act 2006
Registered office: Level 5, Southbank Boulevard, Melbourne, VIC 3006, Australia
Exempt from audit
Exempt from audit under s480 of the Companies Act 2006
Exempt from audit
35 Related party transactions
35 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not included
in the Group analysis, but are included within the Parent analysis below.
Ecclesiastical Insurance Group plc is the Group and Parent's immediate parent company. Other related parties, of both Group and Parent,
include subsidiary undertakings of Ecclesiastical Insurance Group plc, the ultimate parent undertaking and the Group's pension plans.
2019
Group
Trading, investment and other income, including recharges, and amounts received
Trading, investment and other expenditure, including recharges, and amounts paid
Amounts owed by related parties
Amounts owed to related parties
Parent
Trading, investment and other income, including recharges, and amounts received
Trading, investment and other expenditure, including recharges, and amounts paid
Amounts owed by related parties
Amounts owed to related parties
2018
Group
Trading, investment and other income, including recharges, and amounts received
Trading, investment and other expenditure, including recharges, and amounts paid
Amounts owed by related parties
Amounts owed to related parties
Parent
Trading, investment and other income, including recharges, and amounts received
Trading, investment and other expenditure, including recharges, and amounts paid
Amounts owed by related parties
Amounts owed to related parties
Ecclesiastical
Insurance
Group plc Subsidiaries
£000
£000
461
8,590
37,900
-
461
8,590
37,900
-
368
259
29,562
-
368
259
29,562
-
-
-
-
-
15,249
3,743
4,205
1,612
-
-
-
-
5,751
3,685
4,609
2,249
Other
related
parties
£000
1,790
2,481
1,144
57,222
529
867
1,134
-
1,736
2,033
1,157
61,276
498
872
1,140
1
During the year, the Company received premiums, commission and reinsurance recoveries via a related party insurance agency amounting to
£116,000 (2018: £187,000) and paid reinsurance protection, commission and claims amounting to £299,000 (2018: £340,000).
Trading, investment and other expenditure, including recharges, and amounts paid in the current year includes loans totalling £8.3m.
Amounts owed to related parties by the Group and by the Parent include insurance liabilities which are included in note 28.
Transactions and services within the Group are made on commercial terms. With the exception of some insurance liabilities, amounts
outstanding between Group companies are unsecured, are not subject to guarantees, and will be settled in cash. No provisions have been made
in respect of these balances.
The remuneration of the directors is disclosed in the Group Remuneration Report in the Corporate Governance section of the Annual Report
and Accounts. The remuneration of the key management personnel of the Group is disclosed in note 13.
Charitable grants paid to the Group's ultimate Parent undertaking are disclosed in note 15. Contributions paid to and amounts received from
the Group's defined benefits schemes are disclosed in note 19.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
36 Reconciliation of Alternative Performance Measures (continued)
36 Reconciliation of Alternative Performance Measures (continued)
36 Reconciliation of Alternative Performance Measures (continued)
244
245
36 Reconciliation of Alternative Performance Measures
36 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 included in our key performance indicators are set out on page 50: regulatory capital, combined operating ratio (COR), net expense
ratio (NER) and net inflows are APM. These measures are commonly used in the industries the Group operates in and are considered to provide
useful information and enhance the understanding of the 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 COR and NER to its most directly
reconcilable line item in the financial statements. Regulatory capital and net inflows to funds managed by Ecclesiastical Insurance Office plc's
subsidiary, EdenTree Investment Management Limited, do not have an IFRS equivalent. Net inflows are the difference between the funds
invested (gross inflows) less funds withdrawn (redemptions) during the year by third parties in a range of funds EdenTree Investment
Management Limited offers. Regulatory capital is covered in more detail in note 4(i).
