Ecclesiastical Insurance Office plc
Annual Report 2022

Plain-text annual report

Building a Movement for Good Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Contents Building a Movement for Good Foreword Section one Strategic report Ecclesiastical at a glance Our businesses Chair’s Statement Chief Executive’s Report Our business model and strategy Strategy in action Responsible business report highlights Key performance indicators Chief Financial Officer’s Report Risk Management Report Principal risks Going Concern and Viability Statement Non Financial Information Statement Section 172 Statement 2 3 4 5 6 7 9 13 14 18 36 41 45 48 58 60 61 Section two Governance Board of Directors Directors’ Report Corporate Governance Finance & Investment Committee Report Group Nominations Committee Report Risk Committee Report Group Audit Committee Report Group Remuneration Report Section three Financial Statements Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Consolidated statement of profit or loss 62 63 68 71 85 87 92 94 103 119 120 125 Consolidated and parent statement of comprehensive income 125 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 four Other Information 126 126 127 127 164 Directors, executive management and company information 165 Notice of meeting 165 Financial StatementsOther InformationGovernance Strategic Report Financial StatementsOther InformationBuilding a Movement for Good Giving thanks June 8th 2022, was an unforgettable day. It was the day of our Thanksgiving Service at Westminster Abbey, held to mark our £100m giving milestone. It was an amazing day, celebrating a tremendous achievement – one only made possible with the help of some truly extraordinary people. It was humbling to stand among many of these remarkable people at the service, a service held in the presence of His Royal Highness The Prince of Wales, now His Majesty King Charles III. Many of those who have benefited from our giving attended the service too – people whose lives have been transformed. And it’s this transformational power, this desire to effect positive change, that lies at the heart of the Benefact Group. Since 1887, our mission has been to transform the lives of those in need. Owned by a charity, the Benefact Trust, it’s why we give all our available profits to charity. Of course, we can only keep giving 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 an enormous thank you. You can learn more about the Awards on page 22. Our Thanksgiving Service was our way of recognising your united efforts. Seeing so many people gathered to celebrate what we have achieved together, filled me not just with gratitude but with hope and indeed a belief that we can do even more. Together, we can keep building a Movement for Good. Mark Hews Group Chief Executive Strategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Financial Statements Other Information Other Information Other Information Section One Contents Strategic Report Ecclesiastical at a glance Our businesses Chair’s Statement Chief Executive’s Report Our business model and strategy Strategy in action Responsible business report highlights Key performance indicators Chief Financial Officer’s Report Risk Management Report Principal risks Going Concern and Viability Statement Non Financial Information Statement Section 172 Statement 5 6 7 9 13 14 18 36 41 45 48 58 60 61 The Strategic Report, Governance, Financial Statements and Other Information sections form the Ecclesiastical Insurance Office plc Annual Report and Accounts 2022. The Strategic Report contains information about the Group and how we run our businesses, our strategy, business model, key performance indicators, our approach to risk and the responsibilities we have to our people, communities and the planet. The Strategic Report is only part of the Annual Report and Accounts which was approved by the Board of directors. By order of the Board Mark Hews Group Chief Executive 16 March 2023 Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 4 Ecclesiastical at a glance Best Ethical Investment Provider Voted by the Financial Adviser community at the Moneyfacts Life & Pensions Awards for 14 consecutive years (2009 – 2022) – EdenTree Investment Management Proudly part of Benefact Group, a specialist financial services group that gives all its available profits to charity and good causes 98% + UK overall customer satisfaction across all the sectors we measure* *Based on FY 2022 results for Home New Business and Renewals – Ecclesiastical UK; Church Renewals; Ecclesiastical claims; Risk Management; EFAS Since 1994 Ansvar’s Community Education Program has helped over 100 different charities and not for profit organisations supporting the education and life skill development needs of disadvantaged young Australians. 3rd largest corporate donor to charity The Benefact Group, is already the UK’s 3rd largest corporate donor* and it aims to be the largest Leading insurer for the Anglican Church in all our territories 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 £198m+ 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 £198m in grants and donations *DSC – The guide to UK Company Giving 2023-24 £558.6m Gross written premium (£486.2m in previous year) £4.8m loss before tax (£79.2m profit before tax in previous year) Movement for Good Through our Movement for Good Awards – our biggest ever giving campaign – we gave over £1m to help a wide range of charitable causes Rated best insurer by UK brokers in the charity, commercial heritage, education and faith sectors* *15th consecutive year – 200 broker interviews (randomly selected from BIBA approved panel) carried out by FWD – 2022 Trusted to protect over £300bn of property around the world In Canada our Community Impact Grants supported projects that make a positive impact on the community Strategic Report – Ecclesiastical at a glance Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 5 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Our businesses This Annual Report & Accounts is for Ecclesiastical Insurance Office plc which is sometimes abbreviated to EIO. The following terms are used throughout this report: Terms Definition The ‘Company’, ‘Parent’ or ‘Ecclesiastical’ Ecclesiastical Insurance Office plc (EIO) The ‘Ecclesiastical Insurance Office Group’ or ‘Group’ Ecclesiastical Insurance Office plc together with its subsidiaries ‘Benefact Group’, ‘wider group’ or ‘Benefact Family’ Benefact Group plc, the parent company of Ecclesiastical Insurance Office plc, together with its subsidiaries Benefact Trust Benefact Trust Limited, the ultimate parent undertaking of Ecclesiastical Insurance Office plc The Ecclesiastical Insurance Office Group is part of the wider Benefact Group which is organised into the 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. A number of changes have recently been made within the Ecclesiastical Insurance Office Group and Benefact Group to better align our businesses across the three divisions and support our strategic objectives. On 30 December 2022, SEIB Insurance Brokers was disposed of to an associate of the Benefact Group, Lloyd & Whyte Group Limited. On 3 January 2023 the investment management business, EdenTree, and the financial advisory business Ecclesiastical Financial Advisory Services were transferred from the Ecclesiastical Insurance Office Group to the Benefact Group. Note 16 to the financial statements within this Annual Report & Accounts contains further information. Following these changes, the Ecclesiastical Insurance Office Group now exclusively represents our Specialist Insurance division providing products to businesses, organisations and retail customers, both directly and through intermediaries. The Investment Management and Broking and Advisory divisions, included in the Benefact Group, along with the Specialist Insurance division in the Group, all primarily operate from the UK and their associated businesses are: ¹ The businesses in these divisions are owned by the Benefact Group plc Specialist Insurance Ecclesiastical UK / Ansvar UK / Ansvar Australia / Ecclesiastical Canada / Ecclesiastical Ireland / Ecclesiastical Life 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. Ecclesiastical Life provides long-term policies to support funeral planning products. We also provide a discrete range of specialist products including household insurance for churches and congregations and fine art insurance to the high net worth market. Committed to being the most trusted and ethical specialist financial services group, we are proud that our UK home insurance has again been awarded the First Place Gold Ribbon in this year’s independent Fairer Finance Customer Experience ratings, for the 16th consecutive time. Investment Management¹ EdenTree Investment Management and EdenTree Asset 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 14th consecutive year, EdenTree celebrated winning ‘Best Ethical Investment Provider’ at the Moneyfacts Investment Life & Pensions Awards. Broking and Advisory¹ Ecclesiastical Financial Advisory Services (EFAS) / Ecclesiastical Planning Services Ltd (EPSL) / Lycetts Insurance Brokers (Lycetts) / Lycetts Financial Services Our specialist brokers, 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. Strategic Report – Our businesses Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 6 6 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Governance Financial Statements Other Information Chair’s Statement Despite the challenging environment, 2022 was a year of celebration for Ecclesiastical Insurance. We marked the achievement of giving £100m to good causes over the past five years, with a Service of Thanksgiving at Westminster Abbey – an incredible moment in the Company’s 136-year history that saw hundreds of beneficiaries and supporters, among them King Charles III, come together to celebrate our Movement for Good. It also saw the successful launch of the Benefact brand, providing not just a new name for Ecclesiastical’s parent Group and Trust, but a renewed sense of energy and focus on our purpose to contribute to the greater good of society. Speaking to customers and brokers over the past few months, it’s clear the new name resonates and has landed well in our markets. It’s a fantastic achievement that we should all be proud of. Of course, 2022 also brought its challenges. The return to prosperity that many of us hoped for after the pandemic failed to materialise as economic and political events pushed us into a cost-of-living crisis, while the devastating war in Ukraine continues to take its toll on innocent lives. In these difficult times, our mission to help those most in need in society is more important than ever. In response to both challenges, our charitable owner the Benefact Trust moved swiftly to support charities on the frontline. In March it announced £1m of funding to give immediate and longer-term support to people fleeing the devastating conflict in Ukraine. In December, the Trust announced a £500,000 funding package to support charities working to keep people safe and warm this winter. This giving is only possible thanks to the customers, brokers and colleagues that support Ecclesiastical Insurance Office Group, which gives all its available profits to charities and good causes. I’m pleased to say we granted £20m to Benefact Trust in 2022. Alongside this we gave £2.7m through our direct giving programmes in the UK, Ireland and Canada, helping thousands of charities to make a difference in their communities. This combined giving brings us closer to our ambition of being the UK’s biggest corporate donor with a cumulative target of giving £250m to good causes by the end of 2025. Results Despite the challenging economic conditions, our businesses performed well in 2022. We continued to attract and retain prestigious customers across all divisions, which helped to drive double-digit premium growth. We also reported an improved underwriting result, with a profit of £27.4m. We reported an overall loss before tax of £4.8m as our results were affected by investment losses, due to falls in global markets. Achievements and reflections I’m now in my fourth year as Chairman and I’m delighted with the progress we’ve made as a business. We’ve invested considerably over the past few years, from launching new brands for the General Insurance business and the Group, a new head office, and new systems and technology to improve the broker and customer experience. The launch of our new General Insurance system last year was a major milestone and an incredible achievement by everyone involved in the project. ‘None of our achievements would be possible without the commitment of our colleagues and I want to thank them for all their efforts in 2022.’ Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 7 7 7 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Governance Financial Statements Other Information Board activity For the first time since I became Chairman, there have been no changes to the Board in the past 12 months. It is a genuine pleasure to work with such a talented group of individuals who bring a range of different experience and perspectives. I would like to thank all of them for their service over the past year. The future It is an immense 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 grow our business so that we can give more to help those most in need. David Henderson Chair I’m also pleased that we announced our climate commitments in spring last year, outlining our roadmap to achieve net zero by 2040. In my report last year, I talked about the importance of responding to the issues of sustainability and climate change and, as a responsible business, we are committed to making a positive environmental impact in the world. Much work has taken place over the past 12 months to understand our climate impact and identify the measures we need to take to reduce our carbon emissions. This has included training sessions for the Board, which have helped deepen our understanding of how we can do the right thing as a business. None of our achievements would be possible without the commitment of our colleagues and I want to thank them for all their efforts in 2022. Our customer satisfaction and Net Promoter Scores remain high and the Group again achieved Best Companies two-star status, demonstrating outstanding employee engagement. It’s always pleasing to see this commitment and effort is recognised by others and this was reflected in 18 awards last year including products, service quality, risk management, marketing and customer engagement. I was fortunate to visit our offices in Australia and Ireland and spent time with our excellent teams, learning how they’re working hard to improve our services to our brokers and customers. Looking ahead While some companies are retrenching in the face of economic difficulties, Ecclesiastical has set itself an ambitious target to double in size. The strategy announced last year provides a clear roadmap to achieve this stretching goal and I’m excited by the potential within the business to grow. Across our businesses, we have identified new areas of growth, both in existing segments and in new ones, and we have the ambition and capacity to benefit from these opportunities. This year will see continued investment in new systems to improve the customer and broker experience, and we will continue to invest in new technology to drive innovation and growth to enable yet more giving to charities and communities. In particular, we will continue to invest in our risk management offering so that we can help to protect our customers from new and emerging threats. We will also continue to invest in our people as we seek to become a world-class employer. We want to build a workplace where everyone feels welcome and can realise their full potential, while helping to make a difference to the lives of our customers and communities. ‘We want to build a workplace where everyone feels welcome and can realise their full potential, while helping to make a difference to the lives of our customers and communities.’ Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 8 8 8 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report QuoteStrategic Report Governance Financial Statements Other Information Chief Executive’s Report For over 135 years, Ecclesiastical has understood what matters most to our customers and communities. Trusted to protect and preserve much of the nation’s irreplaceable heritage and history, we’re distinguished in the financial services industry by our specialist expertise, our caring approach and our unique charitable purpose. Unlike many other businesses, we prefer to measure success not in sales or profits but in the amount we give to communities to help transform lives for the better. Guided by this purpose, we are driven to grow the business, so that we may give even more to good causes. Last year was a transformational year for our Ecclesiastical Group family. We launched a new brand, prepared for a new Group structure, new strategy, new governance framework, new systems, and strengthened our leadership. In particular, our immediate owner, Ecclesiastical Insurance Group, became Benefact Group, and our ultimate parent, Allchurches Trust, became Benefact Trust. This new structure, which aligns our businesses to our three divisions – specialist expert Insurance, responsible and sustainable Investment Management and Broking & Advisory – provides the foundation for our family of businesses to grow even more, to give even more. By simplifying and streamlining the Benefact Group structure, we have created dynamic, empowered businesses with clarity of focus, a compelling purpose, and the ideal operating environment for each of our new operating divisions to thrive. This is in stark contrast to some other business models where decision- making can be centralised, slow and prioritise profits ahead of customer’s interests. Ecclesiastical Insurance is now proudly part of the Benefact Group, a family of financial services businesses with a common goal to give all available profits to good causes. We are here to protect communities and transform lives. The launch of the Benefact brand is a momentous occasion for our charity-owned Group and at the start of 2023 Benefact Group announced a simplified structure to build on this to help us realise our growth ambitions. Building a movement for good A few years ago we set ourselves (and subsequently met) a stretching ambition to give £100m to charity. This level of giving means that Benefact Group is now the third largest corporate donor to charity in the UK. An amazing achievement when you consider that there are over five million companies. It means that our ultimate parent company, Benefact Trust, is now one of the biggest grant-making charities in the UK and is able to provide transformative funding to charities both in the UK and abroad as, for example, they did in response to the crisis in Ukraine. We thank the Trust enormously for the outstanding work they undertake. Indeed, our combined giving has helped thousands of charities in recent years, changing countless lives and communities for the better. Many of those charities, along with His Majesty King Charles III, joined us at Westminster Abbey last summer for a Service of Thanksgiving to celebrate our £100m giving milestone. It was a proud moment for our business and, for me, a rare moment to reflect on our incredible progress. Hearing moving testimonials about the life- changing work of the charities we support, and taking inspiration from the Parable of the Good Samaritan, we would like to go ‘Ecclesiastical Insurance is now proudly part of the Benefact Group, a family of financial services businesses with a common goal to give all available profits to good causes. We are here to protect communities and transform lives.’ Strategic Report – Chief Executive’s Report Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 9 9 9 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report further and hold out a hand to many, many more. We have therefore raised our ambition, and have set a new cumulative target to give £250m for good causes by the end of 2025. Delivering for our customers Our giving is only possible thanks to the support of our brokers, customers, investors, business partners, and the tremendous efforts of our colleagues. For generations, we have been trusted to protect many of the UK’s iconic treasures, from palaces, castles and stately homes to cathedrals, churches and schools. Today we insure world-renowned buildings such as St Paul’s Cathedral, the Royal Albert Hall, Chatsworth House and Westminster Abbey, the home of the coronation. We pride ourselves on our specialist expertise in our markets and our commitment to customer service. As an insurance company, our goal is to protect our customers through our specialist risk management advice and insurance cover. But as a trusted expert committed to creating a movement for good, our dedication to our customers goes beyond that. Many of our church and charity customers have seen their incomes fall due to the challenging economic climate and we recognise the difficulties they face. We have established resources to help these organisations raise much-needed funds and we invest significantly in our risk- management services to help customers reduce the risk of losses occurring. And if the worst happens, our expert claims team are always there for our customers when they need us most. As the UK’s leading insurer of Grade I listed buildings, we are passionate about protecting Britain’s heritage. We know the key to protecting our built environment from climate change is adaptation and resilient repairs. However, the challenge for heritage buildings, compared to modern properties, is that adaptation can be more complicated to do sensitively. We are working to be at the forefront of this issue and collaborating with partners like English Heritage to research and understand this important issue better. The threat of climate change is one of the biggest challenges facing our customers and communities. We are committed to making a positive environmental impact and we recognise the importance of reducing our own climate impact as well as supporting our customers to reduce theirs. Last year we announced our climate commitments to achieve net zero by 2040 and we are making good progress against our targets, which are detailed in our Responsible Business Report. Providing exceptional service Our customers tell us that our expert service and our compassion makes us stand out in the insurance industry. In the UK, Ecclesiastical retained its top spot in the Fairer Finance Home Insurance league table for a record 16th time and remains the UK’s most trusted home insurance provider. It was also named Risk Management Specialist Company of the Year – Large in the CIR Risk Management Awards. Ecclesiastical Canada was named one of Canada’s Top Employers for Young people for the 10th consecutive year and won Excellence in Claims Service in the Insurance Business Canada Awards. Also, for a second year, I’m delighted the independent research consultancy, Gracechurch, put Ecclesiastical ahead of all other insurers for claims service. In addition, an incredible 98% of customers 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 puts us ahead of many well-known and respected brands. Financial performance Despite the challenging external environment, our businesses performed strongly in 2022. In general insurance we saw excellent premium growth of 15%, driven by new business wins, strong retention and inflationary pressures. In Investment Management we saw record gross inflows of over £1.2bn as we launched new funds; net inflows place us well inside the top 10 fastest growing asset managers in 2022. Given our overall financial strength and excellent solvency position, we hold a significant portion of our investment portfolio in real assets such as property and infrastructure. While we expect this to lead to positive real returns over the long term, it can introduce some volatility into annual reported results. With our long-term approach we look through and beyond this short-term volatility; however, it did mean that, in 2022, our strong operating performance was offset by fair value losses from our assets of around £94.1m on our investment portfolio, leading to an overall Group loss before tax of £4.8m (2021: £79.2m profit). In addition to these fair value losses, the results include a total credit of £30m from a fair value gain on an equity investment and a credit arising from a change to our discounting accounting policy. More detail on these items is included within the Chief Financial Officer’s Report. The GI Underwriting result was a profit of £27.4m, a significant increase on the previous year of £8.8m, which was lower due to strengthening of PSA reserves. This gives a combined operating ratio of 91%, which compares favourably in the insurance market. We were able to give a further £22.7m to charitable causes, including Benefact Trust, in 2022. This takes our cumulative giving to £198.2m against our £250m target. We remain in a strong capital position and I’m pleased that our credit rating agencies affirmed our excellent and strong credit ratings in the second half of 2022. In line with normal business practice, we routinely review our rating agencies and we have now appointed Moody’s to join AM Best as our two agencies for the next period. Strategic ambitions To paraphrase T.S. Eliot… It is only when one tries to go too far, that one finds out how far it is possible to go. Inspired by the impact of our giving on so many, we are extremely ambitious for the future. We have launched an exciting new strategy to invest, energise and grow our Group across all our divisions and all our territories. With a strengthened rate environment, tightened insurance Strategic Report – Chief Executive’s Report Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 10 10 10 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Governance Financial Statements Other Information what has been achieved, and the positive impact that they have had. I certainly am. Join our movement for good With a new brand, a clear strategy for growth and a renewed sense of confidence, we go into 2023 energised and inspired to work together for our customers and society. To those who are reading about Benefact Group for the first time, I invite you to join us, whether as a colleague, customer or business partner, and experience for yourself how it is possible to do business differently. There is no doubt that, together, we are creating something very special – a movement for good that touches and transforms lives in our homes, in our communities, in this country and abroad. As we said when we filled Westminster Abbey in the presence of His Majesty King Charles III in June last year… “Individually we can all make a difference. Together, we can perform miracles.” By order of the Board Mark Hews Group Chief Executive capacity and an increasing market focus on Environmental, Social and Governance (ESG) performance, the timing to push for growth has arguably never been better. This year will see continued investment in new systems, helping to deliver even better service and value for our customers and brokers. We will pursue growth opportunities, both in our existing sectors and in new niches where we can leverage our specialist expertise. We will make significant investment in digital propositions, helping to build our distribution capability and reach, as we seek to find ways to meet our customers’ changing needs. We will also continue to prioritise risk management innovation, exploring new ways to protect our customers from losses, particularly from the growing threat of climate change. To achieve all of this we need to be at our best personally and professionally and we will continue to foster a culture where all our colleagues have the space to grow and perform to their full potential. For a second year running, we were named an “Outstanding” company to work for by Best Companies following the results of our annual engagement survey. Our ambition is to become a world-class employer, attracting, retaining and developing the best talent in the industry by creating career opportunities for every colleague, no matter what their background. On behalf of the Board and thousands of our beneficiaries, we say a heartfelt, sincere “thank you” to all our customers, business partners and dedicated colleagues for their exceptional support. I very much hope that they are inspired when they look back at ‘We are committed to making a positive environmental impact and we recognise the importance of reducing our own climate impact as well as supporting our customers to reduce theirs.’ Strategic Report – Chief Executive’s Report Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 11 11 11 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report QuoteDumfries House Cumnock, Scotland One of Britain’s most beautiful stately homes, Dumfries House in Scotland was saved in 2007 by the intervention of His Royal Highness The Prince of Wales, Duke of Rothesay, now His Majesty King Charles III. Today, it’s a popular tourist attraction open to the public, a wedding and events venue and a five-star country guest house. It is also the home of The Prince’s Foundation, which runs a diverse programme of education and training for all ages and backgrounds, and regenerates and cares for places where communities can thrive and which visitors can enjoy. We are proud to insure this important historic building – whose broad diversity of risks demonstrates our specialist expertise. We are proud too to support The Prince’s Foundation’s vision of creating communities for a more sustainable world. Strategic Report Governance Financial Statements Other Information Our business model and strategy Benefact Group, our parent company, 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 Group. Benefact aims to be a ‘different kind of business’, prioritising trust, ethics and philanthropic donations over the acquisition of higher profits. Benefact Group is organised on a divisional basis; Ecclesiastical Insurance Office plc is part of the General Insurance division, alongside divisions for Investment Management, Broking and Advisory and Shared Services. Recent changes have been made to the legal entity structure to optimise the composition and alignment of these divisions and enable greater connectivity of the ambitions across the Group. The Benefact Group’s overarching strategy encompasses all divisions and businesses to ensure alignment and strategic focus. Whether in specialist insurance, investment management, broking or advisory, every business in the Benefact family is a specialist in their respective field, built on genuine insight and ethics. Together we offer products and services that help protect in the present, pre-empt the possible and invest in a healthier financial future. This is illustrated by three strategic aims: 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, delivering excellent service with long-term sustainable relationships with clients and insurer partners. 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 industry- leading reputation and a consistent, proven approach to deliver long-term investment success. 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. 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. ‘Benefact aims to be a “different kind of business”, prioritising trust, ethics and philanthropic donations over the acquisition of higher profits.’ Strategic Report – Our business model and strategy Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 13 13 13 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report QuoteStrategy in action Introduction 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’s 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. The Group is delighted to continue to make significant contributions to good causes with a further £20m grant to its charitable owner, Benefact Trust in 2022. 