Building a
Movement
for Good
Ecclesiastical Insurance Office plc
Annual Report & Accounts 2021
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An-nual Report and Ac-count concept amends
Trusted to protect
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Proud to preserve
Committed to change
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Building a Movement
for Good
It’s amazing to think that we’ve now given
£100m to charities throughout the UK, Ireland,
Canada and Australia. What’s more amazing
is the incredible collective effort involved.
This great act of giving has only been possible with the
help of our customers, brokers, colleagues, partners and
people who take part in our Movement for Good awards.
And for that, I want to say a heartfelt thank you.
Thanks to you, we’ve been able to make such a difference
to the lives of so many. And this strong charitable purpose
– this desire to help others – is what unites our family
of global, trusted businesses and drives us forward.
Proudly part of Benefact Group, by giving our profits
to charity, we can support the causes you care about.
And we’re ambitious to give more. It’s why we’re
determined to keep growing – because the more
we grow, the more we can give back.
So again, thank you for helping us build a special
kind of business. Thank you for helping us build
a Movement for Good.
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Mark Hews,
Group Chief Executive,
Ecclesiastical Insurance Office plc
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Contents
Section One About Us
Building a Movement for Good
Ecclesiastical at a glance
Our businesses
Section Two Strategic Report
Chair’s Statement
Chief Executive’s Report
Beneficiary stories
Global trends in financial services
Our business model and strategy
Strategy in action
Key Performance Indicators
Financial Performance Report
Risk Management Report
Principal risks
Responsible Business Report
Non-Financial Information Statement
Section 172 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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Section One
About Us
Building a Movement for Good
Ecclesiastical at a glance
Our businesses
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At Ecclesiastical our way of doing business
is a little different to most. That’s because,
proudly part of Benefact Group, we give all
available profits to charities and good causes.
So, the more our business grows, the more
we can give back. The knowledge that
the more successful we become – the more
we can help improve lives and communities
– is what spurs us on each day.
And wanting to help others applies equally
to our customers. It’s why we’re always
looking for ways to offer them more,
building on our trusted specialist expertise
and unrivalled world-respected knowledge.
Together, building a Movement for Good.
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Section One
About Us – Ecclesiastical at a glance
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
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Ecclesiastical at a glance
Best Ethical
Investment
Provider
Voted by the Financial
Adviser community
at the Moneyfacts Life
& Pensions Awards for
13 consecutive years
(2009-2021) – EdenTree
Investment Management
Leading
insurer for
the Anglican
church
in all our territories
Proudly part
of Benefact Group,
a specialist financial
services group that
gives all its available
profits to charity
and good causes
Since the 1880s
Ecclesiastical has been
providing specialist insurance
and risk management support
to its customers
Our specialist brokers
provide tailored
insurance products
particularly for customers in the
high net worth, farming and rural
estates, equine, animal trades, and
specialist motor insurance sectors
A leading
multi-faith insurer
Protecting
churches,
synagogues,
mosques and
Hindu, Sikh and
Buddhist temples
across our
territories
£150m+
One of the UK’s
largest charitable
donors. We are
proud of our
ambition to give
more than £250m
to good causes.
Since 2014 we have given over
£150m in grants and donations*
*Cumulative total 2014-2021
98% +
UK overall customer satisfaction
across all the sectors we measure*
*Based on FY 2021 results for Home New Business and Renewals – Ecclesiastical UK; Church Renewals;
Ecclesiastical claims; Risk Management; Charity; EFAS and Funeral Directors results
4th largest
corporate donor
to charity
£77.0m
profit before tax
(£15.7m loss before
tax in previous year)
Our parent, Benefact Group, is already
the UK’s 4th largest corporate donor*
and we aim to be the largest
*DSC – The guide to UK Company Giving 2021-22
Movement
for Good
Through our Movement
for Good Awards
– our biggest ever giving
campaign – we gave
£1m to help a wide range
of charitable causes
Rated best
insurer by
UK brokers
in the charity,
commercial
heritage,
education and
faith sectors*
*Ecclesiastical UK Broker survey FY2021
In Canada our
Community
Impact Grants
supported
projects that
make a positive
impact on the
community
£486.2m
gross written premium
(£437.3m in previous year)
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Section One
About Us – Our businesses
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
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Our businesses
This Annual Report & Accounts is for Ecclesiastical Insurance Office plc.
The following terms are used throughout this report and are defined as follows:
Terms
Definition
The ‘Company’
or ‘Parent’
The ‘Group’
‘Benefact Group’
or ‘wider group’
Benefact Trust
Ecclesiastical Insurance Office plc (EIO)
Ecclesiastical Insurance Office plc together
with its subsidiaries
Benefact Group plc (formerly Ecclesiastical
Insurance Group plc), the parent company
of Ecclesiastical Insurance Office plc, together
with its subsidiaries. This includes Ecclesiastical
Planning Services Ltd (EPSL), Lycetts Insurance
Brokers (Lycetts) and Lycetts Financial Services.
Benefact Trust Limited, the ultimate parent
undertaking of Ecclesiastical Insurance Office plc
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.
Investment Management
EdenTree Investment Management (EdenTree)
With over 30 years of experience in responsible and sustainable investing,
our investment management team manages and sells Environmental, Social
and Governance 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 13th
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 Ltd1 (EPSL) / Lycetts Insurance Brokers1 (Lycetts) /
Lycetts Financial Services1
Our specialist brokers, SEIB and Lycetts, provide tailored insurance products
for customers, particularly those in the high net worth, farming and rural estates,
equine, animal trades, and specialist motor insurance sectors.
EFAS and Lycetts Financial Services offer financial advice to businesses
and individual customers including Church of England clergy. EPSL markets
and administers prepayment funeral plans under the Perfect Choice brand.
1 These businesses are owned by Benefact Group plc
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout Us – Ecclesiastical at a glance
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Section Two
Strategic Report
Chair’s Statement
Chief Executive’s Report
Beneficiary stories
Global trends in financial services
Our business model and strategy
Strategy in action
Key Performance Indicators
Financial Performance Report
Risk Management Report
Principal risks
Responsible Business Report
Non-Financial Information Statement
Section 172 Statement
Strategic Report approval
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section Two
Chair’s Statement
It is with great
pleasure and pride
that I reflect on a
hugely successful
year for Ecclesiastical
in 2021.
The Group exceeded its ambitious target
of donating £100m, an extraordinary
achievement that has helped thousands
of good causes and communities to transform
lives for the better in the UK and abroad.
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This was made possible thanks to our direct
giving and the annual grants given to our
charitable owner, Benefact Trust, over the past
five years. I would like to thank our customers,
brokers, partners, and colleagues for helping
us achieve this milestone. Alongside this,
we made significant progress on a number
of strategic initiatives including the launch
of the new Ecclesiastical brand and the
opening of our new headquarters
in Gloucestershire.
After a long period of restrictions, the latter
half of 2021 started to feel like a return
to normality. The official opening of our head
office in June was a welcome opportunity
to meet many of our talented colleagues,
who have worked tirelessly through
the challenges of the past two years
to deliver outstanding service to our
customers. Their resilience, positivity
and commitment to doing the right thing
is what sets Ecclesiastical apart.
At the time of writing, the war in Ukraine casts
a dark cloud over the world. Many Ukrainians
continue to be caught in conflict and are
suffering due to the unjust actions of the
Russian government. Our charitable purpose
allows us to help those most in need,
and I’m pleased that our charitable owner
Benefact Trust is contributing £1m of grant
funding to charities supporting those affected
by the war. Alongside this, the Group has also
pledged to triple-match employee giving
to any Ukraine appeals. We send our thoughts
and prayers to those affected by the conflict.
A strong set of results
Thanks to our charitable ownership, we are
able to take a long-term, sustainable approach
to growth. Our 2021 results demonstrate our
continuing financial strength as we recovered
from the challenges posed by Covid-19
the previous year. Strong investment returns
and a solid underwriting result helped us
report a profit before tax of £77.0m, which
is a fantastic achievement. This enabled us
to contribute £26.0m to our owner
Benefact Trust in respect of 2021 performance ,
which includes £5m paid in 2022. We also gave
£2.5m to good causes through our direct giving.
Since 2014, the Group has given over £150m
to good causes. Already the fourth-biggest
corporate donor in the UK, we now want
to become the biggest and to donate
a cumulative £250m to good causes
by the end of 2025.
Achievements and reflections
During my three years as Chair, the Group has
evolved into a modern and confident business,
driven by an ambition to create a Movement
for Good in society. The core insurance, broker
and advisory, and investment management
businesses have all demonstrated impressive
growth. Alongside the launch of the new
Ecclesiastical insurance brand and the
opening of our head office, we continued
to invest in systems and technology to
improve the broker and customer experience,
with a new general insurance system for the
UK and Ireland launching soon.
Our commitment to innovation remains strong
with the launch of the Smart Properties
proposition, which provides an early-warning
system for heritage properties to prevent fire
and flood. This clever technology won Digital
Insurance Innovation of the Year Award at the
British Insurance Awards.
Underpinning all of these achievements
is our commitment to first-class customer
service. Our customer satisfaction and
Net Promoter Scores remain high alongside
a record number of external awards,
and the Group achieved Best Companies
two-star status, demonstrating outstanding
employee engagement.
Looking ahead
While pleased with the progress made
in 2021 in such challenging circumstances,
we undoubtedly have the potential to develop
the business even further following the launch
of our next chapter strategy.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoStrategic Report – Chair’s StatementSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Section Two
Strategic Report – Chair’s Statement
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This year will see us start to realise the
benefits of our long-term investments
in systems and processes. Alongside this,
we will continue to invest in technology and
our people to drive innovation and growth
to enable yet more giving to charities and
communities. I’m confident this roadmap
will see us become an even more successful
organisation over the next five years.
We enter the next chapter with a new name
for our wider group – Benefact Group.
The new name better reflects our purpose
to do good in society – it derives from Latin
and means to do well by supporting a person
or good cause. All of the trading brands in the
Benefact family will continue to operate under
their own names, united in a belief that better
business can better lives.
As the Board looks towards the next chapter
for the Group, it must respond to broader
issues of sustainability and climate change.
As a responsible business, we are committed
to making a positive environmental impact
in the world. The Group recently unveiled
its plan to reach net zero carbon emissions
by 2040. Over the past year, much work has
gone into understanding and measuring our
climate impact, in order to make meaningful
commitments for the future.
Our ambition to wipe out our historic direct
carbon impact by 2030 is, I believe, unique
in the insurance industry, and is the right
thing to do for a company with our purpose
and values. The good news is we’re building
on strong foundations – our award-winning
investment management company, EdenTree,
is a pioneer in the field of ethical investing,
and the Group has introduced a responsible
and sustainable investment strategy that
seeks to invest in markets that have positive
impacts. We’re also a long-term member
of ClimateWise, a group of organisations
ambitious about climate action. Reducing
our climate impact is a key priority for
the Board and we look forward to making
progress on our commitments.
Board activity
It was a pleasure to be able to return
to face-to-face Board meetings in 2021.
While virtual meetings have provided
increased flexibility, our Board members
welcomed the opportunity to interact and
engage in person after a long period apart.
We said goodbye to Caroline Taylor,
who retired from the Board in September.
I would like to thank Caroline for her
contribution over the past seven years.
In July, Rita Bajaj joined us as Non-Executive
Director, bringing with her over 30 years
of financial markets experience. She has
held senior portfolio management positions
at both UK and US investment institutions
as well as experience working in UK
regulation.
A key priority for the Board this year
will be spending more time in the business
and continuing to develop relationships
with senior executives and managers.
The future
It is a privilege to be a part of a business
with such a special purpose of contributing
to the greater good of society. With the
new strategy in place, I believe we are well
positioned to take the business forward,
and in doing so give even more to charities
and communities to help transform lives
for the better.
David Henderson
Chair
‘All of the trading
brands in the
Benefact family will
continue to operate
under their own
names, united in
a belief that better
business can
better lives.’
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Chief Executive’s Report
Over 135 years ago,
our founders created
a different kind of
business committed
to the greater good
of society.
Times may have changed, but our drive and
purpose remain the same. Today we are one
of the biggest corporate donors in the UK,
helping to transform thousands of lives
for the better.
Like many businesses, we are ambitious.
But our ambition is not driven by the short-term
pursuit of profits at any cost. Our ambition
is fuelled by a desire to support and care
for our customers, their communities and
society as a whole.
As a specialist insurer, we not only protect
much of the nation’s irreplaceable heritage,
we are trusted to insure the buildings and
organisations that bind our communities
together – schools, charities, churches,
community centres, and historic buildings.
As custodians of these special places,
we take great care to support our customers.
As a charity-owned business, we believe
commercial success and social good can
sit side by side to generate incredible social
impact. By growing our business, we can give
even more to charities and communities,
and help even more people. By doing business
with Ecclesiastical, every one of our customers,
brokers, and partners is helping to support
good causes and create a powerful Movement
for Good in society.
It’s impossible to write this report without
mentioning the harrowing situation in Ukraine.
The conflict is having a devastating effect
on innocent civilians and, like the rest of the
world, I’ve been shocked by the stories and
pictures emerging from the war. As a business
committed to the greater good of society,
both in the UK and abroad, I am pleased that
our charitable owner, Benefact Trust, has
committed £1m of grant funding to support
charities helping those affected by the conflict.
The Group has also pledged to triple-match
employee giving to any Ukraine appeals
up to £50,000.
Continuing to build a Movement
for Good
Despite the ongoing challenges of the
pandemic, 2021 was a year of great
achievement for our Group. We reported
strong financial performance, a record number
of external awards, excellent customer
and employee survey feedback, and continued
progress on our strategy.
Most importantly, we were able to give
a total of £28.5m to charity in respect of 2021
performance. This meant we achieved our goal
of giving more than £100m to good causes
– meeting and exceeding the stretching goal
that we set ourselves a few short years ago.
This is a remarkable feat and I want to say
a heartfelt thank you to all of our customers,
brokers, business partners, employees and
supporters who have made this happen.
Thanks to you, we have made thousands
of charitable donations over the past five years,
making a difference to countless lives.
As a result of our performance in 2021,
we were able to further the aims of our
charitable owner, Benefact Trust, with
a donation of £26m. This was split between
£21m in cash paid in 2021, with the remainder
paid in 2022. The balance of our giving was
distributed via giving programmes in the UK,
Australia, Canada and Ireland, such as the
Movement for Good awards, which allows
customers, business partners and others
to help steer funds to the causes they wish.
Alongside Benefact Trust, we are very
proud to have supported charities tackling
so many different and important issues.
Their work includes lifting people out of
poverty, making society more inclusive,
helping to support bereaved families and
so much more. When one hears stories
of how our support is making a difference,
it is difficult not to feel humbled, moved
and inspired.
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Indeed, seeing the inspiring work of charities
around us makes us determined to give even
more and set our sights even higher. Already
the fourth biggest corporate donor, we now
have an ambition to be the largest corporate
donor in the UK – not because of the position
in the league table, but because of the
transformative impact that such an ambition
would have on lives and communities.
We step into this challenge with a new identity
for our wider Group – Benefact Group. The new
name for our immediate parent better reflects
our diversity, breadth and charitable purpose
– it originates from the verb ‘benefact’ which
means ‘to do well’ which is for us the basis for
our commitment to give money or help to good
causes. All of the trading brands in the Benefact
Group family will continue to operate under
their own names, united in a belief that better
business can mean better lives. All the available
profits from Benefact Group will continue to
benefit charity.
Delivering for our customers
2021 was another difficult year for many
of us, but our colleagues rose to the challenge
admirably. They embraced new ways
of working while continuing to serve our
customers brilliantly, whether that was
from our offices or from home. I would like
to thank all of our colleagues for their
dedication and resilience.
I continue to be genuinely impressed
at the level of service my colleagues offer.
The independent research consultancy,
Gracechurch, put Ecclesiastical ahead of all
other insurers for claims service. In addition,
an incredible 98% of customers and brokers
are satisfied with the service they receive from
Ecclesiastical, whether that is making a claim
or experiencing our risk management service.
The Net Promoter Score, which measures how
likely a customer is to recommend a company’s
products and services, for Ecclesiastical
Insurance put us ahead of well-known
and respected brands such as John Lewis
and Marks & Spencer.
With such a brilliant team of people, it was
heartening to receive external recognition
for our levels of engagement. In our first
year of participation in the Best Companies
assessment, the Group was awarded a two-star
accreditation demonstrating ‘outstanding’ levels
of employee engagement.
Alongside this, we won a record number
of external awards. This included being named
as the UK’s most trusted home insurer for the
14th consecutive time by independent ratings
agency Fairer Finance, and our Canadian
team was named one of the Top Employers
for Young People for the ninth consecutive
year. Ecclesiastical UK won Digital Insurance
Innovation of the Year Award at the British
Insurance Awards for Smart Properties, while
EdenTree was named Best Ethical Investment
Provider at the 2021 Investment Life and
Pensions Moneyfacts Awards for the 13th
time in a row.
I was particularly pleased our UK General
Insurance team received accolades for our
Smart Properties proposition, which uses
cutting-edge technology to protect some
of the UK’s most iconic properties. This clever
early warning system uses wireless sensors
to learn what’s ‘normal’ for a property. An alert
is then sent by email, text or phone to highlight
a change in conditions, so early preventative
action can be taken. This is a wonderful
example of how we’re using innovation
to protect our customers and our nation’s
irreplaceable heritage.
Despite these achievements, we are
not complacent and we recognise there
is always more to do. Our culture means
that we continually strive to do better for
our customers.
I have previously highlighted the importance
of managing claims for physical and sexual
abuse (PSA) and we remain committed
to improving the claims handling experience
in these sensitive cases. The final report
of the Independent Inquiry into Child Sexual
Abuse (IICSA) will be published later this year
and we await its recommendations on ways
to better safeguard children and 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 have to 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
After a challenging year in 2020 due to the
impact of the Covid-19 pandemic, I’m delighted
that the Group reported a profit before tax
of £77.0m in 2021 (2020: loss before tax
of £15.7m). Our positive financial performance
was driven by impressive investment returns,
as markets bounced back, alongside a strong
underlying underwriting result. I’m pleased
our investment approach saw us outperform
the indices for most asset classes.
Our overall underwriting result included
a strengthening of reserves in our Australian
business, due to an increase in PSA cases,
and the impacts of adverse weather events,
including Storm Arwen and the July floods
in the UK, and severe flooding in Canada
and Australia.
We delivered Gross Written Premium (GWP)
growth of 11% to £486m (2020: £437m)
supported by strong retention and new
business in the UK and Canada. Our broking
businesses also performed above expectation
with SEIB reporting a profit before tax of £3.2m
(2020: £2.4m). Our award-winning investment
management firm EdenTree had another
excellent year, achieving record inflows and
exceeding fund benchmarks. It reported a loss
before tax of £2.5m (2020: loss before tax
of £1.0m) as it continued to invest in growing
the business.
Strategic progress
2021 was a truly transformational year for
Ecclesiastical as we made significant progress
on our strategic initiatives, despite the ongoing
uncertainty in the external environment.
We successfully launched the new
Ecclesiastical brand to positive feedback.
We opened our new head office
in Gloucestershire. We continued to make
substantial investments in new insurance
systems and technology to improve the broker
and customer experience. We reinvigorated
our EdenTree business, strengthening the team
and introducing new funds. We continued
to grow the Broking and Advisory division
and transformed its financial contribution.
Many of these initiatives will have a positive
impact on our carbon footprint. Our new
head office was built to ‘very good’ BREEAM
standards, a leading sustainability assessment
method, and our new EdenTree funds are aimed
at investors looking to contribute to a more
sustainable economy.
As a socially responsible business, we are
committed to making a positive environmental
impact in the world and supporting customers
and communities to tackle their climate
challenges too.
We pioneered ethical investment over
30 years ago and our responsible and
sustainable investment strategy remains
amongst the most stretching in the industry.
As an example, unlike many others, we do not
invest in companies undertaking fossil fuel
exploration or production. More generally,
we look to avoid investment in businesses that
cause social harm whilst proactively seeking
to invest in companies that have positive
impact. We consider environmental, social and
governance factors in every investment case
using our specialists at our award-winning
subsidiary EdenTree.
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Join our Movement for Good
After a successful 2021, we step into 2022
with more ambition and confidence than ever
to build a Movement for Good. None of this
would be possible, of course, without the
energy and endeavour of our specialist teams
worldwide. Our dedicated and talented people
are at the heart of our business, driven
by a desire to support our customers and
united by a common purpose to contribute
to the greater good of society. The Board
and I would like to thank all of our colleagues
for their exceptional efforts. I very much hope
that they are inspired when they look back
at what they have achieved. I certainly am.
As we build momentum for our movement
for good, I invite anyone reading this, whether
as a potential colleague, customer or business
partner, to come and join us and experience
a different way of doing business. Together,
with your support, we can grow our giving
and transform lives for the better.
By order of the Board
Mark Hews
Group Chief Executive
We’ve been members of the voluntary initiative,
ClimateWise, for a number of years and
continue to build our response to the climate
crisis using ClimateWise’s framework, which
is in line with the recommendations of the Task
Force on Climate-related Financial Disclosures
(TFCD). We are in the process of developing
an ambitious roadmap to net zero and are
supporting our customers and communities
to do the same.
Looking ahead
As we look to the future, we expect the needs
of our beneficiaries and charities to grow
substantially. And rather than look the other
way, we want to play our part in rising to help
meet those needs. To this end we have recently
launched a new ambitious Group strategy that
will see us transform our Group over the next
five years. In short, we want to innovate and
accelerate our growth so that we can give
even more money to good causes.
Our ‘next chapter’ will see us invest even more
in new systems and technology, helping our
businesses to innovate with purpose. Over
the next few months, we’ll start to roll out
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.
We will invest in our dedicated and brilliant
people to maximise their potential, creating
a world-class and energised team.
We will seek out new opportunities and new
paths to growth, with an ambition to double
the size / contribution of our businesses.
…And we will give even more. Since 2014,
the Group has given over £150m to good
causes. Our parent, Benefact Group, is now
aiming to donate a cumulative £250m1
to good causes by the end of 2025.
1 Cumulative giving since 2014
‘As a charity-owned
business, we believe
commercial success
and social good can
sit side by side to
generate incredible
social impact.’
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
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A belief that better business
can better lives
Ecclesiastical Insurance Office plc is proudly part of Benefact Group
and a shared desire to help others is the common thread that binds
the family of businesses together. Each business is a specialist
in its field, leading in everything from ethical investment and broking
and advisory to specialist protection for iconic buildings and world
heritage sites. Each one exists for the same purpose: to give all
its available profits to good causes.
This charitable giving is at our very core and has been for over
135 years. We’re even owned by a charity, Benefact Trust.
So our way of doing business is different. The better we serve
our customers, the more our business grows. And the more
we grow, the more we can give back. It’s how we’re making
a difference – to people’s lives and to communities.
And it’s how, together, we’re building a Movement for Good.
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“ The young people
whom we work with
have suffered due
to the current Covid-19
crisis, our inspiring
sailing voyages will
help them to overcome
their problems.”
Emma Pate, Fundraising Manager, The Island Trust
The Island Trust Ltd
The Island Trust, based in Devon,
is a youth sail training charity that enables
disadvantaged and disabled young people
to experience the benefits and challenges
of sailing a traditional wooden sailing boat.
As a winner of the 2021 Movement
for Good awards, the charity can continue
enhancing young lives – building resilience,
independence and self-confidence.
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“ It’s a privilege
to welcome these
children into An Garda
Síochána as Honorary
Garda. They love
getting to wear the
uniform and being
involved on an
ongoing basis.”
Alan Keane, Secretary, Little Blue Heroes Foundation
Little Blue Heroes Foundation
Little Blue Heroes Foundation’s mission
is to provide practical and financial
support to families of children who have
serious illnesses in Ireland, while granting
the wish of the children it supports
to become Honorary Gardaí to empower
the child and foster positive engagement
with An Garda Síochána, Ireland’s National
Police Service. The Movement for Good
awards money means they can keep
making a positive difference to the lives
of seriously ill children and their families.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout Us – Ecclesiastical at a glanceThe Island Trust Ltd
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“ Watching malnourished
babies growing stronger
with our milk – and
knowing their carers
have the means to
support them – makes
everything worthwhile.”
Forever Angels UK Ltd
Forever Angels provides life-saving
nutrition to orphaned, abandoned and
vulnerable babies in Tanzania, while
empowering their caregivers through
business creation. The Movement for
Good money will provide milk for two
babies, plus pay for 12 months’ training
for two caregivers in malaria prevention,
health, hygiene, nutrition and child
development. It will also pay to establish
them in a sustainable business, so they
can provide for their families.
Amy Hathaway, Founder and Director,
Forever Angels UK
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“ However different
you think someone
is from you, when you
get talking to them,
the similarities
and the shared
day-to-day concerns
are often striking.”
Rose Drew, CEO, Interfaith Glasgow
Interfaith Glasgow
Building bridges of trust and friendship
between people of different beliefs
is the aim of Interfaith Glasgow.
By creating a welcoming space where
people can meet and talk, the charity
is helping to overcome prejudice and
promote understanding and respect.
With the Movement for Good money,
Interfaith Glasgow can keep working
to tackle prejudice through friendship-
building initiatives and projects which
bring people together to work for
the common good.
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“ Helping to bring joy
and laughter to the
lives of our residents
– people who have
given so much – is
incredibly rewarding.”
Sophie Fanning-Tichborne, Partnerships Manager,
Royal Star & Garter
Royal Star & Garter
Royal Star & Garter provides loving,
compassionate, residential care to
veterans and their partners living with
disability or dementia. The Movement
for Good award will fund their Wellbeing
Programme which offers meaningful
activities and exercise ranging from
arts and crafts to gardening and tai chi,
supporting individuals in feeling engaged,
valued and loved.
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Section Two
Strategic Report – Global trends in financial services
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
35
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.
Trend
Our perspective
Trend
Our perspective
The conflict in Ukraine
Global economics
and trade
First and foremost the unfolding conflict in Ukraine is a humanitarian catastrophe, with the UN
reporting that over 2.5 million people have been displaced by the conflict at the time of writing.
As an organisation with a strong caring ethos, we empathise with those facing extreme hardship
and are working together with our charitable parent, Benefact Trust, to identify the best ways
that we can provide financial support to them in their hour of need.
The invasion of Ukraine in late February 2022 is a cause for concern around the world. Large oil
and natural gas stocks are found in the region, leading to fears of supply shortages due to the
imposition of sanctions and surging energy prices. Countries across Europe (including the UK)
are seeking to lessen their reliance on Ukraine and Russia for oil and natural gas supplies.
Disruption fears now encompass a wide range of other products that will affect both businesses
and consumers. Uncertainty has spread, with volatility seen in global financial markets and adverse
impacts beginning to flow through for economic growth and inflation. The most severe economic
impacts are expected to be felt in Europe, which is already facing inflation in energy prices resulting
in financial pressure on its businesses and households.
The outlook for the global economic landscape is cautious in 2022. Despite advances in the fight
against Covid-19, countries continue to feel impacts from the pandemic, and the unfolding conflict
in Ukraine continues to affect the outlook. The burden of the pandemic has been significant across
all economies, particularly with national debts rising to potentially unsustainable levels. Gross
Domestic Product (GDP) in advanced economies is expected to rebound to pre-pandemic levels,
with the recovery expected to be fuelled by vaccination programmes and the emergence
of antiviral treatments.
Markets remain nervous with expectations that central banks will raise interest rates at a time
when economies are emerging from the pandemic. Inflation is expected to be above targets
stemming from global supply chain issues, high energy prices and skills shortages.
Pressures on businesses are increasing from supply disruptions and shortages of manufacturing
inputs, together with continued virus containment methods. A huge surge in demand has led
to significant price rises and shortages, particularly in global consumer goods and semi-conductors.
There is increasing discontent with rising energy prices, particularly in Europe, which is likely
to be exacerbated by increased focus on addressing climate risks which will have associated
transition costs.
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 services
businesses create value, act as a force for innovation and drive economic prosperity.
Climate change
response
Financial services has been the least trusted business sector and in 2021, trust fell in all subsectors
of the financial services sector but particularly in property and casualty insurance, financial advisory
and asset management.
Benefact Group, Ecclesiastical Insurance Office plc’s parent company, aims to be a beacon
of responsible and sustainable business practice. This distinct positioning is supported by a business
model and values. Together these target outcomes have resulted in high levels of trust placed
in the Group and its businesses that are rare amongst financial services businesses. These include:
• Ecclesiastical UK being recognised once again as the most trusted home insurer, retaining
its accolade at the top of the Fairer Finance league table for the 14th time and;
• EdenTree, our investment management business, has been recognised for its market-leading
reputation and ethical approach with its 13th consecutive annual award from Moneyfacts.
The climate emergency continues to dominate the World Economic Forum’s Global Risks Report with
environmental risks dominating the global landscape over the next ten years. Average temperatures
continue to rise alongside increased frequency of extreme weather events. Natural defences are
coming under pressure with urbanisation and deforestation increasing global vulnerability to climate
change. These pressures are likely to lead to greater concentrations of insurance losses. Society
and businesses have begun to recognise that urgent action is needed.
Global sentiment is showing that governments need to do more to manage their climate risks.
Many countries are considering how to manage their climate risk and establishing appropriate steps
to move towards a low carbon economy. Opportunities include redirecting investment away from fossil
fuels and subsidising low carbon technologies, supported by building regulations that expect the use
of low-carbon materials. The costs of moving to a lower carbon economy are expected to be very
significant and are likely to lead to further economic and political pressures.
Investors are increasingly demanding Environmental, Social and Governance (ESG) criteria. Companies
are expected to have ESG as a priority (particularly given that the green recovery is playing a part
in the post Covid-19 economy) and this investor demand is likely to be the key driver of increased
environmental responsibility in financial services. EdenTree, our responsible investment business,
has continued to be a champion for sustainability engaging with companies on the opportunities arising
from ESG focused investing. This is underpinned by the intentions of our parent company, Benefact
Group, which has made commitments to be a net zero group by 2040 and support our customers
and partners to tackle their own impacts too.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Section Two
Strategic Report – Global trends in financial services
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Trend
Our perspective
Regulation
Regulatory scrutiny continues with common themes across governance, culture/accountability,
and technology/data management. The world continues to face challenges from Covid-19 with
a variety of economic and regulatory responses across the world.
Despite some regulatory divergence, regulators are imploring financial services organisations
to prioritise their financial and operational resilience to ensure that the financial system can continue
to support businesses and households. As part of the continued response to the pandemic, financial
services organisations are being urged to target credit and investment to where they are most critical
and can have the greatest impact.
Sustainability and responding to climate change is one of the key topics under consideration
by regulators. Our membership of ClimateWise, the insurance industry initiative, helps us to shape
our response to climate change, working within the regulatory frameworks across our geographies,
while supporting our customers and business partners with their own sustainability ambitions.
Other key challenges at the forefront of regulators’ minds for financial services businesses
are evolving their cultures to create positive outcomes for customers and society, and progressing
diversity and inclusion.
Data, technology
and analytics
Data continues to be seen as one of the world’s most valuable assets. The pandemic accelerated
the digitalisation of the majority of economic activities. The online economy has become more
significant, with a continued shift towards trusted brands and dominant platforms. More customer-led
propositions and tailored products are being shaped with the power of data.
Socioeconomic trends
The increased threat and potential for harm from cyber-attacks continues to increase with expectations
of further attacks fuelled by the crisis in Ukraine. The private sector and governments need to work
more closely together on cyber security. Cyber security failure continues to be seen as one of the
top global risks, with the threat of adverse technology advances over the next five to ten years. Our
businesses continue to respond to the opportunities arising from this evolving landscape to work with
current and emerging technologies through a data strategy that is overseen by senior management.
Global interconnectivity and digitalisation has increased over the past few years, accelerating the
‘fourth industrial revolution’. Against the continued backdrop of the Covid-19 pandemic, there has been
a significant shift to a more digital-enabled society underpinned by a deep shift towards remote
working, particularly in the developed economies. The pace of technological change has accelerated
and amplifies the increased expectations from customers and business partners seeking enhanced
tailored propositions.
Labour shortages have been a feature during the pandemic. This talent shortage is being seen in many
countries and business sectors, making recruitment and retention challenging and creating inflationary
pressures on people costs.
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, purpose-driven
and trusted providers, our businesses continue to attract and retain prestigious customers across
our geographies and markets. We are building a Movement for Good, with our charitable giving helping
to support our communities to support those who are vulnerable in our societies.
‘Benefact Group,
Ecclesiastical
Insurance Office’s
parent company,
aims to be a beacon
of responsible
and sustainable
business practice.’
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information About Us – Ecclesiastical at a glance
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Born to give
Charitable giving is at the very heart of our business.
It’s what defines us and what drives us forward.
For us, giving isn’t something new, it’s what we set
out to do when we first started over 135 years ago.
Back in 1887, our founders created
a different kind of business based on
a powerful vision: to contribute to the
greater good of society. We do this by
giving all our available profits to charity.
Since 2016, we’ve donated over £100m
– a target we set ourselves and which
we’re delighted to have reached.
We’re delighted too that Benefact Group
(formerly the Ecclesiastical Insurance
Group) has again been named the fourth
biggest corporate giver to charity1
in The Guide to UK Company Giving.
Far from making us feel satisfied it’s
made us hungry to give more, to be the
largest corporate donor, making the
greatest difference to more. That’s why
we’ve set ourselves a new, ambitious
giving target of £250m by 2025. And
given the energy and enthusiasm of
our people, we’re confident we’ll hit it.
Every Ecclesiastical colleague has the
opportunity to give to good causes
through personal grants and matched
donations for fundraising and payroll
giving as part of our ‘My Giving’ scheme.
And so far, we’ve donated to over 10,000
charities throughout the UK, Ireland,
Canada and Australia – charities that
are tackling the big issues, like poverty,
disability, education, health and heritage.
We also give our time, sharing our
knowledge and expertise, as well
as offering voluntary hands-on help.
In short, we don’t give up giving.
1 Directory for Social Change – The Guide to UK Company Giving 2021-2022
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section One
Section Two
Strategic Report – Our business model and strategy
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
41
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Our business model and strategy
Benefact Group, our wider group, is a diverse family
of specialist financial services businesses, driven
by our shared ambition to do right by our customers
and clients, and united by a common purpose to give
all available profits to charity and good causes.
Being owned by a charity – Benefact Trust – places
good intentions at the foundations of our businesses.
Whether in specialist insurance, investment management,
broking or advisory, every business that makes
up Benefact Group is a specialist in their respective
field. Together we provide responsible and sustainable
investment, protection of iconic buildings and world
heritage sites, and trusted advice to people
and businesses.
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.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Strategic Report – Our business model and strategy
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Section Two
Strategic Report
Strategy in action
44
Our charitable purpose drives our strategic goal of being
the most trusted and ethical business in our chosen
markets. It shapes the way we do business, particularly
our focus on doing the right thing for our customers
and business partners. It creates an environment where
sustainable, long-term value generation is prized over
short-term results.
Thanks to our long-term approach, we have built
long-standing relationships with our customers
and brokers, as demonstrated by their high levels
of trust, loyalty and engagement with our business.
These enduring relationships have helped us build
deep understanding and expertise within our sectors,
allowing us to provide highly valued products
and services.
These factors combine to support our drive to deliver
sustainable and growing returns over the long term,
creating long-term value for our charitable owner and
demonstrating that a distinctly ethical, specialist financial
services group can succeed in competitive markets.
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section Two
Strategic Report – Strategy in action
44
45
Strategy in action
Ecclesiastical Insurance Office plc is a member of Benefact Group,
a diverse family of specialist financial services businesses.
Benefact Group is driven by a shared ambition to do right by our
customers and clients, and united by a common purpose to give
all available profits to charity and good causes.
The Group is delighted to continue to make significant contributions
to good causes with a further £21m grant to its charitable owner,
Benefact Trust, in the year. This accomplishment has been made
possible through the significant efforts of all the businesses across
Benefact Group, which have focused on meeting the needs
of their customers, clients and business partners.
Our refreshed strategy demonstrates our ambitions for the future,
responding to global trends and the external market context, building
on our distinctive position in our chosen markets and our intent to have
a positive impact on all communities that are important to us.
Throughout 2021, we continued to deliver the key elements of our
ambitious strategy enabling further investment in our businesses and the
delivery of value to our customers. At a wider group level, our strategic
actions include reflecting our purpose and distinctive positioning with the
renaming to Benefact Group, and making commitments to being a net zero
group by 2040 and supporting our customers and partners to tackle their
carbon emissions. Highlights of this strategy are shown here:
Most trusted specialist insurer
We achieve
this by being
Strategy in action
Trusted – Operating with the highest ethical
standards and living our customer and
intermediary promise
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
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
• Strong business growth, attracting and retaining
prestigious customers across all our segments
in all our geographies with ongoing recognition
of our valued and trusted approach
• Continued to invest in innovation including
the launch of the Ecclesiastical Smart
Properties sensor system to provide early
warning to help prevent fire and water risks
• Launched a new visual identity in our
Ecclesiastical brand across UK, Ireland
and Canada geographies
• Continued our targeted support for broker
partners including wellbeing and mental
health guidance
• Won 17 awards in general insurance
for various categories including innovation,
service quality, products, claims, people
and corporate social responsibility
• Helped customers to manage their strategic
risks, providing an expert and specialist voice,
publishing insights such as the Education Risk
Barometer and strengthened our enterprise
risk management offering across the UK
and Australia
• Reflected the local needs of our customers
sharing operational risk management advice
including the use of electric vehicles, protecting
buildings against arson, storm and flood
readiness, safeguarding and business resilience
• Established the Ecclesiastical Specialist School
in Canada to offer specialised training modules,
webinars and workshops to customers
and brokers across underwriting, claims
and risk disciplines
• Offered a local point of contact for UK church
customers through our team of Church
Insurance Consultants (CICs) who have
an in-depth toolkit to address key insurance,
risk management and fundraising concerns
• Helped customer communities with tailored
fundraising advice including digital content,
interactive webinars and a church-focused
Fundraising in a Box toolkit
Customer satisfaction
• 98% overall satisfaction for the
Ecclesiastical UK claims service
(of which 93% are extremely or very satisfied)
with an 84% Net Promoter Score
• 98% of church customers are satisfied
with our service, with 86% extremely
or very satisfied
• 99% of customers are satisfied with the
knowledge, efficiency and friendliness of our
customer service team
• 100% of customers are satisfied with the service
provided by our team of risk surveyors
• 97% of brokers that place business with
Ecclesiastical UK are satisfied with our service
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Strategic Report – Strategy in action
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Most trusted specialist insurer
Best ethical investment provider
Awards and
accreditations
Ecclesiastical UK
Ecclesiastical Canada
We achieve this by
• #1 for Home Insurance for 13th and 14th
• Canada’s Top 100 Employer for Young
consecutive times, Fairer Finance
People for 9th consecutive year
• Top for Trust, Happiness, Transparency
and Complaint Handling, Fairer Finance
• Greater Toronto Top Employer
for 3rd consecutive year
• Digital Insurance Innovation of the Year,
• Five Star Carrier Award for 2nd consecutive
British Insurance Awards
year, Insurance Business Canada
• Insurance Claims Team of the Year,
• Excellence in Corporate Social
Insurance Post Claims and Fraud Awards
Responsibility, Insurance Business Canada
• Service Quality Marque for mid-market
• Caring Company, Imagine Canada
claims, Gracechurch
Strategy in action
• Best Overall Completion of the Advanced
Diploma, Cheltenham and Gloucester
Chartered Institute of Insurance
• Best Paper in Advanced Claims,
Cheltenham and Gloucester Chartered
Institute of Insurance
• Customer Service Champion Award
(Kay Short), Plymouth and Cornwall
Chartered Institute of Insurance
• Fellow Chartered Insurance Professional
(FCIP) Top Graduate Award, Insurance
Institute of Canada
• Norman Bortnick Memorial Gold Medal
Award for FCIP top marks in British
Columbia, Insurance Institute of Canada
Ecclesiastical Ireland
• Specialist Lines Best Product Producer,
Brokers Ireland Excellence Awards
Ansvar UK
• Corporate Community Local Involvement
Award with The Hygiene Bank, The Charity
Times Awards
Listening to our clients – we have implemented
a client feedback programme to create greater
proximity to our clients and their evolving needs
Enhancing our infrastructure – we are building
a platform for growth and increased efficiency
Promoting socially responsible investment
– we have an industry-leading reputation
for our socially responsible investment funds
and investment thought leadership
Delivering long-term performance
– we use a consistent, proven approach
to deliver long-term investment success
Developing our products – we are developing
and deepening our fund offering with particular
focus on meeting the demands of our investors
and providing innovative solutions
• Recognised for responsible and sustainable
• Continued to engage across the responsible
investment with a strong long-term
performance record while seeking to have
a positive impact on society
• Acknowledged as a pioneer and thought
leader in our markets with a strengthened
team with even more expertise
• Launched three new multi-asset funds
with different risk objectives and investment
goals to complement our responsible
and sustainable portfolio of funds
• Sixth year of carbon footprinting of
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)
• Reinforced our thought leadership position
with acclaimed responsible investment
research and briefings on topics such as
Climate change and net zero, Oppressive
regimes, Antimicrobial resistance, and
Conflict minerals
EdenTree’s funds portfolio, with an overall
reduction in the amount of CO2 in the
investments portfolio since our footprinting
began. Funds are aligned to the targeted
outcomes from the Paris Agreement (COP26)
• Established partnership with British
swimmer Alice Dearing, the first Black
woman to represent Team GB in open
water swimming who embodies EdenTree’s
approach to Performance with Principles
Awards and
accreditations
• Best Ethical Investment Provider for 13th
• Sustained A+ rating for Strategy and
consecutive year, Investment Life & Pensions
Moneyfacts Awards
Governance in the PRI Transparency Report
• Boutique Investment Management Award,
the European SRI Transparency Code
• Gained ninth accreditation under
The Charity Times Awards
• Retained Tier I Status under
the Stewardship Code
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Strategic Report – Strategy in action
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Section Two
Strategic Report
Key Performance Indicators
Financial
Non-Financial
50
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Most trusted specialist adviser
We achieve this by
Strategy in action
Providing excellent service – building
long-term sustainable relationships
with our clients and insurer partners
Strengthening our proposition – deepening
our expertise further in our chosen markets,
cementing our position as market leaders
in these areas
Building our business – delivering growth
by developing new offerings and schemes
which complement our existing niche markets
Working more closely together – developing
closer operational links across the Group to offer
solutions that meet our customers’ needs
• Continued to grow the Broking and Advisory
division, sharing expertise and capabilities,
working together to develop even stronger
relationships with suppliers and carriers
• Continued to offer supportive and responsive
service that meets customer needs including
insurance broking, risk management and claims
solutions, and financial advice
• Leveraged deep understanding of client and
customer needs and monitored trends to evolve
product offerings and innovative solutions, for
example reflecting medical advances in veterinary
diagnostics and new schemes such as a forestry
and estates scheme that included carbon credits
in sums insured
• Offered knowledge and insights on specialist
areas such as an interactive guide for professional
drivers, equine topics including field safety
and preventing heat stress, risk advice for
funeral directors, fortifying against flooding,
underinsurance in farming, and the impact
of climate uncertainty on crop yield
• Ecclesiastical Planning Services1 (EPSL) launched
a new distribution channel, enabling our funeral
director customers to buy plans online
• Ecclesiastical Financial Advisory Services (EFAS)
continued to meet the key financial concerns
of clergy and church-related people, offering
online and face-to-face financial support
seminars in a number of dioceses
as the pandemic restrictions eased
• Supported our specialist communities including:
– Rewarding excellence in horse care for the third
consecutive year with the SEIB Yard Awards
and for racehorse training with the Lycetts
Leadership & Team Champion Awards
– Recognising long-standing relationship with
first ever joint SEIB and National Association
of Funeral Directors Lifetime Achievement
Award and launched a thank you campaign
to appreciate the efforts of funeral directors
on the frontline of the Covid-19 pandemic
• Expanded our specialist broking footprint with
the acquisition of six specialist businesses through
our investment in Lloyd & Whyte2
• Celebrated 60 years of broking with our
Lycetts1 business
Customer satisfaction
Strong customer satisfaction scores and excellent
Net Promoter Scores across the division:
• 96% EPSL1 funeral director customers are
• 96% EFAS customers are extremely or very
satisfied, with 100% satisfied. EFAS achieved
a Net Promoter Score of 89
extremely or very satisfied, with 100% satisfied
for the second year running. EPSL achieved
a Net Promoter Score of 96
• 92% Lycetts1 customers are extremely or very
satisfied with 98% satisfied. Lycetts achieved
a Net Promoter Score of 76
Awards and
accreditations
• EPSL1: Funeral Plan Experts of the Year
– South West, Southern Enterprise Awards
• Lloyd & Whyte2: Growth Company of the Year,
National Insurance Awards
• Lloyd & Whyte2: Commercial Lines Broker
of the Year (for Business Choice Direct),
National Insurance Awards
1 part of Benefact Group
2 part-owned by Benefact Group
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section Two
Strategic Report – Key Performance Indicators
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Key Performance Indicators
Financial
Measure
Performance
Measure
Performance
Donations
The amount donated
by Ecclesiastical to charities,
including our charitable
owner, each year. This is
the main measure of our
ambition, which was
to exceed £100m
in charitable giving
by September 2021.
