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Understanding
what matters
Ecclesiastical Annual Report & Accounts 2020
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Understanding
precision matters
We raise the bar with our specialist
insurance for independent schools
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Understanding
magnificence matters
We confidently cover the most
complex and specialist risks
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Understanding
heritage matters
We are trusted to insure our
nations’ iconic places and spaces
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Understanding
reflection matters
We lead the way in specialist
insurance for faith buildings
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Understanding
kindness matters
We exist uniquely to give our
profits to charity – supporting
the communities we serve
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12
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Understanding
what matters
Understanding what matters is what we’ve
been doing since 1887. Understanding what
matters to our customers, to our brokers,
our colleagues and communities.
It’s why we’re trusted to cover the most
complex and specialist risks. And it’s why
people know they can depend on us for
our unrivalled niche knowledge, experience
and passion; for our personal approach and
empathetic support. And it’s why we’ve got
the confidence to take a different business
approach – to give back to society and to
the communities we serve. Understanding
what matters. It’s ultimately what matters.
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Ecclesiastical Annual Report & Accounts 2020Section Two
Contents
Section One About Us
Building a movement for good
Ecclesiastical at a glance
Our businesses
Section Two Strategic Report
Chairman s Statement
’
Chief Executive s Report
’
Connecting for generations
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 auditors report to the members of Ecclesiastical Insurance Office plc
’
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 2020
2
Section One
About Us
Building a movement for good
Ecclesiastical at a glance
Our businesses
3
4
6
8
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Section OneEcclesiastical Annual Report & Accounts 2020About Us –
Section One
About Us – Building a Movement for Good
4
4
Ecclesiastical Annual Report & Accounts 2020
5
5
Appreciating what’s important and
what’s not. Being able to talk with
knowledge and passion. And having
the integrity and power to put words
into action. These things matter. And it’s
understanding this, that’s given us the
edge, making us the trusted experts in
specialist insurance. Trusted for over
130 years.
Across all our niche sectors – from
heritage to education and from arts and
culture to faith and charity – we have
world-respected expertise and experience.
And however narrow a niche, we’re
always able to take a wide-angled view
by drawing in insights and ideas from our
knowledgeable teams. All this, along with
our personal approach and empathetic
support, is reflected in our 98%+ customer
satisfaction score.
We’re trusted not just for our specialist
knowledge but for being especially good
in our chosen fields. We’re trusted to do
good too. A significant proportion of our
profits are channelled towards funding
good causes that we know matter to
our communities. We do this through
independent grants from our charitable
owner or via our own considerable
donations, so, together we’re building
a movement for good.
Understanding what matters.
It’s ultimately what matters.
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Section OneEcclesiastical Annual Report & Accounts 2020About Us –
Section One
About Us – Ecclesiastical at a glance
6
6
Ecclesiastical Annual Report & Accounts 2020
7
7
Ecclesiastical at a glance
Main insurer for
the UK’s Grade I
listed buildings
Leading
insurer for
the Anglican
church
in all our territories
An independent,
specialist financial
services group that
exists to give its
profits to charity
Since the 1880s
Ecclesiastical has been
providing specialist insurance
and risk management
support to its customers
Trusted by
independent
schools for
over 60 years
A leading
multi-faith insurer
Protecting
churches,
synagogues,
mosques and
Hindu, Sikh
and Buddhist
temples across
our territories
44,000+
charities and not for profit
organisations insured
in the UK alone
£99m+
One of the UK’s largest
charitable donors. We are
proud of our ambition
to give more than £100m
to good causes. Since 2016
we have given over £99m
in grants and donations*
*Cumulative total 2016 – 2020
98% +
UK overall customer satisfaction
across all the sectors we measure*
*Based on FY 2020 results for Home New Business and Renewals; Church Renewals;
Ecclesiastical claims; Risk Management; FWD Charity; EFAS and Funeral Directors results
£15.7m
loss before tax
(£73.3m profit before
tax in previous year)
Movement
for Good
Through our Movement
for Good Awards
– our biggest ever giving
campaign – we gave
£1m to help change
people’s lives
Our aim
is to be the
most trusted
and ethical
specialist
financial
services
group
£437.3m
gross written premium
(£395.0m in previous year)
Rated best
insurer by
UK brokers
in the charity,
commercial
heritage,
education and
faith sectors*
*Independent survey by FWD
Over 7,000 charities
have benefitted
from our giving
In Canada our
Community Impact
Grants supported
projects that make
a positive impact
on the community
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Section OneEcclesiastical Annual Report & Accounts 2020About Us –
Section One
About Us – Our businesses
10
8
Ecclesiastical Annual Report & Accounts 2020
11
9
Our businesses
We are organised into three divisions:
Specialist Insurance; Investment
Management; and Broking and
Advisory. All are underpinned by our
specialist knowledge and 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 award-winning 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. Committed to being the most trusted and ethical specialist
financial services group, we are proud that our UK home insurance has again been
awarded the First Place Gold Ribbon in this year’s independent Fairer Finance
Customer Experience ratings for home insurance.
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. This year, for the twelfth consecutive year, EdenTree celebrated
winning ‘Best Ethical Investment Provider’ at the Moneyfacts Investment
Life & Pensions Awards.
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. SEIB won Personal
Lines Broker of the Year again at this year’s British Claims Awards.
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 businesses.
This Annual Report & Accounts is for Ecclesiastical Insurance Office plc (referred to as the ‘Company’, or ‘Parent’),
together with its subsidiaries (collectively, the ‘Group’).
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Section OneEcclesiastical Annual Report & Accounts 2020About Us –
Ecclesiastical UK
Negotiating the changing risk landscape
The world is becoming more volatile, more complex, and uncertain – not least
due to Covid-19. As a result, our customers are facing new and emerging
strategic risks. To help them prepare for and tackle these risks – at a more
strategic level – we have now extended our specialist risk management
proposition to include Enterprise Risk Management (ERM).
Identifying risk, and assessing the likely
“
occurrence and business impact, is the
start to managing and transferring risks
to a conventional insurance programme.
Ecclesiastical s Strategic Risk Workshop
unites all interested parties, encouraging
the sharing of opinions, ideas and
experience, which then helps create
”
an informed and valuable action plan.
’
Marcus Rennick, Divisional Director,
James Hallam Limited, London
Developed following consultation
with brokers and customers, a key part
of this new offering is our Strategic
Risk Workshop. And the first of our
customers to try it was Hopetoun House,
one of Scotland s finest stately homes.
’
In terms of risk identification, the team
at Hopetoun House were keen to start
with a blank sheet of paper. Our ERM
experts worked alongside them, to find
out exactly what was keeping them
awake at night and to then work through
the causes and consequences of those
risks. We then produced a new risk
register, which significantly enhanced
their existing approach.
Their broker took part in the workshop
too, and by having this three way
approach, we were able to share
valuable insights and best practice
as well as to identify opportunities.
-
Of course, Covid 19 means many
-
customers are having to change how
they operate and to adapt their strategy
– and are looking for support and
guidance to do this. Our ERM team
can help them strengthen their strategic
risk management arrangements, so that
risks can be managed in a structured
way. By sharing our expertise and
understanding of emerging risks, and
by delivering valuable insights, we can
help customers make informed decisions
as well as seize opportunities. In short,
we can help them look to the future
with more confidence.
“
The Workshop was brilliant
–
bringing brokers and key staff together
to gain deeper insight and mutual
understanding. This approach confirmed
that we d largely been on the right track
albeit with significant improvements
”
from you.
’
Piers de Salis, General Manager,
Hopetoun House, Edinburgh
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Section Two
Strategic Report
Chairman s Statement
’
Chief Executive s Report
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Connecting for generations
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
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Strategic Report approval
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Chairman’s Statement
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Ecclesiastical Annual Report & Accounts 2020
15
Chairman’s Statement
2020 was the year that none of us could have predicted.
The global pandemic affected our lives in ways more
far-reaching than we could have imagined. It has been
a testing time for all of us.
‘I’m delighted that,
despite the challenges
of the past 12 months,
we’ve been able
to donate over £2.7m
to good causes through
our own direct giving
such as the Movement
for Good awards.’
I’m delighted that, despite the challenges
of the past 12 months, we’ve been able to
donate over £2.7m to good causes through
our own direct giving such as the Movement
for Good awards. This is in addition to over
£23m of funds awarded through our parent
Allchurches Trust.
Looking ahead
This is an exciting year for Ecclesiastical.
We enter a new chapter in our strategy
with a new visual identity. Representing
a modern and confident Ecclesiastical,
the new brand focuses on our core
strengths of being trusted, specialist
and committed to customer service.
The benefits of our long-term investment
programme continue to be realised. Our
new purpose-built office in Gloucestershire
opened its doors in February, providing
a modern and inspiring environment for
our colleagues. It’s a great achievement,
particularly considering the challenges
of the past 12 months, and I’m looking
forward to visiting when restrictions
are eased.
This year will also see the start of the
rollout of our new strategic General
Insurance (GI) system for the UK
and Ireland, which will provide
customers and brokers with a better,
faster experience. At a time when our
competitors are battening down the
hatches, we are well-placed to thrive
and achieve our purpose of contributing
to the greater good of society.
Throughout this period, I’ve been
overwhelmed by the efforts of all our
colleagues at Ecclesiastical to continue
to deliver what matters most to our
customers. I have heard inspiring stories
from around the Group of how colleagues
have overcome their own personal
challenges to support our customers and
help those in society who need it most.
True character emerges in adversity and
our teams pulled together during this
difficult time to keep us on course and stay
true to our vision and purpose.
Achievements
The year had many highlights, but I am
especially proud that we kept our
impressive customer satisfaction rankings,
continued to win independent awards and
maintained our strong credit ratings in the
most trying of circumstances. A heart-felt
thanks to all.
While I recognise it was a difficult and
uncertain period for our customers,
I welcome the clarity and certainty brought
by the courts’ rulings in the FCA High
Court Case. I know that we also remain
determined to do the right thing by handling
claims with empathy and sensitivity
following the publication of the IICSA
report into the Anglican Church.
A resilient set of results
Despite the difficulties of the Covid-19
pandemic and the Group reporting a loss
of £15.7m (2019: profit before tax £73.3m),
our businesses generally performed well
and we remain financially strong. Our
underwriting performance was resilient
and gross written premiums grew, thanks
to a number of new business wins. What
makes Ecclesiastical unique in the financial
services world is our charitable ownership.
It’s a business model suited to our times and
means we’re not driven by the short-term
pursuit of profit. Instead, we take a long-term
view, focused on sustainable growth,
enabling us to weather the difficult times.
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Chairman’s Statement
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Board activity
On a personal level, my second year
leading the Group as Chairman could
not have been more different to my first.
While I was fortunate enough at the start
of the year to spend time with colleagues
developing the new GI operating system,
many of my plans to engage with the
business were curtailed due to the
pandemic and I have missed the personal
engagement of being with colleagues.
As a Board, we had to adapt to new ways
of working and since March last year,
we have been meeting virtually in our
role of reviewing and overseeing
the Group’s activities.
I was pleased to welcome two new Board
members in 2020. Neil Maidment joined
in January, bringing a wealth of industry
experience, and Sir Stephen Lamport
followed him in March, bringing vast
experience from his time in Westminster
and serving in the Royal Household.
Their diversity of skills and experience
strengthen our Board considerably.
We were sad to bid farewell to Dean
Christine Wilson, who served the Board
admirably for 11 years.
The future
At a time when the reputation of the
insurance industry is under scrutiny,
it’s more important than ever that
Ecclesiastical is, and is seen to be, doing
the right things for its various stakeholders.
I believe that, provided we continue
to fulfil our purpose and live our values,
we are well-placed to stand out amongst
our competitors and enhance our already
considerable achievements.
David Henderson
Chairman
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‘True character
emerges in adversity
and our teams pulled
together during
this difficult time
to keep us on course
and stay true to our
vision and purpose.’
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Ecclesiastical Annual Report & Accounts 2020Section Two
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Ecclesiastical UK
Using new technology to protect the irreplaceable
The top concerns facing the heritage sector are the threat of a major fire,
a significant loss and ongoing maintenance costs. To help combat this,
we turned to technology – partnering with property performance
management experts, Shepherd. We worked with English Heritage,
a valued customer, to help identify a suitable property in which to pilot
our project. Kenwood House in London, an 18th century stately home
with a world-class art collection, was their suggestion.
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The team installed dozens of small
non invasive sensors throughout
Kenwood House that gathered data
from around the property. This was
subsequently analysed using a machine
learning algorithm to establish a pattern
of normal operation. Any abnormal
readings would then immediately alert
the Kenwood House management team.
At the end of April, a spike was recorded
in the moisture levels, triggering an alert
to the maintenance team who were able
to respond swiftly, preventing water
damage to the gallery below. With so
many heritage sites now closed due
to Covid 19, such remote monitoring
is invaluable.
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The sensor coverage enables machinery
and equipment to be monitored too,
making it easier to detect potential
issues fast – nipping things in the bud
before they escalate into serious and
costly problems.
’
Overall, the project has been a great
success. And this was recognised
at this year s CIR Risk Management
Awards where we picked up the
highly commended award in the
‘
Risk Management Innovation
of the Year category.
’
’
We re now using the insights gained
from our work at Kenwood House
to develop a scaled proposition,
so we can use our understanding
and specialism in risk management,
buildings and heritage along
with innovative technology – to help
as many customers as possible.
–
“
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This is an exciting pilot project for
English Heritage. The application of live
real time monitoring has huge potential
to revolutionise the management of
heritage estates in a sustainable way.
This partnership with Ecclesiastical
will enable us to minimise risks
to the building and its irreplaceable
’
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collections by cost effective evidence
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based preventive maintenance. We ll
be able to identify issues in real time
and take preventative steps before
maintenance issues become too large
and costly. The cost savings will also
enable the charity to invest a greater
percentage of its annual maintenance
budgets in the delivery of exemplary
conservation work across the estate.
”
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Nicola Duncan-Finn, Senior Estates
Manager at English Heritage
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Strategic Report – Chief Executive’s Report
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Chief Executive’s Report
For over 130 years, Ecclesiastical has understood
what matters most to our customers and communities.
Trusted to protect and preserve much of the nation’s
irreplaceable heritage and history, we’re distinguished
in the financial services industry by our expertise,
ethical approach and unique charitable purpose.
‘The challenges
we have overcome,
the progress made
and speed with which
we have done it would
not be possible were
it not for the dedication
of our specialist
teams worldwide.’
We are driven by the pursuit of excellence,
which we achieve through our unrivalled
knowledge of our specialist markets and
a commitment to customer service.
Throughout our long history, we have been
unwavering in our focus and determination
to serve our customers and support those
in society who need us most. This time last
year, as I wrote the Chief Executive’s report
for the 2019 annual report, the impact
of Covid-19 was just beginning to be felt
across the globe. None of us could have
predicted just how much of an impact it
would have on our lives. Businesses closed,
financial markets collapsed and at times
that most basic of human needs, social
contact, all but ceased. The global Covid-19
pandemic has affected every aspect of our
lives – economically, politically and socially
– and has changed the way we live and
work forever.
Extraordinary times require an
extraordinary response and our businesses
responded to this most unprecedented
challenge in the best way possible.
Together, we rose above the challenges
to dream even bigger, and perform even
better. Through it all, we never lost sight
of our purpose, our strategy and our
ambition to drive and grow our business
in order to make an even bigger contribution
to the greater good of the communities
in which we live and work.
Continuing to build
a Movement for Good
Thanks to the incredible support of our
customers, brokers, business partners,
employees and all our supporters, we have
now given over £99m to charity, and are
about to meet the £100m target we set
ourselves back in 2017. This means that
over the last five years our rolling average
donations have exceeded £20m per annum
– something of which all our supporters
can be proud.
Indeed in 2020, in addition to over £23m
of funds awarded through our parent
Allchurches Trust, the Group gave over
£2.7m to support charities and communities
during this difficult time, including:
• £1m through our annual corporate giving
programme Movement for Good awards
– which saw 500 charities receive £1,000
grants and 10 charities receive longer-term
funding of £50,000 – and a further
£120,000 through our 12 Days of Giving
campaign;
• Over £200,000 to a combination
of the industry’s Covid-19 Support Fund,
The National Emergency Trust and
the Disaster Emergency Committee’s
Coronavirus Crisis Appeal;
• Over £250,000 via local charitable
programmes such as our ‘Community
Impact Grants’ in Canada and our
‘Community Education Programme’
in Australia.
We launched Fundraising Hubs to support
Church and Charities raise much needed
financial support, and undertook a
programme to encourage ‘Acts of Kindness’
across the group for those in need. These
acts, mostly unsung, range from providing
meals to the homeless or those in isolation,
through to the establishment of a Hygiene
Bank by our Ansvar office in Eastbourne,
and for which Ansvar have been recognised
as ‘Pro-Bono Company of the Year’.
It’s very humbling to think we’ve been able
to support so many good causes during
such a challenging period. For many
frontline charities, their work has never
been more vital, and they are often helping
the most vulnerable members of society.
I’m proud that we’ve been able to make
a difference to so many lives.
Our charitable purpose drives us to help
those most in need and we have now
increased our aspirations and are focused
to exceed our original £100m charitable
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Strategic Report – Chief Executive’s Report
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giving target by September 2021. We invite
others to join us in this goal. By working
together, and with these charities, we can
help to build a movement for good.
Delivering for our customers
I am immensely proud of the way our
colleagues showed great courage and
resilience to continue to deliver for our
customers. All our colleagues quickly and
successfully moved to remote working
and we adapted our plans to enable
our response to the pandemic, showing
flexibility and agility across our businesses.
This was all achieved while colleagues
faced many personal challenges of their
own. The Board and I are immensely
grateful for the hard work and sacrifice
of our colleagues who went above and
beyond to ensure customer service was
enhanced, and our charitable purpose
maintained. Throughout the pandemic,
we have made the health, safety and
wellbeing of our employees a key priority.
We invested in new systems to enable
different ways of working, and provided
homeworking and mental health and
wellbeing support. We decided not to take
financial benefit from the Government’s
furlough scheme.
I also recognise that this has been
a challenging time for many of our
customers. Many businesses, charities,
schools, nurseries and churches have
suffered financially due to the impact
of successive lockdowns. We introduced
a series of measures to support our
customers and partners during this difficult
period. These included paying claims
quickly where cover was in place, offering
enhanced cover, free of charge, to many
of our customers, and providing credit
support to customers in financial difficulty.
We also introduced online information
hubs, as well as pandemic-related risk
management advice.
The insurance industry came under
intense scrutiny as a result of the test case
on Business Interruption (BI) insurance
brought by the Financial Conduct Authority.
We were always clear that our BI policies
were never intended to cover pandemics
and we welcomed the certainty and clarity
provided by the High Court’s judgment
in our favour. Nevertheless, the case has
damaged trust in the insurance industry
and I believe we now need to work together
to restore trust in insurance.
Despite all the challenges of the pandemic,
I am pleased to report that 98% of surveyed
customers were satisfied with how we
handled their claim last year, with 92%
being very and extremely satisfied, which
is consistent with previous years.
In last year’s report, I talked about the
importance of managing claims for physical
and sexual abuse and we remain committed
to improving the claims experience in these
sensitive cases. To this end, we welcomed
the publication of the Independent Inquiry
into Child Sexual Abuse (IICSA) report
on the Anglican Church investigation and
the insights it gives into the best possible
ways to better safeguard children and how
to improve the treatment of victims and
survivors when disclosing abuse.
The experience of bringing an insurance
claim can be traumatic for victims and
survivors within the adversarial civil justice
system in which we operate. We always
aim to handle claims with empathy and
sensitivity, as embodied in our Guiding
Principles. We thank the Inquiry for
its work, and we will continue to review
our processes as part of our commitment
to continual improvement.
Financial performance
2020 was a challenging year for all
businesses due to the significant impact
of Covid-19 and our results were affected
by the falls in investment markets. While
this affected our reported overall financial
performance, resulting in a loss of £15.7m
(2019: profit before tax £73.3m), our
underlying businesses performed well
and we remain financially resilient as we
move into 2021.
Underwriting results have been resilient
at £12.1m (2019: £20.0m) after £18.7m
for Covid-19 related claims where cover
is confirmed. We delivered Gross Written
Premium (GWP) growth of 11% to £437m
(2019: £394m) supported by strong
retention and new business. Despite the
challenges faced by all businesses in 2020,
our commitment to long-term profitable
growth has endured and our diverse
portfolio of companies has continued
to support this. Our long-term view of risk
means we have a strong capital position
that can withstand short-term volatility
and I’m delighted that our excellent
A and A- credit ratings by AM Best and S&P
were both maintained throughout 2020.
Our strategy for the future
As we move into 2021, we are entering
an exciting phase in our history. After
making significant progress in recent years
to become the most trusted and ethical
specialist financial services group, we
are now investing in the next stage of our
journey. While many businesses retreat
in the face of the coronavirus pandemic,
we see the opportunity to refocus and
re-energise our business based on our
core strengths – our charitable purpose,
our outstanding people and our passion
to do the right thing.
we are today – shaped by tradition, while
looking to the future. The star carries
many meanings but for me it represents
our pursuit of excellence, the ethics and
standards that we strive for and the guiding
light we aspire to be.
Through the launch of our new visual
identity, we will be reinforcing everything
that our audiences know and love about
our organisation – our expertise, our ethics,
and our unique purpose – but articulated
with greater energy than before. It reflects
an Ecclesiastical that not only does good,
but is unified, dynamic and innovative. It’s
a new era for our business and, to support
us, we adapted the strategy in 2020 that
will take us through this challenging period
and enable us to take advantage of the
hardening market conditions.
Alongside the investment in our new
visual identity, I’m delighted that our new
head office in Gloucestershire is now
fully operational and ready to welcome
employees with new flexible ways of
working once lockdown restrictions are
lifted. The premises are truly impressive
and provide a modern and spacious
working environment for our employees.
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.
We have recently implemented new
systems for our broking, investment
management and overseas insurance
businesses. This year, we’ll start to deliver
a new strategic General Insurance system
for the UK and Ireland which, once live,
will help us to provide our customers
and brokers with an enhanced experience
and more efficient processes and capacity.
I’m excited to be able to showcase the
new Ecclesiastical Insurance brand in this
Annual Report & Accounts. The new visual
identity represents the organisation that
This investment in our business, together
with our great people and financial
strength, provides us with the foundation
for a bright future.
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Working together for
the greater good
With our £100m charitable target within
our near term grasp, our adapted strategy,
new brand, new systems, new head office
and the new ways of working developed
this year, we enter 2021 energised and
inspired to work together for our
customers and society.
The challenges we have overcome, the
progress made and speed with which
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, or whatever their
circumstances, will always put doing
what is right for our customers and our
charitable purpose at the centre
of everything they do.
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. There is no doubt 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.
Together, by understanding what matters,
we are better able to help our customers.
Together, we are better able to increase
giving to our beneficiaries. And together,
in the words of Captain Sir Tom Moore,
we will ensure that for more people
“Tomorrow will be a good day”.
By order of the Board
Mark Hews
Group Chief Executive
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‘We are driven by the
pursuit of excellence,
which we achieve
through our unrivalled
knowledge of our
specialist markets
and a commitment
to customer service.’
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Connecting for generations
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Connecting
for generations
We’re proud of our ambition to give more than £100m to good
causes. Since 2016 our Group has given over £99m in grants
and donations. Impressive as these numbers might seem, it’s the
countless precious human connections they help forge, that are
truly remarkable. Here are just some of the people whose lives
have been transformed through our giving. You can read more
about these stories in our Impact Report, available on our website
www.ecclesiastical.com/impactreport
I had amazing support.
Rachel and Robert didn’t
leave until they knew Elijah
and I had somewhere safe
to sit, sleep and enough
milk and bottles.
Safe Families UK is a Christian
charity that works hand
in hand with children’s services
to link families in need with local
volunteers who can offer
much-needed help.
Give a Dog a Bone has given
me a place to socialise and
a feeling of belonging.
For many older people, Give a Dog
a Bone’s spaces are a lifeline, giving
them an opportunity to get out, feel
part of their community and make
new friends.
Paul waits for his carer
by the window every
Saturday morning;
he knows he is going
to Club Islington.
When his carer arrives,
he doesn’t stop smiling.
Paul’s mum, Susan, loves seeing
her son so happy and hugely
appreciates the support she gets
from Disability Sports Coach clubs.
Chemotherapy attacks the
illness, but unfortunately
it also attacks the spirit.
The Katie Nugent fund
was established within the
Children’s Medical and Research
Foundation, by Katie’s parents
Alice and Nick, to provide
psychological and emotional
support for the children on
St John’s Ward in Crumlin, and their
families, during cancer treatment.
Collaboration is a big aspect
of the course, as it’s about
bringing different crafts
together to make something
that bit more extraordinary.
The new Building Arts Programme
was established by The Prince’s
Foundation in partnership with
QEST to help preserve valuable
skills, which are gradually being
lost as the average age of workers
in the heritage sector approaches
retirement age.
I didn’t realise how much
better I felt when I was
clean. I definitely feel
more confident and feel
more like I belong.
Taylor, aged 19, lives in supported
housing after six months
of sleeping rough, and is one
of the people who’ve benefitted
from the services of The Hygiene
Bank project in Eastbourne.
Junior Juries was an
exceptional experience.
The group was lovely, the books
were fabulous and I feel like
I have gained immensely.
Reading for pleasure can have
a fundamental positive impact
on children’s lives. Designed
to encourage reading, The Junior
Juries Award is a unique annual
programme, run by Children’s
Books Ireland, for schools,
libraries and book clubs.
Your assistance and
generosity put proper
school shoes on five
of my grandchildren’s feet.
Grandparents For Grandchildren
South Australia is a voluntary,
not for profit organisation that
helps prevent at-risk children
from entering the statutory child
protection system, instead keeping
them within their extended families
wherever they can.
Emerald was emaciated and
suffering from exhaustion –
she required round-the-clock
care from our team to bring
her back from the brink.
One of the UK’s largest equine
welfare charities, Bransby Horses
provides rescue and welfare services
for horses and ponies along with
donkeys and mules, with a focus
on rehabilitation and careful
handling to give animals a second
lease of life.
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Ecclesiastical Annual Report & Accounts 2020Section Two
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Ansvar UK
A swift return to service
We’ve been protecting churches from the risk of fire since 1887. So, when
our claims team got a call telling them that Moravia Church in Hornsey,
North London, had suffered significant fire damage, we sprang into action.
The fire, which happened after their
Christmas Day service in 2019, was
thought to have been caused by tree
lights being mistakenly left on.
The loss was initially reported to us on
27 December 2019 and we immediately
made arrangements for our specialist
loss adjusters and restoration team to
attend on Sunday 29 December to begin
the reinstatement process.
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The fire had caused serious damage to
the front, left hand corner of the Nave
and meant that the floorboards and
joists needed replacing along with areas
of plasterwork, which had de bonded
and blackened. There was also damage
to the roof boarding, which was charred
in places, and to the timber organ pipes
which were next to the tree.
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Besides the localised fire damage,
the building had suffered smoke logging
throughout, affecting both the structure
and the contents. Soot had also entered
the large pipe organ, which needed
completely taking apart, cleaning
and rebuilding.
To discuss plans, we set up a
meeting the following week with our
claims team, members of the local
congregation, and the wider church
organisation. We quickly agreed and set
in motion a strategy for the rapid and
sensitive restoration of the building,
as well as a plan for the remaining
areas of the site, the church hall
and adjoining nursery, to remain open
and fully functioning throughout.
Works were completed in July 2020,
less than eight months after being
notified of the fire. Claims costs were
significant and covered the cost of
upgrading the church s traditional
’
organ to a modern sound system more
suited to their needs. Thanks to the
initial swift actions of our team and the
sensitive reinstatement programme,
we were able to avoid any long term
interruption to church services and
activities throughout. A happy outcome
for all involved.
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This church suffered severe fire
damage, but by quickly deploying
the specialist loss adjusters and
restorations teams, we were able
to complete the works very quickly,
and to enable the clubs and groups
who used the premises to continue
functioning throughout the process
– providing valuable support to the
wider community.
”
Natasha Baugh, Team Leader,
Claims Department, Ansvar UK
Strategic Report – Global trends in financial services
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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 40).
Trend
Our perspective
Trend
Our perspective
Low trust in financial
services
Trust is at the heart of all business relationships and is a result of a combination of ethics and
competence. Ethical behaviour is driven by being purpose-led, honest and fair. Competent
businesses create value, act as a force for innovation and drive economic prosperity.
Historically, financial services has been the least trusted business sector and falls far short
of the levels of trust achieved by the technology, automotive and entertainment sectors.
During 2020, the insurance industry faced further challenges to its position, with test cases
and class actions raised in a number of countries including the UK.
Ecclesiastical aims to be the most trusted and ethical financial services group.
Our distinct positioning is supported by our business model which underpins our behaviours
– we have high levels of trust placed in us that are rare amongst financial services businesses.
This is evidenced by recognition of our UK insurance business as the most trusted insurer by
consumers (top of the Fairer Finance league table for over ten years), and the market-leading
reputation and ethical approach of our investment business (winning the Moneyfacts award
for the twelfth consecutive year).
Geopolitical
landscape
Uncertainty within the geopolitical landscape continues with an ongoing shift from globalisation
to localism (including increased trade protectionism). The race to produce Covid-19 vaccines has
led to some increased cooperation between nations.
Many countries have seen a significant economic impact during 2020. Pandemic containment
measures have led to rising unemployment, increased government debt and left some sectors
in critical condition – creating the conditions for future economic instability.
There are signs that the fragmented status quo is beginning to improve. The UK is seeking
to create a stable landscape following its Brexit transition period and there are stable
governments in all our geographies.
Our businesses continue to monitor both the local and global landscape to respond
to the potential impacts arising from this uncertainty.
Climate change
response
Average temperatures have risen over the past decade which is expected to lead to more
extreme weather events. Increased urbanisation is putting further pressure on natural
defences, increasing their vulnerability to rising sea levels. Together these forces are likely
to lead to greater concentrations of insurance losses. This will undoubtedly have an impact
on the way that risk is understood and managed.
Even in the midst of a global pandemic, the climate emergency dominates the top five risks
in the World Economic Forum’s Global Risks Report. After infectious diseases, climate action
failure is the top risk by impact. There is growing recognition that governments need to do
more to manage their climate change risk as evidenced by a significant increase in catastrophic
weather events over recent years.
It is crucial that climate change is tackled during the 2020s. The UN Intergovernmental Panel
on Climate Change (IPCC) has advised that global warming must be kept to a maximum of 1.5˚C
within 12 years to reduce the risk of catastrophic outcomes for hundreds of millions of people.
The new US President has an ambitious list of climate goals including net-zero emissions
by 2050 – this would have significant positive implications for the 1.5˚C target.
Investor demand, rather than changes in regulation, is more likely to be the key driver
of increasing environmental responsibility in financial services. EdenTree, our responsible
investment business, has continued to focus on climate change engaging with companies
on the opportunities arising from ESG (environmental, social and governance)
focused investing.
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Global trends in financial services
32
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Trend
Our perspective
Trend
Our perspective
Regulation
Regulation continues to evolve to reflect the global and local context: common themes
are governance, culture and accountability in order to address the historic financial crisis
and associated misconduct issues. There is regulatory scrutiny on technology and data
management given the increasingly digitalised and interconnected world.
Demographics and
social trends
While there has been significant change in demographics and social trends since the turn
of the 21st century, the last 12 months have accelerated this change. Although the Covid-19
pandemic significantly reduced international migration and travel, global interconnectivity
has increased.
An increased focus on credit risk, financial resilience and operational resilience is expected,
shaped in part by the Covid-19 pandemic. Prudential standards are expected to be revised
with implications for financial institutions across the globe. It is supposed that the European
Union (EU) will seek to reduce the impact on its banks in order to support growth as part
of the recovery from the Covid-19 pandemic.
The EU and UK regulatory frameworks are expected to diverge in both timing and substance.
This is expected to increase regulatory complexity in financial services. Following the UK’s exit
from the EU, our Ecclesiastical Ireland business is now authorised to trade as a Third Party
Branch – enabling us to continue offering our specialist proposition in Ireland. Our Northern
Ireland portfolio has been repatriated to our Ecclesiastical UK business.
Our insurance businesses responded to the Covid-19 pandemic by offering support to our
customers, clients and business partners including pandemic-related guidance, cover extensions
or policy adjustments where appropriate, and speedy claims settlement where cover exists.
Ecclesiastical participated in the FCA’s business interruption test case in order to bring maximum
clarity to our customers in the shortest amount of time. The High Court agreed that losses arising
from the pandemic are not covered by our business interruption policies.
We continue to respond to the regulatory context across all our businesses, to continue
to operate in compliance with law and regulations and support our customers and
business partners.
There has been a significant shift to a digital-enabled society, with a huge uptick in the online
economy and an explosion in remote working due to Covid-19 control measures in many parts
of the world. This has accelerated the pace of technological change seen in recent years and
amplifies the increased expectations from customers and business partners seeking enhanced
tailored propositions.
There is growing appetite for ethical employers and businesses, particularly from young people.
A rising focus on the climate emergency is beginning to influence buyers and partners with
a more proactive requirement for proven ethical and trusted companies. As award-winning,
trusted providers, our businesses continue to attract and retain prestigious customers across
our geographies.
Data, technology
and analytics
Data is the world’s most valuable asset, and has been called the oil of the digital era. To enhance
their competitive advantage, data-driven strategies are being adopted by businesses across
the world.
The online economy has become ever more significant – the shift to trusted brands and platforms
has continued. The speed of digital adoption has increased against the backdrop of the Covid-19
pandemic with containment measures meaning that retail businesses have struggled to operate
or faced significant restrictions.
Greater global interconnectivity means that cyber security remains critical with
the increased threat and potential for harm from cyber-attacks for governments,
businesses and individuals alike.
Our businesses continue to respond to the opportunities arising from this evolving landscape
to work with current and emerging technologies. Our businesses have appropriate measures
in place and continue to raise awareness of cyber-risk to our customers, business partners
and employees.
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Ecclesiastical Annual Report & Accounts 2020Section Two
Ecclesiastical Ireland
Playing our part in protecting a national treasure
The National Opera House in Wexford, South East Ireland, is world-renowned
for its opera festival – Wexford Festival Opera. Since 2014 we’ve become a
trusted partner and supporter of this prestigious event, and of the opera house.
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The history of the festival, which in 2017
won ‘Best Opera Festival in the World
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at the International Opera Awards, dates
back to 1951 when a group of opera
enthusiasts in Wexford decided to stage
an opera in their little theatre. What
was then the Theatre Royal, was later
demolished and the magnificent National
Opera House built in its place. Since the
grand reopening in 2008, it s hosted over
1,300 live performances to over 400,000
people from across Ireland and around
the world.
’
The landmark building lies at the heart
of Wexford. Housing two diverse
-
- -
performance spaces, it has a state of the
art auditorium and horseshoe shaped
balconies that enhance the performance
experience for both audiences and
performers. This, along with its rooftop
café and bars, make it a magnet for the
local community providing entertainment
and employment.