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. The Benefact Group’s overarching strategy encompasses all divisions and businesses to ensure alignment and strategic focus. This 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 2022, we continued to progress the key elements of this ambitious strategy, delivering value to our customers and enabling further investment in the Group and its businesses. These are some of the highlights of our strategy: Striving to be the most trusted and ethical business in our chosen markets Delivered valued and trusted approach across the diverse family of specialist financial services businesses, driven by our shared ambition to do right by our customers and clients Continued to attract and retain prestigious customers across all divisions of the Group High levels of retention and customer advocacy across all divisions of the Group with strong satisfaction and excellent Net Promoter Scores External recognition for this distinctive approach with 18 awards including products, service quality, risk management, marketing and customer engagement Helped charity and church communities to raise funds with tailored fundraising support in the UK, Ireland and Canada Seeking to be the most trusted specialist insurer, operating with the highest ethical standards • Demonstrated strong business growth, launched new Art & Private Client product and several new schemes to support customer needs • Reflected needs of customers by providing specialist risk management advice on diverse topics including temporary accommodation for refugees, flood safety, and church tower tours • Offered targeted support for broker partners with wellbeing and mental health guidance, and the ‘Covered in 15’ podcast addressing key issues Strategic Report – Strategy in action Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 14 14 14 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Striving to be the most trusted and ethical business in our chosen markets Seeking to be the best ethical investment provider, building on industry- leading reputation and consistent, proven approach to deliver long-term investment success • Demonstrated strong business growth, attracting record levels of money inflows against a worldwide context of market volatility • Broadened investment waterfront with the launch of three new investment funds and embedding of new adviser relationships • Provided an expert voice including responsible investment insights including water and rivers, modern slavery, and the Just Transition Seeking to be the most trusted specialist adviser, providing excellent service with long-term sustainable relationships with clients and insurer partners • Ecclesiastical Planning Services* achieved regulated status and onboarded 80,000 new customers • The Church of England Pensions Board awarded its first-ever partnership to Ecclesiastical Financial Advisory Services* * Part of the Benefact Group plc Developing the Benefact Group and its businesses Successfully launched the new Benefact Group brand, reflecting the Group’s distinctive positioning and uniting its businesses under a common purpose Continuing to grow the Broking and Advisory division with acquisitions of broking businesses that complement existing specialist expertise Launched first phase of new administration platform and completed migration of church policies and associated claims handling Successful implementation of product governance, fair value and pricing practice framework aligned with new FCA Regulations Made significant progress towards forthcoming regulatory changes including new IFRS 17 financial accounting standards and Consumer Duty requirements Revised and implemented new investment strategy to deliver future improvements and potential for increased value to the Group Optimised composition of the Group’s divisions to streamline decision-making and enable greater alignment of growth ambitions Produced carbon footprint for direct emissions and shared commitments to achieve net zero ambitions Strategic Report – Strategy in action Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 15 15 15 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Developing a world-class team Continuing to be recognised for excellence Continued strengthening of employee satisfaction with B-Heard ‘Outstanding’ accreditation against external context of deteriorating employee happiness Six prestigious awards won by Group employees including Elite Women (Canada and UK), CII Distinguished Service Award, Most Inspiring Returner, Unsung Hero and Meritorious Service Medal (HM the Queen’s Birthday Honours) New values and performance management process launched across the Group, creating greater alignment across the Benefact family of businesses Implemented new Benefact family programme to capitalise on emerging talent and enhance talent acquisition and tracking Implemented an integrated approach to diversity and inclusion including awareness raising campaign and creation of an inclusion network across the Group Delivered a single consistent platform to share resources while providing bespoke learning spaces for each business to inform development, talent and succession planning Responded to the global cost of living crisis with financial wellbeing awards offered to employees in greatest need Relaunched employee-led giving, creating multiple opportunities for employees to give to charity including individual personal grants, volunteering and matched funding Ecclesiastical Canada • 5-Star award for property insurance, Insurance Business Canada • Canada Top Employer for Young People (10th consecutive year) • Greater Toronto Top Employer (4th consecutive year) • Excellence in Claims Service, Insurance Business Canada Ecclesiastical UK • #1 for Home Insurance, Fairer Finance (16th consecutive time, over 8 years) • Continued to be the ‘Most Trusted’ with the ‘Happiest Customers’, Fairer Finance • Risk Management Specialist Company of the Year (Large), CIR Risk Management • Best Home Insurance Provider, The Times Money Mentor Awards EdenTree Investment Management • Best Ethical Investment Provider, Moneyfacts Awards (14th consecutive year) • Best Multi-Asset ESG fund (for Responsible & Sustainable Managed Income fund), ESG Clarity • ESG Advocate (Asset Management), Portfolio Adviser Wealth Management Ecclesiastical Financial Advisory Services • Local Hero Mortgage Awards – South West & Wales, NatWest Intermediary SEIB Insurance Brokers • Marketing & Customer Engagement Award, Insurance Age Broker Awards The Group’s people continue to be recognised for their excellence: • Distinguished Service Award, CII/PFS Awards (Ecclesiastical UK) • Elite Women 2022, Insurance Business magazine Canada (Ecclesiastical Canada) • Elite Women 2022, Insurance Business magazine UK (Shared Services) • Meritorious Service Medal, HM the Queen’s Birthday Honours (Ecclesiastical UK) • Most Inspiring Returner, Women in Financial Advice Awards (EdenTree) • Unsung Hero of the Year Award, Insurance Post Claims and Fraud Awards (Ecclesiastical UK) Strategic Report – Strategy in action Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 16 16 16 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Willowbank School of Restoration Arts Ontario, Canada Located near Niagara-on-the-Lake, Ontario, Willowbank School of Restoration Arts is Canada’s premier heritage conservation school. Its unique three-year diploma programme combines theory with hands- on learning and provides students with a valuable professional network. As part of our continued commitment to supporting heritage conservation, we’re donating CAN$30,000 for second-year student bursaries over three years (2023-2025). In doing so, we’re supporting students, who may otherwise have struggled financially, to focus entirely on their education, immerse themselves in an experiential curriculum and develop the skills and knowledge required to help conserve our built and cultural heritage. As specialist insurers we understand the importance of heritage conservation and sustainability and we’re proud to contribute to the learning of our country’s next generation of heritage conservationists. Responsible Business Report highlights Socially positive £22.7m from the Group overall; £2.7m to charity direct Environmentally positive >£200,000 Nearly £250,000 of charitable funding for climate-related projects 92,631 kWh of energy self-generated, equivalent to 18 tonnes of carbon Outstanding employer awarded a 2 star rating, demonstrating outstanding levels of employee engagement – judged by Best Companies Award-winning across the Group including Best Ethical Investment Provider for 14 consecutive years 98% of colleagues feel that the Company supports mental health at work 1,291 tonnes carbon footprint; or 0.61 tonnes – carbon intensity per employee 82.95% lower Group equity investment footprint: 18.09 tCO2e/£m invested – 82.95% lower than the benchmark Top 3 >400,000 Corporate Giver – according to the Directory of Social Change 2023/24 Guide to UK Company Giving nominations for charities in the 2022 Movement for Good Awards commitment by 2023 for direct impact, 2040 for the Group Net Zero ClimateWise member of voluntary industry initiative Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 18 18 18 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Socially positive Charitable giving The Benefact Group is a unique family of financial services businesses committed to giving to good causes. Benefact Group is proud to be a top company donor, ranked third in the Directory of Social Change’s Guide to UK Company Giving. The following table summarises giving across the ‘Benefact Group’ which includes Ecclesiastical Insurance Office plc, its subsidiaries and the subsidiaries of the Benefact Group. This table also summarises giving from the Benefact Trust, the ultimate parent undertaking of Ecclesiastical Insurance Office plc. Introduction This Responsible Business Report is a summary of positive social and environmental impact. It covers social impact including approach to diversity and inclusion, colleague wellbeing and charitable giving. It also summarises climate impact through reporting in line with the Taskforce on Climate-related Financial Disclosures (TCFD). A reminder about our Group and the legal entities referred to within this Responsible Business Report. In this report, the ‘Group’ refers to Ecclesiastical Insurance Office plc together with its subsidiaries. The ‘Benefact Group’ and ‘wider group’ refers to Benefact Group plc, the immediate parent company of Ecclesiastical Insurance Office plc, together with its subsidiaries. The ‘Benefact Trust’ and ‘the Trust’ refers to Benefact Trust Limited, the ultimate parent undertaking of Ecclesiastical Insurance Office plc. Giving via Highlights Benefact Trust – ambition to be one of the UK’s most impactful Christian grant- making charities Benefact Group – Group-led giving programmes designed to achieve maximum reach and impact Businesses – giving led by subsidiary businesses of the Benefact Group focused on customers and communities Colleagues – enabling Benefact Group colleagues to give to causes they care about and doubling their efforts • Benefact Trust awarded over £22m in • Our £1m+ Movement for Good continues Key business giving initiatives included: • Over £500,000 given in total grants during 2022 • New crisis response grants programmes were awarded – £1m to assist Ukrainian refugees and £500k to help those in need due to the cost-of-living crisis to give through small donations and large grants • £80,000 to charities UK insurance brokers care about • Highest-ever level of employee fundraising – over £140,000 • It generated over 420,000 nominations for charities – the highest ever • Hundreds of charities benefited from £1k • Ecclesiastical Canada’s Community Impact Programme selected 50 charities to mark their 50th anniversary donations • EdenTree’s community fund is in its fifth • £500k in large grants year • £200k+ to climate/environmental projects • Continuing partnership with The Prince’s Foundation • Lycetts held an inaugural fundraising ball to support the British Eventing Support Trust • Retained gold payroll giving standard and grew number of givers • 500+ volunteering days • £250,000+ in £100+ personal grants to colleagues’ charities of choice • Triple matching of donations to charities supporting in Ukraine • 1,700+ attendees of free fundraising webinars Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 19 19 19 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Giving via Commentary Benefact Trust – ambition to be one of the UK’s most impactful Christian grant- making charities Benefact Group – Group-led giving programmes designed to achieve maximum reach and impact Businesses – giving led by subsidiary businesses of the Benefact Group focused on customers and communities Colleagues – enabling Benefact Group colleagues to give to causes they care about and doubling their efforts The Group’s distinct ownership model means it can continue to give all its available profits to Benefact Trust as its charitable owner. In 2022 the Trust continued to distribute grants through a number of programmes supporting church organisations and Christian charities. In 2022 the Trust continued its ambition to address urgent social issues. Its Brighter Lives programme helped charities address mental health and wellbeing in the church and wider community. It responded to the Ukraine Crisis with a £1m fund distributed through key partners including the British Red Cross and Depaul International. Late in 2022 the Trust also launched a £500k fund to help people struggling with the cost-of- living crisis, working with charities including the Trussell Trust and Warm Welcome Campaign. Funding was also given for roof alarms to protect churches against metal theft and for the preservation of heritage skills such as stonemasonry, for example. Movement for Good is the Group’s biggest giving initiative and continues to deliver huge breadth of reach and depth of impact. Small donations reach a diversity of predominantly small charities for whom £1k can make a massive difference. Large grants benefit causes close to customers and communities. Projects supported the rural community, schools and heritage properties. In 2022 we also targeted charities tackling environmental and climate issues, giving more than £200k to support our ambition to have a positive environmental impact. But our support doesn’t stop there – we continue to develop the range of services and support we give to charities including free fundraising webinars which were attended by more than 1,700 charities. The Benefact Group is a growing family of specialist financial services businesses each proud of how close it is to customers and communities. Business giving programmes give the opportunity to target charities we really care about. For example, our Closer to You broker programme gives brokers working with Ecclesiastical UK the chance to choose charities they care about. Our specialist investment business EdenTree continues to support causes aligned with our positive investment themes. Brokers SEIB and Lycetts are totally connected to their communities, funding equine charities such as World Horse Welfare and rural charities such as the County Trust. Our Irish business provides a wide range of support to Jigsaw, the national centre for youth mental health. 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. Giving our people the opportunity to support causes they care about continues to be the foundation of our giving approach. In 2022 we relaunched our employee giving scheme ‘MyGiving’ in our new Group brand. We continue to offer employees small grants to give to any cause they care about, flexible volunteering time and 100% matching of fundraising and payroll giving. In 2022 our people raised more for good causes than ever before, supporting charities with vital funds. Our biggest fundraisers generated tens of thousands for charities including Derian House Children’s Hospice, Prostate Cancer and the World Land Trust. We launched a special triple matching opportunity for Ukraine charities. Volunteering projects were widespread and diverse including setting up hygiene banks and river cleans. Further info Visit www.benefacttrust.com Visit www.movementforgood.com See Group company websites Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 20 20 20 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance ContentsFinancial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Employees In 2022 the Benefact brand was launched which brought the wider Group together. It recognises the individual strengths of our businesses while making them stronger together, united by a common purpose. A new values, culture and behaviour model was rolled out and the historic change was celebrated with a range of events and communications. Engagement and wellbeing Post-pandemic and in a new world of flexible work, the mental health and wellbeing of employees continued to be a top priority. A ‘healthy working check-in’ survey was launched in 2022 to understand and support how well everyone was working. It generated over 900 responses with 98% feeling that mental health at work is well supported. Wellbeing resources continued to be bolstered, in particular with several webinars attended by colleagues from the UK and overseas. Given the potential impacts of the cost of living crisis a range of advice and support for employees was provided should they need it. Fantastic workplaces to encourage employees to benefit from being together continue to be critical. The newly built and sustainable Gloucester head office was used for an increasing number of meetings and team activities as well as external events welcoming brokers, customers and the community. This commitment to creating an outstanding employee experience was reflected in the externally assured B-Heard engagement results which improved and retained ‘2 star, outstanding’ status. This was a particularly impressive achievement set against a challenging external environment with rising living costs and the uncertainty brought by several years of pandemic and the situation in Ukraine. Views on the strength of values and purpose, making a positive difference in the world and customer trust scored highest against benchmarks. Diversity and inclusion Diversity and inclusion was supported with a new campaign ‘We all belong’ which recognises the broad range of backgrounds, abilities, perspectives, beliefs and interests people bring. A diversity and inclusion working group met to discuss topics including menopause and disability and to promote awareness. Internal reporting of sensitive data was improved; diversity was considered in strategic talent, recruitment practices and behavioural competencies; and a range of external initiatives were supported including Women in Finance and the Association of British Insurers’ talent and diversity network and Making Flexible Work campaign. Investment business EdenTree welcomed three interns as part of the 10,000 black interns initiative, and charities Blind in Business and Read Easy were welcomed into our offices to raise awareness of disability and literacy. Funding for the Black Swimming Association, Breaking Barriers and The Circle of Women supported charities fighting for a range of causes including fair pay for workers in the global fashion industry and access to swimming for people of African, Caribbean and Asian heritage. Key employee statistics Gender by level 2022 Group Management Board Senior Leader Manager Team Member Grand Total Gender pay gap Fixed pay gap mean/ median Bonus pay gap mean/ median Male No. 6 51 231 394 682 Female No. 2 30 160 484 676 2022 25.2/19.1 2021 27.7/20.4 43.7/26.4 51.2/32.9 Total No. 8 81 391 878 1358 The gender pay gap is calculated as the difference between average hourly earnings (excluding overtime) of men and women as a proportion of men’s average hourly earnings (excluding overtime). The table above shows median and mean gender pay gap for fixed pay and bonuses paid to men and women, in relation to the 2022 performance year. For more detail see our annual Gender Pay Gap Report available on our website. Ethnicity 2022 White No. 964 Prefer not to say No. 331 BME No. 63 Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 21 21 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Leadership and development We ensured employees completed regulatory training, committed to our Code of Conduct and supported a large number of colleagues to successfully complete qualification programmes. Our UKGI Corporate Chartered Status with the Chartered Insurance Institute was renewed. We continued to support leaders to develop their skills and confidence with our in-house programme alongside Windsor Leadership Trust and UK Business School programmes. We ran more than 100 virtual learning sessions for colleagues across the UK and Ireland and launched our Learning Management System into our broking division and our Canadian general insurance businesses, providing access to a wide range of learning to even more of our colleagues. We launched a performance management process and a pilot of our Benefact Emerging Talent Programme, providing a year-long programme of experiential learning for colleagues who have shown the potential to be leaders in the future. Customers and partners The launch of the Benefact Group and Trust brands and achievement of giving £100m to good causes prompted an historic celebration in 2022. These momentous achievements were celebrated with everyone who had been a part of that journey – colleagues, customers, partners, supporters, charities and their beneficiaries. Over 2,000 people attended the event in Westminster Abbey, including His Majesty King Charles III. Supporting customers and partners Growth and success is credited to a commitment to doing the right thing and building strong relationships over many years with customers and a range of partners. Advice and support for charities which enables them to be more successful and sustainable included free webinars covering topics such as social media, legacies, events and funding applications for core costs and capital projects. They were attended by over 1,700 charities, 96% of whom would recommend them. We supported trustee recruitment through a partnership with charity Getting on Board, and published articles and reports including insights on corporate partnerships. Understanding customers’ concerns is a focus in every part of the Benefact Group. Regular customer research and insight programmes on topics such as climate awareness and risk management enabled our businesses to build their expert advice and support. To deliver on our promise to do the right thing we’re relying on our employees and suppliers sharing this commitment. 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. One hundred per cent of our people complete an annual Code of Conduct attestation. 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 75% under the Payment Practices and Performance Reporting (2021: 74%). Awards and recognition Winning awards is one thing but winning consistently underlines sustained high standards. Ecclesiastical’s UK home insurance has topped the Fairer Finance table 16 times, achieving top position in every aspect they assess: trust, customer happiness, complaint handling and transparency. EdenTree has won the Moneyfacts Investment Life and Pensions Best Ethical Investment Award for the 14th successive year. Ecclesiastical Canada won a slew of awards: Toronto’s Top Employer for the 4th consecutive year; Top Employer for Young People for the 10th consecutive year; plus, recognition for claims excellence and property insurance. Brokers SEIB won the Marketing and Customer Engagement Award at the Insurance Age Broker Awards 2022. This recognised their work with leading vet and Chair of The Showing Council and British Horse Foundation, Dr Jane Nixon, to research the future of horse-riding. Ecclesiastical’s financial advice business was also successful in the ‘local hero’ mortgage awards, organised by NatWest for firms who have gone beyond everyday expectations to put the customer and local community at the heart of their firm. Ecclesiastical UK home insurance • Fairer Finance Award – 16th consecutive year EdenTree • Moneyfacts Investment Life and Pensions Best Ethical Investment Award – 14th consecutive year Ecclesiastical Canada • Toronto’s Top Employer – 4th consecutive year • Top Employer for Young People – 10th consecutive year SEIB • Insurance Age Broker Award for Marketing and Customer Engagement Ecclesiastical’s Financial Advice business • NatWest Local Hero Mortgage Award Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 22 22 22 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Sports Driving Unlimited Sports Driving Unlimited gives people of all ages with a disability a unique chance to learn the challenging sport of pony carriage driving. A wonderful confidence-builder, pony carriage driving provides a great sense of achievement – especially valuable for those who struggle to do other sports. Thanks to the money from the Movement for Good Awards, more people with disabilities will be empowered by this exhilarating experience. Forever Angels Forever Angels provides life- saving nutrition to orphaned, abandoned and vulnerable babies in Tanzania, while empowering their caregivers through business creation. As a winner of the 2023 Movement for Good Awards the charity can continue with their vital work, saving little lives and helping to keep families together. SCOTLAND: The Big Picture SCOTLAND: The Big Picture works to drive the recovery of nature across Scotland through rewilding, in response to the growing climate and biodiversity crises. Their vision is to create a vast network of rewilded land and water, where wildlife flourishes and people thrive. The Movement for Good award provides a welcome financial boost, helping them continue with their rewilding projects and activities. Environmentally positive Governance Climate risk has strong governance and oversight and is subject to effective and robust controls. The Benefact Group is a member of ClimateWise, a voluntary initiative to drive climate responsibility and action. Climate strategy is centred around the ClimateWise framework which is aligned to Taskforce on Climate-related Financial Disclosure (TCFD) principles 1. Be accountable 7. Enhance reporting 2. Strategies and investments 6. Customer/client awareness r r o t s s an in s u r e A Our Group Climate Response e v n i n a s A 3. Managing climate risk As an advi s o r 5. Informing public policy 4. Our own impact TCFD: Disclose the organisation’s governance around climate-related risks and opportunities See the Governance section TCFD: Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning where such information is material See the Strategy section TCFD: Disclose how the organisation identifies, assesses and manages climate-related risks See the Risk section TCFD: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material ClimateWise and TCFD principles See the Metrics and Targets section Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 26 26 26 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report How the Board oversees climate response The Board has overarching responsibility for strategy and risk. Due to the cross- cutting nature of climate risk (as identified by our enterprise-wide Risk Management Framework) the Board has delegated responsibility for oversight of climate risk to the Group Risk Committee (GRC). Responsibility for overseeing these risks (primarily physical and transition) is delegated to the most appropriate Board Committees. Climate strategy and progress has designated responsibility with a named Group Management Board member and Non-Executive Director. Supporting Boards and Committees The Board and GRC are supported by functions including investment, risk, underwriting and capital management to embed commitment to: • Achieve net zero for direct impacts in 2023 • Be Net Negative for direct impacts by 2025 • Wipe out historic impact (Scopes 1 and 2) by 2030 • Become a net zero company by 2040 • Manage the risks that are faced by the Group. The following table demonstrates governance in action: Governance forum Group Board Examples of climate topics discussed/ decisions made Training on net zero and offsetting with a third party, presentation from English Heritage on their climate strategy to understand a key customer’s perspective Briefing on ClimateWise framework and performance Group Audit Committee Training on TCFD reporting and update on Group position Group Risk Committee Reviewed and approved Climate Risk Appetite, Climate Risk Taxonomy Group Management Board Discussed and approved Group offsetting strategy Climate Strategy Group Comprising senior representatives from across business functions, this group developed and delivered the Company sustainability strategy and targets Business sustainability groups Identified and delivered local initiatives, supported Company sustainability reporting Impact team This is the Group’s responsible business team. Activities it led and delivered included ClimateWise and SECR reporting, company footprinting and facilitating Board training Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 27 27 27 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategy Insurers, investors and advisers have a responsibility to play a positive role in tackling, mitigating and seeking opportunity from climate change. Our current strategy runs to 2026 and ‘sustainability champion’ is a key initiative within it, focusing on climate response and action. Climate-related risks and opportunities Climate change presents increasing levels of risk to our businesses and our customers. It is certain that change will occur. We know that warming will continue, with consequent changes to weather patterns, and that actions will be taken globally to seek to mitigate and adapt. Risks will crystalise over a much longer-term horizon than typically seen for other risk exposures. While the greatest impacts of these risks are expected to materialise in the medium to long term, there will also be shorter-term implications and it is important that actions are taken now to mitigate and manage risks arising from climate change. Opportunities Opportunities to benefit from the effects of climate change include greater resource efficiency, using expertise to help customers and investing in areas that will profit from changes as we transition to a low carbon economy. Each of the Group’s insurance businesses have a mature risk management capability to help their customers effectively manage their risks. There is opportunity to incorporate the management of climate change risk within this service so helping existing customers and provide an added attraction for new customers. Risks Risk Nature of risk Examples of action to understand and mitigate impact on business, strategy and planning Physical Direct damage to assets both owned and insured and indirect impacts from supply chain disruption. They can be acute and event-driven or longer-term and therefore chronic. The Group’s main physical risk exposures stem from its property underwriting portfolio and from its investment assets. • In the UK and Ireland work is in progress, in conjunction with our reinsurance brokers, to use climate conditioned proprietary models to assess the exposures to increased levels of UK and Ireland flood risk over medium- to long-term periods. • In Canada, mapping of exposures against risk areas, and in the short term, action is being taken to manage the exposure to wood-framed buildings that are considered particularly vulnerable to perils such as wildfire. • The Group works with a leading Geographic Information System (GIS) provider to provide high-quality data to inform pricing, risk selection and strategy. A GIS partnership enables us to provide a tailored service to customers to assess individual risk to storm, flood and subsidence. • The Group assesses risks at a granular level, using models supplied by external vendors and those models include expert assessments of likely impact of current climate change on the risks over the following year. • Initial work is underway using the methodology developed by the Partnership for Carbon Accounting Financials (PCAF) to understand the carbon intensity of the Group’s underwriting portfolios. Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 28 28 28 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Risk Nature of risk Examples of action to understand and mitigate impact on business, strategy and planning Transition Relates to financial risks resulting from transitioning to a low carbon economy. They arise from two related transformations, namely in regulatory policy such as carbon taxes and technology and market disruption that will include innovation in renewable energy. Additional implications include the subsequent changes to consumer expectations, demand and behaviour as a result of these policy and technological transformations. 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. Liability Stems from the potential for litigation if entities and boards do not adequately consider or respond to the impacts of climate change. This may include the potential breaching of Directors’ duties. There are potential exposures through the Group’s liability underwriting portfolio. • The Group’s Responsible and Sustainable Investment Policy excludes investment in fossil fuel exploration and production and thermal coal extraction, and eschews investment in high carbon emitters (automotive, aviation and heavy industry). • The Group’s investment management business EdenTree employs a positive climate screen to challenge Environmental Social and Governance (ESG) performance in investee companies. They analyse the implications of climate-related issues, assessing investees’ governance of climate risk, commitments to phase out any coal, oil and gas, use of renewable energy, emissions reduction targets and performance, and their decarbonisation strategies. • EdenTree applies a discretionary thematic strand, ‘Striving for Positive Impact’, that looks to invest in companies providing solutions that will enable the low carbon transition, as well as providing a compelling investment case. • Climate change features as a permanent pillar of EdenTree’s engagement strategy, and they have supported various initiatives over the years. They have contributed for six consecutive years to the Carbon Disclosure Project non-disclosure campaign, asking more businesses to report on climate change, and have been actively encouraging companies to set Science Based Targets via in-house engagement and through ShareAction’s Investor Decarbonisation Initiative. They supported the Paris Pledge for Action in 2015 and are a signatory to the Montreal Pledge and TCFD Framework. EdenTree also 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. • The Group’s investment strategy also includes an allocation to infrastructure assets. These investments can not only generate attractive returns and offer diversification from other assets but also help enable the transition to a low carbon economy and help mitigate the impacts of climate change. • Each territory has assessed its exposure to the potential for receiving future liability claims relating to climate-related litigation arising from customers’ activities. The Group will continue to track potential for insured customers to be exposed to liability risks and the evolving legal environment. Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 29 29 29 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Insurance risks by territory Risk exposures vary by territory with respect to the types of perils and the outlook for the future. These have been assessed over the short term (up to 5 years) and medium (5 to 20 years) to long term (20+ years). Our strategic response focuses on these risks and their associated opportunities. • In the UK and Ireland, the key risks are assessed as being from increased river flooding arising from changes in precipitation and coastal flooding/storm surge driven by increased sea levels. Also, more intense rainfall in short periods gives increased exposure to flash-flooding events, particularly in urban areas. • Australia has experienced a significant and increasing number of weather events that could be attributed to climate change and it is expected that their frequency and severity will continue to develop, though it is recognised that short-term patterns are also heavily influenced by El Niño and La Niña conditions. • Canada has also experienced a significant number of weather events in recent years including wildfires, floods and hurricanes. Although nearly all risk exposure is located in the southern part of the country – away from areas that are projected to experience the greatest change – the impact of changes in rainfall and increased heat is expected to have a material impact on the risks we insure. How we determine material risks and opportunities We use stress testing and scenario analysis as the key tool to assess principal risks, with the primary focus on our insurance underwriting businesses and as an asset owner. Scenarios have been used aligned to those defined in the Prudential Regulation Authority’s (PRA) Climate Biennial Exploratory Scenario (CBES) which includes three scenarios exploring transition and physical risks, to different degrees. A Strategic and Emerging Risk Process that scans the external environment for future risks and developments relating to climate change are a key component of that process. As part of business planning and the strategy development process we assess the potential impacts of climate change. An assessment is cascaded down to businesses, and they make local assessments of how climate change will affect them, using their local knowledge. In fulfilling its mandate for the Group, EdenTree identifies both risks and opportunities arising from climate change and discusses these with key decision-makers for invested assets. As a Group, we leverage EdenTree’s expertise and thought leadership. Testing risks through scenarios Insurance Investment • Focusing on worst-case scenario: • Assessing beyond equities: in 2022 an initial assessment of insurance underwriting risk has focused on the worst-case scenario of the three CBES scenarios (the No Additional Action scenario) because this enables identification of the most extreme outcomes, therefore the greatest risks to the business, particularly over the medium to long term. The scenarios have been used primarily in a qualitative nature to identify the types of perils that are most likely to affect the current insured portfolio. • Considering socioeconomic impacts: besides considering the direct impact of weather events, the economic and social impact on key customers were also considered, in this case also using the scenarios whereby Paris-aligned targets are met, to identify some of the issues they likely face in the various circumstances. This analysis is being used to inform customer propositions and how the Group might work with and support customers to manage and mitigate climate risk. The process has been used to assess the Group’s insurance footprint in various geographies, for example assessing wildfires in Canada, temperature rises in Australia and windstorm and flood in the UK. For example, in the UK a tool for flood and storm mapping, Mapview, is used to manage individual and accumulated local exposures. wider assessment of the risk and opportunities of climate change on the Group’s assets (beyond equities) was completed. This looked at asset classes including strategic investments, property investments and gilts/corporate bonds. As our methodology develops, we will increase the scope of our carbon footprinting. A desktop carbon study of property investments has been commissioned. It uses a Real Estate Environmental Benchmark (REEB), an Energy Performance Certificate (EPC) schedule priority, physical and climate risk assessments, scope 1, 2 and 3 data completion and setting of carbon targets and decarbonisation plans. • Footprinting: the footprinting tools used by the investment team enable the Group to view its investments from various perspectives. These include the portfolio emission pathway vs climate scenario budgets (and whether it is overshooting), the associated temperature increase, a transition climate risk analysis and a physical risk exposure based on the holdings (high, moderate, light risk). Based on current targets, the Group’s equity investments are expected to be aligned with the Sustainable Development Scenario by 2050, representing a potential temperature increase of 1.5C by 2050 compared to 3.6C for the benchmark. Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 30 30 30 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report • A Green Future Fund, investing globally in companies which provide sustainable solutions to some of the world’s environmental challenges • A Global Impact Bond Fund that seeks to deliver measurable positive environmental and social impact alongside a regular level of income • A Green Infrastructure Fund investing in environmental infrastructure solutions linked to the energy transition. Tackling climate alongside suppliers, colleagues, communities and customers Supply chain Climate change will affect supply chains now and over the medium to long term. As part of due diligence, evidence is collated of any potential business partners’ resilience to climate change risks, and the actions they are taking to address their risks, besides their carbon footprints. The Group is a member of the financial services purchasing scheme which is designed to drive up standards in supply chains. Around 60% of the Group’s most material suppliers are registered with this scheme and are required to complete an enhanced level of questioning on social and environmental impact. Part of the Group’s downstream footprint is the property restoration work we fund through our claims. We require our restoration companies to be certified to ISO 14001. Colleagues Engaging our people is a key enabler of our climate strategy. In 2022 we: • Launched and announced climate as central to our next chapter strategy at our leadership conference event with global leaders from all parts of the Benefact Group • Held climate roadshows for all colleagues to help everyone understand more about our climate impact and opportunity as a Group • Held management briefings on our direct impact to help teams understand what it comprises and what we can do about it • Tailored team sessions – one example was a workshop session for our Actuarial & Reinsurance Team, involving presenters from within the team to explain our investment and reinsurance positions • Through our benefits package we offer colleagues a personal carbon calculator to calculate and offset their emissions. The Group will be investing in highly assured, transparent and charitable offsetting projects overseas providing carbon credits. This will invest in well- established climate projects which make both a positive environmental and social impact. Social impacts include improving local economies. Colleague support for charities and communities through giving and volunteering is strong. A number of projects support charities tackling climate issues, for example our Compliance team helped to plant 130 trees for the Stroud Valleys Project. In 2022 the EdenTree team brought together its river health research, partnership with Olympic open water swimmer Alice Dearing and a river clean volunteering day. Building on our strong culture of charitable giving, to celebrate COP27, we focused on climate change and environmental charities through our charitable giving programme, Movement for Good. Communities The Group’s unique ownership model enables it to give to good causes every year. Funding for transition charities, biodiversity projects and charities helping customers to reduce their impact has increased over recent years. In 2022 over £200,000 was given to climate-related charities including the InterClimate Network; Heal Rewilding; Trees for Cities and Earthwatch. These funds are supporting a wide range of positive environmental projects including biodiversity and rewilding and education programmes with future climate leaders in schools. Customers Working with customers across our insurance, investment and advisory businesses to help them better understand and tackle their climate risks is a key part of our climate strategy. In 2022 some examples of activity included: • Commissioning and publishing research on a wide range of topics including broker attitudes to net zero, churches’ readiness for climate change, the environmental performance of the water industry and just transition strategy in investments • Producing guidance for key customers such as schools, covering topics including adaptation/transition, solar panels, battery storage and flooding • Hosting webinars on topics including contemporary construction risks and climate reporting • Working with expert partners to offer climate-related services including advice on installation of renewable energy systems and energy audits and monitoring • Embedding climate change within our Enterprise Risk Management service, to help customers consider transition risks and opportunities • Launching new products, namely three new EdenTree funds designed to benefit from the opportunities arising from the climate transition: Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 31 31 31 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Risk We accept the presence of climate risk in our property insurance underwriting portfolio and seek to manage our exposures by geographies. We have adopted a responsible and sustainable approach to investing that minimises exposure to both physical and transition risks and seeks opportunities that allow us to appropriately manage our investments in assets that will benefit from transition to a low carbon world. We actively seek to limit our exposure to counterparties with material climate risk exposures. Risk Management Framework The Group’s Enterprise-Wide Risk Management Framework as illustrated in the Risk Management Report on page 45, provides the tools, guidance, policies, standards and defined responsibilities that enable us to achieve our strategy and objectives, while ensuring that individual and aggregated risks to our objectives are identified and managed on a consistent basis. Our Group Risk Register includes climate change as one of the key risk exposures of the Group. In 2022 our approach to the management of climate change risks was updated. The Group Risk Taxonomy was updated to reflect the cross- cutting nature of climate change acting as a driver for other risk exposures. A Preference Statement and Risk Appetite statements were also developed for specific elements of climate risk. Recognising the likely impacts on its customers, the Group seeks to support them to address these through our underwriting, claims management and risk management activities. Risk Management Process The risk management process is a structured, ongoing method by which the Group, each business unit and significant business areas identify and assess the significance of the risks that it faces in pursuit of its business objectives. Climate change risks are managed according to the four-step cyclical process as illustrated below: Identify Monitor Assess Respond Identifying climate risks In addition to identifying climate change risk as a Level 1 risk-type in our Group Risk Taxonomy, under which sit the sub-risk types of physical risk, transition risk and litigation risk, we have mapped the potential impact of climate change on many of the other risk types that the Group is exposed to. The Group’s emerging risk process includes keeping informed on evolving knowledge and developments in the management of climate change risk. At Group and business unit level we have undertaken exercises to identify the specific risks that climate change will bring to our ability to achieve objectives. Scenario analysis, including potential pathways and looking over a range of timescales, is a key tool employed for this stage. Assessing climate risk Having identified the climate risk exposures, the next step is to assess their potential impact. This entails gaining a deeper understanding of the nature and scale of the risks, and where possible seeking quantitative measures of the impact that the risks may have on the financial position of the Group under the different scenarios. Responding to risks For climate risks, the potential effects of identified risk exposures would emerge in the future, often over much longer timescales than typically for other risks. While impacts may emerge far into the future, sooner actions are often necessary to mitigate the effects. This is why responses to climate change risks are often aimed at making the business more resilient to the future emergence of adverse conditions rather than addressing the immediate potential for loss. Responding to risks also involves identifying opportunities that might arise. Monitoring and reporting risks All business units are expected to define the governance mechanisms for managing their climate risks. These involve the relevant risk and/or management committees receiving information relating to climate change risk exposures and actions. This enables them to monitor key risk exposures, challenge and input into decision-making relating to risk assessments and responses, identify any risks that have not been recognised and carry out other monitoring responsibilities in line with their terms of reference. Risk registers used at Group and business unit levels are not only used to capture, assess and respond to risk, but also to monitor and report. Business unit climate risk reporting is shared with the Group Risk Function which uses this and Group level information to report to the Group Risk Committee of the Board. This is done via the quarterly Chief Risk & Compliance Officer (CRO) Report which summarises the key risks across the Group. Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 32 32 32 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Metrics and targets Setting ambitions and targets is an important way to drive and assess climate progress. In 2022 the Benefact Group set out high-level climate commitments for the short and long term, monitored and set targets for direct emissions, footprinted investments and expanded measurement and understanding of Scope 3 emissions. Targets are integrated into remuneration practices. Net zero targets Net Zero targets NEW investment strategy NET ZERO for direct impact (Scopes 1 & 2) NET NEGATIVE for direct impact (Scopes 1 & 2) WIPE OUT historic carbon impact (Scopes 1 & 2) NET ZERO Group 2021 2023 2025 2030 2035 2040 Direct emissions Scope 1 and 2 footprint (plus Scope 3 business travel, waste and water) is reported and published here according to greenhouse gases (GHG) protocols, to Streamlined Energy and Carbon Reporting (SECR) standards. • Scope 1: all direct GHG emissions • Scope 2: indirect GHG emissions from consumption of purchased electricity, heat or steam • Scope 3: other indirect emissions not covered in Scope 2 that occur in the value chain of the reporting company, including both upstream and downstream emissions and investments where quantifiable Carbon dioxide is the most significant contributor to anthropogenic global GHG emissions (which also include methane, nitrous oxide and fluorinated gases). To measure the equivalent warming impact of GHG emissions, the Group’s GHG emissions are measured as tonnes of carbon dioxide equivalent (tCO2e). The following table provides details of the carbon associated with the direct operation of businesses part of the Benefact Group. To support these ambitions, in 2021 the Benefact Group set a target to reduce direct emissions by 20%. The reporting period is January to December. Emissions source 2021 UK Total Non- UK tCO2/ employee 2022 UK Total Non- UK tCO2/ employee Scope 1: fuel, fluorinated gas losses and fuel combustion in premises / vehicles Scope 2: location based electricity Scope 2: market based electricity Scope 3: business travel, waste and water use Total CO2e 97 6 103 143 23 166 383 97 480 584 92 677 68 97 165 82 92 174 172 22 194 734 217 951 337 125 462 0.23 959 332 1291 0.61 Total energy use 4,139,168 kWh, of which 3,775,241 kWh is UK and 363,927 kWh is non-UK. Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 33 33 33 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Governance Financial Statements Other Information 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 2022. The emissions reporting boundary is defined as all entities and facilities either owned by or under operational control of Benefact Group, therefore emissions relating to our premises and associated travel by staff based at those premises. It includes data covering 89% of our Group by headcount. We continue to improve the coverage and quality of data which informs our report. Scope 1 emissions from fluorinated gas losses and fuel combustion in premises / vehicles, Scope 2 emissions from electricity and cooling in premises, and Scope 3 emissions associated with business travel, waste and water use have been calculated using UK government greenhouse gas reporting emission factors 2022 (Department for Environment, Food and Rural Affairs). The Group sources 40% of its electricity from renewable sources, a slight rise on 2021 (34%). The Group self-generated 92,631 kWh of energy equivalent to 18 tonnes of carbon. The Group recognises that the pandemic had a significant impact on direct business activity resulting in a much lower carbon footprint in 2021 caused by low or no occupation of offices and dramatically reduced business fleet travel. Scope 3 emissions Based on current targets the fund is expected to be aligned with the Sustainable Development Scenario by 2050, representing a potential temperature increase of 1.5C by 2050, compared to 3.1C in the benchmark. There is huge potential to reduce carbon impact through Scope 3 emissions. Accessing accurate data and exerting influence are complex and challenging but we are committed to making progress. The Group’s owned investment assets are managed by EdenTree Investment Management. EdenTree has a seven-year track record of carbon footprinting its equity funds, and a two-year track record of carbon footprinting the Group’s General Fund (which encompasses the Group’s equity funds and some corporate bond funds). Commentary on the Group general fund: • The fund’s carbon footprint is 18.09 tCO₂e/£m invested, 82.95% lower than its benchmark. • The weighted average carbon intensity (WACI) of the fund is 57.18 tCO2e/£m revenue, 68.86% more efficient than its benchmark. • 50.95% of the Fund is covered through this climate analysis, of which 84.4% of companies disclose their emissions. 61% of companies have either set a Science Based Target or have committed to doing so. Expanding Scope 3 emissions reporting and influence In 2022 an initial wider assessment of the Group’s assets (beyond equities) was completed. This looked at asset classes including strategic investments, property investments and gilts/corporate bonds. Quantifying the impact of climate change in investments is an emerging practice, with inherent uncertainty in the quality of available data. It is challenging to obtain consistent asset data across an entire portfolio, but the Group will extend its assessment to property. Work has also started to assess the carbon impact of its underwriting portfolios. Methodologies to achieve this are just emerging but the Group is committed to working to understand the carbon impact of underwriting in order to influence and support customers and communities to decarbonise. Remuneration Climate-focused performance targets are part of the Group’s Long Term Incentive Plan (LTIP). It measures specific climate progress – targeted improvement in ClimateWise performance and reduction in direct emissions. These targets were agreed following a review of remuneration targets with an external partner to ensure best practice. ’Climate-focused performance targets are part of the Group’s Long Term Incentive Plan.’ Strategic Report – Responsible Business Report Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 34 34 34 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report The Beatles Story Liverpool, England In the heart of Liverpool’s Royal Albert Docks, The Beatles Story is an immersive, atmospheric journey through the lives and times of the Fab Four. The world’s largest permanent Beatles exhibition, it houses authentic memorabilia including original instruments such as Ringo Starr’s drum kit, clothing and rare album sleeves. There’s a discovery zone for children where they can learn about the band and its musical legacy using fun, interactive resources. And along with recreations of key locations and moments from the band’s career, there’s a rolling programme of special exhibitions. It’s a privilege for us to be entrusted with insuring such an important piece of popular culture and a great example of the breadth of risks and expertise we can provide. Key Performance Indicators Financial Measure 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 £250m in charitable giving by the end of 2025. Performance A robust underwriting performance enabled us to maintain the level of charitable giving to £22.7m. This includes grants of £20.0m to our charitable owner, Benefact Trust, and a further £2.7m to good causes. We achieved our £100m target in 2021, set in 2016, and have set a new target of reaching £250m by the end of 2025. £m 40 - 30 - 20 - 10 - 0 - 32.5 18.8 23.5 22.7 2.7 2018 2019 2020 2021 2022 Strategic Report – Key Performance Indicators Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 36 36 36 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Measure Regulatory capital1 The Group’s regulatory capital requirements are defined under the Solvency II directive as issued by the European Union and adopted by the Prudential Regulation Authority (PRA). As the Group assessment is conducted at the level of 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. Performance Ecclesiastical’s capital cover under Solvency II has improved. During 2022, own funds have increased due to a large movement in discount rates reducing technical provisions. 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 2022 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. Solvency II capital cover (unaudited) 295 257 306 256 264 263 381 416 236 214 £m 800 - 700 - 600 - 500 - 400 - 300 - 200 - 100 - 0 - % - 300% - 250% - 200% - 150% - 100% - 50% - 0 % 2018 (i) 2019 (i) 2020 (i) 2021 2022 (i) 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 SCR (£m) Excess own funds (£m) Capital cover (%) 1 Alternative performance measure, refer to note 38 to the financial statements for further explanation Strategic Report – Key Performance Indicators Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 37 37 37 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Measure Profit or loss before tax The Group’s profit or loss 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 2022 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. Performance The Group reported a loss before tax in 2022 of £4.8m (2021: £79.2m profit) driven by fair value losses on our investment portfolio. More information on underwriting performance is given below. See the Chief Financial Officer’s Report within the Strategic Report for more details. 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 2022 can be found in the Group Remuneration Report. Our target over the longer term is to achieve 95% COR. Our COR decreased in 2022 despite adverse flooding and freeze events across territories and some unusually large claims in the UK. Prior year releases have been modest overall as we have strengthened reserves for latent claims. 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 38 to the financial statements. See the Chief Financial Officer’s Report within the Strategic Report for more details. 73.3 79.2 £m 80 - 60 - 40 - 20 - 15.4 0 - (20) - % 105 - 100 - 95 - 90 - 85 - 80 - (15.7) (4.8) 2018 2019 2020 2021 2022 Profit/(loss) before tax Underwriting profit 96.8 95.1 91.1 91.0 86.4 2018 2019 2020 2021 2022 Longer-term target 1 Alternative performance measure, refer to note 38 to the financial statements for further explanation. Strategic Report – Key Performance Indicators Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 38 38 38 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Measure 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 expected the NER to reflect a planned increase in strategic investment. Performance Our NER decreased in 2022 to 52.5% reflecting a 11.3% increase in net earned premium and 9.2% 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 38 to the financial statements. (%) 100 - 80 - 60 - 54.5 53.0 52.4 53.5 52.5 40 - 20 - 0 - 2018 2019 2020 2021 2022 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. 1 Alternative performance measure, refer to note 38 to the financial statements for further explanation. Strategic Report – Key Performance Indicators Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 39 39 39 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Grand Lodge Dublin, Ireland The Grand Lodge of Freemasons is one of Dublin’s most historic buildings. On New Year’s Eve 2021, the building that had been home to the Grand Order of Freemasons since the 1860s was almost destroyed in an arson attack. Besides structural damage caused by the fire itself, including to the decorative ceilings, ornate covings and other plasterwork, there was extensive damage to the contents including furniture, paintings, manuscripts and books. As specialist heritage insurers, we knew that speed was of the essence in saving as much of the historic fabric and contents of the building as possible from the acidic soot residue. Our team were on hand the following day to begin the recovery and restoration process. Even before the fire, we’d worked with the Grand Lodge to prepare for such an incident – advance work that helped mitigate loss and aid a smooth recovery. The Grand Lodge reopened having been restored to its former glory by our talented team of experts, and we were delighted that our experience and expertise were able to bring about the speedy restoration of this iconic building. Strategic Report Governance Financial Statements Other Information Chief Financial Officer’s Report The Group reported a loss before tax of £4.8m (2021: £79.2m profit), largely due to fair value investment losses resulting from the challenging economic environment, with the net investment return of £4.1m being £98.8m lower than in 2021. There were a number of specific items affecting the results, both before and after tax. Before tax, and included within the net investment return, a credit of £66.9m (2021: £14.5m) arose from an increase in the discount on general insurance liabilities. A fair value gain was also recognised for £16.8m (2021: £9.3m) on an unlisted equity investment benefiting from the buoyant reinsurance market, and fair value losses of £21.2m (2021: £20.2m gains) were recognised on investment properties. During the year, the Group changed its approach to discounting to include all general insurance liabilities. This change in discounting accounting policy ensured the effects of higher interest rates and high inflation were being reflected across both our short- and longer-term insurance liabilities and so as to more consistently match the effects of changes in interest rates on both insurance liabilities and the assets held to match them. This contributed £13.2m towards the total 2022 impact of discounting and £2.6m in the prior year, which has been restated. More information on these items is included in the investments section below. In December 2022 and January 2023 the Group made a number of structural changes to support the wider Benefact Group’s alignment of businesses across its three main divisions. The impact from these structural changes, including the results of these businesses, was a profit of £13.7m and is presented after tax. Further information on these changes can be found below. We have continued and will continue to manage our businesses with a long-term view of risk. As a result we have a strong capital position that can withstand short term volatility and our excellent and strong credit ratings with AM Best and S&P were reaffirmed during the year. Following a routine review of our credit rating agencies, we added Moody’s alongside AM Best as our agencies, who have also affirmed our excellent credit rating. Given that businesses of our size and type would typically have two rating agencies, we agreed with S&P to exit our relationship with them. S&P reiterated an exit rating of A- (stable). Our Solvency II regulatory capital position remains above regulatory requirements and risk appetite. Structural changes Ecclesiastical is part of the Benefact Group, a charitably owned financial services group. Across this wider Benefact Group we have made a number of changes to the legal entity structure to better align and optimise our businesses to the way in which we manage and achieve our growth ambitions across our specialist insurance, investment management and broking and advisory divisions. On 30 December 2022, Ecclesiastical disposed of South Essex Insurance Holdings Limited and its wholly-owned subsidiary SEIB Insurance Brokers Limited (together ‘SEIB’) to the Lloyd & Whyte Group Limited (Lloyd & Whyte) for £45.2m, recognising a gain after tax of £14.3m. Lloyd & Whyte is an associate of the Benefact Group in whom we are taking an increased share of ‘We have continued and will continue to manage our businesses with a long-term view of risk. As a result we have a strong capital position that can withstand short-term volatility.’ Strategic Report – Chief Financial Officer’s Report Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 41 41 41 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report ownership over time, with full ownership expected to occur in 2026. They provide a range of expert financial planning and specialist insurance services. This disposal took us another step closer to our longer term growth ambitions for our broking and advisory division and will provide synergies and opportunities for closer co-operation in the areas these businesses operates in. On 3 January 2023 two wholly-owned subsidiaries, EdenTree Investment Management Limited (EdenTree) and Ecclesiastical Financial Advisory Services Limited (EFAS), were transferred to the Benefact Group. The assets and liabilities of these businesses are presented in the Group’s balance sheet as amounts held for distribution and represented net assets transferred of £4.5m. The results of SEIB, EdenTree and EFAS contributed a net loss before tax of £0.2m (2021: profit £0.5m) and are presented within the Group’s financial statements as discontinued operations in the current and prior year after tax. The gain on disposal of SEIB is also presented within discontinued operations. General insurance The Group’s underwriting businesses have performed in line with expectations in most territories, resulting in a Group Combined Operating Ratio1 (COR) of 91.0% (2021: 96.8%). We have delivered steady underwriting profits despite adverse flooding and freeze events across territories, and some unusually large claims in the UK. Prior year releases have been modest overall as we have strengthened reserves for latent claims. Our strategy to focus on profitable growth opportunities has continued to deliver, with new business of £34.7m contributing to almost half of our overall GWP growth of 15% to £559m (2021: £486m). The strong growth also reflects targeted rate increases as well as strong retention and excellent service delivered to brokers and customers. Our programme of investment has continued, particularly across our technology platforms and with our colleagues. Our investments 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 fell slightly to £24.2m (2021: £25.0m) resulting in a COR of 86.7% (2021: 85.3%). GWP grew by 16.0% to £344.8m (2021: £297.2m). The current year performance was profitable despite a run of weather events and large claims which affected the UK and Ireland in 2022. Heritage, Real Estate and Schemes were particularly strong growth areas in 2022 as pricing remained robust in these areas, partly due to reduced insurance capacity and strong propositions in these markets, and we continued to focus on consistent service and delivery of expertise across the business. We expect trading conditions to become more competitive in 2023 with the outlook becoming increasingly unpredictable. Inflationary pressures in 1 Alternative performance measure, refer to note 38 to the financial statements for further information. the economy, the Ukrainian war, global economics, 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 and provide resilience enabling us to carry positive rate change where appropriate and contribute to the high levels of retention experienced. GWP in respect of our Faith business remained in line with the prior year reflecting a good result in challenging competitive conditions specific to this market. 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$5.1m resulting in a COR of 107.3% (2021: AUD$24.4m loss, COR of 156.9%). GWP grew by 3.9% in local currency to AUD$177.8m (2021: AUD$171.2m) with strong rate increases combined with moderate new business growth offset by a lower retention rate. The performance of the underlying business in the current year has been good and continues to improve in light of positive underwriting actions. The underwriting result for 2022 was impacted by a very high level of catastrophe claims and the strengthening of prior year casualty reserves. The level of historic physical and sexual abuse (PSA) claims being notified stabilised in 2022, following increases in previous years. This risk is internally reinsured within the Group (reported on below). The overall result in the prior year had been adversely impacted by PSA reserve strengthening. The Australia operation contributed an underwriting loss of £1.0m (2021: £10.0m) to the Group internal reinsurance portfolio, with the relative improvement reflecting the levelling of PSA claims reporting. Canada Our Canadian business continued its track record of delivering double-digit premium growth, reporting GWP of CAD$175.4m (2021: CAD$158.0m), an 11.0% increase, which was supported by strong retention and rate increases as well as new business. Canada reported an underwriting profit of CAD$11.3m resulting in a COR of 90.6% (2021: CAD$12.2m profit, COR of 88.6%). Despite an increase in the number of large losses and Hurricane Fiona, the property book performed well due to lighter than expected attritional losses. The performance of the liability book was impacted by adverse development on prior year claims and the resultant strengthening of the reserves provision. Investments Our results include fair value losses of £94.1m (2021: £58.3m gains) on our Strategic Report – Chief Financial Officer’s Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 42 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Governance Financial Statements Other Information investment portfolio, which contributed to a lower net investment gain of £4.1m (2021: £102.9m). Investment income of £32.1m (2021: £30.9m) stood up well and comparably with the prior year. Investment markets have been impacted by macroeconomic disruptions, exacerbated by the geopolitical turmoil in Ukraine and the cost-of-living crisis shadowing the economic outlook. Higher food and energy prices are pushing inflation to a 40-year high in the UK and other parts of the world, as central banks respond with tighter monetary policy in an effort to bring this under control. While we may have now passed a peak in inflation, the outlook drove down financial asset prices compared to last year. The past three years highlights the impact economic and political uncertainty can have on the performance of our investments; however, we remain confident in our long-term investment philosophy, and are well-diversified and relatively defensively positioned. Fair value losses on financial instruments of £72.9m (2021: £38.1m gains) included a gain on an unlisted equity investment of £16.8m (2021: £9.3m). We recognised fair value losses of £21.2m (2021: £20.2m gains) on our investment properties, driven by a fall in the value of industrial sector capital values in the portfolio, as investors continue to adjust to the new reality of higher interest rates. The Group’s investment strategy includes the objective of matching assets with insurance liabilities when managing exposure to interest rate risk. Insurance liabilities expected future cash flows are discounted at an interest rate which is set to reflect the risk-free yields available on a suitable portfolio of illiquid assets. During the year, an upward movement in interest rates led to an increase in the discount applied to insurance liabilities. This resulted in an overall gain of £66.9m (2021: £14.5m) which is recognised within the net investment return. While the majority of this arose from our longer-term liabilities, £13.2m related to our shorter-term liabilities. We recognise the importance of our role in tackling climate change and that we have a duty to invest responsibly. Our Responsible and Sustainable Investment Policy plays an important part in how we invest responsibly, informing our investment strategy and helping understand and mitigate the risks of climate change. Our strategy includes a focus on responsible investment and encompasses action to respond to climate risk and operations, investing in ways that support the transition to a low-carbon economy. The Group is expected to be aligned with the Sustainable Development Scenario by 2050, representing a temperature increase of 1.5C by 2050, well ahead of the 3.1Cbenchmark. More information on the Group’s approach to responsible investment including actions we take to mitigate the risks of transitioning to a low-carbon economy can be found in our Responsible Business Report. Long-term business Our life business, Ecclesiastical Life Limited, reopened to business during 2021, launching a new product providing guaranteed 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 was £3.6m for the year (2021: £1.1m), driven by a reduction in liabilities due primarily to an increase in interest rates. Assets and liabilities in relation to the life insurance business remain well matched. IFRS 17 The new IFRS 17 insurance accounting standard has been adopted by the Group and was effective from January 2023. This new accounting standard will make the financial statements of public insurance companies more comparable and transparent. The Group’s first set of results reported under IFRS 17 will be published in Autumn within the Group’s 2023 interim results. Further information about the application of this new accounting standard is included within the notes to the financial statements. Outlook Despite the challenges faced during the year and as inflation accelerates across many countries, the underlying resilience of our businesses means we will continue to grow sustainably and invest for the future. It also enabled us to give over £22m to Benefact Trust and other charities in the year. As part of the Benefact Group, we have many exciting opportunities ahead as we look to achieve our ambition of giving £250m cumulatively since 2014 to charitable causes by the end of 2025. Denise Cockrem Group Chief Financial Officer ’We recognise the importance of our role in tackling climate change and that we have a duty to invest responsibly.’ Strategic Report – Chief Financial Officer’s Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 43 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Quote Church of Ascension Salford, England In February 2017, the Grade II listed Church of the Ascension in Salford was devastated by fire. The Ecclesiastical claims team supported the restoration project throughout the five years that followed, from the immediate aftermath, the complex structural process of strengthening the church’s supporting columns, through to making the building fit for the needs of the community today, including some new accessible and sustainable solutions. The church was rededicated in November 2022 and Ecclesiastical was thrilled to have been involved in bringing this key inclusive community space back to the people of Lower Broughton. ‘It has been a long five and a half years since the fire – we can now look forward to the future with a beautifully restored church that is fit for the 21st century.’ Shirley Kehoe, PCC Secretary You can read about the full restoration story and the part our specialist expertise and support played by clicking here. Risk Management Report 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, while 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 R i s k r e p o r t i n g a n d m o n i t o r i n g 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. Strategic Report – Risk Management Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 45 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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 GRC at each meeting. The risk appetite is formally reviewed annually with approval and sign-off by the Board and there are ongoing assessments to ensure its continued appropriateness for the business. The Own Risk and Solvency Assessment (ORSA) process is carried out at least once a year and is a key part of the business management and governance structure. This integrates the risk management, business planning and capital management activities and ensures that risk, capital and solvency considerations are built into the development and monitoring of the Group’s business strategy and plans and all key decision-making. The 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 GRC. While we felt significant pressure on the cost and availability of reinsurance, we were able to complete our placement effectively, despite this background. Although inflation predictions have settled more recently, this will be a continuing area of focus across the business into 2023. With market volatility 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. 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 remains a risk across all our business operations and chosen niches and 2022 was no exception. Our strategy remains to achieve controlled and profitable growth within our defined specialist markets. During 2022 we have maintained our strong underwriting discipline and risk appetite. The potential for adverse development of long-tail liability claims, particularly in respect of PSA claims, remains a key risk that we continue to actively manage. A further report was issued in relation to the Independent Inquiry into Child Sexual Abuse in the UK in October 2022. Continued elevated claims volumes in Australia and a combination of greater frequency and a higher assumed severity of claims in Canada has led to increases in levels of reserves held in both of those territories. We continue to monitor the experience and claims environment in all of the territories in which we operate. The impact of the Covid-19 pandemic continued into the start of 2022 and the wide-ranging impacts, both direct and indirect, continued on the Group, and especially in regards to the economic environment in which we operate. Although there were reduced implications on the Group’s operations through 2022, there Strategic Report – Risk Management Report Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 46 46 46 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Governance Financial Statements Other Information 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. While 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. were continued impacts on the insurance policies written by Group companies and on the Group’s investment assets. These were further impacted by the inflationary pressures felt across the economy. The Covid-19 pandemic was the trigger for a high volume of regulatory guidance issued in all territories during the prior years; some other elements of regulatory change had therefore been delayed. However, focus in 2022 has been heavily on Consumer Duty across the Group. Management of change in the regulatory environment will remain a key focus area to ensure that we operate within relevant legal, regulatory and consumer protection requirements and guidelines and that our people maintain the highest standards of conduct with continued commitment to placing customers at the centre of everything we do. Cyber risk remains a constantly evolving threat due to the threat of zero day attack. We hold customer data, and therefore any event involving a significant loss of such data could result in harm to the data subjects, significant operational disruption and an impact on our service to customers, as well as sizeable regulatory fines and reputational damage. The increased societal focus on data security and appropriateness of use, together with regulations such as GDPR, results in increased scrutiny and prominence. Hybrid working continues, and this is seen as an exploitable opportunity for external attackers, and there continues to be a general increase in social engineering and phishing attacks across the financial sector. Employee awareness and vigilance is therefore highly important at this time, and the Group operates an ongoing programme of ’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.’ Strategic Report – Risk Management Report Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 47 47 47 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Quote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 Underwriting risk1 The risk of failure to price insurance products adequately and failure to establish appropriate underwriting disciplines. The premium charged must be appropriate for the nature of the cover provided and the risk presented to the Group. Disciplined underwriting is vital to ensure that only business within the Company’s risk appetite and desired niches is written. Reserving risk1 Reserving risk is the risk of actual claims payments exceeding the amounts we are holding in reserves. This arises primarily from our long-tail liability business. Failure to interpret emerging experience or fully understand the risks written could result in the Group holding insufficient reserves to meet our obligations. • A robust pricing process is in place • The Underwriting Licencing process has been refreshed • A documented underwriting strategy and risk appetite is in place together with standards and guidance and monitored by SBUs • This is supported by formally documented authority levels for all underwriters which must be adhered to. Local checking procedures ensure compliance • Monitoring of rate strength compared with technical rate is undertaken on a regular basis within SBUs • There are ongoing targeted underwriting training programmes in place • A portfolio management framework is in place to ensure clear understanding and allow targeted actions to be taken • Claims development and reserving levels are closely monitored by the Group Reserving team • For statutory and financial reporting purposes, prudential margins are added to a best estimate outcome to allow for uncertainties • Claims reserves are reviewed and signed off by the Board acting on the advice and recommendations of the Group Chief Actuary following review by the Reserving Committee • An independent review is also conducted by the Actuarial Function Director with reporting to the Board 1 Link to viability statement – risk included in stress and scenario analysis There have not been material changes to this risk during the year, with soft market conditions continuing in all territories, though the impact of increased claims inflation has needed careful management. This risk is not considered to have changed materially during the year, with inflationary impacts being a key consideration in the reserving process during 2022. 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. Strategic Report – Principal risks Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 48 48 48 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Risk detail Key mitigants Change from last year Catastrophe risk1 The risk of large-scale extreme events giving rise to significant insured losses. Through our general insurance business we are exposed to significant natural catastrophes in the territories in which we do business. • Modelling is undertaken to understand the risk profile and inform the purchase of reinsurance • There is a comprehensive reinsurance programme in place to protect against extreme events. All placements are reviewed and approved by the Group Reinsurance Board • 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 There have been no material changes to this risk. We continue to monitor our aggregations and exposures to such events and ensure careful management utilising appropriate protections. Reinsurance risk The risk of failing to access and manage reinsurance capacity at a reasonable price. Reinsurance is a central component of our business model, enabling us to insure a portfolio of large risks in proportion to our capital base. • We take a long-term view of reinsurance relationships to deliver sustainable capacity • A well-diversified panel of reinsurers is maintained for each element of the programme • A Group Reinsurance Board approves all strategic reinsurance decisions The level of this risk has not materially changed, however reinsurance markets have experienced increasing challenges in recent years due to the impact of Covid-19 claims and global catastrophe events, as well as the volatile economic challenges in 2022. This has resulted in tightening of criteria and capacity in certain areas. We continue to take a long-term approach to our reinsurance relationships. Strategic Report – Principal risks Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 49 49 49 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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 Market and investment risk The risk of adverse movements in net asset values arising from a change in interest rates, equity and property prices, credit spreads and foreign exchange rates. This principally arises from investments held by the Group. We actively take such risks to seek enhanced returns on these investments. The Group’s balance sheet is also exposed to market risk within the defined benefit pension fund. • 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 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. • 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 • 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 on page 135. 1 Link to viability statement – risk included in stress and scenario analysis Strategic Report – Principal risks Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 50 50 50 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Risk detail Key mitigants Change from last year • Strict ratings criteria are in place for the reinsurers that we contract with and a Reinsurance Security Committee approves all of our reinsurance partners The level of this risk has remained broadly similar to the previous year, although we are cognisant to the challenges of the current cost-of-living crisis, and the potential knock-on impacts. • 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 on page 135. • We hold a high proportion of our assets in readily realisable investments There have been no material changes to this risk since last year. to ensure we could respond to such a scenario • We maintain cash balances that are spread over several banks • We have arrangements within our reinsurance contracts for reinsurers to pay recoverables on claims in advance of the claim settlement Credit risk The risk that a counterparty, for example a reinsurer, fails to perform its financial obligations to the Company or does not perform them in a timely manner resulting in a loss for the Group. The principal exposure to credit risk arises from reinsurance, which is central to our business model. Other elements are our investment in debt securities, cash deposits and amounts owed to us by intermediaries and policyholders. Liquidity risk The risk that the Group, although solvent, either does not have sufficient financial resources available to enable it to meet its obligations as they fall due, or can secure them only at excessive cost. We may need to pay significant amounts of claims at short notice if there is a natural catastrophe or other large event in order to deliver on our promise to our customers. 1 Link to viability statement – risk included in stress and scenario analysis Strategic Report – Principal risks Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 51 51 51 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Risk detail Key mitigants Change from last year 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. • Catastrophe risk is managed through reinsurance models • We consider flood risk and other weather-related risk factors in insurance risk selection A programme of work continues to fully analyse the impact on the Group and to develop appropriate risk management responses. • 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 1 Link to viability statement – risk included in stress and scenario analysis Strategic Report – Principal risks Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 52 52 52 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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 • A defined IT Strategy is in place • Systems monitoring is in place together with regular systems and data This level of risk remains stable, as the Group continues to invest in IT infrastructure to maintain and improve future stability. 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 • A number of security measures are deployed to ensure protected system access • Security reviews and assessments are performed on an ongoing basis • There is ongoing maintenance and monitoring of our systems and infrastructure in order to prevent and detect cyber security attacks • There is an ongoing Information Security training and awareness programme Cyber risk remains a constantly evolving threat, with malicious threat attackers continuing to seek to exploit businesses returning from the Covid-19 related business disruption, including a more hybrid approach to working. Employee awareness and vigilance is therefore highly important at this time, which is continuing to be proactively managed. • We have a clearly articulated Group Strategic Programme, identifying areas of priority across the Group • We ensure that there is adequate resourcing for change projects using internal and external skills where appropriate • A Change Board and change governance processes are in place and operate 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, including the successful implementation of the required changes from IFRS 17. on an ongoing basis • The GMB undertakes close monitoring and oversight of the delivery of the strategic initiatives and key Group change programmes 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, e.g. customers, employees etc. Cyber security threats from malicious parties continue to increase in both number and sophistication across all industries. Change risk The risk of failing to manage the change needed to transform the business. A number of strategic initiatives are underway under three themes: support and protect; innovate and grow; and transform and thrive. These include a transformation of our core system and key processes, which will deliver significant change for the Company over the next few years. There are a number of material risks associated with major transformation, not only on the risks to project delivery itself, but the potential disruption to business as usual, or delays to planned benefits. 1 Link to viability statement – risk included in stress and scenario analysis Strategic Report – Principal risks Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 53 53 53 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Risk detail Key mitigants Change from last year 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 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 2022 and into the coming couple of years, 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. 1 Link to viability statement – risk included in stress and scenario analysis Strategic Report – Principal risks Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 54 54 54 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Regulatory and conduct risk The risk of regulatory sanction, operational disruption or reputational damage from non-compliance with legal and regulatory requirements or the risk that Ecclesiastical’s behaviour may result in poor outcomes for the customer. Risk detail Key mitigants Change from last year Regulatory risk The risk of regulatory sanction, operational disruption or reputational damage from non-compliance with legal and regulatory requirements. We operate in a highly regulated environment which is experiencing a period of significant change Conduct risk The risk of unfair outcomes arising from the Group’s conduct in the relationship with customers, or in performing our duties and obligations to our customers. We place customers at the centre of the business, aiming to treat them fairly and ethically, while safeguarding the interests of all other key stakeholders. • We undertake close monitoring of regulatory developments and use dedicated project teams supported by in-house and external legal experts to ensure appropriate actions to achieve compliance 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. • 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 is ongoing staff training to ensure that customer outcomes are fully considered in all business decisions • Customer charters have been implemented in all SBUs • Conduct Risk Reporting to relevant governing bodies is undertaken on a regular basis • Customer and conduct measures are used to assess remuneration The probability of such risks crystallising increased during the Covid-19 pandemic, which continued into the start of the financial year. However, we remain committed to placing customers at the centre of our practices and decision-making, governed by our internal Conduct & Compliance Committees, and demonstrated by our wide-ranging industry awards and customer satisfaction scores. Overall the level of this risk is unchanged from last year. 1 Link to viability statement – risk included in stress and scenario analysis Strategic Report – Principal risks Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 55 55 55 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Reputational 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 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. While 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 Maintaining a positive reputation is critical to the Group’s vision of being the most trusted and ethical specialist financial services group. • 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 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 continued 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, and of the successful Benefact brand launch in 2022. 1 Link to viability statement – risk included in stress and scenario analysis Strategic Report – Principal risks Strategic Report – Chair’s Statement Strategic Report – Global trends in financial services Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 56 56 56 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Royal Ballet School London, England The official school of The Royal Ballet, The Royal Ballet School, is a world-renowned centre of excellence. Founded in 1926, the school has contributed immeasurably to our rich dance heritage, with famous names such as Margot Fonteyn and Darcey Bussell among its former students. Admission is based purely on talent and potential, regardless of academic ability or personal circumstances. Providing an eight-year dance course alongside an extensive academic, pastoral and healthcare programme, the school equips students to flourish in their future careers within and beyond the world of classical ballet. The Royal Ballet School is just one of the prestigious academic institutions we insure and provide with risk management support. And in recognition of our specialist expertise in insuring schools and charities, we are delighted to have remained their insurer of choice for many years. y r r e h C l e h c a R y b d e h p a r g o t o h P . l o o h c S t e l l a B l a y o R e h T 9 1 0 2 © Going Concern and Viability Statement The Financial Performance section on page 41 and Risk Management section of the Strategic Report starting on page 45 provide a review of the Group’s business activities and disclose the Group’s principal risks and uncertainties, including exposures to insurance, financial, operational and strategic risk. Despite the continuing and expected economic pressures and challenges, given the Group’s operations, robust capital strength and liquidity, and in conjunction with forecast projections and stress testing, which were considered severe but plausible downside scenarios, 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. The Group has considerable financial resources: financial investments of £870.7m, 84% of which are liquid (2021: financial investments of £883.8m, 90% liquid) and cash and cash equivalents of £104.7m (2021: £114.0m) to withstand economic pressures. Liquid financial investments consist of listed equities and open-ended investment companies, government bonds and listed debt. 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 sufficient levels of cash and other liquid resources and have expectations they can meet their cash commitments over their planning horizon. The Group and its businesses expect to continue to meet regulatory requirements. Strategic Report – Going Concern and Viability Statement Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 58 58 58 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Governance Financial Statements Other Information Benefact Trust Limited. The Group has fixed annual dividend payments of £9.2m in respect of its Non-Cumulative Irredeemable Preference shares. The Group makes regular grants to its ultimate charitable owner, Benefact Trust Limited. 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. Longer-term viability statement The Directors have assessed the prospects of the Group in accordance with Provision 31 of the 2018 UK Corporate Governance Code. Although the prospects and business plans of the Group are considered over a longer period, the assessment by the Directors covers three years. In making its assessment the Directors considered: • the Group’s current position and prospects, risk appetite, and the potential impact of the principal risks and how these are managed • the Group’s long-term business plans and strategy, and the costs associated with its delivery • the Group’s current capital, liquidity and solvency position and projections • the political, economic and regulatory environment, including uncertainties on the geopolitical outlook and potential for a prolonged recession. 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. In determining this assessment period, consideration has been given to the nature of the Group and its businesses, its stage of development, strategy and business model. Given the rate of change in the markets in which the Group operates, three years provides an appropriate balance between the period of outlook and degree of clarity over specific, foreseeable risk events that could impact on the viability of the Group. The Directors will continue to monitor and consider the suitability of this period. The Group uses varying stress scenarios with reference to the principal risks, which are documented on pages 48 to 56. 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 on the Group’s viability. Among the considerations and scenarios were further investment market volatility, claims experience and business deterioration. The solvency position of the Group has been projected as part of the Own Risk and Solvency Assessment (ORSA), which is a private, internal, forward-looking assessment of own risk, required as part of the Solvency II regime. The forward looking emphasis of the ORSA ensures that business strategy and plans are formulated with full recognition of the risk profile and future capital needs. Analysis confirms that the Group has sufficient capital resources to cover its capital requirements and is operationally resilient. The Directors have also considered the Group’s ability to service its Preference shares, subordinated liabilities, and the expectations of its ultimate charitable owner, Quote ’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.’ Strategic Report – Going Concern and Viability Statement Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 59 59 59 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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 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 policies Our key risks and their management We have a range of policies and guidance in place to support the key outcomes for our stakeholders. These also ensure consistent governance on environmental matters, our employees, social matters, human rights and anti-bribery and corruption Pages 13 36 Section Strategic Report – Our business model and strategy Strategic Report – Key performance indicators Strategic Report – Principal risks 48 See below 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 anti-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. Strategic Report – Non-Financial Information Statement Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 60 60 60 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Section 172 Statement The Directors confirm that during 2022 and to the date of this Report, they have acted to promote the success of the Company for the benefit of its members as a whole and considered the matters as set out in section 172(1)(a) to (f) of the Companies Act 2006. This section describes how the Directors have had regard to those matters when performing their duties. Matter Disclosed in (a) the likely consequences of any decision in the Our business model and strategy page 13 long term Strategy in action page 14 Board activities in 2022 page 80 Board leadership and Company purpose page 72 (b) the interests of the company’s employees Employee engagement and wellbeing page 21 Our Culture page 73 Diversity and Inclusion page 21 Board Diversity Policy page 89 (c ) the need to foster the company’s business relationships with suppliers, customers and others Customers and partners part of the Responsible Business Report page 22 (d) the impact of the company’s operations on the Charitable giving page 20 community and the environment (e) the desirability of the company maintaining a reputation for high standards of business conduct Environmentally positive page 26 Beneficiaries stories Risk Management Report page 45 Internal controls page 84 Whistleblowing page 101 Modern Slavery Act declaration page 22 (f) the need to act fairly as between members Annual General Meeting information page 165 of the company Stakeholder engagement page 75 Our approach to the long-term success of the Company The Directors recognise that the long-term success of the Company, and therefore our ability to continue to help people, charities and good causes, is dependent on having regard to the interests of its stakeholders at its heart. In order to achieve our strategic ambitions the Board understands how important it is to listen and respond to the needs of our stakeholders. As a global financial services group driven by the ambition of transforming lives and communities, we are continually striving to do the right thing at all times. However, there are occasions where the needs of different stakeholder groups may not always be aligned. On these occasions, the Board attempts to balance the conflicting interests and impacts of our stakeholders in their decision-making. Stakeholder engagement Examples of the ways in which the Board has engaged with key stakeholder groups are provided in the Corporate Governance Statement on page 74. Strategic Report – Section 172 Statement Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 61 61 61 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Section Two Governance Board of Directors Directors’ Report Corporate Governance Finance & Investment Committee Report Group Nominations Committee Report Risk Committee Report Group Audit Committee Report Group Remuneration Report 63 68 71 85 87 92 94 103 Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 62 62 ContentsFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Board of Directors David Henderson (a) (b) (e) Chair, Independent Non-Executive Director Mark Hews Group Chief Executive Denise Cockrem Group Chief Financial Officer 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. 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. He also 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. Key to membership of Group Board Committees (a) Group Finance and Investment (b) Group Nominations (c ) Group Risk (d) Group Audit (e) Group Remuneration Denise Cockrem was appointed Group Chief Financial Officer in December 2018 and joined the Board in 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 nine 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. In July 2022 Denise was appointed as a Non-Executive Director of ITM Power plc, an AIM-listed company which designs and manufactures hydrogen energy solutions to enhance the use of renewable energy. She is also a Trustee of MacIntyre Academy Trust, which provides special schools and specialist alternative provision for children and young people. Denise was a Non-Executive Director of the Skipton Building Society from 2015 to 2021. 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, a role that she continues to hold. 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. Governance – Board of Directors Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 63 63 63 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Chris Moulder (b) (c ) (d) Senior Independent Non-Executive Director Francois-Xavier Boisseau (a) (c ) (d) Independent Non-Executive Director Rita Bajaj (a) Independent Non-Executive Director Sir Stephen Lamport (c ) (e) 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, 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 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. In addition to his board position at Benefact Group, Francois-Xavier is also Chairman of IQUW Syndicate Managing Agency Ltd. 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 US 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 and a Non-Executive Board, Audit and Investment Commmittee member and Consumer Duty Champion of Wesleyan Assurance. 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 Director of Benefact Trust; Vice-President of the Community Foundation for Surrey; and Chair of the Painshill Park Trust; Chair of the British Red Cross UK Solidarity Fund Committee; and is the Deputy High Bailiff of Westminster Abbey. He has now retired as a Court member of the St Katharine’s Foundation. 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. Key to membership of Group Board Committees (a) Group Finance and Investment (b) Group Nominations (c ) Group Risk (d) Group Audit (e) Group Remuneration Governance – Board of Directors Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 64 64 64 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Neil Maidment (c ) (d) (e) Independent Non-Executive Director Angus Winther (a) (b) (e) Independent Non-Executive Director Andrew McIntyre (c ) (d) 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 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 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 Committee. 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. ‘As a Board, we are committed to applying the highest standards of corporate governance.’ Key to membership of Group Board Committees (a) Group Finance and Investment (b) Group Nominations (c ) Group Risk (d) Group Audit (e) Group Remuneration Governance – Board of Directors Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 65 65 65 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report QuoteGovernance Financial StatementsOther InformationStrategic Report Balance of Non-Executive Directors and Executive Directors ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Non-Executive Directors: 8 ● Executive Directors: 3 2021 2021 2021 2021 2021 2021 ● Male: 8 ● Female: 3 ● White British or other White (including minority-white groups): 10 ● Mixed/Multiple Ethnic Groups: 0 ● Asian/Asian British: 1 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 ● 0–3 years: 5 ● 3–6 years: 3 ● 6–9 years: 0 ● 10 years+: 0 ● United Kingdom: 9 ● Rest of Europe: 1 ● North America: 1 ● Rest of World: 0 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 Balance of Non-Executive Directors and Executive Directors 2022 Balance of Non-Executive Directors and Executive Directors ● Executive Directors: 3 ● Non-Executive Directors: 8 Gender Balance ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Male: 8 ● Female: 3 ● Non-Executive Directors: 8 ● Executive Directors: 3 Board composition as at 16 March 2023 Balance of Non-Executive Directors and Executive Directors 2022 Gender Balance 2022 Balance of Non-Executive Directors and Executive Directors ● Non-Executive Directors: 8 ● Executive Directors: 3 Gender Balance ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Male: 8 ● Female: 3 ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Male: 8 ● Female: 3 2021 2022 2021 Ethnicity ● Male: 8 ● Female: 3 ● White British or other White ● Male: 8 ● Female: 3 (including minority-white groups): 10 ● Mixed/Multiple Ethnic Groups: 0 2021 2021 2022 ● Asian/Asian British: 1 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 ● Non-Executive Directors: 8 ● Male: 8 ● Executive Directors: 3 ● Female: 3 Ethnicity ● White British or other White ● Male: 8 ● Female: 3 (including minority-white groups): 10 ● White British or other White (including minority-white groups): 10 Balance of Non-Executive Directors and Executive Directors ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Male: 8 ● Female: 3 2022 Gender Balance 2022 Ethnicity 2022 2022 Gender Balance Gender Balance 2021 2022 2022 Ethnicity Ethnicity 2021 2022 2022 2022 2021 2021 2022 Ethnicity ● Male: 8 ● Female: 3 ● Male: 8 ● Female: 3 ● White British or other White (including minority-white groups): 10 ● Mixed/Multiple Ethnic Groups: 0 ● White British or other White (including minority-white groups): 10 ● Asian/Asian British: 1 ● Mixed/Multiple Ethnic Groups: 0 ● Black/African/Caribbean/ Black British: 0 ● Asian/Asian British: 1 ● Other ethnic group, including Arab: 0 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 2021 2022 2021 2022 2021 2022 2021 ● Male: 8 ● Mixed/Multiple Ethnic Groups: 0 ● Female: 3 ● White British or other White ● Asian/Asian British: 1 (including minority-white groups): 10 ● Black/African/Caribbean/ ● Mixed/Multiple Ethnic Groups: 0 Black British: 0 ● Asian/Asian British: 1 ● Other ethnic group, including Arab: 0 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 Length of Tenure (Chairman and Non-Executive Directors) ● Mixed/Multiple Ethnic Groups: 0 ● White British or other White ● Asian/Asian British: 1 (including minority-white groups): 10 ● Black/African/Caribbean/ ● 0–3 years: 3 ● Mixed/Multiple Ethnic Groups: 0 Black British: 0 ● 3–6 years: 4 ● Asian/Asian British: 1 ● 6–9 years: 1 ● Other ethnic group, ● 10 years+: 0 including Arab: 0 ● Black/African/Caribbean/ Black British: 0 2021 2021 2022 Length of Tenure (Chairman and Non-Executive Directors) ● White British or other White (including minority-white groups): 10 ● 0–3 years: 3 ● White British or other White ● 3–6 years: 4 Length of Tenure (Chairman and Non-Executive Directors) ● 6–9 years: 1 ● 10 years+: 0 ● Mixed/Multiple Ethnic Groups: 0 ● Mixed/Multiple Ethnic Groups: 0 ● Asian/Asian British: 1 (including minority-white groups): 10 Geographical Mix ● Black/African/Caribbean/ ● 0–3 years: 3 Black British: 0 ● Asian/Asian British: 1 ● 3–6 years: 4 ● 6–9 years: 1 ● Other ethnic group, ● 10 years+: 0 including Arab: 0 Black British: 0 ● Black/African/Caribbean/ ● Other ethnic group, including Arab: 0 2021 ● Other ethnic group, including Arab: 0 ● 0–3 years: 5 ● 3–6 years: 3 ● 6–9 years: 0 ● United Kingdom: 9 ● 10 years+: 0 ● 0–3 years: 5 ● Rest of Europe: 1 ● 3–6 years: 3 ● North America: 1 ● 6–9 years: 0 ● Rest of World: 0 ● 10 years+: 0 Governance – Board of Directors Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 66 66 66 ● United Kingdom: 9 ● Rest of Europe: 1 ● North America: 1 ● Rest of World: 0 ● 35–45: 0 ● United Kingdom: 9 ● 45–55: 2 ● Rest of Europe: 1 ● 55–65: 5 ● North America: 1 ● 65+: 4 ● Rest of World: 0 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 2022 2021 Age 2021 2022 2021 2021 2021 ● White British or other White (including minority-white groups): 10 ● Mixed/Multiple Ethnic Groups: 0 ● White British or other White Length of Tenure (Chairman and Non-Executive Directors) Geographical Mix 2022 (including minority-white groups): 10 Length of Tenure (Chairman and Non-Executive Directors) ● 0–3 years: 3 ● Mixed/Multiple Ethnic Groups: 0 Geographical Mix ● Asian/Asian British: 1 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 2022 ● Asian/Asian British: 1 ● 3–6 years: 4 ● 6–9 years: 1 ● Black/African/Caribbean/ ● 0–3 years: 3 ● 10 years+: 0 Black British: 0 ● 3–6 years: 4 ● 6–9 years: 1 ● Other ethnic group, ● 10 years+: 0 including Arab: 0 Length of Tenure (Chairman and Non-Executive Directors) ● 0–3 years: 3 ● 3–6 years: 4 ● 6–9 years: 1 ● 10 years+: 0 ● United Kingdom: 9 ● Rest of Europe: 1 ● North America: 1 ● Rest of World: 0 2022 Geographical Mix 2022 Age 2021 2022 2022 Geographical Mix Geographical Mix 2022 2021 2022 Age Age 2021 2022 2022 ● 0–3 years: 5 ● United Kingdom: 9 ● 3–6 years: 3 ● Rest of Europe: 1 ● 6–9 years: 0 ● North America: 1 ● United Kingdom: 9 ● Rest of World: 0 ● 10 years+: 0 ● Rest of Europe: 1 ● North America: 1 ● Rest of World: 0 ● United Kingdom: 9 ● 35–45: 0 ● Rest of Europe: 1 ● 45–55: 2 ● North America: 1 ● 55–65: 5 ● Rest of World: 0 ● 35–45: 0 ● 65+: 4 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 2022 2021 Age 2022 2021 Age 2022 2021 2021 2022 2021 2021 ● United Kingdom: 9 ● Rest of Europe: 1 ● 0–3 years: 5 ● North America: 1 ● 3–6 years: 3 ● Rest of World: 0 ● 6–9 years: 0 ● 0–3 years: 5 ● United Kingdom: 9 ● 10 years+: 0 ● 3–6 years: 3 ● Rest of Europe: 1 ● 6–9 years: 0 ● North America: 1 ● 10 years+: 0 ● Rest of World: 0 ● 35–45: 0 ● United Kingdom: 9 ● 45–55: 2 ● Rest of Europe: 1 ● 55–65: 5 ● North America: 1 ● 65+: 4 ● United Kingdom: 9 ● Rest of World: 0 ● 35–45: 0 ● Rest of Europe: 1 ● 45–55: 2 ● North America: 1 ● 55–65: 5 ● Rest of World: 0 ● 65+: 4 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 35–45: 0 ● 65+: 4 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 2022 2021 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Balance of Non-Executive Directors and Executive Directors ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Non-Executive Directors: 8 ● Executive Directors: 3 Balance of Non-Executive Directors and Executive Directors 2022 Balance of Non-Executive Directors and Executive Directors ● Non-Executive Directors: 8 ● Executive Directors: 3 Gender Balance ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Male: 8 ● Non-Executive Directors: 8 ● Female: 3 ● Executive Directors: 3 ● Male: 8 ● Female: 3 Balance of Non-Executive Directors and Executive Directors Balance of Non-Executive Directors and Executive Directors ● Executive Directors: 3 Gender Balance Ethnicity ● Non-Executive Directors: 8 ● Non-Executive Directors: 8 ● Executive Directors: 3 ● Male: 8 ● Non-Executive Directors: 8 ● Female: 3 ● Executive Directors: 3 ● Non-Executive Directors: 8 ● Male: 8 ● Executive Directors: 3 ● Female: 3 Balance of Non-Executive Directors and Executive Directors Gender Balance 2022 ● Non-Executive Directors: 8 ● Executive Directors: 3 Gender Balance ● Non-Executive Directors: 8 ● Male: 8 ● Executive Directors: 3 ● Female: 3 ● Male: 8 ● Female: 3 Length of Tenure (Chairman and Non-Executive Directors) ● Asian/Asian British: 1 ● White British or other White Length of Tenure (Chairman and Non-Executive Directors) ● White British or other White (including minority-white groups): 10 ● 0–3 years: 3 ● Mixed/Multiple Ethnic Groups: 0 Length of Tenure (Chairman and Non-Executive Directors) ● Asian/Asian British: 1 ● 3–6 years: 4 ● White British or other White ● 6–9 years: 1 (including minority-white groups): 10 Geographical Mix 2022 Gender Balance 2022 2022 2021 Ethnicity 2021 2022 Ethnicity 2022 2021 2022 2022 Ethnicity Ethnicity 2021 2022 2022 ● White British or other White ● Male: 8 ● Female: 3 (including minority-white groups): 10 ● Mixed/Multiple Ethnic Groups: 0 ● Male: 8 ● Asian/Asian British: 1 ● White British or other White ● Female: 3 ● Black/African/Caribbean/ (including minority-white groups): 10 Black British: 0 ● Mixed/Multiple Ethnic Groups: 0 2021 2022 2021 2022 ● Other ethnic group, ● Asian/Asian British: 1 including Arab: 0 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 ● 10 years+: 0 ● Black/African/Caribbean/ ● Mixed/Multiple Ethnic Groups: 0 Black British: 0 ● 0–3 years: 3 ● Asian/Asian British: 1 ● 3–6 years: 4 ● Other ethnic group, ● 6–9 years: 1 ● Black/African/Caribbean/ including Arab: 0 ● 10 years+: 0 Black British: 0 ● Other ethnic group, including Arab: 0 2021 2022 2021 ● Male: 8 ● Female: 3 ● White British or other White (including minority-white groups): 10 ● Mixed/Multiple Ethnic Groups: 0 ● White British or other White ● Asian/Asian British: 1 (including minority-white groups): 10 ● Black/African/Caribbean/ ● Mixed/Multiple Ethnic Groups: 0 Black British: 0 ● Asian/Asian British: 1 ● Other ethnic group, including Arab: 0 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 ● White British or other White (including minority-white groups): 10 ● Mixed/Multiple Ethnic Groups: 0 ● Asian/Asian British: 1 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 ● 0–3 years: 5 ● 3–6 years: 3 ● 6–9 years: 0 ● 10 years+: 0 ● United Kingdom: 9 ● Rest of Europe: 1 ● North America: 1 ● Rest of World: 0 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 2021 2021 2021 2021 2021 2021 ● Male: 8 ● Female: 3 ● White British or other White ● Male: 8 ● Female: 3 (including minority-white groups): 10 ● Mixed/Multiple Ethnic Groups: 0 ● Asian/Asian British: 1 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 ● White British or other White (including minority-white groups): 10 ● Mixed/Multiple Ethnic Groups: 0 ● Black/African/Caribbean/ (including minority-white groups): 10 ● 0–3 years: 3 Black British: 0 ● Mixed/Multiple Ethnic Groups: 0 ● 3–6 years: 4 ● Other ethnic group, ● Asian/Asian British: 1 ● 6–9 years: 1 including Arab: 0 ● 10 years+: 0 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 ● 0–3 years: 5 ● 3–6 years: 3 ● 6–9 years: 0 ● 10 years+: 0 ● United Kingdom: 9 ● 0–3 years: 5 ● Rest of Europe: 1 ● 3–6 years: 3 ● North America: 1 ● 6–9 years: 0 ● Rest of World: 0 ● 10 years+: 0 ● United Kingdom: 9 ● Rest of Europe: 1 ● North America: 1 ● Rest of World: 0 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 ● United Kingdom: 9 ● Rest of Europe: 1 ● North America: 1 ● Rest of World: 0 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 2021 2022 2021 2021 2021 2022 2021 2021 2022 2021 2022 2021 2021 2022 2021 2021 2021 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 67 67 67 2022 Gender Balance 2022 Ethnicity 2022 2022 Geographical Mix 2022 Age ● Male: 8 ● Female: 3 ● White British or other White (including minority-white groups): 10 ● Mixed/Multiple Ethnic Groups: 0 ● Asian/Asian British: 1 ● Black/African/Caribbean/ Black British: 0 ● Other ethnic group, including Arab: 0 Board composition as at 16 March 2023 ● White British or other White Length of Tenure (Chairman and Non-Executive Directors) (including minority-white groups): 10 Geographical Mix Length of Tenure (Chairman and Non-Executive Directors) ● Asian/Asian British: 1 ● Mixed/Multiple Ethnic Groups: 0 ● 0–3 years: 3 ● 3–6 years: 4 ● 6–9 years: 1 ● 10 years+: 0 Black British: 0 ● Black/African/Caribbean/ ● 0–3 years: 3 ● 3–6 years: 4 ● Other ethnic group, ● 6–9 years: 1 including Arab: 0 ● 10 years+: 0 2022 Geographical Mix ● United Kingdom: 9 ● 0–3 years: 5 ● Rest of Europe: 1 ● 3–6 years: 3 ● North America: 1 ● 6–9 years: 0 ● Rest of World: 0 ● 10 years+: 0 ● United Kingdom: 9 ● 0–3 years: 5 ● Rest of Europe: 1 ● 3–6 years: 3 ● North America: 1 ● 6–9 years: 0 ● Rest of World: 0 ● 10 years+: 0 Age 2021 2022 Length of Tenure (Chairman and Non-Executive Directors) Geographical Mix 2022 ● 0–3 years: 3 ● 3–6 years: 4 ● 6–9 years: 1 ● 10 years+: 0 ● United Kingdom: 9 ● Rest of Europe: 1 ● North America: 1 ● Rest of World: 0 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 Geographical Mix 2022 2021 2022 Age Age ● United Kingdom: 9 ● 0–3 years: 5 ● Rest of Europe: 1 ● 3–6 years: 3 ● North America: 1 ● 6–9 years: 0 ● Rest of World: 0 ● 10 years+: 0 ● United Kingdom: 9 ● Rest of Europe: 1 ● North America: 1 ● Rest of World: 0 ● United Kingdom: 9 ● 35–45: 0 ● Rest of Europe: 1 ● 45–55: 2 ● North America: 1 ● 55–65: 5 ● Rest of World: 0 ● 65+: 4 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 2021 2022 2022 Governance – Board of Directors Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 2022 2021 2022 2021 Age 2022 2021 Age 2022 2021 2021 2022 2021 2021 ● United Kingdom: 9 ● 35–45: 0 ● Rest of Europe: 1 ● 45–55: 2 ● North America: 1 ● 55–65: 5 ● Rest of World: 0 ● 65+: 4 ● United Kingdom: 9 ● 35–45: 0 ● Rest of Europe: 1 ● 45–55: 2 ● North America: 1 ● 55–65: 5 ● Rest of World: 0 ● 65+: 4 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 ● 35–45: 0 ● 45–55: 2 ● 55–65: 5 ● 65+: 4 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information Directors’ Report The Directors present their report and the audited consolidated financial statements for the year ending 31 December 2022. Information incorporated by reference The Directors’ Report required under Companies Act 2006 comprises this report and other disclosures contained in the Strategic and Governance Reports and the Notes to the consolidated financial statements which are incorporated by reference and include the following information: Information Business model Reported in Our business model and strategy Corporate Governance Statement Corporate Governance Report Financial instruments Note 22 Important events since 31 December 2022 Strategic Report and Note 39 Future developments Strategic Report Research and development Strategic Report Employee engagement and involvement Responsible Business Report Stakeholder engagement Strategic Report Greenhouse gas emissions and energy consumption Going Concern and Viability Statement Corporate Governance Report Responsible Business Report Page 58 Diversity and Inclusion Responsible Business Report Section 172 Statement Page 61 Principal risks and uncertainties Risk Management Report Company status and branches Ecclesiastical Insurance Office plc is incorporated and domiciled in England and Wales (registration number 00024869). The registered address of the Company is Benefact House, 2000 Pioneer Avenue, Gloucester Business Park, Brockworth, Gloucester GL3 4AW. The Company has branches in Canada and Ireland. Principal activities The Group operates principally as a provider of general insurance in addition to offering a range of financial services. Details of the subsidiary undertakings of the Company are shown in note 36 to the financial statements. 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. In turn, the entire issued Ordinary share capital of Benefact Group plc was owned by Benefact Trust Limited, the ultimate parent of the Group. Directors and their interests The Directors of the Company during the year and up to the date of this report are set out on pages 63 to 65 alongside the biographies of those Directors currently serving on the Board. ’The Group operates principally as a provider of general insurance in addition to offering a range of financial services.’ Governance – Directors’ Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 68 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information As set out in the Notice of Meeting, all Directors who have served since the last annual general meeting (AGM) will be proposed for re-election except for Andrew McIntyre who will retire at the AGM. All Directors seeking re-election were subject to a formal and rigorous performance evaluation, further details of which can be found in the Group Nominations Committee Report. Details of Directors’ service contracts are set out in the Directors’ Remuneration Report. Employees The Group is committed to nurturing a culture and work environment in which all colleagues 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 all our colleagues at the heart of our employment policies. Neither the Directors nor their connected persons held any beneficial interest in any Ordinary shares of the Company during the year ended 31 December 2022 and to the date of this report. The interests of the Directors and their connected persons in the Preference share capital of the Company as at 31 December 2022 and to the date of this report are shown below: Director Nature of interest Number of Non- Cumulative Irredeemable Preference Shares held Mark Hews Connected person Denise Cockrem Connected person 75,342 32,020 The Board has a documented process in place in respect of conflicts. Indemnities and insurance In accordance with the Company’s Articles and to the extent permitted by law, the Company indemnifies each of its Directors and Directors of any associated company against certain liabilities that may be incurred because of their positions. In addition, the Company maintains Directors’ and Officers’ liability insurance. Neither our indemnity nor the insurance provides cover in the event that a Director is proven to have acted dishonestly or fraudulently. 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 colleagues can fully participate in all opportunities provided by the Group from continued employment to training, job moves and promotions. We offer a range of support for colleagues to help them maintain a healthy work and home life, including flexible working practices, virtual GP service, Employee Assistance Programme, Flu Vaccinations and Eye tests as well as a wide variety of flexible benefits such as dental care and critical illness insurance. Information on employee engagement and wellbeing is provided in the Responsible Business Report. Dividends Dividends paid on the Preference shares were £9,181,000 (2021: £9,181,000). The Directors do not recommend a final dividend on the Ordinary shares (2021: £nil), and no interim dividends were paid in 2022 and 2021. An interim dividend in specie of the entire issued share capital of EdenTree Investment Management Limited of £4,651,000 and Ecclesiastical Financial Advisory Services Limited of £572,000 was made on 3 January 2023. Governance – Directors’ Report Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 69 69 69 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information Political donations The Group policy is that no political donations be made or expenditure incurred. No political donations were made in the year (2021: £nil). Annual General Meeting A copy of the Notice for the 2023 AGM is available on page 165. External auditor 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. Having reviewed the effectiveness of the external auditor, the Group Audit Committee recommended the reappointment of PricewaterhouseCoopers LLP 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. 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’ 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. Statement of Directors’ Responsibilities for the Annual Report and the financial statements The Directors are responsible for preparing the 2022 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. Directors’ confirmations The Directors consider that the 2022 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 on pages 63 and 65 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 loss before tax of the Group in the year; 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 16 March 2023 Mark Hews Group Chief Executive 16 March 2023 Governance – Directors’ Report Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 70 70 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Corporate Governance Report Introduction from the Chair Dear Stakeholder I am delighted to introduce the Corporate Governance Report. I believe that good corporate governance is important and even more so during these challenging economic times. Provision Current status / Explanation 4: When 20 per cent or more of votes have been cast against the board recommendation for a resolution, the company should explain, when announcing voting results, what actions it intends to take to consult shareholders in order to understand the reasons behind the result. 36: Remuneration schemes should promote long-term shareholdings by executive directors that support alignment with long-term shareholder interests. 38: The pension contribution rates for executive directors, or payments in lieu, should be aligned with those available to the workforce. Given the Company’s entire issued Ordinary share capital is owned by Benefact Group plc whose directors mirror those of the Company, it is deemed inappropriate to comply with the provisions relating to outcomes from shareholder votes. Given the Company does not have listed equity shares we are unable to comply with the shareholding requirements for Executive Directors. From 1 April 2022, we were fully compliant with this provision as the Group Chief Executive pension contribution rate was aligned to that of the wider workforce. Further information is contained in the Directors’ Remuneration Report. Our approach to governance As a Board, we are 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. Consequently, although the Company does not have shares with a premium listing on the London Stock Exchange we have chosen to voluntarily comply with the Principles and Provisions of the 2018 UK Corporate Governance Code (the Code) where possible. A copy of the Code can be found on the FRC’s website. I am pleased to report that from 1 April 2022, we are fully compliant with the principles and provisions of good governance contained in the Code where possible. Further information on our Code compliance is provided in the following table: Governance – Corporate Governance Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 71 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information Areas of Board and Committee focus 2022 proved to be another busy year for the Board and its Committees which culminated in the corporate restructure of the Group. We have also overseen the business plans and strategic initiatives for the Group and a variety of other activities as set out on page 79 and in the Committee reports. In particular, the year saw the completion of the strategic remuneration review, development of the climate change strategy and Consumer Duty Implementation Plan. 2023 will be focused on realising the growth ambitions of the Group. In addition, the Board will look to implement actions in response to the externally facilitated Board Effectiveness Review and ensure a smooth handover of responsibilities to the new Group Audit Committee Chair when Andrew McIntyre steps down from the Board. As noted in the Group Nominations Committee Report, we will continue the search for a new Non-Executive Director. AGM and re-election of Directors This year our AGM will be taking place on 22 June 2023. A copy of the Notice for the AGM is available on page 165. In accordance with the Code and as set out in the Notice of Meeting, all Directors who have served since the last AGM will be proposed for re-election (except for Andrew McIntyre). I can confirm that all Directors seeking re-election were subject to a formal and rigorous performance evaluation, further details of which can be found in the Group Nominations Committee Report. David Henderson Chair 16 March 2023 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. 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 2022, no Director had any such concerns. Purpose, values 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. As a unique company, with a unique purpose, we know that our success is not just about what we do, it’s how we do it that makes the real difference. The way that we work is based upon our Group Values. They underpin our vision, ambition and strategy and they are the common thread that binds our family of businesses together. Our business model and strategy provides more details. Governance – Corporate Governance Report Strategic Report – Chair’s Statement Governance – Board of Directors Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 72 72 72 72 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Culture We are a group that CARES The Board is responsible for setting the right values and culture within the Group and ensuring the fair treatment of customers, which is outlined in the table. 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 Every colleague contributes to building and sustaining our culture through the way we behave with each other, our business partners, clients, customers and communities. Our values are embedded across the Group’s employee lifecycle, from recruitment through to performance management, our behaviour model, personal development and communications. The culture of the Group is monitored and assessed through the employee survey results and individually through the assessment of performance which also informs reward outcomes. 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 Responsible and sustainable • 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 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 Governance – Corporate Governance Report Governance – Board of Directors Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 73 73 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Stakeholder engagement Below is an overview of our approach to stakeholder engagement: Why are our stakeholders so important to us? What matters to them? What engagement has taken place and outcomes? What are the 2022 highlights? Where can more information be found? Colleagues The Board recognises that employees are the Group’s greatest asset given their specialist skills and knowledge and propensity to go above and beyond. - Fair pay and reward - Health and wellbeing - Flexible working practices - Diverse and inclusive workplace - Opportunities for training, development and progression - Making a positive impact on society Members of the management team and subject matter experts are invited to Board and Committee meetings to present on items and input into discussion. - Feedback from employee surveys Quote Responsible Business Report 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: - Sir Stephen Lamport, as the designated Non-Executive Director for employee engagement, is briefed on associated survey results and findings are reported to the Board; - Review of workforce policies and practices - Code of Conduct - Group-wide performance management process launched - Health and Safety - A variety of communication channels including intranet, all colleague emails Report (including weekly news, results, achievements and changes), briefings, conferences, publishing financial reports and feedback and discussion is adopted (including to make colleagues aware of financial and economic factors affecting the performance of the Company); - Colleague engagement surveys adopting the B-Heard Survey provided by an external partner, Best Companies; - During the year colleagues undertake training to support the accessibility and understanding of our whistleblowing policy, procedure and approach to ensure they feel safe to speak up and challenge when needed; - Direct engagement and consultation through colleague representative forums including the Group’s recognised Union and Employee Working Groups such as the Diversity and Inclusion working group; - ‘Town Hall’ meetings are hosted virtually by senior management where colleagues can ask questions and provide feedback; - A performance-related bonus scheme is operated, which directly links individual objectives and business performance to encourage employees to participate in the overall financial success of the Group; and - A range of training, development and volunteering activities are available to colleagues, including technical courses, mentoring, coaching and community opportunities. - Service of Thanksgiving - 2022 Leadership Conference - Leadership update and showcase sessions - Twice yearly manager briefings - Brand launch celebration - CEO presentations in Australia, Canada and Lycetts - Video collateral including brand launch, leadership conference speakers, “The Time is Now” - Benefact Family company fact sheets - Living Wage Employer - Financial Wellbeing Award - NED visits Governance – Corporate Governance Report Strategic Report – Chair’s Statement Governance – Board of Directors Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 74 74 74 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report What engagement has taken place and outcomes? The Board supported by the Group Risk Committee approved the refreshed Outsourcing and Procurement Policies. In addition, the Responsible Business Overarching Policy which covers all aspects of behaviour and conduct and sets out our approach which is designed to deliver a positive social and environmental impact was developed. Awareness sessions have been provided to colleagues managing supplier relationships on their responsibilities under the Outsourcing Policy including consideration of associated regulatory requirements. The Board (via its Committees) receives regular reports detailing the Group’s regulatory interactions. Regular reports are also received on the evolving legal and regulatory landscape incorporating a detailed impact and progress assessment. What are the 2022 highlights? Where can more information be found? - Average payment term was 29 days Responsible Business Report Quote - Responsible Business Overarching Policy - Published our Modern Slavery Statement - Service of Thanksgiving - Legal and Regulatory Report Why are our stakeholders so important to us? Suppliers (including brokers) The Board recognises the importance of the role that suppliers play in ensuring a reliable service is delivered to customers and the need to have a strong working relationship. Regulators and Government 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 in order to maintain standards of business conduct. What matters to them? - Collaborative approach - Open terms of business - Fair payment terms - Responsible supply chain - Communication - Outcomes for customers - Operational and financial resilience - Openness and transparency - Compliance with legislation and regulation Governance – Corporate Governance Report Strategic Report – Chair’s Statement Governance – Board of Directors Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 75 75 75 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Why are our stakeholders so important to us? What matters to them? What engagement has taken place and outcomes? What are the 2022 highlights? Where can more information be found? Shareholder and investors The Board understands the need to maintain a close and open relationship with shareholder and investors characterised by transparency and mutual understanding. - Financial performance and returns - Strategy and business model - Environmental, Social and Governance (ESG) performance - Reputation - Strong leadership Our business model and strategy Strategy in action - Grants amounting to £20m were paid to Benefact Trust Limited - Dividends - Annual General Meeting - Revised protocols for the exchange of information agreed - Annual Report and Accounts - Full and half year results announcements - RNS Announcements - Service of Thanksgiving 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 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’ (i.e. 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. 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 and strategy for the development of the business. 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 distribution in the form of 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. Governance – Corporate Governance Report Strategic Report – Chair’s Statement Governance – Board of Directors Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 76 76 76 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report What engagement has taken place and outcomes? What are the 2022 highlights? Where can more information be found? Why are our stakeholders so important to us? What matters to them? Communities (and environment) The Board is committed to doing business differently and building a movement for good across society, transforming lives and communities. - Charitable giving - Health and Safety - Employment, economic and societal contribution - Environmental impact of operations The Board oversaw arrangements for the Service of Thanksgiving held at Westminster Abbey to celebrate the giving of over £100 million to good causes and considered feedback from the event. It was attended by a range of our stakeholders including beneficiaries of our charitable giving. The service offered an uplifting opportunity for stakeholders to meet and engage. Further information on the Service of Thanksgiving can be found in the Strategic Report. During the year, the Board has received regular updates on our charitable giving and areas of focus. In addition, the Directors have also had the opportunity to visit beneficiaries of the Group’s charitable giving to see first hand their work, which has enabled the Board to better understand their needs. Chair’s Statement Responsible Business Report Chief Executive’s Report Responsible Business Report - Charitable donation made during the year of £22.7m (2021: £23.5m) - Service of Thanksgiving - Movement for Good Awards - MyGiving - 3rd largest corporate donor in the UK - Charity visits - Produced full carbon footprint and externally shared net zero ambitions - External recognition - Francois-Xavier Boisseau appointed as Consumer Duty Champion - Consumer Duty Implementation Plan - Service of Thanksgiving Customers 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. - Customer experience - Specialist expertise and guidance - Products which represent fair value and are clear and easy to understand - Fair pricing During the year, the Board received updates on customer matters via the Group Chief Executive’s Report and business updates. In particular, the Board considered challenges faced by customers in these uncertain times and whether the Company could provide any additional support given the Group’s purpose. The Group has regular engagement with customers (including conducting listening exercises, surveys, holding focus or consultative groups, monitoring customer complaints and satisfaction data) and key outcomes are shared with the Board. Our commitment to customers and clients is further demonstrated by the tailored Customer Promises that have been developed for key SBUs. Governance – Corporate Governance Report Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 77 77 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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 being 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 the interests and views of 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 in papers in advance of each meeting. 