Strong investment returns and a robust
underwriting performance1 enabled
us to increase our charitable giving
to £23.5m. This includes grants of £21.0m
to our charitable owner, Benefact Trust,
and a further £2.5m to good causes.
We achieved our £100m target, set in 2016,
and have set a new target of reaching
£250m1 by the end of 2025.
Regulatory capital2
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 Benefact Group plc,
the following refers
to the regulatory capital
of Ecclesiastical Insurance
Office 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.
Ecclesiastical’s capital cover under
Solvency II has improved.
During 2021, own funds have increased
with the favourable performance
of financial investment assets, pension
surplus and the issuance of €30m
subordinated debt in February 2021.
The €30m subordinated debt is classed
as tier 2 capital. Our Solvency II regulatory
capital position remains above regulatory
requirements and risk appetite.
The solvency coverage has decreased
due to an increase in the Loss Absorbing
Capacity of Deferred Taxes.
The figures for 2021 are based on the
information provided to the Board as part
of its ongoing management of the business
and are unaudited.
We continue to balance the need to retain
profit within the business, to support our
strategy for future growth and investment
in technology and innovation, with our
aspiration to meet charitable giving targets.
£m
40 -
30 -
27.5
32.5
18.8
23.5
20 -
10 -
0 -
£m
700 -
600 -
500 -
400 -
300 -
200 -
100 -
0 -
2.7
2017 2018 2019 2020
2021
Solvency II capital cover
(unaudited)
269
292
295
257
306 256
264 263
381
236
%
- 300%
- 250%
- 200%
- 150%
- 100%
- 50%
- 0 %
2017
(i)
2018
(ii)
2019
(ii)
2020
(ii)
2021
SCR (£m)
Excess own funds (£m)
Capital cover (%)
(i) the 2017 figures are audited and reflect figures
from the Company’s published Solvency and
Financial Condition Report which is available
via the Company’s website
(ii) the 2018, 2019 and 2020 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.
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 2021 can be found in the
Group Remuneration Report.
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 2021
can be found in the Group
Remuneration Report.
Our target over the longer
term is to achieve a 95% COR.
The Group reported a profit before tax
in 2021 of £77.0m (2020: loss before tax £15.7m)
driven by strong investment returns and a solid
insurance result.
Increased profits from our Broking and
Advisory business contributed to the Group
result, while our Investment Management
business reported a loss as it continued
to invest in growing the business.
More information on underwriting performance1
is given below.
See the Financial Performance Report within
the Strategic Report for more details.
Our COR increased in 2021. This reflects liability
reserve strengthening in Australia, adverse
weather events in the UK and more modest prior
year claim releases compared with previous
financial years.
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 37 to the financial statements.
See the Financial Performance Report within
the Strategic Report for more details.
£m
80 -
60 -
40 -
20 -
0 -
(20) -
%
105 -
100 -
95 -
90 -
85 -
80 -
82.2
73.3
77.0
15.4
(15.7)
2017 2018 2019 2020
2021
Profit/(loss) before tax
Underwriting profit1
96.8
95.1
91.1
86.9
86.4
2017 2018 2019 2020
2021
Longer-term target
1 Cumulative giving since 2014.
2 Alternative performance measure, refer to note 37 to the financial statements for further explanation.
1 Alternative performance measure, refer to note 37 to the financial statements for further explanation.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Strategic Report – Key Performance Indicators
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Section Two
Strategic Report
Financial Performance Report
54
Measure
Performance
Our NER increased in 2021 to 53.5% reflecting
a 10.2% increase in net earned premium and
12.6% increase in net expenses.
Expenses include our continuing programme
of strategic investment in technology to support
business growth and customers’ needs.
For a breakdown of how NER is calculated,
see note 37 to the financial statements.
Investment markets were more optimistic
in 2021 as the world learned to live with
Covid-19. Economies reopened and stimulus
packages bolstered growth.
The Group’s investment management
business, EdenTree, increased its distribution
capacity and widened its product range.
Against this backdrop, record net new inflows
of £415m were reported, with the previous
high being £204m in 2019.
Net expense ratio1
(NER)
Total expenses as
a proportion of the net
premium earned in the
year. These expenses
include acquisition costs,
administration costs,
the movement in deferred
acquisition costs and
commission paid less
commission received.
Our aim is to make year-on-
year improvements in the
NER. However, in the short
term, we expect the 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 37 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 and our Responsible Business Report.
(%)
100 -
80 -
60 -
53.6
54.5 53.0 52.4
53.5
40 -
20 -
0 -
£m
450 -
400 -
350 -
300 -
250 -
200 -
150 -
100 -
50 -
0 -
2017 2018 2019 2020
2021
415
204
173
173
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2017 2018 2019 2020
2021
(i)
(i) 2020 figures have been updated to exclude certain
net flows managed at Benefact Group level
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section Two
Financial Performance Report
Profit before tax of £77.0m1 (2020: loss before
tax £15.7m) has been driven in particular
by strong investment returns, as markets
rebounded strongly from 2020.
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The Group’s general insurance businesses
reported profit before tax of £8.8m
(2020: £12.1m) representing another robust
performance. This result includes areas
where we have strengthened reserves and
the impacts of some adverse weather events.
Our underwriting result is also reflective
of our continued strategic investment across
our insurance technology platforms to ensure
that our businesses are well positioned
to deliver sustainable and profitable growth.
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 the 11% growth in gross
written premiums (GWP).
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 year. Our Solvency II
regulatory capital position remains above
regulatory requirements and risk appetite
and was 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
performed in line with expectations in most
territories, resulting in a Group Combined
Operating Ratio2 (COR) of 96.8% (2020: 95.1%).
We have delivered steady underwriting profits
despite liability reserves strengthening
in Australia and adverse weather events in the
UK. Our strategy to focus on profitable growth
opportunities has continued to deliver, with
new business of £42.2m contributing to our
overall GWP growth of 11% to £486m (2020:
£437m) which also reflects targeted rate
increases as well as strong retention.
Our programme of investment has continued,
particularly across our technology platforms.
The customisation and development of the
software that underpins these platforms made
up 2.8 points of our Group COR for the year.
Our investment in these platforms are
an important part in supporting the growth
of our business and our customers’ needs
for the long term.
United Kingdom and Ireland
In the UK and Ireland, underwriting profits
increased to £25.0m (2020: £12.3m) giving
a COR of 85.3% (2020: 92.5%). GWP grew
by 7.5% to £297.2m (2020: £276.6m).
The current year underwriting performance
was strong with prior year claim releases
contributing to a more modest proportion
of the result compared with previous financial
years. Despite a series of weather events and
large claims, current year loss ratios were
slightly ahead of expectations as a result
of rate changes and portfolio management.
Both property and casualty accounts
generated underwriting profits.
Heritage, Education and Real Estate were
particularly strong growth areas in 2021
despite the competitive trading conditions.
We expect trading conditions to remain
competitive but the outlook is becoming
increasingly unpredictable. Inflationary
pressures in the economy, Covid-19
uncertainty, and the potential for more
frequent and intense weather events due
to climate change all contribute to this
uncertainty. However, our Net Promoter
Scores across brokers and customers are
robust, have improved and provide resilience,
enabling us to carry positive rate change
where needed and contribute to the high
levels of retention experienced. Market
hardening in certain areas of our property
and casualty portfolios enabled us to write
1 Further details can be found in note 5 to the financial statements.
2 Alternative performance measure, refer to note 37 to the financial statements for further information.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoStrategic Report – Chair’s StatementSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Strategic Report – Financial Performance Report
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new business at profitable levels.
GWP in respect of our Faith business
remained in line with prior year reflecting
a good result in challenging conditions.
Our strategy over the medium term
is to deliver 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,
specialism, and excellent service that
our customers value.
Ansvar Australia
Our Australian business reported an
underwriting loss of AUD$24.4m resulting
in a COR of 156.9% (2020: AUD$1.2m loss,
COR of 102.2%). GWP grew by 14.2% in local
currency to AUD$171.2m (2020: AUD$149.9m)
with strong new business growth, retention
and rate increases. The performance of the
business written in the current year has
been good and continues to improve in light
of positive underwriting actions. However,
the overall underwriting result includes the
adverse impact of reserves strengthening in
the liability account for historic physical and
sexual abuse (PSA) claims. The underwriting
loss also reflects our significant investment
in a new underwriting system which will
benefit the business over the longer term.
The Group made a further underwriting loss
of £10.0m (2020: £4.7m) within its internal
reinsurance portfolio as a result of reserves
strengthening in respect of historic PSA
claims in Ansvar Australia.
Canada
Our Canadian business continued its track
record of delivering premium growth,
reporting GWP of CAD$158.0m (2020:
CAD$131.5m), a 20.1% increase, which
was supported by strong retention and
rate increases as well as new business.
Canada reported an underwriting profit
of CAD$12.2m resulting in a COR of 88.6%
(2020: CAD$7.8m profit, COR of 91.2%).
Despite an increase in the number of large
losses, the property book performed well
due to benign weather, lighter than expected
attritional losses, and favourable development
on prior year net losses. The performance
of the liability book was impacted by some
adverse development on prior year claims and
the strengthening of the reserves provision.
Investments
2021 saw optimism return as Covid-19
vaccines allowed economies to reopen,
with unprecedented stimulus packages from
governments and central banks bolstering
growth, but also stoking inflation. The Group’s
net investment return of £101.1m (2020: loss
of £4.3m) can be largely attributed to the
continued recovery in equities, both within
our directly-held portfolio, and via holdings
in EdenTree’s Responsible and Sustainable
OEIC funds, whilst our investment property
portfolio also experienced strong gains.
Investment income of £30.9m reflects a more
optimistic market as the world learns to live
with Covid-19 (2020: £30.2m). A recovery
from the initial impact of the pandemic was
also reflected in fair value gains on financial
instruments of £38.1m, reversing the impact
of fair value losses of £13.6m seen in 2020.
The past two years highlight the impact
economic and political uncertainty can have
on the performance of our investments,
with the recent conflict in Ukraine leading
to an increased level of market volatility.
Notwithstanding this, we remain confident
in our long-term investment philosophy,
and are well-diversified and relatively
defensively positioned.
Within our UK equity portfolio, small-cap
exposure proved beneficial as the FTSE
Small-Cap outperformed the FTSE All-Share
by a significant margin over the course
of the year.
Our directly-held sterling bond portfolio
outperformed the FTSE Gilts benchmark
by 5.3% in 2021, as the longer duration index
was impacted by rising yields to a greater
extent than our shorter-dated bond portfolio.
Our investment properties delivered fair value
gains of £20.2m (2020: losses of £5.0m)
driven by increased market demand for
commercial property where the portfolio
is well-represented.
The upward movement in bond yields led
to an increase in the discount rate applied
to long-tail insurance liabilities. The change
in discount rate on those liabilities resulted
in a profit of £11.9m recognised within net
investment return (2020: £15.9m loss).
Investment Management
The Group’s investment management
business, EdenTree, was pleased to report
record net inflows of £415m, excluding Group
flows. The previous high was £204m in 2019
(2020: £44m). EdenTree incurred a loss
before tax for the year of £2.5m (2020: loss
before tax £1.0m) as it invested in growing
the business through its distribution capacity
and with a widening of its product range.
Assets under management (AUM) increased
by 25% in the year. Half of this asset growth
was attributable to new money into the
business, and half to markets as funds
performed well across the fund range.
AUM were £3.7bn (2020: £3.1bn) and £2.8bn
(2020: £2.3bn) excluding assets managed
for the Group.
Net income at £14.9m was up by 20% year
on year (2020: £12.4m). This is due to both
client inflows in the year and increasing
market value of assets, however maintaining
margins on fees earned continues to be
challenging, a trend which is seen across
the industry.
Long-term business
Our life business, Ecclesiastical Life Limited,
reopened to business during the year,
launching a new product providing guaranteed
returns for funeral planning products sold
by Ecclesiastical Planning Services, a business
within the wider Benefact group. The legacy
book within our life insurance business
remains closed to new business. Profit before
tax grew to £1.1m for the year (2020: £0.5m).
Assets and liabilities in relation to the life
insurance business remain well matched.
Broking and Advisory
Overall, Broking and Advisory performance
has been strong, reporting a profit before
tax of £3.0m (2020: £2.4m). 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 £3.2m (2020: £2.8m), whilst EFAS
reported a small loss of £0.2m in the year
(2020: £0.3m loss).
In addition to these Broking and Advisory
businesses our immediate parent company,
Benefact Group plc 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 Group, they are
managed together as part of the Group’s wider
Broking and Advisory group of businesses.
The broker businesses were profitable in 2021
but the prepaid funeral plan business made
a small loss in the year.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Strategic Report – Financial Performance Report
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Outlook
Although the easing of most pandemic-related
restrictions means we entered 2022 in a very
different place to the start of last year, we are
still living with Covid-19, and some remaining
level of uncertainty from the pandemic will
likely persist. The recent devastating events
in Ukraine, and the consequences
of previously unthinkable international
economic sanctions, has led to heightened
market volatility, an increased risk of inflation
and risks to the supply chain. We will continue
to manage these risks and remain alert to
changes in them across all of our businesses.
Despite the increased level of uncertainty,
we remain optimistic about the future and are
fully committed to our ethical and long-term
investment strategy. The Group continues
to take a long-term view of risk, remains well
capitalised and is capable of withstanding
potential future volatility.
As part of Benefact Group, we have many
exciting opportunities ahead. We’ll continue
to grow, innovate and build a sustainable
business that can continue to generate
profitable growth and help achieve our
ambition of giving £250m to charity and
good causes by the end of 2025.
Denise Cockrem
Group Chief Financial Officer
‘As part of
Benefact Group, we
have many exciting
opportunities ahead.
We’ll continue to
grow, innovate and
build a sustainable
business.’
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Benefact. One family. One vision.
We’re proud to be part of Benefact Group,
a global family of specialist financial services
businesses. Like us, each business in the Group
is a trusted expert in its market and has a strong
charitable purpose. And it’s this powerful desire to
help others that binds us together.
These fundraising activities
complement our online church and
charity fundraising hubs, which we
launched in 2020. Featuring a range
of resources, developed in conjunction
with fundraising specialists, they offer
easy-to-use support, tools and guidance,
including advice on researching and
applying to possible donors and grant
funders. Practical help that goes
hand-in-hand with our financial support.
Our desire to help others – to support
the causes you care about – is why
we give all available profits to charities
and good causes. It’s also why we’re
so ambitious to keep on growing –
because quite simply, the more we grow,
the more we can give back. Besides our
charitable donations, one of the other
key ways in which we support charities
is through fundraising.
In 2021, we continued to build on our
fundraising support. We ran a series
of successful webinars, following which
95% of charity attendees said they would
recommend the sessions. And with church,
as well as charity, incomes being hit hard
by the pandemic, we also produced
a tailored toolkit ‘Fundraising in a Box’,
which was sent to all Anglican church
customers in January.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout Us – Ecclesiastical at a glance
Strategic Report – Risk Management Report
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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 that enable us to achieve our strategy and objectives,
whilst ensuring 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
d three lines of defence
ntrol framework an
Internal co
Risk
management
process
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Business performance
and capital
management
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.
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,
which includes 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,
Statement of Responsibilities 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
of a strong Three Lines of Defence Model
whereby:
• 1st Line (Business Management)
is responsible for strategy execution,
performance and identification and
management of risks and application
of appropriate controls;
• 2nd Line (Reporting, Oversight and Guidance)
is responsible for assisting the Board
in formulating risk appetite, establishing
minimum standards, developing appropriate
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.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Section Two
Strategic Report – Risk Management Report
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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 GRC.
The impacts of the conflict in Ukraine are
being closely monitored as the range of
measures being taken in response by the
UK government and other countries grow.
We remain alert to the changing external
environment and the impact it could have
on our business and risk profile.
The Covid-19 pandemic continues to have
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 continuing 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) continued
to operate for the first part of 2021, using
the Group’s Business Continuity Plans,
and to oversee the ongoing management
of operational elements. The primary focus
of the CMT was oversight of the continued
effectiveness of remote working,
with particular emphasis on people
and technology.
Responses to other specific risk-types were
delegated to existing bodies within the risk
framework, with focused management groups
set up where considered appropriate.
Investment markets recovered well during
2021, as economies recovered from the
effects of the global pandemic leading
to growth in the value of our investment
assets throughout the year. We maintained
our existing investment approach and made
no material changes to our asset mix, holding
a diversified portfolio of assets including
equities and property held for prospects
of long-term returns. Consequently,
we continue to choose to take a relatively
high level of market risk, which is well
understood and closely monitored and
managed. We have seen market volatility
in 2022 that has persisted with the unfolding
conflict in Ukraine and this continues
to be monitored.
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 2021 was no exception.
Our strategy remains to achieve controlled
and profitable growth within our defined
specialist markets. During 2021 we obtained
improvements in rate strength across all
territories in which we operate and we have
maintained our strong underwriting discipline
and risk appetite.
is therefore highly important at this time,
and the Group operates an ongoing
programme of training and awareness
exercises for its staff.
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 that additionally affects the insurance
risks that we cover.
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. New claims volumes emerging
during 2021 in Australia and Canada had
led to increases in levels of reserves held.
We continue to monitor the experience and
claims environment in all of the territories
in which we operate.
The Covid-19 pandemic was the trigger
for a high volume of regulatory guidance
issued in all territories during the prior
year. Consequently, some other elements
of regulatory change have been delayed,
though we expect the pace of change
to increase again as we move forward
into 2022. 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
and with the unfolding conflict in Ukraine.
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, together with
regulations such as GDPR, results in increased
scrutiny and prominence. External attackers
view the disruption arising from a more
hybrid working environment as an exploitable
opportunity, and there continues to be a
general increase in social engineering and
phishing attacks across the financial sector.
Employee awareness and vigilance
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 66
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Committed to tackling climate change
As a company dedicated to making a positive
impact on society – and therefore our environment
– we’re committed to making big changes to protect
our planet.
We support our customers and
communities to reduce their carbon
emissions through our innovation
and advice, and we support climate
change reduction through our giving.
So, when we talk about being committed
to tackling climate change we’re talking
about effecting real change through
carefully-thought-out strategies backed
up by a 135 year commitment to the
world around us.
By 2030, instead of just aiming for net
zero emissions, we’ve set ourselves
a target to wipe out our historic carbon
impact. And we’re working with
independent bodies to help us achieve
this across all our businesses.
Through our investment management
business, EdenTree – a pioneer in
Environmental, Social and Governance,
and a signatory to the Montréal Carbon
Pledge in June 2016 – our responsible
and sustainable investment strategy
is a bold step forward. It not only avoids
investment in businesses that cause
social harm but actively seeks to invest
in markets that have positive impacts.
We’ve already disposed of the most
carbon-intensive holdings by excluding
fossil fuels, mining and high emitting
polluters such as automotive, aviation,
and heavy industry – directing capital
to sustainable solutions.
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout Us – Ecclesiastical at a glance
Strategic Report – Principal risks
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Principal risks
There is an ongoing risk assessment process which has identified the current principal risks for the Group as follows:
Insurance risk
The risk that arises from the fluctuation in the timing, frequency and severity of insured events
relative to the expectations of the firm at the time of underwriting.
Risk detail
Key mitigants
Change from last year
Risk detail
Key mitigants
Change from last year
Underwriting risk1
The risk of failure
to price insurance products
adequately and failure
to establish appropriate
underwriting disciplines.
The premium charged must
be appropriate for the nature
of the cover provided and the
risk presented to the Group.
Disciplined underwriting
is vital to ensure that
only business within 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.
There have been no material
changes to this risk during
the year and minimal impacts
as a result of the conflict in
Ukraine.
• 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
This risk is not considered
to have changed materially
during the year. A rise
in numbers of Physical and
Sexual Abuse claims in the
Australian and Canadian
businesses 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.
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 have experienced
challenges in recent
years due to the impact
of Covid-19 claims and global
catastrophe events.
This has 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
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoSection OneAbout UsSection TwoStrategic ReportSection FourFinancial StatementsSection FiveOther Information
Strategic Report – Principal risks
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71
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
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.
• 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
Overall the market risk
profile has not materially
changed and we remain
invested for the long term.
We continue to monitor
market conditions and the
socio-political environment.
We have seen increased
stock market volatility in
2022 in response to the
conflict in Ukraine and
continue to monitor this.
However, the impact has
been minimal to date given
the assets we hold and our
investment strategy.
The Group’s balance sheet is
also exposed to market risk
within the defined benefit
pension fund.
The Pension Scheme Trustee Board has an Investment
Committee that oversees the market risks in the pension fund.
The Company, as employer sponsor of the fund maintains
regular communication with this Committee.
Further information on this risk is given in note 4 to the financial
statements.
• 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
Further information on this risk is given in note 4 to the financial
statements.
The level of this risk has
remained broadly similar
to the previous year.
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.
1 Link to viability statement – risk included in stress and scenario analysis
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 several
There have been no material
changes to this risk since
last year.
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
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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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
This level of risk remains
stable, as the Group
continues to invest in IT
infrastructure to maintain
and improve future stability.
• 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
• 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
Cyber risk remains a constantly
evolving threat, with malicious
threat attackers continuing
to seek to exploit Covid-19
related business disruption
including a more hybrid
approach to working.
Employee awareness and
vigilance is therefore highly
important at this time, especially
with the unfolding conflict
in Ukraine, which is continuing
to be proactively managed.
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, relating to both IT
systems and to meet the ever
changing regulatory landscape.
Appropriate strengthening of
expertise has continued in the
year to reflect and meet 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, for example
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.
• 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
continues to have been
successfully tested during
the year, with the continued
need to meet the needs of
our customers, alongside
working in a new hybrid
environment. Focus in 2021,
and into 2022, remains
on meeting the enhanced
Regulatory requirements
around Resilience.
• 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 continue
to be made to the governance,
management, use and control
of data, in order to meet the
evolving requirements.
It continues to be monitored
and managed within the context
of major change programmes.
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Strategic Report – Principal risks
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75
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
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 are
taken 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. We also remain
vigilant with our financial crime/
sanction controls in response
to the unfolding conflict in Ukraine.
• 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 have increased
due to the on-going Covid-19
pandemic. However, we
remain committed to placing
customers at the centre of
our practices and decision
making, demonstrated by
our wide-ranging industry
awards and customer
satisfaction scores. Overall
the level of this risk is
unchanged from last year.
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.
• 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
Change from last year
Maintaining a positive
reputation is critical
to the Group’s vision
of being the most trusted
and ethical specialist
financial services group.
Risks to our brand and
reputation are inherently
high in an increasingly
interconnected environment,
with the risks of external
threats such as cyber
security attacks, and viral
campaigns through social
media always present.
The external environment
continues to drive a high
inherent probability of
reputational issues across
all financial services
companies. We continue
to focus on serving our
customers and ensuring
fair treatment and clear
communication, and are
proud of the volume
of Industry Awards
we continue to win.
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Section Two
Strategic Report
Responsible Business Report highlights
Overview
Socially-positive
Environmentally-positive
80
82
83
85
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 2024 and is underpinned
by management’s 2022-24 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; and
- The political, economic and regulatory
environment, including uncertainties
on the geopolitical outlook, which have been
heightened following the recent conflict
in Ukraine, market volatility, inflation, the
Covid-19 pandemic and the impact on supply
chain of 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, with the
principal risks documented on pages 68
to 75. 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.
Risks arising from the Ukraine conflict,
in particular investment market volatility and
supply chain/inflationary pressures, have
been considered. Scenario testing showed that,
at this stage, there is no perceived material
risk to the Group’s viability resulting from
the conflict.
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
and subordinated debt borrowing and the
expectations of its ultimate charitable owner,
Benefact Trust Limited. The Group has fixed
annual dividend payments of £9.2m in respect
of its non-cumulative irredeemable preference
shares and quarterly interest payments
in respect of its 6.3144% €30m subordinated
debt. The Group makes regular grants to its
ultimate charitable owner, Benefact Trust
Limited. There is a regular cycle of discussion
with Benefact 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 Insurance Office plc Annual Report & Accounts 2021Section Two
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Trusted for our
specialist protection
For more than 135 years, we’ve been trusted
to protect some of the country’s most iconic buildings
and places. We’ve worked hard to earn that trust and
work even harder to keep it. That means constantly
honing our specialist knowledge and coming up with
innovative new ways to protect our customers’ assets.
Two of the most serious and common
risks to properties are fire and escape
of water. In 2020, 25% of all the property
claims we handled were for water
damage. And according to Home Office
figures for 2019/20, nearly 11,900
property fires were caused by electrical
systems or specific appliance failures.
Soon after launching the new solution
at Kenwood House in London a flood
was averted. Sensors identified water
ingress in the staff room, an instant alert
meant that the leak could be located
and rectified before it could cause
damage to the building or the priceless
artworks in the room below.
To help combat this, we’ve joined forces
with property performance specialists
Shepherd to create an innovative,
technology-based solution called
Ecclesiastical Smart Properties.
This software-based, wireless sensor
system works by detecting abnormal
changes in the property – sudden spikes
in temperature or moisture levels
– and sends a real-time alert via email,
SMS or phone, so early preventative
action can be taken.
One of the first insurers to offer this new
way of managing risk, Ecclesiastical
Smart Properties was awarded Digital
Insurance Innovation of the Year 2021
at the British Insurance Awards.
We were also delighted to have picked
up many other awards last year
including Commercial Lines Broker
of the Year at the National Insurance
Awards and Best Ethical Investment
Provider at the 2021 Investment Life
& Pensions Moneyfacts Awards.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout Us – Ecclesiastical at a glance
Strategic Report – Responsible Business Report
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Responsible Business Report
highlights
Socially-positive
74%
suppliers paid
within 30 days
£2.5m
to charity direct;
£23.5m from the
Group overall
Award-winning
across the Group including
Best Ethical Investment
Provider for thirteen
consecutive years
Signatory to the
ABI’s Making
Flexible Work
Charter
Top 4
Corporate Giver –
according to the DSC’s
2021/22 Guide to UK
Company Giving
2 Star Company
demonstrating outstanding
levels of employee
engagement – judged
by Best Companies
100%
sign-up to employee
Code of Conduct
>150
virtual development
sessions organised
to keep connected
despite Covid-19
Environmentally-positive
£250,000
Nearly £250,000 of
charitable funding for
climate-related projects
‘Very good’ BREEAM
sustainability standard
achieved for new build
head office
1.5˚ potential
temperature
– Group business
fund alignment with
the Sustainable
Development
Scenario compared
to 3.6 degree
benchmark
> 1,600
desktop surveys
completed in the
UK which reduced
environmental impact
ClimateWise
member
of voluntary
industry
initiative
Net
Zero
0.23 tonnes
carbon footprint;
or 0.23 tonnes
– carbon intensity
per employee
commitment by
2023 for direct
impact, 2040
for the Group
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Overview
Socially-positive
Our charitable ownership and commitment
to our customers and communities means
we have a unique opportunity to create a
positive social and environmental impact
in the world.
This means using our unique business
model to give to charities and communities
everywhere, reaching out to help our
customers tackle their climate challenges
and being a beacon of best practice
for responsible business.
An expectation to uphold responsible
business standards is 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 and the ABI’s
Making Flexible Work Charter. 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.
In particular, in 2021, we continued
to support our colleagues, customers
and communities through difficult times
and developed our climate strategy.
Read on to find out more.
Charitable giving
Social impact is central to the purpose
of the Group. Its unique business model enables
it to give millions of pounds to hundreds
of charities every year. 2021 was another year
of sustained giving affirmed by a fourth-place
ranking in the Directory of Social Change’s
Guide to UK Company Giving.
The Group distributed £2.5m in its own right,
primarily through its Movement for Good awards
which give £1m to charities in a combination
of small donations to a huge diversity
of causes and more targeted large grants.
In 2021 the campaign was developed to directly
involve employees from all over the Group
in ‘giving panels’ to find the charities closest
to communities the Group supports.
Around the Group business giving programmes
continued to make a significant impact. In Canada
the now well-established Community Impact
Grants gave CAN$250,000 to 12 charitable
organisations across Canada and in December
it released a further CAN$250,000 to support
89 charities continuing to help their communities
during the pandemic. In Australia the Community
Education Programme continues to equip
Australians under the age of 25 with the tools
to achieve a higher quality of life. Ansvar UK
launched funds to promote healthy lifestyles
to children and young adults. EdenTree’s
community fund supports small, innovative
organisations that are having a remarkable
impact working with marginalised people.
Our Irish business provides a wide range
of support to Jigsaw, the national centre
for youth mental health.
Employee engagement
and wellbeing
Support for employees was paramount
throughout 2021 as we all battled the ongoing
challenging circumstances. The Group continued
to take a supportive and pragmatic approach,
using flexibility and technology to enable our
people to work at their best, ensuring
we continued to deliver for customers
and partners.
We improved our wellbeing offer even further
with the launch of an app which 25%
of employees signed-up to and we made the
process for counselling referral much easier.
Despite the challenging working restrictions
we grasped the opportunity to launch Group-
wide future flexible working principles and
became a signatory to the ABI’s Making Flexible
Work Charter. As we were able to move back
to an effective balance of office working
we invested in fantastic office spaces to support
flexible working in the short and long term.
2021 marked the opening of the Group’s new
head office in Gloucester. The building is built
to high sustainability standard BREEAM and
designed with flexibility and wellbeing in mind
with FitWel.
It was particularly heartening to receive external
recognition of the Group’s levels of engagement
– in the first year of participation in the Best
Companies assessment the Group was awarded
a 2 star accreditation demonstrating ‘outstanding’
levels of employee engagement, with many
teams being recognised at the highest 3 star
level, or ‘world class.’ Employees feel particularly
positive, and the results score above benchmark,
on some key topics including running the
organisation on strong values and principles
and making a positive difference in the world.
In a year that brought personal challenges for all
of us, and in which we developed our approach
to flexible working, we also exceeded benchmark
on feeling supported by our managers and
finding a positive working balance.
The Group continued to keep focused on its
approach to diversity and inclusion. During the
year a campaign to improve the quality and
quantity of data was launched, policies and tone
of voice were reviewed resulting in the launch
of a new campaign ‘we all belong’. The Group
continued to be a founding and supportive
signatory to the Women in Finance Charter
and published gender pay reporting.
Despite the ongoing pandemic we continued
to invest in our people, ensuring their ongoing
personal growth and professional development.
We ensured employees completed regulatory
training across the Group, renewed our
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UK General Insurance Corporate Chartered
Status with the CII and supported leaders
through an in-house programme
and sponsorship of several senior leaders
through Windsor Leadership Programmes
and with Cranfield University.
We also ran over 150 virtual learning sessions
to colleagues across our UK and Ireland
businesses, provided tools for managers
to develop and supported a large number
of colleagues with professional qualification
programmes, using our apprenticeship levy
scheme where appropriate.
We developed and agreed Group-wide
values and a refreshed culture model which
was launched internally alongside our new
Group Brand.
Customers and partners
The Group showed the same level of care
and commitment to supporting customers
and partners. We launched mental health
and wellbeing training for our UK brokers and
continued to develop fundraising tools to help
charities sustain their activities. Our dedicated
fundraising site was visited by over 12,000 users
and over 750 charities attended a webinar jointly
organised with the Directory of Social Change
to network, ask questions and hear the latest
from a range of fundraising experts.
Key employee statistics
Gender by level
Group Management Board
Senior Leader
Manager
Team Member
Grand Total
Gender pay gap
Male
5
67
255
452
779
2021
Fixed pay gap mean/median
Bonus pay gap mean/median
27.7%/20.4%
51.2%/32.9%
We believe we’re doing the right things, but
it’s particularly encouraging when the Group
receives external awards and recognition.
The list of awards for 2021 includes Top
Employer for Young People for the 9th time
(Canada); top ranking for the 13th time for trust,
happiness, transparency and complaint handling
in the Fairer Finance ratings (UK direct insurance);
digital innovation at the British Insurance Awards
(UK general insurance); growth company of the
year at the National Insurance Awards (broking);
best specialist lines producer (Ireland); and Best
Ethical Investment Provider for 13 consecutive
years (investment).
We recognise the social impact and influence
our business can have on the partners and
suppliers we work with. To ensure we uphold
the highest standards regarding human rights,
anti-corruption and anti-bribery we have
a range of measures including robust risk
management, employee Code of Conduct
and employee regulatory training on topics
such as data protection and whistleblowing.
100% of employees attested to our Code
of Conduct in 2021.
We continue to submit our Modern Slavery
Act declaration and we reported a continuing
improvement in the number of suppliers paid
within 30 days to 74% under the Payment
Practices and Performance Reporting
(2020: 72%).
Female
3
28
182
643
856
2020
28.0%/21.1%
49.3%/28.9%
Total
8
95
437
1068
1635
2019
27.6%/22.4%
50.1%/32.4%
Ethnicity
White
1250
Prefer not to say
312
BME
73
Total
1635
Environmentally-positive
Climate change is one of the biggest challenges
facing our colleagues, customers, partners
and communities. The Group is committed
to grasping its opportunity to make a positive
environmental impact and support customers
and communities to tackle their climate
challenges too.
That’s why the Group continues to be
a voluntary member of ClimateWise,
a group of organisations ambitious about
climate action. The Group reports annually
to ClimateWise’s framework which is in line
with the recommendations of the Task Force
on Climate-related Financial Disclosures
(TCFD). The Group will continue to integrate
the assessment of climate-related risks and
opportunities into governance, strategy, risk
management and reporting to both improve
its response and enhance its disclosures
in line with guidance and best practice from
TCFD. We have made significant progress
in 2021, which is summarised over the
following sections.
7. Enhance
reporting
!
6. Customer/client
awareness
1. Be accountable
i n s urer
n
As a
Our Group
Climate
Response
A
s
a
n
a
dvisor
r
o
t
s
e
v
n
i
n
As a
2. Strategies and
investments
3. Managing
climate risk
5. Informing public
policy
4. Our own impact
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1. Be accountable – governance
The Group ensures climate risk has strong
governance and oversight in a number of ways:
– Climate risk is a key consideration of the
Group’s enterprise-wide risk management
framework overseen by the Group Risk
Committee (GRC).
– Board engagement and oversight was
strengthened in 2021 – an extraordinary
climate strategy session was held to discuss
the Group’s position and future ambitions.
A Non-Executive Director has been appointed
to be accountable for climate. Progress
against our climate strategy and plans will
be reported to the Board regularly.
– The Board has delegated responsibility for
oversight of risk arising from climate change
to the GRC. Updates are provided through
quarterly reports and ad-hoc updates
provided to GRC meetings.
– Climate risk is assessed and managed
through the Group risk function, reinsurance
management and investment advisory panel.
– Under the Senior Managers and Certification
Regime (SMCR) climate responsibilities
have been included in Statements
of Responsibilities for specific senior
management functions, including all 3 Lines
of Defence. Leaders of all Strategic Business
Units in the Group have been assigned
responsibility for managing the risks arising
in their businesses.
– A requirement for businesses to consider
the impact of climate change has been
introduced into key risk policies of the Group
that are owned by the Board.
– A climate strategy response group was
established in 2021 to strengthen existing
governance. It is senior management-led
and includes representation from risk,
investment, strategy, general insurance,
Broking and Advisory, communications, risk
and responsible business. This group reports
to the GMB and co-ordinates communication
of climate-related issues to management
across the Group and to the Board.
This includes external information and sharing
of specific issues that have been identified
and are being managed at Group or individual
business levels. Relevant information is also
shared through existing governance bodies
such as Centres of Excellence in the
insurance businesses.
– Group level risk management committees,
the Insurance Risk Committee and the Market
& Investment Risk Committee have been
assigned responsibility for oversight of the
assessment and management of climate
related risks arising in those areas.
Working Groups
Strategic
Business Units
Climate Response Strategy Group
General
Management Board
Main Board
Senior management-led
representation:
– Risk
– Investment
– Strategy
– General insurance
– Broking and Advisory
– Communications
– Risk
– Responsible business
2. Strategies and investments
Climate risk and opportunity continues
to be integrated into the Group’s core strategy
for general insurance, investment and advisory
business. We recognise our responsibility and
opportunity as an insurer, investor and advisor.
– In 2021 the Group set out a new five-year
strategy which includes a key focus
on climate response and action.
– A strategic and emerging risk process
is core to assessing and monitoring
the impact, probability and exposure
of the Group to climate risk.
– The key risks to the Group’s general
insurance businesses arise from the physical
risk of the impact of increased frequency and
severity of weather-related events, changes
in precipitation and rises in sea levels and
temperature variations. These risks primarily
relate to property insurance based on the
location of insured risks.
The Group also recognises the likely
impacts on its customers and seeks
to support them to address these through
underwriting, claims management and
risk management activities.
– The Group uses a range of data and tools
to assess its insurance risk and is seeking
to develop external partnerships
to strengthen its approach.
– The Group’s main exposure to transition
risks is on the value of its investment assets
through the impact of changes to a low
carbon economy on investee companies.
– The Group adopted a new responsible and
sustainable investment policy in February
2021 strengthening its climate response.
The new policy evolves exclusion criteria
by fully removing fossil fuel exploration
and production and thermal coal, so widening
the previous policy of excluding material
exposure to oil sands and Arctic drilling.
The policy also features a new ESG portfolio
risk overlay approach, which will consider
how companies manage their ESG risks
as a factor in investment decisions and
put more pressure on companies the Group
invests in to improve. The new policy has
already resulted in divestment in some
key areas.
– The Group has invested in a tool
to complete carbon footprinting of equity
and corporate bond assets. 80% of funds
under management were included in an
internal footprint review in 2021 and this
analysis will continue to be developed.
– The Group has identified opportunities
to benefit from the effects of climate change
including greater resource efficiency, using
expertise to help customers and directing
investment assets towards areas that will
profit from changes made in transition
to a low carbon economy.
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3. Managing climate risk
The Group has continued to embed the
identification, assessment, management,
monitoring and reporting of climate-related
risks within the Risk Management Framework.
– The Group’s emerging risk process
continues to place climate risk at the heart
of our consideration of risk.
– Scenario analysis is a key tool in this process
and it is being developed to consider short-
(up to 5 years), medium- (5 to 20 years)
and longer-term (20 to 30 years) time
horizons. Key scenarios used by the Group
in identifying and assessing climate risks are
an ‘early action’ scenario, whereby alignment
with the Paris agreement to limit warming
to no more than two degrees is successful,
in which transition risks are most prominent
and a ‘no further action’ scenario, where
warming continues to increase and physical
risks become much greater.
– The Group held risk identification workshops
across all of its territories to consider the
impact of climate change on the operations
of the local businesses. These have resulted
in climate change risk registers owned by
business management. These workshops
considered weather-related perils relevant
for each territory in which the Group
operates, based on scientific projections
of the impact of the climate change scenarios,
and identified the main impacts of these
on the local underwriting portfolios.
– Local insurance underwriting businesses
have considered how these impacts can
be more integrated into underwriting, claims
and risk management strategies.
– The Group’s investment manager EdenTree
engages at portfolio, issuer and individual
holding levels with oversight from
the investment advisory panel.
– In 2021 the Group continued to develop
approaches to help customers strategically
manage their climate risk. For example:
• brokers continue to provide advice and
cover in a range of climate-related areas
including cover for woodlands and
renewable energy; and
• the UK general insurance business
launched a partnership with a third party
to more intelligently manage properties
to reduce risk and climate impact.
The Ecclesiastical Smart Properties
initiative is in its trial phase but we plan
to roll it out widely.
4. Metrics and targets
– our own impact
In 2021 the Group set out its net zero ambitions:
– Achieve net zero for direct impact
(scopes 1+2) by 2023;
– Eliminate historic emissions (scopes 1+2)
by 2030; and
– Net zero for the Group for all scopes
by 2040.
The Group recognises that these ambitions
are long-term, challenging and will stimulate
accelerated climate action.
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 2021. The emissions reporting
boundary is defined as all entities and
facilities either owned or under operational
control of Ecclesiastical Insurance Office,
therefore emissions relating to our premises
and associated travel by staff based at those
premises. It includes data covering 72%
of our Group by headcount. We continue
to improve the coverage and quality of data
which informs our report.