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The magnificent building is Ireland s first
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custom built, multi purpose opera house
and the only national institution of this
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kind outside of the capital. We are
proud to partner with and protect such
a valuable national institution.
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Over the years, various events have
strengthened our relationship. Besides
providing ongoing risk management,
we ve dealt with a particularly technical
claims settlement and maintained our
–
sponsorship support
up to and including
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2020 – when Covid 19 forced the festival
to move to a virtual setting, hosting
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a series of high profile recorded and
live performances, which were
broadcast nationally.
“
The close partnership with Ecclesiastical
has been instrumental in enabling
Wexford Festival Opera and the National
Opera House to continue to flourish.
As our valued and trustworthy insurer,
Ecclesiastical has provided professional
and efficient advice and support. And as
an enthusiastic and visionary sponsor,
Ecclesiastical has provided essential
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support to many of Wexford Festival s
annual opera productions. It has also
crucially supported from the outset the
Ecclesiastical Wexford Festival Volunteer
of the Year Award, which celebrates the
strong ethos of volunteerism, which has
been the bedrock of the Festival since
its foundation. This enduring partnership
has been so beneficial to the entire
‘
’ ”
Wexford family .
David McLoughlin, Chief Executive,
Wexford Festival Opera
and The National Opera House
“
The National Opera House and the
Wexford Festival Opera are the result
of great vision combined with great
passion and the hard work of a dedicated
group of people. Partnering with the
Festival and the venue brings the
specialist knowledge and insurance
strength of Ecclesiastical together with
the talent, vision and passion that have
made The National Opera House and
the Wexford Festival Opera stand out
”
international successes.
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Mary Kelly, Chairperson,
Wexford Festival Opera.
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Strategic Report – Our business model and strategy
36
37
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
Strive to be the
most trusted and ethical
financial services group
Contribute
to society’s
greater good
Provide products
and services that
our customers
value and trust
Build enduring
relationships,
based on trust
Develop
deep specialist
understanding
and expertise
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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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Our business model and strategy
38
Section Two
Strategic Report
Strategy in action
39
40
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 charitable owner and
demonstrating that a distinctly ethical, specialist financial
services group can succeed in competitive markets.
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Strategy in action
40
41
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Strategy in action
Our strategic goal is: To be the most trusted and ethical specialist
financial services group, delivering more than £100m to charity
and our communities.
In mid-2020, the Group adapted its strategy, formalising its
response to the Covid-19 pandemic. The strategy demonstrates
the Group’s aim to support charities and widens this ethos to its
communities. This strategy enables our business to focus on
some of the more immediate needs and opportunities arising
over the next year, while continuing to have a positive impact
on the communities that are important to the Group.
Considerable progress has been made by our business towards
its donations target and it is expected that this will be achieved
in 2021. This 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.
Charitable purpose underpins our business strategy.
Our business is one of the UK’s top corporate donors and 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.
Our strategy reflects our response to global trends and the
external market context, together with the actions needed
to sustain our distinctive position in our chosen markets.
We have continued to deliver the key elements of our
strategy while investing in our businesses and delivering
value to our customers.
Most trusted specialist insurer
We achieve
this by being
Trusted – Operating with the highest ethical
standards and living our customer promise
and our intermediary promise.
Strategy in action
Customer satisfaction
Specialist – Focusing on customer
segments where we have sustainable
competitive advantage
Customer-led – Delivering a value
proposition focused on outstanding
customer experience built on insight,
innovation, personalised engagement,
ethics and true product differentiation
• Attracted and retained prestigious customers
across all our segments in all our territories
with ongoing recognition of valued and
trusted approach
• The first UK insurer to sign the C19 business
pledge to boost opportunity and social
mobility in response to the pandemic
• Provided local support to our brokers
and customers with advice on specialist
topics including risk management, across
all geographies
• A specialist, expert voice, provided
a roadmap for business resilience and
published insights into risks in the
Heritage and Education sectors
• Continued to provide tailored support
to our church customers through our team
of Church Insurance Consultants (CIC) who
offer a range of support including
an introduction to Church insurance
and risk management guidance
• 98% overall satisfaction for our
Ecclesiastical UK claims service
with an 84% Net Promoter Score
• 98% of church customers are satisfied
with our service, with 86% extremely
or very satisfied
• 97% of brokers that place business with
Ecclesiastical UK are satisfied with our
service, with 83% of brokers stating that
we understand what truly matters
1 Excludes ‘don’t know’ responses. Source: Group Insight, January 2021
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Expert – Possessing outstanding expertise
in core risk and insurance disciplines
Efficient – Leveraging innovation and
technology to keep costs as low as possible
Agile – Leveraging data and our smaller
size as an advantage to drive pace
of decision making
• Launched online tailored fundraising advice
hubs for church customers and charity
customers, supported by bespoke webinars
to address specific needs and build resilience
in the face of Covid-19
• Launched the Hub for Education to support
our educational customers in managing their
operational and strategic risks
• Launched toolkits for brokers to support
them with their social media presence and
their mental wellbeing
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• 81% of brokers that place business with
Ecclesiastical UK believe that we are
an ethical and responsible business
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Strategy in action
42
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Most trusted specialist insurer
Best ethical investment provider
Awards and
accreditations
Recognised externally for our expertise and
ethical approach, as evidenced by a number
of awards:
Ecclesiastical UK:
Ecclesiastical Canada:
• Canada’s Top 100 Employers for Young
People (8th consecutive year)
• Elite Women in Canadian Insurance
• Fairer Finance #1 for Home Insurance,
Spring 2020 and Autumn 2020
(12th consecutive time)
• Greater Toronto Top Employer
(3rd consecutive year)
• Insurance Post Claims & Fraud Awards:
• Insurance Business Canada Award
Personal Lines Team of the Year
for Woman of Distinction
• Insurance Post Claims & Fraud Awards:
Ecclesiastical Ireland:
Customer Care Individual
• Drum Roses Creative Awards: Gold Award
Chartered Insurer status
for Corporate/Promotional Literature
(Art & Private Client Review magazine)
Ansvar UK
• Chartered Insurance Institute:
• Chartered Insurance Institute:
Chartered Insurer status
• Better Society Awards: Pro Bono Company
of the Year
• Cheltenham and Gloucester CII:
Achiever of the Year and runner-up
• Manchester CII: Jubilee Prize for excellence
in Claims Practice examinations
We achieve this by
Promoting socially responsible investment
– we have an industry-leading reputation
for our socially responsible investment funds
and investment thought leadership
Listening to our clients – we have
implemented a client feedback programme
to create greater proximity to our clients
and their evolving needs
Strategy in action
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 meeting the demands
of our investors
Enhancing our infrastructure – we are building
a platform for growth and increased efficiency
• Recognised for responsible and sustainable
• Reinforced our thought leadership position
with responsible investment expert briefings
and press commentary on topics ranging
from Fast Fashion to Fossil Fuel Divestment
and Healthy Futures
• Continued to strengthen our distribution
capabilities including implementation
of a new customer relationship
management (CRM) solution
investment with a strong long-term
performance record
• Acknowledged as a pioneer and thought
leader in our markets
• Continued to engage 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 (to increase gender diversity
at board and senior management levels)
• Published our acclaimed specialist EdenTree
Insights research with topics including
The future of road transport; Animals,
business and investment; and Supply chains:
at the heart of business
Awards and
accreditations
• Moneyfacts Best Ethical Investment Prov
ider
(12th consecutive award)
• Investment Week Sustainable & ESG
Investment Awards: Outstanding
Contribution to the Industry (Sue Round)
• Retained Tier I Status under
the Stewardship Code
• Sustained A+ rating for Strategy and
Governance in the PRI Transparency Report
• Gained eighth accreditation under
the European SRI Transparency Code
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Ecclesiastical Annual Report & Accounts 2020Section Two
Section Two
Strategic Report
Key Performance Indicators
Financial
Non financial
-
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48
Strategic Report – Strategy in action
44
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
• Maintained supportive and responsible
• Assessed behavioural insights to enhance
service during Covid-19 lockdown
broker etrade user experience
Customer satisfaction
Awards and
accreditations
• Introduced product cover adaptations
quickly to support customers as their
business models evolved due to the Covid-19
pandemic. Worked with carriers to reduce
premiums to reflect less usage (SEIB)
• Provided a comprehensive and efficient bridge
to carriers to support business interruption
claims queries from their customers
• Created new schemes in response
to understanding specialist client needs
• Created quick win opportunities to support
customer propositions across the Broking
and advisory division
• Acquired WRS Insurance Brokers,
strengthening our proposition to charities,
churches and community groups
• Continued to meet the key financial
concerns of clergy and church-related
people and offered financial support
seminars in a number of dioceses (EFAS)
• High levels of customer satisfaction
in broking:
– 97% of customers satisfied with the serv
ice
(SEIB)
– 85% of customers extremely or very
satisfied with the service (EFAS)
– 97% of customers extremely or very
satisfied (Lycetts*)
• 100% very/extremely satisfied score from
funeral directors for the second year
(Ecclesiastical Planning Services (EPSL))*
• 100% satisfaction across the recently-
acquired Funeral Planning Services book,
a significant improvement on their
previous scores (EPSL*)
*part of the Ecclesiastical Insurance Group
• British Claims Awards, Personal Lines
• Highly commended for the following awards:
Broker of the Year (SEIB)
• Excellence in CII diploma examinations
– the Kemp Prize, Chelmsford and South
Essex CII (SEIB)
• Chartered Insurance Broker status
across all the Group’s broking businesses
(SEIB / Lycetts* / Lloyd & Whyte*)
–Young Insurance Woman (SEIB)
–Insurance Age UK Broker Awards:
Marketing and Customer Engagement
Award (SEIB) and Covid-19 Response
Award (SEIB)
*part of the Ecclesiastical Insurance Group
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Key Performance Indicators
46
47
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 exceed £100m
in charitable giving
by September 2021.
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
Group plc (Ecclesiastical
Insurance Office Group’s
parent company).
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.
Despite the impacts of Covid-19,
the Group has continued to give to charity
and donated £2.7m during 2020.
£m
40 -
The original target of £100m by 2020
was extended and enhanced to reach more
than £100m by September 2021.
30 -
24.7
27.5
32.5
18.8
20 -
10 -
0 -
2.7
2016 2017 2018 2019 2020
Ecclesiastical’s capital cover under
Solvency II has remained broadly stable.
£m
Solvency II capital cover
(unaudited)
During 2020, own funds reduced largely
reflecting unrealised losses on equity
investment assets held for the long term,
together with the impact of reduced
discount rates applied to Pension Fund
and General Insurance liabilities. Significant
improvement in equity markets occurred
after the initial Covid-19 related impacts,
although overall capital cover has reduced
for the year because reductions in the
market risk are offset by less available
future tax absorbency remaining,
and insurance risk has increased, driven
by higher opening discounted reserves.
The figures for 2020 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.
600 -
500 -
400 -
300 -
200 -
100 -
0 -
199 269
292
278
295
257
306 256
264 263
2016 2017 2018 2019 2020
(ii)
(ii)
(i)
(i)
SCR (£m)
Excess own funds (£m)
Capital cover (%)
(i) the 2017 and 2018 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 and 2019 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 or loss
before tax
The Group’s profit before
deduction of tax.
The Group reported a loss before tax in 2020
of £15.7m (2019: profit before tax £73.3m)
as a result of market impacts, largely
from the Covid-19 pandemic, impacting
the investment return.
Our Broking and Advisory business continued
to contribute profits to the Group result while
our Investment Management business reported
a small loss due to continued investment
in infrastructure.
£m
80 -
60 -
40 -
20 -
0 -
82.2
73.3
62.5
15.4
(15.7)
%
- 250%
- 200%
- 150%
- 100%
- 50%
- 0 %
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 2020 can be found in the
Group Remuneration Report
on page 136. 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
2020 can be found in the
Group Remuneration Report
on page 136. Our target over
the longer term is to achieve
a 95% COR.
More information on underwriting performance1
is given below.
(20) -
See the Financial Performance Report within
the Strategic Report for more details.
2016 2017 2018 2019 2020
Profit/(loss) before tax
Underwriting profit1
In 2020, the ratio was slightly above the longer
term target. This reflects the impact of Covid-19,
adverse weather events in Australia and Canada
and the anticipated lower prior year releases
and reserves strengthening.
The Group continues to keep underwriting and
pricing discipline at the centre of its strategy,
prioritising profit over growth in the competitive
business environment.
For a breakdown of how COR is calculated,
see note 36 to the financial statements.
See the Financial Performance Report within
the Strategic Report for more details.
%
105 -
100 -
95 -
90 -
85 -
80 -
95.1
91.1
89.8
86.9
86.4
2016 2017 2018 2019 2020
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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Ecclesiastical Annual Report & Accounts 2020Section Two
Section Two
Strategic Report
Financial Performance Report
49
50
Strategic Report – Key Performance Indicators
48
Measure
Performance
Our NER decreased in 2020 to 52.4% driven
by a 9.6% increase in net earned premium.
Expenses continue to include our programme
of strategic investment in technology,
our people, innovation and loss prevention
along with specialist risk management
services that help to protect organisations
and irreplaceable heritage.
For a breakdown of how NER is calculated,
see note 36 to the financial statements.
Despite political and economic challenges,
the year ended with far less uncertainty and
volatility compared to what was experienced
from March 2020 as markets reacted
to the measures taken by governments
to tackle Covid-19.
The pandemic resulted in a challenging year,
limiting the assets clients had available to invest,
in particular charities. Against this backdrop,
total net new inflows were £58m.
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.
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 40 and our Corporate Responsibility Report starting
on page 78.
(%)
100 -
80 -
60 - 51.5 53.6 54.5 53.0 52.4
40 -
20 -
0 -
£m
250 -
200 -
150 -
100 -
50 -
2016 2017 2018 2019 2020
204
173
61
58
(38)
0 -
(50) -
2016 2017 2018 2019 2020
Comparatives have been updated to reflect
the inclusion of certain third party net flows
previously excluded.
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Financial Performance Report
50
51
Financial Performance Report
The year 2020 has been one of the most challenging in living
memory for us, our brokers and our customers. It has challenged
us in ways we might never have expected but demonstrated
the importance of Ecclesiastical’s purpose and its financial
and operational resilience.
We entered 2020 from a position of strength,
but as the global economy slowed from
the impacts of the pandemic, our financial
performance suffered in line with the rest
of the economy. The real measure of our
performance in 2020 however has been
how we responded to support our customers,
brokers, people and communities.
Following a strong financial performance
in 2019, reported loss before tax of
£15.7m1 (2019: profit before tax £73.3m)
was principally due to investment losses
experienced after significant market falls in
the first half of the year, offset by steady gains
later in the year. The Group’s underwriting
businesses reported profit of £12.1m (2019:
£20.0m) after £18.7m for Covid-19 related
claims where there is confirmed cover,
demonstrating continued progress in our
underlying performance. To ensure the Group
delivers sustainable profitable growth, we
have continued to make strategic investments
in technology, property and our people
and this is reflected both in our capital
expenditure and other costs.
We continue to be a trusted partner to our
customers and brokers, and this is reflected
in our strong retention and satisfaction levels,
which have supported our growth in gross
written premiums (GWP) of more than 10%.
Despite the unprecedented challenges
of 2020, we have continued to invest in the
future of our business, including development
of our new insurance underwriting platform
and our new head office.
Our business is managed with a long-term
view of risk and as a result, we have a strong
capital position that can withstand short-term
volatility and our strong credit ratings with
S&P and AM Best were both reaffirmed during
the second quarter of 2020. Our Solvency II
regulatory capital position remains above
regulatory requirements and risk appetite
and was further supported with the issuance
of €30m subordinated debt in February 2021,
as the Group seeks to take advantage
of profitable growth opportunities.
General insurance
The Group’s underwriting businesses have
proven resilient in 2020, reporting a Combined
Operating Ratio2 (COR) of 95.1% (2019: 91.1%).
Underlying underwriting performance has
been resilient, despite the impact of adverse
weather events in Australia and Canada
and the impacts of anticipated lower prior
year releases and reserves strengthening.
Our strategy has continued to deliver
moderate GWP growth by maintaining our
strong underwriting discipline and focusing
on profit over growth. GWP grew 11%
to £437m (2019: £394m), supported by
retention and rate increases as well as new
business towards the later part of the year.
United Kingdom and Ireland
In the UK and Ireland, financial year
underwriting profits decreased to £12.3m
(2019: £20.4m) giving a COR of 92.5% (2019:
86.8%) and GWP grew by 7.6% to £276.6m
(2019: £257.1m). This represents another
strong performance with positive results
on both the property and liability accounts.
As expected, the level of prior year releases
during 2020 was significantly lower than
in 2019. The run-off of unprofitable business
exited in 2012 and 2013, combined with our
prudent approach to reserving have positively
impacted the overall result over the last four
years. We would expect to continue to see
a modest level of prior year releases,
but with a greater contribution coming from
our current year underwriting performance.
Both property and casualty accounts
generated net underwriting profits
on a current year basis, despite the impacts
of Covid-19 and a significant church fire.
Current year loss ratios are in line with
expectations, reflecting favourable
underlying claims performance and fewer
weather events. We have also seen the
benefit of rate increases in a number
of portfolios.
1 Further details can be found in note 5 to the financial statements.
2 Alternative performance measures, refer to note 36 to the financial statements for further information.
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Ansvar Australia
Our Australian business reported
an underwriting loss of AUD$1.2m resulting
in a COR of 102.2% (2019: AUD$6.0m
loss, COR of 114.1%). GWP grew by 18.5%
in local currency to AUD$149.9m (2019:
AUD$126.5m) with strong new business
growth, retention and rate increases.
Action has been taken to exit from
unprofitable business and the current
year performance of the ongoing business
has shown improvement over 2019.
The property account was adversely
impacted by early 2020 weather events
and Covid-19 related claims and the liability
account was strengthened for physical
and sexual abuse (PSA) reserves to reflect
higher claims reported in 2020.
Canada
Our Canadian business continued its track
record of delivering premium growth,
reporting a 20.2% increase at CAD$131.5m
(2019: CAD$109.5m) supported by strong
retention, growth in new business and
rate increases.
Canada reported an underwriting profit
of CAD$7.4m resulting in a COR of 91.2%
(2019: CAD$3.4m profit, COR of 95.1%).
Despite the impact from Covid-19 and
two weather events, the property book
performed well, driven by fewer large
losses and a favourable development
on prior year claims. The liability
account also performed well delivering
an underwriting profit despite some
adverse development on prior year claims.
Trading conditions remained competitive
and we expect this to continue in a number
of areas. The education sector was
particularly competitive, although
we observed some market hardening
in property, specifically for larger
property exposures. We have continued
to achieve high levels of retention and
carried positive rate change where needed,
whilst continuing to have very strong
customer satisfaction and Net Promoter
Scores across the UK and Ireland. Market
hardening in some property lines and
a strong operational response to keep
trading through Covid-19 has also enabled
us to bring on good levels of new business
at the required rate, and our Real Estate,
Heritage and Art & Private Client business
delivered particularly strong growth
during 2020. GWP in respect of our Faith
business remained in line with prior year
reflecting a good result in challenging
market conditions.
We expect the market to continue
to harden in some parts of the property
portfolio as competitors correct portfolios,
and also in some parts of the casualty
sector. Education is likely to remain a key
competitive area as the UK Government’s
risk protection arrangement (RPA) attracts
local authority maintained schools
in addition to academies. This has left the
independent schools sector at increased
competition from all education insurers.
Our strategy over the medium term
is to deliver moderate GWP growth,
while maintaining our strong underwriting
discipline, as our philosophy is to seek
only profitable growth. We will continue
to deepen our specialist capabilities
through investment in technology and
innovation together with the propositions
and excellent service that our
customers value.
Investment Management
The Group’s investment management
business, EdenTree, incurred a loss
before tax for the year of £1.0m (2019:
loss before tax £0.3m) as it continued
to invest in infrastructure. The Covid-19
pandemic resulted in a challenging year,
limiting the assets clients had available
to invest, in particular charities. Against this
backdrop, EdenTree were pleased to report
£58m of net new money for the year having
reached a historic high of £204m in 2019.
Global equity markets dipped significantly
in March and April due to the pandemic,
the recovery accelerating towards the
back end of the year with some markets
approaching opening levels. Assets under
management were £3.1bn (2019: £3.1bn)
and £2.3bn (2019: £2.3bn) excluding
assets managed for the Group.
Net income at £12.4m was slightly
down (2019: £12.6m). This is due
to the combination of lower fees
earned on assets, a trend which
has been seen across the industry
in recent years, and market turbulence
over the course of the year.
Long-term insurance
Our life insurance business, which
is currently closed to new business,
reported a profit before tax of £0.5m
for the year (2019: £0.3m). Assets and
liabilities are well matched, and the small
profit is in line with our expectations
for this business.
Investments
With the conclusion of a Brexit deal and
the US election, the year ended with far
less uncertainty and volatility compared
to that experienced from March 2020
as markets reacted to the measures taken
by governments to tackle Covid-19.
The Group’s net investment loss of £4.2m
as compared to the 2019 net investment
profit of £74.4m can be largely attributed
to performance of UK equities. The Group’s
fund nevertheless produced a total return
ahead of its asset benchmark over the year.
The lower than expected return
on investments of £20.9m reflects market
conditions and reactions to the pandemic
during 2020 (2019: £26.2m). The impact
from Covid-19 was also reflected in fair
value losses on financial instruments
of £13.6m which contrasted with gains
of £56.0m in 2019. Whilst 2020 ended
with less uncertainty, as for all businesses,
there remains economic uncertainty
which could impact the performance
of our investments. However we remain
confident in our long-term value
investment philosophy, and are
relatively defensively positioned.
Within our UK equity portfolio, small
and mid-cap bias proved beneficial
as the FTSE Small-Cap and FTSE 250
indices outperformed the FTSE All-Share.
Our directly-held sterling bond portfolio
underperformed the FTSE Gilts benchmark
by 5.4%, as the longer dated index
outperformed on falling yields and
our portfolio has a higher proportion
of short dated bonds.
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 £10.9m
loss recognised within net investment
return (2019: £9.9m loss).
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Broking and advisory
Outlook
Whilst the conclusion of Brexit and the
US election towards the end of 2020
provided some market stability, we are
still living with Covid-19 and the economic
consequences are expected to continue.
However, the Group’s long-term view
to managing and investing in the business
has underpinned its financial resilience
and strong capital position and we are
well positioned for the future.
We remain focused on our vision to be the
most trusted and ethical financial services
group, and whilst we can look forward with
more hope, we will do so whilst continuing
to exercise caution where we operate
around uncertainty and market disruption.
We will continue to focus on delivering
sustainable profit growth and 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
Overall, broking and advisory had modest
growth in income and profit, reporting
a profit before tax of £2.4m (2019: £2.1m).
This area of our business includes
our insurance broker, SEIB Insurance
Brokers (SEIB) and our financial advisory
business, Ecclesiastical Financial Advisory
Services (EFAS). SEIB reported an increase
in profit before tax to £2.8m (2019: £2.6m)
and during the year, extended its own
range of specialisms with the acquisition
of WRS Insurance Brokers, recognised
as specialists in charity, church and
care and community groups. EFAS
reported a loss of £0.3m in the year
(2019: £0.4m loss).
In addition to these broking and advisory
businesses our immediate parent company,
Ecclesiastical Insurance Group holds
interests in the specialist broker groups
Lycetts and Lloyd & Whyte and a prepaid
funeral plan business, Ecclesiastical
Planning Services. Whilst the results
of these are not included within the
Ecclesiastical Insurance Office plc Group,
they are managed together as part
of Ecclesiastical’s wider broking and
advisory group of businesses. The broker
businesses were profitable in 2020 but
the prepaid funeral plan business was loss
making as a result of the adverse impacts
caused by lockdown measures in the UK.
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‘We will continue to
focus on delivering
sustainable profit
growth and evolve our
business for the greater
good of society and to
make a positive impact
on people’s lives.’
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Ecclesiastical Annual Report & Accounts 2020Section Two
SEIB
Flexibility for equestrian businesses during Covid-19
With over 50 years’ experience in the equestrian industry, we remain one
of the leaders in this specialist field. Working in an industry for this length
of time, it’s fair to say that there isn’t much that surprises us anymore
– and then Covid-19 hit. Like everyone else, we knew relatively little about
the virus,but one thing we were certain about: it was going to have a serious
effect on our clients.
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We immediately set to work reducing
cover for livery yards and riding schools,
such as Cheston Farm in South Devon,
who have been our customer for over
10 years. This successful riding school
and livery yard was set up by husband
and wife team, Sophie and Andrew
Osborne. As a result of their hard work
and commitment, the centre boasts
some of the best facilities in the region
and plays host to a varied programme
of competitions, clinics and events.
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In March, we made a range of cover
changes to enable cost cutting. These
included the reclassification of 28 tuition
horses to private horses; removing cover
for shows, camps and pony clubs, along
with cover for freelancing, and amending
the business description as a whole
to reflect the reduced rating. We made
further reductions in April, and from May
onwards, we ve been in regular contact
with Andrew to increase cover in line
with the easing of lockdown restrictions.
’
Over the last seven months, we have
been working very closely with Sophie
and Andrew to ensure that their
insurance cover and price reflected
only the activities that they were
allowed to carry out as a result
of Covid 19 restrictions.
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“
Lockdown was like a bolt from the blue.
Overnight 90% of our income was gone,
yet 100% of our overheads remained;
we had to focus quick and hard on all
of our costs and get them down.
Furlough saved the staff, moving
our borrowing to interest-only
served to protect our reserves,
and the flexibility of our insurance
’
offered by SEIB s specialist team
saved us money – we could turn
the tap up or down, depending
on what we were able to do, and
the policy adjustments that went
with this were instant. When we
thanked the team, we were told
simply, ‘not needed, we are just
’ ”
doing our job .
Andrew Osborne, Proprietor,
Cheston Farm, South Devon
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Section Two
Strategic Report
Risk Management Report
Principal risks
59
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‘With over 50 years’
experience in the
equestrian industry,
we remain one of
the leaders in this
specialist field.’
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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
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Business
performance and
capital management
defence
d three lines of
an
framework
ntrol
co
Internal
Risk
management
process
Values and culture
People, systems and processes
Governance
The risk management framework is integrated
into the culture of the Group and is owned
by the Board. Responsibility for facilitation
of the implementation and oversight is
delegated via the Group Chief Executive
to the Group Risk Function, led by the Group
Chief Risk and Compliance Officer.
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;
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
(GRC), 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 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 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 of board sub committees,
management and executive forums, position
descriptions and functional charters.
The Group’s Risk Management Framework
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.
Key to the successful operation of the
internal control framework is the deployment
• 2nd Line (Reporting, Oversight and Guidance)
is responsible for assisting the Board
in formulating risk appetite, establishing
minimum standards, developing appropriate
risk management tools, providing oversight
and challenge of risk profiles and risk
management activities within each of the
business units and providing risk reporting
to executive management and the Board.
• 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.
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 considers
to be 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.
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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 Group 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, 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 Group Risk Committee.
The Covid-19 pandemic has had
a wide-ranging impact on the Group
and the environment in which we operate.
The management of various risks arising
from the evolving position has been
co-ordinated by the GMB. As well
as significant operational implications there
were impacts on the insurance policies
written by Group companies and
on the Group’s investment assets.
A Crisis Management Team (CMT) was
convened as the Group’s Business Continuity
Plans were triggered, and this remained
in place throughout the year to oversee
the ongoing management of operational
elements. The primary focus of the CMT was
oversight of the effective transition to remote
working, with particular emphasis on people
and technology. This event provided the
Group an opportunity to test its operational
resilience in practice and overall the required
activity was completed successfully over
a relatively short time period.
Responses to other specific risk-types were
delegated to existing bodies within the risk
framework, with focused management groups
set up where considered appropriate.
The UK based general insurance business
was one of the eight insurers involved
in a test case brought by the Financial
Conduct Authority to seek clarity on the
eligibility of business interruption claims
linked to Covid-19. The judgement confirmed
that losses arising from the Covid-19
pandemic were not covered by our BI policies
considered in the case. This high profile case
had potential reputational implications for the
whole insurance industry. However, there
are a small number of policies that do provide
cover and appropriate provisions are in place.
Substantial falls in equity markets during the
first quarter of 2020, as the pandemic took
hold globally, adversely affected the value
of our investment assets. We monitored
markets closely and used derivatives to
provide protection against the risk of further
falls, though overall we maintained our
existing investment approach and made
no material changes to our asset mix.
Markets at least partially recovered later
in the year and we continue to hold
a diversified portfolio of assets including
equities which we believe remain a good
prospect for long-term returns. Consequently,
we continue to take a relatively high level
of market risk, which is well understood
and closely managed.
Uncertainty around the eventual outcome
of Brexit negotiations continued during 2020.
The main risk identified for the Group
as a result of Brexit was the loss of our
ability to carry out business in the Republic
of Ireland using the freedom to provide
services previously afforded by the United
Kingdom’s membership of the EU. To mitigate
this risk the Ireland branch has been granted
authorisation by the Central Bank of Ireland
to operate as a Third Country Branch ensuring
continuity of operations for our customers.
The profitable management of our insurance
businesses on a portfolio basis in hardening
markets continues to be a key area of
focus for the Group; ensuring that the
business written and retained is profitable
and sustainable. Competitor activity is an
ever-present risk across all our business
operations and chosen niches and 2020 was
no exception. Our strategy remains to achieve
controlled and profitable growth within our
defined specialist niches. During 2020 there
have been improvements in rate strength and
we have maintained our strong underwriting
discipline and risk appetite.
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
participated in one of the investigations
that delivered its report in 2020. Further
investigations as part of the Inquiry are
underway and we continue to monitor these
and also developments in the other territories
in which we operate, to determine the
potential impacts on such claims.
The Covid-19 pandemic was the trigger for
a high volume of regulatory guidance issued
in all territories during 2020. Consequently,
some other elements of regulatory change
have been delayed, though we expect
the pace of change to increase again
as we move forward. 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 with continued commitment to
placing customers at the centre of everything
we do.
Cyber risk remains a constantly evolving
threat due to the threat of zero-day attack.
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 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.
Threat actors view the disruption arising from
the move to a remote working environment
as an exploitable opportunity and there has
been a general increase in social engineering
and phishing attacks across the financial
sector. Employee awareness and vigilance
is therefore highly important at this time and
the Group operates an ongoing programme
of training and awareness exercises.
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, it is important that we take
actions to mitigate and manage these risks
now. Our exposures to climate change
risk include transition risk, primarily related
to our investment portfolio, and physical risk
which additionally affects the insurance
risks that we cover.
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Ecclesiastical Annual Report & Accounts 2020Section Two
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EdenTree Investment Management
Making a difference for three decades
This year, for the twelfth consecutive year, EdenTree celebrated
winning ‘Best Ethical Investment Provider’ at the Moneyfacts
Investment Life & Pensions Awards.
’
As one of the pioneers of responsible
and sustainable investment, such
longstanding recognition – in an award
that s become increasingly competitive
in recent years – is a testament to how
we continue to lead in this market
after more than thirty years.
That s because for us, responsible
and sustainable investing isn t a fad.
Instead, it s a long term dedication
-
to achieving profits with principles.
’
’
’
experienced team, which has over 100
years of combined experience investing
to make a difference.
“
’
Repeatedly, we ve found that these
credentials, and our rigorous responsible
and sustainable investment process,
have helped us to continually act
as responsible stewards of our clients
’
capital over the long term; avoiding
the ‘greenwash’ seen with increasing
frequency elsewhere in the marketplace.
’
-
One of the things that made me excited
to join EdenTree was the company s
thirty year track record of responsible
and sustainable investing – there are
very few others in the market that can
claim that. We know that we have
a great business and the right platform
for our next stage of growth, with
an authenticity that is hard to match.
I am looking forward to working with
the team to further our success
in the future.
”
While other asset managers are jumping
on the environmental, social and
governance (ESG) investing band wagon,
EdenTree can point to authenticity that
stems from longevity, and to a highly
And since the Best Ethical Investment
Provider’ award is voted for by the
financial adviser community itself,
it s proof that our clients know this.
’
Andy Clark,
Chief Executive Officer
EdenTree Investment Management
Strategic Report – Principal risks
66
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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
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 the
Company’s 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 compliance
• 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
• A portfolio management framework is in place to ensure clear
understanding and allow targeted actions to be taken
• 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 with reporting to the Board
There have not been material
changes to this risk during
the year.
This risk is not considered
to have changed materially
during the year. Whilst the
majority of our policies have
been found not to respond
to Covid-19 claims we have
made appropriate provision
where cover is in place.
A rise in numbers of Physical
and Sexual Abuse claims
in the Australian business
over the past year has led
to an increase in reserves.
• 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
• Exposure monitoring is undertaken on a regular basis
• 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
• We take a long-term view of reinsurance relationships
to deliver sustainable capacity
• A well-diversified panel of reinsurers is maintained
for each element of the programme
• A Group Reinsurance Board approves all strategic
reinsurance decisions
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.
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.
Change from last year*
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.
The level of this risk
has remained broadly
similar since last year.
Reinsurance markets
experienced significant
challenges during 2020
due to the impact of Covid-19
claims. This resulted
in tightening of criteria
and capacity in certain
areas. We continue to take
a long term approach to our
reinsurance relationships.
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1 Link to viability statement – risk included in stress and scenario analysis
* change arrows reflect movement in underlying risks
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Strategic Report – Principal risks
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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
Change from last year*
• An investment strategy is in place which is reviewed at least
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 GMB and F&I in place
• There are risk appetite metrics in place which are agreed
by the Board and include limits on Asset / Liability Matching
and the management of investment assets
• 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
Further information on this risk is given in note 4
to the financial statements.
Overall the market risk
profile has not materially
changed and we remain
invested for the long term.
Markets experienced
significant volatility during
2020 and, whilst values
had largely recovered
by the year-end, there
remains uncertainty around
the future economic outlook
and global socio-political
developments, which
we continue to monitor.
• 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 processes are in place to manage broker
and policyholder exposures
The economic impact
of Covid-19 on both reinsurers
and our policyholders has
increased the inherent
likelihood of this risk, though
we have seen no evidence
of this crystallising.
Further information on this risk is given in note 4
to the financial statements.
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 Company
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
Company are physical risks
(event driven or longer
term shifts), the transition
risks of moving towards
a lower carbon economy
and liability risks associated
with the potential for
litigation arising from
an inadequate response.
• 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
There have been no material
changes to this risk since
last year.
several banks
• We have arrangements within our reinsurance contracts
for reinsurers to pay recoverables on claims in advance
of the claim settlement
• Catastrophe risk is managed through reinsurance models
• We consider flood risk and other weather-related risk factors
in insurance risk selection
• There is an ESG overlay on the Investment Strategy
A programme of work
continues to fully analyse
the impact on the Group and
to develop appropriate risk
management responses.
The Group has effected
changes to its investment
policy to:
• exclude investment
in companies that are
wholly or mainly involved
in fossil fuel exploration
and production and
thermal coal.
• monitor the overall
carbon profile and intensity
of companies and, through
its Fund Manager, engage
with the highest emitters,
and urge the setting
of science-based targets
aligned with the
Paris Agreement.