Group
Revenue
Gross written premiums
Outward reinsurance premiums
Net change in provision for unearned premiums
Net earned premiums
Fee and commission income
Other operating income
Net investment return
Total revenue
Expenses
Claims and change in insurance liabilities
Reinsurance recoveries
Fees, commissions and other acquisition costs
Other operating and administrative expenses
Total operating expenses
Operating profit
Finance costs
Profit before tax
Underwriting profit
Combined operating ratio
2019
Inv'mnt
return
Inv'mnt
mngt
Broking
and
Advisory
Corporate
costs
Total
£000
£000
£000
£000
£000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
72,596
72,596
12,795
-
19
12,814
9,077
-
834
9,911
-
-
-
-
-
-
-
-
393,952
(152,886)
(15,080)
225,986
71,240
544
74,438
372,208
Insurance
General
£000
Life
£000
393,965
(152,886)
(15,080)
225,999
49,368
544
-
275,911
(13)
-
-
(13)
-
-
989
976
(157,481)
52,800
(72,383)
(78,829)
(255,893)
(327)
-
(14)
(300)
(641)
-
-
-
(3,057)
(3,057)
-
-
(819)
(12,305)
(13,124)
20,018
(531)
19,487
335
-
335
69,539
-
69,539
(310)
-
(310)
-
-
476
(8,236)
(7,760)
2,151
(89)
2,062
-
-
-
(17,850)
(17,850)
(157,808)
52,800
(72,740)
(120,577)
(298,325)
[5]
(17,850)
-
(17,850)
73,883
(620)
73,263
[1]
[2]
[3]
[4]
[6]
[6]
20,018
91.1%
Net expenses ( = [2] + [3] + [4] + [5] )
[7]
(119,694)
Net expense ratio
53%
The underwriting profit of the Group is defined as the operating profit of the general insurance business.
The Group uses the industry standard net 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. It is calculated as ( [1] - [6] ) / [1] ).
The NER expresses total underwriting and corporate expenses as a proportion of net earned premiums. It is calculated as
- [7] / [1].
Group
Group
Revenue
Revenue
Gross written premiums
Gross written premiums
Outward reinsurance premiums
Outward reinsurance premiums
Net change in provision for unearned premiums
Net change in provision for unearned premiums
Net earned premiums
Net earned premiums
Fee and commission income
Fee and commission income
Other operating income
Other operating income
Net investment return
Net investment return
Total revenue
Total revenue
Expenses
Expenses
Claims and change in insurance liabilities
Claims and change in insurance liabilities
Reinsurance recoveries
Reinsurance recoveries
Fees, commissions and other acquisition costs
Fees, commissions and other acquisition costs
Other operating and administrative expenses
Other operating and administrative expenses
Total operating expenses
Total operating expenses
Operating profit
Operating profit
Finance costs
Finance costs
Profit before tax
Profit before tax
Underwriting profit
Underwriting profit
Combined operating ratio
Combined operating ratio
[1]
[1]
[2]
[2]
[3]
[3]
[4]
[4]
[6]
[6]
[6]
[6]
2018
2018
Inv'mnt
Inv'mnt
Broking
Broking
and
and
mngt Advisory
mngt Advisory
Inv'mnt
Inv'mnt
return
return
Corporate
Corporate
costs
costs
£000
£000
£000
£000
£000
£000
£000
£000
Insurance
Insurance
General
General
£000
£000
Life
Life
£000
£000
356,950
356,950
(137,640)
(137,640)
(5,241)
(5,241)
214,069
214,069
21
21
-
-
-
-
21
21