We have recalculated 2020 emissions and are
restating these figures. These include a broader
scope of operations and improved quantification
methodology. 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 emission factors 2021 (Department
for Environment, Food and Rural Affairs), and
independently verified according to ISO –
14064-3:2019 Specifications with Guidance for
the Validation and Verification of Greenhouse
Gas Statements.
In line with the Streamlined Energy and Carbon Reports the Group’s 2021 carbon footprint
is detailed here including carbon intensity:
Scope 1
Scope 2 – Location
Based
Scope 2 – Market Based
(not previously reported
in 2020)
Scope 3
TOTAL
UK
97 (378)
383 (414)
68
172 (273)
338 (1,093)
1 Assuming Scope 2 Market Based
2 Total using Scope 2 Location Based
2021 (2020)
Non-UK
6 (40)
97 (106)
97
22 (46)
126 (192)
Total
104 (446)
480 (521)
165
195 (319)
4631 (1,2862)
Total energy use 59,585,679kwH of which 48,147,143kwH is UK and 11,438,536kwH non-UK.
tCO2e/employee: 0.23 (0.54)
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7. Enhance reporting
The Group’s climate-related communication
and reporting will continue to evolve in line with
TCFD requirements. References or commentary
on climate-related issues relevant to TCFD
are included in a number of different areas
in this Annual Report & Accounts highlighted
in each section of the report above.
Topic
Governance
Strategy
Disclosure area
See also…
Disclose the organisation’s governance
around climate-related risks
and opportunities
– Risk Management Report
• More in-depth description
of the Group’s governance of risk
Disclose the actual and potential
impacts of climate-related risks
and opportunities on the organisation’s
businesses, strategy and
financial planning
– Global trends in financial services
• Global context and how this shapes
our strategy
– Strategy in Action
• Consideration of climate risk
in the Group’s strategy
– Chief Executive’s Report
• Statement of commitment to tackling
climate challenge
Risk Management
Disclose how the organisation identifies,
assesses and manages climate-related
risks
- Risk Management Report
• More detailed description of the
Group’s management of climate risk
Metrics and Targets
Disclose the metrics and targets used
to assess and manage relevant
climate-related risks and opportunities
- Group Remuneration Report
• Commentary on the inclusion
of Environmental and Social targets
in bonus schemes
Commentary
The Group’s carbon footprint continues
to develop for a number of reasons:
- It covers the entire Group’s operations,
either using actual or extrapolated data
(average data is only used for 28%
of operations by headcount).
- It continues to be impacted by the Covid-19
period which has influenced reduced office
attendance and business travel. Some
of this influence we expect to stay with
us for the long term – increased use
of meeting technologies and more flexible
work – but we also expect office occupancy
to increase, but not to pre-Covid levels.
To grasp the learnings from the pandemic
period the Group launched future flexible
working principles supported by investment
in technology and fantastic office
environments. The environmental benefits
will be monitored over the long term.
- A dedicated desktop surveying service
has been established by the UK general
insurance business. Its target is to reduce site
visits by more than 3,000 by 2022 to both
improve customer experience and reduce
environmental impact. In 2021 over 1,600
desk top surveys were completed.
- A Scope 3 initial footprint was completed
and assured by a third party in 2021 for the
first time. Although this year’s reporting only
includes business travel, waste and water
in Scope 3, the initial exercise has given
a greater understanding of Scope 3 impacts
and will continue to broaden our reporting
in the future.
- The carbon intensity of the Group’s
investments continues to be a key part
of its footprint and opportunity for influence.
The Group’s investments were 61.3% less
emission intense than its benchmark
in 2020 and, based on current targets,
the fund is expected to align to the
Sustainable Development Scenario
of 1.5 degrees by 2050 compared
to 3.6 degrees for the benchmark.
- 2021 was a transitional year in terms
of head office premises. The footprint
includes occupancy of both an old and
a new head office which was officially
opened in late January. The new head office
has been designed to a ‘very good’ BREEAM
sustainability standard featuring heat
recycling, solar panels and electric charging
points. These enhancements have had
a significant impact on our footprint
already and will make further contributions
to our direct reduction plans in the future.
5. and 6. Informing public policy
and customer / client awareness
Improved communication of climate change
to a wide range of stakeholder groups including
customers, clients, employees and partners is
also a key consideration of the Group’s strategy.
– Public engagement activity includes
briefings and publications led by investment
management business EdenTree which
continue to have a presence and show
support for key initiatives such as the
Global Investor Statement to Governments
on the Climate Crisis to demonstrate our
commitment and influence. Topics included
energy and fossil fuel divestment.
– Customer and partner engagement
activities include issuing advice on cold
weather, storms and floods. The Group
also researches and promotes climate
impact for specific customer groups, such
as the education sector, through webinars
and guidance.
– In 2021 we made significant shifts to direct
some of our charitable funding towards
environment and climate-related projects:
• Our £1m Movement for Good awards
gave £94,000 to climate-related charities
including the Transition Network and
Sheffield Wildlife Trust; and
• Our owner Benefact Trust, formerly
Allchurches Trust, has awarded £150,000
to Eco Church, a charity which will
be supporting one of our key customer
groups, the Church, with advice
on reducing carbon impact.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Workplaces fit for
a world-class team
Our stunning new HQ, Benefact House, marks
an important milestone in our history and
symbolises our forward-looking approach.
The office has been designed to support
a modern, agile and collaborative way of working
– a way of working we’ve fully embraced.
on wellbeing our office meets FitWel
standards, a framework which focuses
on creating a healthy workplace,
including plants throughout the offices
to oxygenate the air, natural lighting,
a variety of work spaces to accommodate
different needs and healthy options
at our staff restaurant. The Gloucester
head office is just the latest example
of our commitment to invest in great
workplaces across our Group to enable
our people to work at their best.
And our focus on our people is clearly
paying off. Following our 2021 b-Heard
survey, we were delighted to be awarded
Best Companies’ 2 star accreditation
demonstrating ‘outstanding’ levels
of employee engagement, with many
teams recognised at the highest
3 star or ‘world class’ level.
In October 2018, we signed
an Agreement for Lease for a new office
to be built at Gloucester Business Park.
The new building would be purpose-
built for our needs, providing a flexible
office space that would accommodate all
our Gloucester colleagues and provide
plenty of parking. The offices were
also designed to BREEAM standards,
a sustainability assessment which
looks at the building’s performance and
environmental factors such as electric
car charging points and solar panels.
Despite Covid-19 and several lockdowns,
the development continued with
only minor disruptions, and the first
colleagues started working at Benefact
House in January 2021. Feedback has
been overwhelmingly positive, with
praise for the fresh, modern working
environment and focus on wellbeing.
The new HQ fits perfectly with our
Future Working Vision, which recognises
the importance of flexible working and
vibrant, social spaces. With an emphasis
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout Us – Ecclesiastical at a glance
Section Two
Strategic Report – Non-Financial Information Statement
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
9595
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
Key performance indicators
(KPIs)
Our KPIs set out how we are doing
against our strategic goal
Principal risks
Our key risks and their management
Our policies
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
Strategic report
– Our Business model
and strategy
Strategic report
– Key performance
indicators
Strategic report
– Principal risks
See below
Pages
40
50
68
Our key policies / statements
of intent
Environmental matters
• We are committed to running the business
in a sustainable way to tackle climate change
and encourage others to do more.
• We assess performance against ClimateWise
reporting which is aligned to Taskforce
on Climate-related Financial Disclosures
(TFCD) reporting.
• We aim to reduce our direct impact
on the environment and seek to use
renewable sources of energy.
• Other information on environmental
matters is included within the Responsible
Business Report.
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 socially-positive section
of the Responsible Business Report.
Also included within the Corporate
Governance report is information about
the composition and diversity of the Board.
Social matters
• We were founded over 135 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
Responsible Business Report. 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, whistleblowing
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 Responsible Business 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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Section Two
Strategic Report – Strategic Report approval
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Section 172 Statement
This section of the Strategic Report provides an overview of how the Directors have fulfilled
their duties to promote the success of the Company and had regard to the matters set out
in section 172(1) (a) to (f) Companies Act 2006 as detailed below:
(1) A director of a company must act in the way he/she considers, in good faith, would be
most likely to promote the success of the company for the benefit of its members
as a whole, and in doing so have regard (amongst other matters) to –
a) the likely consequences of any decision in the long term;
b) the interests of the company’s employees;
c) the need to foster the company’s business relationships with suppliers,
customers and others;
d) the impact of the company’s operations on the community and the environment;
e) the desirability of the company maintaining a reputation for high standards
of business conduct, and;
f) the need to act fairly as between members of the company.
This also forms the Directors’ statement required under section 414CZA, of the Companies
Act 2006.
Our stakeholders are identified in the Group Governance Framework, and are at the core
of all decision making. Key stakeholders are our customers (and clients), employees,
shareholders and bondholders, regulators, intermediary partners (including brokers
and other suppliers), and environment and community groups.
Examples of the way in which the Board has engaged with some of these stakeholder groups
throughout the year can be found in the Corporate Governance Section of the Annual Report
and Accounts.
Strategic Report Approval
The Strategic Report, outlined on pages 12 to 96, 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 Responsible Business Report and
the Section 172 Statement and, when taken as a whole, is considered by the Directors
to be fair, balanced and understandable.
By order of the Board
Mark Hews
Group Chief Executive
17 March 2022
‘Our dedicated and
talented people are
at the heart of our
business, driven by
a desire to support
our customers
and united by a
common purpose
to contribute to the
greater good
of society.’
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section TwoSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Section Three
Governance
Board of Directors
Directors’ Report
Corporate Governance
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
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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)
Chair, 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 was also a Non-Executive
Director of the Skipton Building Society from 2015
to 2021. Denise is a Trustee of MacIntyre Academy
Trust, which provides special schools and specialist
alternative provision for children and young people.
Mark Hews
Group Chief Executive
Mark Hews was appointed Group Chief Executive
in May 2013 and was previously 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.
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.
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, Benefact Trust Limited,
as well as the Insurance Board of Lloyds Banking
Group and Tokio 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.
Francois-Xavier Boisseau (a) (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 of 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.
Francois-Xavier is also Chairman of IQUW
Syndicate Managing Agency Ltd.
Rita Bajaj (a)
Independent Non-Executive Director
Rita was appointed to the Board in July 2021.
She is a Non-Executive Director, Board, and IGC
member with over 30 years’ broad investment
markets experience. Previously, she held senior
investment positions at Global and UK Asset
Managers, heading investment teams at Royal
London and Invesco Perpetual. She was EMEA
Chief Administrative Officer at custodian, State Street
and she is also a former FCA regulator. Currently,
Rita is a Board and Investment Panel member
for the London Pension Fund Authority (LPFA),
Non-Executive Director on Columbia Threadneedle
OEIC Boards and an Independent Governance
Member for Hargreaves Lansdown’s workplace
SIPP Independent Governance Committee.
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 Benefact Trust Limited;
Vice-President of the Community Foundation
for Surrey; Chairman of Painshill Park Trust;
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.
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
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Key to membership
of Group Board Committees
(a) Group Finance and Investment
(b) Group Nominations
(c ) Group Risk
(d) Group Audit
(e) Group Remuneration
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
and a member of the Council of Christ’s Hospital.
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.
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.
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 and of Target Group
Limited, where he also chairs the Audit Committees.
He is a trustee of the Foundling Museum.
Previously, Andrew was for 28 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 was an Independent Non-Executive Director
of National Bank of Greece S.A. and chaired
its Audit Committee.
Caroline Taylor resigned as a Director on 8 September 2021.
Board diversity
Balance of Non-Executive Directors and Executive Directors
8:3
Non-Executive Directors : Executive Directors
8:3
2021
2020
Gender Balance
Male : Female
Length of Tenure
(Chair 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 +
8:3
8.3
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Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Section Three
Governance – Directors’ Report
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
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Directors’
Report
The Directors
submit their Annual
Report and Accounts
for Ecclesiastical
Insurance Office
plc, together with
the consolidated
financial statements
for the year ended
31 December 2021.
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 35 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 Benefact
Group plc.
Board of Directors
The Directors of the Company during the year
and up to the date of this report are stated
on pages 100 to 102.
Caroline Taylor resigned as a Non-Executive
Director on 8 September 2021.
Rita Bajaj was appointed as a Non-Executive
Director on 15 July 2021.
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. Rita Bajaj
will also be recommended for election at the
forthcoming AGM following recommendation
from the Group Nominations Committee.
The Company has made qualifying third-
party indemnity provisions for the benefit
of its Directors and Directors of any associated
company. These were in place throughout
the year and remain in force at the date
of this report.
Neither the Directors nor their connected
persons held any beneficial interest in any
Ordinary shares of the Company during
the year ended 31 December 2021. 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 2021:
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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Governance – Directors’ Report
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Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
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Dividends
Dividends paid on the Preference shares were
£9,181,000 (2020: £9,181,000).
The Directors do not recommend a final dividend
on the Ordinary shares (2020: £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 £23.5m (2020: £2.7m).
It is the Company’s policy not to make political
donations. No political donations were made
in the year (2020: £nil).
Financial instruments
Information about the use of financial
instruments by the Group is given in note 22
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 115.
Throughout the employee lifecycle from
recruitment onwards, we carefully consider
adjustments to our processes and practices
and look for solutions to remove barriers
for those employees with disabilities.
When needed, we engage with third-party and
Occupational Health specialists who provide
us with expert advice and ensure we are offering
the best support we can. Through our adjusted
work approach, we provide an environment
in which disabled employees can fully
participate in all opportunities provided by the
Group from continued employment to training,
job moves and promotions.
Climate change and environment
Information about the approach to climate
change and the environment is provided
in the Responsible Business Report.
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.
Events after the balance sheet date
There were no events after the reporting
period that require disclosure in the Financial
Statements.
Going concern
The Financial Performance section and Risk
Management section of the Strategic Report
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 £883.8m
of which 90% are liquid (2020: financial
investments of £820.8m, 92% liquid) and cash
and cash equivalents of £114.0m (2020: £104.4m).
Liquid financial investments consist of listed
equities and open-ended investment companies,
government bonds and listed debt. In February
2021, the Company raised €30m of Tier 2 capital
with the issue of 20-year subordinated bonds,
callable after year 10.
The Group has a strong risk management
framework and solvency position, is well placed
to withstand significant market disruption
and has proved resilient to stress testing.
The Group has considered its capital position,
liquidity and expected 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.
Primarily during 2020, Covid-19 impacted
how the businesses operate, with a significant
proportion of employees working effectively in a
remote environment. Whilst there was still some
disruption caused by the pandemic during 2021,
our businesses and people continued to work
effectively and support our customers, work with
our key suppliers and perform other functions of
the Group.
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
the auditor is unaware, that could be needed
by the auditor in order to prepare their report.
Having made enquiries of fellow Directors
and the Group’s auditor, each Director has taken
all the steps that they ought to have taken
as a Director, in order to make themselves
aware of any relevant audit information,
and to establish that the auditor is aware
of that information.
This confirmation is given and should
be interpreted in accordance with the provisions
of Section 418 of the Companies Act 2006.
The Group Audit Committee reviews
the appointment of the auditor, including
the auditor’s effectiveness and independence,
and recommends the auditor’s reappointment
and remuneration to the Board. Further
details are disclosed in the Group Audit
Committee Report.
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 2021 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 and the Company financial statements
in accordance with UK-adopted international
accounting standards.
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 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 UK-adopted
international accounting standards have been
followed, 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 Company will
continue in business.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Section ThreeSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Section Three
Governance – Directors’ Report
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109
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
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124
130
132
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Directors’ confirmations
The Directors consider that the 2021 Annual
Report and accounts, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the Group’s and Company’s position
and performance, business model and strategy.
Each of the Directors, whose names and
functions are listed in Section Three
– Governance confirm that, to the best
of their knowledge:
• the Group and Company financial statements,
which have been prepared in accordance
with UK-adopted international accounting
standards, give a true and fair view of the
assets, liabilities and financial position
of the Group and Company, and of the profit
of the Group; and
• the Strategic Report includes a fair review
of the development and performance
of the business and the position of the Group
and Company, together with a description
of the principal risks and uncertainties
that it faces.
By order of the Board
David Henderson
Chair
17 March 2022
Mark Hews
Group Chief Executive
17 March 2022
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Governance – Corporate Governance
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Corporate
Governance
The Board of Directors is committed to applying the highest standards
of corporate governance and believe that the affairs of the Company
should be conducted in accordance with best business practice.
Accordingly, although the Company does
not have shares with a premium listing
on the London Stock Exchange and, therefore,
does not need to adhere to requirements,
the Company has voluntarily chosen to comply
with the Principles and Provisions of the 2018
UK Corporate Governance Code (the Code)
throughout the year ended 31 December 2021
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 Committee1 .
The following aspects of the Code are not
considered appropriate for the Company
given its ownership structure:
• provisions relating to outcomes from
shareholder votes (Provision 4); and
• 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 Group Chief
Executive Officer (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. The Group Remuneration Committee
has reviewed the pension contribution rate
of the GCEO and determined that it should
be aligned to the wider workforce with
effect from 1 April 2022.
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.
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.
Purpose, value and strategy
The Group’s purpose is to contribute
to the greater good of society. In particular,
the Group strives to improve the lives
of customers, beneficiaries and society
as a whole. This is achieved by managing
a portfolio of businesses that operates
on the highest ethical principles. It seeks
to diversify and bring an ethical dimension
to more aspects of society; and all of its
businesses need to set a high bar, putting
its customers first and setting an example
to others.
See our business model and strategy
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 2021,
no Director had any such concerns.
1. Committees of the Company also perform the same Committee functions for Benefact Group plc, the Company’s immediate
parent undertaking.
Culture
The Board is responsible for setting the right
values and culture within the Group and
ensuring the fair treatment of customers.
During 2021 a refreshed set of values were
launched which inform the culture across
the Group, as 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 b-Heard survey results.
Our target culture
We are a group that CARES
Collaborating
and welcoming
• We’re a family of diverse businesses united in a common purpose sharing
our vision, values, culture and behaviours
• We all belong – welcome and inclusion run through everything we do
• Our diversity makes us stronger, more connected with each other,
our customers and communities
• We’re willing to listen, we trust our colleagues and value their perspectives
and experience
• We break down barriers where we spot them to engage with each other
and work together to get the job done
Ambitious and
pioneering
• We’re driven to outperform our ambitious business goals by being bold, brave,
agile and innovative
• We’re competitive and commercial with exceptionally high standards
of customer service
• We nurture new ideas and innovation – listening, learning, adapting
and leading the way
• We have high expectations of each colleague’s performance, supported
by a clear sense of direction and coaching
• We take personal responsibility for the way we act and for delivering
our commitments
• We celebrate every kind of success and reward people for positive results
• We’re building a long-term, sustainable legacy
• We maintain the highest ethical principles that we apply to all aspects
of our business
• We actively manage our impacts on the environment, locally and globally
• We embrace our responsibilities to our colleagues, customers, charities
and communities
• We can be trusted to do the right thing
Responsible and
sustainable
Expert and
specialist
• We nurture specialist expertise across the Group
• We seek to really understand our customers and their needs so we can find
the right solutions for them
• We invest in our colleagues’ personal growth to enable them to reach
their potential
• We understand and fully utilise our individual strengths, skills and knowledge
• We get out of each other’s way and trust our specialists to deliver
Supporting
and Caring
• We grow our business so we can give our profits to good causes
• We’re proud to be a commercial company with a charitable purpose
• We’re caring, kind, empathetic people
• We all passionately believe in improving the lives of people in our communities
• Our culture of giving (money, time and kindness) makes a difference, locally
and globally
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Board activities during 2021
During the year, the Board made decisions
on the following business issues, routine
and Legal and regulatory matters:
Strategic matters
2021 year in review
• Reviewed delivery of the Group’s commercial
achievements and delivery of agreed Group
transitional strategic initiatives and Covid-19
response throughout the previous year.
EdenTree
• Reviewed and approved the EdenTree
growth strategy.
Next chapter strategy
• Oversaw the development
of the Group’s Next Strategic Chapter
which it ultimately approved.
Benefact House
• Approved the change of registered office.
Benefact Trust Limited
• Received regular reports from
the Shareholder.
People and culture
• Considered the findings of the 2021
Employee survey.
Climate change
• Held a dedicated strategy session
to discuss the Group’s approach
to climate change, including reporting
and regulatory requirements.
Company and operational performance
The Chief Executive Officer led discussions
on general business performance and key
strategic initiatives. Providing the Board
with the opportunity to review and challenge
points of interest.
• Considered feedback and insight on service
delivered to brokers and customers; and
• Approved the Group’s approach to Operational
Resilience.
Charitable purpose
• Considered regular updates on the charitable
purpose and mission (including consideration
of the Grant Policy in Canada and Australia);
and
• Approved the Sustainable and Responsible
Investment Policy.
Governance and regulatory matters
• Discussed reports from Board Committees
and management on legislation and proposed
consultations that affect or will affect
the Group’s legal and regulatory obligations;
• Reviewed and approved the updated Group
Data Policy;
• Approved the resolutions to be put
to the shareholders at the AGM;
• Approved changes to the Board Committee’s
Terms of Reference; and
• Considered Directors’ Conflicts of Interest
Register.
Board succession and diversity
• Assessed the independence of Non-Executive
Directors upon the recommendation of the
Group Nominations Committee;
• Approved the appointment of a new
Non-Executive Director and changes
to Committee composition;
• Approved the refreshed Board Diversity
Policy; and
• Considered the annual renewal of Directors’
and Officers’ Liability Insurance.
Board effectiveness
• Approved the 2021 Objectives of the Board
and monitored progression throughout
the year;
• In a private session considered the results
of the annual appraisal of the Chair; and
• Considered the outcome of an externally
facilitated Board Paper effectiveness review.
Business updates
• Received updates on performance from
each business area (general insurance, broker
and advisory and investment);
Regulatory disclosures
• Reviewed and approved the Annual Report
and Accounts, Notice of General Meeting,
Half Year and Full Year results announcements.
Financial reporting and controls,
capital structure and dividend
and reasonable view of the effectiveness
of the Group’s systems of control; and
• Approved the Group Own Risk and Solvency
Financial resilience
• Reviewed the going concern assessment
Assessment and considered the Annual
Report of the Data Protection Officer
and viability statement;
• Considered the General Insurance Claims
Reserve Adequacy; and
• Provided final approval for the raising
of €30m of Tier 2 capital with the issue
of 20-year subordinated bonds, callable
after year 20.
Capital, costs and budget
• Considered the Group’s reinsurance
arrangements;
• Approved a transfer of shares held in Ansvar
Risk Management Services Pty Limited
to Ansvar Insurances Limited; and
• Agreed the Group Corporate Strategy
and Business Plans for 2022 to 2024.
Cashflow and dividends
• Considered the dividends to be paid
to the holders of the 8.625% Non-Cumulative
Shares of £1; and
• Considered making a grant to the Company’s
ultimate parent Benefact Trust Limited
(formerly Allchurches Trust Limited).
Regulatory reporting
• Considered the report of the Actuarial
Function Holder on the adequacy
of the year-end technical provisions; and
• Reviewed and approved the Solvency
and Financial Condition Report (SFCR),
Regular Supervisory Report (RSR), Annual
Quantitative Reporting Templates, National
Specific Templates (NSTs), Internal Model
Output Templates and the Standard Formula
Template (SF) prior to submission to the PRA.
Oversight of Risk and Risk Management
• Received and discussed reports from
the Group Chief Risk and Compliance
Officer (via the Group Risk Committee),
and assessed the Group’s significant risks
and regulatory issues;
• Reviewed the Group Chief Executive’s Report
on the outcomes of the Systems of Control
and Risk Self-Assessment (CRSA) exercise,
concluding that the report provided a fair
Our approach to the long-term
success of the Company
The Board of Directors recognise that
the long-term success of the Company
is dependent upon having regard to the
interests of its stakeholders. In our ambition
to be the most trusted and ethical specialist
financial services group, the Board understands
how important it is to listen and respond to the
needs of our stakeholders.
As an ethical, global financial services
group we are fundamentally different from
our competitors because we are driven
by the power of why and are continually
striving to do the right thing at all times.
In doing so there are occasions where
balancing the needs of different stakeholder
groups can be challenging. On these occasions,
the Board attempts to balance the conflicting
interests and impacts of our stakeholders
in its decision making.
Stakeholder engagement in
decision making
The Board adopts a range of approaches
to engage with stakeholders and recognises
that the importance of a stakeholder group may
differ depending on the matter to be considered.
Given the nature of the business, the Board
sometimes engages directly with stakeholders
and also understands that it may be more
appropriate for engagement to be undertaken
at an operational level.
The Board considers a variety of information
to understand the impact of the Company’s
operations and also the interests and views
of our key stakeholders. A one-year rolling plan
of business for discussion is agreed annually
to ensure that the Board is focused on the
right issues at the right time and sufficient time
is allowed for appropriate consideration and
debate. Information is provided to Directors
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in papers in advance of each meeting.
In addition, people from the business are invited
to attend meetings to provide insight into key
matters and developments. At each Board
meeting, the Directors discuss strategic and
business matters, financial, operational and
governance issues and other relevant issues
that arise. Following Committee meetings,
the Board receives oral reports from the Chair
of each Committee at the next Board meeting.
As a consequence of this, the Board has an
appreciation of engagement with stakeholders
and other relevant matters, which enables the
Directors to comply with their legal duties.
As a global group, the Board also believes
governance is best achieved through the use
of delegation of its authority for the executive
management to the Group Chief Executive.
To assist him in delivering his responsibilities
to the Board, the Group Chief Executive
has established a corporate structure
that comprises three business divisions
(Broker and Advisory, General Insurance
and Investment Management) with more
information found in the ’Our businesses’
section. A General Management Board (GMB)
and Relevant Boards and Committees have also
been established in each business division.
General Management Board (GMB)
Under the leadership of the Group Chief
Executive, the GMB leads the Shared Services
and oversees the business divisions. Working
closely with the Board, it focuses on Group
delivery of culture and values; strategy and
direction; governance and risk management;
key projects and programmes; budgets;
reviewing performance; rating agency
and shareholder matters; and leadership
and communication.
Management Committees
A number of Management Committees
and Boards have been established to ensure
that each SBU Managing Director has oversight
of their respective areas, whilst providing
assurance to the Group Chief Executive
and other Executive Directors and ultimately
the Board.
As the Board remains ultimately responsible
for decision making within the Group, it receives
regular updates from the Group Chief Executive
and other Executive Directors
Covid-19 response
As the world begins to return to some form
of normality, we understand that the effects
of Covid-19 remain with us all. We set out our
initial response to Covid-19 in the 2020 Strategy
and Company Performance Overview. As such,
the Board has continued to make decisions this
year to ensure that the Group remains strong
and in a position of being able to continue
our Movement for Good for so many, during
a time of great need. The ongoing pandemic
has also encouraged us and our stakeholders
to consider and embrace new and innovative
methods of engagement.
This impact and how we have responded to
protect our Group and manage the expectations
of our stakeholders has been included in our
Stakeholder engagement overview below:
Next strategic chapter
The Group unveiled its Next Chapter Strategy
internally in September 2021. A dedicated Board
Session was held which considered feedback
from Benefact Trust Limited (the Company’s
ultimate shareholder) and other stakeholder
and external perspectives (including customers,
colleagues, communities and the environment).
The development of the Strategy was a key
focus of Board Meetings throughout the year.
This culminated in the Board’s approval
of the Corporate Strategic Plan 2022-24.
For more detail on the Strategy please refer
to the Strategic Report.
Below is a summary of key decisions and
actions the Board has taken during the year
in respect of strategic and Group performance
and how it has had regard to the interests
of, and impact on a selection of its stakeholders.
Employee engagement
The Board recognises that employees are
the Group’s greatest 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 colleagues’ views. In order to engage, involve
and inform colleagues, a range of methods
as set out below are used:
• Given Sir Stephen Lamport’s previous
experience and responsibilities as Group
Remuneration Committee Chair, the Board
agreed that he was the most appropriate
Non-Executive Director to replace Caroline
Taylor as the designated Non-Executive
Director for employee engagement .
The designated Non-Executive Director
is briefed on employee engagement survey
results and relevant findings are reported
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);
• During 2020, as a result of the pandemic,
the Group chose to focus on more tailored
and regular ‘check-in’ surveys which were
conducted monthly. This enabled the Group
to gather real time feedback, to flex each
survey and to respond as the situation
evolved during what was a unique year.
During 2021 the Group transitioned back
to a full annual colleague engagement survey
adopting a new b-Heard Survey provided
by an external partner, Best Companies.
The full b-Heard survey was undertaken
in the Spring with 79% of employees taking
part, and this was supplemented by a further
pulse survey later in the year. The Group
was proud to be awarded Best Companies’
2 star accreditation demonstrating
‘outstanding’ levels of employee engagement,
with many of the Group’s teams being
recognised at the highest 3 star level,
or ‘world class’;
• During the year the employees undertook
training to support the accessibility
and understanding of our whistleblowing
policy, 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.
For example during the year the Chief
Executive and other senior leaders engaged
directly with colleagues, through a series
of online roadshows to which employees
from all territories were invited for the internal
launch of the Group’s next strategic chapter;
• 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.
An example of an opportunity where the Board
of Directors were able to engage with a range
of employees from across the Group, at various
levels of seniority, was at the Official Opening
ceremony of the Group’s new Head office
in Gloucester in September. Following which,
the Directors were invited to attend a two day
offsite Leadership Conference. The opportunity
was used to enhance collaboration between
Board members and employees and therefore
improving decision making.
Customer engagement
Customers (being the person or entity,
which ultimately relies upon Ecclesiastical’s
products, advice or expertise for the protection
and management of their assets including
prospective and former customers) are the
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lifeblood of the Group. The Board considers
that customers should be at the heart of
everything we do, treating them fairly and
ethically and 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 Executive’s Report and reports
on strategic initiatives.
The Board also received a report on customer
feedback. The report provided an overview
of service delivery as experienced by its various
customer groups. It also outlined a number
of the Group’s externally received accolades
as evidence of the strong service provided
to our customers.
In addition, the Board considered customers’
needs, knowledge and expectations as part
of the development of the Next Chapter
Strategy and Company’s new visual identity.
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 Strategic Business Units.
Shareholder engagement
Benefact Group plc owns the entire issued
Ordinary share capital of Ecclesiastical
Insurance Office plc. The Directors of the
Boards of both companies are identical.
Benefact Group plc in turn is wholly owned
by Benefact Trust Limited (previously
Allchurches Trust Limited) with whom the Board
has an open and constructive relationship.
Protocols for the exchange of information
between Benefact Trust Limited and Benefact
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’
(a Director who is a member of the Boards
of Benefact Trust Limited, Benefact 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 Benefact Trust Limited
Board meetings to the Directors. There is
also engagement between respective Board
and Committee Chairs and the Group Chief
Executive Officer. Regular dialogue takes
place on Benefact Trust Limited’s expectations
of the Group, strategy for the development
of the business and the grant from the Group.
This ensures that the views of Benefact Trust
Limited are communicated to the Board
as a whole. In turn, the Common Directors
are able to support the Directors of Benefact
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 grant to the Company’s ultimate parent
undertaking, Benefact 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 Chair of Benefact Trust Limited.
Two grants amounting to £21m were paid
to Benefact Trust Limited during the calendar
year 2021.
Suppliers (including brokers)
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.
During the year, the Board received a report
on Broker feedback, which presented
an overview of broker servicing. The report
also set out the Group’s response to supporting
Brokers throughout the pandemic and
subsequent restrictions.
In addition, Executive Directors hold regular
meetings with key suppliers to understand
their perspectives, specifically the impacts that
the wider economic environment (including
Brexit and Covid-19) had upon them.
Community and environment
The Board understands the importance
and the impact of climate change upon
the environment, our communities,
our customers and our wider stakeholders.
In response, Directors attended a bespoke
Climate Change Response Strategy workshop
in order to better understand the potential
impact (and opportunities) that climate change
could have on the Group as an Insurer and
asset owner. This session drove the ongoing
discussions allowing the Group to formulate
its Climate Change ambition, which has been
overseen by the Group Risk Committee.
Being an asset owner, the Group understands
its responsibilities as a sustainable investor.
As such, the Board has overseen the
implementation of EdenTree’s growth strategy.
The importance of communities to us is
demonstrated by our new Group vision
and in particular our desire to transform lives
and communities. During 2021 the Group
achieved its ambition to give more than £100m
to charity leading to a cumulative £150m
since 2014.
We are also committed to creating
a Movement for Good. In doing so, the Board
has overseen and had regular updates
on the Group’s charitable giving.
Engagement with 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) and is committed
to complying with applicable legislation and
regulation. The Board (via its Committees)
receives regular reports detailing the Group’s
regulatory interactions. The Board (via its
Committees) also receives regular reports
on the evolving legal and regulatory landscape
incorporating a detailed impact and progress
assessment which undergoes a rigorous cross
departmental challenge process before being
presented to the Board.
In addition, Directors attend regular
one-to-one meetings with representatives
from its regulatory bodies.
Whistleblowing
The Board (via the Group Audit Committee)
is responsible for reviewing the Group’s
Whistleblowing Policy and Procedures
and receives regular updates.
The Group’s approach to whistleblowing is set
out in a Policy and supported by procedures
and guidance documents (which is available
internally on the Group’s intranet). The Chair
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, procedures
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
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and manage any potential conflicts of interest.
Training on the Companies Act 2006
has been given to all Directors and Directors
are regularly reminded of their duties.
Any conflicts are declared at the first Board
meeting at which the Director becomes aware
of a potential conflict and then recorded
in the Conflicts Register. The Board considers
all conflicts in line with the provisions set
out in the Company’s Articles. The Directors
are required to review their interests recorded
in the Conflicts Register on a biannual basis.
In addition, the Board oversees the procedure
for managing actual and potential conflicts
of interest in the trading relationship with
owned brokers (Lycetts and SEIB) 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 2021,
no Director had any such concerns.
Division of responsibilities
The responsibilities of the Board,
its Committees, Chair, Group Chief Executive
and Senior Independent Director are set
out in writing and are available
on the Company’s website.
The Chair and the Group Chief Executive
The roles of the Chair and the Group Chief
Executive are undertaken by separate
individuals. The Chair, David Henderson,
is responsible for leadership of the Board.
The day-to-day management of the business
is undertaken by the Group Chief Executive,
Mark Hews, assisted by the Group
Management Board.
Senior Independent Director
Chris Moulder was appointed as the Senior
Independent Director on 14 January 2020.
The Senior Independent Director supports
and acts as a sounding board for the Chair
and is responsible for overseeing
the governance practices of the Company
and leading the Directors in their appraisal
of the Chair. Along with the Chair, the Senior
Independent Director 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 ambassadors 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.
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.
Attendance at meetings
Directors are required to attend all Board
meetings and strategy days as well
as Committee meetings where they
are members. In 2021, the Board held five
scheduled meetings and a strategy day.
In addition, the Board participated in regular
training sessions.
David Henderson met with the Non-Executive
Directors without the Executive Directors
present on a number of occasions throughout
the year.
Below is a record of the Directors’ attendance for the Board meetings during 2021:
Board attendance table
Executive Directors
Director since
Meetings eligible
to attend
Meetings
attended
Mark Hews
S. Jacinta Whyte
Denise Cockrem
June 200 9
July 2013
September 2019
6
6
6
6
6
6
Non-Executive Directors
Director since
Meetings eligible
to attend
Meetings
attended
David Henderson (Chair)
Rita Bajaj
Francois-Xavier Boisseau
Sir Stephen Lamport
Neil Maidment
Andrew McIntyre
Chris Moulder
Angus Winther
Caroline Taylor
April 2016
July 2021
March 2019
March 2020
January 2020
April 2017
September 2017
March 2019
September 2014
6
3
6
6
6
6
6
6
3
6
3
6
6
6
51
51
6
3
1 Mr McIntyre and Mr Moulder were unable to attend a meeting because of a prior business commitment arranged
before the meeting was confirmed.
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.
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 the 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 are 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.
By order of the Board
Mrs. R. J. Hall
Group Company Secretary
17 March 2022
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Group Finance and Investment
Committee Report
Chair’s introduction
I am pleased to present this report, describing
the work undertaken by the Committee during
the past year. Caroline Taylor stepped down from
the Committee during the year and we are grateful
for her contribution. We also welcomed Rita Bajaj
and Francois-Xavier Boisseau who joined
as members of the Committee in July 2021.
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
Rita Bajaj2
April 2019
July 2021
Francois-Xavier Boisseau3
July 2021
David Henderson
Caroline Taylor4
June 2016
March 2016
4
2
2
4
2
4
2
1
4
2
1 Angus Winther was appointed to the Committee on 3 April 2019 and was appointed Chair on 1 January 2020.
2 Rita Bajaj was appointed to the Committee on 15 July 2021.
3 Francois-Xavier Boisseau was appointed to the Committee on 1 July 2021. Mr Boisseau was unable to attend his first
Committee meeting due to illness.
4 Caroline Taylor was a member of the Committee until 8 September 2021 when she left the Board.
Committee meetings
The Committee held four scheduled 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 Benefact Group plc and provides
the same functions.
A summary of the main activities of the
Committee during 2021 are set out below:
Finance
During the year, the Committee has monitored
acquisition and disposal activity, outcomes
and performance across the Group. The need
to extend support to some of the businesses
within the Group to enable them to realise
local strategic ambitions was also considered.
In response Benefact Group plc acquired
2,799,900 £1 ordinary shares in Ecclesiastical
Planning Services Limited (EPSL) and
200,000 £1 ordinary shares in EdenTree Asset
Management Limited (EAM).
Benefact Group plc has a non-controlling
equity interest in the speciality insurer Lloyd
& Whyte. The Committee has monitored various
matters relating to that acquisition, including
associated structural changes, Lloyd & Whyte’s
acquisition pipeline, associated loan exposure
and performance.
Investments
During the year, the Committee 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. In addition,
the performance of the Group’s investment
portfolios and outlook for the financial markets
were also considered.
The Group’s business plan investment
assumptions and the overall investment
strategy were reviewed. This included
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consideration of asset allocation and exposure
(to equities, bonds, infrastructure, property
and cash) and associated risk. The Committee
also considered a framework for determining
hedging decisions. Areas of focus included the
reasons and rationale for the framework and
who was best placed to make such decisions
and how they should be made.
Additionally, the Committee reviewed in detail
investments in property and MAPFRE RE.
Governance
The Committee also reviewed its own
performance and set objectives. During the
year, Mr Boisseau was appointed as a member
of the Committee to further strengthen the
interaction with the Group Audit and Group
Risk Committees.
Together with the Group Risk Committee,
the Committee oversaw a review of the
Group’s Authorities Framework, culminating
in recommendations to the Board which
were approved.
By order of the Board
Angus Winther
Chair of the Group Finance
and Investment Committee
17 March 2022
‘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.’
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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 2021.
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 Moulder
David Henderson
Angus Winther 1
Caroline Taylor2
November 2019
January 2019
May 2021
November 2019
3
3
2
2
1 Angus Winther was appointed to the Committee on 13 May 2021.
2 Caroline Taylor was a member of the Committee until 8 September 2021.
3
3
2
2
Meetings of the Committee
The Committee held three scheduled
meetings in 2021 (February, May and October)
which were attended by the Group Chief
Executive and Group Company Secretary
(2020: three meetings).
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 Group Management Board (GMB), heads
of Strategic Buiness Units 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.
Appointment of a new Group
Remuneration Chair and
Workforce Engagement
Non-Executive Director
The appointment process for a new Group
Remuneration Chair commenced during 2020.
This was to ensure that the appointee was able
to serve on the Group Remuneration Committee
for at least 12 months. The Board considered
the Committee’s recommendation that Sir
Stephen Lamport be Caroline Taylor’s successor
at its meeting in February 2021. This proposal
was unanimously supported by Directors subject
to regulatory approval, which was received
on 24 June 2021. As part of the appointment
process, Sir Stephen completed an extensive
induction to the Group Remuneration Committee.
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Board diversity
Ecclesiastical recognises the benefits of having
a diverse Board and is committed to improving
diversity on the Board in the broadest sense.
It believes that diversity, including in respect
of gender, both improves performance
of the Board and strengthens the business.
Ecclesiastical will:
• Seek to achieve a level of at least 33% female
Directors over the medium term on the Board
of Ecclesiastical Insurance Office plc;
• Ensure that the Board composition comprises
of at least one Director from an ethnic
minority background;
• Engage solely with executive search firms
who have signed up to the voluntary Code
of Conduct on both gender and ethnic
diversity and practice;
• Ensure that the recruitment process and the
development of ‘long-lists’ reflect the Board’s
diversity commitments to both gender
and ethnic diversity and that candidates
are presented from all backgrounds, and
with diverse skills and personal qualities;
• Maintain commitment to the Women
in Finance Charter, which focuses upon
building a more balanced and fair industry
by promoting gender balance at all levels
across the financial services industry; and
• Report annually on its diversity objectives
and other initiatives undertaken by the
Company, which promote gender, social
and ethnic diversity.
As at 17 March 2022 the Board has appointed
three female Directors (including two Executive
Directors) in a membership of eleven. The Board
recognises that the majority of its Committees
lack female representation and that all of its
Committees are chaired by male Non-Executive
Directors. The Board is actively seeking
to address this issue. Notwithstanding this,
the Board is proud that most of the Company’s
Executive Directors are female.
As at 31 December 2021, female representation
on the GMB stands at 38%(2020: 38%) and
in the wider senior management population
(GMB and BL) at approximately 28%
(2020: 27%). The Board encourages executive
management to ensure appropriate diversity
at senior levels within the organisation.
The Board will take the opportunity, as and
when appropriate, to further improve diversity
in its broadest sense (including 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. All Board
appointments are made on merit, in the context
of the diversity of skills, experience, background
and gender required to be effective.
Directors’ length of service
The Committee monitors the length of tenure
of all Directors as shown in the table
on Board diversity.
Independence and time
commitment
The Board believes that all the Non-Executive
Directors were independent throughout
2021. 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
Non-Executive Directors and, following rigorous
review, the Committee confirmed to the Board
that all Non-Executive Directors remained
independent in character and judgement.
No individual participated in the discussions
relating to their own independence.
Chris Moulder and Sir Stephen Lamport
are Directors on the Boards of Benefact 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
Appointments to the Board
Non-Executive Director Appointment
Rita Bajaj
An Appointments Panel comprising David
Henderson, Chris Moulder, and Angus Winther
was formed to commence the recruitment
of a new Non-Executive Director with extensive
experience in financial services, preferably
gained from investment management and
ideally with some experience of socially
responsible investments.
Four executive search firms were interviewed
with Sapphire Partners (which had no other
connection to the Group and is a signatory
to the Voluntary Code of Conduct on gender
diversity and best practice) engaged to support
the recruitment process.
The initial candidate long-list was reduced
to a short-list by the Appointments Panel.