• seek opportunities to invest
in areas that are leading the
transition to a low carbon
economy, where these
also meet robust
investment criteria.
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Principal risks
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Operational risk
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
• A defined IT Strategy is in place
• 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
Programmes remain
underway to modernise
our IT systems and better
enable our business.
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
• There is an ongoing Information Security training and
awareness programme
Cyber risk remains a constantly
evolving threat and has
inherently increased during the
year as malicious threat actors
seek to exploit Covid-19 related
business disruption including
the move to remote working.
Employee awareness and
vigilance is therefore highly
important at this time and
is being proactively managed.
• We have a clearly articulated Group Strategic Programme,
identifying areas of priority across the Group
• We ensure that there is adequate resourcing for change
projects using internal and external skills where appropriate
• A Change Board and change governance processes
are in place and operate 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. Appropriate
strengthening of expertise
has been undertaken
to reflect this volume
of change.
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 three themes,
Support and protect, Innovate
and grow and Transform
and thrive. These include
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 disruption
to business as usual, or delays
to planned benefits.
Operational Resilience
The risk that the Group
does not prevent, respond
to, recover and learn from
operational disruptions.
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.
1
• 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 Company 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
Change from last year*
Operational Resilience has
been successfully tested
during the year through
the move to a remote
working environment.
This is currently an area
of focus, with a programme
of activity planned
throughout 2021 that will
add value to the business
and improve customer
service, as well as ensure
compliance with enhanced
regulatory expectations.
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• A Group Data Governance and Management Committee
is in place
• 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
Enhancements have been
made to the governance,
management, use
and control of data.
It continues to be monitored
and managed within
the context of major
change programmes.
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Ecclesiastical Annual Report & Accounts 2020Section Two
Section Two
Strategic Report – Principal risks
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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.
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
Change from last year*
Risk detail
Key mitigants
Change 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.
• 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.
• There is 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 probability of such risks
crystallising increased due
to distraction and changes
in working practices due
to the Covid-19 pandemic.
However, we remained
committed to placing
customers at the centre
of our practices and decision
making. Overall the level
of this risk is unchanged
from last year.
• 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
• There is a dedicated Marketing and PR function
responsible for the implementation of the marketing
and communication strategy
• Ongoing monitoring of various media is in place 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.
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 external environment
in 2020 resulted in a high
inherent probability
of reputational issues
across all financial services
companies. We continued
to focus on serving our
customers and ensuring
fair treatment and
clear communication.
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1 Link to viability statement – risk included in stress and scenario analysis
*change arrows reflect movement in underlying risks
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Ecclesiastical Annual Report & Accounts 2020Section Two
Section Two
Strategic Report
Corporate Responsibility Report
2020 highlights
Overview
Our workplace
Our community
Our marketplace
Our environment
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80
81
82
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Strategic Report – Principal risks
74
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. The assessment of the Group’s
prospects by the directors covers the
three years to 2023 and is underpinned
by management’s 2021-23 business
plans. In making its assessment
the directors considered:
- The Group’s current position and
prospects, risk appetite, and the potential
impact of the principal risks and how
these are managed;
- The Group’s long-term business plans
and strategy, and the costs associated
with its delivery;
- The Group’s current capital, liquidity
and solvency position and projections;
- The political, economic and regulatory
environment, including uncertainties
on the geopolitical outlook, the Covid-19
pandemic and the UK’s exit from the EU.
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. The directors will continue
to monitor and consider the suitability
of this period.
The Group uses varying stress scenarios
with reference to the principal risks,
which are documented on pages 66 to 73.
Scenarios are designed to be severe,
but plausible, and assess the impact of
certain events on the Group’s profitability
and capital strength. Reverse stress testing
is also used to assess what could make
the Group’s business model unviable.
The outcome of testing was discussed
by the Board during the year and
consideration was given to the current
environment and the impact of Covid-19
on the Group’s viability.
Among the considerations and scenarios
were further investment market
volatility, claims experience and
business deterioration.
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.
Analysis confirms that the Group has
sufficient capital resources to cover its
capital requirements and is operationally
resilient. The impact of Covid-19 on the
Group has been subject to continual
monitoring with additional focus across
committees and at Board level.
The directors have also considered the
Group’s ability to service its preference
share borrowing and the expectations
of its ultimate charitable owner, Allchurches
Trust Limited. 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 over the three year
period of the viability assessment.
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Ecclesiastical Annual Report & Accounts 2020Section Two
Ecclesiastical Canada
A church rebuilt
Less than 30 months after fire destroyed St Paul Church in Bas-Caraquet,
New Brunswick, Canada, it was ready to re-open its doors to worshippers
once more. The speed of the rebuild was the result of a remarkable team
effort. Throughout this time, our claims team held numerous meetings with
the architect, engineers, church leaders and, most importantly, the community
to ensure that the finished church met with everyone’s approval.
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At the initial project presentation
in April 2019, to over 200 members
of the community, the reaction was
overwhelmingly positive we even
received a standing ovation. Many
people were very emotional as they
were so happy that we were giving them
back a church that integrated so many
elements of the old, much loved one.
–
-
One of the other positives, was that
we were able to provide bilingual
communications – something that was
especially useful since the community
in Bas Caraquet are French speaking
and some of the project team members
only spoke English.
-
An important part of the rebuild was
the bell tower, as previously it was used
as a navigation point by local fishermen
to guide them safely back to shore.
So, we made sure that the new tower
was built to the same height as the
original. And, following customer
feedback, we made sure that some
of the stones from the original church
featured in the new build.
-
Since Bas Caraquet is in an isolated
location, prone to frequent power
cuts, there was a great idea to build
a new comfort centre in the church for
residents, equipped with a commercial
kitchen and washrooms. The area also
has meeting rooms and a large church
hall for community group meetings
and events. To ensure the comfort
centre remains operational during
power cuts, the contractor who rebuilt
the church kindly donated a generator
to the project.
“
Without your professionalism and
countless volunteer hours contributed,
we would never have achieved
such a result. You can all be proud
”
of your contribution.
Bishop Daniel Jodoin,
Diocese of Bathurst, New Brunswick
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Strategic Report – Corporate Responsibility Report
78
79
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Corporate Responsibility Report
2020 highlights
Our workplace
>32%
of our senior management
roles globally are filled
by women
97%
of employees attending offices
were happy with the measures
in place to keep everyone safe
Employees from every
part of our Group
attended mental
health and wellbeing
webinars including
over 150 managers
99%
of employees believed
we were doing
the best we could
during extraordinary
circumstances
throughout 2020
100%
of employees agreed
to abide by our Code
of Conduct
Our community
£2.7m
given to good causes by the
Ecclesiastical Group in total
(2019 £2.5m). This is in addition
to over £23m awarded through
our charitable owner,
Allchurches Trust.
>250,000
nominations for £1,000 donations through
our Movement for Good awards
£200,000
given in small
donations
and matching
through our
employees
£200,000
in additional
support
for NET, DEC
and ABI
Covid appeals
Our charitable
owner
Allchurches
Trust gave
over £3m
to Covid-19
related
causes
Our marketplace
72%
of suppliers paid
within 30 days
(2019: 70%)
Outstanding
contribution
awards for
women across
our Group
>4,400
users of our new
online fundraising
advice service
for charities
Consistency
top of the Fairer Finance home
insurance rankings and winner
of the best ethical investment
provider for 11 and 12 consecutive
years respectively
Our environment
92%
electricity from renewable sources
(2019: 87%, 2018: 78%)
All EdenTree funds
have smaller carbon
footprints than their
benchmarks
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Carbon
intensity
0.54 tonnes/employee
ClimateWise
526 tonnes
member of voluntary
industry initiative
Total carbon emissions,
Scopes 1-3 – 526 tonnes
(2019: 1,426, 2018: 1,118)
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Corporate Responsibility Report
80
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Overview: governance,
assessment and materiality
As a charitably-owned ethical financial
services group, we’ve been advocating
a more responsible approach to business
since we were founded. It’s so engrained
in what we do but it also has formal
governance in place 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
continues to be important – it ensures
we challenge ourselves and live up to the
highest standards. We continue to hold
standards including Living Wage, Women
in Finance and the Fairer Finance Gold
Ribbon and we are a voluntary 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.
We use a materiality approach to drive
our strategy and respond to current issues.
In many ways in 2020 every aspect
of responsible business was a priority.
We needed to focus on supporting our
people through a challenging time; in turn
our customers needed our reassurance
and expertise; charities relied on our giving
more than ever before; and the importance
of climate change was brought into
greater focus.
In an unprecedented year we needed
to deliver for today, but we have also
been very focused on the future.
Read on to find out more.
Key employee statistics
Gender by level
Group Management Board*
Senior Leader
Manager
Team Member
Total
Gender pay gap
Male
5
78
233
449
765
2020
Fixed pay gap mean/median
Bonus pay gap mean/median
28.0%/21.1%
49.3%/28.9%
Female
3
27
164
681
875
2019
27.6%/22.4%
50.1%/32.4%
Total
8
105
397
1130
1640
2018
30.6%/23.5%
55.8%/36.5%
Ethnicity
White
1349
* Includes Executive Directors
Prefer not to say
209
BME
82
Total
1640
Our workplace
Supporting our people through
extraordinary times.
data protection and managing negotiations.
We’ve sustained a gradual improvement
in our gender pay gap. When we signed
up as one of the founding signatories of the
Women in Finance Charter, women made
up 23.3% of our senior management group
globally. Four years on, we are delighted
to say over 32% of our senior management
roles globally are filled by women
and 27.3% representation at board level.
This is a fantastic achievement for us and
something that we will continue to focus
on. Our Canadian team was named one
of Canada’s ‘top employers for young
people’ for the ninth consecutive year
and we continue to commit to Living
Wage status.
The challenges of 2020 gave us a unique
opportunity to invest time in building
a flexible, healthy and resilient approach
to work for the long term. We’ve launched
a new strategic initiative to drive this work,
started conversations all over our Group
and integrated this thinking into the design
and plans for our new head office due
to open in 2021.
Supporting our employees was
of paramount importance during such
challenging and uncertain times. Due
to the pandemic we quickly established
a Group-wide approach to homeworking
with investment in technology and
equipment. Where our offices remained
open for essential work we ensured they
were Covid-safe environments – 97%
of employees were happy with the measures
in place. We established a new ‘check-in
survey’ to gather employee feedback across
our Group throughout the year. Response
rates sustained at around 70% and gave
us valuable insight on what more
we could do.
Throughout the year 99% of employees
felt we were definitely or mostly doing
the best we could in extraordinary
circumstances. Only 4% of employees
felt unable to do their jobs as effectively
as possible and employees felt more
effective as the year progressed.
Eighty-four percent felt they were receiving
the right level of support from colleagues,
managers and the Company.
Employees from every part of our Group
attended mental health and wellbeing
webinars – including over 150 managers
to enable them to support their teams better.
Despite the situation we continued to invest
in developing our people, growing our
expertise and building our professionalism.
Every single employee committed to our
Code of Conduct, all of our brokers have
achieved Corporate Chartered Broking
status, another cohort of senior managers
progressed through our leadership
development programme and our proactive
training included sessions on whistleblowing,
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Corporate Responsibility Report
82
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Our community
Sustaining our commitment to giving.
Our marketplace
Putting customers and partners first
with consistency and care.
Once again through a range of other giving
campaigns we supported the charities our
brokers, customers and employees care
about in the UK and overseas in Canada,
Australia and Ireland. We gave nearly
£100,000 with our closest broker partners;
through our employee-led giving
we donated nearly £200,000 in personal
grants and we also retained our gold
standard for Payroll Giving. We also
gave £1,000 donations to 120 charities
at Christmas once again generated
thousands of nominations.
Despite hugely challenging circumstances
our people still found ways to give
in innovative ways. We came up with
exercise challenges to generate sponsorship,
volunteered at vaccination centres and our
Gloucester catering team avoided furlough
by volunteering at a local food bank instead.
All of this combined means we are
continuing to make progress towards
our ambition to give more than £100m
to charities and our communities.
The events of 2020 had a devastating impact
on the charity sector – many charities
faced the double pressure of a dramatic
drop in fundraising and huge demand for
their services. We sustained giving from
our Group at £2.5m and gave an additional
£200,000 to Covid-related appeals.
Our charitable owner Allchurches Trust
distributed more than £3 million to help
communities tackle loneliness, poor
mental health, food poverty and financial
hardship. We gave donations to the National
Emergencies Trust and the Disasters
Emergency Committee to support efforts
in the UK and overseas. We also donated
to the Association of British Insurers’ Covid
response fund, which was the biggest
business sector fund established during
the crisis.
Our Impact Report shares stories of the
amazing charities we reach and the people
and communities we connect through
our giving – www.ecclesiastical.com/
impactreport
The second year of our Movement for Good
awards brought double the success in many
respects. Our £1,000 donations attracted
over 250,000 nominations for over 14,000
charities. The breadth and diversity of good
causes was staggering. With the help
of sector experts and employee judges our
£50,000 grants will be transforming projects
focused on a range of areas including mental
and physical health, supporting young
people and community cohesion.
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
and whistleblowing. We continue to submit
our Modern Slavery Act declaration
and we reported an improvement in the
number of suppliers paid within 30 days
to 72% under the Payment Practices
and Performance Reporting (2019: 70%).
Consistency and care were forefront
in our minds when supporting our customers
and partners throughout 2020. This was
recognised through awards and recognition
across the Group.
Our consistency was reflected in a top
of the table performance in Fairer Finance’s
home insurance rankings for the 11th year
running and best ethical investment provider
win for the 12th successive year. Our care
was recognised with award wins for our
personal lines claims team, personal lines
broker and pro bono company of the year.
What’s more, women across our Group
were put in the spotlight for outstanding
contribution and distinction in the insurance
and investment industries. A number
of colleagues were shortlisted in the Women
in Insurance awards and our Deputy Group
Chief Executive Jacinta Whyte and Deputy
Chairman of our EdenTree investment
business Sue Round both won prestigious
industry awards.
Understanding and supporting customers
through strong sector partnerships
continues to be important to us. In particular
in 2020 we launched an online fundraising
hub and webinar series to provide additional
fundraising advice and support to charities.
We conducted new research on charity
concerns and supported a campaign
to improve trustee recruitment. Founded
on mutual interest we have strong
partnerships in all parts of our Group
and across all sectors including heritage,
faith and education.
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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Corporate Responsibility Report
84
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Our environment
Strengthening our commitment to action
on climate change.
Through our continued membership
of voluntary initiative ClimateWise
we are strengthening our commitment
to acting on climate change and improving
the transparency of our reporting. The
ClimateWise report is in line with regulatory
requirements and aligned with the Taskforce
on Climate-related Financial Disclosures
(TCFD). Key highlights of our performance
are shown in the graphic opposite:
Methodology
We have reported on all emission sources
required under the Companies (Directors’
Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations
2018. Our reporting year runs from January
to December 2020.
The emissions reporting boundary is defined
as all entities and facilities either owned
or under operational control of Ecclesiastical
Insurance Office, i.e. emissions relating to our
Gloucester, London, Birmingham, Manchester,
Eastbourne, and Dublin premises, and
associated travel by staff based at those
premises. It includes data covering around
two thirds of our Group by headcount.
We continue to improve the coverage and
quality of data which informs our report.
Scope 1 Emissions from fluorinated gas losses
and fuel combustion in premises / vehicles,
Scope 2 Emissions from electricity and
cooling in premises, and Scope 3 Emissions
associated with business travel, waste
and water use have been calculated using
UK Government Greenhouse Gas reporting
conversion factors 2020 (Department for
Business, Energy & Industrial Strategy),
and independently verified according
to ISO – 14064-3:2019 Specifications with
Guidance for the Validation and Verification
of Greenhouse Gas Statements.
Commentary
Our 2020 carbon footprint has been
significantly influenced by the Covid-19
pandemic. Business travel makes the largest
contribution to our footprint and it was greatly
reduced due to Government restrictions.
We expect business travel to increase
in the future, however 2020 also inspired
us to adopt new technologies and
In line with the Streamlined Energy and Carbon Reporting requirements the Group’s carbon footprint
is detailed here including our first report on carbon intensity:
Scope 1
Scope 2
Scope 3
Total
UK tCO2e
378 (530)
17 (63)
125 (826)
520 (1,419)
2020 (2019)
Non-UK tCO2e
Total tCO2e
0 (0)
6 (7)
0 (0)
6 (7)
378 (530)
23 (70)
125 (826)
526 (1,426)
Total energy use: 2,682,606 kWh, of which 2,655,294 is UK
and 27,312 non-UK. Of the 526 tCO2e, 520 relate to UK and 6 to non-UK.
Carbon intensity: 0.54 tonnes/employee (2019: 1.45).
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think differently about future working
so we expect our impact to reduce overall.
We are particularly pleased to achieve
sourcing more than 92% of our energy
from renewables.
We continue to focus on the influence
we can exert through the carbon intensity
of our investments. All five of our EdenTree
investment funds are below their sector
benchmark for 2020 and four out of five have
a lower carbon intensity than five years ago.
In 2021 we will also move into our new
head office which has been designed
to a ‘very good’ BREEAM sustainability
standard. The building features heat
recycling, solar panels and electric charging
points. We have been planting trees
in the local area to improve green spaces.
Improving working environments across
our Group will boost wellbeing, reduce
our impact and support a more flexible
working future.
An overview of our Group’s
2020 ClimateWise report
The size of the sectors reflects
the weighting applied by
ClimateWise
Enhance
reporting
Publishing
an annual
summary of
our approach
and key
activities
Be
accountable
Embedding climate
change in governance
structures including
our EdenTree
independent advisory
panel and CEO-led
Greater Good
Steering Group
Our Group
climate change
response
Strategies
and investments
Integrating climate risk
into our investment
policies and disclosing
our approach to
scenario analysis
within our insurance
businesses
Customer/client
awareness
Mandating climate
change in our ethical
investment policies,
signing the Montreal
Pledge, giving
customers advice on
weather-related risks
Informing
public policy
Championing heritage
skills preservation
and participating in
membership initiatives
including the ABI and
IIGCC
Our
own
impact
Including
resilient
reinstatement
clauses in
our insurance
policies and
applying
sustainability
criteria to our
supply chain
Managing
climate risk
Identifying climate risk
as part of our emerging
risk process to
recognise transition
and physical risks.
Using stress and
scenario testing
and third party data
to inform pricing, risk
selection and strategy
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Ecclesiastical Annual Report & Accounts 2020Section Two
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Ansvar Australia
Building on a strong relationship
We have a long tradition of providing specialist insurance solutions to the
Australian faith community, and over the years we’ve built up a number
of trusted relationships with our brokers and partners. One of our long-standing
partners is the Anglican Insurance and Risk Services (AIRS), one of Australia’s
largest religious, education, not-for-profit, aged and community care insurance
programme providers for the Anglican community in Australia.
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For the past 21 years, we have
successfully partnered with AIRS
and their brokers to protect the
Anglican Church and communities.
In a lead up to the 2020 21 renewal,
the AIRS team have undertaken a full
remarketing of the AIRS Programme,
and we were privileged to be selected
once again as the AIRS insurance and
risk solutions partner, fending off strong
market competition in a challenging
Covid 19 environment.
-
-
As part of the 2020 21 renewal,
we worked closely with both AIRS
and their broker Marsh to deliver
on the shared vision through co design
-
of the insurance and risk services,
building AIRS members’ capabilities
with risk management to strengthen
governance and risk culture, and
providing a comprehensive and
competitively priced Property and
Casualty insurance programme along
with the priority claims support.
’
Having listened closely to our clients
’
objectives and needs, we ve delivered a
comprehensive risk led value proposition
-
across all AIRS membership sectors of
faith, care and education. Supported by
our parent, Ecclesiastical Insurance Group,
our risk led value proposition reflected
our deep sector experience, based on
132 years of protecting the Anglican
churches, communities and exposures.
-
As well as providing AIRS members with
enhanced advice on risk maturity in a
lead up to the renewal, our new 2020 21
-
initiatives included the delivery of the
inaugural Anglican Risk Conference,
building and delivering virtual education
and Risk Alert series, and enterprise risk
management advice and support with
the focus on safeguarding for vulnerable
people and building safer Anglican
communities.
membership including a new Anglicans
Fundraising Hub – exclusive to AIRS
members – a benchmarking toolkit,
risk management scholarships for the
emerging Anglican Risk leaders, risk
engineering support as well as training and
education initiatives for the team at AIRS.
-
Ansvar remains committed to our
“
long term partnership with AIRS and
Marsh, to continue their mission of fusing
the insurance and risk management,
whilst embedding a strong risk culture
within the AIRS Programme members.
”
Warren Hutcheon, Ansvar Australia
Chief Executive Officer
-
Throughout the 2020 21 renewal
“
process, Ansvar were the only partner
that listened and aligned their offering
and value proposition to support delivery
of the AIRS vision.
”
We have also committed to delivering
innovative resources for the AIRS
Neil Bull, AIRS Chief Executive Officer
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Strategic Report – Non-Financial Information Statement
88
89
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
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
Pages
36
40
66
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 84.
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 81.
Also included within the Corporate
Governance report on page 104
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 82. 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 an 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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Ecclesiastical Annual Report & Accounts 2020Section Two
Strategic Report – Strategic Report approval
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91
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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 shareholders, employees,
customers and clients, bondholders, regulators and
intermediary partners (including brokers and other suppliers).
Stakeholder engagement is considered as part of the decision
making process of the Board.
Strategic Report approval
The Strategic Report, outlined on pages 14 to 90, 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
18 March 2021
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‘Thanks to the
incredible support of
our customers, brokers,
business partners,
employees and all our
supporters, we have
now given over £99m
to charity.’
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Ecclesiastical Annual Report & Accounts 2020Section Two
92
Section Three
Governance
Board of Directors
Directors’ Report
Corporate Governance
93
94
98
104
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Board of Directors
94
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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 the 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 has also been
a Non-Executive Director of the Skipton Building Society since 2015.
Denise is also 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, as well as the Insurance Board of Lloyds
Banking Group and Tokyo Marine Kiln. 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.
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. He has also been a board member of the
National Bank of Greece S.A.
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 the 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) (b) (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 St Mellitus College
Trust and St Paul’s Theological Centre.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Board of Directors
96
97
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
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.
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 and Chairman
of ERS Managing Agency Ltd.
Sir Stephen Lamport (c) (e)
Independent Non-Executive Director
Sir Stephen was appointed to the Board in March 2020. He is the Vice
Lord-Lieutenant of Surrey and a Senior Adviser at Sanctuary Counsel.
He is a Board member of Allchurches Trust; Vice-President of the
Community Foundation for Surrey; a Trustee of Painshill Park; a member
of the Court of the St Katharine Foundation; and Chairman of the British
Red Cross UK Solidarity Fund Committee. He is the Deputy High Bailiff
of Westminster Abbey. Sir Stephen was the Receiver General
of Westminster Abbey from 2008 to 2018, and previously a Group Director
of the Royal Bank of Scotland for five years. He was Deputy Private
Secretary to The Prince of Wales from 1993, and Private Secretary and
Treasurer from 1996 to 2002. From 1994 to 2002 he was a member of HM
Diplomatic Service, with overseas postings in New York, Tehran and Rome.
The Very Reverend Christine Wilson retired as a director
at the Annual General Meeting held on 18 June 2020
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 +
2020
2019
8:3
8:3
8:3
7:4
4
3
1
0
9
1
1
0
0
2
7
2
5
2
1
0
9
1
1
0
0
2
8
1
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Directors’ Report
98
99
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 2020.
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.
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 and details
of international branches are shown
in Section Five, Other Information.
Ownership
At the date of this report, the entire issued
Ordinary share capital of the Company and
4.35% 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 94 to 96.
The Very Reverend Christine Wilson retired
as a director at the AGM on 18 June 2020.
Neil Maidment was appointed as a
Non-Executive Director on 6 January 2020.
Sir Stephen Lamport was appointed as a
Non-Executive Director on 23 March 2020.
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. All directors who have
served since the last AGM will be proposed
for re-election at the forthcoming AGM.
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 2020. There
has been no change in this position since
the end of the financial year and the date
of this report.
The following directors of the Company, and their connected persons, held Preference
shares in the capital of the Company at 31 December 2020:
Director
Nature of interest
Number of Non-Cumulative
Irredeemable Preference
Shares held
Mark Hews
Denise Cockrem
Connected person
Connected Person
75,342
16,000
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.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Directors’ Report
100
101
Dividends
Dividends paid on the Preference shares
were £9,181,000 (2019: £9,181,000).
disabled employees can fully participate
in all opportunities provided by the Group
from continued employment to training,
job moves and promotions.
The directors do not recommend a final
dividend on the Ordinary shares (2019:
£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 £2.7 million
(2019: £32.5million).
It is the Company’s policy not to make
political donations. No political donations
were made in the year (2019: £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
Climate change and environment
Information about the approach to climate
change and the environment is provided
on page 84.
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 60.
Events after the balance
sheet date
Note 37 to the financial statements contains
disclosures of events after the reporting period.
Going concern
The Financial Performance section
on page 50 and Risk Management section
of the Strategic Report starting on page 60
provide a review of the Group’s business
activities and disclose the Group’s principal
risks and uncertainties, including exposures
to insurance financial risk, operational
and strategic risk, and risks associated
with Covid-19.
The Group has considerable financial
resources: financial investments of £820.8m,
92% of which are liquid (2019: financial
investments of £857.9m, 91% liquid) and
cash and cash equivalents of £104.4m (2019:
£74.8m). Liquid financial investments consist
of listed equities and open-ended investment
companies, government bonds and listed
debt. In February 2021, the Company
raised €30 million of Tier 2 capital with
the issue of 20-year subordinated bonds,
callable after year 10.
the auditor is unaware, that could be needed
by the auditor in order to prepare their report.
The Group also has a strong risk
management framework and solvency
position, is well placed to withstand
significant market disruption and has proved
resilient to stress testing.
Due to the level of uncertainty created
by the global Covid-19 pandemic, the Group
has considered its capital position, liquidity
and the impact on performance. The Group
and its businesses have strong levels
of cash and other liquid resources and has
no concerns over the ability to meet its cash
commitments over the three year planning
horizon. The Group and its businesses expect
to continue to meet regulatory requirements.
Covid-19 has impacted how the businesses
operate, with a significant proportion of
employees working effectively in a remote
environment. They have continued
to support our customers, work with our
key suppliers and perform other functions
of the Group. Whilst making some of these
changes to the way the Group and its
businesses operate caused some level
of disruption, the businesses are equipped
to deliver services in this way and can
continue to do so over a prolonged period.
Given the Group’s operations, robust capital
strength, liquidity and in conjunction with
forecast projections and stress testing,
the directors have a reasonable expectation
that the Group has adequate resources
and is well placed to manage its 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
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 126.
In accordance with Section 489 of the
Companies Act 2006, a resolution proposing
that PricewaterhouseCoopers LLP
be reappointed as auditor of the Group
will be put to the forthcoming AGM.
Directors’ responsibilities
The directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulation.
Company law requires the directors
to prepare financial statements for
each financial year. Under that law the
directors have prepared the group financial
statements in accordance with International
Accounting Standards (IAS) in conformity
with the requirements of the Companies Act
2006 and International Financial Reporting
Standards (IFRS) adopted pursuant
to Regulation (EC) No 1606/2002
as it applies in the European Union and
Parent company financial statements in
accordance with IAS in conformity with the
requirements of the Companies Act 2006.
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Ecclesiastical Annual Report & Accounts 2020Section Three
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
103
104
114
118
124
126
136
Governance – Directors’ Report
102
Responsibility statement
We confirm that to the best
of our knowledge:
• The financial statements, which have
been prepared in accordance with IAS
in conformity with the requirements of the
Companies Act 2006 and IFRS adopted
pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union, give
a true and fair view of the assets, liabilities,
financial position and loss of the Group.
• The Parent company financial statements,
which have been prepared in accordance
with IAS in conformity with the
requirements of the Companies Act 2006,
give a true and fair view of the assets,
liabilities, financial position and loss of the
Parent company;
• The Strategic Report includes a fair review
of the development and performance of the
business and the position of the Group and
Parent company, together with a description
of the principal risks and uncertainties that
it faces.
• 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
18 March 2021
Group Chief Executive
18 March 2021
Under company law, directors must not
approve the financial statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Group
and Parent company and of the profit or loss
of the Group for that period. In preparing
the financial statements, the directors are
required to:
• select suitable accounting policies and then
apply them consistently;
• state whether applicable IAS in conformity
with the requirements of the Companies
Act 2006 and IFRS adopted pursuant
to Regulation (EC) No 1606/2002
as it applies in the European Union have
been followed for the Group financial
statements and IAS in conformity with
the requirements of the Companies Act
2006 have been followed for the Parent
company financial statements, subject
to any material departures disclosed and
explained in the financial statements;
• make judgements and accounting estimates
that are reasonable and prudent; and
• prepare the financial statements
on the going concern basis unless
it is inappropriate to presume that
the group and parent company will
continue in business.
The directors are also responsible for
safeguarding the assets of the group and
parent company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the group’s
and parent company’s transactions and
disclose with reasonable accuracy at any
time the financial position of the Group and
Parent company and enable them to ensure
that the financial statements comply with
the Companies Act 2006.
The directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Corporate Governance
104
105
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.
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.
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.
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 2020 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.
* Committees of the Company also perform the same Committee functions for Ecclesiastical Insurance Group plc, the Company’s immediate parent undertaking.
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.
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.
See page 36 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 2020,
no director had any such concerns.
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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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Corporate Governance
106
107
Strategy and Company
Performance
Key
• Communities
• Customers
• Employees
• Regulators
• Shareholders
• Suppliers
The following shows the structure and
content of Board Meetings and how
stakeholders have been considered as part
of the decision making process during 2020,
which was an exceptional year in terms
of the challenging strategic environment.
The Chairs of the Group Finance and
Investment, Group Audit, Group Nominations
and Group Remuneration Committees
provide updates on key matters discussed
at those meetings and any recommendations
for the Board’s approval. This ensures that
the Board as a whole understands a range
of significant issues including those that are
outside its immediate remit.
Strategic matters
The Board considered strategically significant
matters, provided insight and constructive
challenge and implemented required action.
Covid-19 ••••••
• Held regular meetings to discuss and
monitor the impact of Covid-19 on the
business and the impact on stakeholders
(including in relation to the FCA’s business
interruption test case (in the UK) and the
Australian Financial Complaints Authority
business interruption test case). Extensive
activity has been undertaken to support
customers and protect the Group’s
business. An interim transition strategy
was adopted to respond to the pandemic.
Core business functions were successfully
moved to remote working which enabled
external stakeholders to continue
to be supported. A package to support
remote working and wellbeing (and
returning to the office) was agreed.
Acts of kindness from across the Group
were celebrated. In addition, the Board
considered operational resilience and
received regular updates from the
Crisis Management Team (CMT) who
responded to the Government’s
rapidly changing guidance.
Culture ••
• Considered findings from the 2020
staff surveys and the update from the
designated Non-Executive Director
for employee engagement
Benefact House •
• Received regular updates on the relocation
to a new Head Office
Brand
• Received updates on the new visual identity
and brand
Allchurches Trust Limited •
• Received regular reports from
the Shareholder
Strategy, Company and Operational
Performance
The Chief Executive led discussions
on general business performance
and key strategic initiatives
Business Updates •••
• Received updates on the performance
from each of the business areas
(general insurance, broker and advisory
and investment)
Organisation ••••••
• Received updates on senior leadership
appointments and succession plans for
the Senior Leadership Team (including the
appointment of Richard Coleman (Managing
Director – UK), Andy Clark (Chief Executive,
EdenTree) and Sarah Binstead (Group Chief
Risk and Compliance Officer))
• Considered Health and Safety
(including how the Group was responding
to supporting staff with mental stress
from working at home and their physical
wellbeing)
• Reviewed the vision and strategy for
the Broking and Advisory Businesses
Charitable Purpose ••
• Considered regular updates on
the charitable purpose and mission.
The Board is proud that local communities
were supported across the Group’s four
territories and fundraising support was
delivered to impacted church and charity
communities. The reach of visibility
of the Movement for Good Campaign
and 12 Days of Giving Campaign was
also materially increased. This included
consideration of the Grants Policy
in Canada and Australia and a donation
to the Charities Aid Foundation’s Covid-19
Support Fund.
• Approved the Sustainable & Responsible
Investment Policy
Portfolio Optimisation •
• Received regular report on portfolio
optimisation with the general insurance
businesses
Financial Updates and Regulatory
Reporting
Financial resilience ••••••
• Considered the tolerances for various
scenarios and solvency positions and
any resulting actions
• Considered the financial position of
its subsidiaries
• Reviewed the going concern assessment
• Considered GI Claims Reserves Adequacy
Capital, costs and budget •••••
• Reviewed the Company’s financial and
liquidity position
• Agreed the Group Strategy and Business
Plans for 2021 to 2023
• Considered reinsurance arrangement
• Considered the capital management
strategy and approved the raising of
€30 million of Tier 2 capital
Cash flow and dividends ••
• Considered the dividends to be paid to the
holders of the 8.625% Non-Cumulative
Irredeemable Preference Shares of £1
• Considered making a distribution in the form
of a grant to the Company’s ultimate parent,
Allchurches Trust Limited
• Considered the approach to inter
group funding
Regulatory and reporting •
• Considered the Actuarial Function
Director’s Opinion on Technical Provisions,
Reinsurance, Underwriting and Pricing,
Business Plan and Aggregate Report
Wrapper as required under Solvency II
Risk ••••••
• Approved the Internal Model Management
Actions and the Internal Model Quarterly
Change reports
• Approved the Annual review of Profit & Loss
Attribution Report, and SCR and EC end
of year 2019 annual evaluations
• Approved the Group Risk Framework
and Risk Appetite
• Approved the Group ORSA
Governance
Board Evaluation •
• Considered outcomes from the external
Board Evaluation and received regular
progress updates
Board succession and diversity •
• Approved the appointment of two new
Non-Executive Directors and changes
to Committee composition
• Approved the refreshed Board
Diversity Policy
Governance Framework ••
• Approved changes to the Group Governance
Framework and Expectations of SBUs
• Approved changes to the Board Committee
Terms of Reference
• Considered Directors’ Conflicts of Interest
Regulatory disclosures ••••••
• Reviewed and approved the Annual
Report and Accounts, Notice of General
Meeting, Half Year and Full Year
Results Announcements
AGM •
• Approved the resolutions to be put
to the shareholders at the AGM
(including the proposal that following
the conclusion of the tender process
PriceWaterhouseCoopers LLP be
appointed as External Auditors)
IICSA and safeguarding •
• Considered updates on developments
with the IICSA inquiry
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Corporate Governance
108
109
Capital Raising Case Study
The Board approved the decision to raise
€30 million (as announced on 25 February
2021). When considering its decision,
the Board took into account the likely
perspectives of stakeholders regarding
potential capital raising, the short-term
and long-term requirements of the
business which could impact on employees,
customers and suppliers, and the protection
of stakeholder interests as a whole.
The merits of proposal were reviewed
to ensure that resilience against future
uncertainty could be maintained and
opportunities could be leveraged by
ensuring funds were available to support
growth and diversification aspirations.