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
41,346
41,346
1,039
1,039
-
-
256,454
256,454
-
-
-
-
1,573
1,573
1,594
1,594
-
-
-
-
1,600
1,600
1,600
1,600
12,601
12,601
-
-
13
13
12,614
12,614
9,049
9,049
-
-
808
808
9,857
9,857
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Total
£000
£000
356,971
356,971
(137,640)
(137,640)
(5,241)
(5,241)
214,090
214,090
62,996
62,996
1,039
1,039
3,994
3,994
282,119
282,119
349
349
-
-
(15)
(15)
(286)
(286)
48
48
1,642
1,642
-
-
1,642
1,642
-
-
-
-
-
-
(2,889)
(2,889)
(2,889)
(2,889)
(1,289)
(1,289)
-
-
(1,289)
(1,289)
-
-
-
-
(943)
(943)
(10,730)
(10,730)
(11,673)
(11,673)
941
941
-
-
941
941
-
-
-
-
299
299
(8,111)
(8,111)
(7,812)
(7,812)
2,045
2,045
-
-
2,045
2,045
[5]
[5]
-
-
-
-
-
-
(16,829)
(16,829)
(16,829)
(16,829)
(16,829)
(16,829)
-
-
(16,829)
(16,829)
(111,873)
(111,873)
26,188
26,188
(66,346)
(66,346)
(114,388)
(114,388)
(266,419)
(266,419)
15,700
15,700
(329)
(329)
15,371
15,371
(112,222)
(112,222)
26,188
26,188
(65,687)
(65,687)
(75,543)
(75,543)
(227,264)
(227,264)
29,190
29,190
(329)
(329)
28,861
28,861
29,190
29,190
86.4%
86.4%
Net expenses ( = [2] + [3] + [4] + [5] )
Net expenses ( = [2] + [3] + [4] + [5] )
[7]
[7]
(116,713)
(116,713)
Net expense ratio
Net expense ratio
55%
55%
37 Events after the balance sheet date
37 Events after the balance sheet date
37 Events after the balance sheet date
In early 2020, the existence of a new coronavirus, COVID-19, was confirmed. This virus has since spread across the globe and is now
In early 2020, the existence of a new coronavirus, COVID-19, was confirmed. This virus has since spread across the globe and is now
characterised by the World Health Organization as a pandemic. COVID-19 has caused disruption to businesses and economic activity which
characterised by the World Health Organization as a pandemic. COVID-19 has caused disruption to businesses and economic activity which
has been reflected in recent fluctuations in UK and global stock markets. The Group considers the emergence and spread of COVID-19 to be a
has been reflected in recent fluctuations in UK and global stock markets. The Group considers the emergence and spread of COVID-19 to be a
non-adjusting post balance sheet event. The Group has plans in place to support continued operation of business activity and has capital
non-adjusting post balance sheet event. The Group has plans in place to support continued operation of business activity and has capital
resources that can withstand significant temporary market disruption. The Group does not consider there to be any significant exposure from
resources that can withstand significant temporary market disruption. The Group does not consider there to be any significant exposure from
insurance policies underwritten by the Group. Given the inherent uncertainties, it is not practicable at this time to determine the impact of
insurance policies underwritten by the Group. Given the inherent uncertainties, it is not practicable at this time to determine the impact of
COVID-19 on the Group or to provide a quantitative estimate of the impact.