The short-list was further reduced by the
Appointment Panel based on the skills and
knowledge of the candidates and identified
Board skills gaps. After a series of interviews
and due diligence, Rita Bajaj emerged as
the preferred candidate. This was based
on consideration of personal attributes,
external commitments and needs of the Board.
Prior to appointment, all members of the Board
were given the opportunity to meet with Rita.
At the end of the process and following
recommendation of the Group Nominations
Committee, the appointment was approved
by the Board and was effective on 15 July 2021.
performance and the strategic issues it faces,
and for the subsidiary to understand
the expectations of its parent company.
A joint Company and Benefact Trust Limited
Nominations Committee Meeting is held
on an annual basis, amongst other things to
consider the appointment of common Directors.
The Committee evaluates the time
Non-Executive Directors spend on
the Company’s business annually and
is satisfied that, in 2021, the Non-Executive
Directors 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.
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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, Group
Chief Internal Auditor and heads of the Group’s
trading businesses. New Directors also meet
individually with the Chair of Benefact Trust,
the Group Chair, 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 Chair reviews as part of their annual
appraisal. Training and development needs
of Board members are also reviewed by the
Committee. In 2021, a number of training
sessions took place including Catastrophe
and PSA Exposure, Internal Model, Board
Paper Review Workshop, Anti-Money
Laundering, Bribery and Corruption, IFRS17
and Cyber Training. In 2022 sessions have
been planned on Technology, IFRS 17, Insure
Tech and Re-Insurance (Credit Risk).
Board evaluation
All Directors receive an annual appraisal
from the Chair. The Chair 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 typically every two to three
years. The last external Board evaluation
was carried out in 2019; facilitated by Grant
Thornton (which acts as our co-source
provider for internal audit on UK and Canada
and has no other connection with the Group).
Given Covid-19, the Board agreed that the
next external evaluation should take place
in 2022. During 2021, the Board has focused
its attention upon a Board and Committee
Reporting Review, which was an action arising
from the previous Board evaluation. The Board
and Committee Reporting Review has been
externally facilitated by Deloitte and will further
strengthen the Board’s oversight and decision
making of the Company and its SBUs.
In addition, the Company Secretariat facilitated
an evaluation based on bespoke questionnaires
with outcomes considered by the Board
and Committees.
The next external Board evaluation will
be undertaken in 2022.
By order of the Board
Chris Moulder
Chair of the Group Nominations Committee
17 March 2022
‘Ecclesiastical
recognises the
benefits of having
a diverse Board
and is committed to
improving diversity
on the Board in the
broadest sense.’
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Group Risk
Committee Report
Chair’s introduction
I am pleased to present this report describing
the work undertaken by the Group Risk
Committee (the Committee) during the past year.
The Committee’s role is to oversee the Group’s
risk management framework (including risk
appetite and tolerance) and the Group’s risk and
compliance functions; and to monitor prudential
risk (including overseeing the internal model).
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 (Chair)
September 2017
Andrew McIntyre
August 2017
Francois-Xavier Boisseau
April 2019
Neil Maidment
March 2020
Sir Stephen Lamport
November 2020
4
4
4
4
4
4
4
4
4
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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.
Throughout 2021, the Committee continued
to monitor the impact of the Covid-19 pandemic
on the Group’s risk environment, including the
Group’s financial and operational resilience
and its capital and solvency position.
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, use, governance
and validation.
The Group’s principal risks and uncertainties
are set out on pages 68 to 75. The Committee
has reviewed these in detail and is comfortable
that the business has addressed them
appropriately within its ongoing operating
model and identification of strategic priorities.
The impact of the recent conflict in Ukraine
on the principal risks was considered
by the Committee and these are included within
the Group’s principal risks and uncertainties.
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
Chair, Deputy Group Chief Executive, Group
Chief Risk and Compliance Officer, Group Chief
Financial Officer, Group Underwriting Director,
Group Chief Actuary and Group Chief
Internal Auditor.
A focus of the Committee’s work this year
has been monitoring the Group’s ongoing
operational and financial resilience; and
its capital and solvency position, in light
of the continuing Covid-19 pandemic, receiving
reports from management. The Committee also
continued to monitor the ongoing development,
governance, methodology and calibration of the
Internal Model; overseeing validation; reviewing
Profit and Loss Attribution and recommending
Model changes and management actions
to the Board.
During the year, the Committee also received
a report on the outcome of a risk and
compliance effectiveness review; oversaw
projects to develop the Group’s data
management model and a Group operational
resilience programme; reviewed the Own
Risk and Solvency Assessment (ORSA) and
Control Risk Self-Assessment; and oversaw
the continuing development of a risk oversight
and assurance plan and the risk taxonomy.
Additionally, the Committee received regular
reports on risk and compliance monitoring and
breaches; underwriting and insurance risk;
reinsurance; material outsourcing; and business
continuity. The Committee also received the
Money Laundering Reporting Officer’s Report
and reviewed a financial crime continuous
assurance plan.
The Group Chief Risk and Compliance Officer
reports to the Committee and has direct access
to the Committee Chair 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
Chair of the Group Risk Committee
17 March 2022
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Group Audit
Committee Report
Chair’s overview
As Chair of the Group Audit Committee, I am pleased
to present the Committee’s report for the year
ended 31 December 2021. This report outlines
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 and regulatory
reporting, internal and external audit arrangements,
internal control environment and the processes
for compliance with laws, regulation and ethical
codes of practice.
The Committee’s duties over the last year were
unchanged, however, there was a particular
focus on supporting the business as it navigated
through some of the risks and uncertainties
arising from Covid-19. While 2021 may have
presented less of a challenge than 2020,
for nearly all of the Committee’s work during
2021, Covid-19 continued to be an important
consideration. The invasion of Ukraine by Russia
in March 2022 caused the Committee to consider
whether there were issues arising which might
affect its assessment of the Company’s 2021
Annual Report. Developments related to these
tragic events will be kept under close scrutiny.
The Committee has reviewed the Group’s
financial reporting, ensuring that this year’s
Annual Report and Accounts are prepared using
appropriate judgements and are a fair reflection
of the Group’s performance and position.
The significant accounting and reporting issues
considered in detail by the Committee are set
out on pages 136 to 138. The new insurance
accounting standard IFRS 17 will be effective
for the Group from January 2023 and will
continue to be an important part of the
Committee’s 2022 agenda. 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 have continued
to adapt and respond to developments.
The role of the Committee in the Group’s
governance framework is vital, providing
independent challenge and oversight across
financial reporting and internal control
procedures. The Committee ensures the interests
of our shareholders are protected by providing
independent scrutiny and challenge to ensure
the Group always presents a true and fair view
of its performance, with a focus on the accuracy,
integrity and communication of its financial
reporting. The Committee also examines the
Group’s control environment and strategies
for risk management, providing assurance
these are managed appropriately. We remain
satisfied that the business has maintained
a robust risk management and internal controls
culture, supported by strong overall
governance processes.
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 100. 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 six meetings held during the year are shown below.
Committee member
Member since
Meetings eligible
to attend
Meetings attended
Andrew McIntyre (Chair) April 2017
Francois-Xavier
Boisseau
Neil Maidment
Chris Moulder
March 2019
March 2020
September 2017
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Committee meetings
In addition to the members of the Committee,
the Chair 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.
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.
The Group’s external auditor is invited
to attend meetings. During the year,
PricewaterhouseCoopers (PwC) attended six
of the Committee’s meetings. 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 Benefact
Group plc (formerly 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:
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 Company confirms that it complied with
the provisions of the Competition and Markets
Authority’s Order for the financial year under
review. Both the Board and the external
auditor have safeguards in place to protect
the independence and objectivity of the
external auditor.
The Committee is responsible for the
development, implementation and monitoring
of the Group’s policy on the provision
of non-audit services by the external
auditor. The policy is reviewed annually
by the Committee. The purpose of the policy
is to safeguard the independence and objectivity
of the external auditor and to comply
with the ethical standards of the Financial
Reporting Council (FRC).
The Committee oversees the plan 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 in the Independent auditors’ report.
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.
For the year ended 31 December 2021, the Group
was charged £946,000 (ex VAT) by PwC
for audit services. Non-audit fees for
audit-related assurance services required
by legislation and/or regulation amounted
to £214,000, making total fees from PwC
of £1,160,000. There were no other non-audit
services provided by PwC during the financial
year. More detail can be found in note 12
to the financial statements.
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 PwC 2020 statutory audit. The audit
team had been responsive and demonstrated
flexibility in working with management
to overcome the challenges of completing
the majority of the audit remotely.
The Committee recognised the strengths
of the external auditor and that their duties
were performed independently and effectively.
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; and
• 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 statements about going concern
and the viability statement.
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. 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 2021
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, and also
note 2 to the financial statements.
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Matter considered
Action
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.
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 the latest developments of Covid-19
across the Group for both the business interruption and liability
claims and acknowledges that although this remains an area
of uncertainty for the next 12 to 18 months, the level of uncertainty
has decreased since last year end as the reserves set up in
2020 are running off as expected. The Committee challenged
management on whether the current reserves appropriately take
account of these uncertainties.
The Committee acknowledged the exceptional economic
circumstances leading to high current and future inflation
and how these impact both property and liability accounts across
the group. The Committee was satisfied that management and
the Group Reserving Actuary have considered inflation in their
recommendations and that this will be a key area of uncertainty
for the medium term.
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 27
of the financial statements.
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.
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 2021)
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.
The Committee considered a report from the Chief Actuary
of Ecclesiastical Life Limited (ELL) (the Group’s life business)
which sets out recommendations for the basis and methodology
to apply for:
• Valuation of policy liabilities for inclusion in the report
and accounts for ELL at 31 December 2021; and
• The calculation of technical provisions in accordance
with Solvency II regulations at 31 December 2021.
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 2020.
The Committee reviewed the work done by the Chief Actuary
to assess whether the methodology remained appropriate, with
a particular focus on mortality assumptions (including any impacts
from Covid-19), 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
27(b) of the financial statements.
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
• The determination of a discount rate.
The Committee paid particular attention to the business plans
and management’s proposed cashflows attributable to each
Cash Generating Unit, and the determination of the discount rate
used in the calculation. Detailed support for these assumptions
was provided by management.
The Committee considered the proposal and provided robust
challenge to the assumptions, notably the evidence to support
the discount rate and the appropriateness of the future cashflow
assumptions. After its reviews, the Committee concluded that
the assumptions were reasonable.
Goodwill is disclosed in note 16 of the financial statements.
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Matter considered
Action
Valuation of defined benefit pension scheme liability
The Group’s liabilities of the scheme are material in comparison
to the Group’s net asset 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.
Valuation of unlisted equity
This is an area of focus for the Committee given the materiality
and the subjectivity in deriving fair value.
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 the most appropriate valuation approach, the set of comparable
companies, choice of valuation multiples and the setting
of an illiquidity discount.
Significant insurance risk
During 2021, the Group launched a new whole of life policy
to support pre-paid funeral plan products. The specific features
of the product and the resulting accounting treatment were an area
of focus for the Committee.
Judgement was required when determining how the contractual
terms of the arrangements affected the accounting treatment.
During 2021, 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 needed
updating, which included a reduction in the expected long-term
improvements in future mortality. Management also concluded
that no weighting would be applied to 2020 mortality data
as the long-term impacts of Covid-19 on mortality were uncertain.
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 2021
are explained in note 18 to the financial statements.
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.
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 management’s recommendations of the valuation multiple,
the suitability of comparable companies and the discount applied
for illiquidity.
Following consideration, the Committee concluded that
the assumptions proposed were appropriate.
The Committee received management’s assessment of the
arrangement and how the contractual terms of this whole of life
policy resulted in the conclusion that the product was accounted
for under IAS 39 Financial Instruments and not IFRS 4 Insurance
Contracts. Particular attention was paid to whether there was
significant insurance risk transferred from the policyholder.
When considering management’s assessment of product and
its accounting treatment, the Committee studied the requirements
of IAS 39 and IFRS 4 which are currently applied by the Group
along with IFRS 9 Financial Instruments and IFRS 17 Insurance
Contracts which are the equivalent standards the Group will
apply from 1 January 2023.
Following consideration, the Committee concluded management’s
assessment that there is no insurance risk resulted in the
appropriate accounting treatment of financial instruments.
The Committee is constituted as a Committee
of the Board of Directors of both Ecclesiastical
Insurance Office plc and its immediate parent,
Benefact Group plc (formerly Ecclesiastical
Insurance Group plc). As a result, the Committee
will also consider matters that are specific
to the Group, Benefact 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 Benefact Group’s financial results in a manner
consistent with that set out within this report.
This included the carrying value of goodwill
and the accounting treatment and control
of business combinations related to insurance
broker businesses of that Group.
Implementation of IFRS 17 Insurance
contracts
IFRS 17 is a new insurance accounting standard,
issued by the International Accounting
Standards Board (IASB). IFRS 17 will be effective
for the Group from 1 January 2023 and will
impact the Group’s financial reporting.
During the year, the Committee monitored
preparedness of the implementation of IFRS 17.
This new accounting standard is expected
to impact the measurement and disclosure
of the Group’s insurance business, which
is predominantly general insurance.
The Committee continues to assess the impact
the new standard on the calculation of insurance
liabilities and financial reporting processes. The
implementation of this standard is an important
feature on the Committee’s current agenda as
management work to complete the changes
required to adopt the standard and carry out
‘dry runs’ before the effective date.
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. When forming its opinion,
in particular, the Committee considered:
Is the report fair?
– Does the financial reporting reflect the key
messages within narrative statements?
– Is the story complete and is there any sensitive
material that has been omitted that should have
been included?
– Does the Group that is portrayed in the
Annual Report and Accounts reflect the Group
discussed by the Committee and the Board?
Is the report balanced?
– Are the key areas of judgement included
within any narrative reporting and significant
matters discussed within this Committee report
consistent with the disclosures within
the financial statements?
– Are the significant and higher risk areas
identified within the Annual Report and Accounts
also those risks identified and reported by PwC.
Fair, balanced and understandable
The Committee considered whether in its opinion,
the 2021 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
Is the report understandable?
– Does the reporting focus on the more
significant items and not become obscured
with immaterial detail?
– Are the important messages highlighted
up front?
– Does the report use clear and concise language
and provide simple explanations of topics?
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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 2021.
• 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
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.
In reviewing the effectiveness of the system
of internal control and risk management during
2021, the Committee has:
• Reviewed the findings and agreed management
actions arising from both external and internal
audit reports issued during the year;
• Monitored management’s responsiveness
to the findings and recommendations
of the Group Chief Internal Auditor;
• Met with the Group Chief Internal Auditor once
during the year without management being
present to discuss any issues arising from
internal audits carried out; and
• Considered a report prepared by the Group
Chief Internal Auditor giving his assessment
of the strength of the Group’s internal controls
based on internal audit activity during the year.
Internal control over financial reporting
Internal control over financial reporting
is a process designed to provide reasonable,
but not absolute, assurance regarding
the reliability of management and financial
reporting in accordance with generally accepted
accounting principles. Controls over financial
reporting policies and procedures include
controls to ensure that:
• Through clearly defined role profiles
and financial mandates, there is effective
delegation of authority;
• There is adequate segregation of duties
in respect of all financial transactions;
• Commitments and expenditure are appropriately
authorised by management;
• Records are maintained which accurately
and fairly reflect transactions;
• 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.
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 Chair, reports
administratively to the Group Chief Financial
Officer and has access to the Group Chief
Executive and the Chair 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. GIA continued to focus on the
highest areas of risk within the Group such
as Cyber Security, Operational Resilience,
Disaster Recovery and the firm’s major change
programmes .
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.
Whistleblowing
During the year, the Committee continued
to perform regular oversight of the Group’s
whistleblowing arrangements, which are the
responsibility of the Board and overseen by
Group HR. Actions during 2020 had focused
on ensuring an environment in which
whistleblowing is well understood, openly
communicated and that a positive culture
for raising concerns was promoted.
During 2021 and following the roll out
of a targeted set of actions designed to improve
both accessibility and understanding across
the Group, an independent assessment was
undertaken and overseen by the Committee
to establish whether these actions had raised
awareness and understanding. The assessment
found that engagement, understanding
and governance had significantly improved,
supporting a culture of openness where
colleagues feel confident and safe to speak
up and challenge when and if they need to.
The Group now has an established annual
whistleblowing activity cycle encompassing
training, communication and monitoring. Online
training modules for all colleagues and managers
in both Whistleblowing and Code of Conduct
increase and maintain awareness and emphasise
an open and positive culture. Individual attestation
and quarterly reporting ensure the continued
close monitoring of whistleblowing activity and
understanding across the Group. These annual
actions are reinforced by regular colleague
communications and awareness raising activities.
Our whistleblowing procedures, polices
and guides are also reviewed and updated
annually to ensure that, in line with best practice,
they are accessible, easily understood and
are aimed to encourage and give confidence
to potential 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 2022, the Committee will continue to provide
oversight of financial reporting and internal
controls of the Group. Key areas 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 resourcing and scope of work
of GIA as the Group continues to expand,
and continued close attention to geo-political
events which might impact on the Group’s
operations and stakeholder reporting.
The Committee remains committed to its role
in overseeing the integrity of financial reporting
and effectiveness of controls.
Andrew McIntyre
Chair of the Group Audit Committee
17 March 2022
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Group Remuneration Report
Group Remuneration
Committee Chair’s
statement
As Chair of the Group Remuneration Committee
(the Committee), I am pleased to introduce
the Group Remuneration Report for 2021
and to highlight some of the key aspects
of the Committee’s work during the year.
I was appointed as Chair of the Committee
on 8 September 2021, having been a member
of the Committee since 2020. I would like
to take this opportunity to thank Caroline Taylor
for her leadership of the Committee over
the last two years and her ongoing support
of the Committee’s work.
2021 performance and incentive outcomes
2021 saw the Group recover strongly from
the challenges caused by Covid-19 over
the previous year. The Group reported a profit
before tax of £77.0m in 2021. This positive
financial performance was driven by strong
investment returns, as markets bounced back,
and a solid underlying underwriting result
of £8.8m (2020: £12.1m). The Group delivered
Gross Written Premium (GWP) growth of 11%
to £486m (2020: £437m) supported by strong
retention and new business in the UK and
Canada. Our broking business performed above
expectation, with SEIB reporting a profit before
tax of £3.2m. Lycetts, owned by Benefact Group,
reported a profit before tax of £3.2m, well ahead
of the £1.1m in the previous year. Our award
winning investment management business,
EdenTree, had another excellent year, achieving
record inflows and exceeding fund benchmarks.
These excellent results enabled the Group
to award a grant of £21m to our owner Benefact
Trust, together with a further grant of £5m
in 2022 in respect of its 2021 performance.
2021 continued, however, to be a challenging
year for customers, brokers, business partners
and colleagues alike. The Committee note with
pride and thanks the outstanding efforts of all
our colleagues across the Group in continuing
to deliver what matters most to the business,
supporting our customers and delivering
on the Group’s purpose, strategy and ambition
for the future. Our colleagues’ dedication
to providing excellent customer service is borne
out by an outstanding 98% of customers and
brokers who report they are satisfied with
the service they receive from Ecclesiastical.
This level of delivery is reflected in the Group’s
performance against its customer and conduct
targets for the year.
2021 was a transformational year for the Group,
with significant progress on the Group’s strategic
initiatives and the launch of a new and ambitious
Group strategy which aims to raise £250m
for good causes by the end of 2025. Alongside
the launch of the new Ecclesiastical brand
and the opening of our head office, 2021 saw
us continue to invest in systems and technology
to improve the broker and customer experience;
to grow our Broking and Advisory business;
and to strengthen the team and fund portfolio
of our EdenTree business. During 2021,
as part of our commitment to making a properly
responsible environmental, as well as social,
impact, we built on our existing membership
of ClimateWise and the pioneering work of
EdenTree in the field of ESG investments
through the adoption of a new responsible and
sustainable investment strategy; improvements
to the way we measure our climate impact;
and the integration of our environmental
commitments into our remuneration schemes
for 2022 and beyond.
In considering the annual bonus outcomes
for Executive Directors, the Committee reflected
on the financial, underwriting, strategic, customer
and conduct performance of the Group including
the reported profit before tax of £77.0m, solid
performance against Group COR targets,
and the continuing strong delivery against
the Group’s strategic change programme
and customer and conduct targets. In its
assessment of individual performance during
the year, the Committee recognised the excellent
performance against Executive Directors’
personal financial, strategic and wider objectives.
The Committee considered that the annual
bonus outcomes 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.
The annual bonus awards for 2021 of 87.5%
of maximum (which is 100% of salary) for the
Group Chief Executive; 84.4% for the Deputy
Group Chief Executive; and 71.9% for the Group
Chief Financial Officer reflected the strong
performance of the Group during the year.
Further details of performance against the
targets set for 2021 are disclosed on page 166
of this report.
In view of the Group’s reported results for 2020,
35% of the awards for Executive Directors under
the 2020 plan were deferred for one year,
subject to the Group returning to profit in 2021.
In light of the Group’s welcome return to profit
in 2021, the Committee has approved payment
of the 2020 deferred awards.
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The long-term incentive plan (LTIP) granted
in 2019 vested at 47.0%, reflecting the Group’s
performance against the financial, strategic,
customer and conduct targets over the
2019-2021 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.
In line with the Committee’s established practice,
the Committee, supported by the Group Chief
Risk and Compliance Officer, considered risk
management outcomes across the Group
as part of its deliberations, including how
these had impacted individual performance
assessments where relevant. Following this
review, the Committee did not consider further
risk adjustment of the awards to be necessary.
Base salary
The level of salary increases for UK
Ecclesiastical employees is a key consideration
in setting the level of any salary increase
for Executive Directors. After careful
consideration the Committee determined that
the base salaries of Executive Directors would
be increased by 5.0% (effective 1 April 2022)
in line with the wider workforce.
Key Committee activities during the year
During 2021 the Committee undertook
a strategic review of the Group’s remuneration
policy and incentive design, including
the applicable performance measures
and targets, in order to ensure these continue
to drive the Group’s strategy and long-term
performance, including in respect of ESG
and climate change considerations. The review
was underpinned by the following principles:
fair reward; simplification of the Group’s
incentive arrangements; compliance with
evolving regulatory and corporate governance
requirements; linking pay and performance;
alignment of incentive designs with the Group’s
strategy and with shareholder expectations;
and consideration of the reputational impact
of any changes. As part of this strategic review
the Committee consulted with the Group’s
charitable owner and ultimate shareholder
Benefact Trust Limited (previously Allchurches
Trust Limited) and the Committee are grateful
for their support and counsel.
The 2022 Group Management Board (GMB)
annual bonus applicable to Executive Directors
and members of the Group’s leadership team
includes stretching targets in relation
to the delivery of profit; the Group’s growth
strategy; and its strategic change programme.
The new Greater Good measure supports
the Group’s ambition to build a Movement
for Good, incentivising delivery of its charitable
giving programme; exceptional customer
service; and the highest standards of conduct
and governance. In line with evolving market
practice, deferral of bonuses is increased
to one third of the total annual bonus awarded,
with deferral continuing to be over a period
of three years.
The award level applicable to Executive
Directors under the 2022–2024 Group LTIP
is increased to 180% for the Group Chief
Executive; and 120% for the Deputy Group
Chief Executive and Group Chief Financial
Officer. The 2022–2024 Group LTIP is subject
to performance measures which incentivise
the delivery of the Group’s return on capital
targets; the growth strategy applicable to each
of the Group’s divisions; the delivery of grants
to Benefact Trust Limited to support
its charitable work; and the Group’s climate
change targets for the period ahead.
Full details of the revised incentive
arrangements applicable to Executive Directors
and the Group’s senior leaders are set out
on page 156.
The Committee determined that the
remuneration packages of Executive Directors
remain appropriately aligned with the Group’s
strategic objectives and reflect both the
experience and track record of the Executive
Directors and comparative benchmarking.
The pension contribution rate for the Group
Chief Executive was reviewed during the year
and will be aligned with the wider workforce
rate of 12% of salary with effect from April 2022.
During 2021 the Committee also considered
the remuneration packages for a number
of its Material Risk Takers, ensuring that these
remained in line with evolving responsibilities
and market benchmarks.
The Group’s gender pay report for 2021 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 over time and this has contributed
to our median gender pay gap reducing for
a fifth consecutive year to 20.4%, from 21.1%
in 2020. The Group continues to be committed
to promoting inclusion and diversity through
our business and to 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 2021, the Committee
considered the implications of the Investment
Firms Prudential Regime on remuneration
policy; the BEIS white paper on ‘Restoring trust
in audit and corporate governance’; and the
Regulators’ proposals on improving diversity
and inclusion in financial services.
Conclusion
Finally, I value the continued support and
counsel of our charitable owner and ultimate
shareholder Benefact 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.
Sir Stephen Lamport
Chair of the Group Remuneration Committee
17 March 2022
Committee member
Member since
Meetings eligible Meetings
attended
to attend
Sir Stephen Lamport (Chair)1
David Henderson
Neil Maidment2
Angus Winther
Caroline Taylor3
June 2020
September 2016
March 2020
April 2019
November 2014
7
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7
5
7
7
6
7
5
1 Sir Stephen Lamport was appointed the Chair of the Committee on 8 September 2021.
2 Neil Maidment was unable to attend a meeting due to a prior commitment.
3 Caroline Taylor stepped down as Chair and member of the Committee on 8 September 2021.
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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 2021, the Committee held seven
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
Non-Executive Directors (NED) 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.
Remuneration Committee timetable
The table below sets out some of the key agenda items discussed at each Committee meeting
during 2021.
Meeting
Key discussion points
February 2021
• 2021 annual bonus and 2021-2023 LTIP design and targets
• 2021 Lycetts annual bonus design
• 2020 Directors’ Remuneration Report
• Material Risk Taker list
• Evaluation of Committee performance
February 2021
• 2021 annual bonus and 2021-2023 LTIP design and targets
• 2020 annual bonus and 2018-2020 LTIP outcomes
March 2021
April 2021
July 2021
October 2021
November 2021
• 2020 annual bonus and 2018-2020 LTIP outcomes
• Review of 2021 salary proposals
• 2020 Directors’ Remuneration Report
• Material Risk Taker list
• 2021 Committee objectives
• Strategic review of remuneration
• Strategic review of remuneration
• Review of executive remuneration trends and market practice
• Wider employee trends and policies
• Remuneration Policy review and Remuneration Policy Statement
• Review of remuneration packages for Material Risk Takers
• Material Risk Taker list
• Strategic review of remuneration
• Performance management policy
• Deferral policy
• Strategic review of remuneration
• Update on 2021 GMB pay outturns
• Wider employee remuneration trends and pay
• 2021 Directors’ Remuneration Report
• Material Risk Taker list
• Gender pay gap reporting
• Annual audit of EdenTree remuneration policy
• Review of remuneration packages for Material Risk Takers
• Annual review of Remuneration Committee Terms of Reference
Advisers to the Committee
Having stepped down as Chair and member
of the Committee in September 2021, Caroline
Taylor acted as an advisor to the Committee
for the period October 2021 to February 2022
to support the strategic review of the Group’s
remuneration policy.
During the year, the Committee received
external advice from Deloitte in relation
to the strategic review of remuneration;
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. The Committee also had access
to benchmarking reports from Willis Towers
Watson and McLagan, which provide additional
data to support the determination of pay
and conditions throughout the Group.
Fees for professional advice to the Committee
paid to Deloitte were £137,250 (2020: £99,222).
The Committee is satisfied that the advice
received during 2021 from Deloitte
was impartial.
To assist its work, 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.
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Remuneration ‘At a Glance’ – Remuneration Policy summary and implementation for 2022
During 2021 the Committee undertook a strategic review of and consulted with the shareholder regarding remuneration
policy and incentive design to ensure these continue to drive the Group’s strategy and long-term performance. The principles
which underpin the Group’s reward structures for all Group employees are set out in full on page 150. The table below sets
out the key features of the revised remuneration policy and how it will be implemented in 2022.
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.
For 2021, 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 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 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 2021, these were:
i) Benefact Group (BG) PBT (including fair value investment
gains/losses);
ii) Group Combined Operating Ratio (COR);
iii) Underwriting balanced scorecard;
iv) Strategic targets;
v) Customer and conduct targets; and
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 awards are granted annually and operate in three-year periods.
Under the rules of the LTIP applicable in 2021, 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 2021-23, the measures were:
i) Group BG PBT (including fair value investment gains/losses);
ii) Group BG PBT (excluding fair value investment gains/losses);
iii) Group COR;
iv) Strategic targets; and
v) Customer and conduct targets.
Malus and clawback provisions apply.
Implementation
for 2022
• CEO: £498,800
• Deputy CEO: £407,433
• Group Chief Financial Officer: £322,900
The Canadian branch car allowance applicable
to the Deputy CEO increases to £17k.
With effect from April 2022 the employer pension
contribution rate for Executive Directors appointed
before 2019, applicable to the Group Chief Executive,
reduces to 12% of salary, in line with the wider
employee population.
The maximum and target opportunities are
unchanged for 2022, with targets for 2022 being:
i) Group BG PBT (including fair value investment
gains/losses);
ii) Group BG PBT (excluding fair value investment
gains/losses);
iii) Underwriting balanced scorecard;
iv) Gross New Money;
v) Broking and Advisory turnover;
vi) Strategic targets;
vii) Greater Good targets; and
viii) Personal performance targets.
One third of total bonus earned is deferred over three
years. Malus and clawback provisions apply.
Under the rules of the LTIP applicable in 2022,
awards can be made of up to 180% of salary in the
case of the Group Chief Executive and of up to 120%
of salary in the case of other Executive Directors.
The measures applicable to the 2022-2024 LTIP
period are:
i) Group BG PBT (including fair value investment
gains/losses);
ii) Return on Capital;
iii) Underwriting profit;
iv) EdenTree revenue;
v) Broking and Advisory turnover;
vi) Grant to Benefact Trust Limited; and
vii) Environmental targets.
Malus and clawback provisions apply.
Remuneration ‘At a Glance’ – variable pay outturns
Annual bonus outturn for the year ending 31 December 2021
Further details including information on the performance assessment of the strategic
and customer and conduct metrics are set out on page 166 in this report.
Threshold (0.5x) Target
Maximum (1.5x) Weighted multiplier
Group BG PBT
(including fair value investment
gains/losses)
£7.6m
(1.0x)
£37.4m
£73.8m
0.60
Actual £83.6m
Group COR
97.0%
91.3%
86.3%
Actual 96.8%
Underwriting balanced
scorecard
Strategic Targets
50%
50%
75%
100%
Actual 90.8%
75%
100%
Actual 90.0%
Customer and Conduct
85%
90%
100%
Actual 99.0%
Total
0.10
0.13
0.20
0.22
1.25
2019-2021 LTIP Outturns
Further details including information on the performance assessment of the strategic
and customer and conduct metrics are set out on page 169 in this report.
Group BG PBT
(excluding fair value
investment gains/losses)
Group BG PBT
(including fair value
investment gains/losses)
Threshold
(20% vesting)
Target
(50% vesting)
Maximum
(100% vesting)
Percentage vesting
£82.4m
£114.1m
£156.2m
-
Actual £58.6m
£70.9m
£117.6m
£189.8m
63%
Actual £135.7m
Group COR
96.6%
93.6%
89.3%
41%
Strategic Targets
50%
75%
100%
Actual £94.5%
Customer and Conduct
85%
90%
100%
Actual £97.3%
Actual £91.8%
Total
84%
87%
47%
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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.
9. The Group holds itself to the high standards
of corporate behaviour as a trusted,
ethical and socially responsible business
and is mindful of the need to maintain and
build on these standards, and to avoid
risk of reputational damage to the Group
and Benefact Trust Limited through the
implementation of its remuneration policy.
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 2022.
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, and
take into account the expectations of the
shareholder. 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.
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.
When determining remuneration policy
for Executive Directors, the Committee considers
the following factors, which are embedded
in the Group’s 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.
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Future policy table (Executive Directors)
How the element supports the
Group’s strategic objectives
Operation of the element
Maximum potential value and payment at threshold
Performance measures used, weighting
and time period applicable
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 normally reviewed annually with any changes
normally taking effect from 1 April each year.
Group and individual performance
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.
Salary increases will normally be in line with the increase
applicable to the wider employee population, but higher salary
increases can be awarded in certain circumstances such
as (but not limited to) where there is an increase in scope
of role or responsibility; due to performance in the role;
or where there has been an increase in the size and/or
complexity of the business.
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.
The cash allowance is equal to the employer contribution rate,
net of employer’s national insurance contributions.
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 is 12% of salary, in line with
the wider employee population.
The employer contribution rate to the Canada Defined
Contribution Pension plan is 12% of salary subject
to the government’s annual contribution limits.
Amounts in excess are contributed to a SERP.
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Future policy table (Executive Directors) continued
How the element supports the
Group’s strategic objectives
Operation of the element
Maximum potential value and payment at threshold
Performance measures used, weighting
and time period applicable
GMB 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.
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.
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.
One third of total bonus earned is deferred over three years.
Maximum opportunity of 100% of salary of which 50%
is payable for a target level of performance.
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.
Under the rules of the LTIP, awards can be made
of up to 180% of salary in the case of the Group Chief
Executive and of up to 120% 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 GMB annual bonus is subject to a range of challenging
financial and non-financial metrics linked to key strategic priorities.
For 2022, these are:
• Group BG PBT (including fair value investment gains/losses);
• Group BG PBT (excluding fair value investment gains/losses);
• Underwriting balanced scorecard;
• EdenTree Gross New Money;
• Broking and Advisory turnover;
• Strategic targets;
• Greater Good targets; and
• Personal performance targets.
The Group LTIP is subject to a range of challenging financial and
non-financial conditions linked to key strategic priorities.
For 2022 awards relating to the performance period 2022-2024,
the following performance conditions will apply:
• Group BG PBT (including fair value investment gains/losses);
• Return on capital;
• Underwriting profit;
• EdenTree revenue;
• Broking and Advisory turnover;
• Grant to Benefact Trust Limited; and
• Environmental targets.
Notes to policy table
Performance measures and targets
During 2021 the Committee undertook a strategic
review of remuneration policy and incentive
design, including the applicable performance
measures and targets, in order to ensure these
continue to drive the Group’s strategy and long-
term performance. The Committee selected
the performance conditions set out in the table
above because they are central to the Group’s
new strategy and are key metrics used
in measuring the performance of the Group.
As part of this strategic review the Committee
consulted with the Group’s charitable owner
and ultimate shareholder Benefact Trust Limited
and the Committee are grateful for their support
and counsel. The Committee additionally sought
input from the Group Chief Risk and Compliance
Officer, in particular regarding the extent to which
the revised 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 cause
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)
where:
(i) There are material issues regarding
the Group’s underlying financial
strength and position (including
if the Group has made a loss);
(ii) There is actual or potential material
regulatory censure;
(iii) The Group is in material breach
of its risk policies (including conduct
risk) and/or its values and ethics;
(iv) There is material reputational damage
or a material diminution in the regard
by which the Group is held
by its customer base; or
Bonus already paid or deferred,
LTIP already vested and any unvested LTIP
are subject to malus and clawback
in certain circumstances, including
(but not limited to) where:
(i) There are issues regarding the material
accuracy of the calculated award;
(ii) There is material regulatory censure,
or material reputational damage
or a material diminution in the regard
by which the Group is held by
its customer base;
(iii) There is material non-adherence
to the Group’s risk guidance, limits and
/or tolerances (including conduct risk);
(v) There is a material reduction in the
(iv) The Group or any company within
Group’s and/or any regulated entity’s
Solvency ratio and/or a material
reduction in EdenTree’s capital base
and/or a material reduction in the
Group’s credit rating.
the Group suffers a material failure
of risk management;
(v) There is reasonable evidence
of misbehaviour or material error
on the part of a scheme participant;
(vi) There is a corporate failure of the Group
and/or any company within the Group
and/or there has been unreasonable
failure to protect the interests
of employees and customers; or
(vii) (In relation to malus only) the Group
or any company within the Group
suffers a material downturn
in its financial performance.
A three-year time limit applies in respect
of clawback from the date of bonus
payment and LTIP vesting.
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
GMB Annual Bonus and Group LTIP
arrangements are not subject to a post
vesting holding period.
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Changes to the Policy from that operating in 2021
The Committee carried out a strategic review of the Group’s remuneration policy and incentive
design during 2021 in order to ensure these continue to drive the Group’s strategy and long-term
performance, including in respect of ESG and climate change considerations.
As a result of the review, the following revised performance conditions will apply to the GMB
annual bonus for 2022, together with individual performance:
Group performance measures
Percentage
weighting
Strategic rationale
Group BG PBT (including fair value
investment gains and losses)
Group BG PBT (excluding fair value
investment gains and losses)
25%
25%
Underwriting balanced scorecard
10%
Gross New Money
Broking and Advisory Turnover
Delivery of Group strategic initiatives
in line with the Group’s strategic plan
Greater Good
5%
5%
15%
15%
To incentivise delivery of overall
profitability targets
To incentivise delivery of profitability targets,
excluding market movements
To incentivise delivery of the general insurance
growth strategy through achievement
of a balanced scorecard of rate adequacy,
retention and new business targets
To incentivise delivery of the EdenTree
growth strategy
To incentivise delivery of the Broking
and Advisory growth strategy
To incentivise delivery of the Group’s strategic
change programme
Aligned to the Group’s ambition to build
a Movement for Good, to incentivise delivery
of the Group’s charitable giving and colleagues’
engagement with the Group’s MyGiving
programme; of exceptional customer service;
and of the highest standards of conduct
and governance
In line with evolving market practice, deferral of bonuses is increased in 2022 to one third
of the total annual bonus awarded, with deferral continuing to be over a period of three years
(previously bonus earned in excess of 75% of maximum opportunity was deferred over three years).
Malus and clawback provisions are amended as set out on page 154.
Following the review, the following revised performance conditions will apply to the Group LTIP
for 2022-2024:
Group performance measures
Percentage
weighting
Strategic rationale
Group BG PBT (including fair value
investment gains and losses)
Return on Capital
30%
30%
General Insurance Underwriting Profit
10%
EdenTree Revenue
Broking and Advisory Turnover
Grant to Benefact Trust Limited
Environmental targets
5%
5%
10%
10%
To incentivise delivery of overall
profitability targets
To incentivise delivery of return on capital targets
To incentivise delivery of the general insurance
growth strategy
To incentivise delivery of the EdenTree
growth strategy
To incentivise delivery of the Broking
and Advisory growth strategy
To incentivise delivery of Grants to Benefact Trust
Limited to support the Trust’s charitable work
To incentivise delivery of the Group’s climate
change strategy
Malus and clawback provisions are amended as set out on page 154.
The pension contribution rate for the Group Chief Executive will be aligned with the wider workforce
rate of 12% of salary with effect from April 2022.
These changes to the Group’s Remuneration Policy will be made in 2022 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
150. 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 which may be applicable.
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.
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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 2022,
under different performance scenarios:
• Minimum: fixed pay only (being salary,
pension or cash in lieu of pension
and benefits) with no annual bonus
and no vesting of the LTIP;
• Fixed pay is base salary for 2022 plus
the value of pension and benefits.
• Salary is the salary applicable
at 1 April 2022.
• 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 2021.
• On target: fixed pay plus annual bonus
• The Group operates a cash LTIP
of 50% of salary and 50% vesting
of the LTIP; and
• Maximum: fixed pay plus maximum
bonus of 100% of salary and 100%
vesting of the 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 £563k
On-Target
Maximum
45%
29%
20%
34%
Total £1,240k
26%
45%
Total £1,917k
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.
Any new Executive Director’s package would
include the same elements and generally
be subject to the same constraints as existing
Executive Directors.
The Committee’s approach is to pay a fair
market value to attract appropriate candidates
to the role, taking into consideration their
individual skills and experience and the ethos
of the Group.
Where it is thought necessary to compensate
for an individual’s awards resulting from
previous employment, the Group may, as far
as practicable, seek to match the expected
value of such awards through the use of the
Group’s existing incentive arrangements. Where
this is not possible, it may be necessary to offer
some form of ‘buy-out’ award, the size of which
will, in the normal course of events, reflect the
commercial value of the award foregone (and
the vesting timetable of the awards foregone)
and will also (where possible) be subject
to some form of clawback if the individual
leaves Ecclesiastical within a set timeframe.
The Group retains discretion to adjust
the balance of the annual bonus and LTIP
and the measures used to assess performance.
Other payments may be made in relation
to relocation expenses and support
as appropriate.
In the case of an internal appointment,
any incentive awards in respect of the prior
role would be allowed to continue according
to its original terms, or be adjusted
if appropriate to take into account
the appointment.
The Group retains discretion to make
appropriate remuneration decisions outside
the Policy to meet the individual circumstances
of recruitment when:
• an interim appointment is made to fill
an Executive Director role on a short-term
basis; and
• exceptional circumstances require that
the Chair or a Non-Executive Director
takes on an executive function
on a short-term basis.
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Service contracts and policy on payment for loss of office
Service contracts and policy on payment for loss of office continued
Standard provision
Policy
Details
Standard provision
Policy
Details
Notice periods in Executive
Directors’ service contracts
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 £504k
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
Except in the case of the Group
Chief Executive, Executive
Directors’ service contracts
expressly provide for mitigation
on termination by allowing for
payment in instalments over
the balance of the notice period.
The Committee will take
account of the circumstances
of the termination and the
Director’s performance during
the period of qualifying service
to determine whether the
exercise of any discretion
is appropriate.
Treatment of annual bonus
on termination or change
of control under plan rules
Treatment of long-term
incentive awards
on termination or change
of control under plan rules
No payment is to be made
unless the executive
is employed on the date
of bonus payment except
for ‘good leavers’ as defined
in the plan rules (for example
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 (for example
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.
Good leavers are entitled
to a bonus payment subject
to the achievement of bonus
criteria which is pro-rated
down to reflect their service
during the performance
year unless the Committee
determines that a higher
amount is justified. A similar
provision would apply if there
were a change of control
event. Bonus payments
for good leavers are subject
to deferral, malus
and clawback.
For good leavers, vesting
is determined based on the
application of the performance
conditions and any award
is then pro-rated down based
on the proportion of the
36-month performance period
that the employee has served
since the grant date unless
the Committee determines that
a higher amount is justified.
A similar provision would
apply if there were a change of
control event. For good leavers
grants vest on the original
anniversary date.
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Service contracts and policy on payment for loss of office continued
NED fees policy
Standard provision
Policy
Details
Exercise of discretion
Discretion is intended
to be relied upon only
in certain circumstances
as set out on page 161.
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.
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 Chair’s fees,
are approved by the Board and
at a general meeting, following
recommendation by the Chair
and Executive Directors.
NEDs take no part in the
discussion relating to their
own fees. The Chair’s and the
SID’s fees are considered and
approved by the Board in the
absence of the Chair 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.