The Board sought external debt, legal
and tax advice in order to determine the
type of capital, product terms and structure
of the chosen debt instrument. In addition,
the Board assessed a number of factors
including cost, timing, market conditions
and investment performance, perspectives
from banks and investment houses, and
credit rating. It was agreed that privately
placed issue of a 20-year subordinated
bond would achieve the desired outcomes.
Consultation with Allchurches Trust Limited
and management also underpinned the
view that the debt instrument was in the
best interest of all stakeholders and was
therefore approved by the Board.
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.
Sir Stephen Lamport and Chris Moulder 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. 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
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.
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. No grant was paid to Allchurches
Trust Limited during the calendar year 2020.
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);
• In 2020 the Group focused on regular
targeted and tailored check-in surveys
(as outlined on page 81) which were
focused on gathering real time feedback
as the pandemic situation evolved during
2020. Adopting a targeted approach and
consulting on matters directly affecting
employees, enabled us to respond quickly
to any concerns as they emerged. Results
were monitored and reviewed by the
Group’s Crisis Management Team and were
also disseminated throughout the Group
for local action planning.
• whistleblowing policy and procedures.
During 2020 the Group implemented
a set of engagement actions including
training and communications to improve
the accessibility and understanding of our
whistleblowing procedure and approach;
• 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 virtually
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.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Corporate Governance
110
111
In addition, the Board considered customers’
needs, knowledge and expectations as part
of the development of the transition strategy
and the Group’s response to the pandemic.
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
The Board (via the Group Risk Committee)
has reviewed and challenged the approach
to the management of risks associated with
climate change. This included consideration
of key workstreams such as communication
and governance, risk management
assessment, scenario analysis, business
and operational risk and opportunities,
strategy and disclosures. An update on the
approach to the TCFD related disclosures
is provided on page 84.
During the year, the Board has considered
the payment of grants to Allchurches Trust
Limited for charitable purposes.
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.
Group HR has responsibility for ensuring
the effectiveness of internal whistleblowing
arrangements, including arrangements
for protecting whistleblowers against
detrimental treatment (on behalf of the
Whistleblowing Champion) including
ownership of the associated policy
and guidance documents.
More information about the Group’s
whistleblowing policy and arrangements
is included within the Group Audit
Committee Report.
Conflicts of Interest
A Register of Directors’ Conflicts is
maintained by the Group Company
Secretary to monitor and manage
any potential conflicts of interest.
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.
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 2020,
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.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Corporate Governance
112
113
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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 118;
the Group Risk Committee Report
on page 124; the Group Audit Committee
Report on page 126; and the Group
Remuneration Report on page 136.
Attendance at meetings
Directors are required to attend all Board
meetings and strategy days as well
as Committee meetings where they
are members. In 2020, the Board held
five scheduled meetings and ten ad hoc
meetings. 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 during 2020:
Board attendance table
Executive Directors
Director since
Meetings eligible
to attend
Meetings
attended
Mark Hews
S. Jacinta Whyte
Denise Cockrem
June 2009
July 2013
September 2019
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15
15
15
15
15
Non-Executive Directors
Director since
Meetings eligible
to attend
Meetings
attended
David Henderson (Chairman)
Francois-Xavier Boisseau
Sir Stephen Lamport
Neil Maidment
Andrew McIntyre
Chris Moulder
Caroline Taylor
Angus Winther
Christine Wilson
April 2016
March 2019
March 2020
January 2020
April 2017
September 2017
September 2014
March 2019
June 2012
15
15
13
15
15
15
15
15
10
15
14 1
13
132
143
15
15
15
9
1 Mr Boisseau was unable to attend an ad hoc Board Meeting called at the last minute to consider an update
on the FCA’s test case in relation to business interruption.
2 Mr Maidment was unable to attend a scheduled Board Meeting as it had been arranged prior to his appointment
as a director. In addition, he was unable to attend an ad hoc meeting called at short notice to consider matters
linked to Covid-19.
3 Mr McIntyre was unable to attend a meeting because of a prior business commitment.
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 60.
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.
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.
Further information on internal controls
is set out in the Group Audit Committee
Report on page 126.
By order of the Board
Mrs. R. J. Hall
Group Company Secretary
18 March 2021
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Finance and Investment Committee Report
114
115
Group Finance
and Investment
Committee Report
Chairman’s introduction
I am pleased to present this report, describing the work
undertaken by the Committee during the past year.
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*
Angus Winther1
Caroline Taylor
David Henderson2
April 2019
March 2016
June 2016
6
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6
5
1 Angus Winther was appointed to the Committee on 3 April 2019 and was appointed Chair on 1 January 2020.
2 David Henderson was unable to attend a meeting called at short notice to consider a potential acquisition.
His views on the proposal were relayed to the Committee by its Chair.
Committee meetings
The Committee comprised the directors
shown in the table above who were
appointed by the Board.
The Committee held four scheduled and
two ad hoc meetings during the year, each
of which were attended by the Group Chief
Executive and Group Chief Financial Officer
by invitation. Other people from the business
were invited to attend meetings to provide
insight into key matters and developments.
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 is
performing as expected. The Committee
also considers and approves major
financial decisions including capital raisings,
acquisitions and disposals on behalf of the
Board. The Committee is also constituted
as a committee of the Company’s immediate
parent Ecclesiastical Insurance Group plc
and provides the same functions.
A summary of the main activities of the
Committee during 2020 are set out below:
Raising funds
The Committee supported management
in developing the proposal to raise funds
which culminated in issuing €30 million
of Tier 2 Capital by way of a privately placed
issue of 20-year subordinated bonds
in February 2021. The Committee considered
the rationale for the proposed fund raising
including protecting against the risk
of a downturn in a period of uncertainty
as well as supporting the Group’s growth
ambitions and strategy. The Committee also
explored the advantages and disadvantages
of alternative sources of capital (including
preference shares and hybrid capital) and
their impact on stakeholders, reviewed the
product terms and structure and oversaw
the appointment of key advisors for
the project including financial, legal and
tax advisors.
The hedging of currency and interest rate
exposure and the impact on the Group’s
capital position (under base, adverse and
favourable scenarios) was also reviewed
ahead of making a recommendation
to the Board.
Finance
The Committee supported a proposal
to improve the Group’s Treasury
Management Framework and the approach
to managing working capital. The model
is being implemented across all SBUs
to maintain an optimal level of cash and
liquidity across the Group and release
cash for investment.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Finance and Investment Committee Report
116
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In 2019, Ecclesiastical Insurance Group plc
acquired a non-controlling equity interest
in the speciality insurer Lloyd & Whyte.
The Committee has continued to monitor
various matters relating to that acquisition,
including associated structural changes,
Lloyd & White’s acquisition pipeline,
associated loan exposure and performance.
Governance
The Committee also reviewed its Terms
of Reference, its own performance and set
objectives. Historically the Committee Chair
had been a member of the Group Risk and
Group Audit Committees. Given Mr Winther
is not a member of either of these
Committees, he has regularly liaised with
the Chairs of both Committees on matters
relevant to the Committee’s business and
also attended the Group Risk Committee
on a number of occasions.
By order of the Board
Angus Winther
Chairman of the Group Finance
and Investment Committee
18 March 2021
Investments
During the year, the Committee reviewed
the Group’s business plan investment
assumptions; and the overall investment
strategy. This included consideration of
asset allocation and exposure (to equities,
bonds, infrastructure, property and cash) and
associated risk. In particular, the continued
use of equity derivatives and the development
of a “balanced scorecard” approach for their
assessment was considered.
The Committee also reviewed the investment
mandate with EdenTree Investment
Management Limited to ensure that
it remained fit for purpose and remained
compliant with legal and regulatory
requirements. The performance of the
Group’s investment portfolios were also
reviewed. In addition the Committee
considered the outlook for the financial
markets in the context of the impact of the
pandemic and uncertainty relating to Brexit.
Acquisition activity
The Committee has monitored acquisition
activity, outcomes and performance,
including providing guidance on the
approach to making offers. A proposal
for a potential acquisition by one of the
Company’s subsidiaries, SEIB Insurance
Brokers Limited, was reviewed in detail.
Updates on smaller acquisitions such
as WRS Insurance Limited were
also received.
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‘The Committee
supported management
in developing the
proposal to raise funds
which culminated
in issuing €30 million
of Tier 2 Capital.’
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Nominations Committee Report
118
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Group Nominations
Committee Report
Dear Stakeholder
I am pleased to present the Group Nominations
Committee’s Report describing the work we have carried
out during the past year. This report gives more detailed
information on how we performed our duties in 2020.
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
November 2019
March 2016
January 2019
November 2019
3
2
3
3
3
1
3
3
1 Appointed as Chair of the Nominations Committee with effect from 14 January 2020.
2 The Very Reverend Christine Wilson stepped down from the Board on 18 June 2020
and from Chair of the Nominations Committee on 14 January 2020.
Meetings of the Committee
The Committee held three scheduled
meetings in 2020 (February, May
and September) which were attended
by the Group Chief Executive and Group
Company Secretary (2019: three meetings).
the target. As at 18 March 2021, the Board
has appointed three female directors
(including two Executive Directors)
in a membership of 11. The Board is actively
seeking to address this issue and will aim
to meet the target by the end of 2022.
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.
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.
Over the last few years, the Board has
met the targets set out in the ‘Hampton
– Alexander Review’ of 33% female
representation on the Board, but following
the retirement of a female director in June
2020, the percentage had slipped below
At 31 December 2020, female representation
on the Group Management Board stands
at 38% (2019:43%) and in the wider senior
management population (GMB and BL
grades) at approximately 27% (2019:32%).
The Board encourages Executive
Management to ensure appropriate
diversity, including gender diversity,
at senior levels within the organisation.
In addition, the Board will have regard
to the Parker Review and has set itself a target
to have at least one director from an ethnic
minority background by the end of 2025.
Ecclesiastical aspires to having a Board that
is diverse and it encourages external search
firms to identify and present candidates from
all backgrounds, and with diverse skills and
personal qualities. All Board appointments are
made on merit, in the context of the diversity
of skills, experience, background and gender
required to be effective.
The Board will take the opportunity,
as and when appropriate, to further improve
diversity in its broadest sense (including
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Nominations Committee Report
120
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ethnicity, skills, regional and industry
experience, background, age, gender and
other distinctions) as part of its board
recruitment practice. 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.
Directors’ length of service
The Committee monitors the length
of tenure of all directors as shown in the
table on page 97.
Independence and time
commitment
The Board believes that all the NEDs
were independent throughout 2020.
Independence is reviewed as part of each
director’s annual appraisal, considered
by the Committee and agreed by the Board
annually. 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 2020, 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
Non-Executive Director Appointments
Sir Stephen Lamport
Sir Stephen Lamport had been a member
of the ultimate parent company, Allchurches
Trust Limited for many years and
in early 2020 was appointed as a director
to the Trust. On the recommendation of
Allchurches Trust, he was appointed a
director of the Company on 23 March 2020,
becoming a ‘common director’, succeeding
Tim Carroll.
Neil Maidment
In addition, Neil Maidment was appointed
to the Board on 6 January 2020.
An overview of the appointment process for
Mr Maidment was set out in the 2019 Annual
Report and Accounts.
Non Executive Director Resignations
– Dean Christine Wilson and Caroline Taylor
Dean Christine Wilson stood down from
the Board on 18 June 2020 following
an eight-year tenure.
In September 2021, Caroline Taylor will have
served for more than six years and will step
down from the Board.
Common Directors, Chris Moulder
and Sir Stephen Lamport
Chris Moulder and Sir Stephen Lamport
are directors on the Boards of Allchurches
Trust Limited and the Company (‘common
directors’). The common directorship model
is regarded as good practice with a charity
that owns a trading subsidiary and these
‘common directors’ enable the Trust to gain
a thorough understanding of its subsidiary
company’s performance and the strategic
issues it faces, and for the subsidiary
to understand the expectations of its
parent company.
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.
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 Chief Risk and Compliance Officer,
Director of Group Finance, Group Chief
Actuary, Group Development Director, Group
HR Director, Group Reinsurance Director,
Chief Internal Auditor 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.
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 2020, a number of training
sessions took place including Safeguarding
(covered by the Head of Claims), EIG
Sustainable & Responsible Investment
Policy (delivered by Head of Responsible
Investment Policy and Research) and Senior
Managers and Certification Regime (SMCR)
(covered by the Group HR Director). In 2021,
sessions have been planned on IFRS 17,
Technology, Money Laundering, Anti-Bribery
and Corruption, and Catastrophe and PSA
Exposure Risks.
Board evaluation
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.
It is the Board’s policy for its evaluations
to be facilitated every two to three years
and the last external Board evaluation
was carried out in 2019, facilitated
by Grant Thornton. Grant Thornton acts
as a co-source provider for internal audit
on UK and Canada and has no other
connection with the Group.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Nominations Committee Report
122
123
The key themes that arose from the evaluation are listed in the table below along with
an update on progress made.
Theme
Evaluation Recommendations
Progress Update
Succession Plans
Diversity
Stakeholders
Refresh the approach
to reviewing succession plans
of GMB members and their
direct reports.
Succession plans are reviewed
and challenged by the Group
Nominations Committee twice a year
and a report considered by the Board
on an annual basis.
Further improve diversity across A new Diversity Policy was agreed
various Group and Subsidiary
Boards (in terms of ethnicity,
broker knowledge, technology
and digital representation)
was highlighted.
in 2020 and the Strategic Talent Forum will
consider diversity across the Group
to support the talent pipeline.
Develop a stakeholder map
and refine the approach
to demonstrating how decisions updated by the Board in 2020. Actions
in relation to updating Board Papers and
impact on stakeholders
in Boards Papers and Minutes. Minutes were delayed as a consequence
A stakeholder map was included in the
Governance Framework which was
of the pandemic.
This is regularly considered
by the Chairman and the Group
Company Secretary as part
of the pre-meeting process.
A Transitional Strategy was launched
during the year and the number of strategic
initiatives reduced.
Response to this has been deferred
until 2021. An external consultant will
be engaged to review Board Papers
and observe meetings and make
recommendations. Internal training
will also be arranged for internal
paper authors.
The Group Employee Survey monitors
culture and engagement. The results from
the survey are fed into Board discussions
via Caroline Taylor (the designated NED
for employee engagement – further
information on employee engagement
is set out on page 109).
Newly acquired businesses are integrated
into the Group via adoption of standard
processes and practices, cascade of values
and regular attendance at Group events
such as Conferences.
Strategy and Direction Review the Board agenda
to ensure that it was
balanced and focused
on important matters.
Strategy and Direction Consider streamlining
strategic programmes.
Strategy and Direction Review Board packs to ensure
focus on strategic matters,
insight and impact.
Culture and Values
Evidence the Board’s
approach to assessing
and monitoring culture.
Culture and Values
Consider how the Group’s
culture can be integrated
into acquisitions.
The next evaluation will be in 2022.
By order of the Board
Chris Moulder
Chairman of the Group Nominations Committee
18 March 2021
‘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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Ecclesiastical Annual Report & Accounts 2020Section Three
Section Three
Governance – Group Risk Committee Report
124
125
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 60. We welcomed
Neil Maidment as a member of the Committee in March 2020
and Sir Stephen Lamport was appointed to the Committee
on 25 November 2020. Sarah Binstead was appointed Group
Chief Risk and Compliance Officer in September 2020.
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)
Andrew McIntyre
Francois-Xavier Boisseau
Neil Maidment*
Sir Stephen Lamport**
September 2017
August 2017
April 2019
March 2020
November 2020
4
4
4
4
0
* Neil Maidment was appointed to the Committee on 2 March 2020.
4
4
4
4
0
** Sir Stephen Lamport was appointed to the Committee on 25 November 2020. There were no Committee meetings
held in 2020 after this date.
The last year was a challenging one from
a risk and resilience perspective. With
the onset of the Covid-19 global pandemic,
the Group was required to quickly adapt its
ways of working in all territories. The impact
of the pandemic on the Group’s risk
environment was wide ranging and therefore
a key consideration for the Committee
in 2020. Time was committed to assessing and
monitoring the Group’s operational resilience;
its capital and solvency position; and financial
resilience in light of the global pandemic and
the FCA’s test case on business interruption.
Committee meetings
The Group Risk Committee comprised the
directors shown in the table above who were
appointed by the Board.
The Committee held four meetings during
the year, which were attended by the Group
Chairman, Deputy Group Chief Executive,
Group Chief Risk and Compliance Officer,
Group Chief Financial Officer, Group
Underwriting Director, Group Chief Actuary
and the Group Heads of Risk and Compliance.
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 66 to 73. 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 assess and monitor the Group’s
ongoing operational and financial resilience;
and its capital and solvency position, in light
of the global pandemic, receiving reports from
Management. The Committee has continued
to monitor the ongoing development,
governance, methodology and calibration of
the Internal Model; overseeing the validation
cycle; recommending Model changes to the
Board; agreeing Management Actions and
reviewing the Profit and Loss Attribution.
Additionally, during the year, the
Committee has continued to oversee the
ongoing development of the Group’s data
management model; the Own Risk and
Solvency Assessment and Control Risk
Self-Assessment processes; and material
outsourcing risks. The Committee has
also overseen the development of the risk
oversight and assurance plan and a risk
appetite breach protocol. The Committee has
also received other regular reports including
compliance monitoring and breaches;
reinsurance; climate change; business
continuity; and the Money Laundering
Reporting Officer’s Report.
The Committee also reviewed the Group’s
Governance Framework and Expectations
of SBUs documents, and its own Terms of
Reference, culminating in recommendations
to the Board, which were approved.
The Group Chief Risk and Compliance 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 and Compliance Officer at least annually
without management present.
By order of the Board
Chris Moulder
Chairman of the Group Risk Committee
18 March 2021
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Audit Committee Report
126
127
Group Audit
Committee Report
Chairman’s overview
I am pleased to present the Group Audit Committee
Report describing the work undertaken by the
Committee to safeguard 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 the management
of financial risks.
The last year turned out to be challenging
for accounting and auditing judgements
and required the Group to adapt its ways
of working and focus on its systems of internal
control. For nearly all of the Committee’s
work during 2020, Covid-19 has been
a key consideration. In particular, time was
committed to Group Internal Audit’s review
of internal controls impacted by Covid-19
and reviewing accounting judgements
in very different economic conditions.
The Committee has reviewed the Group’s
financial reporting, ensuring that this year’s
Annual Report and Accounts are fairly
presented and prepared using appropriate
judgements. The significant accounting and
reporting issues considered in detail by the
Committee are set out on pages 130 to 132.
The Committee has also monitored internal
and external audit arrangements and the
effectiveness of internal controls. Additionally,
the Committee has monitored the external
environment to ensure that reporting and
controls respond to developments.
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.
Following the completion of a rigorous
tender process in 2019 we welcomed
PricewaterhouseCoopers LLP (PwC) as the
Group’s external auditor. I would like to thank
PwC and our previous auditors Deloitte LLP
for their mutual co-operation that ensured
a smooth transition done so under
challenging circumstances.
During 2020, the Committee considered
the key judgements made by management
in preparing the Annual Report and Accounts.
The Committee has continued to prioritise
the Group’s control environment and other
important areas of the business such
as data management, cyber security
and whistleblowing.
The Committee seeks to ensure that the
identification and management of significant
Andrew McIntyre
Chair of the Group Audit Committee
Members of the Committee
Committee members are independent non-executive directors and 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. The Committee is also then able to challenge and
scrutinise management’s work. Further information about the experience of each member
of the Committee can be found on page 94. 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 11 meetings held during the year are shown below.
Committee member
Member since
Meetings attended
/ (eligible to attend)
Andrew McIntyre (Chairman)
Francois-Xavier Boisseau
Neil Maidment*
Chris Moulder
April 2017
March 2019
March 2020
September 2017
11 / (11)
11 / (11)
10 / (10)
10 / (11)
* Neil Maidment was appointed to the Committee on 2 March 2020.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Audit Committee Report
128
129
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. During the year,
Deloitte attended all seven of the Committee’s
meetings held prior to their resignation.
PwC attended three of the four meetings held
following their appointment in June 2020.
During the year, the Committee met privately
with the Group’s external auditors without
management present.
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 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
management of financial risks.
When the Committee discharges its
responsibilities these are extended to include
Ecclesiastical Insurance Office plc’s immediate
parent Ecclesiastical Insurance Group plc
and matters related to its own subsidiary
undertakings and interests.
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.
PwC has acted as the Group’s external
statutory auditor following appointment
at the Annual General Meeting in June 2020.
The Group’s policy for auditor rotation follows
regulatory requirements and PwC will
be required to be rotated after no more than
20 years, and an audit tender held after
no more than 10 years.
Sue Morling of PwC became the Group’s
senior statutory auditor for the financial year
2020 after PwC’s appointment. Sue Morling’s
term as senior statutory auditor cannot
exceed a maximum duration of five years.
The Group’s previous senior statutory auditor,
Mr Paul Stephenson of Deloitte, led the
Group’s audit 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).
In October 2020 the Committee received
PwC’s 2020 Audit Plan and considered
the auditor’s assessment of risk, materiality
and audit approach. The Committee also
considered the auditor’s approach to audit
risk in respect of Covid-19 and how the audit
would be conducted effectively using more
remote working and technology.
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, regarding the
Deloitte 2019 statutory audit. The Committee
recognised the strengths of the external
auditor and that their duties were performed
independently and effectively.
The Committee oversees the plans for the
external audit to ensure it is comprehensive,
risk-based and cost-effective. 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 180. 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 and
discussions with management. The fee for the
audit was proposed during the Committee’s
2019 external auditor tender.
For the year ended 31 December 2020,
the Group was charged £709,000 (ex VAT)
by PwC for audit services. Fees for other
assurance services required by legislation
and/or regulation amounted to £178,000,
making total fees from PwC of £887,000.
There were no non-audit services provided
by Deloitte prior to their resignation as the
Group’s statutory auditor. There were
no non-audit services provided by PwC
during the financial year. More detail can
be found in note 12 to the financial statements.
Auditor transition
A key area of focus for the Committee during
2020 was the effective transition to PwC
as the Group’s statutory auditor to ensure
the safeguarding of audit independence
and quality.
During 2020, PwC commenced planning
for the 2020 audit, including engaging
with management, shadowing Deloitte,
obtaining a detailed understanding of key
areas of audit focus and management
judgement, and observing Audit Committee
meetings. Following their appointment
in June 2020, PwC attended all Audit
Committee meetings in their capacity
as the Group’s statutory auditor.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Audit Committee Report
130
131
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.
In respect of these annual financial
statements the Committee paid particular
attention to the significant judgements set
out below, including a review of the corporate
governance disclosures, monitoring of the
external audit process and the going concern
and viability statements.
The Committee concluded that it remained
appropriate to prepare the financial
statements on a going concern basis
and recommended the viability statement
to the Board for approval.
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 2020
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
PwC. The nature of these issues and how
they are mitigated is explained in more detail
in the Risk Management Report on page 60,
and also note 2 to the financial statements
on page 200.
Matter considered
Action
Valuation of investment property
and unlisted equity
These are areas of focus for the Committee given their
materiality and the subjectivity in deriving their fair value.
The Committee received information from management on the
composition of the investment property portfolio and the methodology
used to determine the fair value. The Committee paid particular
attention to the application of industry recognised valuation techniques
and areas of the portfolio more susceptible to valuation uncertainty.
For investment property, the Group uses real estate
valuation experts who use recognised valuation
techniques together with the principles of IFRS 13 Fair
Value Measurement. These techniques use assumptions
and estimates including investment yields.
The judgements and estimates used to determine the
value of the Group’s interest in unlisted equity follow
industry recognised fair value model techniques and
the principles of IFRS 13 Fair Value Measurement.
Judgements and estimates include the selection of
comparable companies and setting an illiquidity discount.
When considering management’s assessment of the fair value
of unlisted equities, the Committee considered the fair value model
and inputs used. Particular consideration was given to the suitability
of comparable companies and the discount applied for illiquidity.
Following consideration, the Committee concluded that the
assumptions proposed were appropriate.
Matter considered
Action
General insurance reserves
The estimation of the ultimate 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 PwC also provided detailed
reporting on these matters to the Committee.
The Committee considered in detail the impact of Covid-19 across
the Group on the current year and the key uncertainty surrounding
the developments of the business interruption and liability claims
in the next 24 months. The committee acknowledged the exceptional
circumstances surrounding 2020 claims developments and was
satisfied that management and the Group Reserving Actuary have
considered a suitable range of outcomes. 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 of 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 for ELL at 31 December 2020, and
• the calculation of technical provisions in accordance with Solvency II
regulations at 31 December 2020.
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 2019.
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 PwC’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)
of the financial statements.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Audit Committee Report
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Matter considered
Action
Carrying value
of goodwill
This is an area of focus for the Committee given
the materiality of the Group’s goodwill balances (£24m
as at 31 December 2020) 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
The Group’s liabilities of the scheme are material
in comparison to the Group’s net liability 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, and the determination of the discount rate used in the
calculation. Consideration was also given to the impact of Covid-19.
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 of the financial statements.
During 2020, 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 a number of assumptions would align
to those used in the scheme’s 2019 triennial valuation, the gap between
CPI and RPI reflected the outcome of a Government consultation
of the future of RPI and future improvements in mortality assumptions
were updated.
Following consideration, the Committee concluded that the
assumptions proposed were appropriate and in line with normal
market practice.
The impact of updating assumptions to reflect those in force
at the balance sheet date on the valuation at 31 December 2020
are explained in note 19 to the financial statements.
Other matters considered by the
Committee outside of the Group
The Committee is constituted
as a committee of the Board of Directors
of both Ecclesiastical Insurance Office plc
and its immediate parent Ecclesiastical
Insurance Group plc. As a result, the
Committee will also consider matters that
are specific to the Group, Ecclesiastical
Insurance Group plc and therefore items
that are not included within Ecclesiastical
Insurance Office plc’s financial statements
within this Annual Report and Accounts.
The Committee considered a number
of accounting judgements and reporting
matters in the preparation of Ecclesiastical
Insurance Group’s financial results
in a manner consistent with that set out
within this report. This included the carrying
value of goodwill and the treatment of
business combinations related to insurance
broker businesses of that Group.
Fair, balanced and
understandable
The Committee considered whether
in its opinion, the 2020 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. When forming its opinion,
the Committee reflected on information
it had received and discussions throughout
the year as well as its 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 Committee was satisfied that
the disclosures in the Annual Report
and Accounts, taken as a whole, are
fair, balanced and understandable and
represented the results and business
performance for the year ended
31 December 2020.
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 104.
In reviewing the effectiveness of the system
of internal control and risk management
during 2020, 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.
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Governance – Group Audit Committee Report
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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 operate 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,
with the internal audit outsourced partner
for Canada changed during 2020, to bring
on board Ernst & Young.
The Committee has oversight responsibility
for GIA and is satisfied that GIA has
the appropriate resources. The Group
Chief Internal Auditor is accountable
to the Committee Chairman, reports
administratively to the Group Chief Financial
Officer and has access to the Group Chief
Executive and the Chairman of the Board.
The function also has an extensive
stakeholder management programme
across the whole of the Group.
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. In light of new
and emerging risks identified in relation
to Covid-19, the Committee reviewed and
approved a revised plan in response to the
pandemic. All proposed changes to the
agreed internal audit plan are reviewed,
challenged and approved by the Committee
during the year. In addition to this, GIA also
continued focus on the Horizon Programme
and Data Management within the Company.
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.
Our Whistleblowing procedures, polices and
guides were reviewed and updated to ensure
that, in line with best practice, they are
accessible, easily understood and are aimed
to encourage and give confidence to potential
Whistleblowers. The procedures that exist
to monitor whistleblowing incidents were
also improved to embed regular Group wide
monitoring and oversight.
Whistleblowing
During the year, the Committee reviewed the
development of the Group’s whistleblowing
arrangements which are the responsibility
of the Board and overseen by Group HR.
A key focus was creating an environment
in which whistleblowing is well understood,
openly communicated and a positive
culture for raising concerns was promoted.
By fostering a culture of openness we aim
to ensure that every employee feels
confident and safe to speak up and challenge
when and if they need to.
The Whistleblowing programme included
a targeted set of actions encompassing
training, communication and monitoring,
each designed to improve both accessibility
and understanding across the Group. Online
training modules were implemented for all
employees in both Whistleblowing and
Code of Conduct to increase awareness
and emphasise an open and positive culture.
Individual attestation ensured the roll out
could be closely monitored and tracked and
the programme was reinforced via employee
communications. Further targeted training
was provided for colleagues with additional
responsibilities including line managers and
persons named in the Whistleblowing policy.
Our guidance for managers paid particular
attention to both recognising and responding
to potential instances of whistleblowing
to ensure that incidents are correctly
handled in a responsive and sensitive way
and to prevent any victimisation
of Whistleblowers.
More information about the Group’s
whistleblowing policy and arrangements
is included within the Corporate
Governance Report.
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 2021, 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 Group’s
implementation of IFRS 17, effective from
1 January 2023, and the increasing maturity
of the control environment.
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
18 March 2021
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Remuneration Report
136
137
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 2020 and to highlight some of the
key aspects of the Committee’s work during what has been a year of unprecedented
challenges for all of our stakeholders including the Group, our customers, employees
and communities. I was appointed as Chair of the Committee on 21 June 2019 having
been a member of the Committee since 2014. This year Neil Maidment and Sir Stephen
Lamport joined the Committee on 2 March 2020 and 18 June 2020 respectively.
The Very Reverend Christine Wilson stepped down from the Committee
on 18 June 2020 and I would like to take this opportunity to thank her
for her contribution to the Committee’s work.
2020 performance and incentive outcomes
2020 was uniquely challenging due to the
significant impact of Covid-19. As described
in the Strategic Report starting on page 14,
our results were impacted by Covid-19
and in particular by the falls in investment
markets. However while this affected our
reported overall financial performance,
resulting in a reported loss before tax
of £15.7m, our underlying businesses
performed well and the Group remains
financially resilient going into 2021.
Underwriting results across the Group have
been resilient at £12.1m (2019: £20.0m) after
£18.7m for Covid-19 related claims where
cover is confirmed. The Group delivered Gross
Written Premium growth of 11% to £437m
(2019: £394m) supported by strong retention
and new business. As set out in the Financial
Performance Report starting on page 50,
investment returns were down due
to Covid-19’s impact on financial markets,
resulting in a net investment loss of £4.2m.
The Committee, however, note with pride
and thanks the efforts of all our colleagues
at Ecclesiastical in continuing to deliver what
matters most to the business, overcoming
their own personal challenges to support
our customers and to deliver on the Group’s
purpose, strategy and ambition for the future.
Delivery of the Group’s strategic agenda
remained strong, despite the unprecedented
challenges of Covid-19, and its performance
against its customer and conduct targets
remained resilient and in line with prior years.
Performance targets applicable to the
Group’s annual bonus and long-term
incentive plans (LTIP) were not adjusted
in light of the impact of Covid-19 and remain
as originally determined.
These are challenging times for Ecclesiastical,
our customers and the many charities and
communities that we look to support and
therefore our approach to remuneration
remains restrained. 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 reported loss before
tax of £15.7m, reduced performance against
Group COR targets, and the continuing strong
delivery against the Group’s strategic change
programme and customer and conduct
targets. The Committee further considered
shareholder and regulatory expectations
regarding executive remuneration and the
experience of the wider employee population
in relation to annual bonus outcomes
for 2020. In its assessment of individual
performance during the year, the Committee
recognised the excellent performance
against executive directors’ personal financial,
strategic and wider objectives, in the face
of the challenges brought by Covid-19.
In light of the Group’s reported results and
to align executive directors’ awards with
shareholder experience and with wider
employee awards, the Committee resolved
that the aggregate Group performance
multiplier determined in line with the
executive directors’ bonus plan for 2020
should be reduced by a further 13%.
Awards under the annual bonus scheme were
therefore materially reduced in comparison
to prior years. Annual bonus awards for 2020
are 45.0% of maximum (which is 100%
of salary) for the Group Chief Executive,
46.5% for the Deputy Group Chief Executive
and 43.4% for the Group Chief Financial
Officer. 35% of the awards under the plan
are deferred for one year and are subject
to the Group returning to profit in 2021.
Further details of performance against
the targets set for 2020 are disclosed on
page 158 of this report.
The long-term incentive plan (LTIP) granted
in 2018 vested at 53.8%, reflecting the Group’s
performance against the financial, strategic,
customer and conduct targets over the
2018-2020 period. The Committee considered
that the LTIP awards were a fair reflection
of the overall performance achieved and,
having considered all the relevant factors,
determined that no discretionary adjustment
of awards was necessary.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Remuneration Report
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139
In line with the Committee’s established
practice, the Committee, supported by the
Group Chief Risk & Compliance Officer,
considered risk management outcomes
across the Group as part of its deliberations
and in particular assessed whether any
risk adjustment of awards was appropriate.
Following this review, the Committee did
not consider risk adjustment of the awards
to be necessary.
Base salary
In light of the impact of the Covid-19
pandemic, the Committee decided that there
will be no pay increases for directors or
senior employees across the Group in 2021
and that there will be no increases to fees for
the Chairman and non-executive directors.
Key Committee activities during the year
A key consideration underlying the
Committee’s work during the year has
been the impact of Covid-19 on the Group,
its customers and employees, as well as
consideration of wider shareholder and
regulatory expectations regarding executive
remuneration. The Committee has sought
to balance these perspectives throughout
its deliberations, striking a balance between
rewarding the exceptional hard work
and resilience shown by executive directors
and colleagues in continuing to deliver for
our customers, and the reduced performance
against the financial targets set out in the
Group’s variable pay schemes for 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.
Looking ahead to the next stage of the
Group’s strategic journey, the Committee
explored how remuneration policy and
incentive design should evolve in future
to continue to drive the Group’s strategy and
long-term performance, including in respect
of ESG and climate change considerations.
2020 saw a number of changes within the
wider leadership of the Group. In relation
to these changes, the Committee considered,
on their respective appointments,
the remuneration packages for the Group
Development Director, Chief Executive
Officer of EdenTree, Group Chief Risk
and Compliance Officer, Claims Director
and Chief Investment Officer.
Across the wider Group, with the aim
of aligning reward, the Committee continued
to oversee the development and application
of remuneration policy and incentive scheme
design. In particular, revised incentive
arrangements were reviewed for Lycetts
Holdings Ltd (Lycetts) (part of the EIG Group).
The Group’s gender pay report for 2020
showed a continuing improvement in the
Group’s gender pay gap. The actions the
Group has taken have resulted in a higher
proportion of women filling senior roles and
this has contributed to our median gender
pay gap reducing for a fourth consecutive
year to 21.1%, from 22.4% in 2019 and 25.0%
when first reported 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.
The regulatory and corporate governance
environment in which the Group operates
continues to evolve. During 2020,
the Committee considered the implications
of the Investment Firms Directive and
Regulation on remuneration policy and
the changes arising from the requirements
of the Shareholder Rights Directive, further
details of which are set out in this report.
The Committee undertook a competitive
tender process during 2020 to appoint
an external adviser to the Committee.
As a result Deloitte LLP were appointed as
adviser to the Committee with effect from
June 2020. Following their appointment, the
Committee worked with Deloitte to embed
effective input and challenge by Deloitte into
the Committee’s deliberations.