COVID-19 on the Group or to provide a quantitative estimate of the impact.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Financial StatementsSection Four 246
247
Section Five
Other Information
Directors, executive management and company information
United Kingdom regional centres
United Kingdom business division and international branches
Insurance subsidiaries and agencies
Notice of meeting
Notes
248
250
251
252
253
254
Ecclesiastical Annual Report & Accounts 2019Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationSection FiveOther Information Directors, executive management and company information
Directors, executive management and company information
Directors, executive management and company information
Directors, executive management and company information
248
249
Auditor
Registrar
Deloitte LLP
London
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Directors
Group Management Board
* R. D. C. Henderson FCA Chairman
*
F. X. Boisseau MSc
D. P. Cockrem, MA, FCA Group Chief Financial Officer
M. C. J. Hews BSc (Hons), FIA Group Chief Executive
* N. P. Maidment MA, FCII
* A. J. McIntyre MA, ACA, FRCO
* C. J. G. Moulder MA, FCA Senior Independent Director
* C. H. Taylor BSc (Hons) Banking and International Finance
S. J. Whyte MC Inst. M, ACII Deputy Group Chief Executive
* A. Winther BA
*
The Very Reverend C. L. Wilson
D. P. Cockrem, MA, FCA Group Chief Financial Officer
M. C. J. Hews BSc (Hons), FIA Group Chief Executive
M. Bennett BSc, FIA
D. R. Moore BA (Hons), MBA
C. M. Taplin BSc (Hons), MSc, MBA
S. J. Whyte MC Inst. M, ACII Deputy Group Chief Executive
Company Secretary
Mrs R. J. Hall FCG
Registered and Head Office
Beaufort House
Brunswick Road
Gloucester GL1 1JZ
Tel: 0345 777 3322
Company Registration Number
24869
Investment Management Office
Legal advisers
24 Monument Street
London EC3R 8AJ
Tel: 0800 358 3010
Charles Russell Speechlys LLP
London
DAC Beachcrofts LLP
Leeds, London and Bristol
Harrison Clark Rickerbys LLP
Cheltenham
Matheson
Dublin
William Fry
Dublin
Pinsent Masons LLP
Birmingham and London
* Non-Executive Directors
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Other InformationSection Five United Kingdom regional centres
United Kingdom regional centres
United Kingdom business division and international branches
United Kingdom business division and international branches
250
251
Central and South West
Office:
London and South East
North
Tel:
Office:
Tel:
Office:
Tel:
12th Floor
Alpha Tower
Suffolk Street
Queensway
Birmingham B1 1TT
0345 605 0209
24 Monument Street
London EC3R 8AJ
0345 608 0069
St Ann's House
St Ann's Place
Manchester M2 7LP
0345 603 7554
Ansvar Insurance
Business Division
Managing Director:
Office:
Canada Branch
Tel:
Deputy Group Chief Executive,
Ecclesiastical Insurance and
General Manager and Chief Agent:
Chief Office:
-
-
-
-
Eastern Region:
Regional Vice President:
Western Region:
Regional Vice President:
Pacific Region:
Regional Vice President:
Central Region and
National Accounts:
Regional Vice President:
S. Cox ACII Chartered Insurer
Ansvar House
31 St. Leonards Road
Eastbourne, East Sussex BN21 3UR
0345 60 20 999
S. J. Whyte MC Inst M, ACII
2200-100 Wellington St W, TD West Tower
P.O. Box 307
Toronto, Ontario M5K 1K2
K. Biermann BBA, CIP
100 Eileen Stubbs Avenue
Suite 201
Dartmouth, Nova Scotia B3B 1Y6
K. Webster CRM, FCIP
Suite 521, 10333 Southport Road S.W.
Calgary, Alberta T2W 3X6
N de Souza Jensen BA, CIP
Suite 1713, Three Bentall Centre
595 Burrard Street, Box 49096
Vancouver, British Columbia V7X 1G4
R. Jordan BBA, CRM, FCIP
2200-100 Wellington St W, TD West Tower
P.O. Box 307
Toronto, Ontario M5K 1K2
Ireland Branch
Managing Director:
Office:
D. G. Lane B.Comm (Hons), Certified Insurance Director
2nd Floor, Block F2
Eastpoint
Dublin 3, DO3 T6P8
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Other InformationSection Five Insurance subsidiaries and agencies
Insurance subsidiaries and agencies
Ansvar Insurance Limited
Chief Executive Officer:
Head Office:
Ecclesiastical Life Limited
Head Office:
Ecclesiastical Underwriting
Management Limited
South Essex Insurance
Brokers Limited
Office:
Director:
Office:
Tel:
W. R. Hutcheon MBA, GAICD, Fellow ANZIIF (CIP)
Level 5
1 Southbank Boulevard
Southbank
Melbourne VIC 3006
Beaufort House
Brunswick Road
Gloucester GL1 1JZ
Beaufort House
Brunswick Road
Gloucester GL1 1JZ
B. W. Fehler
South Essex House, North Road
South Ockendon
Essex RM15 5BE
01708 850000
252
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Notice of meeting
Notice of meeting
Notice of meeting
Notice of meeting
NOTICE is hereby given that the Annual General Meeting of Ecclesiastical Insurance Office plc will be held at Beaufort House, Brunswick Road,
NOTICE is hereby given that the Annual General Meeting of Ecclesiastical Insurance Office plc will be held at Beaufort House, Brunswick Road,
NOTICE is hereby given that the Annual General Meeting of Ecclesiastical Insurance Office plc will be held at Beaufort House, Brunswick Road,
Gloucester, GL1 1JZ on Thursday, 18th June 2020 at 12:35pm for the following purposes:
Gloucester, GL1 1JZ on Thursday, 18th June 2020 at 12:35pm for the following purposes:
Gloucester, GL1 1JZ on Thursday, 18th June 2020 at 12:35pm for the following purposes:
Ordinary business
Ordinary business
Ordinary business
Ordinary business
1.