NEDs and the Chair 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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Annual Report on Remuneration
This section of the Directors’ Remuneration
Report sets out how the above Remuneration
Policy was implemented in 2021 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 2021 financial
year for each Executive Director, together
with comparative figures for 2020.
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.
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 additionally consults with
the shareholder in respect of the NED’s
and the Chair’s fees.
During 2021, the Committee consulted
the shareholder throughout its strategic
review of remuneration in order to understand
the shareholder’s expectations with regard
to Executive Directors and wider employee
remuneration and the shareholder’s
views in relation to the evolving
remuneration proposals.
£000
Fixed pay
Pension
Salary
Benefits1
Pension
benefit2
Total fixed
remuneration
Fixed
Variable pay
Total variable
remuneration
Total
remuneration
Annual
bonus3
LTIP4
Variable
Total
2021
2020 2021
2020 2021
2020 2021
2020 2021
2020 2021
2020 2021
2020 2021
2020
475
388
472
386
14
37
308
306
13
14
22
13
61
69
32
61
57
551
493
547
465
416
327
214
180
319
174
355
193
734
501
569
1,285
1,116
374
994
839
32
353
351
221
133
108
0
329
133
682
484
Executive
Director
Mark Hews
S. Jacinta
Whyte5 6
Denise
Cockrem
Total
1,171
1,164
64
49
162
150
1,397 1,363
964
527
601
548
1,564 1,076 2,961 2,439
1 Benefits include car allowance and private medical insurance which are valued at their taxable value. Provision of benefits during 2021 was in line
with the Directors’ Remuneration Policy. The Deputy Group Chief Executive received £15k in 2021 in respect of outstanding annual leave.
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 national insurance 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 In line with the deferral policy, annual bonus earned in respect of 2021 which is in excess of 75% of the maximum bonus opportunity is deferred over
a period of three years. In 2021 the value of Executive Directors’ annual bonuses that are deferred is: £59k (Group Chief Executive) and £36k
(Deputy Group Chief Executive). 35% of the awards under the 2020 annual bonus plan were deferred for one year and were subject to the Group
returning to profit in 2021. These amounts became payable in March 2022 on the Group returning to profit in 2021.
4 LTIP represents the amount payable in respect of the three-year LTIP performance period 2019-2021 for 2021 and 2018-2020 for 2020.
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 2021 exchange rate of 1.7247 Canadian dollars to 1 GBP has been used in respect of both 2021 and 2020.
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 and interest accruing to the SERP are included in the figures shown.
Mark Hews is a NED for MAPFRE RE and was appointed to their Board in December 2013. The fee of £30k (2020: £34k)
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 resigned as a NED of Skipton Building Society in April 2021. The fee that Denise Cockrem earned in respect
of this role was paid directly to the Group by Skipton Building Society and was not received by Denise Cockrem. The fee
earned in respect of 2021 was £15.6k (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).
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Additional requirements in respect
of the single total figure table
Annual bonus outcomes for 2021 (audited)
The annual bonus awards for 2021 were 87.5%
of maximum (which is 100% of salary)
for the Group Chief Executive; 84.4%
for the Deputy Group Chief Executive; and
71.9% for the Group Chief Financial Officer.
The annual bonuses outturns were determined
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.
these were Group BG PBT (including fair value
investment gains and losses) (40%); Group COR
(20%); Underwriting balanced scorecard
(10%); 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 2021 were not adjusted as a result
of the impact of the Covid-19 pandemic
and remain as originally determined.
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.
Group performance is subject to the five
performance conditions which together form
the Group performance multiplier. For 2021,
The targets relating to the GMB annual bonus
and actual performance against those targets
for the financial year 2021 were:
Performance
Condition
Group BG PBT1
Group COR
Underwriting
balanced scorecard
Strategic Targets
Customer and
Conduct
Weighting
Threshold
(0.5x)
40%
20%
10%
15%
15%
£7.6m
97.0%
50%
50%
85%
Target
(1.0x)
£37.4m
91.3%
75%
75%
90%
Aggregate Group performance multiplier
1 Audited to EIO Group level
Maximum
(1.5x)
Actual
performance
Weighted
multiplier
£73.8m
£83.6m
86.3%
100%
100%
100%
96.8%
90.8%
90.0%
99.0%
0.60
0.10
0.13
0.20
0.22
1.25
satisfaction continued to be high through 2021,
with 98% of customers and brokers reporting
that they were satisfied with the service they
received from Ecclesiastical. This outstanding
level
of customer service, together with the Group’s
strong customer and conduct culture and
effective systems of control, drove another
strong performance against the Group’s
customer and conduct targets, with an outturn
of 99.0% being achieved in 2021. In just one
business unit customer satisfaction outturns
were slightly below target. 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.
The Strategic Targets performance condition
measures delivery of the Group’s change
programme. As set out in more detail
in the Strategic Report, 2021 saw both
significant progress on the Group’s strategic
initiatives and the launch of an ambitious
new strategy for the Group. During the year,
the Group launched the new Ecclesiastical
brand; opened its new head office; delivered
further investment in systems, technology and
innovation; grew the Broking and Advisory
business; and invested in the EdenTree
business, including strengthening the team
and launching three new funds. The Group’s
climate change strategy was agreed by the
Board and a new responsible and sustainable
investment strategy implemented. Overall
in 2021, substantial progress was made
on the Group’s change programme, resulting
in an outturn of 90.0% being achieved against
the strategic targets measure for 2021.
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. Customer
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Personal performance
Personal performance was assessed taking into consideration delivery against the Group’s
business plans for 2021, 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 assessment of personal performance for 2021 takes account of the additional challenges
that the ongoing Covid-19 pandemic has presented.
Mark Hews
S. Jacinta Whyte
Denise Cockrem
Delivered another year of exceptional leadership across the Group
throughout what has been a pivotal year in the Group’s history. Under Mark
Hews’ leadership, 2021 saw the Group recover strongly from the challenges
caused by Covid-19 in 2020, with the Group reporting a profit before tax
of £77.0m in 2021 and exceeding its goal of donating more than £100m
to good causes.
The Group continued to deliver for customers, maintaining outstanding
levels of customer satisfaction, with 98% of customers and brokers reporting
that they were satisfied with the service they received from Ecclesiastical.
Employee engagement levels remained high, with the Group being awarded
a two-star ‘outstanding’ accreditation by Best Companies.
During 2021, Mark Hews oversaw the development of the new Benefact
Group identity and name for the Group, the delivery of transformational
changes including investments in new systems and technology, a new
head office, the new Ecclesiastical brand for the Group’s General Insurance
businesses and a new ambitious strategy behind which the whole Group
can align.
Continued to provide strong leadership across the Group’s General
Insurance portfolio of businesses. Playing a central leadership role
in the Group’s ongoing Covid-19 response, Jacinta Whyte ensured that
the Group’s General Insurance businesses continued to provide market
leading products and service as well as overseeing the management
of business interruption claims.
Jacinta Whyte additionally managed a programme of work to strengthen
the Group’s overall management of data, enabling the Group to be increasingly
strategic in its use of data in support of its long-term business goals.
Further improved the financial strength of the Group during 2021 and made
a significant contribution across the Group which has been central to the
delivery of the business plan, including overseeing a return to profitability
in all of the Group’s businesses at the same time as maintaining control
over costs.
Denise Cockrem additionally managed the issuance of €30m subordinated
debt in February 2021, as the Group seeks to take advantage of profitable
growth opportunities, and continued to lead and strengthen the Group’s Risk,
Compliance and Audit functions.
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 154.
LTIP outcomes in 2021 (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 2019-2021, which vested at 47.0%. Vesting was dependent
on performance over the three financial years ending on 31 December 2021 and continued service
until March 2022.
The 2019-2021 Group LTIP is subject to five performance conditions: Group BG PBT (excluding fair
value investment gains and losses) (25%); Group BG PBT (including fair value investment gains
and losses) (25%); Group COR (25%); delivery of Group strategic initiatives in line with the Group’s
strategic plan (15%); and Customer and Conduct performance (10%). 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
Vesting
(% of maximum
for performance
condition)
Group PBT (excluding
fair value investment
gains and losses)1
Group PBT
(including fair value
investment gains and
losses)1
Group COR
Strategic Targets
Customer and Conduct
Total
1 Audited to EIO Group level
£82.4m
£114.1m
£156.2m
£58.6m
-
£70.9m
£117.6m
£189.8m
£135.7m
63%
96.6%
50%
85%
93.6%
75%
90%
89.3%
100%
100%
94.5%
91.8%
97.3%
41%
84%
87%
47.0%
The Strategic Targets performance condition measures delivery of the Group’s change programme
over the period 2019-2021. During 2021 the Group surpassed its target of delivering £100m to good
causes. 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; launching the new Ecclesiastical and
Benefact Group brands; further strengthening the Group’s award winning EdenTree business;
adoption of a climate change strategy for the Group; and the launch of an ambitious new strategy
for the Group. 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 91.8% being achieved against
the strategic targets measure for 2019-2021.
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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. Customer satisfaction outturns were slightly below
target for one business unit in 2021 and for two business units in 2020, with all business units
meeting targets in 2019. Claims service outturns were slightly below target in 2020, reflecting
the challenges of Covid-19, having been met in full in 2019 and 2021. Targets relating to the Group’s
rolling programme of product reviews were met in full in 2021 and 2020, with one business unit
reporting below target outturns in 2019. An overall outturn of 97.3% was achieved.
Combining the financial and non-financial performance results in an overall vesting level of 47.0%.
The Group LTIP outcome that vests in respect of each Executive Director in respect of 2019-2021
is shown below.
Mark Hews
S. Jacinta Whyte1
Denise Cockrem2
LTIP grant
% of salary
150%
100%
100%
Total LTIP vesting
£000
319
174
108
% of maximum
47.0%
47.0%
47.0%
1 An average 2020 exchange rate of 1.7247 Canadian dollars to 1 GBP has been used in respect of 2021.
2 Denise Cockrem was appointed to the Board on 6 September 2019.
Scheme interests awarded during 2021 (audited)
During 2021, awards comprising of a cash sum were granted under the 2021-2023 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 2024, to the extent that the applicable
performance targets are met. The vesting date for these awards is the date on which
the Group’s 2023 results are announced, anticipated to be during March 2024.
Executive
Director
Award
date
Maximum
cash sum
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
26 Jul
2021
150%
713
20%
31 December
2023
S. Jacinta
Whyte2
26 Jul
2021
100%
388
20%
31 December
2023
Denise
Cockrem
26 Jul
2021
100%
308
20%
31 December
2023
• Group BG PBT
(including fair value
investment gains/
losses) 40%;
• Group BG PBT
(excluding fair value
investment gains/
losses) 20%;
• Group COR 15%;
• Strategic targets
15%; and
• 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 2021 exchange rate of 1.7247 Canadian dollars to 1 GBP has been used.
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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
2021
2020
2019
Option A 2
Option A 2
Option A 2
25th percentile pay
ratio
Median pay ratio
75th percentile pay
ratio
32.1
30:1
40:1
23.1
23:1
29:1
17.1
16:1
21:1
The total remuneration and salary values for the 25th percentile, median and 75th percentile
employees for 2021 were:
25th percentile
Total remuneration3
Salary
£40,755
£31,948
Median
£55,306
£42,506
75th percentile
£77,786
£57,562
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 2021.
The Group Chief Executive was paid 23 times the median employee in 2021, with the CEO pay
ratios being broadly consistent with the prior year. 2021 awards under both the Group’s GMB
and employee annual bonus schemes were materially higher in comparison to the prior year,
in line with 2021 performance. Vesting of the 2019-2021 Group LTIP was, however, marginally
lower than the prior year. Whilst salary increases were awarded to employees during 2021,
those of the Group Chief Executive, Directors or other senior leaders across the Group
were frozen, in light of the impact of the Covid-19 pandemic.
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 2020 to 2021) 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.
Salary
Taxable benefits2
Annual bonus
Executive Directors
Mark Hews
Jacinta Whyte
Denise Cockrem
UK-based employees
0.6%
0.6%
0.6%
Average UK-based employees1
3.9%
0.1%
67.1%
0.0%
1.1%
94.7%
81.5%
65.6%
132.0%
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).
The Deputy Group Chief Executive received £15k in respect of outstanding annual leave in 2021 (2020: £0k).
The fee paid to the Chair and the basic fee for NEDs were unchanged in 2021 compared to 2020.
Relative importance of spend on pay
The table below sets out for 2021 and 2020, the actual costs of employee remuneration;
grants paid to Benefact Trust Limited; and dividends paid to Preference shareholders.
PBT in each year is provided for context.
(£000)
Remuneration paid to all Group employees
Gross charitable grants to the ultimate
parent company, Benefact Trust Limited2
2021
102,313
21,000
2020
86,840
Nil
Non-Cumulative Irredeemable Preference
share dividend
9,181
9,181
Profit/(loss) before tax3
77,037
(15,746)
% change
17.8%1
N/A
Nil
N/A
1. In light of the Group’s reported results, total variable remuneration is significantly increased compared to 2020
as set out above. In addition, there has been an increase in the number of employees and salary inflation.
See note 13 to the financial statements.
2 An additional grant of £5m has been made in 2022 following finalisation of the Group results.
3 Ecclesiastical Insurance Office (EIO) Group.
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175
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 2021.
Financial year ending 31 December
Financial
year
Group Chief
Executive1
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Total remuneration
(single figure) £000
Annual bonus
received (% of
maximum)
Long-term incentive
vesting (% of
maximum)
Mark Hews
N/A
569
907
1,089 1,370 1,212 1,240 1,489 1,116 1,285
Michael
Tripp
390
330
162
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Mark Hews
N/A
45% 78% 88% 97% 99% 84% 96% 45% 88%
Michael
Tripp2
0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Mark Hews3 N/A
4%
60% 70% 88% 75% 88% 86% 54% 47%
Michael
Tripp4
0%
4%
47% N/A
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. 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 2021.
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.
£
Fees
Taxable Benefits1
Non-Executive Directors
2021
2020
David Henderson2
Chris Moulder3
Andrew McIntyre4
Sir Stephen Lamport5
Angus Winther6
Francois-Xavier Boisseau7
Neil Maidment8
Rita Bajaj9
Caroline Taylor10
The Very Revd Christine Wilson11
Total
145,000
145,000
75,000
68,000
59,087
66,000
61,500
55,000
25,417
46,879
0
601,883
74,772
68,000
42,708
66,000
55,000
54,402
0
68,000
26,485
600,637
2021
182
0
0
385
0
0
0
0
222
0
789
2020
987
5
4
159
144
263
6
0
2,869
1,467
5,904
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 Chair on 19 March 2019.
3 Chris Moulder was appointed as the SID on 14 January 2020 and a NED on 27 September 2017. He became Chair
of the Group Nominations Committee on 7 January 2020 and Chair of the Group Risk Committee on 1 June 2018.
4 Andrew McIntyre was appointed as a NED and Chair of the Group Audit Committee on 4 April 2017.
5 Sir Stephen Lamport was appointed as a NED on 23 March 2020 and Chair of the Group Remuneration Committee
on 8 September 2021.
6 Angus Winther was appointed as a NED on 19 March 2019 and Chair of the Group Finance and Investment Committee
on 1 January 2020.
7 Francois-Xavier Boisseau was appointed as a NED on 19 March 2019 and to undertake a Broker Oversight role
on 1 July 2021.
8 Neil Maidment was appointed as a NED on 6 January 2020.
9 Rita Bajaj was appointed as a NED on 15 July 2021.
10 Caroline Taylor retired from the Board and as Chair of the Group Remuneration Committee on 8 September 2021.
11 The Very Revd Christine Wilson retired from the Board on 18 June 2020. Christine Wilson chose to donate her fee
to charity in 2020.
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177
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 2022
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 2022
are set out below.
Salary (Executive Directors)
Executive Directors’ salaries are reviewed annually in line with the Directors’ Remuneration
Policy. The level of salary increases for UK Ecclesiastical employees is a key consideration
in setting the level of any salary increase for Executive Directors. After careful consideration
the Committee determined that the salaries of Executive Directors would be increased by
5.0% in line with the wider workforce. The following salaries will apply from 1 April 2022:
(£000)
Salary
Salary
Mark Hews
S. Jacinta Whyte1
Denise Cockrem
1 April 2022
1 April 2021
499
407
323
475
388
308
1 An average 2021 exchange rate of 1.7247 Canadian dollars to 1 GBP has been used.
Percentage
increase
5.0%
5.0%
5.0%
Annual bonus for 2022
The annual bonus performance conditions and targets have been set in accordance with
the Directors’ Remuneration Policy above.
As set out above, a strategic review of the Group’s incentive arrangements was carried out in 2021,
with the resulting revised arrangements below applying from 2022.
The annual bonuses payable to Executive Directors in respect of 2022 will be assessed based
on both Group and individual performance. Individual performance continues to be subject
to delivery of personal performance objectives and performance in line with the Group’s culture
and behaviours framework, expressed as a personal performance multiplier. Group performance
is subject to seven performance conditions which together form the Group performance multiplier.
For 2022, these will be as follows:
Group performance measures
Percentage weighting
Group BG PBT (including fair value investment gains and losses)
Group BG PBT (excluding fair value investment gains and losses)
Underwriting balanced scorecard
Gross New Money
Broking and Advisory Turnover
Delivery of Group strategic initiatives in line with the Group’s strategic plan
Greater Good (including charitable giving; employee engagement with
MyGiving programme; customer and conduct; and governance)
25%
25%
10%
5%
5%
15%
15%
The overall bonus outturn for each Executive Director is the product of their target bonus
opportunity, personal performance multiplier and the aggregate Group performance multiplier.
The maximum opportunity under the annual bonus plan in 2022 is 100% of salary. Annual bonuses
in respect of 2022 will be subject to deferral, over a period of three years, of one third of the total
annual bonus awarded.
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Ecclesiastical Annual Report & Accounts 2021
179
179
LTIP for 2022-2024
The 2022-2024 LTIP performance conditions and targets have been set in accordance
with the Directors’ Remuneration Policy above. As outlined above, a strategic review
of the Group’s incentive arrangements was carried out in 2021, with the resulting revised
performance conditions below applying for the 2022-2024 Group LTIP:
Group performance measures
Percentage weighting
Group BG PBT (including fair value investment gains and losses)
Return on Capital
General Insurance Underwriting Profit
EdenTree Revenue
Broking and Advisory Turnover
Grant to Benefact Trust Limited
Environmental targets
30%
30%
10%
5%
5%
10%
10%
Awards under the 2022-2024 Group LTIP will be up to 180% of salary in the case of the Group
Chief Executive and up to 120% 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 Chair
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 Broker Oversight Role
Fee for chairing the Group Finance and Investment Committee
Fee for chairing the Group Nominations Committee1
Fees (£000)
145
75
55
13
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 2022.
By order of the Board
Sir Stephen Lamport
Chair of the Group Remuneration Committee
17 March 2022
‘A transformational
year for the Group,
2021 saw significant
progress on the
Group’s strategic
initiatives and the
launch of a new and
ambitious Group
strategy which aims
to raise £250m for
good causes by the
end of 2025.’
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Financial Statements
Independent auditors’ report to the members of Ecclesiastical Insurance Office plc
Financial Statements
182
191
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182
183
Independent auditors’ report to the members
of Ecclesiastical Insurance Office plc
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.
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.
Other than those disclosed in note 12, we have
provided no non-audit services to the parent
company or its controlled undertakings
in the period under audit.
Report on the audit of the
financial statements
Opinion
In our opinion, Ecclesiastical Insurance Office
plc’s group financial statements and parent
company financial statements (the “financial
statements”):
• give a true and fair view of the state
of the group’s and of the parent company’s
affairs as at 31 December 2021 and
of the group’s profit and the group’s
and parent company’s cash flows
for the year then ended;
• have been properly prepared in accordance
with UK-adopted international accounting
standards; 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 statement of financial
position as at 31 December 2021; Consolidated
statement of profit or loss, Consolidated and
parent statement of comprehensive income,
Consolidated and parent statement of cash
flows and Consolidated and parent statement
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.
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.
Completeness of reserves in relation
to business interruption claims, valuation
of investment property and unlisted equity
and impact of Covid-19, which were key audit
matters last year, are no longer included
because of the subsequent easing of lockdown
restrictions and start of the recovery from
the pandemic has resulted in the reduction
of the level of uncertainty surrounding these
areas of the audit. Otherwise, the key audit
matters below are consistent with last year.
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 subsidiaries that carries out
insurance broking, life insurance, investment
management and financial advisory business.
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 used in calculating asbestos
and Physical and Sexual Abuse “PSA” reserves
(group and parent).
Materiality
• Overall group materiality: £11,382,000
(2020: £10,000,000) based on 1.8%
of Net assets.
• Overall parent company materiality:
£10,813,000 (2020: £9,500,000) based
on 2.0% of Net assets.
• Performance materiality: £8,536,000
(2020: £7,500,000) (group) and £8,109,000
(2020: £7,100,000) (parent 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.
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Key audit matter
Assumptions used in calculating asbestos
and Physical and Sexual Abuse “PSA” reserves
(group and parent)
As disclosed in the Group Audit Committee
Report and notes 2, 3 and 27. 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 area of significant judgement
to be specific to assumptions used in calculating
the reserves for asbestos and PSA exposures,
specifically in relation to the incurred but not
reported (‘IBNR’) element of these reserves.
Specifically, the assumptions requiring significant
judgement and estimation are claims frequency,
claim severity, the discount rate, future inflation,
and the reserve margin.
How our audit addressed the key
audit matter
With involvement from our Actuarial specialists
we have performed the following procedures:
– Observed the Reserving Committee control
which reviews, challenges and approves
the assumptions used within the calculation
of the reserves;
– Challenged the assumptions used
by management and considered reasonable
alternative assumptions and the impact
of the level of reserves calculated.
This includes consideration of the historic
claim numbers, average claims cost, the
current regulatory environment and IICSA
review (for PSA) and Asbestos Working Party
(for asbestos), discount rate, future inflation
and level of margin.
- We have assessed the appropriateness
of the resulting reserves based on the
assumptions selected.
Based on the work performed and evidence
obtained, we consider the assumptions used
in the calculation of the asbestos and PSA
reserves to be appropriate.
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 parent 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 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 include
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 and 95% coverage of insurance
contract liabilities.
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:
Financial statements – group
Financial statements
– parent company
Overall materiality £11,382,000 (2020: £10,000,000).
£10,813,000 (2020: £9,500,000).
How we
determined it
Rationale
for benchmark
applied
1.8% of Net assets
2.0% of Net assets
The engagement team concluded
that a net assets benchmark
is the most appropriate when setting
an overall materiality on the 2021
audit engagement. We consider
net assets to be the appropriate
benchmark as it best aligns
with the underlying interest
of the stakeholders.
The engagement team concluded
that a net assets benchmark
is the most appropriate when setting
an overall materiality on the 2021
audit engagement. We consider
net assets to be the appropriate
benchmark as it best aligns
with the underlying interest
of the stakeholders.
The percentage of net assets
of 1.8% is consistent with the prior
period. The quantum of materiality
was determined by considering
the various benchmarks available
to us as auditors, our experience
of auditing other insurance groups
and the business performance
during 2021.
The percentage of net assets
of 2.0% is consistent with the prior
period. The quantum of materiality
was determined by considering
the various benchmarks available
to us as auditors, our experience
of auditing other insurance groups
and the business performance
during 2021.
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 £2.0 million and £10.0 million.
Certain components were audited to a local
statutory audit materiality that was also less
than our overall group materiality.
of account balances, classes of transactions
and disclosures, for example in determining
sample sizes. Our performance materiality
was 75% (2020: 75%) of overall materiality,
amounting to £8,536,000 (2020: £7,500,000)
for the group financial statements and
£8,109,000 (2020: £7,100,000) for the parent
company financial statements.
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
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.
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187
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 parent company’s ability to continue
as a going concern.
In relation to the directors’ reporting on
how they have applied the UK Corporate
Governance Code, we have nothing material
to add or draw attention to in relation to the
directors’ statement in the financial statements
about whether the directors considered
it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities
of the directors with respect to going concern
are described in the relevant sections
of this report.
We agreed with the Group Audit Committee
that we would report to them misstatements
identified during our audit above £560,000
(group audit) (2020: £500,000) and £540,000
(parent company audit) (2020: £475,000)
as well as misstatements below those amounts
that, in our view, warranted reporting
for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment
of the group’s and the parent 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; 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 parent 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.
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 2021
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 parent 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.
Corporate governance statement
ISAs (UK) require us to review the directors’
statements in relation to going concern,
longer-term viability and that part of the
corporate governance statement relating
to the parent company’s compliance with
the provisions of the UK Corporate Governance
Code, which the Listing Rules of the Financial
Conduct Authority specify for review
by auditors of premium listed companies.
Our additional responsibilities with respect
to the corporate governance statement
as other information are described in the
Reporting on other information section
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.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Independent auditors’ report to the members of Ecclesiastical Insurance Office plcSection FourSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 188
189
Based on the work undertaken as part
of our audit, we have concluded that each
of the following elements of the corporate
governance statement, included within
the Governance and Strategic Report sections
is materially consistent with the financial
statements and our knowledge obtained during
the audit, and we have nothing material
to add or draw attention to in relation to:
• The directors’ confirmation that they have
carried out a robust assessment
of the emerging and principal risks;
• The disclosures in the Annual Report
that describe those principal risks,
what procedures are in place to identify
emerging risks and an explanation of how
these are being managed or mitigated;
• The directors’ statement in the financial
statements about whether they considered
it appropriate to adopt the going concern basis
of accounting in preparing them, and their
identification of any material uncertainties
to the group’s and parent company’s ability
to continue to do so over a period of at least
twelve months from the date of approval
of the financial statements;
• The directors’ explanation as to their
assessment of the group’s and parent
company’s prospects, the period this
assessment covers and why the period
is appropriate; and
• The directors’ statement as to whether they
have a reasonable expectation that the parent
company will be able to continue in operation
and meet its liabilities as they fall due over
the period of its assessment, including any
related disclosures drawing attention to any
necessary qualifications or assumptions.
Our review of the directors’ statement regarding
the longer-term viability of the group was
substantially less in scope than an audit
and only consisted of making inquiries and
considering the directors’ process supporting
their statement; checking that the statement is
in alignment with the relevant provisions of the
UK Corporate Governance Code;
and considering whether the statement
is consistent with the financial statements
and our knowledge and understanding
of the group and parent company and their
environment obtained in the course of the audit.
In addition, based on the work undertaken as
part of our audit, we have concluded that each
of the following elements of the corporate
governance statement is materially consistent
with the financial statements
and our knowledge obtained during the audit:
• The directors’ statement that they consider
the Annual Report, taken as a whole, is fair,
balanced and understandable, and provides
the information necessary for the members
to assess the group’s and parent company’s
position, performance, business model
and strategy;
• The section of the Annual Report that
describes the review of effectiveness of risk
management and internal control systems;
and
• The section of the Annual Report describing
the work of the Group Audit Committee.
We have nothing to report in respect of our
responsibility to report when the directors’
statement relating to the parent company’s
compliance with the Code does not properly
disclose a departure from a relevant provision
of the Code specified under the Listing Rules
for review by the auditors.
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 parent company’s ability
to continue as a going concern, disclosing, as
applicable, matters related to going
concern and using the going concern basis
of accounting unless the directors either intend
to liquidate the group or the parent company
or to cease operations, or have no realistic
alternative but to do so.
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.
Irregularities, including fraud, are instances
of non-compliance with laws and regulations.
We design procedures in line with our
responsibilities, outlined above, 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 regulation, such
as those governed by the Prudential Regulation
Authority and the Financial Conduct Authority,
and we considered the extent to which
non-compliance might have a material effect
on the financial statements. 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
journal entries to revenue or expenditure and
management bias in accounting estimates
specifically the valuation of specific general
insurance reserves including asbestos and
Physical and Sexual Abuse (“PSA”) reserves
(see Key Audit Matters section). 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
and the Financial Conduct 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 specific
general insurance reserves such as asbestos
and PSA reserves described in the related key
audit matters;
• 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.
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.
Our audit testing might include testing complete
populations of certain transactions and
balances, possibly using data auditing techniques.
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021Independent auditors’ report to the members of Ecclesiastical Insurance Office plcSection FourSection OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Section Four
Independent auditors’ report to the members of Ecclesiastical Insurance Office plc
190
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.
The period of total uninterrupted engagement
is 2 years, covering the years ended
31 December 2020 to 31 December 2021.
Other matter
In due course, as required by the Financial
Conduct Authority Disclosure Guidance and
Transparency Rule 4.1.14R, these financial
statements will form part of the ESEF-prepared
annual financial report filed on the National
Storage Mechanism of the Financial Conduct
Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’).
This auditors’ report provides no assurance
over whether the annual financial report will
be prepared using the single electronic
format specified in the ESEF RTS.
Sue Morling (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Bristol
17 March 2022
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 parent 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.
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 parent 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 parent company financial statements
are not in agreement with the accounting
records and returns.
We have no exceptions to report arising from
this responsibility.
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
192
193
194
195
196
197
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Consolidated statement of profit or loss
for the year ended 31 December 2021
Consolidated statement of profit or loss
for the year ended 31 December 2021
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/(loss)
Finance costs
Profit/(loss) before tax
Tax (expense)/credit
Profit/(loss) for the year (attributable to equity holders of the Parent)
Notes
5, 6
6
6
7
8
9
9
10
5
14
11
2021
£000
486,211
(198,601)
(14,620)
272,990
81,547
1,136
101,067
456,740
(269,633)
123,822
(95,896)
(135,632)
(377,339)
79,401
(2,364)
77,037
(17,648)
59,389
2020
£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)
192
193
Consolidated and parent statements of comprehensive income
Consolidated and parent statements of comprehensive income
for the year ended 31 December 2021
for the year ended 31 December 2021
Profit/(loss) for the year
Other comprehensive income
Items that will not be reclassified to profit or loss:
Fair value losses on property
Actuarial gains/(losses) on retirement benefit plans
Attributable tax
Items that may be reclassified subsequently to profit or loss:
(Losses)/gains on currency translation differences
Gains/(losses) on net investment hedges
Attributable tax
Net other comprehensive income/(expense)
Notes
2021
Group
£000
59,389
-
38,660
(8,098)
30,562
(2,356)
1,912
(183)
(627)
29,935
18
26
26
26
Total comprehensive income/(loss) attributable to equity holders of the Parent
89,324
Parent
£000
64,229
-
38,660
(8,098)
30,562
551
(713)
131
(31)
30,531
94,760
2020
Group
£000
(15,220)
Parent
£000
(19,376)
(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)
(29,126)
(33,684)
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Consolidated and parent statements of changes in equity
Consolidated and parent statements of changes in equity
for the year ended 31 December 2021
for the year ended 31 December 2021
Group
Notes
15
15
15
15
At 1 January 2021
Profit for the year
Other net (expense)/income
Total comprehensive (expense)/income
Dividends
Gross charitable grant
Tax relief on charitable grant
Reserve transfers
At 31 December 2021
At 1 January 2020
Loss for the year
Other net income/(expense)
Total comprehensive income/(expense)
Dividends
At 31 December 2020
Parent
At 1 January 2021
Profit for the year
Other net (expense)/income
Total comprehensive (expense)/income
Dividends
Gross charitable grant
Tax relief on charitable grant
Group tax relief in excess
of standard rate
Reserve transfers
At 31 December 2021
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
Share
capital
£000
120,477
-
-
-
-
-
-
-
120,477
120,477
-
-
-
-
120,477
120,477
-
-
-
-
-
-
-
-
120,477
120,477
-
-
-
-
-
120,477
Share
premium
£000
Revaluation
reserve
£000
Translation
and hedging
reserve
£000
4,632
-
-
-
-
-
-
-
4,632
4,632
-
-
-
-
4,632
4,632
-
-
-
-
-
-
-
-
4,632
4,632
-
-
-
-
-
4,632
599
-
(18)
(18)
-
-
-
(313)
268
565
-
34
34
-
599
600
-
(18)
(18)
-
-
-
-
(313)
269
565
-
35
35
-
-
600
18,230
-
(627)
(627)
-
-
-
-
17,603
18,324
-
(94)
(94)
-
18,230
7,067
-
(31)
(31)
-
-
-
-
-
7,036
7,564
-
(497)
(497)
-
-
7,067
Retained
earnings
£000
425,290
59,389
30,580
89,969
(9,181)
(21,000)
3,990
313
489,381
463,537
(15,220)
(13,846)
(29,066)
(9,181)
425,290
348,644
64,229
30,580
94,809
(9,181)
(21,000)
3,990
Total
£000
569,228
59,389
29,935
89,324
(9,181)
(21,000)
3,990
-
632,361
607,535
(15,220)
(13,906)
(29,126)
(9,181)
569,228
481,420
64,229
30,531
94,760
(9,181)
(21,000)
3,990
(87)
313
417,488
(87)
-
549,902
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
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 26.
194
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
195
195
Consolidated and parent statements of financial position
Consolidated and parent statements of financial position
at 31 December 2021
at 31 December 2021
Notes
2021
Assets
Goodwill and other intangible assets
Deferred acquisition costs
Deferred tax assets
Pension surplus
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
Investment contract liabilities
Lease obligations
Provisions for other liabilities
Pension deficit
Retirement benefit obligations
Deferred tax liabilities
Current tax liabilities
Deferred income
Subordinated liabilities
Other liabilities
Total liabilities
Group
£000
52,512
46,027
8,480
28,304
35,245
163,355
883,770
254,449
5
240,910
114,036
1,827,093
120,477
4,632
507,252
632,361
943,292
15,519
22,738
6,373
-
7,058
48,355
1,232
28,385
24,433
97,347
1,194,732
16
17
29
18
19
20
21
27
23
24
25
27
32
33
28
18
18
29
30
31
30
Parent
£000
27,501
36,740
-
28,304
32,771
162,822
707,106
171,922
5
194,808
48,437
1,410,416
120,477
4,632
424,793
549,902
673,598
-
20,806
6,068
-
7,058
46,123
819
21,951
24,433
59,658
860,514
A
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2020
Group
£000
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
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
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Total shareholders' equity and liabilities
1,827,093
1,410,416
1,637,370
1,247,038
The financial statements of Ecclesiastical Insurance Office plc, registered number 24869, on pages 192 to 261 were approved and authorised for
issue by the Board of Directors on 17 March 2022 and signed on its behalf by:
i
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David Henderson
Chair
Mark Hews
Group Chief Executive
S
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Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021
Consolidated and parent statements of cash flows
Consolidated and parent statements of cash flows
for the year ended 31 December 2021
for the year ended 31 December 2021
Notes
2021
Profit/(loss) 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
Loss on disposal of intangible assets
Impairment of shares in subsidiary undertakings
Profit on disposal of subsidiary
Net fair value (gains)/losses on financial instruments and investment
property
Dividend and interest income
Finance costs
Adjustment for pension funding
Changes in operating assets and liabilities:
Net increase in insurance contract liabilities
Net increase in investment 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 (decrease)/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
Disposal of subsidiary
Net cash used by investing activities
Cash flows from financing activities
Interest paid
Payment of lease liabilities
Change in interest in subsidiary
Proceeds from issue of subordinate debt, net of expenses
Dividends paid to Company's shareholders
Charitable grant paid to ultimate parent undertaking
Net cash used by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange (losses)/gains on cash and cash equivalents
Cash and cash equivalents at end of year
Group
£000
77,037
6,155
-
24
856
4,765
-
-
(58,340)
(21,802)
2,364
1,646
83,952
15,519
(49,513)
(4,376)
(25,891)
8,472
(234)
40,634
(186,514)
157,614
7,427
14,068
(3,142)
30,087
(3,634)
48
(3,914)
-
-
(7,500)
(2,364)
(3,209)
-
25,014
(9,181)
(21,000)
(10,740)
11,847
104,429
(2,240)
114,036
Parent
£000
87,719
5,285
-
11
622
87
-
(5)
(58,384)
(18,822)
2,276
1,646
57,439
-
(37,260)
(3,169)
(33,049)
8,544
114
13,054
(117,611)
103,706
9,547
8,830
(4,912)
12,614
(3,451)
19
(3,914)
-
5
(7,341)
(2,276)
(2,512)
(5,406)
25,014
(9,181)
(21,000)
(15,361)
(10,088)
59,466
(941)
48,437
21
24
2020
Group
£000
Parent
£000
(15,746)
(20,398)
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)
(11,086)
-
(9,181)
-
(25,366)
16,867
42,248
351
59,466
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Notes to the financial statements
Notes to the financial statements
1 Accounting policies
1 Accounting policies
Ecclesiastical Insurance Office plc (hereafter referred to as the ‘Company’, or ‘Parent’), a public limited company incorporated and domiciled in
England, together with its subsidiaries (collectively, the ‘Group’) operates principally as a provider of general insurance and in addition offers a range
of financial services, with offices in the UK & Ireland, Australia and Canada. The principal accounting policies adopted in preparing the International
Financial Reporting Standards (IFRS) financial statements of the Group and Parent are set out below.
Basis of preparation
The Group’s consolidated and Parent's financial statements have been prepared using the following accounting policies, which are in accordance
with UK adopted IFRS applicable at 31 December 2021 issued by the International Accounting Standards Board (IASB). The financial statements have
been prepared on the historical cost basis, except for certain financial assets and derivatives measured at fair value through profit and loss (FVTPL),
and the revaluation of properties and certain derivatives measured at fair value through other comprehensive income (FVOCI).
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),
and endorsed by the UK, with an effective date of on or after 1 January 2021, and are therefore applicable for the 31 December 2021 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 and Ansvar Insurance Limited qualify for the temporary exemption from the requirements of
IFRS 9. Within the Group, Ecclesiastical Life Limited previously qualified for the temporary exemption, however policies issued by Ecclesiastical Life
Limited from 1 August 2021 do not give rise to liabilities within the scope of IFRS 4. Following this change in operations, Ecclesiastical Life Limited is
still able to defer application of IFRS 9 for a further year, until 1 January 2023.
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.
IFRS 9, Financial Instruments
Key requirements
Provides a new model for the classification and measurement of financial instruments, a single, forward-looking ‘expected loss’ impairment model
and a reformed approach to hedge accounting.
Effective date
Annual periods beginning on or after 1 January 2018. Although can be deferred until 2023 for insurers in line with the effective date of IFRS 17.
Expected impact on financial statements
It is expected that equity instruments will continue to be measured at fair value through profit or loss. The measurement of certain debt instruments
may change to amortised cost or fair value through other comprehensive income. No changes are expected from the more principles-based hedge
accounting requirements. The Group is eligible for, and has applied, the deferral approach, which gives a temporary exemption from applying IFRS
9 until the effective date of IFRS 17, Insurance contracts .
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Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021
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Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
IFRS 17, Insurance Contracts
Key requirements
Requires insurance liabilities to be measured at a current fulfilment value and provides a more uniform measurement and presentation approach for
all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts.
Use of estimates
The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities,
and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on
management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. Those estimates which
have the most material impact on the financial statements are disclosed in note 2.
Effective date
Applicable to annual reporting periods beginning on or after 1 January 2023. The final standard remains subject to endorsement in the UK by the UK
Endorsement Board which is expected to be complete in time for the 1 January 2023 effective date.
Operating profit or loss
Operating profit or loss is stated before finance costs.
Expected impact on financial statements
IFRS 17 is a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure.
The accounting principles for the Group’s life insurance business (Whole-of-Life policies supporting pre-paid funeral plans, which ceased to be
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
written from 2013) are expected to be revised. These contracts are serviced over a long coverage period and applying IFRS 17 is expected to result in
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
expected profits attributable to future services (the contractual services margin concept within IFRS 17) being spread over the lifetime of the contract.
transactions, balances and cash flows are eliminated.
Margins for prudence within the reserving basis will be replaced with an explicit risk adjustment defined as the compensation required by the entity
for non-financial risks. A key judgement being assessed is whether sufficient information exists to apply the full retrospective approach to transition,
otherwise a fair value approach is expected to be adopted.
The Group expects to use the premium allocation approach for the majority of its general business insurance contracts, and for which the deferral
of expected future profits and initial recognition of losses are not expected to represent a significant change. The Group has developed draft
accounting policies for the key accounting judgements. The key new items expected to impact net assets relate to:
Key item
Impact
Level of aggregation for
portfolios and groups of
For the majority of product lines, the Group issues packaged policies incorporating a range of lines of business within
a single contract. Accounting policy development has focussed on applying the IASB’s Transition Resource Group’s
insurance and reinsurance
guidance to identify when it is appropriate to unbundle individual components and treat as separate contracts. In the
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.
contracts
majority of cases, the Group expects that its contracts should not be unbundled below the legal contract level. The
For business combinations involving entities or businesses under common control, the cost of the acquisition equals the value of net assets
most material determinant of portfolios of significant risks that are managed together is expected to be the
transferred, as recognised by the transferor at the date of the transaction. No goodwill arises on such transactions.
geographic territories in which the Group underwrites its core general insurance products. An outcome of the draft
policy is instances of up front recognition of losses on groups of onerous contracts within a portfolio will be triggered
at a more granular level, although the transitional impact is not expected to be significantly different from applying
the current Liability Adequacy Test under IFRS 4.
Eligibility for applying the
premium allocation
approach
Draft definitions of what constitutes reasonably expected assumption changes on future profitability, and measuring
the materiality of differences between the general measurement model and the premium allocation approach as a
proportion of exposure, indicates that the majority of the Group’s general insurance products and associated
reinsurance are expected to be eligible.
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
Discounting of the claims
The Group already incorporates illiquidity into a discount rate, but this will be extended to all components of the
denominated in foreign currencies, are recognised through profit or loss.
reserves
reserve and not only the longer term liabilities. Aligning the illiquidity measurement to the characteristics of the
liabilities is expected to increase the discount because general insurance liabilities in the incurred claims phase are
highly illiquid and cannot be extinguished on demand by the Group or readily converted into cash by the policyholder.
Risk adjustment
For products applying the premium allocation approach, the Group’s reserves for incurred claims are currently
measured using best estimate plus an explicit risk margin quantified using confidence level techniques. This is
expected to remain the case, with policy development focussing on the level of diversification of risk informing each
entity’s compensation required, to quantify the risk adjustment as aligned to risk appetite.
Expenses allocation
A new policy has been developed defining directly attributable expenses as those which are required in order to
obtain and fulfil contracts, with other expenses being reported outside of insurance services. Under the premium
allocation approach, the Group does not expect to choose to recognise insurance acquisition cash flows when they
are incurred, with measurement therefore remaining similar to the current policy of deferring acquisition costs. The
recurring nature of the Group’s acquisition cost expense base on renewing business means that all such incurred
costs are expected to be attributable to groups of insurance contracts that have been recognised (impacting the
liability for remaining coverage), with the presentation not expected to give rise to separate assets for insurance
acquisition cash flows.