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. In addition, the Chair of each Committee provides a verbal report to the Board on proceedings of those meetings including areas of discussion and any recommendations. Because 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. Stakeholders in action Engage and input Build and focus (including identifying themes and workstreams) Concept development (including identifying priorities) Test and/or deploy Approval of the Group restructure How did the Board consider stakeholders? A range of perspectives were sought including from the ordinary shareholder and colleagues. Discussion focused on capital, tax, regulatory, governance and oversight matters. The Board determined that reflecting the divisional structure comprising investment, insurance, and broking and advisory was deemed the most suitable for all stakeholders. How does this link to the business model, strategy and the long-term success of the Company? This links to our “energise” strategic theme to create an environment where everyone has the space to grow and perform to fulfil their potential. We believe the new corporate structure will provide greater clarity of focus and increase business agility through streamlined governance. It will also enable us to deliver on our purpose so that we can give more to charities and communities across all our markets and allow us to make a difference to the lives of so many. Approval of the Consumer Duty Implementation Plan and Champion How did the Board consider stakeholders? The Board reflected on the FCA’s strategy to reduce customer harm in financial services which created obligations on the firm and its employees to ensure customers receive good outcomes. Areas of consideration included product governance, service governance, communications, monitoring and training and conduct. Discussion focused on the needs of customers and regulatory expectations in the context of the Group’s culture, governance and controls. How does this link to the business model, strategy and the long-term success of the Company? This links to our “invest” strategic theme by investing in our specialist capabilities for the benefit of our customers and to deliver value for the Group. It will also support our desire to be the most trusted specialists. Governance – Corporate Governance Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 78 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Board activities in 2022 The key activities considered by the Board during the year are set out below. Key stakeholders Customers Communities Colleagues Shareholders and investors Suppliers (including brokers) Regulators and Government Sustainability and the environment Strategy and performance Group Chief Executive’s Report Benefact Trust updates Ukraine crisis Business updates • The CEO led discussions on general • Received regular reports from the • Discussed implications of the war • Received business and performance business performance and key strategic initiatives shareholder updates from business areas including Canada, Ireland and Churches Strategic reviews At each meeting, the Board had focused discussion on matters of strategic significance to evaluate progress, provide insight and where necessary take appropriate action as shown below: Ansvar Australia UKGI systems Group corporate restructure Climate change • Discussed the assessment of Ansvar • Considered and challenged progress made • Approved changes to the Group legal • Received regular sustainability champion Australia’s performance, its strategic outlook and future opportunities and challenges in implementing the combined policy administration, reinsurance and claims platform structure updates Governance – Corporate Governance Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 79 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Financial Group Chief Financial Officer’s Report Results and regulatory disclosures Cash flow and dividends Capital, costs and budget • The CFO led discussions on financial performance across the Group including rating agency considerations, IFRS 17 and the tax strategy • On recommendation of the Group Audit Committee, reviewed and approved the Annual Report and Accounts and the half and full year results announcements • Reviewed and approved the Solvency and Financial Condition Report (SFCR) • Considered the dividends to be paid to the holders of the 8.625% Non-Cumulative Irredemable Preference Shares of £1 each • Considered making distributions in the form of a grant to the Company’s ultimate parent Benefact Trust Limited • Agreed the Group Corporate Strategy and Business Plans 2023-25 Group reinsurance arrangements Financial resilience General insurance underwriting Investment strategy update • Received an update on the renewal season • Reviewed the going concern assessment • Received reports from the Chief • Received updates on the review of the including market conditions and reinsurance arrangements put in place and viability statement • Considered the GI Claims Reserve Adequacy Underwriting Officer on the performance and health of the general insurance underwriting portfolios investment strategy Governance, legal and regulatory Board succession and diversity Board effectiveness Governance, legal and regulatory Policies • On recommendation from the Group • Approved objectives for 2022 and monitored • Approved the resolutions to be put to the • Supported by its Committees, the Board Nominations Committee, assessed the independence of the Non-Executive Directors • Approved changes to Committee composition including Chairs of the Group Risk and Audit Committees • Approved the refreshed Board Diversity Policy progress during the year shareholder at the AGM • Approved changes to Committee terms of reference • Considered Directors’ Conflicts of Interest • Determined Non-Executive Directors’ fees • Considered operational resilience • Considered reports from the Actuarial Function Director • Approved the Consumer Duty Implementation Plan and Champion reviewed a range of policies including those linked to HR, Outsourcing, Dividend and the Internal Model Governance – Corporate Governance Report Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 80 80 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Colleagues, culture and values Culture • Considered updates on people, engagement and performance • Reviewed the annual Health and Safety report We All Belong – Integrated Diversity & Inclusion • Considered the update on the approach, activities and data in relation to Diversity and Inclusion and associated strategic initiative Thanksgiving Service Charitable purpose • Oversaw arrangement for the Service of • Considered regular updates on the Thanksgiving and reviewed feedback from a range of stakeholders charitable purpose and mission (including consideration of the Grant Policy in Canada and Australia) Risk management Group ORSA Effectiveness of internal controls Group Risk Framework and Appetite • Approved the Own Risk and Solvency Assessment • Reviewed the internal controls in place across the Group and determined their effectiveness • Approved the Group Risk Framework and Group Risk Appetite Continuous Professional Development, training and site visits Board CPD sessions Site visits During the year the Board received dedicated sessions on IFRS 17; the Internal Model and climate change In 2022, Directors resumed site visits to enable them to deepen their knowledge and understanding of the Group. Sites visited during the year included Australia, Canada and Ireland Whistleblowing The Board (via the Group Audit Committee) is responsible for reviewing the Group’s Whistleblowing Policy and Procedures and receives regular updates from the Chair of that Committee. More information is contained within the Group Audit Committee Report. Conflicts of Interest A Register of Directors’ Conflicts is maintained by the Group Company Secretary to monitor and manage any potential conflicts of interest. 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 brokers 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 2022, no Director had any such concerns. Division of responsibilities There is a division of responsibilities between non-executive and executive roles to ensure appropriate oversight and accountability. These roles and responsibilities are clearly defined, set out in writing, and reviewed by the Board. The roles of the Chair and Group Chief Executive are undertaken by separate individuals as set out in the Governance Structure Chart. In addition, the Board has designated Non-Executive Directors as Champions for Workforce Engagement, Climate Change and Consumer Duty. David Henderson met with the Non- Executive Directors without the Executive Directors present on a number of occasions throughout the year. Mark Hews regularly meets with the Group Management Board to attend to the operational management of the Group. Any matters of significance are communicated to Directors outside of the Board meeting schedule. Governance – Corporate Governance Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 81 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance ContentsFinancial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance structure Documents available at https://www.ecclesiastical.com/ Articles of Association Matters Reserved to the Board Committee Terms of Reference The Board The Board’s role is to provide entrepreneurial leadership of the Group within a framework of prudent and effective controls which enables the risks that the Group faces to be assessed and managed. The Board sets the Group’s high-level strategic aims, ensures that the necessary financial and human resources are in place for it to meet its objectives and reviews management performance. The Board sets the Group’s values and standards and ensures that its obligations to its customers, its shareholders and other stakeholders are understood and met. Chair, David Henderson Senior Independent Director, Chris Moulder The Chair is responsible for the active leadership of the Board, ensuring its effectiveness in all aspects of its role. The Chair is pivotal in creating the conditions for overall Board and individual Director effectiveness, setting clear expectations concerning the style and tone of Board discussions, ensuring the Board has effective decision-making processes and applies sufficient challenge to major proposals. 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, Rita Bajaj, Francois-Xavier Boisseau, Sir Stephen Lamport, Neil Maidment, Andrew McIntyre, Angus Winther 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. g n i t r o p e R The Board delegates certain matters to its five principal Committees, which report to the Board after each meeting Group Audit Committee Oversees financial, climate, non- financial and regulatory reporting processes; internal controls; whistleblowing arrangements; tax strategy and policies; internal audit function; and manages the relationship with the external auditor. Group Finance and Investment Committee Oversees the management of certain of the Company’s financial assets (including its investment portfolio) to ensure it is properly governed, controlled and performing as expected within agreed risk parameters. It also reviews and advises on any major financial decisions on behalf of the Board. Group Risk Committee Oversees the Risk Management Framework including risk appetite and tolerance; the risk and compliance functions; and reviews prudential risk (including overseeing the Internal Model, conduct risk and climate change risk. Group Nominations Committee Ensures that there is an appropriate balance of skills, knowledge and experience on the Board, its Committees and within the Group’s subsidiary companies. Group Remuneration Committee Determines the Group’s Remuneration Policy and ensures there is alignment between performance and reward. I n f o r m n g i Report page 94 Report page 85 Report page 92 Report page 87 Report page 103 Group Chief Executive, Mark Hews The Board delegates the execution of the Company’s strategy and day-to-day management of the business to the Chief Executive, assisted by members of the Group Management Board (GMB). Deputy Group Chief Executive, Jacinta Whyte The Deputy Group Chief Executive is accountable to the Group Chief Executive for leading the general insurance businesses. Group Chief Financial Officer, Denise Cockrem The Group Chief Financial Officer is accountable to the Group Chief Executive for the financial management of the Group and for ensuring that it complies with its statutory and regulatory reporting requirements. Group Company Secretary, Rachael Hall 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. Governance – Corporate Governance Report Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 82 82 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Attendance at meetings Directors are expected to attend all Board meetings and strategy days as well as Committee meetings where they are members. However, it is recognised that sometimes this may not be possible in exceptional circumstances. Where this is the case, Directors receive the papers and provide comments to the relevant meeting. In 2022, the Board held five scheduled meetings and a strategy day. In addition, the Board participated in regular training sessions. The following is a record of the Directors’ attendance for Board and Committee meetings during 2022: Director since Board Group Audit Committee Group Finance and Investment Committee Group Nominations Committee Group Remuneration Committee Group Risk Committee Executive Directors Mark Hews June 2009 S. Jacinta Whyte July 2013 Denise Cockrem September 2019 Non-Executive Directors David Henderson Rita Bajaj1 Francois-Xavier Boisseau2 Sir Stephen Lamport April 2016 July 2021 March 2019 6/6 6/6 6/6 6/6 6/6 6/6 - - - - - 5/7 March 2020 6/6 - Neil Maidment3 January 2020 Andrew McIntyre April 2017 Chris Moulder4 September 2017 Angus Winther March 2019 6/6 6/6 4/6 6/6 7/7 7/7 6/7 - - - - 5/5 4/5 5/5 - - - - 5/5 - - - - - - 3/3 5/5 - - - - - 3/3 3/3 - - 5/5 4/5 - - 5/5 - - - - - 4/4 4/4 4/4 4/4 4/4 - 1 Rita Bajaj was unable to attend a Group Finance and Investment Committee due to a personal commitment arranged before the meeting was confirmed. 2 Francois-Xavier Boisseau was unable to attend two meetings of the Group Audit Committee due to prior professional commitments. 3 Neil Maidment was unable to attend a Group Remuneration Committee meeting due to a family matter. 4 Chris Moulder was unable to attend two Board meetings and a Group Audit Committee meeting due to prior business commitments arranged before the meetings were confirmed. Governance – Corporate Governance Report Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 83 83 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information 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 16 March 2023 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. ‘The Board views the management of risk as a key accountability and is the responsibility of all management.’ Governance – Corporate Governance Report Strategic Report – Chair’s Statement Governance – Board of Directors Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 84 84 84 84 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report QuoteGovernance Financial StatementsOther InformationStrategic Report QuoteGroup Finance and Investment Committee Report Committee member Member since Meetings attended Angus Winther (Chair) Rita Bajaj1 Francois-Xavier Boisseau David Henderson April 2019 July 2021 July 2021 June 2016 5/5 4/5 5/5 5/5 1 Rita Bajaj was unable to attend a meeting due to a personal commitment agreed prior to the scheduling of an ad hoc meeting. Dear Stakeholder I am pleased to present the Group Finance and Investment Committee Report reflecting on the work carried out by the Committee during the past year. Our main responsibility is to ensure the Group’s financial assets are properly managed, governed and controlled (within financial limits delegated by the Board) and that performance is as expected. On behalf of the Board, we also consider major financial decisions such as raising capital, acquisitions and disposals. The Committee is constituted as a committee of the Company’s immediate parent Benefact Group plc, for which it provides the same functions. We were supported by the Group Chief Executive, Group Chief Financial Officer and other subject matter experts (including the Group Chief Actuary) who attended meetings to provide insight on key matters and developments. ‘Our main responsibility is to ensure the Group’s financial assets are properly managed, governed and controlled (within financial limits delegated by the Board) and that performance is as expected.’ Governance – Group Finance and Investment Committee Report Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 85 85 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information In particular, we considered proposals to refine the Group’s exposure to growth assets and protections that could be put in place. Governance We also reviewed the Committee’s performance and set objectives focusing on optimising the Group’s legal entity and governance structure and the investment strategy. Angus Winther Group Finance and Investment Committee Chair 16 March 2023 Areas of focus during 2022 Volatility and uncertainty We considered the market implications of the war in Ukraine, and the consequent humanitarian crisis, as well as changes in economic conditions, most notably central banks acting to increase interest rates to reduce inflation, and the consequent impact on economic growth prospects. Climate change We reflected on both the benefits and costs of the Group’s responsible and sustainable investment approach on current and likely future performance (especially as we hold no energy stocks). We monitored the Group’s carbon footprint within its investment portfolio focusing on Scope 1 and 2 emissions. We also considered the challenges associated with identifying and measuring Scope 3 emissions (given reliance on suppliers and the quality of publicly available data). Notwithstanding this, we have an expectation that a significant proportion of our investment portfolio’s carbon footprint will be measurable by the end of 2023 including in relation to the property portfolio. Simplifying the Group We discussed updates on the Group’s legal entity restructure which took effect on 3 January 2023. Discussion focused on the complexities, practicalities and merits of potential corporate structural changes including the sale of South Essex Insurance Holdings Limited and SEIB Insurance Brokers Limited on 30 December 2022 to the Lloyd & Whyte Group as well as financial and resource aspects. Further information is provided on page 6. Finance We 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. During the year, Benefact Group plc had a non-controlling equity interest in the speciality insurance broking group, Lloyd & Whyte. We have monitored various matters relating to that acquisition, including associated structural changes, Lloyd & Whyte’s acquisition pipeline, associated loan exposure and performance. In addition, Lloyd & Whyte’s Group Managing Director and Chief Operating Officer attended a Committee meeting to present a deep dive on acquisition integration including the acquisition selection process and outcomes. Investments During the year, we reviewed the investment mandate with EdenTree to ensure that it was fit for purpose and compliant with legal and regulatory requirements. The performance of the Group’s investment portfolios and outlook for the financial markets were also considered. Additionally, the Committee reviewed in detail the Group’s investments in property and an unlisted equity investment. Investment strategy and risk tolerances The Group’s business plan investment assumptions and the overall Investment Strategy were reviewed. This included consideration of asset allocation and exposure (to equities, bonds, infrastructure, property and cash) and associated risk. ’We reflected on both the benefits and costs of the Group’s responsible and sustainable investment approach on current and likely future performance.’ Governance – Group Finance and Investment Committee Report Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 86 86 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Group Nominations Committee Report Committee member Member since Meetings attended Chris Moulder (Chair) November 2019 David Henderson Angus Winther January 2019 May 2021 3/3 3/3 3/3 Dear Stakeholder I am pleased to present the Group Nominations Committee’s Report reflecting on the work we carried out during the past year. The Group has set itself an ambitious growth strategy and the Committee’s role is to support that strategy by ensuring that there is a diverse and inclusive, future proof pipeline of talent across the Board, its Committees and Senior Management. Diversity and inclusion The Committee has continued to support the Group’s refreshed Diversity and Inclusion Strategy (more information on the Group’s ‘We All Belong ’ can be found on page 21). Additionally, the Committee has reviewed the Board Diversity Policy and Senior Management succession plans in the context of the FCA’s published policy statement PS22/3: Diversity and inclusion on company boards and executive management (“PS22/3”). The Board understands the benefits that diversity in its widest sense can bring and has set itself clear medium- to long-term objectives, acknowledging that there is work to be done to achieve these. The Committee remains committed to supporting the Board and the Group Diversity and Inclusion Strategy, and diversity and inclusion will remain a key focus of the Committee moving forward. Non-Executive Director recruitment In light of the anticipated retirement of Andrew McIntyre, NED and Group Audit Committee Chair, the Committee have been focused on identifying a suitable successor. Following an external search which did not find a suitable successor, and given the current needs of the Board and the imminent introduction of IFRS 17 Accounting Standard, it was agreed that I should replace Andrew as the Group Audit Committee Chair (effective June 2023). Neil Maidment will then succeed me as the Group Risk Committee Chair. The search for new NEDs and, in particular, female candidates will continue during 2023. External Board and Committee evaluation Another key area of focus for the Committee has been the externally facilitated Board effectiveness review. More details are outlined later in this Report. Chris Moulder Group Nominations Committee Chair 16 March 2023 Governance – Group Nominations Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 87 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information As the effects of Covid-19 prevented the Directors from travelling in previous years, the Directors have been keen to resume meeting key employees across the Group. The Committee has developed a schedule of site visits for each Director which commenced in 2022. Board Diversity and Inclusion Policy, application and progress against objectives During the year, the Committee has continued to oversee the development and implementation of the Board’s Diversity Policy (the Policy). The Policy has been updated in line with PS22/3 and the Group’s recently refreshed “We All Belong” Diversity and Inclusion Strategy. The Policy was last reviewed by the Committee in October 2022 and approved by the Board in November 2022. 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 both improves performance of the Board and strengthens the business. In doing so, the Board has set itself objectives as set out on the following page. Areas of focus during 2022 Composition of the Board and Senior Management The Committee considered the composition of the Board and its Committees. This included consideration of skills, knowledge, experience, length of tenure, independence, and diversity in the context of the Group’s long-term strategic priorities. The Committee is conscious that the diversity of the Board and its Committees should be improved particularly in terms of female representation and has been actively trying to rectify the position. In line with the expectations of the FCA, the Committee has also committed to making this a consideration when recruiting in the future. In addition to gender balance, it is noted that there is a need to strengthen ethnic minority representation among the Senior Management. In recognition of this, diversity in its fullest sense will be a consideration in terms of ensuring that there is a diverse pipeline of talent and opportunities at this level. Succession planning and talent development The composition of the Board and Senior Management is informed by plans for orderly, rigorous and a phased approach to succession and to reflect the Group’s strategic ambitions, opportunities and challenges faced. In respect of each leadership role, emergency, short-term and long-term succession plans are considered and challenged by the Committee to ensure that appropriate skills are in place to support the Group’s strategy and ensure a diverse pipeline of talent is in place. This is supported by robust skills analysis which is conducted for all Directors annually. During 2022, the assessment demonstrated that all Directors had the required skills, expertise and knowledge the Board believes are necessary to drive the Group forward. In support of the Group’s strategy to build a world-class team, the Committee reviewed the refreshed talent, succession and leadership activities across the Group. Induction and training All Directors undertake a formal, comprehensive and tailored induction upon joining the Board. This includes sessions with key subject matter experts across the Group. In addition, the annual training schedule of the Board is developed in consultation with the Committee, the GMB and key subject matter experts around the Group before being approved by the Board. It is dynamic and can change to reflect the needs of the Board. Any Director may request further training to support their individual or collective needs. During the year, the Board received training on IFRS 17, Internal Model and TCFD Disclosure (externally facilitated by Grant Thornton LLP) and Climate Change. The Group Company Secretary maintains annual CPD records for all Directors, which the Chair reviews as part of their annual appraisal. ‘In support of the Group’s strategy to build a world class team, the Committee reviewed the refreshed talent, succession, and leadership activities across the Group.’ Governance – Group Nominations Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 88 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report QuoteGovernance Financial StatementsOther InformationStrategic Report QuoteBoard Policy medium- to long-term objectives Ecclesiastical will seek to: Achieve a level of at least 40% female Directors over the medium term on the Board of Ecclesiastical Insurance Office plc or explain if this is not the case Ensure that at least one of the senior positions on the Board (defined as Chair, Chief Executive, Senior Independent Director and Chief Financial Officer) is held by a female Director or explain if this is not the case; Ensure that the Board composition comprises of at least one Director from a minority ethnic background or explain if this is not the case; 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; Report annually on its diversity objectives and other initiatives undertaken by the Company, which promote gender, social and ethnic diversity or explain why not met. Implementation and progress The Board includes three female Directors (including two Executive Directors) in a membership of eleven (27%). In recognition of the progress required to meet its own medium-term objective, the Committee will continue to support the Board to achieve this objective. The positions of Deputy Chief Executive Officer and Group Chief Financial Officer are held by women. Together with a number of other senior leaders, Mrs Whyte and Mrs Cockrem took part in a Group communication campaign outlining the story of their careers, challenges and successes as part of the Group’s International Women’s Day celebrations to inspire future leaders. The Board is pleased to have met this objective. As an ethical business, the Board values equality highly and continues to work towards broadening the ethnic mix of the Board as and when appropriate. The Company engages with executive search firms that have signed up to the Voluntary Code of Conduct for Executive Search Firms. An overview of the recruitment process is set out later in this Report. This Report of the Committee is open and transparent and demonstrates that there are improvements to be made in relation to the Board becoming more diverse and inclusive. The Board will take opportunities, 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). However, the Board believes the approach to diversity and inclusion should not be a “tick box exercise” but an opportunity to continue to build a cohesive future proof leadership and that ultimately all appointments should be made on merit. The Board encourages Executive Management to ensure appropriate diversity at senior levels within the organisation. Further information including key employee statistics on gender and ethnicity is provided in the Responsible Business Report on page 21. The Board remains committed to documenting its journey via the annual reports of the Committee. Governance – Board of Directors Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 89 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Non-Executive Director recruitment It is the Committee’s responsibility to ensure that the composition and pipeline of talent for the Board and Senior Management supports the future direction of the Group. Accordingly, following a review of the Board’s composition and succession plans, the Committee agreed to prioritise appointing a suitable successor to the role of Group Audit Committee Chair. Appointment process: Stage one: Objective Criteria A Selection Panel comprising Chris Moulder, David Henderson, Angus Winther and Rachael Hall was formed to commence the recruitment of a Chair for the Group Audit Committee. The Panel developed a Position Specification for the role based on objective criteria and having regard to the outcome of the Board skills analysis. The candidate was expected to have extensive experience in financial services focusing on finance, accounting or actuarial. Stage two: Candidate Lists Compiled and Reviewed Stage three: Candidate Identified Following a tender process Per Ardua Associates Limited was engaged to support the recruitment process. Per Ardua do not have any connection to the Group beyond supporting the recruitment of non- executive and executive roles. Having due regard to the Board’s diversity and inclusion ambitions, the skills and competences outlined in the specification, and the Group’s ethics, culture and values, Per Ardua drew up a list of potential candidates for consideration by the Panel. Following a rigorous search process, a suitable external candidate could not be found within the timeframe specified. Balancing the requirements of the Board in leading the Group at this pivotal strategic point and given the imminent introduction of IFRS 17, the decision was taken to appoint the successor to the role of Group Audit Committee Chair from within the Board in the short term. Stage four: Recommendation and Appointment It was agreed that as Chris Moulder possessed the required leadership qualities, skills and experience required for this role, he would be appointed Group Audit Committee Chair at the conclusion of the AGM subject to regulatory approval. In recognition of the time commitment of the role, Chris will step down as Group Risk Committee Chair and will be replaced by Neil Maidment subject to regulatory approval. will step down as Group Risk Committee Chair and will be replaced by Neil Maidment subject to regulatory approval. The search for a long-term successor to the role of Group Audit Committee Chair will re- commence in 2023. Directors’ length of service The Committee monitors the length of tenure of all Directors as shown in the table on Board diversity. Director’s independence and time commitments The Board believes that all the Non- Executive Directors were independent throughout 2022. 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 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 annually, among other things to consider the appointment of Common Directors. Governance – Group Nominations Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 90 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report The Committee evaluates the time Non- Executive Directors spend on the Company’s business annually and is satisfied that, in 2022, 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. 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. In line with the Code, the Board undergoes an externally facilitated performance review every three years. An overview of the process which commenced in 2022 is outlined below: Stage 1: Proposals and Requirements Stage 2: Selection of an Independent Evaluator It was agreed that the evaluation would include a review into: the effectiveness of the Board in terms of its processes, people, team work and behaviours; the value it delivers to its shareholder; how it engages with its Committees; how it sets the ‘tone from the top’; and how it provides effective oversight of the setting and execution of the strategy of the Company and its subsidiaries, and the operating performance of Executive Management. Three firms were asked to submit proposals and following subsequent presentations Stephenson Executive Search was appointed to undertake the external Evaluation. Stephenson Executive Search has no connection to the Group or its Directors beyond Tim Stephenson, Stephenson Executive Search’s Chair supporting David Henderson in relation to Non-Executive Director assignments. The Board is content that Mr Stephenson provided an independent view on the performance of the Board, its Committees and individual Directors. Stage 3: Review Process As part of the review, the Evaluator conducted a series of one-to-one interviews with each member of the Board, the Group Company Secretary, the Group Chief Actuary and the Group Chief Risk and Compliance Officer. In addition, the Evaluator observed Board and Committee meetings. Stage 4: Review of Report, discuss and agree action plans for 2023 The outcome of the Evaluation will be considered by the Board at its meeting on 16 March 2023 and an action plan agreed. The Committee will monitor the implementation of all the recommendations arising from the review. Details on the above actions will be reported in the 2023 Annual Report. Governance – Group Nominations Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 91 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information Group Risk Committee Report Committee member Member since 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 4/4 Dear Stakeholder I am pleased to present this report describing the work undertaken by the Group Risk Committee during the past year. The Committee’s key roles are to oversee the Group’s Risk Management Framework and culture (including risk strategy, appetite and tolerance); the Group’s risk and compliance monitoring functions; and to monitor prudential risk (including overseeing the Internal Model), conduct risk and climate change risk. Throughout 2022, the Committee monitored the Group’s Risk Management Framework, capital management and operational resilience, paying close attention to impacts from the internal and external environments. The Committee monitored the material risks of the Group and reviewed Internal Model scope, use, governance and validation. The Group has voluntarily chosen to include this report in addition to the disclosures in the Risk Management Report and Principal Risks sections. The latter sets out the Group’s principal risks and uncertainties which the Committee has reviewed in detail and is comfortable that the business has addressed them appropriately within its ongoing operating model and strategic priorities. ‘Throughout 2022, the Committee monitored the Group’s Risk Management Framework, capital management and operational resilience, paying close attention to impacts from the internal and external environments.’ Governance – Group Risk Committee Report Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 92 92 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information Additionally, the Committee received reports on risk and compliance monitoring and breaches; underwriting and insurance risk; market and investment risk; reinsurance; outsourcing and supplier risk; and business continuity. The Committee reviewed the Own Risk and Solvency Assessment, recommending it to the Board, and oversaw the risk oversight and assurance plan, including work ongoing to embed the risk taxonomy and further develop an emerging risk register. The Committee also received the Money Laundering Reporting Officer’s Report and monitored sanctions screening and financial crime controls. 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 other management present. By order of the Board Chris Moulder Group Risk Committee Chair 16 March 2023 Committee meetings 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. Areas of focus during 2022 During 2022, the Committee continued to monitor the Group’s ongoing operational and financial resilience and its capital and solvency positions, receiving updates from management particularly in light of direct and indirect impacts from the external environment. These impacts included adverse weather events in all territories in which the Group operates; volatility in global investment markets; inflationary pressures; and the war in Ukraine. Although the Group was not directly exposed to risks arising from the war, the Committee kept indirect exposures under review, including cyber and credit risks. The Committee also monitored the ongoing development, governance, methodology and calibration of the Internal Model; overseeing independent validation; reviewing profit and loss attribution; and recommending Model changes and management actions to the Board. During the year, the Committee oversaw management’s work to embed key elements of climate change risk into the Group’s Risk Management Framework, including the development of a Board level risk appetite statement and key risk metrics. The Committee also received updates from projects to develop the Group’s data management model and operational resilience programme. ’During the year, the Committee oversaw management’s work to embed key elements of climate change risk into the Group’s Risk Management Framework.’ Governance – Group Risk Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 93 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information Group Audit Committee Report Dear Stakeholder As Chair of the Group Audit Committee, I am pleased to present the Committee’s report for the year ended 31 December 2022. This report outlines the work undertaken by the Committee to safeguard Ecclesiastical for the benefit of its shareholders. 