1.
1.
To receive the Report of the Directors and Accounts for the year ended 31st December 2019 and the report of the auditors
To receive the Report of the Directors and Accounts for the year ended 31st December 2019 and the report of the auditors
To receive the Report of the Directors and Accounts for the year ended 31st December 2019 and the report of the auditors
thereon.
thereon.
thereon.
2.
2.
2.
3.
3.
3.
4.
4.
4.
5.
5.
5.
6.
6.
6.
7.
7.
7.
8.
8.
8.
9.
9.
9.
10.
10.
10.
11.
11.
11.
12.
12.
12.
13.
13.
13.
14.
14.
14.
To re-elect Mr F. X. Boisseau as a director.*
To re-elect Mr F. X. Boisseau as a director.*
To re-elect Mr F. X. Boisseau as a director.*
To re-elect Mr R. D. C. Henderson as a director.*
To re-elect Mr R. D. C. Henderson as a director.*
To re-elect Mr R. D. C. Henderson as a director.*
To re-elect Mr M. C. J. Hews as a director.*
To re-elect Mr M. C. J. Hews as a director.*
To re-elect Mr M. C. J. Hews as a director.*
To re-elect Mr A. J. McIntyre as a director.*
To re-elect Mr A. J. McIntyre as a director.*
To re-elect Mr A. J. McIntyre as a director.*
To re-elect Mr C. J. G. Moulder as a director.*
To re-elect Mr C. J. G. Moulder as a director.*
To re-elect Mr C. J. G. Moulder as a director.*
To re-elect Mrs C. H. Taylor as a director.*
To re-elect Mrs C. H. Taylor as a director.*
To re-elect Mrs C. H. Taylor as a director.*
To re-elect Mrs S. J. Whyte as a director.*
To re-elect Mrs S. J. Whyte as a director.*
To re-elect Mrs S. J. Whyte as a director.*
To re-elect Mr A. Winther as a director.*
To re-elect Mr A. Winther as a director.*
To re-elect Mr A. Winther as a director.*
To elect Mrs D. Cockrem as a director.*
To elect Mrs D. Cockrem as a director.*
To elect Mrs D. Cockrem as a director.*
To elect Mr N. Maidment as a director.*
To elect Mr N. Maidment as a director.*
To elect Mr N. Maidment as a director.*
To elect Sir S. Lamport as a director.*
To elect Sir S. Lamport as a director.*
To elect Sir S. Lamport as a director.*
To consider the declaration of a dividend.
To consider the declaration of a dividend.
To consider the declaration of a dividend.
To appoint PricewaterhouseCoopers LLP as auditors and authorise the directors to fix their remuneration.
To appoint PricewaterhouseCoopers LLP as auditors and authorise the directors to fix their remuneration.
To appoint PricewaterhouseCoopers LLP as auditors and authorise the directors to fix their remuneration.