The Group is developing and testing the changes to existing processes required to apply new policies. It is not yet practicable to quantify the impact
on the Group’s financial statements
Amendments to other standards in issue but not yet effective are not expected to materially impact the Group.
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 written up to April 2013 are classified as insurance contracts and those written from August 2021 are classified as
investment contracts.
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.
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Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021
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Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
Life insurance business
Insurance contract premiums are recognised as income when receivable, at which date the liabilities arising from them are also recognised.
(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
Fee and commission income
Fee and commission income consists primarily of reinsurance commissions and reinsurance profit commissions which are accounted for in
assessed separately for each class of business.
accordance with IFRS 4, Insurance contracts . It also includes income from the Group's insurance broking activities, investment fund management
Surpluses and deficits are offset where business classes are considered to be managed together and a provision is held for any net deficit.
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.
Life insurance provisions
Under current IFRS requirements, insurance contract liabilities are measured using accounting policies consistent with those adopted previously.
The life insurance 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 insurance provision is held in respect of certain 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
Income generated from the Group's insurance broking activities is recognised at the point at which the performance obligation is satisfied, being the
directors based on advice from the Chief Actuary, including assumptions relating to future interest rates, inflation, mortality, expenses and
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
investment return. Changes in the life business provision are recognised in the statement of profit or loss.
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.
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
Fees charged for investment management services are variable based on funds under management and are recognised over time as the services
premiums ceded in a year which relates to periods of risk extending beyond the current year is carried forward as unearned. The Group does
are provided, once it is reasonably certain that no significant reversal of the amount recognised would occur. Fees charged for investment
not reinsure its life business.
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.
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,
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 27.
Investment contract liabilities
For products that have no significant insurance risk and therefore classified as a investment contracts, the Group recognises a liability measured
at fair value. The fair value of these liabilities is estimated based on an arms-length transaction between willing market participants with
consideration given to the cost of the minimum repayment guarantee to the policyholders. The cost of the guarantee is determined using risk
free rates of return, with the associated volatility assumption and allowing for the costs of administration associated with this low risk investment
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. Amortisation and impairment charges incurred for the period are included in the statements of
profit or loss within other operating and administrative expenses.
whether reported or not, together with related claims handling costs. Significant delays are experienced in the notification and settlement of certain
Software costs that cannot be classified as intangible assets are charged to profit or loss during the period in which they are incurred.
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.
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. Amortisation and impairment charges incurred for the period are included in the statement of profit or loss within
other operating and administrative expenses.
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Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
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
Derivative financial instruments and hedging
Derivative financial instruments include foreign exchange contracts and other financial instruments that derive their value from underlying equity
properties are sold, the accumulated revaluation surpluses are transferred from this reserve to retained earnings.
instruments.
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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.
Land is not depreciated. No depreciation is provided on owner-occupied properties since such depreciation would be immaterial. Depreciation is
calculated to write down the cost of other assets to their residual values over their estimated useful lives as follows:
Computer equipment
Motor vehicles
Fixtures, fittings and office equipment
Right-of-use assets
3 - 5 years straight line
4 years straight line or 27% reducing balance
3 - 10 years or length of lease straight line
Over the term of the lease
Where the carrying amount of an item carried at historical cost less accumulated depreciation is greater than its estimated recoverable amount, it is
written down to its recoverable amount by way of an impairment charge to profit or loss.
Repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Investment property
Investment property comprises land and buildings which are held for long-term rental yields. It is carried at fair value with changes in fair value
recognised in the statement of profit or loss within net investment return. Investment property is valued annually by external qualified surveyors at
open market value. Investment properties are derecognised when they have been disposed of. Where the Group disposes of a property, the carrying
value immediately prior to the sale is adjusted to the transaction price, and the adjustment is recorded in profit or loss within net investment return.
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.
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
The classification depends on the nature and purpose of the financial assets and liabilities, and is determined at the time of initial recognition. Assets
are reclassified to profit or loss on disposal of the related investment.
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.
(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.
Subordinated liabilities
Subordinated liabilities are recognised initially at fair value, being the issue proceeds net of premiums, discounts and transaction costs incurred. All
borrowings are subsequently measured at amortised cost using the effective interest rate method. The amortisation is recognised as an interest
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All other financial assets and liabilities are measured at amortised cost, using the effective interest method (except for short-term receivables and
expense using the effective interest rate method.
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
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 insurance 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 can be deferred and amortised over the period during which the costs are
expected to be recoverable. No acquisition costs have been deferred on the Group's existing long-term business.
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
value adjusted for transaction costs. Financial investments within this category are classified as held for trading if they are derivatives that are not
of three months or less and bank overdrafts.
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.
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Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
Notes to the financial statements
Notes to the financial statements
1 Accounting policies (continued)
1 Accounting policies (continued)
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205
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.
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:
Variable lease payments that are based on an index or rate;
- Fixed payments less any lease incentives receivable;
-
- Amounts expected to be payable by the lessee under residual value guarantees;
-
- Payments and penalties from terminating the lease, if the lease term reflects the lessee exercising that option.
The exercise price of an option if the lessee is reasonably certain to exercise that option; and
Employee benefits
Pension obligations
The Group operates defined benefit and defined contribution pension plans, the assets of which are held in separate trustee-administered funds.
For defined benefit plans, the pension costs are assessed using the projected unit credit method. Under this method, the cost of providing pensions
is charged to profit or loss so as to spread the regular cost over the service lives of employees. The pension obligation is measured as the present
value of the estimated future cash outflows using a discount rate based on market yields for high-quality corporate bonds. The resulting pension
plan surplus or deficit appears as an asset or obligation in the statement of financial position. Any asset resulting from this calculation is limited to
the present value of economic benefits available in the form of refunds from the plan or reductions in future employer contributions to the plan.
Independent actuarial valuations are carried out at the end of each reporting period.
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
Right-of-use assets are initially measured at cost and subsequently measured as cost less accumulated depreciation and comprises:
comprehensive income. Independent actuarial valuations are carried out at the end of each reporting period.
- 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.
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.
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.
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.
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.
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, Benefact Trust Limited, a registered charity. The Group does not regard these
payments as being expenses of the business and, as such, recognises these 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 37 provides details of how these key performance indicators reconcile
to the results reported under IFRS.
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207
Notes to the financial statements
Notes to the financial statements
2 Critical accounting estimates and judgements in applying accounting policies
2 Critical accounting estimates and judgements in applying accounting policies
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. Management have considered the current economic environment in their estimates and judgements.
(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.
The Group also applies judgement in determining the extent to which a surplus in the defined benefit plan can be recognised in the statement of
financial position. In accordance with IAS 19, Employee benefits, the recognisable surplus is limited to the lower of the surplus in the plan and the
asset ceiling. The asset ceiling is the present value of future economic benefits available in the form of a refund or as a reduction in future
contributions. The Group applies judgement in determining the asset ceiling in accordance with IFRS Interpretations Committee Interpretation 14
(IFRIC 14).
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).
Significant insurance risk
Whole-of-life policies issued by the Group where significant insurance risk has been accepted from a policyholder are accounted for as insurance
contracts. Whole-of-life policies where the Groups has not accepted significant insurance risk from a policyholder are accounted for as financial
instruments. Contracts can have features of, or appear to have features of, an insurance contract and therefore judgement is required on whether
there is insurance risk and then whether that insurance risk is significant. Policies are considered to be insurance contracts where future benefits are
linked to inflation as there is uncertainty over the timing and amount of a resulting claim. Policies that provide a policyholder with a guarantee to
return the original premium have not transferred insurance risk and are considered financial instruments.
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
Notes to the financial statements
Notes to the financial statements
2 Critical accounting estimates and judgements in applying accounting policies (continued)
2 Critical accounting estimates and judgements in applying accounting policies (continued)
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 27(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 27(a).
Future benefit payments arising from life insurance contracts
The determination of the liabilities under life insurance contracts is dependent on estimates made by the Group.
Estimates are made as to the expected number of deaths for each of the years in which the Group is exposed to risk. The Group bases these
estimates on standard industry and national mortality tables, adjusted to reflect recent historical mortality experience of the Group's portfolio, with
allowance also being made for expected future mortality improvements where prudent. The estimated mortality rates are used to determine
forecast benefit payments net of forecast premium receipts.
Estimates are also made as to future investment returns arising from the assets backing life insurance contracts. These estimates are based on
current market returns as well as expectations about future economic and financial developments.
In addition to the best estimates of future deaths, inflation, investment returns and administration expenses, margins for risk and uncertainty are
added to these assumptions in calculating the liabilities of life insurance contracts. The sensitivity of profit or loss to changes in the assumptions is
presented in note 27(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. Any change in these assumptions may affect planned funding of the pension plans.
The discount rate assumption is a component in determining the charge to profit or loss. 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 18.
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
management’s knowledge of current facts and circumstances, assumptions based on that knowledge and their predictions of future events and
outflows expected to be required to settle the pension and other post-employment benefit obligations.
actions.
The expected rate of medical expense inflation is determined by comparing the historical relationship of medical expense increases over a portfolio
There is still some uncertainty as to the economic effect that both Covid-19 and higher inflation will have in both the short and long term. The key
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
estimates and assumptions set out below include variables which may be impacted (either positively or negatively). These include but are not limited
experience.
to inflation, discount rate, long-term economic growth rate and investment market returns.
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 18.
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Notes to the financial statements
2 Critical accounting estimates and judgements in applying accounting policies (continued)
2 Critical accounting estimates and judgements in applying accounting policies (continued)
Unlisted equity securities
The valuation of unlisted equity securities requires estimates to be made for the illiquidity discount and credit rating discount. Further details,
including the sensitivity of the valuation to these inputs, are shown in note 4(b).
208
209
Notes to the financial statements
Notes to the financial statements
3 Insurance risk
3 Insurance risk
Through its general and life insurance operations, the Group is exposed to a number of risks, as summarised in the Risk Management section of the
Strategic Report. The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount and
timing of the resulting claim. Factors such as the business and product mix, the external environment including market competition and reinsurance
capacity all may vary from year to year, along with the actual frequency, severity and ultimate cost of claims and benefits. This subjects the Group
to underwriting and pricing risk (the risk of failing to ensure disciplined risk selection and to obtain the appropriate premium), claims reserving risk
(the risk of actual claims payments exceeding the amount we are holding in reserves) and reinsurance risk (the risk of failing to access and
manage reinsurance capacity at a reasonable price).
(a) Risk mitigation
Statistics demonstrate that the larger and more diversified the portfolio of insurance contracts, the smaller the relative variability in the expected
outcome will be. The Group’s underwriting strategy is designed to ensure that the underwritten risks are well diversified in terms of type and amount
of risk and geographical spread. In all operations pricing controls are in place, underpinned by sound statistical analysis, market expertise and
appropriate external consultant advice. Gross and net underwriting exposure is protected through the use of a comprehensive programme of
reinsurance using both proportional and non-proportional reinsurance, supported by proactive claims handling. The overall reinsurance structure is
regularly reviewed and modelled to ensure that it remains optimum to the Group's needs. The optimal 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:
2021
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 Whole of Life
£000
£000
Total
£000
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
217,961
109,242
54,229
5,891
64,086
44,750
336,276
159,883
217,961
109,242
64,086
44,750
282,047
153,992
62,949
60,060
37,106
31,733
27,524
25,306
127,579
117,099
62,949
60,060
27,524
25,306
90,473
85,366
16,941
8,883
1,290
1,238
-
-
18,231
10,121
16,941
8,883
-
-
16,941
8,883
3,394
376
740
140
-
-
4,134
516
16,425
13,407
-
-
16,425
13,407
(9)
(9)
-
-
-
-
(9)
(9)
-
-
-
-
-
-
301,236
178,552
93,365
39,002
91,610
70,056
486,211
287,610
314,276
191,592
91,610
70,056
405,886
261,648
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Notes to the financial statements
Notes to the financial statements
3 Insurance risk (continued)
3 Insurance risk (continued)
Notes to the financial statements
Notes to the financial statements
3 Insurance risk (continued)
3 Insurance risk (continued)
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211
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
£000
Whole of Life
£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
(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
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 27 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. None of the risks arising from this business are amongst the Group's principal risks and no new policies
with insurance risk have been written in the life fund since 2013.
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 is
insufficient to meet future claims payments, particularly if the timing of claims is different from that assumed. 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.
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. This small mortality risk is retained by the Group. The Group holds a reserve to meet the costs of future expenses in running the life
larger claims typically taking longer to settle and business interruption claims taking much longer depending on the length of the indemnity period
business and administration of the policies. There is a risk that this is insufficient to meet the expenses incurred in future periods.
involved.
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management
4 Financial risk and capital management
The Group is exposed to financial risk through its financial assets, financial liabilities, reinsurance assets and insurance liabilities. In particular, the key financial risk
is that the proceeds from its financial assets are not sufficient to fund the obligations arising from its insurance contracts. The most important components of
financial risk are interest rate risk, credit risk, equity price and currency risk.
There has been no change from the prior period in the nature of the financial risks to which the Group is exposed. Despite the rollout of the Covid-19 vaccine
programmes in 2021, the subsequent conflict in Ukraine and recent international economic sanctions means there is continued uncertainty in relation to the
economic risks to which the Group is exposed. This includes equity price volatility, movements in exchange rates and long-term UK growth prospects. The
Group's management and measurement of financial risks is informed by either stochastic modelling or stress testing techniques.
(a) Categories of financial instruments
(i) Categories applying IAS 39
Group
Designated
at fair
value
£000
Financial assets
Held for
trading
£000
Loans and
receivables
£000
Hedge
accounted
derivatives
£000
Designated
at fair
value
£000
Financial liabilities
Held for
trading
£000
Financial
liabilities¹
£000
Hedge
accounted
derivatives
£000
Other assets
and liabilities
£000
Total
£000
883,770
240,910
114,036
(22,738)
(24,433)
(81,828)
(15,519)
(461,837)
632,361
820,777
216,570
104,429
(25,450)
(93,561)
(453,537)
569,228
-
8,357
-
-
-
(13,394)
-
(461,837)
(466,874)
-
5,095
-
-
(12,093)
(453,537)
(460,535)
At 31 December 2021
Financial investments
Other assets
Cash and cash equivalents
Lease obligations
Subordinated liabilities
Other liabilities
Inv't contract liabilities
Net other
Total
At 31 December 2020
Financial investments
Other assets
Cash and cash equivalents
Lease obligations
Other liabilities
Net other
Total
Parent
At 31 December 2021
Financial investments
Other assets
Cash and cash equivalents
Lease obligations
Subordinated liabilities
Other liabilities
Net other
At 31 December 2020
Financial investments
Other assets
Cash and cash equivalents
Lease obligations
Other liabilities
Net other
Total
882,350
-
-
-
-
-
-
-
882,350
817,551
-
-
-
-
-
817,551
639,523
-
-
-
-
-
-
639,523
586,804
-
-
-
-
-
586,804
¹ Financial liabilities are held at amortised cost.
336
-
-
-
-
-
-
-
336
2,079
-
-
-
-
-
2,079
481
-
-
-
-
-
-
481
2,079
-
-
-
-
-
2,079
670
232,553
114,036
-
-
-
-
-
347,259
746
211,475
104,429
-
-
-
316,650
670
190,478
48,437
-
-
-
-
239,585
746
157,239
59,466
-
-
-
217,451
414
-
-
-
-
-
-
-
414
401
-
-
-
-
-
401
269
-
-
-
-
-
-
269
401
-
-
-
-
-
401
-
-
-
-
-
-
(15,519)
-
(15,519)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(331)
-
-
(331)
-
-
-
-
-
-
-
-
-
-
-
-
(331)
-
(331)
-
-
-
-
(1,244)
-
(1,244)
-
-
-
(22,738)
(24,433)
(68,103)
-
-
(115,274)
-
-
-
(25,450)
(80,224)
-
(105,674)
-
-
-
(20,806)
(24,433)
(48,571)
-
(93,810)
-
-
-
(22,838)
(44,008)
-
(66,846)
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,244)
-
(1,244)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
212
213
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
(ii) Categories of financial assets applying IFRS 9
As disclosed in note 1, the Group has chosen to defer application of IFRS 9 and classifies and measures financial instruments using IAS 39. To
facilitate comparison with entities applying IFRS 9, the table below sets out the Group's financial assets at the balance sheet date, split between
those which have contractual cash flows that are solely payments of principal and interest on the principal outstanding (SPPI), other than those
which are held for trading or whose performance is evaluated on a fair value basis, and all other financial assets.
Group
2021
2020
SPPI financial
Other financial
Total financial
SPPI financial
Other financial
Total financial
assets
£000
assets
£000
assets
£000
assets
£000
assets
£000
assets
£000
Financial investments
Cash and cash equivalents
Other financial assets
Total fair value
670
114,036
232,553
347,259
883,100
-
-
883,100
883,770
114,036
232,553
1,230,359
746
104,429
211,475
316,650
820,031
-
-
820,031
820,777
104,429
211,475
1,136,681
Parent
2021
2020
SPPI financial
Other financial
Total financial
SPPI financial
Other financial
Total financial
assets
£000
assets
£000
assets
£000
assets
£000
assets
£000
assets
£000
Financial investments
Cash and cash equivalents
Other financial assets
Total fair value
670
48,437
190,478
239,585
640,273
-
-
640,273
640,943
48,437
190,478
879,858
746
59,466
157,239
217,451
589,284
-
-
589,284
590,030
59,466
157,239
806,735
There has been a £30,609,000 increase (2020: £62,109,000 increase) in the fair value of SPPI financial assets of the Group, and a £63,069,000
increase (2020: £32,112,000 decrease) in the fair value of other financial assets of the Group during the reporting period. There has been a
£22,134,000 increase (2020: £39,217,000 increase) in the fair value of SPPI financial assets of the Parent, and a £50,989,000 increase (2020:
£52,374,000 decrease) in the fair value of other financial assets of the Parent during the reporting period.
66,163
4,330
-
-
-
(10,756)
(295,552)
(235,815)
707,106
194,808
48,437
(20,806)
(24,433)
(59,658)
(295,552)
549,902
60,757
3,875
-
-
(9,835)
(312,022)
(257,225)
650,787
161,114
59,466
(22,838)
(55,087)
(312,022)
481,420
S
t
a
t
e
m
e
n
t
s
i
F
n
a
n
c
a
l
i
S
e
c
t
i
o
n
F
o
u
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Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FiveOther Information
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
214
215
(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 (as prices) or indirectly (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 2021
Financial assets at fair value through profit or loss
Financial investments
Equity securities
Debt securities
Structured notes
Derivatives
Hedged accounted derivatives
Total financial assets at fair value
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
Fair value measurement at the
end of the reporting period based on
Level 1
£000
Level 2
£000
Level 3
£000
281,169
515,953
-
-
-
797,122
262,014
493,601
-
-
755,615
186
1,412
14,649
336
414
16,997
185
1,512
2,079
401
4,177
68,947
34
-
-
-
68,981
59,687
552
-
-
60,239
Total
£000
350,302
517,399
14,649
336
414
883,100
321,886
495,665
2,079
401
820,031
Parent
At 31 December 2021
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 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
Fair value measurement at the
end of the reporting period based on
Level 1
£000
Level 2
£000
Level 3
£000
254,377
315,033
-
-
569,410
238,150
287,252
-
-
525,402
186
1,094
481
269
2,030
185
1,158
2,079
401
3,823
68,799
34
-
-
68,833
59,507
552
-
-
60,059
Total
£000
323,362
316,161
481
269
640,273
297,842
288,962
2,079
401
589,284
In the current year the derivative liabilities of the Group and Parent were measured at fair value through profit or loss. In the prior year the
derivative liabilities of the Group were measured at fair value through other comprehensive income and the derivative liabilities of the Parent
were measured at fair value through profit or loss. Derivative liabilities are categorised as level 2 (see note 22).
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 2021
Opening balance
Total gains/(losses) recognised in profit or loss
Closing balance
Total gains/(losses) for the period included in profit or loss for assets
held at the end of the reporting period
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
Financial assets at fair value
through profit and loss
Equity
securities
£000
Debt
securities
£000
59,688
9,259
68,947
551
(517)
34
Total
£000
60,239
8,742
68,981
9,259
(517)
8,742
66,703
(7,015)
59,688
(7,015)
404
147
551
147
67,107
(6,868)
60,239
(6,868)
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 216
217
Notes to the financial statements
4 Financial risk and capital management (continued)
Notes to the financial statements
4 Financial risk and capital management (continued)
Parent
At 31 December 2021
Opening balance
Total gains/(losses) recognised in profit or loss
Closing balance
Total gains/(losses) for the period included in profit or loss for assets
held at the end of the reporting period
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
Financial assets at fair value
through profit and loss
Equity
securities
£000
Debt
securities
£000
59,508
9,292
68,800
551
(518)
33
Total
£000
60,059
8,774
68,833
9,292
(518)
8,774
66,523
(7,015)
59,508
(7,015)
404
147
551
147
66,927
(6,868)
60,059
(6,868)
All the above gains or losses included in profit or loss for the period (for both the Group and Parent) are presented in net investment return within
the statement of profit or loss.
The valuation techniques used for instruments categorised in levels 2 and 3 are described below.
Listed debt and equity securities not in active market (level 2)
These financial assets are valued using third-party pricing information that is regularly reviewed and internally calibrated based on management's
knowledge of the markets.
Non-exchange-traded derivative contracts (level 2)
The Group's derivative contracts are not traded in active markets. Foreign currency forward contracts are valued using observable forward exchange
rates corresponding to the maturity of the contract and the contract forward rate. Over-the-counter equity or index options and futures are valued by
reference to observable index prices.
Structured notes (level 2)
These financial assets are not traded on active markets. Their fair value is linked to an index that reflects the performance of an underlying basket of
observable securities, including derivatives, provided by an independent calculation agent.
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-tangible 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 +/-£8m (2020: +/-£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.
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
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, subordinated debt which has a fixed interest rate until 2030, 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 (2020: 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 27(a)(iv).
For the Group’s life insurance 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 insurance 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 (for
example mortality risk) and the availability of suitable assets, therefore some interest rate risk will persist. The Group monitors its exposure by
comparing projected cash flows for these assets and liabilities and making appropriate adjustments to its investment portfolio.
The table below summarises the maturities of life insurance business assets and liabilities that are exposed to interest rate risk.
Group life business
At 31 December 2021
Assets
Debt securities
Cash and cash equivalents
Liabilities (discounted)
Life insurance business provision
At 31 December 2020
Assets
Debt securities
Cash and cash equivalents
Liabilities (discounted)
Life insurance business provision
Within
1 year
£000
Maturity
Between
1 and 5 years
£000
After
5 years
£000
Total
£000
6,120
5,269
11,389
26,768
-
26,768
63,819
-
63,819
96,707
5,269
101,976
4,787
16,686
52,436
73,909
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
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.
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 218
219
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
(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.
Parent
At 31 December 2021
AAA
AA
A
BBB
Below BBB
Not rated
AAA
AA
A
BBB
Below BBB
Not rated
SPPI
Non-SPPI
Cash and cash
Reinsurance
Other financial
equivalents¹
debtors
assets
Total SPPI
Debt securities
£000
-
7,018
10,896
30,518
-
5
48,437
-
15,726
12,151
31,584
-
5
59,466
£000
-
1,828
5,585
3
-
585
8,001
-
1,592
3,008
3
-
338
4,941
£000
-
-
-
-
-
183,147
183,147
-
-
-
-
-
153,044
153,044
£000
-
8,846
16,481
30,521
-
183,737
239,585
-
17,318
15,159
31,587
-
153,387
217,451
£000
89,099
61,199
108,443
44,598
4,379
8,443
316,161
72,697
51,769
96,351
55,456
5,539
7,150
288,962
The following table provides information regarding the credit risk exposure of financial assets with external credit ratings from Standard & Poors
hand.
¹ Cash includes amounts held on deposit classified within financial investments and disclosed in note 21. Cash balances which are not rated relate to cash amounts in
or an equivalent rating from a similar agency. This includes financial assets that meet the definition of 'solely payments of principal and interest'
equivalents¹
debtors
assets
Total SPPI
Debt securities
The debt securities portfolio consists of a range of mainly fixed interest instruments including government securities, local authority issues,
(SPPI), as detailed in note 4(a)(ii).
Group
At 31 December 2021
AAA
AA
A
BBB
Below BBB
Not rated
At 31 December 2020
AAA
AA
A
BBB
Below BBB
Not rated
Cash and cash
Reinsurance
Other financial
SPPI
Non-SPPI
£000
-
42,719
19,946
51,365
-
6
114,036
-
36,319
16,753
51,351
-
6
104,429
£000
-
2,651
9,424
3
-
505
12,583
-
1,986
8,564
3
-
452
11,005
£000
-
-
-
-
-
220,640
220,640
-
-
-
-
-
201,216
201,216
£000
-
45,370
29,370
51,368
-
221,151
347,259
-
38,305
25,317
51,354
-
201,674
316,650
£000
171,502
122,895
129,795
72,653
7,895
12,659
517,399
128,037
130,285
125,745
94,101
8,997
8,500
495,665
¹ Cash includes amounts held on deposit classified within financial investments and disclosed in note 21. 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.
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:
2021
Group
£000
265,506
104,530
119,622
27,741
517,399
Parent
£000
168,798
-
119,622
27,741
316,161
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
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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Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021
220
221
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
(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:
2021
Group
£000
281,497
68,619
186
350,302
Parent
£000
254,557
68,619
186
323,362
UK
Europe
Hong Kong
Total
2020
Group
£000
262,414
59,287
185
321,886
Parent
£000
238,370
59,287
185
297,842
UK
Europe
Hong Kong
Total
(f) Currency risk
The Group operates internationally and its main exposures to foreign exchange risk are noted below. The Group's foreign operations generally
invest in assets and purchase reinsurance denominated in the same currencies as their insurance liabilities, which mitigates the foreign currency
exchange rate risk for these operations. As a result, foreign exchange risk arises from recognised assets and liabilities denominated in other
currencies and net investments in foreign operations. The Group mitigates this risk through the use of derivatives when considered necessary.
The Group exposure to foreign currency risk within the investment portfolios arises from purchased investments that are denominated in currencies
other than sterling.
The Group's foreign operations create two sources of foreign currency risk:
-
The operating results of the Group's foreign branches and subsidiaries in the Group financial statements are translated at the average exchange
rates prevailing during the period; and
-
The equity investment in foreign branches and subsidiaries is translated into sterling using the exchange rate at the year-end date.
The forward foreign currency risk arising on translation of these foreign operations is hedged by the derivatives which are detailed in note 22. The
Group has designated certain derivatives as a hedge of its net investments in Canada and Australia, which have Canadian and Australian dollars
respectively as their functional currency.
(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 27. 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 33, and other liabilities for which a
maturity analysis is included in note 30, and subordinated debt 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 18.
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
2021
£000
(6,797)
5,088
4,118
(3,369)
28,375
2020
£000
(11,896)
6,153
2,833
(2,318)
26,073
Potential increase/
(decrease) in profit
2020
£000
(9,642)
4,909
2,833
(2,318)
24,125
(4,999)
2,733
4,118
(3,369)
26,192
Potential increase/
(decrease) in
other equity reserves
2021
£000
54
(48)
10,845
(8,873)
-
2020
£000
(70)
44
9,715
(7,948)
-
Potential increase/
(decrease) in
other equity reserves
2021
£000
(19)
29
5,303
(4,339)
-
2020
£000
(19)
29
3,692
(3,021)
-
The largest currency exposures, before the mitigating effect of derivatives, with reference to net assets/liabilities are shown below, representing
effective diversification of resources.
The following assumptions have been made in preparing the above sensitivity analysis:
2021
Group
£000
64,005
46,087
11,054
2,345
172
Parent
£000
14,131
46,087
11,054
2,345
172
Aus $
Can $
Euro
USD $
HKD $
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 $
The figures in the table above, for the current and prior years, do not include currency risk that the Group and Parent are exposed to on a ‘look
through’ basis in respect of collective investment schemes denominated in sterling. The Group and Parent enter into derivatives to hedge currency
exposure, including exposures on a ‘look through’ basis. The open derivatives held by the Group and Parent at the year end to hedge currency
exposure are detailed in note 22.
-
-
-
-
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.
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 222
223
Notes to the financial statements
Notes to the financial statements
4 Financial risk and capital management (continued)
4 Financial risk and capital management (continued)
(i) Capital management
The Group's primary objectives when managing capital are to:
-
-
Comply with the regulators' capital requirements of the markets in which the Group operates; and
Safeguard the Group's ability to continue to meet stakeholders' expectations in accordance with its corporate mission, vision and values.
The Group is subject to insurance solvency regulations in all the territories in which it issues insurance and investment contracts, and capital is
managed and evaluated on the basis of both regulatory and economic capital, at a group and parent entity level.
In the UK, the Group and its UK regulated entities are required to comply with rules issued by the Financial Conduct Authority (FCA) and the
Prudential Regulation Authority (PRA).
Capital is assessed at both individual regulated entity and group level. The PRA expects a firm, at all times, to hold Solvency II Own Funds in excess
of its calculated Solvency Capital Requirement (SCR). Group solvency is assessed at the level of Ecclesiastical Insurance Office plc (EIO)’s parent,
Benefact Group plc. Consequently, there is no directly comparable solvency measure for EIO group. 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.
Notes to the financial statements
Notes to the financial statements
5 Segment information
5 Segment information
(a) Operating segments
The Group segments its business activities on the basis of differences in the products and services offered and, for general insurance, the
underwriting territory. Expenses relating to Group management activities are included within 'Corporate costs'. This reflects the management and
internal Group reporting structure.
The activities of each operating segment are described below.
- General business
United Kingdom and Ireland
The Group's principal general insurance business operation is in the UK, where it operates under the Ecclesiastical and Ansvar brands.
The Group also operates an Ecclesiastical branch in the Republic of Ireland underwriting general business across the whole of Ireland.
Australia
The Group has a wholly-owned subsidiary in Australia underwriting general insurance business under the Ansvar brand.
Canada
The Group operates a general insurance Ecclesiastical branch in Canada.
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. The
Other insurance operations
This includes the Group's internal reinsurance function, adverse development cover and operations that are in run-off or not reportable
Group's regulated entities, EIO and ELL, expect to meet the deadline for submission to the PRA of 8 April 2022 and their respective SFCRs will be
due to their immateriality.
made available on the Group's website shortly thereafter. Benefact Group is also expected to meet its deadline for submission to the PRA of 20 May
2022, with its SFCR also being made available on the Group’s website shortly after.
- Investment management
2021
2020
Ecclesiastical
Insurance
Office plc
Parent
£000
Ecclesiastical
Life Limited
£000
Ecclesiastical
Insurance
Office plc
Parent
£000
Ecclesiastical
Life Limited
£000
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 and financial advisory services through Ecclesiastical
Financial Advisory Services Limited.
- Life business
Solvency II Own Funds
616,905
55,235
518,562
49,259
Ecclesiastical Life Limited provides long-term policies to support funeral planning products. The business reopened in the year but
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.
remains closed to new insurance 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.
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Notes to the financial statements
Notes to the financial statements
5 Segment information (continued)
5 Segment information (continued)
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
5 Segment information (continued)
5 Segment information (continued)
5 Segment information (continued)
224
225
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
297,235
93,365
91,610
4,010
486,220
(9)
-
-
486,211
2021
Non-
insurance
services
£000
-
-
-
-
-
-
14,908
11,346
26,254
Gross
written
premiums
£000
276,618
80,178
75,953
4,538
437,287
12
-
-
437,299
2020
Non-
insurance
services
£000
-
-
-
-
-
-
12,382
9,458
21,840
Total
£000
297,235
93,365
91,610
4,010
486,220
(9)
14,908
11,346
512,465
Total
£000
276,618
80,178
75,953
4,538
437,287
12
12,382
9,458
459,139
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 37.
The life business segment result comprises the profit or loss on insurance contracts (including return on assets backing insurance liabilities in the
long-term fund), shareholder investment return and other expenses.
All other segment results consist of the profit or loss before tax measured in accordance with IFRS.
2021
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
85.3%
156.9%
88.6%
96.8%
Insurance
£000
Investments
£000
24,952
(13,306)
7,065
(9,952)
8,759
1,117
-
-
-
9,876
87,106
1,924
246
(133)
89,143
3,981
-
-
-
93,124
Other
£000
(2,098)
(34)
(156)
-
(2,288)
-
(2,525)
2,984
(24,134)
(25,963)
Total
£000
109,960
(11,416)
7,155
(10,085)
95,614
5,098
(2,525)
2,984
(24,134)
77,037
2020
2020
General business
United Kingdom and Ireland
General business
Australia
United Kingdom and Ireland
Canada
Australia
Other insurance operations
Canada
Other insurance operations
Life business
Investment management
Life business
Broking and advisory
Investment management
Corporate costs
Broking and advisory
Profit/(loss) before tax
Corporate costs
Profit/(loss) before tax
Combined
operating
Combined
ratio
operating
ratio
92.5%
102.2%
92.5%
91.2%
102.2%
91.2%
95.1%
95.1%
Insurance
£000
Insurance
£000
12,254
(620)
12,254
4,521
(620)
(4,103)
4,521
12,052
(4,103)
468
12,052
-
468
-
-
-
-
12,520
-
12,520
Investments
£000
Investments
£000
(12,123)
1,678
(12,123)
3,003
1,678
-
3,003
(7,442)
-
29
(7,442)
-
29
-
-
-
-
(7,413)
-
(7,413)
Other
£000
Other
£000
(479)
(31)
(479)
(176)
(31)
-
(176)
(686)
-
-
(686)
(1,031)
-
2,397
(1,031)
(21,533)
2,397
(20,853)
(21,533)
(20,853)
Total
£000
Total
£000
(348)
1,027
(348)
7,348
1,027
(4,103)
7,348
3,924
(4,103)
497
3,924
(1,031)
497
2,397
(1,031)
(21,533)
2,397
(15,746)
(21,533)
(15,746)
(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
(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:
follows:
2021
2020
Non-current
assets
Non-current
£000
assets
£000
276,236
6,114
276,236
6,946
6,114
289,296
6,946
289,296
Gross written premiums are allocated based on the country in which the insurance contracts are issued. Non-current assets exclude rights arising
United Kingdom and Ireland
Australia
United Kingdom and Ireland
Canada
Australia
Canada
Non-current
assets
Non-current
£000
assets
£000
301,523
2,925
301,523
6,227
2,925
310,675
6,227
310,675
Gross
written
Gross
premiums
written
£000
premiums
£000
301,236
93,365
301,236
91,610
93,365
486,211
91,610
486,211
Gross
written
Gross
premiums
written
£000
premiums
£000
281,168
80,178
281,168
75,953
80,178
437,299
75,953
437,299
2021
2020
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.
under insurance contracts, deferred tax assets, pension assets and financial instruments and are allocated based on where the assets are located.
6 Net insurance premium revenue
6 Net insurance premium revenue
6 Net insurance premium revenue
For the year ended 31 December 2021
Gross written premiums
For the year ended 31 December 2021
Outward reinsurance premiums
Gross written premiums
Net 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 gross provision for unearned premiums
Change in the net provision for unearned premiums
Change in the provision for unearned premiums, reinsurers' share
Earned premiums, net of reinsurance
Change in the net provision for unearned premiums
Earned premiums, net of reinsurance
For the year ended 31 December 2020
Gross written premiums
For the year ended 31 December 2020
Outward reinsurance premiums
Gross written premiums
Net 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 gross provision for unearned premiums
Change in the net provision for unearned premiums
Change in the provision for unearned premiums, reinsurers' share
Earned premiums, net of reinsurance
Change in the net provision for unearned premiums
Earned premiums, net of reinsurance
General
business
General
£000
business
£000
486,220
(198,601)
486,220
287,619
(198,601)
287,619
(24,504)
9,884
(24,504)
(14,620)
9,884
272,999
(14,620)
272,999
437,287
(173,074)
437,287
264,213
(173,074)
264,213
(24,984)
8,422
(24,984)
(16,562)
8,422
247,651
(16,562)
247,651
Life
business
Life
£000
business
£000
(9)
-
(9)
(9)
-
(9)
-
-
-
-
-
(9)
-
(9)
12
-
12
12
-
12
-
-
-
-
-
12
-
12
Total
£000
Total
£000
486,211
(198,601)
486,211
287,610
(198,601)
287,610
(24,504)
9,884
(24,504)
(14,620)
9,884
272,990
(14,620)
272,990
437,299
(173,074)
437,299
264,225
(173,074)
264,225
(24,984)
8,422
(24,984)
(16,562)
8,422
247,663
(16,562)
247,663
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
226
227
7 Fee and commission income
7 Fee and commission income
During the year, the Group recognised £55,019,000 (2020: £47,541,000) fee and commission income in accordance with IFRS 4, Insurance Contracts
7 Fee and commission income
and £26,528,000 (2020: £22,041,000) in accordance with IFRS 15, Revenue from contracts with customers . Fee and commission income from
During the year, the Group recognised £55,019,000 (2020: £47,541,000) fee and commission income in accordance with IFRS 4, Insurance Contracts
contracts with customers was recognised as follows:
and £26,528,000 (2020: £22,041,000) in accordance with IFRS 15, Revenue from contracts with customers . Fee and commission income from
Recognised at a
Recognised
contracts with customers was recognised as follows:
point in time
Recognised at a
£000
over time
£000
Recognised
Total
£000
Total
point in time
£000
398
14,908
11,222
398
26,528
14,908
11,222
26,528
201
12,382
9,458
201
22,041
12,382
9,458
22,041
£000
398
7
11,222
398
11,627
7
11,222
11,627
201
66
9,458
201
9,725
66
9,458
9,725
over time
£000
-
14,901
-
-
14,901
14,901
-
14,901
-
12,316
-
-
12,316
12,316
-
12,316
For the year ended 31 December 2021
General business
Investment management
For the year ended 31 December 2021
Broking and advisory
General business
Investment management
Broking and advisory
For the year ended 31 December 2020
General business
Investment management
For the year ended 31 December 2020
Broking and advisory
General business
Investment management
Broking and advisory
8 Net investment return
8 Net investment return
8 Net investment return
Income from financial assets at fair value through profit or loss
- equity income
- debt income
Income from financial assets at fair value through profit or loss
- structured note income
- equity income
Income from financial assets calculated using the effective interest rate method
- debt income
- cash and cash equivalents income
- structured note income
- other income received
Income from financial assets calculated using the effective interest rate method
Other income
- cash and cash equivalents income
- rental income
- other income received
- exchange movements
Other income
Investment income
- rental income
Fair value movements on financial instruments at fair value through profit or loss
- exchange movements
Fair value movements on investment property
Investment income
Fair value movements on property, plant and equipment
Fair value movements on financial instruments at fair value through profit or loss
Impact of discount rate change on insurance contract liabilities
Fair value movements on investment property
Net investment return/(loss)
Fair value movements on property, plant and equipment
Impact of discount rate change on insurance contract liabilities
Net investment return/(loss)
Included within fair value movements on financial instruments at fair value through profit or loss are gains of £6,434,000 (2020: £2,396,000) in
(24)
8,648
1,999
605
30,863
8,648
38,102
605
20,238
30,863
-
38,102
11,864
20,238
101,067
-
11,864
101,067
2021
7,482
£000
12,123
30
7,482
12,123
(24)
30
1,999
141
8,786
1,887
492
30,192
8,786
(13,618)
492
(4,984)
30,192
10
(13,618)
(15,898)
(4,984)
(4,298)
10
(15,898)
(4,298)
2020
6,255
£000
12,631
-
6,255
12,631
141
-
1,887
2021
£000
2020
£000
respect of derivative instruments.
Included within fair value movements on financial instruments at fair value through profit or loss are gains of £6,434,000 (2020: £2,396,000) in
respect of derivative instruments.
9 Claims and change in insurance liabilities and reinsurance recoveries
9 Claims and change in insurance liabilities and reinsurance recoveries
9 Claims and change in insurance liabilities and reinsurance recoveries
For the year ended 31 December 2021
Gross claims paid
For the year ended 31 December 2021
Gross change in the provision for claims
Gross claims paid
Gross change in life business provision
Gross change in the provision for claims
Claims and change in insurance liabilities
Gross change in life business provision
Reinsurers' share of claims paid
Claims and change in insurance liabilities
Reinsurers' share of change in the provision for claims
Reinsurers' share of claims paid
Reinsurance recoveries
Reinsurers' share of change in the provision for claims
Claims and change in insurance liabilities, net of reinsurance
Reinsurance recoveries
For the year ended 31 December 2020
Claims and change in insurance liabilities, net of reinsurance
Gross claims paid
For the year ended 31 December 2020
Gross change in the provision for claims
Gross claims paid
Gross change in life business provision
Gross change in the provision for claims
Claims and change in insurance liabilities
Gross change in life business provision
Reinsurers' share of claims paid
Claims and change in insurance liabilities
Reinsurers' share of change in the provision for claims
Reinsurers' share of claims paid
Reinsurance recoveries
Reinsurers' share of change in the provision for claims
Claims and change in insurance liabilities, net of reinsurance
Reinsurance recoveries
Claims and change in insurance liabilities, net of reinsurance
10 Fees, commissions and other acquisition costs
10 Fees, commissions and other acquisition costs
10 Fees, commissions and other acquisition costs
Fees paid
Commission paid
Fees paid
Change in deferred acquisition costs
Commission paid
Other acquisition costs
Change in deferred acquisition costs
Fees, commissions and other acquisition costs
Other acquisition costs
Fees, commissions and other acquisition costs
General
business
General
£000
business
£000
191,685
75,605
191,685
-
75,605
267,290
-
(83,235)
267,290
(40,587)
(83,235)
(123,822)
(40,587)
143,468
(123,822)
143,468
164,510
59,617
164,510
-
59,617
224,127
-
(59,024)
224,127
(35,557)
(59,024)
(94,581)
(35,557)
129,546
(94,581)
129,546
Life
business
Life
£000
business
£000
5,438
-
5,438
(3,095)
-
2,343
(3,095)
-
2,343
-
-
-
-
2,343
-
2,343
6,008
-
6,008
(7,341)
-
(1,333)
(7,341)
-
(1,333)
-
-
-
-
(1,333)
-
(1,333)
2021
£000
2021
21
£000
73,446
21
(4,376)
73,446
26,805
(4,376)
95,896
26,805
95,896
Total
£000
Total
£000
197,123
75,605
197,123
(3,095)
75,605
269,633
(3,095)
(83,235)
269,633
(40,587)
(83,235)
(123,822)
(40,587)
145,811
(123,822)
145,811
170,518
59,617
170,518
(7,341)
59,617
222,794
(7,341)
(59,024)
222,794
(35,557)
(59,024)
(94,581)
(35,557)
128,213
(94,581)
128,213
2020
£000
2020
13
£000
68,717
13
(3,352)
68,717
20,066
(3,352)
85,444
20,066
85,444
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 228
229
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
11 Profit/(loss) for the year
11 Profit/(loss) for the year
11 Profit/(loss) for the year
Profit/(loss) for the year has been arrived at after (crediting)/charging
Profit/(loss) for the year has been arrived at after (crediting)/charging
Net foreign exchange gains
Net foreign exchange gains
Depreciation of property, plant and equipment
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss on disposal of property, plant and equipment
Amortisation of intangible assets
Amortisation of intangible assets
(Increase)/decrease in fair value of investment property
(Increase)/decrease in fair value of investment property
Employee benefits expense including termination benefits, net of recharges
Employee benefits expense including termination benefits, net of recharges
12 Auditor’s remuneration
12 Auditor's remuneration
12 Auditor's remuneration
Fees payable to the Company's auditor and its associates for the audit of the Company's
Fees payable to the Company's auditor and its associates for the audit of the Company's
annual accounts
annual accounts
Fees payable to the Company’s auditor and its associates for other services:
Fees payable to the Company’s auditor and its associates for other services:
- The audit of the Company's subsidiaries
- The audit of the Company's subsidiaries
Total audit fees
Total audit fees
- Audit-related assurance services
- Audit-related assurance services
Total non-audit fees
Total non-audit fees
Total auditor's remuneration
Total auditor's remuneration
2021
2021
£000
£000
(605)
(605)
6,155
6,155
24
24
829
829
(20,238)
(20,238)
98,838
98,838
2021
2021
£000
£000
599
599
347
347
946
946
214
214
214
214
1,160
1,160
2020
2020
£000
£000
(493)
(493)
5,486
5,486
172
172
1,433
1,433
4,984
4,984
83,865
83,865
2020
2020
£000
£000
476
476
238
238
714
714
178
178
178
178
892
892
Amounts disclosed are net of services taxes, where applicable. Audit-related assurance services include Prudential Regulatory Authority (PRA) and
Amounts disclosed are net of services taxes, where applicable. Audit-related assurance services include Prudential Regulatory Authority (PRA) and
other regulatory audit work.
other regulatory audit work.