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 also remains alert to the external risks facing Ecclesiastical and features these in its work. The Committee’s duties over the last year have been expanded to include oversight of climate and non-financial reporting as part of the Group’s overall climate change governance strategy. The Group continues to closely monitor and deal with the evolution of the pandemic, however; as this eased across the globe, 2022 has presented further challenges including inflationary pressures, and interest rate risk, all further intensified by the war in Ukraine. The Committee has remained vigilant to these developments and expects to keep these 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 97 to 99. The new insurance accounting standard IFRS 17 became effective for the Group from January 2023 and continued 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 ’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.’ Governance – Group Audit Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 94 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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 63. 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 seven meetings held during the year are shown below. Committee meetings In addition to the members of the Committee, the Chairman of the Board, the Group Chief Executive, the Group Chief Financial Officer, the Deputy Group Chief Executive and the Group Chief Internal Auditor attend meetings by invitation. Other relevant people from the business are invited to attend certain meetings in order to provide insight into key issues and developments. The Group’s external auditor is invited to attend meetings. During the year, PricewaterhouseCoopers (PwC) attended seven 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 climate and non-financial metrics reporting; • 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. Committee member Member since Andrew McIntyre (Chair) Francois-Xavier Boisseau Neil Maidment Chris Moulder April 2017 March 2019 March 2020 September 2017 Meetings attended 7 5* 7 6** * committee member was unable to attend two Committee meetings due to prior professional commitments. ** Committee member was unable to attend one Committee meeting as a result of a late change to the schedule of Committee meetings. ’The Committee ensures the interests of our shareholders are protected by providing independent scrutiny and challenge.’ Governance – Group Audit Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 95 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report A summary of the main activities of the Committee during the year is set out below: Auditor appointment and tenure, independence and non-audit services The Committee has primary responsibility for overseeing the relationship with and performance of the external auditor. This includes making the recommendation on the appointment, reappointment and removal of the external auditor, assessing their independence on an ongoing basis and for agreeing the audit fee. PwC has acted as the Group’s external statutory auditor following appointment at the Annual General Meeting in June 2020. The Group’s policy for auditor rotation follows regulatory requirements and PwC will be required to be rotated after no more than 20 years, and an audit tender held after no more than 10 years. Sue Morling of PwC became the Group’s Senior Statutory Auditor for the financial year 2020 after PwC’s appointment. Her term as Senior Statutory Auditor is due to conclude upon the completion of the 2024 audit. 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 on page 120. 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 2022, the Group was charged £1,032,000 (ex VAT) by PwC for audit services. Non-audit fees for audit-related assurance services required by legislation and/or regulation amounted to £270,000, making total fees from PwC £1,302,000. 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 several 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 2021 statutory audit and audit- related assurance services. The Committee recognised the strengths of the external auditor and that duties were performed independently and effectively, scoring particularly highly in technical knowledge and expertise. 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, among 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 viability. 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 requirements of the publicly and privately filed regulatory reporting. The significant areas of focus considered by the Committee in relation to the 2022 accounts, and how these were addressed, are outlined below. These were discussed and agreed with management during the course of the year, and also discussed with PwC. The nature of these issues and how they are mitigated is explained in more detail in the Risk Management Report on page 45, and also note 2 to the financial statements. Governance – Group Audit Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 96 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Matter considered General insurance reserves The estimation of the ultimate liability arising from claims under general business insurance contracts is a critical accounting estimate. There is uncertainty as to the total number of claims on each class of business, the amounts that such claims will be settled for and the timings of any payments. Life insurance reserves The calculation of the Group’s life insurance reserves requires management to make significant judgements about bond yields, discount rates, credit risk, mortality rates and current expectations of future expense levels. Action 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, including the application of a change in the Group’s accounting policy for discounting. This is a major area of audit focus and PwC also provided detailed reporting on these matters to the Committee. The Committee challenged management on whether the reserving methodologies and level of reserves held had adequately taken into account changes in the economic environment that had been emerging over the year. The Committee gained confidence that additional focus had been given within the calibration exercise to the use of explicit modelling of future cashflows by period, taking account of claims inflation projections and discounting of the reserves in order to provide accurate representation in the best estimate of the latest economic position. The Committee requested a walkthrough of the key drivers of management’s selected uncertainty margin loading in order to gain comfort that the unique reserving risks facing the Group had been appropriately allowed for. The Committee was satisfied that management and the Group Reserving Actuary have carried out a thorough review of the drivers of uncertainty, including inflation on all components, and have arrived at a prudent recommendation for the level of booked reserves, which provides a high degree of confidence in the resultant level of sufficiency. Following all of our reviews and discussions, the Committee’s opinion was that the reserving process and outcomes were robust and well managed and that the overall reserves set were reasonable, as disclosed in notes 9 and 28 of the financial statements. The Committee considered a report from the Chief Actuary of Ecclesiastical Life Limited (ELL) (the Group’s life business) which 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 2022; and • the calculation of technical provisions in accordance with Solvency II regulations at 31 December 2022. The Committee reviewed the work done by the Chief Actuary to assess whether changes to methodology were appropriate, with a particular focus on fixed expenses and a change in approach to reserve on a per policy basis, 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 28(b) of the financial statements. Governance – Group Audit Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 97 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Matter considered Action Carrying value of goodwill The Committee received detailed reporting from management and challenged the appropriateness of the assumptions made, including: This is an area of focus for the Committee given the materiality of the Benefact Group’s goodwill balances (£23.8m at 31 December 2022 of which £2.1m relates to the Group) and the inherent subjectivity in impairment testing. The judgements in relation to goodwill impairment continue to relate primarily to the assumptions underlying the calculation of the value in use of the business, being the achievability of the business plans and the macroeconomic and related modelling assumptions underlying the valuation process. Valuation of defined benefit pension obligation and recognition of surplus The valuation of the defined benefit pension obligation 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. Change of accounting policy and other accounting disclosures A number of changes made during the year impacted the Group and its results, including a change in accounting policy used to discount general insurance liabilities, a legal restructure of the Group and wider Benefact Group, along with other matters set out within this report. As well as considering the accounting treatment and judgements used by management, the way in which these changes were disclosed is particularly important for a user’s understanding of their bearing on the Group and its results. • 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. During 2022, 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. Improvements in the pension actuary’s models increased the accuracy, and also dynamically captured changes in the scheme’s liability profile. Following the review, management concluded that no allowance would be made for 2020 and 2021 mortality experience within future life expectancy calculations due to the continuing uncertainty over the long-term impacts of Covid-19 on mortality. 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 2022 is explained in note 19 to the financial statements. The Committee considered management’s recommendations for the change in accounting policy used to discount general insurance liabilities. Consideration was given to the impact of market during 2022 on assets used by the Group to match general insurance liabilities and whether a change in accounting policy provided users with more relevant and useful information. The Committee also considered the previous accounting policy against the changes recommended by management, and concluded with management that this was a change in accounting policy to be applied retrospectively. Consideration was given by the Committee to how the impact of this change and other items affecting the Group and its results were disclosed throughout the Annual Report and Accounts. Specific consideration was given to disclosures made throughout the Strategic Report and within the financial statements including consideration of their compliance with accounting standards. The Committee made a number of recommendations to the disclosures to ensure specific items, when taken individually and together in the context of their impact on the Group, were transparent. The Committee concluded that disclosures made throughout the Annual Report and Accounts for these specific items was fair, balanced and understandable. Governance – Group Audit Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 98 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Matter considered 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. Legal entity reorganisation The Group has made a number of legal entity structural changes during the year and after the balance sheet date. These included disposals to related parties of Ecclesiastical Insurance Office plc and Benefact Group plc. Judgements were required, in particular over control conclusions as well as accounting and disclosure. Disposal of a subsidiary to a related party During the financial year, the Group disposed of its entire interest in South Essex Insurance Holdings Limited and its wholly- owned subsidiary SEIB Insurance Brokers Limited, (together ‘SEIB’). This was acquired by a broker group that the Benefact Group plc has an existing non-controlling interest in. Management applied judgement when determining if this transaction with a related party was in the best interests of the Group. Action The Committee received information from management on Group’s unlisted equity investments and the model used to determine fair value of these investments. 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 recommended valuation multiple, the impact on market multiples from increases in interest rates during 2022, the discount applied for illiquidity and both the suitability and number of comparable companies used within the model. Following consideration, the Committee concluded that the assumptions proposed were appropriate. The Committee considered management’s recommendations on the application of accounting and disclosures requirements across a number of accounting standards including those dealing with discontinued operations, segmental reporting, control and business combinations. The Committee considered in particular the impact on disclosures within 2022 for transactions before and after the balance sheet date and their impact on discontinued operations and comparative information. Consideration was also given to the specific circumstances of control over related undertakings within the Benefact Group plc. The Committee’s opinion was that the accounting application and disclosures made within the financial statements were appropriate and provided users of the accounting with useful information. The Committee considered the terms of the disposal and the basis used to determine a suitable consideration. The Committee considered both the substance and legal form of the Group’s relationship with the related party. Particular consideration was given to the following: • The typical commercial terms used by businesses in this industry when entering into the sale and purchase of UK broker businesses and whether this transaction was consistent. • The legal form and substance of the existing and future expected relationship the Group has with the related party and whether this influenced the commercial terms of the transaction. • The disclosure requirements of IAS 24 Related Party Disclosures and how management applies these within the financial statements. Consideration was also given to other disclosures within the Strategic Report of this Annual Report & Accounts. The Committee’s opinion was that the transaction was carried out under commercial terms which are characteristic of the broking industry and in the best interests of the Group and its stakeholders. The Committee made additional disclosure recommendations to provide more transparency of the transaction and the true and fair view of the financial statements. Governance – Group Audit Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 99 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information 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. 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 became effective for the Group from 1 January 2023 and will impact the Group’s financial reporting. The Group will issue results under IFRS 17 in its 2023 Interim Results expected to be published in September 2023. During the year, the Committee monitored preparedness of the implementation of IFRS 17 as well as assessed the impact of the new standard on the calculation of insurance liabilities and financial reporting processes, as management finalised the ‘dry runs’ before the effective date. Climate change risk and related disclosures During the year the Committee continued to strengthen its understanding of the developments of disclosures regarding climate change and its impacts. This included the Committee receiving training from external and internal experts. The Committee discussed with management the continued development of the Group’s disclosures regarding climate change risks and impacts which are included principally within the Responsible Business Report in the Annual Report and Accounts. The Committee’s review paid particular attention to the transparency of disclosure and alignment to Task Force on Climate- Related Financial Disclosures along with the challenges in working towards net- zero. As the Group develops its response to the risks and impacts of climate change the Committee expects to consider management’s evaluation of the potential impact on the financial statements and the evolution of disclosure. Fair, balanced and understandable The Committee considered whether, in its opinion, the 2022 Annual Report and Accounts were fair, balanced and understandable and provided the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. The Committee has reviewed and provided feedback on early drafts of the Annual Report and Accounts, highlighting any areas where further clarity was required in the final version. 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. 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? 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? ’The Committee continued to strengthen its understanding of the developments of disclosures regarding climate change and its impacts.’ Governance – Group Audit Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 100 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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 2022. Oversight of the Group’s systems of internal control including the internal audit function Assessment of internal controls The Group’s approach to internal control and risk management is set out in the Corporate Governance Report on page 84. In reviewing the effectiveness of the system of internal control and risk management during 2022, the Committee has: • reviewed the findings and agreed management actions arising from both external and internal audit reports issued during the year; • monitored management’s responsiveness to the findings and recommendations of the Group Chief Internal Auditor; • met with the Group Chief Internal Auditor once during the year without management being present to discuss any issues arising from internal audits carried out; and • considered a report prepared by the Group Chief Internal Auditor giving his assessment of the strength of the Group’s internal controls based on internal audit activity during the year. Internal control over financial reporting Internal control over financial reporting is a process designed to provide reasonable, but not absolute, assurance regarding the reliability of management and financial reporting in accordance with generally accepted accounting principles. Controls over financial reporting policies and procedures include controls to ensure that: • through clearly defined role profiles and financial mandates, there is effective delegation of authority; • there is adequate segregation of duties in respect of all financial transactions; • commitments and expenditure are appropriately authorised by management; • records are maintained which accurately and fairly reflect transactions; • any unauthorised acquisition, use or disposal of the Group’s assets that could have a material effect on the financial statements should be detected on a timely basis; • transactions are recorded as required to permit the preparation of financial statements; and • the Group is able to report its financial statements in compliance with IFRS. Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Risk management and control systems provide reasonable assurance that the financial reporting does not contain any material inaccuracies. Through its review of reports received from management, along with those from internal and external auditors, the Committee did not identify any material weaknesses in internal controls over financial reporting during the year. The financial systems are deemed to have functioned properly during the year under review, and there are no current indications they will not continue to do so in the forthcoming period. Group Internal Audit (GIA) GIA is monitored by the Committee and provides independent, objective assurance to the Board that the governance processes, management of risk and systems of internal control are adequate and effective to mitigate the most significant risks to the Group. GIA 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 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. 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 have focused on ensuring an environment in which whistleblowing is well understood, openly communicated and that a positive culture for raising concerns is promoted across the Benefact Group. The Group 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, with 80% of colleagues agreeing that they feel the Benefact Group is an environment in which they feel safe to speak up and challenge if they need to. Individual attestation and quarterly Governance – Group Audit Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 101 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information of work of GIA as the Group continues to expand, and continued close attention to geopolitical 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 16 March 2023 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 2023, 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 reporting under IFRS 17, which became effective from 1 January 2023, and the increasing maturity of the control environment, the resourcing and scope ’In 2023, the Committee will continue to provide oversight of financial reporting and internal controls of the Group.’ Governance – Group Audit Committee Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 102 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information 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 2022 and to highlight some of the key aspects of the Committee’s work during the year. The Committee’s principal aim remains to ensure that all colleagues are rewarded fairly according to their contribution to the success of the Group and the quality of their individual performance, keeping carefully in mind the relationship between reward, recruitment and retention. 2022 performance and incentive outcomes The EIO Group reported a statutory loss before tax of £4.8m in 2022 (2021: profit before tax £79.2m). This result was driven largely by fair value investment losses resulting from the challenging economic environment. The Group delivered Gross Written Premium (GWP) growth of 15% to £559m (2021: £486m) reflecting targeted rate increases as well as strong retention and excellent service delivered to brokers and customers. The broking businesses performed well, with SEIB reporting a profit before tax of £2.9m and Lycetts, owned by Benefact Group, reporting a profit before tax of £3.4m. Our award-winning investment management business, EdenTree also had a good year, achieving record net inflows. These results enabled the Group to award a grant of £20m to our owner Benefact Trust alongside £2.7m through our direct giving programmes. 2022 continued, however, to be a challenging year for customers, brokers, business partners and colleagues alike. The Committee note with thanks the 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 next chapter in our strategy and continued ambition for the future. Our colleagues’ dedication to providing excellent customer service is borne out by 98% of customers who report they are satisfied with the service they receive. 2022 was an important year for the Group, with the launch of a new and ambitious Group strategy which aims to raise £250m for good causes by the end of 2025. The integration of our environmental commitments was introduced into our remuneration schemes for 2022 and beyond as we set out in the report last year. During the year the Group also provided additional support to employees in the context of the cost-of-living crisis and current rate of inflation. For EIO employees, a one-off Financial Wellbeing Award was made of £1,000 (paid in two instalments) to employees who earned £50,000 or less to ensure that support was targeted to those who needed it most. ’2022 was an important year for the Group, with the launch of a new and ambitious Group strategy which aims to raise £250m for good causes by the end of 2025.’ Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 103 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information As noted in the 2021 Directors’ Remuneration Report, a strategic review of the Group’s incentive arrangements was carried out, including engagement with our shareholder, and a number of changes were made including incorporating a ‘Greater Good’ measure supporting the Group’s ambition to build a Movement for Good, incentivising delivery of its charitable giving programme, and reinforcing its commitment to deliver exceptional customer service, and the highest standards of conduct and governance. In considering the annual bonus outcomes for Executive Directors the Committee paid careful attention to the financial performance of the Group and its significant business units, to the strategic and ’Greater Good’ performance of the Group, to its solid performance against underwriting targets, and to its 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 strong 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 by both the Group and the individuals. The annual bonus awards for 2022 of 78.3% of maximum (which is 100% of salary) for the Group Chief Executive; 72.9% for the Deputy Group Chief Executive; and 64.8% for the Group Chief Financial Officer reflected the performance of the Group during the year. Further details of performance against the targets set for 2022 are disclosed in the Annual Report on Remuneration section of this report. In line with evolving market practice, and as set out in the 2021 Directors’ Remuneration Report, deferral of the bonus has been increased and one-third of the total bonus award will be deferred for three years. The long-term incentive plan (LTIP) granted in 2020 vested at 35.2%, reflecting the Group’s performance against the financial, strategic, customer and conduct targets over the 2020-2022 period. The Committee considered that the LTIP vesting levels were a fair reflection of the overall performance achieved. 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. On this basis, the Committee determined that the base salaries of Executive Directors would be increased by 5% (effective 1 April 2023), which is lower than the wider workforce of 6.15%. Key Committee activities during the year As reported last 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, to ensure these continue to drive the Group’s strategy and long-term performance. These targets now include 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 shareholder expectations; and consideration of the reputational impact of any changes. This is the first year of implementation of the changes and the Committee is of the view that the current structure and performance measures are bedding in well for the business and are aligned to the Group’s forward-looking strategy. There are no major changes to the remuneration structure for 2023. During the year the Committee, alongside management, reviewed the approach to target setting and developed a set of guiding principles for future years. The Committee determined that the remuneration packages of Executive Directors should remain aligned with the Group’s strategic objectives and reflect both the experience and track record of the Executive Directors and comparative benchmarking. No changes were proposed to the annual bonus opportunity and LTIP award levels. There are also no changes proposed to the performance measures and weightings. Full details of the revised incentive arrangements applicable to Executive Directors and the Group’s senior leaders are set out in the ‘At a Glance’ section of this report. The pension contribution rate for the Group Chief Executive was reviewed in 2021 and aligned with the wider workforce rate of 12% of salary with effect from 1 April 2022. The Committee considered the Chair’s fees as part of its regular review of NEDs’ fees. Historically this has been done every two years. Fees were due to be reviewed as at 1 January 2022 but this was delayed as a result of the 2021 pay freeze. The UK has since experienced significant increases in inflation. Consequently, an interim review was undertaken and it was agreed that the approach should be aligned to the total pay settlement for colleagues. Fees were thus increased by 5% with effect from 1 April 2022. It has been agreed that the NED fee review process (including those of the Chair) should be aligned to the employee annual pay review process, and further fee increases have been agreed with effect from 1 April 2023 as set out later in this report. David Henderson took no part in the discussions on his fees, nor the NEDs in discussion of theirs. The Group’s gender pay report for 2022 showed a continuing improvement in the Group’s gender pay gap, driven by improvements in the gender representation of those in the lowest pay quartile. This has contributed to our median gender pay gap reducing for a sixth consecutive year to 19.1%, from 20.4% in 2021. The Group Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 104 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Strategic Report Governance Governance Financial Statements Financial Statements Other Information Other Information 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 2022, the Investment Firms Prudential Regime (IFPR) on remuneration policy applicable to EdenTree became effective and we therefore reviewed the EdenTree remuneration arrangements against this. Conclusion I value the continued support and counsel of our charitable owner and ultimate shareholder, Benefact Trust Limited, and reaffirm our responsibility 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 16 March 2023 Committee member Member since Meetings attended Sir Stephen Lamport (Chair) June 2020 David Henderson September 2016 Neil Maidment Angus Winther March 2020 April 2019 5/5 5/5 4/5 5/5 Neil Maidment was unable to attend a Group Remuneration Committee meeting due to a family matter. ’The Group continues to be committed to promoting inclusion and diversity through our business.’ Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 105 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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 2022, the Committee held five meetings in total. The Group Remuneration Committee members and their attendance at meetings during the year are set out in the table above. All members are independent 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 the key agenda items discussed at each Committee meeting during 2022. Meeting Key discussion points February 2022 March 2022 July 2022 October 2022 December 2022 • Strategic review of remuneration • 2022 annual bonus and 2022-2024 LTIP design and targets • 2021 Directors’ Remuneration Report • Impact of new IFPR regulations • Material Risk Taker list • Evaluation of Committee performance • 2021 annual bonus and 2019-2021 LTIP outcomes • Review of 2022 salary proposals • 2022 annual bonus and 2022-2024 LTIP design and targets • 2021 Directors’ Remuneration Report • 2022 Committee objectives • Strategic review of remuneration • Review of executive remuneration trends • Wider employee trends and policies • Remuneration Policy review and Remuneration Policy Statements • Annual review of Material Risk Taker List • Strategic review of remuneration • Material Risk Taker list • Financial Wellbeing Award • Strategic review of remuneration • Update on 2022 GMB pay outturns • Wider employee remuneration trends and pay • 2022 Directors’ Remuneration Report • Material Risk Taker list • Gender pay gap reporting • Annual audit of EdenTree Remuneration Policy • 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 adviser 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 provided additional data to support the determination of pay and conditions throughout the Group. Fees for professional advice to the Committee paid to Deloitte were £97,650 (2021: £137,250). The Committee is satisfied that the advice it received during 2022 from Deloitte was impartial. To assist its work, during the year the Committee received input from the Group Chief Executive, Group Chief Financial Officer, Group HR Director, Deputy Group HR Director, Group Chief Actuary, Group Chief Risk and Compliance Officer and Group Reward Director. Such input, however, did not relate to their own remuneration. Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 106 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Remuneration ‘At a Glance’ – Remuneration Policy summary and implementation for 2023 The table opposite sets out the key features of the Remuneration Policy and how it will be implemented in 2023. The full Remuneration Policy can be found in the 2021 Directors’ Remuneration Report. The principles which underpin the Group’s reward structures for all Group employees are summarised in the Remuneration Committee Chair’s Statement. The full description of the principles, including detail on how the Committee has addressed the principles in the UK Corporate Governance Code of: i) clarity; ii) simplicity; iii) risk; iv) predictability; v) proportionality; and vi) alignment to culture, were set out in last year’s Policy Report. Element of pay Operation Base salary Reviewed annually with any increases normally taking effect in April. Implementation for 2023 CEO: £523,700 • • Deputy CEO: £457,579 • Group Chief Financial Officer: £339,000 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. No change for 2023 For 2022, the employer contribution rate to the UK Defined Contribution Scheme for Executive Directors 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 2022, these were: i) Benefact Group PBT (including fair value investment gains/losses); ii) Benefact Group 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. The awards are granted annually and operate in three-year periods. 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. Targets are set annually for each successive three-year LTIP period. The measures applicable to the 2022-2024 LTIP period were: i) Benefact Group 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. No change for 2023 The maximum and target opportunities are unchanged for 2023, with targets for 2023 being: i) Benefact Group PBT (including fair value investment gains/losses); ii) Benefact Group 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. No change to the award levels. The measures applicable to the 2023-2025 LTIP period are: i) Benefact Group 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. Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 107 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Remuneration ‘At a Glance’ – variable pay outturns Annual bonus outturn for the year ending 31 December 2022 Further details including information on the performance assessment of the underwriting balanced scorecard, strategic and greater good metrics are set out in the Annual Report on Remuneration section of this report. 