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.
Conclusion
Finally, I value the continued support
and counsel of our charitable owner
Caroline Taylor
Chair of the Group Remuneration
18 March 2021
Committee
Committee member
Member since
Meetings eligible
to attend
Meetings
attended
Caroline Taylor1
David Henderson2
Sir Stephen Lamport3
Neil Maidment4
Angus Winther5
The Very Reverend Christine Wilson6
November 2014
September 2016
June 2020
March 2020
April 2019
February 2018
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1 Caroline Taylor was appointed Chairman of the Committee on 21 June 2019.
2 David Henderson relinquished the chairmanship of the Committee with effect
from 19 March 2019 on his appointment as Group Chairman.
3 Sir Stephen Lamport was appointed to the Committee on 18 June 2020.
4 Neil Maidment was appointed to the Committee on 2 March 2020.
5 Angus Winther was appointed to the Committee on 3 April 2019.
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 2020, the Committee held five
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.
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Remuneration Committee timetable
The table below sets out some of the key agenda items discussed at each Committee meeting
during 2020.
Meeting
Key discussion points
January 2020
March 2020
July 2020
November 2020
• 2020 annual bonus and 2020-2022 LTIP design
• 2019 Directors’ Remuneration Report
• Material Risk Taker list
• 2019 annual bonus and 2017-2019 LTIP outcomes
• 2020 annual bonus and 2020-2022 LTIP design
• Review of pay benchmarking and 2020 salary proposals
• Deferral policy for EdenTree Material Risk Takers
• 2019 Directors’ Remuneration Report
• Tender for external Remuneration Adviser to the Committee
• Review of executive remuneration trends and market practice
• Wider employee trends and policies
• Remuneration Policy review and Remuneration Policy Statement
• Material Risk Taker list
• Impact of Covid-19 on remuneration
• External Remuneration Committee evaluation results
• Strategic Remuneration Policy review
• Update on 2020 Group Management Board pay outturns
• Wider employee remuneration trends and pay
• 2020 Directors’ Remuneration Report
• Material Risk Taker identification process and Material Risk Taker list
• Gender pay gap reporting
• Annual audit of EdenTree remuneration policy
• 2021 Lycetts annual bonus design
• Annual review of Remuneration Committee Terms of Reference
• External Remuneration Committee evaluation outcomes
Advisers to the Committee
The Committee undertook a competitive tender process during 2020 to appoint an external
adviser to the Committee. Deloitte were appointed as adviser to the Committee with effect
from June 2020, taking over from Aon who acted as advisers to the Committee prior
to this date.
As such, the Committee received external advice from both Aon and Deloitte during the year
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 act in the capacity
of Actuary to EIO Trustees Ltd in respect of the Group’s closed 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 for professional advice to the Committee paid to Aon during 2020 were £27,970
(2019: £48,722) and fees paid to Deloitte were £99,222. The Committee is satisfied that
the advice received during 2020 from both Aon and Deloitte was impartial.
Where appropriate, the Committee received input from the Group Chief Executive,
Group Chief Financial Officer, Group HR Director, Group Chief Risk and Compliance Officer
and Group Reward Director. Such input, however, never relates to their own remuneration.
Remuneration ‘At a Glance’ – Key features of the Policy and implementation for 2021
Key Remuneration Principles
Long-term sustainable
returns
Reflecting individual and
business performance
The performance measures 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 and
a prudent and considered approach adopted to determine
the performance-related portion of an employee’s package.
Straightforward and simple Reward structures will be straightforward and simple
Set by reference to levels
for comparable roles
An appropriate balance
of fixed to variable pay
A balance between short-
and long-term incentives
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
in determining remuneration packages.
Reward structures will deliver an appropriate balance
of fixed to variable pay to foster a performance culture,
with the proportion of ‘at risk’ pay typically increasing
with seniority.
The balance is largely driven by role and seniority,
with generally a greater contribution to reward provided
by long-term incentives for more senior employees.
Fair and equal pay
opportunity
Ecclesiastical is committed to ensuring that all employees
have a fair and equal pay opportunity appropriate to their role.
Best practice guidelines
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.
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Remuneration ‘At a Glance’ – Remuneration Policy summary and implementation for 2021
The table below sets out the key features of the Policy and how it will be implemented in 2021. Looking ahead to the next
stage of the Group’s strategic journey, the Committee initiated a strategic review of remuneration policy and incentive design,
which will continue through 2021, to ensure these continue to drive the Group’s strategy and long-term performance.
Element
of pay
Operation
Base Salary Reviewed annually with any increases normally taking effect
in April.
Benefits
Pension
Annual
Bonus
Long-term
incentive
plan
Benefits normally comprise a car allowance, a private healthcare
scheme, income protection, life assurance, medical assessments,
and other benefits cover on the same basis as the wider
employee population.
The employer contribution rate to the UK Defined Contribution
Scheme for Executive Directors appointed prior to 2019 is 15% and
for Executive Directors appointed from 2019 is 12% of basic salary,
in line with the wider employee population. A cash allowance can
be paid where pension contributions would be in excess of the
HMRC annual and/or lifetime allowance.
The employer contribution rate to the Canada 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.
Targets are set annually and award levels are determined based
on one-year performance against these targets.
For 2020, these were:
i) Ecclesiastical Insurance Group (EIG) PBT (including fair value
investment gains/losses)
ii) Group Combined Operating Ratio (COR)
iii) Strategic targets
iv) Customer and conduct targets
v) Personal performance targets
Any bonus earned in excess of 75% of maximum opportunity
is deferred over three years. Malus and clawback provisions apply.
The awards are granted annually and operate in three-year
periods.
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.
Targets are set annually for each successive three-year LTIP
period. For 2020-22, the measures were:
i) Group EIG PBT (including fair value investment gains/losses);
ii) Group EIG PBT (excluding fair value investment gains/losses);
iii) Group COR;
iv) Strategic targets;
v) Customer and conduct targets.
Malus and clawback provisions apply.
Implementation
for 2021
In light of the impact of the Covid-19 pandemic,
the Committee decided that there will be no pay
increases for directors in 2021, in line with senior
employees across the Group.
• CEO: £475,000
• Deputy CEO: £386,486
• Group Chief Financial Officer: £307,500
No change.
No change.
The maximum and target opportunities are
unchanged for 2021, with targets for 2021 being:
i) Group EIG PBT (including fair value investment
gains/losses)
ii) Group COR
iii) Underwriting balanced scorecard
iv) Strategic targets
v) Customer and conduct targets
vi) Personal performance targets
Any bonus earned in excess of 75% of maximum
opportunity is deferred over three years. Malus
and clawback provisions apply.
The size of the awards granted is unchanged
for 2021, with targets for 2021 being:
i) Group EIG PBT (including fair value investment
gains/losses);
ii) Group EIG PBT (excluding fair value investment
gains/losses);
iii) Group COR;
iv) Strategic targets;
v) Customer and conduct targets.
Malus and clawback provisions apply.
Remuneration ‘At a Glance’ – variable pay outturns
Annual bonus outturn for the year ending 31 December 2020
Further details including information on the performance assessment of the strategic
and customer and conduct metrics are set out on pages 158 to 162 in this report.
Group COR
Group EIG PBT –
including fair
value investment
gains/losses
Strategic Targets
Actual
£(17.7m)
Threshold
(0.5x)
98.6%
Actual 95.1%
Target
(1.0x)
92.1%
Maximum
(1.5x)
Weighted
multiplier
89.5%
0.31
£10.9m
£38.9m
£71.0m
-
50%
75%
100%
0.21
Actual 94.9%
Customer and Conduct
85%
90%
100%
0.20
Total (before discretion)
Total (after discretion)
Actual 96%
0.71
0.62
35% of annual bonus awards for the year ending 31 December 2020 are deferred for one year
and are subject to the Group returning to profit in 2021.
2018-2020 LTIP Outturns
Further details including information on the performance assessment of the strategic
and customer and conduct metrics are set out on pages 158 to 162 in this report.
Group COR
96.9%
93.9%
90.9%
97%
Threshold
(20% vesting)
Target
(50% vesting)
Maximum
(100% vesting)
Percentage
vesting
First PBT Condition –
excluding fair value
gains/losses
Second PBT Condition –
including fair value
gains/losses
Actual
£68.6m
Actual 91.1%
£80.8m
£110.4m
£140.7m
34%
Actual £94.8m
£70.8m
£115.4m
£172.7m
-
Strategic Targets
50%
75%
100%
85%
Actual 92.4%
Customer and Conduct
80%
90%
100%
83%
Actual 96.7%
Total
53.8%
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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 up to three years
from January 2021. 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.
1. 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.
2. 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.
3. Reward structures will be straightforward
and simple for everyone to understand.
4. 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.
5. 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.
6. 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.
7. Ecclesiastical is committed to ensuring that
all employees have a fair and equal pay
opportunity appropriate to their role.
8. 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 remuneration policy for
Executive Directors, the Committee considers
the following factors, which are embedded
in our 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 on a regular basis
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)
How the element supports the Operation of the element
Group’s strategic objectives
Maximum potential value and payment
at threshold
Performance measures used,
weighting and time period applicable
Salary
To support the attraction
and retention of talent with
the capability to deliver
the Group’s strategy and
performance goals.
Benefits
To provide a market-competitive
and cost-effective benefits
package and promote the
wellbeing of employees.
Pension
To provide market-competitive
and cost-effective
post-retirement benefits.
Salaries are reviewed annually with any changes normally
taking effect from 1 April each year.
When the annual review is conducted various factors are taken
into account, including Group and individual performance,
any changes to the scope or responsibilities of the role,
relevant market information and levels of pay increases
in the wider UK or relevant territory population.
Group and individual performance
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.
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. A cash allowance can be paid where pension
contributions would be in excess of the HMRC annual and/or
lifetime allowance.
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.
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.
Not applicable
Not applicable
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 Executive Directors appointed prior to 2019 is 15%
and for Executive Directors appointed from 2019 is 12% of basic
salary, in line with the wider employee population.
The employer contribution rate to the Canada 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.
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Group annual
bonus scheme
To incentivise delivery of the
Group’s key financial and
strategic targets over the year.
Deferral provides
further alignment with
shareholder 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.
Maximum opportunity of 100% of salary of which 50%
is payable for a target level of performance.
The Group annual bonus is subject to a range of challenging
financial and non-financial metrics linked to key strategic
priorities.
For 2021, these are:
• Ecclesiastical Insurance Group (EIG) PBT (including fair value
investment gains/losses)
• Group COR
• Underwriting balanced scorecard
• Strategic targets
• Customer and conduct targets
• Personal performance targets
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Future policy table (Executive Directors) continued
How the element supports the Operation of the element
Group’s strategic objectives
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 the
shareholder 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 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 Group Chief Risk and Compliance
Officer, including in particular regarding 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.
Performance conditions under annual
bonus and LTIP schemes may be amended
or substituted by the Committee if an event
occurs, or other exceptional circumstances
arise, which causes the Committee
to determine an amended or substituted
performance condition would
be more appropriate.
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
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 is subject to a range of challenging financial
and non-financial conditions linked to key strategic priorities.
For 2021 awards relating to the performance period 2021-2023,
the following performance conditions will apply:
• Group EIG PBT (including fair value investment
gains/losses);
• Group EIG PBT (excluding fair value investment
gains/losses);
• Group COR;
• Strategic targets;
• Customer and conduct targets
All employees of the Group are
entitled to a salary, benefits, pension
and an annual bonus opportunity.
However, remuneration for executive
directors is more heavily weighted
towards variable rewards, through
a higher annual bonus opportunity
and participation in the Group LTIP
alongside other senior employees.
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 the shareholder.
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 2020
The weighting of financial performance
conditions within the GMB annual
bonus will be revised in the 2021
GMB annual bonus plan, in order
to place more weight on the overall
profitability of the Group. The weighting
on Group EIG PBT (including fair
value investment gains and losses)
is increased to 40% (from 30%) and
that of Group COR is reduced to 20%
(from 40%). An underwriting scorecard
with targets relating to rate adequacy,
retention and new business is being
introduced for 2021, with a weighting
of 10%.
The weighting of financial performance
conditions within the LTIP will be
revised in the 2021 LTIP award relating
to performance period 2021-2023,
in order to place more weight on the
overall profitability of the Group. The
weighting of Group EIG PBT (including
fair value investment gains and losses)
is increased to 40% (from 25%); that
of Group EIG PBT (excluding fair
value investment gains and losses)
is reduced to 20% (from 25%) and
that of Group COR is reduced to 15%
(from 25%).
These changes to the Group’s
Remuneration Policy will be made
in 2021 and are reflected in the Future
Policy table above.
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 142.
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 a Group
entity and the individual regulatory
requirements applying thereto.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Remuneration Report
150
151
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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 2021,
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 plus annual bonus
of 50% of basic salary and 50% vesting
of the LTIP;
• Maximum: fixed pay plus maximum bonus
of 100% of basic salary and 100% vesting
of the LTIP.
• Fixed pay is base salary for 2021 plus
the value of pension and benefits.
• Base salary is the salary applicable
at 1 April 2021.
• 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 2020
which can be found on page 157.
• 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.
Mark Hews: Effect of the application of this policy in financial year 2021
Minimum
100%
Total £550k
On-Target
Maximum
48%
32%
21%
31%
Total £1,144k
27%
41%
Total £1,738k
S. Jacinta Whyte: Effect of the application of this policy in financial year 2021
Minimum
100%
Total £455k
On-Target
Maximum
54%
37%
23%
23%
Total £841k
31%
31%
Total £1,228k
D. Cockrem: Effect of the application of this policy in financial year 2021
Minimum
100%
Total £352k
On-Target
Maximum
53%
36%
23%
23%
Total £660k
32%
32%
Total £967k
Fixed Pay
Annual Variable
LTIP
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.
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.
Where it is thought necessary
to compensate for an individual’s awards
resulting from previous employment,
the Committee may, as far as practicable,
Any new executive director’s package would
include the same elements and generally
be subject to the same constraints
as existing executive directors.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Remuneration Report
152
153
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
Payment in lieu of notice
Severance payment for
Deputy Group Chief
Executive
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
Chief Financial Officer.
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.
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.
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
Chief Financial Officer.
The executive’s entitlement
arises in the case of any
termination by the Group
for ‘No Cause’ as defined
and represents the sum
of £502k 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 £148k.
Mitigation
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
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.
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, 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, 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.
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.
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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154
155
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 153.
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.
NED 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 typically paid in 12
equal monthly instalments
during the year. Fees are
normally reviewed every two
years against those for NEDs
in companies of a similar
scale and complexity.
NEDs do not participate
in incentive or pension plans.
Non-Executive Directors
and the Chairman shall
be entitled to have
reimbursed all expenses
(such as their travel to Board
meetings), and any associated
tax, that they reasonably
incur in the performance
of their duties.
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157
Consideration of employment
conditions elsewhere in the Group
The remuneration of employees across
the Group is a key consideration when
setting remuneration policy and outcomes
for executive directors. The Committee
is mindful of the importance of aligning
executive and wider employee pay and
conditions and takes internal and external
measures, including internal pay relativities,
into account when considering remuneration
policy and outcomes for executive directors.
As part of its work, the Committee has
oversight of pay, incentive arrangements
and conditions applicable to employees and
oversees the incentive plans and material
changes to employee pay and conditions
across the Group’s businesses.
Annual Report
on Remuneration
This section of the Directors’ Remuneration
Report sets out how the above
Remuneration Policy was implemented
in 2020 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 2020
financial year for each executive director,
together with comparative figures for 2019.
The Group consults with its recognised
Union, Unite, regarding remuneration for
employees within relevant UK businesses.
Additionally, employees can provide
feedback 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 on 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 NED and the Chairman’s fees.
£000
Fixed pay
Pension
Salary
Benefits1
Pension
benefit2
Total fixed
remuneration
Fixed
Variable pay
Total variable
remuneration
Total
remuneration
Annual
bonus3
LTIP4
Variable
Total
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Mark Hews
472
461
384
375
14
22
14
22
61
57
60
556
547
535
214
444
355
510
569
954
1,116
1,489
463
452
180
362
193
292
372
653
835
1,106
306
95
13
4
32
10
351
109
133
86
0
0
133
86
484
196
Executive
Director
S. Jacinta
Whyte5
Denise
Cockrem7
Total
1,162
931
49
40
150
125
1,361
1,096 527
892
548
802
1,074
1,694 2,435 2,790
1 Benefits include car allowance and private medical insurance which are valued at their taxable value. Provision of benefits during 2020 was in line
with the previous year and the Directors’ Remuneration Policy, and no exceptional benefits were paid.
2 The Group Chief Executive and Group Chief Financial Officer 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 Chief Financial Officer) of salary (net of NI contributions) can be paid to UK-based executive directors where
pension contributions would be in excess of the HMRC annual and/or lifetime allowance.
3 35% of the awards under the 2020 annual bonus plan are deferred for one year and are subject to the Group returning to profit in 2021. In 2020 the value
of executive directors’ annual bonuses that were deferred is: £76k (Group Chief Executive), £64k (Deputy Group Chief Executive) and £47k (Group Chief
Financial Officer).
4 LTIP represents the amount payable in respect of the three-year LTIP performance period 2018-2020 for 2020 and 2017-2019 for 2019. 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.
5 An average 2020 exchange rate of 1.7315 Canadian dollars to 1 GBP has been used in respect of both 2020 and 2019.
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 Denise Cockrem was appointed to the Board on 6 September 2019. Her remuneration for the period she served as a Director during 2019 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 £34k (2019: £33k)
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 earned in respect of 2020 was £52.1k, of which £49.5k was received by the Group and £2.6k
was donated to charity (2019 for period since her appointment to the Ecclesiastical Board on 6 September 2019: £16.2k).
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Additional requirements in respect
of the single total figure table
Annual bonus outcomes for 2020 (audited)
The annual bonuses payable to executive
directors in respect of 2020 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 2020, 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 table below.
Performance targets for 2020 were not
adjusted as a result of the impact of the
Covid-19 pandemic and remain as originally
determined. In light of the Group’s reported
results and to align executive directors’
awards with shareholder experience and
with wider employee awards, the Committee
resolved that the aggregate Group
performance multiplier determined in line
with the targets shown in the table below
should be reduced by a further 13%.
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 and actual performance against those
targets for the financial year 2020 were:
The Strategic Targets performance condition
measures delivery of the Group’s change
programme. As set out in more detail
in the Strategic Report on pages 40 to 44,
the Group adapted its strategy in mid-2020,
including formalising its response
to Covid-19. It has continued to deliver
across a wide front through its strategic
change programme, delivering investment
in the Group’s people, systems, technologies
and brand, and strengthening
its commitment and approach to climate
change through its ‘Greater Good’ initiative.
In addition, 2020 saw significant delivery
in response to Covid-19, supporting the
Group’s customers including through the
launch of Fundraising Hubs, supporting
those in need through ‘Acts of Kindness’,
and supporting colleagues through the
‘Supported Teams’ initiative, ensuring
the safety and wellbeing of colleagues
throughout the pandemic and establishing
of new ways of working for the future.
Overall in 2020, substantial progress was
made on the Group’s change programme,
resulting in an outturn of 94.9% being
achieved against the strategic targets
measure for 2020.
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 across a range
of customer and conduct metrics. It was
pleasing to note that despite the challenges
of Covid-19, 98% of surveyed customers
were satisfied with how the Group handled
their claim in 2020, with a net promoter
score of 84%. The Group delivered
an outturn of 96.0% against the customer
and conduct metrics for 2020, a result which
is in line with prior years and which reflects
the Group’s strong customer and conduct
culture and effective systems of control,
even in the face of the challenges presented
by Covid-19. Targets in respect of compliance
with the Group’s risk appetite; regulatory
feedback; the Group’s rolling programme
of product reviews; complaints handling;
data security; and timely resolution
of internal audit and compliance findings
were met in full. Reflecting the challenges
of Covid-19, customer satisfaction and claims
service outturns for some business units
were slightly below target.
Performance Weighting
Condition
Threshold
(0.5x)
Target
(1.0x)
92.1%
£38.9m
75%
Maximum
(1.5x)
Actual
Weighted
performance multiplier
89.5%
£71.0m
100%
95.1%
£(17.7)m
94.9%
0.31
-
0.21
98.6%
£10.9m
50%
Group COR
40%
Group EIG PBT1 30%
Strategic
Targets
Customer
and Conduct
15%
15%
85%
90%
100%
96.0%
0.20
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Aggregate Group performance multiplier (before discretion)
Aggregate Group performance multiplier (after discretion)
0.71
0.62
1
Audited to EIO Group level
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Remuneration Report
160
161
Personal performance
Personal performance was assessed taking into consideration delivery against the Group’s
business plans for 2020, personal objectives and performance in line with the Group’s
behavioural competency framework for strategic leaders. The table below provides
an overview of the personal performance achieved by each executive director based
on their objectives.
The Covid-19 pandemic commenced after objectives had been set for 2020. The assessment
of personal performance for 2020 takes account of the additional activity necessary for the
business to successfully navigate this global challenge in addition to delivering strategic goals
and objectives.
Mark Hews
S. Jacinta Whyte
Denise Cockrem
Provided exceptional leadership across the Group throughout what
has been a very challenging year. Whilst overall financial performance
was adversely impacted by Covid-19, underlying business performance
was strong and the Group remains financially resilient going into 2021.
Strong leadership through Covid-19 ensured the Group continued
to deliver for customers, the health and wellbeing of employees
was prioritised with employee engagement remaining high, and
the Group’s charitable purpose was maintained through its support
for charities and communities. Specific achievements included the
development and launch of an adapted strategy, guiding the Group
through the IICSA inquiry and FCA court case relating to business
interruption, formalising the Group’s response to Covid-19 and laying
strong foundations for delivery of the Group’s ambitions for the future,
together with continued delivery of the existing strategic change
programme including major investment in core business technology
platforms, brand and acquisitions.
Provided energetic and disciplined leadership across the Group’s
general insurance portfolio of businesses. Played a central leadership
role in the Group’s Covid-19 response ensuring that the Group’s
general insurance businesses continued to provide market leading
products and services as well as driving continuous improvement
across the core disciplines of underwriting, claims management,
risk management and business development. Strengthened the
leadership of the Group’s businesses in Canada and the UK enabling
them to continue to outperform in a competitive market.
Maintained the financial strength of the Group and made a significant
contribution across the Group which has been central to the delivery
of the business plan. During 2020, assumed responsibility for Risk,
Compliance and Audit and has taken action to strengthen the Group’s
assurance teams as well as to raise the profile of the Group’s risk and
control environment. Chaired the Group’s Crisis Management Team
throughout the year, providing calm and steady leadership of the
Group’s response to the global pandemic.
Bonuses are earned in respect of the financial year and are paid in March following
the end of the financial year. Under the plan rules, any proportion of a bonus outcome above
75% of the maximum bonus outcome is deferred over three years, in cash and all annual
bonus outcomes are subject to malus and clawback as set out on page 148. Additionally,
the Committee resolved that 35% of the awards under the annual bonus plan for 2020
are to be deferred for one year and are subject to the Group returning to profit in 2021.
LTIP outcomes in 2020 (audited)
The LTIP amount included in the single total figure of remuneration is the cash award
resulting from the Group LTIP grant for the period 2018-2020. Vesting was dependent
on performance over the three financial years ending on 31 December 2020 and continued
service until March 2021.
The 2018-2020 Group LTIP is subject to the five performance conditions: Group COR (25%);
Group EIG PBT (excluding fair value investment gains and losses) (25%); Group EIG PBT
(including fair value investment gains and losses) (25%); delivery of Group strategic initiatives
in line with the Group’s strategic plan (15%); and Customer and Conduct performance
(10%). Results in respect of each performance condition are assessed against the required
performance levels set at threshold, target and maximum as shown below. Performance
targets were not adjusted in light of the impact of the Covid-19 pandemic and remain
as originally determined.
Performance
condition
Threshold –
20% vesting
Target –
50% vesting
Maximum –
100% vesting
Actual
Group COR
96.9%
93.9%
90.9%
91.1%
£80.8m
£110.4m
£140.7m
£94.8m
Vesting
(% of maximum
for performance
condition)
97%
34%
Group PBT
(excluding fair
value investment
gains and losses)1
Group PBT
(including fair
value investment
gains and losses)1
Strategic Targets
Customer and
Conduct
Total
£70.8m
£115.4m
£172.7m
£68.6m
-
50%
80%
75%
90%
100%
100%
92.4%
96.7%
85%
83%
53.8%
1 Audited to EIO Group level
The Strategic Targets performance condition measures delivery of the Group’s change
programme over the period 2018–2020. Considerable progress has been made by the Group
towards its target of delivering more than £100m to charity: the total now stands at over
£99m. Key achievements over the period include the implementation of enhanced systems
and technology across the Group’s businesses, welcoming new brokers into the Group’s
expanding broking business, investment in people and expertise, and delivery of the Group’s
Covid-19 response. A minority of programmes remain to be fully delivered, including the new
strategic General Insurance system for UK and Ireland. Overall, substantial progress has been
made on the Group’s change programme, resulting in an outturn of 92.4% being achieved
against the strategic targets measure for 2018-2020.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Remuneration Report
162
163
The Customer and Conduct performance condition measures delivery against the Group’s
customer and conduct metrics. Targets in respect of compliance with the Group’s risk
appetite; regulatory feedback; complaints handling; data security; and timely resolution
of internal audit and compliance findings were met in full throughout the period. Reflecting
the challenges of the Covid-19 pandemic, customer satisfaction and claims service outturns
for some business units were slightly below target in 2020, having been met in full in prior
years. Targets relating to the Group’s rolling programme of product reviews was met in full
in 2020 and with some business units reporting below target outturns in prior years.
An overall outturn of 96.7% was achieved.
Combining the financial and non-financial performance results in an overall vesting level
of 53.8%.
The Group LTIP outcome that vests in respect of each executive director in respect
of 2018-2020 is shown below.
Mark Hews
S. Jacinta Whyte1
Ian Campbell2
LTIP grant
% of salary
150%
100%
100%
Total LTIP vesting
% of maximum
53.8%
53.8%
0%
£000
355
193
0
1 An average 2020 exchange rate of 1.7315 Canadian dollars to 1 GBP has been used in respect of 2020.
2 Ian Campbell resigned from the Board on 31 August 2018.
Scheme interests awarded during 2020 (audited)
During 2020, awards comprising of a cash sum were granted under the 2020-2022 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 2023, to the extent that the applicable
performance targets are met. The vesting date for these awards is the date on which
the Group’s 2022 results are announced, anticipated to be during March 2023.
Executive
director
Award Maximum
cash sum
date
subject to
the award
(% base
salary)
Face value
of award
at grant
£000s
Cash award
if threshold
performance
achieved
(% base
salary)
End of the
period over
which the
performance
targets have
to be fulfilled
Performance
measures1
2020-2022 Group LTIP
Mark Hews
8 Jul
2020
150%
695
20%
31 December
2022
S. Jacinta
Whyte2
8 Jul
2020
100%
377
20%
31 December
2022
Denise
Cockrem
8 Jul
2020
100%
300
20%
31 December
2022
• 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 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.
2 An average 2020 exchange rate of 1.7315 Canadian dollars to 1 GBP has been used.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Remuneration Report
164
165
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 employees1 in the Group in order to provide greater transparency.
Year
Method
25th percentile
pay ratio
Median pay ratio
2020
Option A 2
2019
Option A 2
30:1
40:1
23:1
29:1
75th percentile
pay ratio
16:1
21:1
The total remuneration and salary values for the 25th, median and 75th percentile employees
for 2020 were:
25th percentile
Median
75th percentile
Total remuneration3
Salary
£37,296
£30,486
£49,317
£41,612
£67,952
£55,215
1 The table sets out the ratio between the Group Chief Executive’s total remuneration and that of the 25th percentile,
median and 75th percentile UK-based employees of Ecclesiastical Insurance Office plc (excluding SEIB), which
constitute the large majority of the UK employee population. 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.
2 The calculation is based on Option A as set out in the regulations for listed companies, as this is considered to be
the most accurate way of identifying employees at the 25th percentile, median and 75th percentile.
3 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 and taxable travel and accommodation expenses for administrative reasons. Calculations
have been carried out on a full-time equivalent basis as at 31 December 2020.
The Group Chief Executive was paid 23 times the median employee in 2020, reduced from
29:1 in 2019. 2020 awards under the Group’s annual bonus schemes and long-term incentive
plans were materially reduced in comparison to the prior year in line with 2020 performance.
The Group Chief Executive has a larger proportion of total remuneration linked to performance
than is the case for the wider UK employee population, and hence total remuneration for the
Group Chief Executive was impacted to a greater extent by the reduction in awards in respect
of 2020.
Percentage change in remuneration of all Directors and UK-based employees
The table below shows the percentage year-on-year change in salary, benefits and annual
bonus (from 2019 to 2020) for the Board Directors 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 Board.
Executive Directors
Mark Hews
Jacinta Whyte
Denise Cockrem3
UK-based employees
Salary
Taxable benefits2
Annual bonus
2.5%
2.5%
220.9%
0.2%
-0.2%
215.1%
-52.0%
-50.3%
55.0%
Average UK-based employees1
4.2%
2.0%
-53.4%
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. Taxable benefits
include car allowance and private medical insurance for executive directors and private medical insurance
for UK-based employees (taxable company car benefits and taxable travel and accommodation expenses
are excluded for administrative reasons).
3 Denise Cockrem was appointed to the Board on 6 September 2019. Her remuneration for the period she served
as a director during 2019 only is included in comparator figure for 2019. The underlying annualised movement
in remuneration as a director was 2.5% in respect of salary, 0.1% in respect of taxable benefits and -50.8%
in respect of annual bonus.
4 The fee paid to the Chairman was increased by 9.4% and the basic fee for NEDs was increased by 4.8% effective
1 January 2020.
Relative importance of spend on pay
The table below sets out for 2020 and 2019, 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. The changes are labelled in the chart below.
(£000)
2020
Remuneration paid to all Group employees
86,840
Gross charitable grants to the ultimate
parent company, Allchurches Trust Limited
Nil
2019
88,137
30,000
% change
-1%1
-100%
Non-Cumulative Irredeemable Preference
share dividend
9,181
9,181
Nil
(Loss)/profit before tax2
-15,746
73,263
-121%
1 In light of the Group’s reported results, total variable remuneration is significantly reduced compared to 2019,
as set out on page 165. This is offset by the increase in number of employees and salary inflation. See note 13
to the financial statements on page 223.
2 Ecclesiastical Insurance Office (EIO) Group.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Remuneration Report
166
167
Mark Hews3 N/A N/A
4%
60% 70% 88% 75% 88% 86% 54%
Non-Executive Directors
Total
remuneration
(single figure)
£000
Annual bonus
received
(% of
maximum)
Long-term
incentive
vesting (%
of maximum)
Group Chief Executive pay for performance comparison
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 2020.
Financial
year
Group Chief
Executive1
Financial year ending 31 December
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Mark Hews
N/A N/A
569
907
1,089 1,370
1,212
1,240 1,489
1,116
Michael
Tripp
416
390
330
162 N/A N/A N/A N/A N/A N/A
Mark Hews
N/A N/A
45%
78% 88% 97% 99% 84% 96% 45%
Michael
Tripp2
0%
0% N/A N/A N/A N/A N/A N/A N/A N/A
Michael
Tripp4
34%
0%
4%
47% N/A 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.
Statement of directors’ shareholdings and share interests
Directors’ shareholdings and share interests are set out in the Directors’ Report on page 98.
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 6 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 2020.
Early vesting of LTIP award
There is no early vesting of the executive directors’ LTIP.
Single total figure of remuneration for NEDs (audited)
NEDs do not participate in any of the Group’s incentive arrangements.
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.
David Henderson2
Chris Moulder3
Andrew McIntyre4
Caroline Taylor5
Angus Winther6
Francois-Xavier Boisseau7
Neil Maidment8
Sir Stephen Lamport9
The Very Revd Christine Wilson10
Tim Carroll11
John Hylands12
Total
Fees
Taxable Benefits1
2020
145,000
74,772
68,000
68,000
66,000
55,000
54,402
42,708
26,485
-
-
2019
118,327
64,500
64,500
58,777
41,192
41,192
-
-
65,000
62,500
28,708
2020
987
5
4
2,869
144
263
6
159
1,467
-
-
2019
1,120
1,615
19
4,615
-
94
-
-
4,777
1,284
9,411
600,637
544,969
5,904
22,935
1 Benefits are travel and accommodation expenses only, 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 David 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 £3k in 2019
for his services as a NED of EIM.
3 Chris Moulder was appointed as the SID on 14 January 2020 and a NED on 27 September 2017. He became
Chairman of the Group Nominations Committee on 7 January 2020 and Chairman of the Group Risk Committee
on 1 June 2018.
4 Andrew McIntyre was appointed as a NED and Chairman of the Group Audit Committee on 4 April 2017.
5 Caroline Taylor was appointed as Chairman of the Group Remuneration Committee on 21 June 2019.
6 Angus Winther was appointed as a NED on 19 March 2019 and Chairman of the Group Finance and Investment
Committee on 1 January 2020.
7 Francois-Xavier Boisseau was appointed as a NED on 19 March 2019.
8 Neil Maidment was appointed as a NED on 6 January 2020.
9 Sir Stephen Lamport was appointed as a NED on 23 March 2020.
10 The Very Revd Christine Wilson retired from the Board on 18 June 2020. Christine Wilson chose to donate her fee
to charity in 2019 and 2020.
11 Tim Carroll retired from the Board on 31 December 2019.
12 John Hylands retired as Chairman of the Group and from the Board on 19 March 2019.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Remuneration Report
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169
The information provided in this part of the Annual Report on Remuneration is not subject to audit
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 2021
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 2021 are set
out below.
Salary (Executive Directors)
Executive directors’ salaries are reviewed annually in line with the Directors’ Remuneration
Policy. In light of the impact of the Covid-19 pandemic, the Committee has determined that
there will be no pay increases for directors or senior employees across the Group in 2021
and as such the following salaries will apply from 1 April 2021:
(£000)
Salary
Salary
Mark Hews
S. Jacinta Whyte1
Denise Cockrem
1 April 2021
1 April 2020
475
386
308
475
386
308
1
An average 2020 exchange rate of 1.7315 Canadian dollars to 1 GBP has been used.
Percentage
increase
0%
0%
0%
Annual bonus for 2021
The annual bonus performance conditions and targets have been set in accordance
with the Directors’ Remuneration Policy above.
The annual bonuses payable to executive directors in respect of 2021 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 five performance conditions which together form the Group performance multiplier.
For 2021, these will be as follows:
Group performance measures
Percentage weighting
Group EIG PBT (including fair value investment gains and losses)
Group COR
Underwriting balanced scorecard
Delivery of Group strategic initiatives in line with the Group’s strategic plan
Customer and Conduct performance
40%
20%
10%
15%
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 2021 is unchanged at 100% of salary. Annual bonuses
in respect of 2021 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.