Notes to the financial statements
Notes to the financial statements
13 Employee information
13 Employee information
The average monthly number of full-time equivalent employees of the Group and Parent, including executive directors, during the year by
geographical location was:
Group
United Kingdom and Ireland
Australia
Canada
Parent
United Kingdom and Ireland
Canada
General
business
No.
860
110
78
1,048
General
business
No.
860
78
938
2021
Life
business
No.
1
-
-
1
2021
Life
business
No.
1
-
1
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
Other
No.
227
-
-
227
Other
No.
107
-
107
Other
No.
194
-
-
194
Other
No.
92
-
92
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.
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
2021
2020
Group
£000
86,072
8,101
6,411
1,646
83
102,313
(2,303)
(1,446)
98,564
Parent
£000
72,207
7,592
5,516
1,646
83
87,044
(12,260)
(1,446)
73,338
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
The above Group figures do not include termination benefits of £274,000 (2020: £476,000) of which £nil (2020: £56,000) was recharged to related
undertakings of the group. The above Parent figures do not include termination benefits of £274,000 (2020: £476,000), of which £10,000 (2020:
£74,000) was recharged to related undertakings of the Parent.
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Notes to the financial statements
Notes to the financial statements
14 Tax expense
14 Tax expense
(a) Tax charged/(credited) to the statement of profit or loss
Current tax
Deferred tax
Total tax expense/(credit)
- current year
- prior year adjustments
- temporary differences
- prior year adjustments
- Impact of change in deferred tax rate
230
231
Notes to the financial statements
Notes to the financial statements
15 Appropriations
2021
£000
13,178
1,468
(5,140)
(887)
9,029
17,648
2020
£000
1,027
(414)
(5,395)
-
4,256
(526)
Amounts paid directly from equity 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, Benefact Trust Limited
Tax relief
Net appropriation for the year
2021
£000
2020
£000
9,181
9,181
21,000
(3,990)
17,010
-
-
-
Tax on the Group’s result before tax differs from the United Kingdom standard rate of corporation tax for the reasons set out in the following
reconciliation:
Profit/(loss) before tax
Tax calculated at the UK standard rate of tax of 19% (2020: 19%)
Factors affecting charge/(credit) for the year:
Expenses not deductible for tax purposes
Non-taxable income
Life insurance and other tax paid at non-UK rates
Impact of differential between current and deferred tax rate
Tax losses utilised for which no deferred tax asset was recognised
Deferred tax asset for tax losses not previously recognised
Impact of change in deferred tax rate
Adjustments to tax charge in respect of prior periods
Total tax expense/(credit)
2021
£000
77,037
14,637
(1,265)
(1,862)
(1,234)
707
(379)
(2,565)
9,029
580
17,648
2020
£000
(15,746)
(2,992)
84
(1,391)
90
-
(159)
-
4,256
(414)
(526)
A change in the UK standard rate of corporation tax from 19% to 25% will become effective from 1 April 2023. Deferred tax has been provided at
an average rate of 24% (2020: 19%).
(b) Tax charged/(credited) to other comprehensive income
Current tax charged/(credited) on:
Fair value movements on hedge derivatives
Deferred tax charged/(credited) on:
Fair value movements on property
Actuarial movements on retirement benefit plans
Fair value movements on hedge derivatives
Impact of change in deferred tax rate
Total tax charged/(credited) to other comprehensive income
Tax relief on charitable grants of £3,990,000 (2020: £nil) has been taken directly to equity.
2021
£000
2020
£000
313
(328)
-
9,665
(178)
(1,519)
(62)
(3,291)
53
(158)
8,281
(3,786)
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 232
233
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
16 Goodwill and other intangible assets (continued)
16 Goodwill and other intangible assets (continued)
16 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 three years
on a weighted average basis (2020: one year).
Other intangible assets consist of acquired brand, customer and distribution relationships, which have an overall remaining useful life of three years
on a weighted average basis (2020: one year).
Parent
Parent
Computer
software
£000
Computer
software
£000
41,330
3,914
41,330
(1,964)
3,914
92
(1,964)
43,372
92
43,372
17,222
574
17,222
(1,876)
574
52
(1,876)
15,972
52
27,400
15,972
27,400
Cost
At 1 January
Cost
Additions
At 1 January
Disposals
Additions
Exchange differences
Disposals
At 31 December
Exchange differences
Amortisation
At 31 December
At 1 January
Amortisation
Charge for the year
At 1 January
Disposals
Charge for the year
Exchange differences
Disposals
At 31 December
Exchange differences
Net book value at 31 December
At 31 December
Net book value at 31 December
17 Deferred acquisition costs
17 Deferred acquisition costs
17 Deferred acquisition costs
At 1 January
Increase in the period
At 1 January
Release in the period
Increase in the period
Exchange differences
Release in the period
At 31 December
Exchange differences
All balances are current.
At 31 December
All balances are current.
2021
2021
Other
intangible
assets
Other
£000
intangible
assets
£000
198
-
198
-
-
(13)
-
185
(13)
185
41
48
41
-
48
(5)
-
84
(5)
101
84
101
Total
£000
Total
£000
41,528
3,914
41,528
(1,964)
3,914
79
(1,964)
43,557
79
43,557
17,263
622
17,263
(1,876)
622
47
(1,876)
16,056
47
27,501
16,056
27,501
Computer
software
£000
Computer
software
£000
29,163
12,780
29,163
(542)
12,780
(71)
(542)
41,330
(71)
41,330
17,249
552
17,249
(542)
552
(37)
(542)
17,222
(37)
24,108
17,222
24,108
2020
Other
2020
intangible
assets
Other
£000
intangible
assets
£000
-
198
-
-
198
-
-
198
-
198
-
41
-
-
41
-
-
41
-
157
41
157
2021
2020
2021
Group
£000
Group
41,989
£000
46,122
41,989
(41,746)
46,122
(338)
(41,746)
46,027
(338)
46,027
Parent
£000
Parent
33,472
£000
36,689
33,472
(33,520)
36,689
99
(33,520)
36,740
99
36,740
2020
Group
£000
Group
38,199
£000
41,582
38,199
(38,230)
41,582
438
(38,230)
41,989
438
41,989
Total
£000
Total
£000
29,163
12,978
29,163
(542)
12,978
(71)
(542)
41,528
(71)
41,528
17,249
593
17,249
(542)
593
(37)
(542)
17,263
(37)
24,265
17,263
24,265
Parent
£000
Parent
31,133
£000
33,515
31,133
(31,110)
33,515
(66)
(31,110)
33,472
(66)
33,472
Notes to the financial statements
Notes to the financial statements
16 Goodwill and other intangible assets
16 Goodwill and other intangible assets
Group
Cost
At 1 January 2021
Additions
Disposals
Exchange differences
At 31 December 2021
Accumulated impairment losses and amortisation
At 1 January 2021
Amortisation charge for the year
Impairment losses for the year
Disposals
Exchange differences
At 31 December 2021
Net book value at 31 December 2021
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
Goodwill
£000
Computer
software
£000
Other
intangible
assets
£000
24,697
-
-
-
24,697
379
-
27
-
-
406
24,291
23,779
918
-
-
24,697
344
-
35
-
-
379
24,318
48,135
3,914
(6,641)
(73)
45,335
19,179
575
-
(1,876)
53
17,931
27,404
33,069
15,407
(542)
201
48,135
18,537
1,219
-
(542)
(35)
19,179
28,956
5,987
-
-
(12)
5,975
4,908
254
-
-
(4)
5,158
817
5,376
611
-
-
5,987
4,692
214
-
-
2
4,908
1,079
Total
£000
78,819
3,914
(6,641)
(85)
76,007
24,466
829
27
(1,876)
49
23,495
52,512
62,224
16,936
(542)
201
78,819
23,573
1,433
35
(542)
(33)
24,466
54,353
£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 and prior period balance relates to the acquisition of WRS Insurance Brokers Limited (WRS) during 2020.
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 1.7% (2020: 1.8%) as being appropriate, based on medium-term rates published in the OBR's
November report. The pre-tax discount rate of 10.8% (2020: 9.8%) 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 £5.8m (2020: £4.4m). If the
cumulative growth rate between 2022 and 2024 was 2.8% lower than assumed in management-approved business plans, or the discount rate
increased by 1.9%, then the recoverable amount would equal the carrying amount. For the investment in Lansdown Insurance Brokers Limited, the
headroom above the carrying value is significant and reasonably possible changes to the key assumptions do not result in impairment.
Assumptions used are consistent with historical experience within the business acquired and external sources of information.
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 234
235
Notes to the financial statements
Notes to the financial statements
18 Retirement benefit schemes
18 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. 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. The scheme previously had two discrete sections; the EIO Section and the Ansvar Section. With effect from 1 January
2021, the two discrete sections of the scheme have been combined.
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. No contribution is expected to be paid by the Group in 2022.
Actuarial valuations were reviewed and updated by an actuary at 31 December 2021 for IAS 19 purposes. The surplus in the scheme attributable to
the former EIO Section has been assessed against the economic benefit available to the Parent as a reduction in future contributions in accordance
with IFRIC 14. This has resulted in the recognisable surplus being restricted by £17.5m. The Parent has an unconditional right to a refund of the
surplus attributable to the former Ansvar Section of the Fund, which has been recognised in full in accordance with IFRIC 14.
In the current year, actuarial gains arising from changes in financial assumptions of £19.4m (2020: actuarial losses of £53.6m) have been recognised
in the statement of other comprehensive income. These gains resulted from a 0.6% increase in the discount rate partially offset by inflation-linked
pension increases. In the prior year, actuarial losses were recognised as a result of a 0.6% fall in the discount rate combined with inflationary
increases arising from a reduction in the gap between the RPI and CPI assumptions following the conclusion of the government's consultation on
the future measure of RPI.
Certain mortality assumptions used in the IAS 19 valuation were reviewed and updated resulting in an actuarial gain of £4.2m (2020: £6.0m actuarial
gain) being recognised in the current year. In the prior year, updating for actual member experience since the previous triennial valuation and for
other financial assumption experience resulted in an actuarial gain of £14.5m.
A past service cost of £32,000 was recognised in the prior year following the High Court ruling relating to Guaranteed Minimum Pensions (GMP)
equalisation for historic transfers values.
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; and
- 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
Notes to the financial statements
18 Retirement benefit schemes (continued)
18 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 portfolio, structured to increase in value with decreases in interest rates and grow in line with inflation expectations. This is
estimated currently to hedge 65% of the interest rate and 75% 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, including the use of an equity protection strategy to
reduce the impact of a material fall in equity markets. 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.
The Trustees have recently adopted a Responsible and Sustainable Investment Policy with regards to the Fund’s equities. This includes an 'absence
of harm' exclusion policy, as well as an aspiration to reduce the portfolio’s carbon intensity over time.
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 surplus/(deficit) in the statement of financial position
Movements in the net defined benefit pension scheme asset recognised in the statement of financial position
are as follows:
At 1 January
Expense charged to profit or loss
Amounts recognised in other comprehensive income
Contributions paid
At 31 December
The amounts recognised through profit or loss are as follows:
Current service cost
Administration cost
Interest expense on liabilities
Interest income on plan assets
Past service cost
Total, included in employee benefits expense
The amounts recognised in the statement of other comprehensive income are as follows:
Return on plan assets, excluding interest income
Experience (losses)/gains on liabilities
Gains from changes in demographic assumptions
Gains/(losses) from changes in financial assumptions
Change in asset ceiling
Total included in other comprehensive income
2021
£000
2020
£000
(377,113)
422,885
45,772
(17,468)
28,304
(403,709)
394,356
(9,353)
-
(9,353)
(9,353)
(1,646)
39,303
-
28,304
683
828
5,193
(5,058)
-
1,646
34,200
(944)
4,155
19,360
(17,468)
39,303
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)
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Notes to the financial statements
Notes to the financial statements
18 Retirement benefit schemes (continued)
18 Retirement benefit schemes (continued)
Notes to the financial statements
Notes to the financial statements
18 Retirement benefit schemes (continued)
18 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:
236
Ecclesiastical Insurance Office plc Annual Report & Accounts 2021
237
237
Group and Parent
Pension surplus
Pension deficit
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 other1
Equity instruments
UK quoted
UK unquoted
Overseas quoted
Liability driven investments - unquoted
Debt instruments
UK public sector quoted - fixed interest
UK non-public sector quoted - fixed interest
UK quoted - index-linked
Derivative financial instruments - unquoted
Property
2021
£000
28,304
-
28,304
2020
£000
1,053
(10,406)
(9,353)
%
1.90
3.40
3.00
4.50
3.60
3.20
2.20
22.7
24.0
23.5
25.2
£000
38,856
81,330
34
90,751
172,115
60,482
227
77,883
24,806
102,916
851
47,665
%
1.30
2.90
2.50
4.50
3.40
2.80
1.70
22.9
24.1
24.0
25.6
£000
36,657
83,040
552
80,704
164,296
57,519
243
68,500
24,383
93,126
885
41,873
1 Includes accrued income, prepayments and other debtors and creditors.
The actual return on plan assets was a gain of £39,258,000 (2020: a gain of £23,282,000).
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.
422,885
394,356
Plan assets
At 1 January
Interest income
Actual return on plan assets, excluding interest income
Pension benefits paid and payable
At 31 December
Defined benefit obligation
At 1 January
Current service cost
Administration cost
Past service cost
Interest cost
Pension benefits paid and payable
Experience losses/(gains) on liabilities
Gains from changes in demographic assumptions
(Gains)/losses from changes in financial assumptions
At 31 December
Asset ceiling
At 1 January
Change in asset ceiling
At 31 December
History of plan assets and liabilities
Present value of defined benefit obligations
Fair value of plan assets
Restrictions on asset recognised
Surplus/(deficit)
2021
£000
394,356
5,058
34,200
(10,729)
422,885
403,709
683
828
-
5,193
(10,729)
944
(4,155)
(19,360)
377,113
-
17,468
17,468
2018
£000
(325,738)
341,869
16,131
-
16,131
2020
£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
2021
£000
(377,113)
422,885
45,772
(17,468)
28,304
2020
£000
(403,709)
394,356
(9,353)
-
(9,353)
2019
£000
(371,179)
379,684
8,505
-
8,505
The weighted average duration of the defined benefit obligation at the end of the reporting period is 21 years (2020: 21 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
2021
£000
2020
£000
(35,010)
40,505
29,134
(26,435)
5,540
(5,128)
16,402
(16,021)
(39,500)
46,000
33,600
(29,100)
6,800
(6,300)
20,100
(20,000)
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Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021
Notes to the financial statements
Notes to the financial statements
18 Retirement benefit schemes (continued)
18 Retirement benefit schemes (continued)
Notes to the financial statements
Notes to the financial statements
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
19 Property, plant and equipment
19 Property, plant and equipment
238
239
Group
Cost or valuation
At 1 January 2021
Additions
Disposals
Transfers to investment property
Exchange differences
At 31 December 2021
Depreciation
At 1 January 2021
Charge for the year
Disposals
Exchange differences
At 31 December 2021
Net book value at 31 December 2021
Cost or valuation
At 1 January 2020
Additions
Disposals
Revaluation
Exchange differences
At 31 December 2020
Depreciation
At 1 January 2020
Charge for the year
Disposals
Exchange differences
At 31 December 2020
Net book value at 31 December 2020
Land and
buildings
£000
Motor
vehicles
£000
Furniture,
fittings and
equipment
£000
Computer
equipment
£000
Right-of-
use asset
£000
2,440
-
-
(975)
-
1,465
-
-
-
-
-
1,465
2,445
-
-
(5)
-
2,440
-
-
-
-
-
2,440
146
34
(68)
-
-
112
107
17
(50)
-
74
38
146
-
-
-
-
146
87
20
-
-
107
39
14,971
2,444
(2,087)
-
8
15,336
7,247
1,377
(2,087)
(5)
6,532
8,804
9,841
5,142
(10)
-
(2)
14,971
6,536
712
(6)
5
7,247
7,724
11,363
1,155
(3,880)
-
(16)
8,622
8,738
1,599
(3,880)
(13)
6,444
2,178
10,748
892
(300)
-
23
11,363
7,539
1,481
(300)
18
8,738
2,625
31,766
746
(2,241)
-
(77)
30,194
6,278
3,162
(1,952)
(54)
7,434
22,760
14,595
17,599
(535)
-
107
31,766
3,291
3,273
(342)
56
6,278
25,488
Total
£000
60,686
4,379
(8,276)
(975)
(85)
55,729
22,370
6,155
(7,969)
(72)
20,484
35,245
37,775
23,633
(845)
(5)
128
60,686
-
17,453
5,486
(648)
79
22,370
38,316
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; and
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
2021
£000
7,058
6,530
83
643
(198)
7,058
83
83
2020
£000
6,530
5,998
112
463
(43)
6,530
112
112
The weighted average duration of the net obligations at the end of the reporting period is 12.8 years (2020: 13.1 years).
The main actuarial assumptions for the plan are a long-term increase in medical costs of 7.4% (2020: 6.9%) and a discount rate of 1.9% (2020: 1.3%).
An actuarial loss from experience of £814,000 has been recognised in the current year following a review of the medical cost scale. This has been
partially offset by an actuarial gain of £130,000 arising from changes in financial assumptions. A small actuarial gain has been recognised due to
changes in mortality assumptions. 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
2021
£000
(421)
464
875
(743)
513
(480)
2020
£000
(404)
445
851
(721)
576
(527)
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 240
241
Notes to the financial statements
Notes to the financial statements
19 Property, plant and equipment (continued)
19 Property, plant and equipment (continued)
Parent
Cost or valuation
At 1 January 2021
Additions
Disposals
Transfers to investment property
Exchange differences
At 31 December 2021
Depreciation
At 1 January 2021
Charge for the year
Disposals
Exchange differences
At 31 December 2021
Net book value at 31 December 2021
Cost or valuation
At 1 January 2020
Additions
Disposals
Revaluation
Exchange differences
At 31 December 2020
Depreciation
At 1 January 2020
Charge for the year
Disposals
Exchange differences
At 31 December 2020
Net book value at 31 December 2020
Land and
buildings
£000
Motor
vehicles
£000
Furniture,
fittings and
equipment
£000
Computer
equipment
£000
Right of
use asset
£000
2,040
-
-
(575)
-
1,465
-
-
-
-
-
1,465
2,045
-
-
(5)
-
2,040
-
-
-
-
-
2,040
53
-
(39)
-
-
14
40
2
(28)
-
14
-
53
-
-
-
-
53
29
11
-
-
40
13
14,439
2,438
(2,045)
-
9
14,841
6,922
1,321
(2,045)
(6)
6,192
8,649
9,315
5,138
(10)
-
(4)
14,439
6,270
654
(6)
4
6,922
7,517
10,283
1,013
(3,795)
-
10
7,511
7,989
1,432
(3,793)
7
5,635
1,876
9,846
742
(298)
-
(7)
10,283
6,964
1,329
(300)
(4)
7,989
2,294
27,802
678
(2,195)
-
29
26,314
4,940
2,530
(1,940)
3
5,533
20,781
11,362
16,994
(535)
-
(19)
27,802
2,658
2,626
(342)
(2)
4,940
22,862
Total
£000
54,617
4,129
(8,074)
(575)
48
50,145
19,891
5,285
(7,806)
4
17,374
32,771
32,621
22,874
(843)
(5)
(30)
54,617
15,921
4,620
(648)
(2)
19,891
34,726
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 £1,464,000 (2020: £2,444,000). The value of land and buildings of the
Parent on a historical cost basis is £1,464,000 (2020: £2,044,000).
Depreciation expense has been charged in other operating and administrative expenses.
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
20 Investment property
20 Investment property
20 Investment property
Fair value at 1 January
Fair value at 1 January
Transfers from property, plant and equipment
Transfers from property, plant and equipment
Disposals
Disposals
Fair value gains/(losses) recognised in profit or loss
Fair value gains/(losses) recognised in profit or loss
Fair value at 31 December
Fair value at 31 December
2021
2021
Group
Group
£000
£000
142,142
142,142
975
975
-
-
20,238
20,238
163,355
163,355
Parent
Parent
142,142
142,142
575
575
-
-
20,105
20,105
162,822
162,822
2020
2020
Group
Group
£000
£000
148,146
148,146
-
-
(1,020)
(1,020)
(4,984)
(4,984)
142,142
142,142
Parent
Parent
£000
£000
148,146
148,146
-
-
(1,020)
(1,020)
(4,984)
(4,984)
142,142
142,142
The Group’s investment properties were last revalued at 31 December 2021 by Cluttons LLP, an independent professional firm of chartered
The Group’s investment properties were last revalued at 31 December 2021 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
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
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.
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
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 £8,648,000 (2020: £8,786,000) and is included in net investment return.
owned by both the Group and Parent amounted to £8,648,000 (2020: £8,786,000) and is included in net investment return.
21 Financial investments
21 Financial investments
21 Financial investments
Financial investments summarised by measurement category are as follows:
Financial investments summarised by measurement category are as follows:
Financial investments at fair value through profit or loss
Financial investments at fair value through profit or loss
Equity securities
Equity securities
- listed
- listed
- unlisted
- unlisted
Debt securities
Debt securities
- government bonds
- government bonds
- listed
- listed
- unlisted
- unlisted
Structured notes
Structured notes
Derivative financial instruments
Derivative financial instruments
- options
- options
- forwards
- forwards
Financial investments at fair value through other comprehensive income
Financial investments at fair value through other comprehensive income
Derivative financial instruments
Derivative financial instruments
- forwards
- forwards
Total financial investments at fair value
Total financial investments at fair value
Loans and receivables
Loans and receivables
Other loans
Other loans
Parent investments in subsidiary undertakings
Parent investments in subsidiary undertakings
Shares in subsidiary undertakings
Shares in subsidiary undertakings
Total financial investments
Total financial investments
Current
Current
Non-current
Non-current
All investments in subsidiary undertakings are unlisted.
All investments in subsidiary undertakings are unlisted.
2021
2021
Group
Group
£000
£000
281,682
281,682
68,620
68,620
204,071
204,071
313,294
313,294
34
34
14,649
14,649
334
334
2
2
882,686
882,686
Parent
Parent
£000
£000
254,743
254,743
68,619
68,619
100,631
100,631
215,496
215,496
34
34
-
-
334
334
147
147
640,004
640,004
2020
2020
Group
Group
£000
£000
262,598
262,598
59,288
59,288
160,381
160,381
334,732
334,732
552
552
-
-
1,407
1,407
672
672
819,630
819,630
Parent
Parent
£000
£000
238,555
238,555
59,287
59,287
71,199
71,199
217,211
217,211
552
552
-
-
1,407
1,407
672
672
588,883
588,883
414
414
883,100
883,100
269
269
640,273
640,273
401
401
820,031
820,031
401
401
589,284
589,284
670
670
-
-
883,770
883,770
447,418
447,418
436,352
436,352
670
670
66,163
66,163
707,106
707,106
392,530
392,530
314,576
314,576
746
746
-
-
820,777
820,777
335,916
335,916
484,861
484,861
746
746
60,757
60,757
650,787
650,787
298,036
298,036
352,751
352,751
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 242
243
Notes to the financial statements
Notes to the financial statements
22 Derivative financial instruments
22 Derivative financial instruments
The Group utilises derivatives to mitigate equity price risk arising from investments held at fair value, foreign exchange risk arising from investments
denominated in foreign currencies, and foreign exchange risk arising from investments denominated in Sterling that contain underlying foreign
currency exposure. These 'non-hedge' derivatives either do not qualify for hedge accounting or the option to hedge account has not been taken.
The Group has also formally designated certain derivatives as a hedge of its net investments in Australia and Canada. A gain of £1,912,000 (2020:
loss of £2,339,000) in respect of these 'hedge' derivatives has been recognised in the hedging reserve within shareholders' equity, as disclosed in
note 26. The Group has formally assessed and documented the effectiveness of derivatives that qualify for hedge accounting in accordance with
IAS 39, Financial Instruments: Recognition and Measurement .
Group
Non-hedge derivatives
Equity/Index contracts
Options
Foreign exchange contracts
Forwards (Euro)
Hedge derivatives
Foreign exchange contracts
Forwards (Australian dollar)
Forwards (Canadian dollar)
Contract/
notional
amount
£000
2021
Fair value
asset
£000
Fair value
liability
£000
Contract/
notional
amount¹
£000
2020
Fair value
asset
£000
Fair value
liability
£000
34,695
99,369
40,512
37,609
212,185
334
2
145
269
750
296
35
-
-
331
40,597
1,407
86,980
672
41,231
30,269
199,077
-
401
2,480
-
-
1,244
-
1,244
¹ The contract/notional amount in the prior year has been restated to reflect sterling values
All 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 of the Australian dollar foreign exchange contract
which is classified as a non-hedge derivative.
All contracts designated as hedging instruments were fully effective in the current and prior year.
The notional amounts above reflect the aggregate of individual derivative positions on a gross basis and so give an indication of the overall scale of
the derivative transactions. They do not reflect current market values of the open positions.
Derivative fair value assets are recognised within financial investments (note 21) and derivative fair value liabilities are recognised within other
liabilities (note 30).
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
23 Other assets
23 Other assets
23 Other assets
2021
2020
Group
£000
2021
Parent
£000
Group
£000
2020
Parent
£000
Group
50,285
£000
66,232
11,005
50,285
66,232
11,005
4,329
5,259
52,683
4,329
6,685
5,259
236
52,683
19,856
6,685
216,570
236
19,856
162,085
216,570
54,485
162,085
54,485
Group
52,706
£000
67,333
12,583
52,706
67,333
12,583
3,927
8,606
68,900
3,927
7,008
8,606
111
68,900
19,736
7,008
240,910
111
19,736
181,346
240,910
59,564
181,346
59,564
Parent
52,629
£000
43,712
8,001
52,629
43,712
8,001
3,096
4,425
80,688
3,096
-
4,425
111
80,688
2,146
-
194,808
111
2,146
134,574
194,808
60,234
134,574
60,234
Receivables arising from insurance and reinsurance contracts
- due from contract holders
- due from agents, brokers and intermediaries
Receivables arising from insurance and reinsurance contracts
- due from reinsurers
- due from contract holders
- due from agents, brokers and intermediaries
Other receivables
- due from reinsurers
- accrued interest and rent
- other prepayments and accrued income
Other receivables
- amounts owed by related parties
- accrued interest and rent
- debtors arising from broking activities
- other prepayments and accrued income
- net investment in finance leases
- amounts owed by related parties
- other debtors
- debtors arising from broking activities
- net investment in finance leases
- other debtors
Current
Non-current
Current
The Group has recognised a net charge of £554,000 (2020: net charge of £759,000) in other operating and administrative expenses in the
Non-current
statement of profit or loss for the impairment and reversal of impairment of its trade and other receivables during the year. The Parent has
The Group has recognised a net charge of £554,000 (2020: net charge of £759,000) in other operating and administrative expenses in the
recognised a net charge of £578,000 (2020: £693,000).
statement of profit or loss for the impairment and reversal of impairment of its trade and other receivables during the year. The Parent has
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
recognised a net charge of £578,000 (2020: £693,000).
consider that the amounts are recoverable at their carrying values, which are stated net of an allowance for doubtful debts for those debtors that
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
are individually determined to be impaired.
consider that the amounts are recoverable at their carrying values, which are stated net of an allowance for doubtful debts for those debtors that
Included within amounts due from agents, brokers and intermediaries of the Group and Parent is a letter of credit for £2,000,000 (2020:
are individually determined to be impaired.
£2,000,000) and included within amounts owed by related parties of the Parent is £12,152,000 (2020: £2,920,000) pledged as collateral in respect
Included within amounts due from agents, brokers and intermediaries of the Group and Parent is a letter of credit for £2,000,000 (2020:
of an insurance liability.
£2,000,000) and included within amounts owed by related parties of the Parent is £12,152,000 (2020: £2,920,000) pledged as collateral in respect
Included within other receivables of the Group is £1,584,000 (2020: £1,201,000) classified as contract assets, and £1,618,000 (2020: £1,410,000)
of an insurance liability.
classified as receivables in accordance with IFRS 15.
Included within other receivables of the Group is £1,584,000 (2020: £1,201,000) classified as contract assets, and £1,618,000 (2020: £1,410,000)
Parent
49,981
£000
39,796
4,941
49,981
39,796
4,941
3,253
3,966
56,513
3,253
-
3,966
236
56,513
2,428
-
161,114
236
2,428
105,075
161,114
56,039
105,075
56,039
classified as receivables in accordance with IFRS 15.
Movement in the allowance for doubtful debts
2021
Group
£000
2021
Parent
£000
2020
Group
£000
2020
Parent
£000
Movement in the allowance for doubtful debts
Balance at 1 January
Movement in the year
Balance at 31 December
Balance at 1 January
Movement in the year
Included within other assets of the Group is £13,702,000 (2020: £13,767,000) overdue but not impaired, of which £11,754,000 (2020: £11,588,000) is
Balance at 31 December
not more than three months overdue at the reporting date. Included within trade receivables of the Parent is £2,012,000 (2020: £5,238,000)
Included within other assets of the Group is £13,702,000 (2020: £13,767,000) overdue but not impaired, of which £11,754,000 (2020: £11,588,000) is
overdue but not impaired, of which £1,884,000 (2020: £4,245,000) is not more than three months overdue at the reporting date.
not more than three months overdue at the reporting date. Included within trade receivables of the Parent is £2,012,000 (2020: £5,238,000)
24 Cash and cash equivalents
overdue but not impaired, of which £1,884,000 (2020: £4,245,000) is not more than three months overdue at the reporting date.
24 Cash and cash equivalents
24 Cash and cash equivalents
Parent
574
£000
307
881
574
307
881
Parent
69
£000
505
574
69
505
574
Group
723
£000
262
985
723
262
985
Group
145
£000
578
723
145
578
723
2020
2021
Cash at bank and in hand
Short-term bank deposits
Cash at bank and in hand
Short-term bank deposits
Included within short-term bank deposits of the Group and Parent are cash deposits of £2,830,000 (2020: £1,960,000) pledged as collateral by
Group
£000
Group
75,982
£000
38,054
114,036
75,982
38,054
114,036
Parent
£000
Parent
30,038
£000
18,399
48,437
30,038
18,399
48,437
Group
£000
Group
78,643
£000
25,786
104,429
78,643
25,786
104,429
Parent
£000
Parent
43,713
£000
15,753
59,466
43,713
15,753
59,466
2021
2020
way of cash margins on open derivative contracts to cover derivative liabilities. Included within cash at bank and in hand of the Group and Parent are
Included within short-term bank deposits of the Group and Parent are cash deposits of £2,830,000 (2020: £1,960,000) pledged as collateral by
amounts of £820,000 (2020: £874,000) held in accordance with the third country branch requirements of the European Union.
way of cash margins on open derivative contracts to cover derivative liabilities. Included within cash at bank and in hand of the Group and Parent are
Included within Group cash at bank and in hand are amounts of £23,072,000 (2020: £4,131,000) pledged as collateral by way of cash calls from
amounts of £820,000 (2020: £874,000) held in accordance with the third country branch requirements of the European Union.
reinsurers, and £4,604,000 (2020: £3,765,000) of restricted cash held on an agency basis.
Included within Group cash at bank and in hand are amounts of £23,072,000 (2020: £4,131,000) pledged as collateral by way of cash calls from
reinsurers, and £4,604,000 (2020: £3,765,000) of restricted cash held on an agency basis.
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
25 Called up share capital
25 Called up share capital
25 Called up share capital
Ordinary shares of 4p each
8.625% Non-Cumulative Irredeemable Preference shares of £1 each
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
The number of shares in issue are as follows:
At 1 January and 31 December
Ordinary shares of 4p each
8.625% Non-Cumulative Irredeemable Preference shares of £1 each
At 1 January and 31 December
At 1 January and 31 December
Issued, allotted and
fully paid
Issued, allotted and
fully paid
2021
£000
2020
£000
14,027
2021
106,450
£000
120,477
14,027
106,450
120,477
14,027
2020
106,450
£000
120,477
14,027
106,450
120,477
350,678
350,678
350,678
106,450
350,678
106,450
8.625% Non-Cumulative Irredeemable Preference shares of £1 each
On winding up, the assets of the Company remaining after payment of its liabilities are to be applied to holders of the Non-Cumulative
106,450
At 1 January and 31 December
Irredeemable Preference shares in repaying the nominal capital sum paid up on the shares and an amount equal to all arrears of accrued and
106,450
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
On winding up, the assets of the Company remaining after payment of its liabilities are to be applied to holders of the Non-Cumulative
liabilities belongs to the Ordinary shareholders.
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
Holders of the Non-Cumulative Irredeemable Preference shares are not entitled to receive notice of, or to attend, or vote at any general meeting
liabilities belongs to the Ordinary shareholders.
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
Holders of the Non-Cumulative Irredeemable Preference shares are not entitled to receive notice of, or to attend, or vote at any general meeting
Company.
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
26 Translation and hedging reserve
Company.
26 Translation and hedging reserve
26 Translation and hedging reserve
Group
Total
£000
Total
18,230
At 1 January 2021
£000
Group
(2,356)
Losses on currency translation differences
Gains on net investment hedges
1,912
18,230
At 1 January 2021
Attributable tax
(183)
(2,356)
Losses on currency translation differences
17,603
At 31 December 2021
Gains on net investment hedges
1,912
Attributable tax
(183)
18,324
At 1 January 2020
17,603
At 31 December 2021
1,980
Gains on currency translation differences
(2,339)
Losses on net investment hedges
18,324
At 1 January 2020
265
Attributable tax
1,980
Gains on currency translation differences
18,230
At 31 December 2020
(2,339)
Losses on net investment hedges
Parent
265
Attributable tax
18,230
At 31 December 2020
7,067
At 1 January 2021
Parent
Gains on currency translation differences
551
Losses on net investment hedges
(713)
7,067
At 1 January 2021
Attributable tax
131
551
Gains on currency translation differences
7,036
At 31 December 2021
Losses on net investment hedges
(713)
Attributable tax
131
7,564
At 1 January 2020
7,036
At 31 December 2021
(712)
Losses on currency translation differences
279
Gains on net investment hedges
7,564
At 1 January 2020
(64)
Attributable tax
(712)
Losses on currency translation differences
7,067
At 31 December 2020
279
Gains on net investment hedges
(64)
Attributable tax
The translation reserve arises on consolidation of the Group's and Parent's foreign operations. The hedging reserve represents the cumulative
7,067
At 31 December 2020
amount of gains and losses on hedging instruments in respect of net investments in foreign operations.
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.
Translation
reserve
£000
Translation
reserve
15,552
£000
(2,356)
-
15,552
-
(2,356)
13,196
-
-
13,572
13,196
1,980
-
13,572
-
1,980
15,552
-
-
15,552
6,418
551
-
6,418
-
551
6,969
-
-
7,130
6,969
(712)
-
7,130
-
(712)
6,418
-
-
6,418
Hedging
reserve
£000
Hedging
reserve
2,678
£000
-
1,912
2,678
(183)
-
4,407
1,912
(183)
4,752
4,407
-
(2,339)
4,752
265
-
2,678
(2,339)
265
2,678
649
-
(713)
649
131
-
67
(713)
131
434
67
-
279
434
(64)
-
649
279
(64)
649
244
245
Notes to the financial statements
Notes to the financial statements
27 Insurance liabilities and reinsurance assets
27 Insurance liabilities and reinsurance assets
Gross
Claims outstanding
Unearned premiums
Life business provision
Total gross insurance liabilities
Recoverable from reinsurers
Claims outstanding
Unearned premiums
Total reinsurers’ share of insurance liabilities
Net
Claims outstanding
Unearned premiums
Life business provision
Total net insurance liabilities
Gross insurance liabilities
Current
Non-current
Reinsurance assets
Current
Non-current
2021
Group
£000
616,225
253,158
73,909
943,292
166,360
88,089
254,449
449,865
165,069
73,909
688,843
Parent
£000
471,209
202,389
-
673,598
107,491
64,431
171,922
363,718
137,958
-
501,676
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
449,342
493,950
347,937
325,661
412,200
456,449
315,863
300,339
172,844
81,605
117,315
54,607
142,466
66,211
94,662
39,854
(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, 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.
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
246
247
Notes to the financial statements
Notes to the financial statements
27 Insurance liabilities and reinsurance assets (continued)
27 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:
Geographical territory
UK and Ireland
Canada
Australia
Parent consists of UK, Ireland and Canada. Group also includes Australia.
Discount rate
Mean term of discounted
liabilities (years)
2021
2020
2021
2020
1.3% to 2.1%
1.2% to 2.1%
1.5%
0.5% to 1.5%
0.4% to 1.7%
0.70%
17
12
5
17
12
4
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 £640,528,000 for the Group (2020: £585,635,000), and £493,198,000 for the Parent (2020: £456,912,000).
The impact of discount rate changes on the outstanding claims liability is presented within net investment return (note 8).
At 31 December 2021, it is estimated that a fall of 1% in the discount rates used would increase the Group's net outstanding claims liabilities by
£18,922,000 (2020: £20,715,000). 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 approach but we continue to evolve estimates in light of underlying experience.
(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
2021
2020
Gross
£000
18,900
18,000
12,200
9,000
100
Net
£000
17,200
13,700
6,200
3,100
100
Gross
£000
20,200
14,900
10,300
7,200
200
Net
£000
19,000
12,200
5,600
2,600
200
Notes to the financial statements
Notes to the financial statements
27 Insurance liabilities and reinsurance assets (continued)
27 Insurance liabilities and reinsurance assets (continued)
(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.
Estimate of ultimate gross claims
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
2012
£000
100,612
88,046
78,196
72,516
67,980
62,712
61,213
60,560
62,025
61,615
2013
£000
81,725
80,027
69,860
66,192
60,174
56,912
54,901
55,516
55,252
2014
£000
61,901
50,571
48,327
45,495
37,064
34,606
34,962
36,195
2015
£000
46,464
43,582
40,337
33,804
29,436
28,211
31,738
2016
£000
51,738
46,073
41,041
38,468
37,044
34,649
2017
£000
50,736
46,885
41,883
38,648
40,177
2018
£000
2019
£000
2020
£000
2021
£000
Total
£000
48,759
40,461
34,680
33,362
47,945
42,467
39,859
60,267
50,134
42,044
61,615
55,252
36,195
31,738
34,649
40,177
33,362
39,859 42,044
60,267
435,158
(54,400)
7,215
date
Outstanding liability
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
(21,087)
10,651
(21,853)
12,796
(17,642)
22,535
(47,153)
8,099
(12,013)
21,349
(28,117)
8,078
(8,852)
31,007
(5,571)
(1,471)
36,473 58,796
(218,159)
216,999
(10,619)
206,380
162,780
369,160
Total
£000
2012
£000
84,511
77,629
69,580
63,068
56,225
51,872
50,791
50,092
50,367
49,929
2013
£000
71,798
60,950
54,792
50,492
43,910
42,289
40,698
40,041
40,161
2014
£000
52,350
40,153
39,015
37,158
31,530
30,024
30,063
30,505
2015
£000
34,769
31,941
30,129
27,287
23,620
23,068
25,631
2016
£000
37,981
32,541
29,538
28,622
27,899
25,084
2017
£000
34,210
33,353
31,463
29,557
30,012
2018
£000
32,992
28,181
24,212
23,116
2019
£000
2020
£000
33,719 35,690
30,285
28,874
28,618
2021
£000
43,976
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
49,929
40,161
30,505
25,631
25,084
30,012
23,116
28,618 28,874
43,976
325,906
(45,540)
4,389
date
Outstanding liability
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
(5,622)
(8,158)
14,958 22,996
(24,976)
5,529
(34,792)
5,369
(16,580)
8,504
(17,859)
7,772
(13,548)
16,464
(3,744)
25,130
(809)
43,167
(171,628)
154,278
(6,677)
147,601
126,428
274,029
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 248
249
Notes to the financial statements
Notes to the financial statements
27 Insurance liabilities and reinsurance assets (continued)
27 Insurance liabilities and reinsurance assets (continued)
Estimate of ultimate net claims
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
2012
£000
88,247
79,272
73,735
69,837
65,872
60,800
59,338
59,061
60,056
59,783
2013
£000
76,729
66,475
60,075
55,710
51,482
49,196
47,518
47,443
47,338
2014
£000
59,633
47,690
47,428
41,494
35,164
33,233
33,309
34,245
2015
£000
42,739
40,397
37,740
32,297
28,506
27,418
30,544
2016
£000
47,402
41,631
37,740
36,337
35,217
32,993
2017
£000
45,920
41,706
37,797
34,818
36,431
2018
£000
2019
£000
2020
£000
45,459
37,509
44,230
39,842
37,243
44,053
37,456
32,867
31,647
2021
£000
47,289
Total
£000
59,783
47,338
34,245
30,544
32,993
36,431
31,647
37,243 37,509 47,289
395,022
(53,066)
6,717
date
Outstanding liability
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
(20,558)
9,986
(39,851)
7,487
(17,570)
18,861
(26,771)
7,474
(21,651)
11,342
(1,463)
(12,011)
19,636 28,405 32,025 45,826
(8,838)
(5,484)
(207,263)
187,759
(10,619)
177,140
146,274
323,414
Total
£000
2012
£000
74,361
69,805
65,297
61,795
55,686
51,766
50,762
50,079
50,356
49,918
2013
£000
67,690
57,538
51,828
47,942
43,568
42,126
40,587
39,930
40,051
2014
£000
50,025
38,944
38,215
34,393
30,252
28,825
28,865
29,268
2015
£000
33,122
31,041
29,494
26,981
23,229
22,806
25,061
2016
£000
35,882
30,906
28,199
27,493
26,894
24,782
2017
£000
33,134
30,965
28,854
26,774
27,279
2018
£000
31,981
27,208
23,787
22,651
2019
£000
2020
£000
32,688 33,502
29,509 26,536
27,615
2021
£000
33,792
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
49,918
40,051
29,268
25,061
24,782
27,279
22,651
27,615 26,536
33,792
306,953
(45,537)
4,381
date
Outstanding liability
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
(8,156)
(5,613)
14,495 22,002
(34,688)
5,363
(23,752)
5,516
(16,395)
8,387
(13,548)
13,731
(17,330)
7,731
(3,657)
22,879
(800)
32,992
(169,476)
137,477
(6,677)
130,800
119,609
250,409
Notes to the financial statements
Notes to the financial statements
27 Insurance liabilities and reinsurance assets (continued)
27 Insurance liabilities and reinsurance assets (continued)
(b) Life insurance contracts
(i) Assumptions
The most significant assumptions in determining life reserves are as follows:
Mortality
An appropriate base table of standard mortality is chosen depending on the type of contract. Where prudent, an allowance is made for future
mortality improvements based on trends identified in population data. For both 2021 and 2020 the base tables used were ELF16F and ELT16M with
a 1% improvement applied each year.