By order of the Board
By order of the Board
By order of the Board
Mrs R. J. Hall, Secretary
Mrs R. J. Hall, Secretary
Mrs R. J. Hall, Secretary
17 March 2020
17 March 2020
17 March 2020
* Brief biographies of the directors seeking re-election are shown on pages 96 to 98 of the 2019 Annual Report. All non-executive directors
* Brief biographies of the directors seeking re-election are shown on pages 96 to 98 of the 2019 Annual Report. All non-executive directors
* Brief biographies of the directors seeking re-election are shown on pages 96 to 98 of the 2019 Annual Report. All non-executive directors
seeking re-election have been subject to formal performance evaluation by the Chairman who is satisfied that the performance of each non-
seeking re-election have been subject to formal performance evaluation by the Chairman who is satisfied that the performance of each non-
seeking re-election have been subject to formal performance evaluation by the Chairman who is satisfied that the performance of each non-
executive director is effective and sufficient time has been spent on the Company’s affairs.
executive director is effective and sufficient time has been spent on the Company’s affairs.
executive director is effective and sufficient time has been spent on the Company’s affairs.
Only a member holding ordinary shares, or their duly appointed representative(s), is entitled to attend, vote and speak at the annual general
Only a member holding ordinary shares, or their duly appointed representative(s), is entitled to attend, vote and speak at the annual general
Only a member holding ordinary shares, or their duly appointed representative(s), is entitled to attend, vote and speak at the annual general
meeting.
meeting.
meeting.
A member holding ordinary shares is entitled to appoint a proxy or proxies (who need not be a member of the Company) to exercise all or any of
A member holding ordinary shares is entitled to appoint a proxy or proxies (who need not be a member of the Company) to exercise all or any of
A member holding ordinary shares is entitled to appoint a proxy or proxies (who need not be a member of the Company) to exercise all or any of
their rights to attend, speak and vote on their behalf at the annual general meeting. Such a member may appoint more than one proxy in relation to
their rights to attend, speak and vote on their behalf at the annual general meeting. Such a member may appoint more than one proxy in relation to
their rights to attend, speak and vote on their behalf at the annual general meeting. Such a member may appoint more than one proxy in relation to
the annual general meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that
the annual general meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that
the annual general meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that
member.
member.
member.
Any corporation which is a member holding ordinary shares can appoint one or more corporate representatives who may exercise, on its behalf, all
Any corporation which is a member holding ordinary shares can appoint one or more corporate representatives who may exercise, on its behalf, all
Any corporation which is a member holding ordinary shares can appoint one or more corporate representatives who may exercise, on its behalf, all
of the same powers as that corporation could exercise if it were an individual member, provided that they do not do so in relation to the same share
of the same powers as that corporation could exercise if it were an individual member, provided that they do not do so in relation to the same share
of the same powers as that corporation could exercise if it were an individual member, provided that they do not do so in relation to the same share
or shares and that they act within the powers of their appointment.
or shares and that they act within the powers of their appointment.
or shares and that they act within the powers of their appointment.
This notice is sent purely for information to the holders of 8.625% Non-Cumulative Irredeemable Preference shares who are not entitled to attend
This notice is sent purely for information to the holders of 8.625% Non-Cumulative Irredeemable Preference shares who are not entitled to attend
This notice is sent purely for information to the holders of 8.625% Non-Cumulative Irredeemable Preference shares who are not entitled to attend
and vote at the annual general meeting.
and vote at the annual general meeting.
and vote at the annual general meeting.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Other InformationSection Five Notes
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255
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Annual Report & Accounts 2019Other InformationSection Five Notes
256
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fablecreative.co.uk
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationOther InformationSection Five A
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Annual Report & Accounts 2019
Ecclesiastical Insurance Office plc
Beaufort House
Brunswick Road
Gloucester
GL1 1JZ
www.ecclesiastical.com
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Ecclesiastical Insurance Office plc (EIO) Reg. No. 24869. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL11JZ, United Kingdom.
EIO is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Firm Reference Number 113848.
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