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Ecclesiastical Annual Report & Accounts 2020Section Three
Governance – Group Remuneration Report
170
171
LTIP for 2021-2023
The 2021-2023 LTIP performance conditions and targets have been set in accordance with
the Directors’ Remuneration Policy above. The 2021-2023 Group LTIP will be subject to the
following performance conditions:
Group performance measures
Percentage weighting
Group EIG PBT (including fair value investment gains and losses)
Group EIG PBT (excluding fair value investment gains and losses)
Group COR
Delivery of Group strategic initiatives in line with the Group’s strategic plan
Customer and Conduct performance
40%
20%
15%
15%
10%
Awards under the 2021-2023 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 Chief Financial Officer.
Fees (Non-Executive Directors)
The following fee structure will apply from 1 January 2021:
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 2021.
By order of the board
Caroline Taylor
Chair of the Group Remuneration Committee
18 March 2021
‘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.’
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Ecclesiastical Annual Report & Accounts 2020Section Three
172
Section Four
Financial Statements
Independent auditors report to the members of Ecclesiastical Insurance Office plc
’
Financial Statements
173
174
186
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Section Four
Independent auditors’ report to the members of Ecclesiastical Insurance Office plc
174
175
Independent auditors’ report to the members
of Ecclesiastical Insurance Office plc
Separate opinion in relation
to international financial reporting
standards adopted pursuant
to Regulation (EC) No 1606/2002
as it applies in the European Union
As explained in note 1 to the group financial
statements, the group, in addition
to applying international accounting
standards in conformity with the
requirements of the Companies Act 2006,
has also applied international financial
reporting standards adopted pursuant
to Regulation (EC) No 1606/2002
as it applies in the European Union.
In our opinion, the group financial
statements have been properly prepared
in accordance with international financial
reporting standards adopted pursuant
to Regulation (EC) No 1606/2002
as it applies in the European Union.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK)
are further described in the Auditors’
responsibilities for the audit of the financial
statements section of our report. 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, Ecclesiastical Insurance
Office plc’s group financial statements
and company financial statements
(the “financial statements”):
• give a true and fair view of the state of the
group’s and of the company’s affairs
as at 31 December 2020 and of the group’s
loss and the group’s and company’s cash
flows for the year then ended;
• have been properly prepared
in accordance with international
accounting standards in conformity
with the requirements of the Companies
Act 2006; and
• have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements,
included within the Annual Report and
Accounts (the “Annual Report”), which
comprise: Consolidated and parent
statements of financial position
as at 31 December 2020; consolidated
statement of profit or loss, consolidated
and parent statements of comprehensive
income, consolidated and parent statements
of cash flows and consolidated and parent
statements of changes in equity for the year
then ended; and the notes to the financial
statements, which include a description
of the significant accounting policies.
Our opinion is consistent with our reporting
to the Group Audit Committee.
Independence
We remained independent of the group
in accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, which includes the
FRC’s Ethical Standard, as applicable
to listed public interest entities, and we
have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief,
we declare that non-audit services prohibited
by the FRC’s Ethical Standard were not
provided to the group headed by Allchurches
Trust Limited, of which the company
is a member.
Other than those disclosed in note 12 to
the financial statements, we have provided
no non-audit services to the parent and its
controlled undertakings in the period
under audit.
Our audit approach
Context
The company is a UK headquartered general
insurer. The majority of business is written
in the UK however it does also have branches
in Ireland and Canada and subsidiaries
in Australia. The group of which it is the
parent also includes insurance broking,
life insurance, investment management
and financial advisory subsidiaries.
Overview
Audit scope
• We have scoped the audit based on the
financially significant components and
material account balances within the group,
which are described below
Key audit matters
• Assumptions and methodology used
in calculating asbestos, business
interruption and Physical and Sexual Abuse
“PSA” reserves and the completeness of
reserves in respect of business interruption
claims (group and company)
• Valuation of investment property and
unlisted equity (group and company)
• Impact of Covid-19 (group and company)
Materiality
• Overall group materiality: £10,000,000
based on 1.8% of Net assets.
• Overall company materiality: £9,500,000
based on 2.0% of Net assets.
• Performance materiality: £7,500,000
(group) and £7,125,000 (company).
The scope of our audit
As part of designing our audit, we determined
materiality and assessed the risks of material
misstatement in the financial statements.
Capability of the audit in detecting
irregularities, including fraud
Irregularities, including fraud, are instances
of non-compliance with laws and regulations.
We design procedures in line with our
responsibilities, outlined in the Auditors’
responsibilities for the audit of the
financial statements section, to detect
material misstatements in respect
of irregularities, including fraud. The extent
to which our procedures are capable
of detecting irregularities, including fraud,
is detailed below.
Based on our understanding of the group and
industry, we identified that the principal risks
of non-compliance with laws and regulations
related to breaches of UK, Canadian and
Australian regulatory principles, such
as those governed by the Prudential
Regulation Authority (UK), the Financial
Conduct Authority (UK), Office of the
Superintendent of Financial Institutions
(Canada) and the Australian Prudential
Regulation Authority, and we considered the
extent to which non-compliance might have
a material effect on the financial statements.
We also considered those laws and
regulations that have a direct impact on the
preparation of the financial statements such
as the Companies Act 2006. We evaluated
management’s incentives and opportunities
for fraudulent manipulation of the financial
statements (including the risk of override
of controls), and determined that the principal
risks were related to posting inappropriate
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Ecclesiastical Annual Report & Accounts 2020
Section Four
Independent auditors’ report to the members of Ecclesiastical Insurance Office plc
176
177
There are inherent limitations in the audit
procedures described above. We are less
likely to become aware of instances
of non-compliance with laws and
regulations that are not closely related
to events and transactions reflected
in the financial statements. Also, the risk
of not detecting a material misstatement
due to fraud is higher than the risk of not
detecting one resulting from error,
as fraud may involve deliberate
concealment by, for example, forgery
or intentional misrepresentations,
or through collusion.
Key audit matters
Key audit matters are those matters that,
in the auditors’ professional judgement,
were of most significance in the 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) identified by the
auditors, including 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, and any comments
we make on the results of our procedures
thereon, 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.
This is not a complete list of all risks
identified by our audit.
journal entries to revenue or expenditure
and management bias in accounting
estimates specifically investments with
a judgemental valuation, being investment
property and unlisted equity investments,
and the valuation of specific general
insurance reserves such as UK loss of profits,
asbestos and Physical and Sexual Abuse
(“PSA”) reserves (see Key Audit Matters).
The group engagement team shared this risk
assessment with the component auditors
so that they could include appropriate audit
procedures in response to such risks in their
work. Audit procedures performed by the
group engagement team and/or component
auditors included:
• Enquiries of compliance, risk, internal audit,
and the Group’s legal function, including
consideration of known or suspected
instances of non-compliance with laws
and regulation and fraud;
• Reading key correspondence with
the Prudential Regulation Authority,
the Financial Conduct Authority, Office
of the Superintendent of Financial
Institutions and the Australian Prudential
Regulation Authority in relation
to compliance with laws and regulations;
• Reviewing relevant meeting minutes
including those of the Group Board,
Group Audit Committee and Group
Risk Committee;
• Procedures relating to the valuation
of investment property and unlisted equity
investments, and the valuation of specific
general insurance reserves such as UK
loss of profits, asbestos and PSA reserves
described in the related key audit
matters below;
• Identifying and testing journal entries,
in particular any journal entries posted
with unusual account combinations in
revenue or expenditure; and.
• Designing audit procedures to incorporate
unpredictability around the nature, timing
or extent of our testing.
Key audit matter
Assumptions and methodology used in calculating
asbestos, business interruption and Physical and
Sexual Abuse “PSA” reserves and the completeness
of reserves in respect of business interruption claims
(group and company)
As disclosed in the Group Audit Committee Report
and notes 2, 3 and 28.
The valuation of the general insurance liabilities
is a complex process involving inherent uncertainty
and is one of the most significant areas of management
judgement within the financial statements of the group
and company. The uncertainty around claims frequency,
claims severity, discount rate, future inflation and
reserve margin require significant management
judgement and estimation in setting the reserves.
We consider the following to be the specific areas
of significant judgement:
– Assumptions and methodology used in calculating
the reserves for asbestos and PSA exposures,
specifically in relation to the incurred but not reported
(‘IBNR’) element of these reserves.
– The key assumptions and completeness of reserves
held against business interruption claims arising
as a result of the Covid-19 pandemic.
How our audit addressed the key audit matter
With involvement from our Actuarial specialists we have
performed the following procedures:
Assumptions and methodology used in calculating
the reserves for asbestos and PSA exposures
• Observed the Reserving Committee control which
reviews, challenges and approves the assumptions
used within the calculation of the reserves;
• Assessed the appropriateness of the methodology
used in setting the reserves;
• Challenged the assumptions used by management
and considered reasonable alternative assumptions
and the impact of the level of reserves calculated; and
• Performed independent recalculations of the models
used in the calculation of the reserves;
The methodology and assumptions used in calculating
and the completeness of reserves held against
business interruption claims arising as a result
of the Covid-19 pandemic.
• Tested a sample of policies recorded on the policy
administration systems to test management’s
judgement as to whether or not an exposure
to business interruption claims exists (including
consideration of policy wording and the result
of the FCA test case);
• Tested a sample of policies where a business
interruption reserve is held to ensure the methodology
and assumptions used in calculating the reserves
is appropriate.
Other procedures performed to address risks common
across both identified key audit matters include:
• Understood management’s process and controls
for the calculation of the reserves including review,
challenge and approval of key assumptions by the
reserving committee and audit committee; and
• Reviewed disclosures within the financial statements
to ensure they appropriately reflect the level
of judgement and uncertainty within the reserves.
As a result of our work outlined above, we have
concluded that the reserves calculated are supportable.
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Ecclesiastical Annual Report & Accounts 2020
Section Four
Independent auditors’ report to the members of Ecclesiastical Insurance Office plc
178
179
Key audit matter
Valuation of investment property and unlisted equity
(group and company)
As disclosed in the Group Audit Committee report
and notes 2, 4 and 21.
As at 31 December 2020, the group and company held
£963m of investments. The majority of these investments
do not require significant judgement in calculating their
valuation in the financial statements. However, £142m
of these investments are in investment properties and
£59m in unlisted equity investments, which require
management to use significant estimates and judgements
in order to calculate the valuation at the year-end.
Due to the magnitude of these balances and the level
of judgement involved in their valuation, this was an area
of focus for our audit.
The group outsources the valuation of investment
properties to a third party, whilst unlisted equity
investments are valued by the Group Finance Team.
How our audit addressed the key audit matter
With involvement from our Real Estate valuation experts
we have performed the following procedures over
investment property valuation:
• Tested the reasonableness of the valuation
assumptions used by management’s experts by
considering them against industry benchmarks;
• Obtained and reviewed the valuation reports produced
by management’s experts and confirmed that the
methodology adopted was appropriate;
• Compared the valuation movement and investment
yield movement from 31 December 2019 and our
estimated industry range and understood the reasons
for valuations outside that range; and
• Assessed the competence, objectivity and
independence of the third party valuers.
For a sample of investment properties, we also
performed the following:
• Performed testing over the inputs used in the valuation
of the investment property (e.g. lease lengths and
rental amounts).
From our work carried out we found that the
assumptions and methodology used in the investment
property valuations were supported by the evidence
we obtained.
With involvement from our insurance valuation experts
we have performed the following procedures over
unlisted equity valuations:
• Reviewed the methodology used by management
in calculating the valuation;
• Tested the suitability of comparable companies
considered by management in their valuation;
• Tested adjustments such as the illiquidity discount
used by management in their valuation; and
• Performed an independent valuation of the unlisted
investment and compared this valuation range with
that valuation provided by management.
From our work carried out we found that the
assumptions and methodology used in the unlisted
equity investment valuations were supported by the
evidence we obtained.
How our audit addressed the key audit matter
In assessing management’s consideration of the impact
of COVID-19 on the Ecclesiastical Insurance Office plc
and its subsidiaries we have performed the following
procedures:
• Obtained and reviewed management’s updated
going concern assessment which included the board
approved income statement, balance sheet, cash flow
and solvency forecasts;
• Considered the forward looking assumptions and
assessed the reasonableness of this based on recent
historic performance;
• Considered information obtained during the course
of the audit and publicly available market information
to identify any evidence that would contradict
management’s assessment of the ongoing impact
of COVID-19; and
• Considered our own independent alternative downside
scenarios and whether these could impact the going
concern assessment.
As a result of the procedures performed, we agree with
the Director’s conclusions in respect of going concern.
• Considered whether there has been any impacts
on the design and operating effectiveness of key
controls impacting the preparation of financial
statement information;
• Considered the result of the FCA test case in respect
of Business Interruption claims and challenged the
assumptions made by management in calculating the
gross and net exposure to claims (see separate key
audit mattter for details);
• With consideration of the impacts of the pandemic,
on the portfolio of investment properties held.
(see separate key audit matter for details);
We have audited the balances impacted by estimation
uncertainty and believe the values presented in the
Financial Statements to be reasonable.
• Reviewed the appropriateness of disclosures within
the Annual Report and Financial Statements with
respect to COVID-19 and where relevant checked
the material consistency of other information to the
audited financial statements.
We conclude that the disclosures made are appropriate.
Key audit matter
Impact of Covid-19 (group and company)
As disclosed in the Strategic Report, the Group Audit
Commitee Report and notes 1 and 2, the impacts of
the global pandemic due to the Coronavirus COVID-19
continue to cause significant social and economic
disruption up to the date of reporting. In our audit
we have identified the following key impacts
of COVID-19 to consider:
Ability of the entity to continue as a going concern
There are a number of potential matters in relation
to Covid-19 which could impact on the going concern
status of the group and company. Management have
produced a going concern assessment which projects
the future cash position, liquidity and solvency of the
group. The assessment has shown the group and entity
to have sufficient liquid resources to meet payments
as they fall due and not to breach their Solvency risk
appetite under Solvency II.
Using downside scenarios driven by the group’s and
company’s cash flow forecasting, the Directors have
considered the ability of the group and company
to remain solvent with sufficient liquidity to meet
future obligations.
The Directors have also considered its requirements
in respect of regulatory capital under Solvency II and
the potential operational impacts on the business
arising from remote working. Specific consideration has
also been given to the exposure the Group faces from
Business Interruption policies during the lockdowns
in UK, Ireland, Canada and Australia.
The Directors’ have concluded that the group and parent
are a going concern.
Impact on Estimation Uncertainty in the Financial
Statements
The pandemic has increased the level of estimation
uncertainty in the financial statements. The Directors
have therefore considered how COVID-19 has impacted
the key estimates that determine the valuation
of material balances, particularly certain Insurance
Contract Liabilities (specifically in relation to Business
Interruption), and the fair value of investment
properties held.
Qualitative Disclosures in the Annual Report
and Accounts
In addition, the Directors have considered the qualitative
disclosures included in the Annual Report and Financial
Statements in respect of COVID-19 and the impact that
the pandemic has had, and continues to have, on the
Group and Company.
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Ecclesiastical Annual Report & Accounts 2020
Section Four
Independent auditors’ report to the members of Ecclesiastical Insurance Office plc
180
181
Materiality
The scope of our audit was influenced
by our application of materiality.
We set certain quantitative thresholds
for materiality. These, together with
qualitative considerations, helped
us to determine the scope of our audit
and the nature, timing and extent of our
audit procedures on the individual financial
statement line items and disclosures and
in evaluating the effect of misstatements,
both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement,
we determined materiality for the financial
statements as a whole as follows:
How we tailored the audit scope
We tailored the scope of our audit
to ensure that we performed enough work
to be able to give an opinion on the financial
statements as a whole, taking into account
the structure of the Group and the Company,
the accounting processes and controls,
and the industry in which they operate.
The group operates a general insurance
business in the United Kingdom, Ireland,
Canada and Australia. It also operates
a life insurance business, an investment
management business and an insurance
broking business within the United Kingdom.
The group also includes certain non-insurance
entities within the United Kingdom and
Australia which are smaller and do not form
part of our in scope components.
We consider the general insurance business
in the United Kingdom and the consolidation
adjustments to be a financially significant
reporting component. We have performed
a full scope audit of this component.
The general insurance business in Canada
and Australia as well as the life insurance
business, an investment management
business and an insurance broking business
within the United Kingdom were noted
to included specific large balances. These
large balances have then been brought
into the scope of our audit. Consolidation
adjustments in the Group accounts have
also been considered.
Together with additional procedures
performed at a Group level on the
consolidation, the result of the above
scoping was that we achieved greater than
96% coverage of gross written premiums,
95% coverage of insurance contract
liabilities and 85% of net assets.
Financial statements
– group
Financial statements
– company
Overall materiality
£10,000,000.
£9,500,000.
How we determined it
1.8% of Net assets
2.0% of Net assets
Rationale for benchmark
applied
The engagement team
concluded that £9.5 million
is the most appropriate
figure when setting the
company materiality
on the 2020 engagement.
The engagement team
concluded that £10.0 million
is the most appropriate
figure when setting
an overall materiality
on the 2020 engagement.
The quantum of £10.0 million The quantum of £9.5 million
was determined by
considering the various
benchmarks available
to us as auditors, our
experience of auditing other
insurance groups and the
business performance
during 2020.
was determined by
considering the various
benchmarks available
to us as auditors, our
experience of auditing other
insurance companies and
the business performance
during 2020.
In determining the performance materiality,
we considered a number of factors – the
history of misstatements, risk assessment
and aggregation risk and the effectiveness
of controls – and concluded that an amount
at the upper end of our normal range
was appropriate.
We agreed with the Group Audit Committee
that we would report to them misstatements
identified during our audit above £500,000
(group audit) and £475,000 (company
audit) as well as misstatements below
those amounts that, in our view, warranted
reporting for qualitative reasons.
For each component in the scope of our
group audit, we allocated a materiality that
is less than our overall group materiality.
The range of materiality allocated across
components was between £0.5 million
and £9.0 million.
We use performance materiality to reduce
to an appropriately low level the probability
that the aggregate of uncorrected and
undetected misstatements exceeds
overall materiality. Specifically, we use
performance materiality in determining
the scope of our audit and the nature and
extent of our testing of account balances,
classes of transactions and disclosures,
for example in determining sample sizes.
Our performance materiality was 75%
of overall materiality, amounting to £7.5m
for the group financial statements and £7.1m
for the company financial statements.
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Ecclesiastical Annual Report & Accounts 2020
Section Four
Independent auditors’ report to the members of Ecclesiastical Insurance Office plc
182
182
183
Conclusions relating to going concern
Our evaluation of the directors’ assessment
of the group’s and the company’s ability
to continue to adopt the going concern basis
of accounting included:
• Obtained and reviewed management’s
updated going concern assessment which
included the board approved income
statement, balance sheet, cash flow
and solvency forecasts;
• Considered the forward looking
assumptions and assessed the
reasonableness of this based
on recent historic performance;
• Considered information obtained during
the course of the audit and publicly
available market information to identify
any evidence that would contradict
management’s assessment of the
ongoing impact of COVID-19; and
• Considered our own independent
alternative downside scenarios and
whether these could impact the going
concern assessment.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or conditions
that, individually or collectively, may cast
significant doubt on the group’s and the
company’s ability to continue as a going
concern for a period of at least twelve
months from when the financial statements
are authorised for issue.
In auditing the financial statements,
we have concluded that the directors’ use
of the going concern basis of accounting
in the preparation of the financial statements
is appropriate.
However, because not all future events
or conditions can be predicted, this
conclusion is not a guarantee as to the
group’s and the company’s ability
to continue as a going concern.
Our responsibilities and the responsibilities
of the directors with respect to going
concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the
information in the Annual Report other than
the financial statements and our auditors’
report thereon. The directors are responsible
for the other information. Our opinion
on the financial statements does not cover
the other information and, accordingly,
we do not express an audit opinion or, except
to the extent otherwise explicitly stated
in this report, any form of assurance 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
an apparent material inconsistency
or material misstatement, we are required
to perform procedures to conclude
whether there is a material misstatement
of 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 based
on these responsibilities.
With respect to the Strategic report and
Directors’ Report, we also considered
whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the
course of the audit, the Companies Act 2006
requires us also to report certain opinions
and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work
undertaken in the course of the audit,
the information given in the Strategic
report and Directors’ Report for the year
ended 31 December 2020 is consistent
with the financial statements and has been
prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding
of the group and company and their
environment obtained in the course
of the audit, we did not identify any
material misstatements in the Strategic
report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Group
remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
Responsibilities for the financial
statements and the audit
Responsibilities of the directors
for the financial statements
As explained more fully in the Directors’
responsibilities, the directors are
responsible for the preparation of the
financial statements in accordance with
the applicable framework and for being
satisfied that they give a true and fair view.
The directors are also responsible for
such internal control as they 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 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 company
or to cease operations, or have no realistic
alternative but to do so.
Auditors’ 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 auditors’
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.
Our audit testing might include testing
complete populations of certain transactions
and balances, possibly using data auditing
techniques. However, it typically involves
selecting a limited number of items for
testing, rather than testing complete
populations. We will often seek to target
particular items for testing based on their
size or risk characteristics. In other cases,
we will use audit sampling to enable
us to draw a conclusion about the population
from which the sample is selected.
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
auditors’ report.
Use of this report
This report, including the opinions, has been
prepared for and only for the company’s
members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not,
in giving these opinions, accept or assume
responsibility for any other purpose
or to any other person to whom this report
is shown or into whose hands it may come
save where expressly agreed by our prior
consent in writing.
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Ecclesiastical Annual Report & Accounts 2020
185
186
187
188
189
190
191
Section Four
Independent auditors’ report to the members of Ecclesiastical Insurance Office plc
184
184
Ecclesiastical Annual Report & Accounts 2020
Section Four
Financial Statements
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
Other required reporting
Companies Act 2006
exception reporting
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
• we have not obtained all the information
and explanations we require for our audit;
or
• adequate accounting records have not
been kept by the company, or returns
adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of directors’
remuneration specified by law are
not made; or
• the company financial statements and the
part of the Group remuneration report
to be audited are not in agreement with
the accounting records and returns; or
• a corporate governance statement has
not been prepared by the company.
We have no exceptions to report arising
from this responsibility.
Appointment
Following the recommendation of the Group
Audit Committee, we were appointed
by the directors on 18 June 2020 to audit
the financial statements for the year ended
31 December 2020 and subsequent financial
periods. This is therefore our first year
of uninterrupted engagement.
Sue Morling
(Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory
Auditors
Bristol
18 March 2021
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Consolidated statement of profit or loss
for the year ended 31 December 2020
Consolidated and parent statement of comprehensive income
for the year ended 31 December 2020
186
Ecclesiastical Annual Report & Accounts 2020
187
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 (loss)/profit
Finance costs
(Loss)/profit before tax
Tax credit/(expense)
(Loss)/profit for the year (attributable to equity holders of the Parent)
Notes
5, 6
6
6
7
8
9
9
10
5
14
11
2020
£000
2019
£000
437,299
(173,074)
(16,562)
247,663
69,582
2,126
(4,298)
315,073
(222,794)
94,581
(85,444)
(116,393)
(330,050)
(14,977)
(769)
(15,746)
526
(15,220)
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
(Loss)/profit for the year
(15,220)
(19,376)
61,813
Notes
2020
Group
£000
Parent
£000
2019
Group
£000
Other comprehensive income
Items that will not be reclassified to profit or loss:
Fair value losses on property
Actuarial losses on retirement benefit plans
Attributable tax
Items that may be reclassified subsequently to profit or loss:
Gains/(losses) on currency translation differences
(Losses)/gains on net investment hedges
Attributable tax
19
27
27
27
Net other comprehensive expense
Total comprehensive (loss)/income attributable to equity holders of
the Parent
Parent
£000
70,151
-
(7,049)
1,198
(5,851)
525
(649)
110
(14)
(5,865)
(15)
(17,318)
3,521
(13,812)
1,980
(2,339)
265
(94)
(15)
(17,318)
3,521
(13,812)
(711)
279
(64)
(496)
(13,906)
(14,308)
-
(7,049)
1,198
(5,851)
(1,368)
640
(19)
(747)
(6,598)
(29,126)
(33,684)
55,215
64,286
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Financial StatementsSection Four
Consolidated and parent statement of changes in equity
for the year ended 31 December 2020
Group
Notes
Share
capital
£000
Share
premium
£000
Translation
Revaluation and hedging
reserve
£000
reserve
£000
Retained
earnings
£000
15
15
15
15
At 1 January 2020
Loss for the year
Other net income/(expense)
Total comprehensive income/(expense)
Dividends
At 31 December 2020
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
Parent
At 1 January 2020
Loss for the year
Other net income/(expense)
Total comprehensive income/(expense)
Dividends
Group tax relief in excess
of standard rate
At 31 December 2020
At 1 January 2019
Profit for the year
Other net expense
Total comprehensive (expense)/income
Dividends
Gross charitable grant
Tax relief on charitable grant
Group tax relief in excess
of standard rate
At 31 December 2019
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
-
34
34
-
599
565
-
-
-
-
-
-
565
565
-
35
35
-
-
600
565
-
-
-
-
-
-
-
565
18,324
-
(94)
(94)
-
18,230
19,071
-
(747)
(747)
-
-
-
18,324
7,564
-
(497)
(497)
-
-
7,067
7,578
-
(14)
(14)
-
-
-
188
Total
£000
607,535
(15,220)
(13,906)
(29,126)
(9,181)
569,228
586,004
61,813
(6,598)
55,215
(9,181)
(30,000)
5,497
607,535
463,537
(15,220)
(13,846)
(29,066)
(9,181)
425,290
441,259
61,813
(5,851)
55,962
(9,181)
(30,000)
5,497
463,537
391,519
(19,376)
(13,846)
(33,222)
(9,181)
524,757
(19,376)
(14,308)
(33,684)
(9,181)
(472)
348,644
(472)
481,420
361,595
70,151
(5,851)
64,300
(9,181)
(30,000)
4,920
494,847
70,151
(5,865)
64,286
(9,181)
(30,000)
4,920
-
7,564
(115)
391,519
(115)
524,757
Consolidated and parent statement of financial position
at 31 December 2020
189
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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
Pension liabilities
Retirement benefit obligations
Deferred tax liabilities
Current tax liabilities
Deferred income
Other liabilities
Total liabilities
Total shareholders' equity and liabilities
Notes
2020
Group
£000
17
18
30
19
20
21
22
28
24
25
26
28
32
29
19
19
30
31
31
54,353
41,989
1,078
1,053
38,316
142,142
820,777
208,677
7,986
216,570
104,429
1,637,370
120,477
4,632
444,119
569,228
868,649
25,450
6,499
10,406
6,530
29,846
1,293
25,908
93,561
1,068,142
1,637,370
Parent
£000
24,265
33,472
-
1,053
34,726
142,142
650,787
134,516
5,497
161,114
59,466
1,247,038
120,477
4,632
356,311
481,420
616,202
22,838
5,842
10,406
6,530
28,562
1,293
18,858
55,087
765,618
2019
Group
£000
Parent
£000
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
1,247,038
1,530,839
1,199,025
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The financial statements of Ecclesiastical Insurance Office plc, registered number 24869, on pages 186 to 255 were approved and authorised for issue
by the Board of Directors on 18 March 2021 and signed on its behalf by:
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.
David Henderson
Chairman
Mark Hews
Group Chief Executive
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Consolidated and parent statement of cash flows
for the year ended 31 December 2020
Notes to the financial statements
190
191
(Loss)/profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Revaluation of property, plant and equipment
Loss on disposal of property, plant and equipment
Amortisation and impairment of intangible assets
Impairment of shares in subsidiary undertakings
Net fair value losses/(gains) on financial instruments and
investment property
Dividend and interest income
Finance costs
Adjustment for pension funding
Changes in operating assets and liabilities:
Net increase in insurance contract liabilities
Net increase in reinsurers' share of contract liabilities
Net increase in deferred acquisition costs
Net increase in other assets
Net increase in operating liabilities
Net increase 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
Net cash used by investing activities
Cash flows from financing activities
Interest paid
Payment of lease liabilities
Dividends paid to Company's shareholders
Charitable grant paid to ultimate parent undertaking
Acquisition of shares issued by subsidiary
Net cash used by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at end of year
Notes
2020
Group
£000
Parent
£000
2019
Group
£000
(15,746)
(20,398)
73,263
5,486
(10)
172
1,468
-
18,602
(21,814)
769
1,003
94,180
(45,101)
(3,352)
(35,369)
16,642
1,298
18,228
(121,754)
151,531
6,255
14,519
(2,756)
66,023
(6,028)
1
(15,602)
(822)
(22,451)
(769)
(5,090)
(9,181)
-
-
(15,040)
28,532
74,775
1,122
104,429
4,620
(10)
172
593
58
24,390
(17,185)
667
1,003
59,703
(27,858)
(2,405)
(27,384)
10,148
1,212
7,326
(89,260)
129,725
6,812
9,332
(2,844)
61,091
(5,881)
1
(12,978)
-
(18,858)
(667)
(4,432)
(9,181)
-
(11,086)
(25,366)
16,867
42,248
351
59,466
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
16
22
25
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
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 2020 issued by the International Accounting Standards Board (IASB) in conformity with the
requirements of the Companies Act 2006 and pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (EU). The
financial statements have been prepared on the historical cost basis, except for the revaluation of properties measured at fair value through
other comprehensive income (FVTOCI) and certain other financial assets and derivatives measured at fair value through profit and loss
(FVTPL).
As stated in the Directors' 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 Company's
functional currency and the Group’s presentational 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
A number of amendments and improvements to accounting standards have been issued by the International Accounting Standards Board
(IASB) with an effective date of on or after 1 January 2020, and are therefore applicable for the 31 December 2020 financial statements. None
had a significant impact on 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 2023, 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 .
Within the Group, Ecclesiastical Insurance Office plc, Ecclesiastical Life Limited and Ansvar Insurance Limited qualify for the temporary
exemption from the requirements of IFRS 9.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
1 Accounting policies (continued)
Notes to the financial statements
1 Accounting policies (continued)
192
193
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.
Standard
Key requirements
Expected impact on financial statements
Effective date
IFRS 9, Financial Provides a new model for
Instruments
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 2018. Although can be
deferred until 2023 for
change to amortised cost or fair value through other
comprehensive income. No changes are expected from the more
insurers inline with the
principles-based hedge accounting requirements. The Group is
effective date of IFRS 17.
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
IFRS 17,
Insurance
Contracts
IFRS 17 is a comprehensive new accounting standard for
Requires insurance
insurance contracts covering recognition and measurement,
liabilities to be measured
at a current fulfilment
presentation and disclosure. The standard was issued in May
value and provides a more 2017 as replacement for IFRS 4, Insurance Contracts and the
uniform measurement and
presentation approach for
all insurance contracts.
These requirements are
designed to achieve the
goal of a consistent,
principle-based accounting Amendments to IFRS 17 that had been proposed by the IASB in
January 2019, were been issued in June 2020. It is not currently
for insurance contracts.
practical to quantify the potential impact on the Group’s financial
position or performance. The Group expects to quantify the
potential impact closer to transition.
impact of the standard on the financial statements is 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 to contracts with a coverage period of one year or less.
Applicable to annual
reporting periods
beginning on or after 1
January 2023.
Amendments to 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. This includes estimates and assumptions related
to insurance contract liabilities as a result of Covid-19. 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.
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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.
Premiums written include adjustments to premiums written in prior periods and estimates for pipeline premiums and are shown net of insurance
premium taxes.
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.
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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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
1 Accounting policies (continued)
Notes to the financial statements
1 Accounting policies (continued)
194
195
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 uncertainty margin within a range of possible outcomes.
Designated insurance liabilities are remeasured to reflect current market interest rates.
(ii) Provision for unearned premiums
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.
The life business provision is held in respect of funeral plans and is based on an estimate of the discounted future cash flows expected to arise
from contracts in-force at the year-end date. The methods and assumptions used in calculating the provision are approved by the directors
based on advice from the Chief Actuary, including assumptions relating to future interest rates, inflation, mortality, expenses and investment
return. Changes in the life business provision are recognised in the statement of profit or loss.
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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.
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 fair 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 fair 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.
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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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
1 Accounting policies (continued)
Notes to the financial statements
1 Accounting policies (continued)
196
197
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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.
Assets and liabilities held at fair value are disclosed according to a hierarchy that reflects the significance of observable market inputs in
calculating those fair values. The three levels of the fair value hierarchy are included within note 4. 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.
(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
Leases are recognised as a right-of-use asset and a corresponding lease 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.
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Lease liabilities are determined using the net present value of the payments over the lease term with the rate used to discount payments
reflecting the rate implicit in the lease or, if it not readily determinable, the Group's incremental borrowing rate, and include:
fixed payments less any lease incentives receivable;
variable lease payments that are based on an index or rate;
amounts expected to be payable by the lessee under residual value guarantees;
the exercise price of an option if the lessee is reasonably certain to exercise that option; and
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
1 Accounting policies (continued)
Notes to the financial statements
1 Accounting policies (continued)
198
199
Right-of-use assets are initially measured at cost and subsequently measured as cost less accumulated depreciation and comprises:
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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.
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
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.
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.
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.
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 these distributions 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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
200
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Notes to the financial statements
2 Critical accounting estimates and judgements in applying
accounting policies
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
the circumstances. During 2020, the Covid-19 pandemic developed rapidly with far-reaching impacts across the global economy and the
insurance industry. Management has considered the effects of Covid-19 and actions taken by Government's in its estimates and judgements.
Specifically, insurance liabilities reflect management’s best estimate of claims directly related to Covid-19. Valuations incorporate market
conditions as at 31 December 2020 and recoverability of intangible assets has been tested where the value of these intangible assets is
sensitive to prevailing economic conditions.
(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).
Notes to the financial statements
2 Critical accounting estimates and judgements in applying accounting policies
(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.
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).
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.
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 and Covid-19 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 these. These include but are not limited
to discount rate, inflation, long-term economic growth rate and investment market returns.
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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
202
203
Notes to the financial statements
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 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
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:
2020
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 Funeral plans
£000
£000
Total
£000
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
203,921
107,458
48,665
7,299
51,920
35,846
304,506
150,603
203,922
107,458
51,920
35,846
255,842
143,304
57,634
55,095
29,279
24,840
24,033
22,425
110,946
102,360
57,634
55,095
24,033
22,425
81,667
77,520
16,273
9,080
1,332
1,283
-
-
17,605
10,363
16,273
9,080
-
-
16,273
9,080
3,328
716
902
171
-
-
4,230
887
4,005
752
-
-
4,005
752
12
12
-
-
-
-
12
12
-
-
-
-
-
-
281,168
172,361
80,178
33,593
75,953
58,271
437,299
264,225
281,834
172,385
75,953
58,271
357,787
230,656
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
3 Insurance risk (continued)
Notes to the financial statements
3 Insurance risk (continued)
204
205
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
(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, theft and earthquake. 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.
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 Group
holds a reserve to meet the costs of future expenses in running the life business and administration of the policies. There is a risk that this is
insufficient to meet the expenses incurred in future periods. The small mortality risk is retained by the Group.