Investment returns
Projected investment returns for index-linked business 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:
S
e
c
t
i
o
n
T
w
o
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
UK and overseas government bonds: non-linked
UK and overseas government bonds: index-linked
Corporate debt instruments: index-linked
2021
-
-2.71%
-2.28%
2020
-0.28%
-2.72%
-2.23%
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. For index-linked assets, the real yield is shown gross of tax.
The investment return assumption for non-linked business is based on government bond returns at an average duration of cash flows for this
business. The return after allowance for investment expenses is 1.02%.
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 £2.60 per annum (2020: £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 £5.7m
(2020: £5.8m).
Expense inflation is set with reference to the nominal and index-linked UK government bond rates of return and is assumed to be 4.69% per annum
(2020: 4.07%).
Tax
It has been assumed that current tax legislation and rates applicable at 1 January 2022 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 £0.1m (2020: £5.0m increase).
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 £0.2m increase (2020: £0.7m increase).
There has been a small change in the mortality assumptions that has reduced liabilities by £0.1m (2020: no material change).
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
Notes to the financial statements
Notes to the financial statements
27 Insurance liabilities and reinsurance assets (continued)
27 Insurance liabilities and reinsurance assets (continued)
Notes to the financial statements
Notes to the financial statements
27 Insurance liabilities and reinsurance assets (continued)
27 Insurance liabilities and reinsurance assets (continued)
(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
Group
250
251
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 2021
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 2021
Provision for unearned premiums
At 1 January 2021
Increase in the period
Release in the period
Exchange differences
At 31 December 2021
Life business provision
At 1 January 2021
Effect of claims during the year
Changes in assumptions
Change in discount rate
Other movements
At 31 December 2021
Change in
variable
Potential increase/
(decrease) in the result
2021
£000
1,300
(1,500)
-
(400)
(200)
200
(600)
500
2020
£000
1,300
(1,600)
200
(700)
(200)
300
(600)
500
+10%
-10%
+1% pa
-1% pa
+10%
-10%
+1% pa
-1% pa
Gross
£000
Reinsurance
£000
Net
£000
560,992
(191,685)
252,310
14,980
(13,034)
(7,338)
616,225
230,800
253,759
(229,255)
(2,146)
253,158
76,857
(5,577)
2,493
147
(11)
73,909
(129,284)
83,235
(114,378)
(9,444)
1,023
2,488
(166,360)
(79,393)
(88,464)
78,580
1,188
(88,089)
-
-
-
-
-
-
431,708
(108,450)
137,932
5,536
(12,011)
(4,850)
449,865
151,407
165,295
(150,675)
(958)
165,069
76,857
(5,577)
2,493
147
(11)
73,909
Total insurance contract liabilities and reinsurance assets
943,292
(254,449)
688,843
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 methodolgy
Change in discount rate
Other movements
At 31 December 2020
Gross
£000
Reinsurance
£000
Net
£000
481,669
(164,510)
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
(89,982)
59,024
(97,272)
2,691
(898)
(2,847)
(129,284)
(69,574)
(78,170)
69,748
(1,397)
(79,393)
-
-
-
-
-
-
-
391,687
(105,486)
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
Parent
Claims outstanding
At 1 January 2021
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 2021
Provision for unearned premiums
At 1 January 2021
Increase in the period
Release in the period
Exchange differences
At 31 December 2021
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
434,583
(165,227)
(78,450)
57,340
356,133
(107,887)
221,277
(9,317)
(9,367)
(740)
471,209
181,619
202,191
(181,753)
332
202,389
391,268
(136,184)
191,326
(21,916)
9,567
522
434,583
165,004
181,778
(164,992)
(171)
181,619
(102,576)
16,370
-
(175)
(107,491)
(56,066)
(64,432)
56,049
18
(64,431)
(56,174)
34,368
(66,322)
9,579
-
99
(78,450)
(50,527)
(56,074)
50,555
(20)
(56,066)
118,701
7,053
(9,367)
(915)
363,718
125,553
137,759
(125,704)
350
137,958
335,094
(101,816)
125,004
(12,337)
9,567
621
356,133
114,477
125,704
(114,437)
(191)
125,553
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
252
253
28 Provisions for other liabilities and contingent liabilities
28 Provisions for other liabilities and contingent liabilities
Group
At 31 December 2020
Additional provisions
Used during year
Not utilised
Exchange differences
At 31 December 2021
Current
Non-current
Parent
At 31 December 2020
Additional provisions
Used during year
Not utilised
Exchange differences
At 31 December 2021
Current
Non-current
Regulatory
and legal
provisions
£000
Contingent
consideration
£000
Other
provisions
£000
2,329
2,142
(1,789)
(63)
-
2,619
2,619
-
2,329
2,142
(1,789)
(63)
-
2,619
2,619
-
419
22
(441)
-
-
-
-
-
-
-
-
-
-
-
-
-
3,751
70
(60)
-
(7)
3,754
1,609
2,145
3,513
-
(60)
-
(4)
3,449
1,609
1,840
Total
£000
6,499
2,234
(2,290)
(63)
(7)
6,373
4,228
2,145
5,842
2,142
(1,849)
(63)
(4)
6,068
4,228
1,840
Regulatory and legal provisions
The Group operates in the financial services industry and is subject to regulatory requirements in the normal course of business, including
contributing towards any levies raised on UK general and life business. The provisions reflect an assessment by the Group of its share of the total
potential levies.
In addition, from time to time the Group receives complaints from customers and, while the majority relate to cases where there has been no
customer detriment, we recognise that we have provided, and continue to provide, advice and services across a wide spectrum of regulated activities.
We therefore believe that it is prudent to hold a provision for the estimated costs of customer complaints relating to services provided. The Group
continues to reassess the ultimate level of complaints expected and the appropriateness of the provision, which reflects the expected redress and
associated administration costs that would be payable in relation to any complaints we may uphold.
Contingent consideration
The provision for contingent consideration relates to the acquisition of WRS Insurance Brokers Limited that completed in 2020.
Other provisions
The provision for other costs relates to costs in respect of dilapidations.
29 Deferred tax
29 Deferred tax
An analysis and reconciliation of the movement of the key components of the net deferred tax liability during the current and prior reporting period is as
follows:
Group
At 1 January 2020
(Credited)/charged to profit or loss
- Impact of change in deferred tax rate
(Credited)/charged to other comprehensive income
- Impact of change in deferred tax rate
Exchange differences
At 31 December 2020
Charged/(credited) to profit or loss
- Impact of change in deferred tax rate
Charged/(credited) to other comprehensive income
- Impact of change in deferred tax rate
Exchange differences
At 31 December 2021
Parent
At 1 January 2020
(Credited)/charged to profit or loss
- Impact of change in deferred tax rate
(Credited)/charged to other comprehensive income
- Impact of change in deferred tax rate
Exchange differences
At 31 December 2020
Charged/(credited) to profit or loss
- Impact of change in deferred tax rate
Charged/(credited) to other comprehensive income
- Impact of change in deferred tax rate
Exchange differences
At 31 December 2021
Unrealised
gains on
investments
£000
Net
retirement
benefit
assets
£000
Equalisation
reserve
£000
Other
differences
£000
34,081
(6,569)
4,050
-
-
(4)
31,558
4,022
8,584
-
-
5
44,169
33,149
(6,489)
3,900
-
-
-
30,560
3,538
8,202
-
-
425
(204)
232
(3,291)
(182)
-
(3,020)
(383)
632
9,665
(1,585)
-
5,309
427
(204)
232
(3,290)
(182)
-
(3,017)
(383)
632
9,665
(1,585)
42,300
5,312
1,434
(790)
145
-
-
-
789
(789)
-
-
-
-
-
1,434
(790)
145
-
-
-
789
(789)
-
-
-
-
(2,494)
2,168
(171)
(9)
24
(77)
(559)
(8,877)
(187)
(179)
66
133
(9,603)
(582)
971
(165)
(9)
24
(9)
230
(1,442)
(170)
(179)
66
6
(1,489)
Total
£000
33,446
(5,395)
4,256
(3,300)
(158)
(81)
28,768
(6,027)
9,029
9,486
(1,519)
138
39,875
34,428
(6,512)
4,112
(3,299)
(158)
(9)
28,562
924
8,664
9,486
(1,519)
6
46,123
The equalisation reserve was previously required by law and maintained in compliance with insurance companies' regulations. Transfers to this
reserve were deemed to be tax deductible under legislation that applied prior to 1 January 2016 and gave rise to deferred tax. With effect from the
implementation date of Solvency II, 1 January 2016, these reserves become taxable over 6 years under the transition rules set out by HM Treasury.
Certain deferred tax assets and liabilities have been offset where the Group has a legally enforceable right to do so. The following is the analysis of
the deferred tax balances (after offset) for financial reporting purposes:
Deferred tax liabilities
Deferred tax assets
2021
2020
Group
£000
48,355
(8,480)
39,875
Parent
£000
46,123
-
46,123
Group
£000
29,846
(1,078)
28,768
Parent
£000
28,562
-
28,562
The Group has unused tax losses of £10,565,000 (2020: £12,954,000) arising from life business, which are available for offset against future profits
and can be carried forward indefinitely. In the prior year no deferred tax asset was recognised due to the unpredictability of future profit streams. In
the current year a deferred tax asset has been recognised based on the expectation that these losses can be utilised.
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
30 Other liabilities and deferred income
30 Other liabilities and deferred income
30 Other liabilities and deferred income
2021
2020
2021
2021
30 Other liabilities and deferred income
Creditors arising out of direct insurance operations
Creditors arising out of reinsurance operations
Creditors arising out of direct insurance operations
Derivative liabilities
Creditors arising out of reinsurance operations
Creditors arising from broking activities
Derivative liabilities
Creditors arising out of direct insurance operations
Other creditors
Creditors arising from broking activities
Creditors arising out of reinsurance operations
Amounts owed to related parties
Other creditors
Derivative liabilities
Accruals
Amounts owed to related parties
Creditors arising from broking activities
Accruals
Other creditors
Current
Amounts owed to related parties
Non-current
Accruals
Current
Non-current
Derivative liabilities are in respect of equity futures contracts and are detailed in note 22.
Current
96,791
Non-current
556
Derivative liabilities are in respect of equity futures contracts and are detailed in note 22.
Deferred income of the Group and Parent is a current liability in both the current and prior year.
Group
£000
Group
3,238
£000
34,865
Group
3,238
331
£000
34,865
5,370
331
3,238
23,843
5,370
34,865
22
23,843
331
29,678
22
5,370
97,347
29,678
23,843
96,791
97,347
22
556
29,678
96,791
97,347
556
Parent
£000
Parent
1,579
£000
23,714
Parent
1,579
331
£000
23,714
-
331
1,579
12,114
-
23,714
369
12,114
331
21,551
369
-
59,658
21,551
12,114
59,658
59,658
369
-
21,551
59,658
59,658
-
59,658
-
2020
2020
Group
£000
Group
3,055
£000
39,190
Group
3,055
1,244
£000
39,190
4,343
1,244
3,055
24,020
4,343
39,190
3
24,020
1,244
21,706
3
4,343
93,561
21,706
24,020
93,011
93,561
3
550
21,706
93,011
93,561
550
93,011
550
Parent
£000
Parent
1,556
£000
24,539
Parent
1,556
1,244
£000
24,539
-
1,244
1,556
12,304
-
24,539
45
12,304
1,244
15,399
45
-
55,087
15,399
12,304
55,087
55,087
45
-
15,399
55,087
55,087
-
55,087
-
Deferred income of the Group and Parent is a current liability in both the current and prior year.
Derivative liabilities are in respect of equity futures contracts and are detailed in note 22.
Included within deferred income of the Group is £407,000 (2020: £308,000) classified as contract liabilities in accordance with IFRS 15. Included
within deferred income of the Parent is £nil (2020: £nil) classified as contract liabilities in accordance with IFRS 15.
Included within deferred income of the Group is £407,000 (2020: £308,000) classified as contract liabilities in accordance with IFRS 15. Included
Deferred income of the Group and Parent is a current liability in both the current and prior year.
within deferred income of the Parent is £nil (2020: £nil) classified as contract liabilities in accordance with IFRS 15.
Included within deferred income of the Group is £407,000 (2020: £308,000) classified as contract liabilities in accordance with IFRS 15. Included
31 Subordinated debt
31 Subordinated debt
within deferred income of the Parent is £nil (2020: £nil) classified as contract liabilities in accordance with IFRS 15.
31 Subordinated debt
Group and Parent
31 Subordinated debt
6.3144% EUR 30m subordinated debt
Group and Parent
6.3144% EUR 30m subordinated debt
Group and Parent
Subordinated debt consists of a privately-placed issue of 20-year subordinated bonds, maturing in February 2041 and callable after February 2031.
6.3144% EUR 30m subordinated debt
The Group's subordinated debt ranks below its senior debt and ahead of its preference shares and ordinary share capital.
Subordinated debt consists of a privately-placed issue of 20-year subordinated bonds, maturing in February 2041 and callable after February 2031.
2021
£000
2021
24,433
£000
24,433
24,433
2021
24,433
£000
2020
£000
2020
-
£000
-
-
2020
-
£000
24,433
24,433
-
-
The Group's subordinated debt ranks below its senior debt and ahead of its preference shares and ordinary share capital.
Subordinated debt is stated at amortised cost.
Subordinated debt consists of a privately-placed issue of 20-year subordinated bonds, maturing in February 2041 and callable after February 2031.
Subordinated debt is stated at amortised cost.
32 Investment contract liabilities
The Group's subordinated debt ranks below its senior debt and ahead of its preference shares and ordinary share capital.
32 Investment contract liabilities
Subordinated debt is stated at amortised cost.
Group
32 Investment contract liabilities
32 Investment contract liabilities
Investment contract liabilities
Group
Investment contract liabilities
Group
Investment contract liabilities represents amounts due to policyholders and, if applicable, the cost of the minimum repayment guarantee. Investment
2021
£000
2021
15,519
£000
15,519
15,519
2021
15,519
£000
2020
£000
2020
-
£000
-
-
2020
-
£000
contract liabilities are repayable on demand or at short notice and therefore classified as current. These liabilities are matched with highly liquid
Investment contract liabilities
Investment contract liabilities represents amounts due to policyholders and, if applicable, the cost of the minimum repayment guarantee. Investment
investments.
contract liabilities are repayable on demand or at short notice and therefore classified as current. These liabilities are matched with highly liquid
15,519
15,519
-
-
254
255
Notes to the financial statements
Notes to the financial statements
33 Leases
33 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 1 January 2021
Additions
Disposals
Depreciation expense
Exchange differences
At 31 December 2021
At 1 January 2020
Additions
Disposals
Depreciation expense
Exchange differences
At 31 December 2020
Parent
At 1 January 2021
Additions
Disposals
Depreciation expense
Exchange differences
At 31 December 2021
At 1 January 2020
Additions
Disposals
Depreciation expense
Exchange differences
At 31 December 2020
Set out below are the carrying amounts of lease obligations:
Land and
buildings
£000
Motor
vehicles
£000
Other
equipment
£000
24,231
189
-
(2,812)
(20)
21,588
9,961
17,125
-
(2,901)
46
24,231
1,068
448
(268)
(236)
(2)
1,010
1,038
474
(193)
(254)
3
1,068
189
109
(21)
(114)
(1)
162
305
-
-
(118)
2
189
Land and
buildings
£000
Motor
vehicles
£000
Other
equipment
£000
21,738
121
-
(2,217)
27
19,669
7,449
16,617
-
(2,310)
(18)
21,738
993
448
(235)
(219)
-
987
1,028
377
(193)
(219)
-
993
131
109
(20)
(94)
(1)
125
227
-
-
(97)
1
131
2021
2020
Group
£000
3,402
19,336
22,738
Parent
£000
2,691
18,115
20,806
Group
£000
3,502
21,948
25,450
Total
£000
25,488
746
(289)
(3,162)
(23)
22,760
11,304
17,599
(193)
(3,273)
51
25,488
Total
£000
22,862
678
(255)
(2,530)
26
20,781
8,704
16,994
(193)
(2,626)
(17)
22,862
Parent
£000
2,725
20,113
22,838
investments.
Investment contract liabilities represents amounts due to policyholders and, if applicable, the cost of the minimum repayment guarantee. Investment
contract liabilities are repayable on demand or at short notice and therefore classified as current. These liabilities are matched with highly liquid
investments.
Current
Non-current
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 256
257
Notes to the financial statements
Notes to the financial statements
Notes to the financial statements
34 Commitments
34 Commitments
At the year end, the Group and Parent had no capital commitments relating to furniture, fittings and equipment (2020: £2,506,000).
34 Commitments
The Group has lease contracts for right-of-use assets that had not commenced at 31 December 2021. These leases will commence in 2022. Leases
At the year end, the Group and Parent had no capital commitments relating to furniture, fittings and equipment (2020: £2,506,000).
for other equipment have a term of 2 years with expected cash outflow of £47,000 per annum. Leases for motor vehicles have a term of 4 years
with an expected cash outflow of £73,000 per annum.
The Group has lease contracts for right-of-use assets that had not commenced at 31 December 2021. These leases will commence in 2022. Leases
for other equipment have a term of 2 years with expected cash outflow of £47,000 per annum. Leases for motor vehicles have a term of 4 years
35 Related undertakings
with an expected cash outflow of £73,000 per annum.
35 Related undertakings
Ultimate parent company and controlling party
The Company is a wholly-owned subsidiary of Benefact Group plc. Its ultimate parent and controlling company is Benefact Trust Limited. Both
35 Related undertakings
companies are incorporated and operate in the United Kingdom and copies of their financial statements are available from the registered office as
Ultimate parent company and controlling party
shown on page 264. The parent companies of the smallest and largest groups for which group financial statements are drawn up are
The Company is a wholly-owned subsidiary of Benefact Group plc. Its ultimate parent and controlling company is Benefact Trust Limited. Both
Ecclesiastical Insurance Office plc and Benefact Trust Limited, respectively.
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 264. The parent companies of the smallest and largest groups for which group financial statements are drawn up are
Related undertakings
Ecclesiastical Insurance Office plc and Benefact Trust Limited, respectively.
The Company's interest in related undertakings at 31 December 2021 is as follows:
Company
Registration Share
Number
Capital
Company
Registration Share
Number
Capital
2046087
Ordinary
0243111
Ordinary
2519319
Ordinary
Ordinary
2046087
Ordinary
0941199
Ordinary
0243111
Ordinary
10988127
Ordinary
2519319
Ordinary
6317314
Ordinary
0941199
Ordinary
6317313
Ordinary
10988127
Ordinary
6317314
Ordinary
6317313
Ordinary
007216506
623695054 Ordinary
162612286
Ordinary
Ordinary
007216506
623695054 Ordinary
162612286
Ordinary
Holding of shares by
Company
Group
Activity
Holding of shares by
Company
Group
Activity
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
-
100%
100%
-
-
100%
-
-
-
-
-
-
-
-
-
-
100%
-
-
-
100%
-
-
100%
100%
-
100%
100%
Independent financial advisory
Life insurance
Investment management
Independent financial advisory
Trustee company
Life insurance
Trustee company
Investment management
Insurance agents and brokers
Trustee company
Investment holding company
Trustee company
Insurance agents and brokers
Investment holding company
Insurance
Risk management services
Dormant company
Insurance
Risk management services
Dormant company
1
1
1
1
1
1 3
1 3
Subsidiary undertakings
Ecclesiastical Financial Advisory Services Limited
1
Ecclesiastical Life Limited
Incorporated in the United Kingdom
EdenTree Investment Management Limited
Ecclesiastical Financial Advisory Services Limited
E.I.O. Trustees Limited
1
1
Ecclesiastical Life Limited
Ecclesiastical Group Healthcare Trustees Limited
EdenTree Investment Management Limited
SEIB Insurance Brokers Limited
E.I.O. Trustees Limited
South Essex Insurance Holdings Limited
Ecclesiastical Group Healthcare Trustees Limited
Incorporated in Australia
SEIB Insurance Brokers Limited
South Essex Insurance Holdings Limited
Ansvar Insurance Limited
Ansvar Risk Management Services Pty Limited
Incorporated in Australia
Ansvar Insurance Services Pty Limited
Ansvar Insurance Limited
Ansvar Risk Management Services Pty Limited
1
Ansvar Insurance Services Pty Limited
2
2 4
2 4
2
2
2
2
1
1
1
1
Registered office: Benefact House, 2000 Pioneer Avenue, Gloucester Business Park, Brockworth, Gloucester, GL3 4AW, United Kingdom
Registered office: Level 5, 1 Southbank Boulevard, Melbourne, VIC 3006, Australia
3
1
4
2
3
4
Exempt from audit under s480 of the Companies Act 2006
Registered office: Benefact House, 2000 Pioneer Avenue, Gloucester Business Park, Brockworth, Gloucester, GL3 4AW, United Kingdom
Exempt from audit
Registered office: Level 5, 1 Southbank Boulevard, Melbourne, VIC 3006, Australia
Exempt from audit under s480 of the Companies Act 2006
Exempt from audit
2021
Group
£000
Parent
£000
2020
Group
£000
Parent
£000
Subsidiary undertakings
Company
Incorporated in the United Kingdom
Related undertakings
The Company's interest in related undertakings at 31 December 2021 is as follows:
Company
Notes to the financial statements
Notes to the financial statements
33 Leases (continued)
33 Leases (continued)
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
2021
£000
3,162
974
23
4,159
2020
£000
3,273
773
9
4,055
The Group had total cash outflows for leases, including interest paid, of £4,206,000 (2020: £5,872,000). The Parent had total cash outflows for
leases, including interest paid, of £3,406,000 (2020: £5,103,000). The future cash outflows relating to leases that have not yet commenced are
disclosed in note 34.
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.
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 less than 1 year. The contract does not include an extension or early termination option.
Year 1
Year 2
Undiscounted lease payments
Less: unearned finance income
Net investment in the lease
111
-
111
-
111
111
-
111
-
111
Net investment in the lease is recognised in other assets as shown in note 23.
Group profit for the year has been arrived at after crediting the following amounts in respect of finance lease contracts:
Finance income on the net investment in finance leases
131
110
241
(5)
236
2021
£000
4
4
131
110
241
(5)
236
2020
£000
7
7
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 20.
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
2021
2020
Group
£000
7,866
7,604
7,165
6,014
4,883
20,217
53,749
Parent
£000
7,866
7,604
7,165
6,014
4,883
20,217
53,749
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
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 258
259
Notes to the financial statements
Notes to the financial statements
36 Related party transactions (continued)
36 Related party transactions (continued)
The total aggregate remuneration of the directors in respect of qualifying services during 2021 was £2,801,000 (2020: £2,344,000). After inclusion
of amounts receivable under long-term incentive schemes and pension benefits, the total aggregate emoluments of the directors was £3,564,000
(2020: £3,043,000). 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
2021
2020
Group
£000
6,221
566
303
602
7,692
Parent
£000
6,221
566
303
602
7,692
Group
£000
3,645
558
241
606
5,050
Parent
£000
3,645
558
241
606
5,050
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 18.
Notes to the financial statements
Notes to the financial statements
36 Related party transactions
36 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.
Benefact Group plc is the Group and Parent's immediate parent company. Other related parties, of both Group and Parent, include subsidiary
undertakings of Benefact Group plc, the ultimate parent undertaking and the Group's pension plans.
2021
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
2020
Group (restated)
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
Benefact
Group plc
£000
Subsidiaries
£000
531
15,625
66,254
-
531
15,625
66,254
-
480
13,525
50,991
-
480
13,525
50,991
-
-
-
-
-
17,700
25,971
12,278
9,458
-
-
-
-
3,238
20,980
3,873
2,265
Other
related
parties
£000
14,188
5,706
2,646
53,924
960
1,438
2,156
10
1,880
4,534
1,692
43,833
535
1,467
1,649
-
*Amounts owed to related parties of the Group in the prior year have been restated from £57,427,000, to better reflect the fair value of funeral plan liabilities.
During the year, the Company received premiums, commission and reinsurance recoveries via a related party insurance agency amounting to
£147,000 (2020: £38,000) and paid reinsurance protection, commission and claims amounting to £136,000 (2020: £34,000).
Trading, investment and other expenditure, including recharges, and amounts paid in the current year includes loans totalling £24.9m (2020:
£13.1m), general business claims of £11.2m (2020: £5.7m) and acquisition of shares totalling £nil (2020: £11.1m).
Trading, investment and other income, including recharges, and amounts received in the current year includes general business premiums
totalling £13.0m (2020: £0.6m) and deposits received for life business totalling £11.8m (2020: £nil).
Amounts owed to related parties by the Group and by the Parent include insurance liabilities which are included in note 27. Amounts owed to
related parties by the Group also includes investment contract liabilities which are included in note 32.
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.
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information
260
261
Notes to the financial statements
Notes to the financial statements
37 Reconciliation of Alternative Performance Measures (continued)
37 Reconciliation of Alternative Performance Measures (continued)
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/(loss) before tax
Underwriting profit
Combined operating ratio
2020
Inv'mnt
Broking
and
mngt Advisory
Inv'mnt
return
Corporate
costs
Total
£000
£000
£000
£000
£000
Insurance
General
£000
Life
£000
12
-
-
12
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(484)
(472)
-
-
(4,600)
(4,600)
12,382
-
(25)
12,357
9,458
-
811
10,269
-
-
-
-
-
-
-
-
437,299
(173,074)
(16,562)
247,663
69,582
2,126
(4,298)
315,073
1,333
-
(13)
(380)
940
468
-
468
-
-
-
(2,813)
(2,813)
(7,413)
-
(7,413)
-
-
(939)
(12,449)
(13,388)
(1,031)
-
(1,031)
-
-
360
(8,149)
(7,789)
2,480
(83)
2,397
[5]
-
-
-
(21,533)
(21,533)
(21,533)
-
(21,533)
(222,794)
94,581
(85,444)
(116,393)
(330,050)
(14,977)
(769)
(15,746)
437,287
(173,074)
(16,562)
247,651
47,742
2,126
-
297,519
(224,127)
94,581
(84,852)
(71,069)
(285,467)
12,052
(686)
11,366
[1]
[2]
[3]
[4]
[6]
[6]
12,052
95.1%
Net expenses ( = [2] + [3] + [4] + [5] )
[7]
(129,712)
Net expense ratio
52%
Notes to the financial statements
Notes to the financial statements
37 Reconciliation of Alternative Performance Measures
37 Reconciliation of Alternative Performance Measures
The Group uses alternative performance measures (APM) in addition to the figures which are prepared in accordance with IFRS. The financial
measures included in our key performance indicators are set out on page 50: regulatory capital, combined operating ratio (COR), net expense ratio
(NER) and net inflows are APM. These measures are commonly used in the industries the Group operates in and are considered to provide useful
information and enhance the understanding of the results.
Users of the accounts should be aware that similarly titled APM reported by other companies may be calculated differently. For that reason, the
comparability of APM across companies might be limited.
The table below provides a reconciliation of the COR and NER to its most directly reconcilable line item in the financial statements. Regulatory
capital and net inflows to funds managed by Ecclesiastical Insurance Office plc's subsidiary, EdenTree Investment Management Limited, do not have
an IFRS equivalent. Net inflows are the difference between the funds invested (gross inflows) less funds withdrawn (redemptions) during the year
by third parties in a range of funds EdenTree Investment Management Limited offers. Regulatory capital is covered in more detail in note 4(i).
Group
Revenue
Gross written premiums
Outward reinsurance premiums
Net change in provision for unearned premiums
Net earned premiums
Fee and commission income
Other operating income
Net investment return
Total revenue
Expenses
Claims and change in insurance liabilities
Reinsurance recoveries
Fees, commissions and other acquisition costs
Other operating and administrative expenses
Total operating expenses
Operating profit
Finance costs
Profit/(loss) before tax
Underwriting profit
Combined operating ratio
Net expenses ( = [2] + [3] + [4] + [5] )
Net expense ratio
2021
Inv'mnt
return
Inv'mnt
mngt
Broking
and
Advisory
Corporate
costs
Total
£000
£000
£000
£000
£000
Insurance
General
£000
Life
£000
486,220
(198,601)
(14,620)
272,999
(9)
-
-
(9)
-
-
-
-
-
-
-
-
-
-
-
-
55,417
1,136
-
329,552
-
-
3,939
3,930
-
-
96,358
96,358
14,908
-
6
14,914
11,222
-
764
11,986
-
-
-
-
-
-
-
-
486,211
(198,601)
(14,620)
272,990
81,547
1,136
101,067
456,740
(267,291)
123,822
(95,628)
(81,696)
(320,793)
(2,342)
-
(21)
(450)
(2,813)
-
-
-
(3,234)
(3,234)
-
-
(979)
(16,460)
(17,439)
-
-
732
(9,658)
(8,926)
[5]
-
-
-
(24,134)
(24,134)
(269,633)
123,822
(95,896)
(135,632)
(377,339)
8,759
(2,288)
6,471
1,117
-
1,117
93,124
-
93,124
(2,525)
-
(2,525)
3,060
(76)
2,984
(24,134)
-
(24,134)
79,401
(2,364)
77,037
[1]
[2]
[3]
[4]
[6]
[6]
8,759
96.8%
[7]
(146,041)
53%
The underwriting profit of the Group is defined as the operating profit of the general insurance business.
The Group uses the industry standard net COR as a measure of underwriting efficiency. The COR expresses the total of net claims costs, commission
and underwriting expenses as a percentage of net earned premiums. It is calculated as ( [1] - [6] ) / [1] ).
The NER expresses total underwriting and corporate expenses as a proportion of net earned premiums. It is calculated as
- [7] / [1].
Section FourFinancial PagesEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information 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
264
266
267
268
269
270
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther Information Directors, executive management and Company information (unaudited)
Directors, executive management and Company information (unaudited)
Directors, executive management and company information (unaudited)
Directors, executive management and Company information (unaudited)
Directors, executive management and Company information (unaudited)
Directors, executive management and company information (unaudited)
264
265
Auditor
Auditor
Registrar
Registrar
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Bristol
Bristol
Computershare Investor Services plc
Computershare Investor Services plc
The Pavilions
The Pavilions
Bridgwater Road
Bridgwater Road
Bristol BS13 8AE
Bristol BS13 8AE
Directors
Directors
1
1
1
1
1
1
1
1
1
R. D. C. Henderson FCA Chair
R. D. C. Henderson FCA Chair
1
R. Bajaj MA
R. Bajaj MA
1
F. X. Boisseau MSc
F. X. Boisseau MSc
D. P. Cockrem, MA, FCA Group Chief Financial Officer
D. P. Cockrem, MA, FCA Group Chief Financial Officer
M. C. J. Hews BSc (Hons), FIA Group Chief Executive
M. C. J. Hews BSc (Hons), FIA Group Chief Executive
Sir S. M. J. Lamport GCVO, DL
Sir S. M. J. Lamport GCVO, DL
N. P. Maidment MA, FCII
N. P. Maidment MA, FCII
A. J. McIntyre MA, ACA, FRCO
A. J. McIntyre MA, ACA, FRCO
C. J. G. Moulder MA, FCA Senior Independent Director
C. J. G. Moulder MA, FCA Senior Independent Director
S. J. Whyte MC Inst. M, ACII Deputy Group Chief Executive
S. J. Whyte MC Inst. M, ACII Deputy Group Chief Executive
A. Winther BA
A. Winther BA
1
1
1
1
1
Company Secretary
Company Secretary
Mrs R. J. Hall FCG
Mrs R. J. Hall FCG
Registered and Head Office
Registered and Head Office
Benefact House,
Benefact House,
2000 Pioneer Avenue,
2000 Pioneer Avenue,
Gloucester Business Park,
Gloucester Business Park,
Brockworth,
Brockworth,
Gloucester, GL3 4AW
Gloucester, GL3 4AW
Tel: 0345 777 3322
Tel: 0345 777 3322
Company Registration Number
Company Registration Number
00024869
00024869
Investment Management Office
Investment Management Office
Legal advisers
Legal advisers
24 Monument Street
London EC3R 8AJ
Tel: 0800 358 3010
24 Monument Street
London EC3R 8AJ
Tel: 0800 358 3010
Charles Russell Speechlys LLP
Cheltenham and London
Charles Russell Speechlys LLP
Cheltenham and London
DAC Beachcroft LLP
Bristol and London
DAC Beachcroft LLP
Bristol and London
Eversheds Sutherland LLP
Cardiff, Birmingham and London
Eversheds Sutherland LLP
Cardiff, Birmingham and London
Burges Salmon LLP
Bristol and London
Burges Salmon LLP
Bristol and London
Harrison Clark Rickerbys LLP
Harrison Clark Rickerbys LLP
Cheltenham
Cheltenham
Matheson
Dublin
Matheson
Dublin
William Fry LLP
William Fry LLP
Dublin
Dublin
Pinsent Masons LLP
Birmingham and London
Pinsent Masons LLP
Birmingham and London
CMS Cameron McKenna Nabarro Olswang LLP
London, Leeds and Bristol
CMS Cameron McKenna Nabarro Olswang LLP
London, Leeds and Bristol
Fieldfisher Capital LLP
Fieldfisher Capital LLP
Dublin
Dublin
Wynne-Jones IP Limited
Cheltenham
Wynne-Jones IP Limited
Cheltenham
1 Non-Executive Directors
1 Non-Executive Directors
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section FiveOther information United Kingdom regional centres (unaudited)
United Kingdom regional centres (unaudited)
United Kingdom regional centres (unaudited)
United Kingdom business division and international branches (unaudited)
United Kingdom business division and international branches (unaudited)
266
267
Central and South West
Central and South West
Office:
Office:
London and South East
London and South East
Office:
Office:
Tel:
Tel:
North
North
Tel:
Tel:
Office:
Office:
Tel:
Tel:
12th Floor
12th Floor
Alpha Tower
Alpha Tower
Suffolk Street
Suffolk Street
Queensway
Queensway
Birmingham B1 1TT
Birmingham B1 1TT
0345 605 0209
0345 605 0209
24 Monument Street
London EC3R 8AJ
0345 608 0069
24 Monument Street
London EC3R 8AJ
0345 608 0069
3rd Floor
3rd Floor
St Ann's House
St Ann's House
St Ann's Place
St Ann's Place
Manchester M2 7LP
Manchester M2 7LP
0345 603 7554
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
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section FiveOther information Insurance subsidiaries and agencies (unaudited)
Insurance subsidiaries and agencies (unaudited)
Insurance subsidiaries and agencies (unaudited)
Notice of meeting (unaudited)
Notice of meeting (unaudited)
Notice of meeting (unaudited)
268
269
Ansvar Insurance Limited
Ansvar Insurance Limited
Chief Executive Officer:
Head Office:
Chief Executive Officer:
Head Office:
W. R. Hutcheon MBA, GAICD, Fellow ANZIIF (CIP)
W. R. Hutcheon MBA, GAICD, Fellow ANZIIF (CIP)
Level 5
Level 5
1 Southbank Boulevard
1 Southbank Boulevard
Southbank
Southbank
Melbourne VIC 3006
Melbourne VIC 3006
Ecclesiastical Life Limited
Ecclesiastical Life Limited
Chief Executive Officer:
Head Office:
Chief Executive Officer:
Head Office:
Ecclesiastical Underwriting
Ecclesiastical Underwriting
Management Limited
Management Limited
Office:
Office:
SEIB Insurance
Brokers Limited
SEIB Insurance
Brokers Limited
Chief Executive Officer:
Chief Executive Officer:
Office:
Office:
Tel:
Tel:
P. S. Pickernell, FIA
P. S. Pickernell, FIA
Benefact House,
Benefact House,
2000 Pioneer Avenue,
2000 Pioneer Avenue,
Gloucester Business Park,
Gloucester Business Park,
Brockworth,
Brockworth,
Gloucester,
Gloucester,
GL3 4AW
GL3 4AW
Benefact House,
Benefact House,
2000 Pioneer Avenue,
2000 Pioneer Avenue,
Gloucester Business Park,
Gloucester Business Park,
Brockworth,
Brockworth,
Gloucester,
Gloucester,
GL3 4AW
GL3 4AW
S. Middleton FCII
S. Middleton FCII
South Essex House, North Road
South Essex House, North Road
South Ockendon
South Ockendon
Essex RM15 5BE
Essex RM15 5BE
01708 850000
01708 850000
NOTICE is hereby given that the Annual General Meeting of Ecclesiastical Insurance Office plc will be held at 24 Monument Street, London EC3R
8AJ on Thursday, 23rd June 2022 at 12.35pm for the following purposes:
NOTICE is hereby given that the Annual General Meeting of Ecclesiastical Insurance Office plc will be held at 24 Monument Street, London EC3R
8AJ on Thursday, 23rd June 2022 at 12.35pm for the following purposes:
Ordinary business (unaudited)
Ordinary business (unaudited)
Ordinary business (unaudited)
1.
To receive the Report of the Directors and Accounts for the year ended 31st December 2021 and the report of the auditors
1.
2.
2.
3.
3.
4.
4.
5.
5.
6.
6.
7.
7.
8.
8.
9.
9.
10.
10.
11.
11.
12.
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13.
13.
14.
thereon.
To receive the Report of the Directors and Accounts for the year ended 31st December 2021 and the report of the auditors
1
thereon.
To re-elect Mr F. X. Boisseau as a Director.
1
1
To re-elect Mr F. X. Boisseau as a Director.
To re-elect Mrs D. Cockrem as a Director.
1
1
To re-elect Mrs D. Cockrem as a Director.
To re-elect Mr R. D. C. Henderson as a Director.
1
1
To re-elect Mr R. D. C. Henderson as a Director.
To re-elect Mr M. C. J. Hews as a Director.
1
1
To re-elect Mr M. C. J. Hews as a Director.
To re-elect Sir S. Lamport as a Director.
1
1
To re-elect Sir S. Lamport as a Director.
To re-elect Mr N. Maidment as a Director.
1
1
To re-elect Mr N. Maidment as a Director.
To re-elect Mr A. J. McIntyre as a Director.
1
1
To re-elect Mr A. J. McIntyre as a Director.
To re-elect Mr C. J. G. Moulder as a Director.
1
1
To re-elect Mr C. J. G. Moulder as a Director.
To re-elect Mrs S. J. Whyte as a Director.
1
1
To re-elect Mrs S. J. Whyte as a Director.
To re-elect Mr A. Winther as a Director.
1
1
To re-elect Mr A. Winther as a Director.
To elect Mrs R. Bajaj as a Director.
1
To consider the declaration of a dividend.
To elect Mrs R. Bajaj as a Director.
To consider the declaration of a dividend.
To re-appoint PricewaterhouseCoopers LLP as auditors and authorise the Directors to fix their remuneration.
14.
By order of the Board
To re-appoint PricewaterhouseCoopers LLP as auditors and authorise the Directors to fix their remuneration.
By order of the Board
Mrs R. J. Hall, Secretary
17 March 2022
Mrs R. J. Hall, Secretary
1 Brief biographies of the Directors seeking election or re-election are shown on pages 100 to 102 of the 2021 Annual Report. All Non-Executive
17 March 2022
Directors seeking re-election have been subject to formal performance evaluation by the Chair who is satisfied that the performance of each Non-
1 Brief biographies of the Directors seeking election or re-election are shown on pages 100 to 102 of the 2021 Annual Report. All Non-Executive
Executive Director is effective and sufficient time has been spent on the Company’s affairs.
Directors seeking re-election have been subject to formal performance evaluation by the Chair who is satisfied that the performance of each Non-
Only a member holding ordinary shares, or their duly appointed representative(s), is entitled to attend, vote and speak at the annual general
Executive Director is effective and sufficient time has been spent on the Company’s affairs.
meeting.
Only a member holding ordinary shares, or their duly appointed representative(s), is entitled to attend, vote and speak at the annual general
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
meeting.
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
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
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
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
member.
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
Any corporation which is a member holding ordinary shares can appoint one or more corporate representatives who may exercise, on its behalf,
member.
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
Any corporation which is a member holding ordinary shares can appoint one or more corporate representatives who may exercise, on its behalf,
share or shares and that they act within the powers of their appointment.
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
This notice is sent purely for information to the holders of 8.625% Non-Cumulative Irredeemable Preference shares who are not entitled to attend
share or shares and that they act within the powers of their appointment.
and vote at the annual general meeting.
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.
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section FiveOther information Other information
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271
Notes
Notes
Section OneAbout UsSection TwoStrategic ReportSection ThreeGovernanceSection FourFinancial StatementsSection FiveOther InformationEcclesiastical Insurance Office plc Annual Report & Accounts 2021Section FiveOther information Other information
272
Notes
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Section FiveOther information
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Annual Report & Accounts 2021
Ecclesiastical Insurance Office plc (EIO)
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
Section OneAbout Us – Ecclesiastical at a glance