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Ecclesiastical Annual Report & Accounts 2020Financial 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
(ii) Categories of financial assets applying IFRS 9
206
207
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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. Despite the conclusion of Brexit and the US
election at the end of 2020 and Covid-19 vaccine programmes, uncertainty remains 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
Financial assets
Hedge
Financial liabilities
Hedge
Group
At 31 December 2020
Financial investments
Other assets
Cash and cash equivalents
Lease obligations
Other liabilities
Net other
Total
At 31 December 2019
Financial investments
Other assets
Cash and cash equivalents
Lease obligations
Other liabilities
Net other
Total
Parent
At 31 December 2020
Financial investments
Other assets
Cash and cash equivalents
Lease obligations
Other liabilities
Net other
Total
At 31 December 2019
Financial investments
Other assets
Cash and cash equivalents
Lease obligations
Other liabilities
Net other
Total
Designated Held for Loans and accounted Held for
trading
at fair value
£000
£000
trading receivables derivatives
£000
£000
£000
Financial
liabilities*
£000
accounted Other assets
derivaties and liabilities
£000
£000
Total
£000
817,551
-
-
-
-
-
817,551
848,573
-
-
-
-
-
848,573
586,804
-
-
-
-
-
586,804
638,088
-
-
-
-
-
638,088
2,079
-
-
-
-
-
2,079
3,061
-
-
-
-
-
3,061
2,079
-
-
-
-
-
2,079
3,311
-
-
-
-
-
3,311
746
211,475
104,429
-
-
-
316,650
5,770
173,996
74,775
-
-
-
254,541
746
157,239
59,466
-
-
-
217,451
5,766
130,220
42,248
-
-
-
178,234
401
-
-
-
-
-
401
509
-
-
-
-
-
509
401
-
-
-
-
-
401
259
-
-
-
-
-
259
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,244)
-
(1,244)
-
-
-
-
-
-
-
-
-
-
(25,450)
(80,224)
-
-
-
-
-
(1,244)
-
(105,674)
(1,244)
-
-
-
(12,923)
(65,634)
-
(78,557)
-
-
-
(22,838)
(44,008)
-
(66,846)
-
-
-
(10,328)
(36,543)
-
(46,871)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,095
-
-
820,777
216,570
104,429
(25,450)
(93,561)
(12,093)
(453,537)
(453,537)
(460,535) 569,228
-
4,362
-
-
(11,318)
(413,636)
(420,592)
857,913
178,358
74,775
(12,923)
(76,952)
(413,636)
607,535
60,757
3,875
-
-
650,787
161,114
59,466
(22,838)
(55,087)
(9,835)
(312,022)
(312,022)
(257,225) 481,420
49,729
3,573
-
-
(9,023)
(292,543)
(248,264)
697,153
133,793
42,248
(10,328)
(45,566)
(292,543)
524,757
* 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.
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
2020
Other
2019
SPPI financial
assets
£000
financial Total financial
assets
£000
assets
£000
SPPI financial
assets
£000
Other financial
assets
£000
Total financial
assets
£000
Financial investments
Cash and cash equivalents
Other financial assets
Total fair value
746
104,429
211,475
316,650
Parent
820,031
-
-
820,031
2020
Other
820,777
104,429
211,475
1,136,681
5,770
74,775
173,996
254,541
857,913
74,775
173,996
1,106,684
852,143
-
-
852,143
2019
SPPI financial
assets
£000
financial Total financial
assets
£000
assets
£000
SPPI financial Other financial
assets
£000
assets
£000
Total financial
assets
£000
Financial investments
Cash and cash equivalents
Other financial assets
Total fair value
746
59,466
157,239
217,451
589,284
-
-
589,284
590,030
59,466
157,239
806,735
5,766
42,248
130,220
178,234
641,658
-
-
641,658
647,424
42,248
130,220
819,892
There has been a £62,109,000 increase (2019: £13,925,000 decrease) in the fair value of SPPI financial assets of the Group, and a
£32,112,000 decrease (2019: £63,099,000 increase) in the fair value of other financial assets of the Group during the reporting period. There
has been a £39,217,000 increase (2019: £17,038,000 decrease) in the fair value of SPPI financial assets of the Parent, and a £52,374,000
decrease (2019: £65,237,000 increase) in the fair value of other financial assets of the Parent during the reporting period.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
4 Financial risk and capital management (continued)
Notes to the financial statements
4 Financial risk and capital management (continued)
208
209
(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 2020
Financial assets at fair value through profit or loss
Financial investments
Equity securities
Debt securities
Derivatives
Hedged accounted derivatives
Total financial assets at fair value
At 31 December 2019
Financial assets at fair value through profit or loss
Financial investments
Equity securities
Debt securities
Derivatives
Hedged accounted 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
262,014
493,601
-
-
755,615
289,165
490,911
-
-
780,076
185
1,512
2,079
401
4,177
190
1,200
3,061
509
4,960
59,687
552
-
-
60,239
66,703
404
-
-
67,107
Total
£000
321,886
495,665
2,079
401
820,031
356,058
492,515
3,061
509
852,143
Parent
At 31 December 2020
Financial assets at fair value through profit or loss
Financial investments
Equity securities
Debt securities
Derivatives
Hedged accounted derivatives
Total financial assets at fair value
At 31 December 2019
Financial assets at fair value through profit or loss
Financial investments
Equity securities
Debt securities
Derivatives
Hedged accounted 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
238,150
287,252
-
-
525,402
263,478
306,661
-
-
570,139
185
1,158
2,079
401
3,823
190
832
3,311
259
4,592
59,507
552
-
-
60,059
66,523
404
-
-
66,927
Total
£000
297,842
288,962
2,079
401
589,284
330,191
307,897
3,311
259
641,658
The derivative liabilities of the Group are measured at fair value through other comprehensive income. The derivative liabilities of the Parent in
the current year were measured at fair value through profit or loss. Derivative liabilities are 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 2020
Opening balance
Total (losses)/gains recognised in profit or loss
Closing balance
Total (losses)/gains for the period included in profit or loss for assets
held at the end of the reporting period
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
Financial assets at fair value
through profit and loss
Equity
securities
£000
Debt
securities
£000
66,703
(7,015)
59,688
404
147
551
Total
£000
67,107
(6,868)
60,239
(7,015)
147
(6,868)
44,773
7,538
14,392
66,703
7,539
261
143
-
404
143
45,034
7,681
14,392
67,107
7,682
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
210
211
Notes to the financial statements
4 Financial risk and capital management (continued)
Parent
At 31 December 2020
Opening balance
Total (losses)/gains recognised in profit or loss
Closing balance
Total (losses)/gains for the period included in profit or loss for assets
held at the end of the reporting period
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
Financial assets at fair value
through profit and loss
Equity
securities
£000
Debt
securities
£000
66,523
(7,015)
59,508
404
147
551
Total
£000
66,927
(6,868)
60,059
(7,015)
147
(6,868)
44,771
7,539
14,213
66,523
7,539
261
143
-
404
143
45,032
7,682
14,213
66,927
7,682
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.
Notes to the financial statements
4 Financial risk and capital management (continued)
(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 (2019: three 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 valuation techniques used for instruments categorised in levels 2 and 3 are described below.
The table below summarises the maturities of life business assets and liabilities that are exposed to interest rate risk.
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, 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 (2019: +/-£7m).
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.
Group life business
At 31 December 2020
Assets
Debt securities
Cash and cash equivalents
Liabilities (discounted)
Life business provision
At 31 December 2019
Assets
Debt securities
Cash and cash equivalents
Liabilities (discounted)
Life business provision
Within
1 year
£000
Maturity
Between
1 & 5 years
£000
After
5 years
£000
Total
£000
6,083
4,692
10,775
30,161
-
30,161
61,665
-
61,665
97,909
4,692
102,601
5,103
18,045
53,709
76,857
6,066
2,584
8,650
28,732
-
28,732
65,093
-
65,093
99,891
2,584
102,475
5,517
19,223
54,472
79,212
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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
4 Financial risk and capital management (continued)
Notes to the financial statements
4 Financial risk and capital management (continued)
212
213
(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 2020
AAA
AA
A
BBB
Below BBB
Not rated
At 31 December 2019
AAA
AA
A
BBB
Below BBB
Not rated
Cash and cash
equivalents*
Reinsurance Other financial
assets
debtors
Total SPPI Debt securities
SPPI
Non-SPPI
£000
-
36,319
16,753
51,351
-
6
104,429
-
19,760
17,269
42,713
-
7
79,749
£000
-
1,986
8,564
3
-
452
11,005
-
1,286
8,856
3
-
1,032
11,177
£000
-
-
-
-
-
201,216
201,216
-
-
-
-
-
163,615
163,615
£000
-
38,305
25,317
51,354
-
201,674
316,650
-
21,046
26,125
42,716
-
164,654
254,541
£000
128,037
130,285
125,745
94,101
8,997
8,500
495,665
113,359
138,341
132,419
89,563
9,537
9,296
492,515
*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.
Parent
At 31 December 2020
AAA
AA
A
BBB
Below BBB
Not rated
At 31 December 2019
AAA
AA
A
BBB
Below BBB
Not rated
Cash and cash
equivalents*
Reinsurance Other financial
assets
debtors
Total SPPI Debt securities
SPPI
Non-SPPI
£000
-
15,726
12,151
31,584
-
5
59,466
-
8,540
14,748
23,927
-
7
47,222
£000
-
1,592
3,008
3
-
338
4,941
-
783
2,865
3
-
272
3,923
£000
-
-
-
-
-
153,044
153,044
-
-
-
-
-
127,089
127,089
£000
-
17,318
15,159
31,587
-
153,387
217,451
-
9,323
17,613
23,930
-
127,368
178,234
£000
72,697
51,769
96,351
55,456
5,539
7,150
288,962
72,366
73,979
97,184
51,712
4,560
8,096
307,897
*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:
2020
Group
£000
276,914
108,792
89,661
20,298
495,665
Parent
£000
179,003
-
89,661
20,298
288,962
UK
Australia
Canada
Europe
Total
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
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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
4 Financial risk and capital management (continued)
Notes to the financial statements
4 Financial risk and capital management (continued)
214
215
(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:
2020
Group
£000
262,414
59,287
185
321,886
Parent
£000
238,370
59,287
185
297,842
UK
Europe
Hong Kong
Total
2019
Group
£000
289,566
66,302
190
356,058
Parent
£000
263,699
66,302
190
330,191
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 23.
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.
2020
Group
£000
57,291
39,621
23,932
2,045
171
Parent
£000
3,089
39,621
23,932
2,045
171
Aus $
Can $
Euro
USD $
HKD $
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 $
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 23.
(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
2020
£000
(11,896)
6,153
2,833
(2,318)
26,073
2019
£000
(6,724)
4,133
6,330
(5,179)
28,841
Potential increase/
(decrease) in profit
2020
£000
(9,642)
4,909
2,833
(2,318)
24,125
2019
£000
(5,267)
3,028
6,331
(5,180)
26,745
Potential increase/
(decrease) in
other equity reserves
2020
£000
(70)
(44)
9,715
(7,948)
-
2019
£000
(25)
37
7,628
(6,241)
-
Potential increase/
(decrease) in
other equity reserves
2020
£000
(19)
29
3,692
(3,021)
-
2019
£000
(19)
29
3,224
(2,638)
-
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;
currency gains and losses will arise from a change in the value of sterling against all other currencies moving in parallel;
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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
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.
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 8 April 2021 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 20 May 2021, with its SFCR also being made available on the Group’s website
shortly after.
2020
(unaudited)
2019
(unaudited)*
Ecclesiastical
Insurance
Office plc Ecclesiastical
Life Limited
£000
Parent
£000
Ecclesiastical
Insurance
Office plc
Parent
£000
Ecclesiastical
Life Limited
£000
Solvency II Own Funds
Solvency Capital Requirement
Own Funds in excess of Solvency Capital Requirement
Solvency II Capital Cover
518,562
(262,723)
255,839
49,259
(15,394)
33,865
570,110
(264,251)
305,859
197%
320%
216%
49,120
(15,976)
33,144
307%
*Unaudited with the exception of EIO parent's Solvency II Own Funds.
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.
216
217
Notes to the financial statements
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 SEIB 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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
5 Segment information (continued)
Notes to the financial statements
5 Segment information (continued)
218
219
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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.
General business
United Kingdom and Ireland
Australia
Canada
Other insurance operations
Total
Life business
Investment management
Broking and Advisory
Group revenue
Gross
written
premiums
£000
2020
Non-
insurance
services
£000
276,618
80,178
75,953
4,538
437,287
12
-
-
437,299
-
-
-
-
-
-
12,382
9,458
21,840
Total
£000
276,618
80,178
75,953
4,538
437,287
12
12,382
9,458
459,139
Gross
written
premiums
£000
257,135
68,857
64,457
3,516
393,965
(13)
-
-
393,952
2019
Non-
insurance
services
£000
-
-
-
-
-
-
12,795
9,078
21,873
Total
£000
257,135
68,857
64,457
3,516
393,965
(13)
12,795
9,078
415,825
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.
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
Other
£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
(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
(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:
United Kingdom and Ireland
Australia
Canada
2020
Gross
written Non-current
assets
£000
premiums
£000
281,168
80,178
75,953
437,299
276,236
6,114
6,946
289,296
2019
Gross
written
premiums
£000
260,638
68,857
64,457
393,952
Non-current
assets
£000
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
are located.
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All other segment results consist of the profit or loss before tax measured in accordance with IFRS.
6 Net insurance premium revenue
2020
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
92.5%
102.2%
91.2%
95.1%
Insurance
£000
Investments
£000
Other
£000
Total
£000
12,254
(620)
4,521
(4,103)
12,052
468
-
-
-
12,520
(12,123)
1,678
3,003
-
(7,442)
29
-
-
-
(7,413)
(479)
(31)
(176)
-
(686)
-
(1,031)
2,397
(21,533)
(20,853)
(348)
1,027
7,348
(4,103)
3,924
497
(1,031)
2,397
(21,533)
(15,746)
For the year ended 31 December 2020
Gross written premiums
Outward reinsurance premiums
Net written premiums
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
For the year ended 31 December 2019
Gross written premiums
Outward reinsurance premiums
Net written premiums
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
Life
business
£000
437,287
(173,074)
264,213
(24,984)
8,422
(16,562)
247,651
393,965
(152,886)
241,079
(23,829)
8,749
(15,080)
225,999
12
-
12
-
-
-
12
(13)
-
(13)
-
-
-
(13)
Total
£000
437,299
(173,074)
264,225
(24,984)
8,422
(16,562)
247,663
393,952
(152,886)
241,066
(23,829)
8,749
(15,080)
225,986
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
220
221
7 Fee and commission income
9 Claims and change in insurance liabilities and reinsurance recoveries
During the year, the Group recognised £47,541,000 (2019: £49,065,000) fee and commission income in accordance with IFRS 4 Insurance
Contracts and £22,041,000 (2019: £22,175,000) in accordance with IFRS 15 Revenue from contracts with customers. Fee and commission
income from contracts with customers was recognised as follows:
For the year ended 31 December 2020
General business
Investment management
Broking and advisory
For the year ended 31 December 2019
General business
Investment management
Broking and advisory
8 Net investment return
Income from financial assets at fair value through profit or loss
- equity income
- debt income
Income from financial assets calculated using the effective interest rate method
- cash and cash equivalents income
- other income received
Other income
- rental income
- exchange movements
Investment income
Fair value movements on financial instruments at fair value through profit or loss
Fair value movements on investment property
Fair value movements on property, plant and equipment
Impact of discount rate change on insurance contract liabilities
Net investment (loss)/return
Recognised at
a point in time
£000
Recognised
over time
£000
201
66
9,458
9,725
302
108
9,078
9,488
-
12,316
-
12,316
-
12,687
-
12,687
2020
£000
6,255
12,631
141
1,887
8,786
492
30,192
(13,618)
(4,984)
10
(15,898)
(4,298)
Total
£000
201
12,382
9,458
22,041
302
12,795
9,078
22,175
2019
£000
9,580
14,221
605
1,795
8,519
60
34,780
55,991
(3,900)
-
(12,433)
74,438
Included within fair value movements on financial instruments at fair value through profit or loss are gains of £2,396,000 (2019: £162,000) in
respect of derivative instruments.
For the year ended 31 December 2020
Gross claims paid
Gross change in the provision for claims
Gross change in life business provision
Claims and change in insurance liabilities
Reinsurers' share of claims paid
Reinsurers' share of change in the provision for claims
Reinsurance recoveries
Claims and change in insurance liabilities, net of reinsurance
For the year ended 31 December 2019
Gross claims paid
Gross change in the provision for claims
Gross change in life business provision
Claims and change in insurance liabilities
Reinsurers' share of claims paid
Reinsurers' share of change in the provision for claims
Reinsurance recoveries
Claims and change in insurance liabilities, net of reinsurance
10 Fees, commissions and other acquisition costs
Fees paid
Commission paid
Change in deferred acquisition costs
Other acquisition costs
Fees, commissions and other acquisition costs
General
business
£000
Life
business
£000
164,510
59,617
-
224,127
(59,024)
(35,557)
(94,581)
129,546
139,221
18,260
-
157,481
(40,808)
(11,992)
(52,800)
104,681
6,008
-
(7,341)
(1,333)
-
-
-
(1,333)
5,562
-
(5,235)
327
-
-
-
327
Total
£000
170,518
59,617
(7,341)
222,794
(59,024)
(35,557)
(94,581)
128,213
144,783
18,260
(5,235)
157,808
(40,808)
(11,992)
(52,800)
105,008
2020
£000
13
68,717
(3,352)
20,066
85,444
2019
£000
14
62,134
(4,553)
15,145
72,740
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
11 (Loss)/profit for the year
13 Employee information
222
223
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(Loss)/profit for the year has been arrived at after (crediting)/charging
Net foreign exchange gains
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Amortisation of intangible assets
Decrease in fair value of investment property
Employee benefits expense including termination benefits, net of recharges
12 Auditor’s remuneration
Fees payable to the Company's auditor and its associates for the audit of the
Company's annual accounts
Fees payable to the Company’s auditor and its associates for other services:
- The audit of the Company's subsidiaries
Total audit fees
- Audit-related assurance services
- Other assurance services
Total non-audit fees
Fees payable to the Company's auditor in respect of associated pension schemes
- The audit of associated pension schemes
Total auditor's remuneration
2020
£000
(493)
5,486
172
1,433
4,984
83,781
2019
£000
(60)
5,081
171
1,000
3,900
86,065
2020
£000
2019
£000
476
238
714
178
-
178
-
892
497
179
676
164
-
164
17
857
Deloitte LLP stepped down as auditor to the Group. PricewaterhouseCoopers LLP were appointed as the Group's auditor at the June 2020
AGM. The figures for 2019 relate exclusively to fees paid to Deloitte LLP. Amounts disclosed are net of services taxes, where applicable. Audit-
related assurance services include Prudential Regulatory Authority (PRA) and other regulatory audit work.
In the year ended 31 December 2020, audit fees of £476,000 include £5,000 to Deloitte LLP in relation to auditor transition.
The average monthly number of full-time equivalent employees of the Group and Parent, including executive directors, during the year by
geographical location was:
Group
United Kingdom and Ireland
Australia
Canada
Parent
United Kingdom and Ireland
Canada
General
business
No.
827
102
81
1,010
General
business
No.
827
81
908
2020
Life
business
No.
1
-
-
1
2020
Life
business
No.
1
-
1
(restated)*
2019
Life
business
No.
1
-
-
1
(restated)*
2019
Life
business
No.
1
-
1
General
business
No.
804
97
84
985
General
business
No.
804
84
888
Other
No.
194
-
-
194
Other
No.
92
-
92
Other
No.
181
-
-
181
Other
No.
82
-
82
* 2019 has been restated to include 23 full-time equivalent employees within United Kingdom and Ireland General Business for both Group and Parent which were
previously omitted.
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.
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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
2020
2019
Group
£000
73,057
6,815
5,853
1,003
112
86,840
(1,743)
(1,652)
83,445
Parent
£000
61,194
6,347
5,101
1,003
112
73,757
(9,010)
(1,652)
63,095
Group
£000
74,370
7,010
4,791
1,812
154
88,137
(1,340)
(1,090)
85,707
Parent
£000
62,968
6,577
4,014
1,812
154
75,525
(8,278)
(1,090)
66,157
The above Group figures do not include termination benefits of £476,000 (2019: £358,000) of which £56,000 (2019: £nil) was recharged to
related undertakings of the group.. The above Parent figures do not include termination benefits of £476,000 (2019: £135,000), of which
£74,000 (2019: £33,000) was recharged to related undertakings of the Parent.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
224
225
14 Tax expense
(a) Tax (credited)/charged to the statement of profit or loss
Current tax
Deferred tax
Total tax (credit)/expense
- current year
- prior year adjustments
- temporary differences
- prior year adjustments
- Impact of change in deferred tax rate
2020
£000
1,027
(414)
(5,395)
-
4,256
(526)
2019
£000
5,893
808
4,749
-
-
11,450
15 Appropriations
Amounts recognised as distributions to equity holders in the period:
Dividends
Non-Cumulative Irredeemable Preference share dividend (8.625 pence per share)
Charitable grants
Gross charitable grants to the ultimate parent company, Allchurches Trust Limited
Tax relief
Net appropriation for the year
2020
£000
2019
£000
9,181
9,181
-
-
-
30,000
(5,497)
24,503
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:
16 Acquisition of business
(Loss)/profit before tax
Tax calculated at the UK standard rate of tax of 19% (2019: 19%)
Factors affecting (credit)/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
Impact of change in deferred tax rate
Adjustments to tax charge in respect of prior periods
Total tax (credit)/expense
2020
£000
(15,746)
(2,992)
84
(1,391)
90
(159)
4,256
(414)
(526)
2019
£000
73,263
13,920
463
(3,110)
(198)
(433)
-
808
11,450
The 2020 Budget Resolution not to reduce the corporation tax rate to 17% from 1 April 2020 was passed on 17 March 2020 and as such the
main rate of tax remained at 19%. Deferred tax has been provided at a rate of 19% (2019: 17%).
(b) Tax (credited)/charged to other comprehensive income
Current tax (credited)/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 to other comprehensive income
In the prior year, tax relief on charitable grants of £5,497,000 was taken directly to equity.
2020
£000
2019
£000
(328)
129
(49)
(3,472)
63
-
(1,198)
(110)
(3,786)
(1,179)
On 30 September 2020, SEIB Insurance Brokers Limited acquired WRS Insurance Brokers Limited (WRS).
The aggregate amounts recognised in respect of the identifiable assets of the acquisition are set out in the table below.
Assets
Intangible assets
Goodwill
Property, plant and equipment
Debtors
Cash
Liabilities
Creditors
Total identified net assets
Satisfied by:
Satisfied by:
Cash
Contingent consideration
Total consideration
Analysis of cash flows
Analysis of cash flows
Cash paid
Net cash acquired with subsidiary
Net cash flow on acquisition
£000
406
918
7
45
371
1,747
167
167
1,580
1,162
418
1,580
1,162
(371)
791
The goodwill of £918,000 arising from the acquisitions consists of intangible assets not qualifying for separate recognition, such as synergies
and new business opportunities. None of the goodwill is expected to be deductible for tax purposes.
The contingent consideration arrangement requires a cash payment to be made on 1 October 2021. The amount paid is determined by an
income target in the 'earn-out' period which ends on 30 September 2021. The maximum and minimum payments expected are £436,000 and
£400,000 respectively.
From the date of acquisition, WRS has contributed £206,989 of revenue and £80,565 to the net profit before tax from the continuing
operations of the group. If the acquisition had taken place at the begining of the year, revenue from continuing operations would have been
£8,422,209 and the profit from continuing operations for the period would have been £203,818.
No material acquisition-related costs were incurred in relation to the transaction.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
226
227
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Notes to the financial statements
17 Goodwill and other intangible assets
Group
Cost
At 1 January 2020
Additions
Disposals
Exchange differences
At 31 December 2020
Accumulated impairment losses and amortisation
At 1 January 2020
Amortisation charge for the year
Impairment losses for the year
Disposals
Exchange differences
At 31 December 2020
Net book value at 31 December 2020
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
Goodwill
£000
Computer
software
£000
Other
intangible
assets
£000
23,779
918
-
-
24,697
344
-
35
-
-
379
24,318
23,779
-
-
-
23,779
328
-
16
-
-
344
23,435
33,069
15,407
(542)
201
48,135
18,537
1,219
-
(542)
(35)
19,179
28,956
23,453
9,613
(4)
7
33,069
17,686
838
-
(4)
17
18,537
14,532
5,376
611
-
-
5,987
4,692
214
-
-
2
4,908
1,079
5,376
-
-
-
5,376
4,530
162
-
-
-
4,692
684
Total
£000
62,224
16,936
(542)
201
78,819
23,573
1,433
35
(542)
(33)
24,466
54,353
52,608
9,613
(4)
7
62,224
22,544
1,000
16
(4)
17
23,573
38,651
£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. £918,000
of the current period balance relates to the acquisition of WRS Insurance Brokers Limited (WRS) as detailed in note 16.
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 1.8% (2019: 1.6%) as being appropriate, based on medium-term rates published in
the OBR's November report. The pre-tax discount rate of 9.8% (2019: 9.2%) reflects the way that the market would assess the specific risks
associated with the estimated cash flows.
The recoverable amount of the investment in South Essex Insurance Holdings Limited exceeds its carrying amount by £4.4m (2019: £8.8m). If
the cumulative growth rate between 2021 and 2023 was 2.9% lower than assumed in management-approved business plans, or the discount
rate increased by 1.7%, 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.
Notes to the financial statements
17 Goodwill and other intangible assets (continued)
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 (2019: one year).
Parent
Computer software
Cost
At 1 January
Additions
Disposals
Exchange differences
At 31 December
Amortisation
At 1 January
Charge for the year
Disposals
Exchange differences
At 31 December
Net book value at 31 December
18 Deferred acquisition costs
At 1 January
Increase in the period
Release in the period
Exchange differences
At 31 December
All balances are current.
2020
£000
29,163
12,978
(542)
(71)
41,528
17,249
593
(542)
(37)
17,263
24,265
2019
£000
21,495
7,615
(4)
57
29,163
16,646
589
(4)
18
17,249
11,914
2020
2019
Group
£000
38,199
41,582
(38,230)
438
41,989
Parent
£000
31,133
33,515
(31,110)
(66)
33,472
Group
£000
33,907
38,529
(33,976)
(261)
38,199
Parent
£000
27,812
31,283
(27,976)
14
31,133
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
228
229
Notes to the financial statements
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. Active members in employment at this date retained certain enhanced benefits after the plan closed to future accrual,
including benefits in relation to death in service and ill health retirement. They 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. With effect from 1 January
2021, the two discrete sections of the scheme have been combined. This has no impact on the financial statements.
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 2019. As the scheme is closed to future accrual, no
contribution is expected to be paid by the Group in 2021.
Actuarial valuations were reviewed and updated by an actuary at 31 December 2020 for IAS 19 purposes. The Parent has an unconditional
right to a refund of the surplus in the Ansvar Section of the Fund, which has been recognised in full in accordance with IFRIC 14. The EIO
Section was in a deficit position on an IAS 19 basis at the year end.
In the current year, actuarial losses arising from changes in financial assumptions of £53.6m (2019: actuarial losses of £59.7m) have been
recognised in the statement of other comprehensive income. These losses resulted from a 0.6% decrease in the discount rate combined with
inflationary increases arising from a reduction in the gap between RPI and CPI following the announcement of the outcome of the UK
Government's consultation on the future measure of RPI.
The demographic assumptions used in the IAS 19 valuation were reviewed and updated, informed by the 2019 triennial valuation process. This
resulted in an actuarial gain of £6.0m (2019: £13.2m actuarial gain) being recognised in the current year. Updating for actual member
experience since the previous triennial valuation and for other financial assumption experience resulted in a gain of £14.5m in the current year
(2019: £0.1m loss arising from financial assumption experience).
In the current year, the High Court issued a ruling relating to Guaranteed Minimum Pensions (GMP) equalisation for historic transfers values.
This ruling, and the previous High Court ruling on GMP equalisation in 2018, relates to the Lloyds Bank pension scheme, and has implications
for the EIO section of the Group’s defined benefit plan. The impact of the ruling in the current year is estimated at £32,000 and is presented as
a past service cost in the statement of profit and loss.
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.
Notes to the financial statements
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 equity price risk, 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 40% of the 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 monitor investment performance and strategy over time to ensure the structure adopted continues to meet their objectives and to
highlight opportunities to reduce investment risk and volatility where practical and affordable. 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 Parent.
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 gains/(losses) on liabilities
Gains from changes in demographic assumptions
Losses from changes in financial assumptions
Total included in other comprehensive income
* Charge to profit or loss includes £nil (2019: £289,000) in respect of member salary sacrifice contributions.
2020
£000
2019
£000
(403,709)
394,356
(9,353)
-
(9,353)
(371,179)
379,684
8,505
-
8,505
8,505
(1,003)
(16,855)
-
(9,353)
575
557
6,971
(7,132)
32
1,003
16,150
14,543
6,017
(53,565)
(16,855)
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)
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
19 Retirement benefit schemes (continued)
Notes to the financial statements
19 Retirement benefit schemes (continued)
The following is the analysis of the defined benefit pension balances:
The movements in the fair value of plan assets and the present value of the defined benefit obligation over the year are as follows:
230
231
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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
2020
£000
1,053
(10,406)
(9,353)
%
1.30
2.90
2.50
4.50
3.40
2.80
1.70
22.9
24.1
24.0
25.6
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
36,657
£000
21,945
83,040
552
80,704
164,296
93,519
270
78,282
172,071
57,519
41,781
243
68,500
24,383
93,126
885
41,873
2,411
71,189
24,232
97,832
2,396
43,659
394,356
379,684
*Cash and other includes accrued income, prepayments and other debtors and creditors.
The actual return on plan assets was a gain of £23,282,000 (2019: a gain of £48,870,000).
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.
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 (gains)/losses on liabilities
Gains from changes in demographic assumptions
Losses 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
(Deficit)/surplus
2020
£000
(403,709)
394,356
(9,353)
-
(9,353)
2019
£000
(371,179)
379,684
8,505
-
8,505
2018
£000
(325,738)
341,869
16,131
-
16,131
2020
£000
2019
£000
379,684
7,132
16,150
(8,610)
-
394,356
371,179
575
557
32
6,971
(8,610)
(14,543)
(6,017)
53,565
403,709
2017
£000
(343,143)
363,179
20,036
-
20,036
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)
S
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T
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a
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e
The weighted average duration of the defined benefit obligation at the end of the reporting period is 21 years (2019: 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
2020
£000
2019
£000
(39,500)
46,000
33,600
(29,100)
6,800
(6,300)
20,100
(20,000)
(40,500)
47,700
33,300
(27,500)
5,600
(5,400)
15,700
(15,600)
S
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F
o
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i
F
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
19 Retirement benefit schemes (continued)
Notes to the financial statements
232
233
20 Property, plant and equipment
Group
Land and
buildings
£000
Motor
vehicles
£000
Furniture,
fittings and
equipment
£000
Computer
equipment
£000
Right of
use asset
£000
Cost or valuation
At 31 December 2019
Additions
Disposals
Revaluation
Exchange differences
At 31 December 2020
Depreciation
At 31 December 2019
Charge for the year
Disposals
Exchange differences
At 31 December 2020
Net book value at 31 December 2020
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
Transition to IFRS 16
At 1 January 2019
Charge for the year
Disposals
Exchange differences
At 31 December 2019
Net book value at 31 December 2019
*The Group adopted IFRS 16 from 1 January 2019.
2,445
-
-
(5)
-
2,440
-
-
-
-
-
2,440
2,445
-
2,445
-
-
-
-
2,445
-
-
-
-
-
-
-
2,445
146
-
-
-
-
146
87
20
-
-
107
39
2,227
(2,095)
132
14
-
-
-
146
843
(781)
62
25
-
-
87
59
9,841
5,142
(10)
-
(2)
14,971
6,536
712
(6)
5
7,247
7,724
9,058
74
9,132
1,459
(730)
-
(20)
9,841
6,082
28
6,110
981
(559)
4
6,536
3,305
10,748
892
(300)
-
23
11,363
7,539
1,481
(300)
18
8,738
2,625
7,914
-
7,914
2,921
(76)
-
(11)
10,748
6,328
-
6,328
1,296
(76)
(9)
7,539
3,209
14,595
17,599
(535)
-
107
31,766
3,291
3,273
(342)
56
6,278
25,488
-
12,402
12,402
3,142
(843)
-
(106)
14,595
-
781
781
2,779
(252)
(17)
3,291
11,304
Total
£000
37,775
23,633
(845)
(5)
128
60,686
17,453
5,486
(648)
79
22,370
38,316
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
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 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
2020
£000
6,530
5,998
112
463
(43)
6,530
112
112
2019
£000
5,998
5,813
154
238
(207)
5,998
154
154
The weighted average duration of the net obligations at the end of the reporting period is 13.1 years (2019: 13.3 years).
The main actuarial assumptions for the plan are a long-term increase in medical costs of 6.9% (2019: 7.0%) and a discount rate of 1.3%
(2019: 1.9%). An actuarial loss of £513,000 has been recognised in the current year due to the 0.6% fall in discount rate. This has been
partially offset by an actuarial gain of £88,000 arising from a fall in medical cost inflation. A small actuarial loss has been recognised due to
changes in mortality assumptions. Benefits paid in the year fell due to the suspension of routine treatment as private facilities supported the
NHS during the Covid-19 pandemic. 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
2020
£000
(404)
445
851
(721)
576
(527)
2019
£000
(371)
409
782
(662)
529
(484)
A
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F
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
20 Property, plant and equipment (continued)
Notes to the financial statements
234
235
Parent
Cost or valuation
At 31 December 2019
Additions
Disposals
Revaluation
Exchange differences
At 31 December 2020
Depreciation
At 31 December 2019
Charge for the year
Disposals
Exchange differences
At 31 December 2020
Net book value at 31 December 2020
Cost or valuation
At 31 December 2018
IFRS 16 transition adjustment*
At 1 January 2019
Additions
Disposals
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
*The Parent adopted IFRS 16 from 1 January 2019.
Land and
buildings
£000
Motor
vehicles
£000
Furniture,
fittings and
equipment
£000
Computer
equipment
£000
Right of
use asset
£000
2,045
-
-
(5)
-
2,040
-
-
-
-
-
2,040
2,045
-
2,045
-
-
-
2,045
-
-
-
-
-
-
-
2,045
53
-
-
-
-
53
29
11
-
-
40
13
2,135
(2,095)
40
13
-
-
53
799
(781)
18
11
-
-
29
24
9,315
5,138
(10)
-
(4)
14,439
9,846
742
(298)
-
(7)
10,283
6,270
654
(6)
4
6,922
7,517
8,470
74
8,544
1,422
(633)
(18)
9,315
5,874
28
5,902
893
(528)
3
6,270
3,045
6,964
1,329
(300)
(4)
7,989
2,294
7,237
-
7,237
2,680
(76)
5
9,846
5,842
-
5,842
1,192
(75)
5
6,964
2,882
11,362
16,994
(535)
-
(19)
27,802
2,658
2,626
(342)
(2)
4,940
22,862
-
9,181
9,181
3,038
(814)
(43)
11,362
-
781
781
2,126
(244)
(5)
2,658
8,704
Total
£000
32,621
22,874
(843)
(5)
(30)
54,617
15,921
4,620
(648)
(2)
19,891
34,726
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
All properties of the Group and Parent were last revalued at 31 December 2020. 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 value. All properties are classified as level 3 assets.
Movements in fair 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 fair 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 (2019: £2,444,000). The value of land and buildings of the
Parent on a historical cost basis is £2,044,000 (2019: £2,044,000).
Depreciation expense has been charged in other operating and administrative expenses.
21 Investment property
Group and Parent
Fair value at 1 January
Additions - subsequent expenditure
Disposals
Fair value losses recognised in profit or loss
Fair value at 31 December
2020
£000
148,146
-
(1,020)
(4,984)
142,142
2019
£000
152,182
191
(327)
(3,900)
148,146
The Group’s investment properties were last revalued at 31 December 2020 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 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 £8,786,000 (2019: £8,519,000) and is included in net investment return.
22 Financial investments
Financial investments summarised by measurement category are as follows:
Financial investments at fair value through profit or loss
Equity securities
- listed
- unlisted
Debt securities
- government bonds
- listed
- unlisted
Derivative financial instruments
- options
- forwards
Financial investments at fair value through other comprehensive
income
Derivative financial instruments
- forwards
Total financial investments at fair value
Loans and receivables
Cash held on deposit
Other loans
Parent investments in subsidiary undertakings
Shares in subsidiary undertakings
Total financial investments
Current
Non-current
All investments in subsidiary undertakings are unlisted.
2020
Group
£000
Parent
£000
2019
Group
£000
Parent
£000
262,598
59,288
160,381
334,732
552
1,407
672
819,630
238,555
59,287
71,199
217,211
552
1,407
672
588,883
289,754
66,304
154,244
338,001
270
1,562
1,499
851,634
263,888
66,303
91,255
216,372
270
1,562
1,749
641,399
401
820,031
401
589,284
509
852,143
259
641,658
-
746
-
746
4,974
796
4,974
792
-
60,757
-
49,729
820,777
650,787
857,913
697,153
335,916
484,861
298,036
352,751
383,578
474,335
346,980
350,173
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
23 Derivative financial instruments
24 Other assets
236
237
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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 loss of £2,339,000 (2019:
gain of £640,000) 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
Futures
Options
Foreign exchange contracts
Forwards (Euro)
Hedge derivatives
Foreign exchange contracts
Forwards (Australian dollar)
Forwards (Canadian dollar)
2020
2019
Contract/
notional
amount
£000
Fair value
asset
£000
Fair value
liability
£000
Contract/
notional
amount
£000
Fair value
asset
£000
-
40,597
-
1,407
96,000
672
-
-
-
-
58,588
-
1,562
116,603
1,499
75,000
52,000
263,597
-
401
2,480
1,244
-
1,244
45,411
30,456
251,058
250
259
3,570
Included with Equity/Index contracts are options with a contract/notional value of £nil (2019: £17,997,000), and fair value asset of £nil (2019:
£734,000), 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.
Receivables arising from insurance and reinsurance contracts
- due from contract holders
- due from agents, brokers and intermediaries
- due from reinsurers
Other receivables
- accrued interest and rent
- other prepayments and accrued income
- amounts owed by related parties
- debtors arising from broking activities
- net investment in finance leases
- other debtors
Current
Non-current
2020
2019
Group
£000
50,285
66,232
11,005
4,329
5,259
52,683
6,685
236
19,856
216,570
162,085
54,485
Parent
£000
49,981
39,796
4,941
3,253
3,966
56,513
-
236
2,428
161,114
105,076
56,038
Group
£000
41,549
56,549
11,177
4,519
4,526
39,044
6,509
366
14,119
178,358
136,999
41,359
Parent
£000
41,296
36,337
3,923
3,431
3,710
43,239
-
366
1,491
133,793
90,787
43,006
The Group has recognised a net charge of £759,000 (2019: net credit of £31,000) 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
recognised a net charge of £693,000 (2019: net credit of £15,000).
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
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.
Included within amounts owed by related parties of the Parent is £2,920,000 (2019: £2,744,000) pledged as collateral in respect of an
insurance liability.
Included within other receivables of the Group is £1,201,000 (2019: £1,255,000) classified as contract assets, and £1,410,000 (2019:
£1,151,000) classified as receivables in accordance with IFRS 15. Included within other receivables of the Parent is £nil (2019: £nil) classified
as contract assets, and £nil (2019: £nil) classified as receivables in accordance with IFRS 15.
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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.
Movement in the allowance for doubtful debts
Derivative fair value assets are recognised within financial investments (note 22) and derivative fair value liabilities are recognised within other
liabilities (note 31).
Balance at 1 January
Movement in the year
Balance at 31 December
2020
2019
Group
£000
145
578
723
Parent
£000
69
505
574
Group
£000
168
(23)
145
Parent
£000
69
-
69
Included within other assets of the Group is £13,767,000 (2019: £8,162,000) overdue but not impaired, of which £11,754,000 (2019:
£7,253,000) is not more than three months overdue at the reporting date. Included within trade receivables of the Parent is £5,238,000 (2019:
£3,688,000) overdue but not impaired, of which £4,245,000 (2019: £3,485,000) is not more than three months overdue at the reporting date.
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25 Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
2020
2019
Group
£000
78,643
25,786
104,429
Parent
£000
43,713
15,753
59,466
Group
£000
47,155
27,620
74,775
Parent
£000
23,781
18,467
42,248
Included within short-term bank deposits of the Group and Parent are cash deposits of £1,960,000 (2019: £1,007,000) pledged as collateral
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 £4,131,000 (2019: £3,821,000) pledged as collateral by way of cash calls
from reinsurers, and £3,765,000 (2019: £3,464,000) of restricted cash held on an agency basis.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
238
239
26 Called up share capital
28 Insurance liabilities and reinsurance assets
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Ordinary shares of 4p each
8.625% Non-Cumulative Irredeemable Preference shares of £1 each
The number of shares in issue are as follows:
Ordinary shares of 4p each
At 1 January and 31 December
8.625% Non-Cumulative Irredeemable Preference shares of £1 each
At 1 January and 31 December
Issued, allotted and
fully paid
2020
£000
14,027
106,450
120,477
2019
£000
14,027
106,450
120,477
350,678
350,678
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
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
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
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
Company.
27 Translation and hedging reserve
Group
At 1 January 2020
Gains on currency translation differences
Losses on net investment hedges
Attributable tax
At 31 December 2020
At 1 January 2019
Losses on currency translation differences
Gains on net investment hedges
Attributable tax
At 31 December 2019
Parent
At 1 January 2020
Losses on currency translation differences
Gains on net investment hedges
Attributable tax
At 31 December 2020
At 1 January 2019
Gains on currency translation differences
Loses on net investment hedges
Attributable tax
At 31 December 2019
Translation
reserve
£000
Hedging
reserve
£000
13,572
1,980
-
-
15,552
14,940
(1,368)
-
-
13,572
7,130
(712)
-
-
6,418
6,605
525
-
-
7,130
4,752
-
(2,339)
265
2,678
4,131
-
640
(19)
4,752
434
-
279
(64)
649
973
-
(649)
110
434
Total
£000
18,324
1,980
(2,339)
265
18,230
19,071
(1,368)
640
(19)
18,324
7,564
(712)
279
(64)
7,067
7,578
525
(649)
110
7,564
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.
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
2020
Group
£000
560,992
230,800
76,857
868,649
129,284
79,393
208,677
431,708
151,407
76,857
659,972
Parent
£000
434,583
181,619
-
616,202
78,450
56,066
134,516
356,133
125,553
-
481,686
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
412,200
456,449
315,863
300,339
354,977
409,000
282,020
274,252
142,466
66,211
94,662
39,854
115,082
44,474
78,432
28,269
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(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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
240
241
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
(iv) Discounting
General insurance outstanding claims provisions are undiscounted, except for certain designated long-tail classes of business for which
discounted provisions are held in the following territories:
(viii) Claims development tables
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.
Discount rate
Mean term of discounted
liabilities (years)
Estimate of ultimate gross claims
Geographical territory
2020
2019
2020
2019
UK and Ireland
Canada
Australia
0.5% to 1.5%
0.4% to 1.7%
0.7%
1.3% to 2.2%
1.9% to 2.0%
1.2%
17
12
4
17
12
4
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 £585,635,000 for the Group (2019: £516,068,000), and £456,912,000 for the Parent (2019:
£422,531,000).
The impact of discount rate changes on the outstanding claims liability is presented within net investment return (note 8).
At 31 December 2020, it is estimated that a fall of 1% in the discount rates used would increase the Group's net outstanding claims liabilities
by £20,715,000 (2019: £17,065,000). 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 insurance claims reserved for at the year end turns out to be 10% higher or lower than the undiscounted 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
2020
2019
Gross
£000
20,200
14,900
10,300
7,200
200
Net
£000
19,000
12,200
5,600
2,600
200
Gross
£000
19,700
12,100
7,900
4,900
200
Net
£000
18,500
10,200
4,800
1,900
200
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2012
£000
100,612
88,046
78,196
72,516
67,980
62,712
61,213
60,560
62,025
2011
£000
82,095
76,371
71,543
68,587
60,841
59,914
57,950
57,939
57,790
59,079
2013
£000
81,725
80,027
69,860
66,192
60,174
56,912
54,901
55,516
2014
£000
61,901
50,571
48,327
45,495
37,064
34,606
34,962
2015
£000
46,464
43,582
40,337
33,804
29,436
28,211
2016
£000
51,738
46,073
41,041
38,468
37,044
2017
£000
2018
£000
2019
£000
2020
£000
Total
£000
50,134
47,945
42,467
48,759
40,461
34,680
50,736
46,885
41,883
38,648
59,079
62,025
55,516
34,962
28,211
37,044
38,648 34,680 42,467
50,134
442,766
(51,823)
(54,716)
(46,905)
(25,553)
(17,590)
(19,540)
(13,547)
(9,264)
(5,342)
(1,410)
(245,690)
7,256
7,309
8,611
9,409
10,621
17,504
25,101 25,416 37,125
48,724
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
197,076
(6,824)
190,252
159,442
349,694
2011
£000
66,864
63,770
62,587
60,653
52,985
50,355
49,127
48,927
49,040
49,272
2012
£000
84,511
77,629
69,580
63,068
56,225
51,872
50,791
50,092
50,367
2013
£000
71,798
60,950
54,792
50,492
43,910
42,289
40,698
40,041
2014
£000
52,350
40,153
39,015
37,158
31,530
30,024
30,063
2015
£000
34,769
31,941
30,129
27,287
23,620
23,068
2016
£000
37,981
32,541
29,538
28,622
27,899
2017
£000
2018
£000
2019
£000
2020
£000
Total
£000
35,690
34,210 32,992 33,719
33,353 28,181 30,285
31,463 24,212
29,557
49,272
50,367
40,041
30,063
23,068
27,899
29,557 24,212 30,285
35,690
340,454
(43,627)
(45,478)
(34,010)
(22,432)
(14,232)
(14,408)
(10,132)
(6,130)
(3,007)
(786)
(194,242)
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
5,645
4,889
6,031
7,631
8,836
13,491
19,425 18,082 27,278 34,904
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
146,212
(5,299)
140,913
126,082
266,995
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
242
243
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Estimate of ultimate net claims
2011
£000
75,302
72,336
68,057
66,822
60,314
59,521
57,641
57,591
57,439
58,462
2012
£000
88,247
79,272
73,735
69,837
65,872
60,800
59,338
59,061
60,056
2013
£000
76,729
66,475
60,075
55,710
51,482
49,196
47,518
47,443
2014
£000
59,633
47,690
47,428
41,494
35,164
33,233
33,309
2015
£000
42,739
40,397
37,740
32,297
28,506
27,418
2016
£000
47,402
41,631
37,740
36,337
35,217
2017
£000
2018
£000
2019
£000
2020
£000
Total
£000
44,053
37,456
32,867
45,920
41,706
37,797
34,818
44,230
39,842
45,459
58,462
60,056
47,443
33,309
27,418
35,217
34,818 32,867 39,842 45,459
414,891
(51,448)
(53,318)
(39,244)
(24,373)
(17,590)
(19,482)
(13,547)
(9,262)
(5,333)
(1,406)
(235,003)
7,014
6,738
8,199
8,936
9,828
15,735
21,271 23,605 34,509 44,053
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
179,888
(6,824)
173,064
142,764
315,828
2011
£000
59,011
59,873
59,997
59,352
52,850
50,189
49,029
48,858
48,977
49,208
2012
£000
74,361
69,805
65,297
61,795
55,686
51,766
50,762
50,079
50,356
2013
£000
67,690
57,538
51,828
47,942
43,568
42,126
40,587
39,930
2014
£000
50,025
38,944
38,215
34,393
30,252
28,825
28,865
2015
£000
33,122
31,041
29,494
26,981
23,229
22,806
2016
£000
35,882
30,906
28,199
27,493
26,894
2017
£000
2018
£000
2019
£000
2020
£000
Total
£000
33,134 31,981 32,688 33,502
30,965 27,208 29,509
28,854 23,787
26,774
49,208
50,356
39,930
28,865
22,806
26,894
26,774 23,787 29,509 33,502
331,631
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
5,639
4,882
6,024
7,612
8,574
12,545
16,642 17,659 26,511 32,720
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
(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. 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
2020
-0.28%
-2.72%
-2.23%
2019
0.61%
-2.18%
-1.64%
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 in-force business is £2.50 per annum (2019: £2.50 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 £5.8m (2019: £5.7m).
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 4.07% per annum (2019: 4.08%).
Tax
It has been assumed that current tax legislation and rates applicable at 31 December 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 £5.0m (2019: £2.5m).
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 £0.7m increase (2019: £0.4m).
The assumptions underlying the calculation of the fixed expense reserve have been revised to reflect updated views on the expenses that
would be incurred as the portfolio reduces in scale. The effect of this one-off change is a reduction in liabilities of £0.7m.
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s
(43,569)
(45,474)
(33,906)
(21,253)
(14,232)
(14,349)
(10,132)
(6,128)
(2,998)
(782)
(192,823)
There has been no material change in the mortality assumptions.
138,808
(5,299)
133,509
118,934
252,443
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
Notes to the financial statements
28 Insurance liabilities and reinsurance assets (continued)
244
245
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(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 mortality
Improvement in 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
(c) Movements in insurance liabilities and reinsurance assets
Group
Claims outstanding
At 1 January 2020
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 2020
Provision for unearned premiums
At 1 January 2020
Increase in the period
Release in the period
Exchange differences
At 31 December 2020
Life business provision
At 1 January 2020
Effect of claims during the year
Changes in assumptions
Changes in methodology
Change in discount rate
Other movements
At 31 December 2020
Change in
variable
Potential increase/
(decrease) in the result
2020
£000
1,300
(1,600)
200
(700)
(200)
300
(600)
500
2019
£000
1,000
(1,100)
500
(600)
(700)
600
(900)
700
+10%
-10%
+1% pa
-1% pa
+10%
-10%
+1% pa
-1% pa
Gross
£000
Reinsurance
£000
Net
£000
481,669
(164,510)
(89,982)
59,024
391,687
(105,486)
240,868
(16,741)
11,810
7,896
560,992
203,096
228,361
(203,377)
2,720
230,800
79,212
(5,549)
(1,077)
(708)
4,986
(7)
76,857
(97,272)
2,691
(898)
(2,847)
(129,284)
(69,574)
(78,170)
69,748
(1,397)
(79,393)
-
-
-
-
-
-
-
143,596
(14,050)
10,912
5,049
431,708
133,522
150,191
(133,629)
1,323
151,407
79,212
(5,549)
(1,077)
(708)
4,986
(7)
76,857
Total insurance contract liabilities and reinsurance assets
868,649
(208,677)
659,972
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 Reinsurance
£000
£000
Net
£000
457,319
(139,221)
(78,731)
40,808
378,588
(98,413)
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
(58,688)
5,888
(599)
1,340
(89,982)
(61,615)
(70,165)
61,416
790
(69,574)
-
-
-
-
-
-
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
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Parent
Claims outstanding
At 1 January 2020
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 2020
Provision for unearned premiums
At 1 January 2020
Increase in the period
Release in the period
Exchange differences
At 31 December 2020
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
391,268
(136,184)
(56,174)
34,368
335,094
(101,816)
191,326
(21,916)
9,567
522
434,583
165,004
181,778
(164,992)
(171)
181,619
(66,322)
9,579
-
99
(78,450)
(50,527)
(56,074)
50,555
(20)
(56,066)
125,004
(12,337)
9,567
621
356,133
114,477
125,704
(114,437)
(191)
125,553
381,631
(112,589)
(54,357)
24,498
327,274
(88,091)
140,367
(25,030)
7,862
(973)
391,268
149,808
165,625
(150,384)
(45)
165,004
(27,217)
807
-
95
(56,174)
(45,881)
(50,631)
45,926
59
(50,527)
113,150
(24,223)
7,862
(878)
335,094
103,927
114,994
(104,458)
14
114,477
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
29 Provisions for other liabilities and contingent liabilities
30 Deferred tax
246
247
Group
At 31 December 2019
Acquisitions
Additional provisions
Used during year
Not utilised
Exchange differences
At 31 December 2020
Current
Non-current
Parent
At 31 December 2019
Additional provisions
Used during year
Not utilised
Exchange differences
At 31 December 2020
Current
Non-current
Regulatory
and legal
provisions
£000
Contingent
consideration
£000
Other
provisions
£000
2,565
-
5,644
(5,859)
(21)
-
2,329
2,329
-
2,565
5,644
(5,859)
(21)
-
2,329
2,329
-
23
418
-
(22)
-
-
419
419
-
-
-
-
-
-
-
-
-
2,279
-
1,465
-
-
7
3,751
1,669
2,082
2,130
1,380
-
-
3
3,513
1,669
1,844
Total
£000
4,867
418
7,109
(5,881)
(21)
7
6,499
4,417
2,082
4,695
7,024
(5,859)
(21)
3
5,842
3,998
1,844
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
Acquisitions included within the provision for contingent consideration relates to the acquisition of WRS Insurance Brokers Limited as disclosed
in note 16.
Other provisions
The provision for other costs relates to costs in respect of dilapidations.
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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 2019
Charged/(credited) to profit or loss
Credited to other comprehensive income
Exchange differences
At 31 December 2019
(Credited)/charged to profit or loss
Charged/(credited) to profit or loss
- Impact of change in deferred tax rate
Credited to other comprehensive income
(Credited)/charged to other comprehensive income
- Impact of change in deferred tax rate
Exchange differences
At 31 December 2020
Parent
At 1 January 2019
Charged/(credited) to profit or loss
(Credited)/charged to other comprehensive income
Exchange differences
At 31 December 2019
(Credited)/charged to profit or loss
Charged/(credited) to profit or loss
- Impact of change in deferred tax rate
Credited to other comprehensive income
(Credited)/charged to other comprehensive income
- Impact of change in deferred tax rate
Exchange differences
At 31 December 2020
Unrealised
gains on
investments
£000
Net
retirement
benefit
assets
£000
Equalisation
reserve
£000
Other
differences
£000
27,566
6,500
-
15
34,081
1,753
(130)
(1,198)
-
425
2,204
(770)
-
-
1,434
(1,607)
(851)
(110)
74
(2,494)
Total
£000
29,916
4,749
(1,308)
89
33,446
(6,569)
(204)
(790)
2,168
(5,395)
4,050
-
-
(4)
31,558
27,274
5,875
-
-
33,149
232
(3,291)
(182)
-
(3,020)
1,755
(130)
(1,198)
-
427
145
-
-
-
789
2,204
(770)
-
-
1,434
(171)
(9)
24
(77)
(559)
(163)
(318)
(110)
9
(582)
4,256
(3,300)
(158)
(81)
28,768
31,070
4,657
(1,308)
9
34,428
(6,489)
(204)
(790)
971
(6,512)
3,900
-
232
(3,290)
-
(182)
145
-
-
30,560
(3,017)
789
(165)
(9)
24
(9)
230
4,112
(3,299)
(158)
(9)
28,562
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:
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Deferred tax liabilities
Deferred tax assets
2020
2019
Group
£000
29,846
(1,078)
28,768
Parent
£000
28,562
-
28,562
Group
£000
35,649
(2,203)
33,446
Parent
£000
34,428
-
34,428
The Group has unused tax losses of £12,954,000 (2019: £13,361,000) 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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
31 Other liabilities and deferred income
Creditors arising out of direct insurance operations
Creditors arising out of reinsurance operations
Derivative liabilities
Creditors arising from broking activities
Other creditors
Amounts owed to related parties
Accruals
Current
Non-current
248
Notes to the financial statements
32 Leases (continued)
2020
2019
Group
£000
3,055
39,190
1,244
4,343
24,020
3
21,706
93,561
93,011
550
Parent
£000
1,556
24,539
1,244
-
12,304
45
15,399
55,087
55,087
-
Group
£000
2,215
26,652
-
4,258
18,085
4
25,738
76,952
76,533
419
Parent
£000
1,418
14,567
-
-
10,109
24
19,448
45,566
45,566
-
Parent
At 31 December 2019
Additions
Disposals
Depreciation expense
Exchange differences
At 31 December 2020
At 31 December 2018
Transition to IFRS 16
At 1 January 2019
Additions
Disposals
Depreciation expense
Exchange differences
At 31 December 2019
249
Total
£000
8,704
16,994
(193)
(2,626)
(17)
22,862
-
8,400
8,400
3,038
(570)
(2,126)
(38)
8,704
Land and
buildings
£000
Motor
vehicles
£000
Other
equipment
£000
7,449
16,617
-
(2,310)
(18)
21,738
-
6,865
6,865
2,805
(442)
(1,741)
(38)
7,449
1,028
377
(193)
(219)
-
993
-
1,315
1,315
128
(128)
(287)
-
1,028
227
-
-
(97)
1
131
-
220
220
105
-
(98)
-
227
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.
Included within deferred income of the Group is £308,000 (2019: £278,000) classified as contract liabilities in accordance with IFRS 15.
Included within deferred income of the Parent is £nil (2019: £nil) classified as contract liabilities in accordance with IFRS 15.
32 Leases
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
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
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.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period.
Group
At 31 December 2019
Additions
Disposals
Depreciation expense
Exchange differences
At 31 December 2020
At 31 December 2018
Transition to IFRS 16
At 1 January 2019
Additions
Disposals
Depreciation expense
Exchange differences
At 31 December 2019
Land and
buildings
£000
Motor
vehicles
£000
Other
equipment
£000
9,961
17,125
-
(2,901)
46
24,231
-
9,962
9,962
2,864
(442)
(2,336)
(87)
9,961
1,038
474
(193)
(254)
3
1,068
-
1,362
1,362
128
(128)
(323)
(1)
1,038
305
-
-
(118)
2
189
-
297
297
150
(21)
(120)
(1)
305
Total
£000
11,304
17,599
(193)
(3,273)
51
25,488
-
11,621
11,621
3,142
(591)
(2,779)
(89)
11,304
Set out below are the carrying amounts of lease obligations:
Current
Non-current
2020
Group Parent
£000
£000
3,502
21,948
25,450
2,725
20,113
22,838
2019
Group
£000
2,985
9,938
12,923
Parent
£000
2,460
7,868
10,328
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
Expenses relating to short-term leases
2020
£000
3,273
773
9
4,055
2019
£000
2,779
581
-
3,360
The Group had total cash outflows for leases, including interest paid, of £5,872,000 (2019: £3,371,000). The Parent had total cash outflows for
leases, including interest paid, of £5,103,000 (2019: £2,653,000). 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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
250
251
Notes to the financial statements
32 Leases (continued)
Notes to the financial statements
Group as a lessor
Finance leases
The Group has a finance leasing arrangement as a lessor to sublease a commercial office space no longer occupied by the Group. The
remaining term of the finance lease is 2 years. The contract does not include an extension or early termination option.
33 Commitments
At the year end, the Group and Parent had no capital commitments relating to computer software (2019: £2,559,000) and £2,506,000 capital
commitments (2019: £nil) relating to furniture, fittings and equipment.
2020
Group
£000
Parent
£000
2019
Group
£000
Parent
£000
The Group has lease contracts for right of use assets that had not commenced at 31 December 2020. These leases will commence in 2021.
The lease for other equipment has a term of 6 years with expected cash outflow of £12,000 per annum. The lease for motor vehicles has a
term of 4 years with an expected cash outflow of £23,000 per annum.
Year 1
Year 2
Year 3
Undiscounted lease payments
Less: unearned finance income
Net investment in the lease
131
110
-
241
(5)
236
131
110
-
241
(5)
236
134
134
111
379
(13)
366
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
2020
£000
-
7
7
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
2020
2019
Group
£000
8,150
7,290
6,773
6,390
5,441
22,163
56,207
Parent
£000
8,150
7,290
6,773
6,390
5,441
22,163
56,207
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
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
Trust Limited. Both companies are incorporated and operate in the United Kingdom and copies of their financial statements are available from
the registered office as shown on page 258. 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 2020 is as follows:
Company
Subsidiary undertakings
Incorporated in the United Kingdom
Ecclesiastical Financial Advisory Services Limited *
Ecclesiastical Life Limited *
EdenTree Investment Management Limited *
E.I.O. Trustees Limited * ^
Ecclesiastical Group Healthcare Trustees Limited *
SEIB Insurance Brokers Limited *
South Essex Insurance Holdings Limited *
WRS Insurance Brokers Limited *
Incorporated in Australia
Company
Registration Share
Capital
Number
Holding of shares by
Company Group Activity
2046087
0243111
2519319
0941199
10988127
6317314
6317313
0878984
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
-
100%
-
100%
100%
-
-
-
-
-
-
100%
-
Independent financial advisory
Life insurance
Investment management
Trustee company
Trustee company
Insurance agents and brokers
Investment holding company
100% Dormant company
-
-
Insurance
Risk management services
100% Dormant company
Ansvar Insurance Limited **
Ansvar Risk Management Services Pty Limited**
Ansvar Insurance Services Pty Limited ** †
007216506 Ordinary
623695054 Ordinary
162612286 Ordinary
*
**
^
†
Registered office: Benefact House, 2000, Pioneer Avenue, Gloucester Business Park, Brockworth, Gloucester, GL3 4AW, United Kingdom
Registered office: Level 5, Southbank Boulevard, Melbourne, VIC 3006, Australia
Exempt from audit under s480 of the Companies Act 2006
Exempt from audit
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
35 Related party transactions (continued)
252
253
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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.
2020
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
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
Ecclesiastical
Insurance
Group plc
£000
Subsidiaries
£000
480
13,525
50,991
-
480
13,525
50,991
-
461
8,590
37,900
-
461
8,590
37,900
-
-
-
-
-
3,238
20,980
3,873
2,265
-
-
-
-
15,249
3,743
4,205
1,612
Other
related
parties
£000
1,880
4,534
1,692
57,427
535
1,467
1,649
-
1,790
2,481
1,144
57,222
529
867
1,134
-
During the year, the Company received premiums, commission and reinsurance recoveries via a related party insurance agency amounting to
£38,000 (2019: £116,000) and paid reinsurance protection, commission and claims amounting to £34,000 (2019: £299,000).
Trading, investment and other expenditure, including recharges, and amounts paid in the current year includes loans totalling £13.1m (2019:
£8.5m) and acquisition of shares totalling £11.1m (2019: £nil).
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 total aggregate remuneration of the directors in respect of qualifying services during 2020 was £2,344,000 (2019: £2,446,000). After
inclusion of amounts receivable under long-term incentive schemes and pension benefits, the total aggregate emoluments of the directors was
£3,043,000 (2019: £3,379,000). The key management personnel is defined as the Group Management Board (Ecclesiastical's leadership team),
Executive and Non-executive directors. The remuneration is shown below.
Key management personnel
Wages and salaries
Social security costs
Pension costs - defined contribution plans
Fees and benefits for non-executive directors
2020
2019
Group
£000
3,645
558
241
606
5,050
Parent
£000
3,645
558
241
606
5,050
Group
£000
4,713
443
213
568
5,937
Parent
£000
4,713
443
213
568
5,937
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.
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
Notes to the financial statements
Notes to the financial statements
36 Reconciliation of Alternative Performance Measures (continued)
254
255
36 Reconciliation of Alternative Performance Measures
Group
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 46: 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).
2020
Inv'mnt
Broking
and
mngt Advisory
Inv'mnt
return
Corporate
costs
Total
£000
£000
£000
£000
£000
Insurance
General
£000
Life
£000
437,287
(173,074)
(16,562)
247,651
47,742
2,126
-
297,519
12
-
-
12
-
-
(484)
(472)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,382
-
(25)
(4,600)
(4,600) 12,357
9,458
-
811
10,269
(224,127) 1,333
-
(13)
(380)
940
94,581
(84,852)
(71,069)
(285,467)
-
-
-
(2,813)
(2,813)
-
-
(939)
(12,449)
(13,388)
-
-
360
(8,149) [5]
(7,789)
(21,533)
(21,533)
-
-
-
-
-
-
-
-
-
-
-
437,299
(173,074)
(16,562)
247,663
69,582
2,126
(4,298)
315,073
(222,794)
94,581
(85,444)
(116,393)
(330,050)
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
[1]
[2]
[3]
[4]
[6]
[6]
12,052
95.1%
2019
Inv'mnt
Broking
and
mngt Advisory
Inv'mnt
return
Corporate
costs
Total
£000
£000
£000
£000
£000
Insurance
General
£000
Life
£000
393,965
(152,886)
(15,080)
225,999
49,368
544
-
275,911
(13)
-
-
(13)
-
-
989
976
-
-
-
-
-
-
-
-
-
-
-
-
-
-
72,596
72,596
12,795
-
19
12,814
9,077
-
834
9,911
(157,481)
52,800
(72,383)
(78,829)
(255,893)
(327)
-
(14)
(300)
(641)
-
-
-
(3,057)
(3,057)
-
-
(819)
(12,305)
(13,124)
-
-
476
(8,236)
(7,760)
-
-
-
-
-
-
-
-
-
-
-
[5]
(17,850)
(17,850)
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)
20,018
(531)
19,487
335
-
335
69,539
-
69,539
(310)
-
(310)
2,151
(89)
2,062
(17,850)
-
(17,850)
73,883
(620)
73,263
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
[1]
[2]
[3]
[4]
[6]
[6]
20,018
91.1%
Net expenses ( = [2] + [3] + [4] + [5] )
[7]
(119,694)
Net expense ratio
53%
37 Events after the balance sheet date
In February 2021 the Company raised EUR 30m in nominal amount of Tier 2 Capital by way of a privately-placed issue of 20-year
subordinated bonds, callable after year 10. The rate of interest until the call date is fixed at 6.3144%.
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O
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12,052
(686)
11,366
468
-
468
(7,413)
-
(1,031)
-
(7,413)
(1,031)
2,480
(83)
2,397
(21,533)
-
(21,533)
(14,977)
(769)
(15,746)
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Net expenses ( = [2] + [3] + [4] + [5] )
[7]
(129,712)
Net expense ratio
52%
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].
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Ecclesiastical Annual Report & Accounts 2020Financial StatementsSection Four
256
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
257
258
260
261
262
263
264
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Ecclesiastical Annual Report & Accounts 2020Section FiveOther Information
Directors, executive management and company information (unaudited)
Directors, executive management and company information (unaudited)
258
259
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Directors
* 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
* Sir S. M. J. Lamport GCVO, DL
* 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
Company Secretary
Mrs R. J. Hall FCG
Registered and Head Office
Benefact House,
2000 Pioneer Avenue,
Gloucester Business Park,
Brockworth,
Gloucester, GL3 4AW
Tel: 0345 777 3322
Company Registration Number
00024869
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
Burges Salmon LLP
Bristol and London
CMS Cameron McKenna with Nabarro and Olswang LLP
London, Leeds and Bristol
Fieldfisher Capital LLP
Dublin
Wynne-Jones IP Limited
Cheltenham
Eversheds Sutherland LLP
Cardiff
Auditor
Registrar
PricewaterhouseCoopers LLP
Bristol
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS13 8AE
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Ecclesiastical Annual Report & Accounts 2020Section FiveOther Information
United Kingdom regional centres (unaudited)
United Kingdom business division and international branches (unaudited)
260
261
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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:
Ireland Branch
Managing Director:
Office:
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
D. G. Lane B.Comm (Hons), Certified Insurance Director
2nd Floor, Block F2
Eastpoint
Dublin 3, DO3 T6P8
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Ecclesiastical Annual Report & Accounts 2020Section FiveOther Information
Insurance subsidiaries and agencies (unaudited)
Notice of meeting (unaudited)
262
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Ansvar Insurance Limited
Chief Executive Officer:
Head Office:
W. R. Hutcheon MBA, GAICD, Fellow ANZIIF (CIP)
Level 5
1 Southbank Boulevard
Southbank
Melbourne VIC 3006
NOTICE is hereby given that the Annual General Meeting of Ecclesiastical Insurance Office plc will be held at Benefact House, 2000 Pioneer
Avenue, Gloucester Business Park, Brockworth, Gloucester, GL3 4AW on Thursday, 15th July 2021 at 11:30am for the following purposes:
Ordinary business (unaudited)
Ecclesiastical Life Limited
Head Office:
Ecclesiastical Underwriting
Management Limited
Office:
SEIB Insurance
Brokers Limited
Director:
Office:
Tel:
Benefact House,
2000 Pioneer Avenue,
Gloucester Business Park,
Brockworth,
Gloucester,
GL3 4AW
Benefact House,
2000 Pioneer Avenue,
Gloucester Business Park,
Brockworth,
Gloucester,
GL3 4AW
B. W. Fehler
South Essex House, North Road
South Ockendon
Essex RM15 5BE
01708 850000
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
To receive the Report of the Directors and Accounts for the year ended 31st December 2020 and the report of the
auditors thereon.
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 M. C. J. Hews 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 Mrs C. H. Taylor as a director.*
To re-elect Mrs S. J. Whyte as a director.*
To re-elect Mr A. Winther as a director.*
To elect Mrs D. Cockrem as a director.*
To elect Mr N. Maidment as a director.*
To elect Sir S. Lamport as a director.*
To consider the declaration of a dividend.
To appoint PricewaterhouseCoopers LLP as auditors and authorise the directors to fix their remuneration.
By order of the Board
Mrs R. J. Hall, Secretary
18 March 2021
* Brief biographies of the directors seeking re-election are shown on pages 94 to 96 of the 2020 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-
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
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
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
member.
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 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 and vote at the annual general meeting.
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Ecclesiastical Annual Report & Accounts 2020Section FiveOther Information
Notes
264
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Fable
Design. Art Direction. Production.
fablecreative.co.uk
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Section FiveOther Information
Annual Report & Accounts 2020
Ecclesiastical Insurance Office plc
Benefact House
2000 Pioneer Avenue
Gloucester Business Park
Brockworth
Gloucester
GL3 4AW
Ecclesiastical Insurance Office plc (EIO) Reg. No. 24869. Registered in England at Benefact House, 2000, Pioneer Avenue, Gloucester Business Park, Brockworth, Gloucester, GL3 4AW
,
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.