2020-2022 LTIP outturns Further details including information on the performance assessment of the metrics are set out in the Annual Report on Remuneration section of this report. Unaudited Threshold (0.5x) Target (1.0x) Maximum (1.5x) Weighted multiplier Unaudited Benefact Group PBT (including fair value investment gains/losses)1 Benefact Group PBT (excluding fair value investment gains/losses)1 Underwriting balanced scorecard £10.0m £44.6m £75.1m 0.16 Actual £18.6m £14.1m £38.7m £49.2m 0.31 Actual £44.1m Benefact Group PBT1 (including fair value investment gains/losses) Benefact Group PBT1 (excluding fair value investment gains/losses) Threshold (20% vesting) Target (50% vesting) Maximum (100% vesting) Percentage vesting £79.5m £139.5m £198.8m 22% £88.9m £133.9m £163.2m - 50% 75% 100% 0.12 Group COR 96.6% 92.3% 89.3% EdenTree: Gross New Money £412m £700m £988m 0.08 Actual 87.1% Actual £1,175.0m Strategic targets Customer and Conduct 50% 85% 75% 90% 100% 100% Broking: Turnover £45m £47m £49m 0.05 Total Actual £47.1m 1 For consistency, amended for prior year adjustments arising from changes to accounting policy and Benefact Group plc consolidation adjustments. Strategic targets 50% 75% 100% 0.20 Greater Good 85% 90% 100% 0.16 Actual 90.2% Total 1.08 1 For consistency, amended for prior year adjustments arising from changes to accounting policy and Benefact Group plc consolidation adjustments. Actual 91.3% Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 108 37% 83% 81% 35.2% Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Annual Report on Remuneration This section of the Directors’ Remuneration Report sets out how the above Remuneration Policy was implemented in 2022 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 below shows a single total figure of remuneration received in respect of qualifying services for the 2022 financial year for each Executive Director, together with comparative figures for 2021. £000 Fixed remuneration Variable remuneration Total remuneration Salary Benefits1 Pension benefit2 Total Annual bonus3 LTIP4 Total Total Executive Director 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Mark Hews S. Jacinta Whyte5 6 Denise Cockrem 493 431 319 475 415 308 Total 1,243 1,198 14 25 13 52 14 39 13 66 53 78 33 164 61 74 32 560 534 365 167 1,459 550 528 353 1,431 391 318 209 918 416 350 221 987 245 143 106 494 319 185 108 612 636 461 315 735 535 329 2022 1,196 995 680 2021 1,285 1,063 682 1,412 1,599 2,871 3,030 1) Benefits include car allowance and private medical insurance which are valued at their taxable value. Provision of benefits during 2022 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), reducing to 12% from 1 April 2022 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. For the annual bonus earned in respect of 2022, one-third of the total bonus is deferred over a period of three years. The value of Executive Directors’ 2022 annual bonuses that are deferred is: £130k (Group Chief Executive), £106k (Deputy Group Chief Executive) and £70k (Group Chief Financial Officer). 4) LTIP represents the amount payable in respect of the three-year LTIP performance period 2020-2022 for 2022 and 2019-2021 for 2021, as disclosed in the 2021 Directors’ Remuneration Report. 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 2022 exchange rate of 1.6124 Canadian dollars to 1 GBP has been used in respect of both 2021 and 2022. 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 £33k (2021: £30k) that Mark Hews earns in respect of this role is paid directly to the Group by MAPFRE RE and is not received by Mark Hews. Denise Cockrem is a NED for ITM Power plc and was appointed to their Board in July 2022. The fee of £25.5k that Denise Cockrem earns in respect of this role is paid directly to the Group by ITM Power plc and is not received by Denise Cockrem. Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 109 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Additional requirements in respect of the single total figure table Annual bonus outcomes for 2022 (audited) The annual bonus awards for 2022 were 78.3% of maximum (with the maximum award level being 100% of salary) for the Group Chief Executive; 72.9% for the Deputy Group Chief Executive; and 64.8% for the Group Chief Financial Officer. The annual bonus 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 multiplier of between 0 and 1.5 may be awarded in respect of this element of the annual bonus. The personal performance multiplier is reviewed and agreed by the Committee. Group performance is subject to the seven performance conditions which together form the business performance multiplier. For 2022 these were Benefact Group PBT (including fair value investment gains and losses) (25%); Benefact Group PBT (excluding fair value investment gains and losses) (25%); Underwriting balanced scorecard (10%); EdenTree: Gross new money (5%); Broking: Turnover (5%); delivery of Group strategic initiatives in line with the Group’s strategic plan (15%); and Greater Good measures (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 business performance multiplier as shown in the table below. Performance targets for 2022 were not adjusted and remain as originally determined. The overall bonus outcome at the end of the performance year for each Executive Director is: Target bonus % X business performance multiplier X personal performance multiplier The targets relating to the GMB annual bonus and actual performance against those targets for the financial year 2022 were: Performance Condition (unaudited) Benefact Group PBT (including fair value investment gains/ losses)1 Benefact Group PBT (excluding fair value investment gains/ losses)1 Underwriting balanced scorecard EdenTree: Gross New Money Broking: Turnover Strategic targets Greater Good measures Weighting Threshold (0.5x) Target (1.0x) Maximum (1.5x) Actual performance Weighted multiplier 25% £10.0m £44.6m £75.1m £18.6m 0.16 25% £14.1m £38.7m £49.2m £44.1m 0.31 10% 50% 75% 100% 87.1% 0.12 5% 5% 15% 15% £412m £700m £988m £1,175m 0.08 £45m £47m £49m £47.1m 0.05 50% 85% 75% 90% 100% 100% 90.2% 91.3% 0.20 0.16 1.08 Aggregate business performance multiplier 1 For consistency, amended for prior year adjustments arising from changes to accounting policy and Benefact Group plc consolidation adjustments. Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 110 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report reviews; complaints handling; data security; and timely resolution of internal audit and compliance findings were met in full. Overall in 2022, this resulted in an overall outturn of 91.3% being achieved against the Greater Good measures. Personal performance Personal performance was assessed taking into consideration delivery against the Group’s business plans for 2022, 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 2022 is set out below. Mark Hews Provided outstanding leadership during 2022 across the Group during a year in which the Group successfully launched new brands for the Benefact Group culminating in the Service of Thanksgiving at Westminster Abbey. The Group’s reported profit before tax decreased, due largely to fair value investment losses resulting from the challenging economic environment. Underlying business performance was strong, and the Group remains financially resilient. The Group continued to deliver and act as a trusted partner looking after a wide range of customers and business partners. This is reflected in strong retention and satisfaction levels and growth across all divisions in the Group. During 2022 Mark Hews additionally oversaw the delivery of genuinely transformational Group-wide change including the roll out and embedding of the next chapter of the Group’s strategy which includes ambitious sustainability goals, further investment in new systems and a new legal structure for Benefact Group. Employee engagement levels remained high, with the Group retaining a two-star ‘outstanding’ accreditation by Best Companies reflecting the Group’s commitment to supporting colleagues and positive progress towards the Group’s goal of being an employer of choice. Continued to provide strong and consistent leadership across the Group’s General Insurance portfolio of businesses. The Group’s insurance businesses performed strongly with excellent growth in gross written premiums driven by new business wins and supported by rate strengthening. Jacinta Whyte played a central leadership role in the Group’s growth strategy ensuring that the Group’s general insurance businesses continued to drive improvement across the core disciplines of underwriting, claims management, risk management and business development. S. Jacinta Whyte Denise Cockrem Maintained the financial strength of the Group positioning the business to enable future aspirations for growth. Oversaw several key programmes including IFRS 17, operational resilience and business optimisation. Denise Cockrem additionally assumed responsibility for the oversight of a programme of work to reinforce and further develop the Group’s overall approach to and management of data, enabling the Group to be increasingly strategic in its use of data as an asset. The underwriting balanced scorecard was based on four targets relating to rate change, retention, new business and rate strength change. There was strong performance across the scorecard which resulted in combined outturn of 87.1% being achieved under this measure for 2022. The Strategic Targets performance condition measures delivery of the Group’s change programme. As set out in more detail in the Strategic Report, 2022 saw significant progress on the Group’s strategic initiatives. During the year, the Group delivered transformational Group-wide change. The level and impact of strategic change across the Group is increasing year-on-year with 2022 representing the most material level of change to date. This resulted in an outturn of 90.2% being achieved against the strategic targets measure for 2022. The Greater Good performance condition measures are aligned to the Group’s ambition to build a Movement for Good in order to incentivise delivery of both the Group’s charitable giving and colleagues’ engagement with the Group’s MyGiving programme; and to their commitment to delivering exceptional customer service and the highest standards of conduct and governance. The Customer and Conduct and Governance performance conditions measure delivery across a range of customer and conduct metrics. Customer satisfaction continued to be high through 2022, with customers and brokers reporting that they were satisfied with the service they received from Ecclesiastical. Targets in respect of compliance with the Group’s risk appetite; regulatory feedback; the Group’s rolling programme of product Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 111 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Performance condition Weighting Threshold – 20% vesting Target – 50% vesting Maximum – 100% vesting Actual Vesting (% of maximum for performance condition) (unaudited) Benefact Group PBT (excluding fair value investment gains and losses)1 Benefact Group PBT (including fair value investment gains and losses)1 Group COR Strategic Targets Customer and Conduct Total 25% £88.9m £133.9m £163.2m £75.0m - 25% £79.5m £139.5m £198.8m £82.6m 22% 25% 15% 10% 96.6% 50% 85% 92.3% 75% 90% 89.3% 100% 100% 94.2% 91.7% 96.1% 37% 83% 81% 35.2% 1 For consistency, amended for prior year adjustments arising from changes to accounting policy and Benefact Group plc consolidation adjustments. Bonuses are earned in respect of the financial year and are paid in March following the end of the financial year. One- third of the total annual bonus is deferred over three years, in cash, and all annual bonus outcomes are subject to malus and clawback as set out in full in the 2021 Directors’ Remuneration Report. LTIP outcomes in 2022 (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 2020-2022, which vested at 35.2%. Vesting was dependent on performance over the three financial years ending on 31 December 2022. The 2020-2022 Group LTIP is subject to five performance conditions: Benefact Group PBT (excluding fair value investment gains and losses) (25%); Benefact Group 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 and remain as originally determined. Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 112 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report The Strategic Targets performance condition measures delivery of the Group’s change programme over the period 2020–2022. During the performance period, the Group surpassed its target of delivering £100m to good causes. Other key achievements 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. Overall, substantial progress has been made on the Group’s change programme, resulting in an outturn of 91.7% being achieved against the strategic targets measure for 2020-2022. 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. Claims service outturns were slightly below target in 2020, reflecting the challenges of Covid-19, but met in full in 2021. Targets relating to the Group’s rolling programme of product reviews were met in full in 2021 and 2020. An overall outturn of 96.1% was achieved over the period. Combining the financial and non-financial performance results in an overall vesting level of 35.2%. The Group LTIP outcome that vests in respect of each Executive Director in respect of 2020-2022 is shown below. LTIP grant % of salary Mark Hews S. Jacinta Whyte1 Denise Cockrem 150% 100% 100% Total LTIP vesting £000 245 143 106 % of maximum 35.2% 35.2% 35.2% 1 An average 2022 exchange rate of 1.6124 Canadian dollars to 1 GBP has been used in respect of 2022. Scheme interests awarded during 2022 (audited) During 2022, awards comprising of a cash sum were granted under the 2022-2024 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 2025, to the extent that the applicable performance targets are met. The vesting date for these awards is the date on which the Group’s 2024 results are announced, anticipated to be during March 2025. 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 2022-2024 Group LTIP Mark Hews 5 July 2022 S. Jacinta Whyte2 5 July 2022 Denise Cockrem 5 July 2022 180% 855 20% 120% 498 20% 120% 369 20% 31 December 2024 31 December 2024 31 December 2024 • Benefact Group PBT (including fair value investment gains/ losses) 30%; • Return on Capital 30%; • GI Underwriting Profit 10%; • EdenTree Revenue 5%; • Broking and Advisory Turnover 5%; • Grant to Benefact Trust Limited 10%; and • Environmental 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 2022 exchange rate of 1.6124 Canadian dollars to 1 GBP has been used. Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 113 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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 2022 2021 2020 2019 Method Option A2 Option A2 Option A2 Option A2 25th percentile pay ratio Median pay ratio 75th percentile pay ratio 28:1 32:1 30:1 40:1 21:1 23:1 23:1 29:1 15:1 17:1 16:1 21:1 The total remuneration and salary values for the 25th, median and 75th percentile employees for 2022 were: 25th percentile Total remuneration3 £42,587 Salary £35,716 Median £57,136 £46,314 75th percentile £81,029 £63,847 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 2022. The Group Chief Executive was paid 21 times the median employee in 2022, with the CEO pay ratios being broadly consistent with the prior year. The pay ratio is considered appropriate as a large proportion of the Group Chief Executive’s pay is based on the performance of the Group, business units, and the individual on both short-term and long-term time horizons. 2022 awards under both the Group’s GMB and employee annual bonus schemes were lower in comparison to the prior year, in line with 2022 performance. Vesting of the 2020-2022 Group LTIP was lower than the prior year. The salary increase for the CEO in April 2022 was in line with the wider workforce. 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 2021 to 2022) 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 reflect that of the Board. Salary Taxable benefits2 Annual bonus Executive Directors Mark Hews Jacinta Whyte Denise Cockrem UK-based employees Average UK-based employees1 3.8% 3.8% 3.8% 6.6% 0.1% -35.2% 0% 5.6% -6.0% -9.3% -5.3% -8.5% 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 decrease for the Deputy Group Chief Executive in 2022 is due to a payment of £15k received in 2021 in respect of outstanding annual leave. Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 114 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Relative importance of spend on pay Group Chief Executive pay for performance comparison The table below sets out for 2022 and 2021, the actual costs of employee remuneration; grants paid to Benefact Trust Limited; and dividends paid to Preference shareholders. Benefact Group PBT in each year is provided for context. 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 2022. £000 2022 Remuneration paid to all Group employees2 92,834 Gross charitable grants to the ultimate parent company, Benefact Trust Limited 20,000 20211 84,463 21,000 % change 9.9% -4.8% Non-Cumulative Irredeemable Preference share dividend 9,181 9,181 (Loss)/profit before tax2 (4,773) 79,178 Nil n/a 1 To ensure comparability between years, the comparatives have been re-presented for changes in accounting policy, discontinued operations and the amounts recharged to related undertakings not within the Group. 2 Ecclesiastical Insurance Office plc (EIO) Group. Financial year ending 31 December Financial year Group Chief 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Executive1 Total remuneration (single figure) £000 Annual bonus received (% of maximum) Long-term incentive vesting (% of maximum) Mark Hews 569 907 1,089 1,370 1,212 1,240 1,489 1,116 1,285 1,196 Michael Tripp 330 162 N/A N/A N/A N/A N/A N/A N/A N/A Mark Hews 45% 78% 88% 97% 99% 84% 96% 45% 88% 78% Michael Tripp2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Mark Hews3 4% 60% 70% 88% 75% 88% 86% 54% 47% 35% Michael Tripp4 4% 47% N/A 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. Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 115 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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 2022. Wider employee engagement 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. 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 while 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 2022 with increased fees becoming effective from 1 April 2023. Prior to that, fees were increased on 1 April 2022, and it is planned that fees will now be reviewed annually. The fees set out below are commensurate with the demands and responsibilities of the NED roles. £ Fees Taxable Benefits1 Non-Executive Directors 2022 2021 David Henderson 150,437 145,000 Chris Moulder Rita Bajaj2 Francois-Xavier Boisseau3 Sir Stephen Lamport4 Neil Maidment Andrew McIntyre Angus Winther Caroline Taylor5 Total 77,813 57,062 70,550 70,550 57,062 70,550 68,475 - 75,000 25,417 61,500 59,087 55,000 68,000 66,000 46,879 2022 636 802 829 - 1,127 - - - - 2021 182 - - - 385 - - - 222 789 622,499 601,883 3,394 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 Rita Bajaj was appointed as a NED on 15 July 2021. 3 Francois-Xavier Boisseau was appointed as the Consumer Duty Champion on 27 September 2022. He also undertakes a Broker Oversight role having been appointed on 1 July 2021. 4 Sir Stephen Lamport was appointed as the Chair of the Group Remuneration Committee on 8 September 2021. 5 Caroline Taylor was retired from the Board and as Chair of the Group Remuneration Committee on 8 September 2021. Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 116 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report The information provided in this part of the Annual Report on Remuneration is not subject to audit. Statement of implementation of Remuneration Policy in 2023 The implementation of the Remuneration Policy will be consistent with that outlined in the Directors’ Remuneration Policy ‘At a Glance’ section. The full Remuneration Policy can be found in the 2021 Directors’ Remuneration Report. Details of how this policy will apply in 2023 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%, which is lower than the wider workforce of 6.15%. The following salaries will apply from 1 April 2023: £000 Salary Salary Percentage Group performance measures Percentage weighting increase Benefact Group PBT (including fair value investment gains and losses) 25% Benefact Group 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% 10% 5% 5% 15% 15% The overall bonus outcome at the end of the performance year for each Executive Director is: Target bonus % X business performance multiplier X personal performance multiplier The maximum opportunity under the annual bonus plan in 2023 is 100% of salary. Annual bonuses in respect of 2023 will be subject to deferral over a period of three years, of one-third of the total annual bonus awarded. 1 April 2023 1 April 2022 524 458 499 436 5.0% 5.0% 339 323 5.0% Mark Hews S. Jacinta Whyte1 Denise Cockrem 1 An average 2022 exchange rate of 1.6124 Canadian dollars to 1 GBP has been used. Annual bonus for 2023 The annual bonus performance conditions and targets have been set in accordance with the Directors’ Remuneration Policy. 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 2023 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 2023, these will be unchanged as follows: Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 117 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report LTIP for 2023-2025 Fees (Non-Executive Directors) The 2023-2025 LTIP performance conditions and targets have been set in accordance with the Directors’ Remuneration Policy above. The performance conditions below applying for the 2023-2025 Group LTIP: The following table sets out the current and future fee structure which will apply from 1 April 2023. £000 Fees (effective 1 April 2022) Fees (effective 1 April 2023) Group performance measures Percentage weighting All-inclusive fee for the Group Chair Benefact Group 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 2023-2025 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. 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 Fee for workforce engagement NED Fee for Consumer Duty Champions (two years only) 152 79 58 14 14 14 14 12 12 - - 160 83 61 15 15 15 15 12 12 4 5 1 The fee for chairing the Group Nominations Committee is included within the all-inclusive fee for the Senior Independent Director. By order of the Board Sir Stephen Lamport Chair of the Group Remuneration Committee 16 March 2023 Governance – Group Remuneration Report Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 118 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Section Three Financial Statements Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Consolidated statement of profit or loss 120 125 Consolidated and parent statement of comprehensive income 125 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 126 126 127 127 Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 119 119 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Governance Financial StatementsOther InformationStrategic Report Independent auditors’ report to the members of Ecclesiastical Insurance Office plc 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 2022 and of the Group’s loss 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 as applied in accordance with the provisions of the Companies Act 2006; and • have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements, included within the Annual Report and Accounts 2022 (the “Annual Report”), which comprise: Consolidated and parent statements of financial position as at 31 December 2022; Consolidated statement of profit or loss, Consolidated and parent statements of comprehensive income, Consolidated and parent statements of cash flows and Consolidated and parent statements of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies. 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. Our opinion is consistent with our reporting to the Group Audit Committee. Our audit approach Context 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. The Company is a UK headquartered general insurer. The majority of business is written in the UK; however, it also has branches in Ireland and Canada and subsidiaries in Australia. The Group of companies headed/ owned by Ecclesiastical Insurance Office includes subsidiaries that carry out life insurance, investment management and financial advisory business. The Company also owned an insurance broking business which was sold in the year to a related party. 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 Physical and Sexual Abuse “PSA” reserves (Group and Parent) To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided. Materiality • Overall Group materiality: £10,000,000 (2021: £11,382,000) based on 1.6% of Net assets. • Overall Parent company materiality: £9,500,000 (2021: £10,813,000) based on 1.7% of Net assets. • Performance materiality: £7,500,000 (2021: £8,536,000) (Group) and £7,125,000 (2021: £8,109,000) (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. 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. Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 120 120 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Governance Financial StatementsOther InformationStrategic Report This is not a complete list of all risks identified by our audit. The appropriateness of the assumptions used to value the Asbestos reserves, which was part of the key audit matters in relation to general insurance reserves last year, is no longer included because of the level of subjectivity in relation to the assumptions decreasing. Otherwise, the key audit matters below are consistent with last year. Key audit matter How our audit addressed the key audit matter Assumptions used in calculating Physical and Sexual Abuse “PSA” reserves (Group and Parent) With involvement from our Actuarial specialists we have performed the following procedures: As disclosed in the Group Audit Committee Report and notes 2, 3 and 28. The valuation of the general insurance liabilities is a complex process involving inherent uncertainty and is one of the most significant areas of management judgement within the financial statements of the Group and Parent company. We consider the area of significant judgement to be specific to assumptions used in calculating the reserves for PSA exposures, which contribute to the liability reserves held as at the balance sheet date described in note 3. 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. The uncertainty around claims frequency, claims severity, discount rate, future inflation and reserve margin require significant management judgement and estimation in setting the reserves. • 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 on the level of reserves calculated. This includes consideration of the historic claim numbers, average claims cost, the current regulatory environment and IICSA review (in the UK), discount rate, future claims 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 PSA reserves to be appropriate. How we tailored the audit scope The impact of climate risk on our audit As part of our audit we made enquiries of management to understand the process that has been adopted to assess the extent of the potential impact of climate risk on the Group’s and Parent’s financial statements and to support disclosures made. We remained alert when performing our audit procedures for any indicators of the impact of climate risk, including in our testing of going concern, valuation of investment property and valuation of reserves which have been identified as the areas of higher risk of impact. We also considered the consistency of the disclosures in relation to climate change between the Annual Report and the financial statements based on the knowledge obtained from our audit. 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. 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 up until December 2022 an insurance broking business all 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 financially significant reporting components. We have performed a full scope audit of these components. 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. The result of the above scoping was that we achieved greater than 95% coverage of gross written premiums and insurance contract liabilities. Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 121 121 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall materiality How we determined it Rationale for benchmark applied Financial statements – Group Financial statements – Parent company £10,000,000 (2021: £11,382,000). £9,500,000 (2021: £10,813,000). 1.6% of Net assets 1.7% of Net assets The engagement team concluded that a net assets benchmark is the most appropriate when setting an overall materiality on the 2022 audit engagement. In our view, we consider net assets to be the appropriate benchmark as it best aligns with the underlying interest of the stakeholders. 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 2022. The engagement team concluded that a net assets benchmark is the most appropriate when setting an overall materiality on the 2022 audit engagement. In our view, we consider net assets to be the appropriate benchmark as it best aligns with the underlying interest of the stakeholders. 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 2022. 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 £9.5 million. Certain components were audited to a local statutory audit materiality that was also less than our overall Group materiality. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2021: 75%) of overall materiality, amounting to £7,500,000 (2021: £8,536,000) for the Group financial statements and £7,125,000 (2021: £8,109,000) for the Parent company financial statements. In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Group Audit Committee that we would report to them misstatements identified during our audit above £500,000 (Group audit) (2021: £560,000) and £475,000 (Parent company audit) (2021: £540,000) 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 going concern assessment which included the Board approved income statement, balance sheet, cash flow and solvency forecasts, along with stressed and downside scenarios; • considered the forward looking assumptions and assessed the reasonableness of these 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. 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. Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 122 122 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below. Strategic Report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended 31 December 2022 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. Responsibilities for the financial statements and the audit Responsibilities of the Directors for the financial statements As explained more fully in the Statement of 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 also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate the financial statements and management bias in accounting estimates, specifically the valuation of specific general insurance reserves including 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: Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 123 123 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report 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. Appointment Following the recommendation of the Group Audit Committee, we were appointed by the members 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 3 years, covering the years ended 31 December 2020 to 31 December 2022. Sue Morling (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Bristol 16 March 2023 Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www. frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinions, has been prepared for and only for the 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. • enquired 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; • read key correspondence with the Prudential Regulation Authority and the Financial Conduct Authority in relation to compliance with laws and regulations; • reviewed relevant meeting minutes including those of the Group Board, Group Audit Committee and Group Risk Committee; • procedures related to the valuation of specific general insurance reserves such as PSA reserves described in the related key audit matter; • risk based target testing of journal entries, in particular any journal entries which include characteristics which were identified as potentially being indicative of a fraudulent journal; and • 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. Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 124 124 Financial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Governance Financial StatementsOther InformationStrategic Report Governance Financial StatementsOther InformationStrategic Report Strategic Report Governance Financial Statements Other Information Consolidated statement of profit or loss Consolidated statement of profit or loss for the year ended 31 December 2022 for the year ended 31 December 2022 Consolidated and parent statements of comprehensive income Consolidated and parent statements of comprehensive income for the year ended 31 December 2022 for the year ended 31 December 2022 Revenue Gross written premiums Outward reinsurance premiums Net change in provision for unearned premiums Net earned premiums Fee and commission income Other operating income Net investment return Total revenue Expenses Claims and change in insurance liabilities Reinsurance recoveries Fees, commissions and other acquisition costs Other operating and administrative expenses Total operating expenses Operating (loss)/profit Finance costs (Loss)/profit before tax from continuing operations Tax credit/(expense) (Loss)/profit for the year from continuing operations Net profit attributable to discontinued operations Profit for the year (attributable to equity holders of the Parent) *The comparative financial statements have been restated as detailed in note 40. Notes 5, 6 6 6 7 8 9 9 10 5 14 11 16 2022 £000 558,551 (238,069) (16,505) 303,977 63,533 2,020 4,058 373,588 (285,680) 136,507 (108,696) (118,036) (375,905) (2,317) (2,456) (4,773) 3,015 (1,758) 13,696 11,938 Restated* 2021 £000 486,211 (198,601) (14,620) 272,990 55,417 1,136 102,897 432,440 (269,633) 123,822 (95,649) (109,514) (350,974) 81,466 (2,288) 79,178 (18,021) 61,157 338 61,495 Profit for the year Other comprehensive (expense)/income Items that will not be reclassified to profit or loss: Actuarial (losses)/gains on retirement benefit plans Attributable tax Items that may be reclassified subsequently to profit or loss: Gains/(losses) on currency translation differences (Losses)/gains on net investment hedges Attributable tax Net other comprehensive (expense)/income Total comprehensive income (attributable to equity holders of the Parent) Notes 2022 Restated* 2021 Group £000 11,938 (10,171) 2,543 (7,628) 5,392 (4,514) 825 1,703 (5,925) 6,013 Parent £000 23,572 (10,171) 2,543 (7,628) 2,470 (1,938) 485 1,017 (6,611) 16,961 Group £000 61,495 38,660 (8,098) 30,562 (2,356) 1,912 (183) (627) 29,935 91,430 Parent £000 66,335 38,660 (8,098) 30,562 551 (713) 131 (31) 30,531 96,866 19 27 27 27 *The comparative financial statements have been restated as detailed in note 40. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 125 125 125 Page 125 Page 126 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsConsolidated and parent statements of changes in equity Consolidated and parent statements of changes in equity for the year ended 31 December 2022 for the year ended 31 December 2022 Consolidated and parent statements of financial position Consolidated and parent statements of financial position at 31 December 2022 at 31 December 2022 Group Notes 15 15 15 15 15 15 At 1 January 2022 Profit for the year Other net income/(expense) Total comprehensive income Dividends Gross charitable grant Tax relief on charitable grant Reserve transfers At 31 December 2022 At 31 December 2020 (as reported) Restatement* At 1 January 2021 (as restated*) 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 (as restated*) Parent At 1 January 2022 Profit for the year Other net income/(expense) Total comprehensive income Dividends Gross charitable grant Tax relief on charitable grant Group tax relief in excess of standard Reserve transfers At 31 December 2022 At 31 December 2020 (as reported) Restatement* At 1 January 2021 (as restated*) 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 Reserve transfers At 31 December 2021 (as restated*) Share capital £000 120,477 - - - - - - - 120,477 120,477 - 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 - 4,632 - - - - - - - - 4,632 268 - - - - - - (46) 222 599 - 599 - (18) (18) - - - (313) 268 269 - - - - - - - (359) (90) 600 - 600 - (18) (18) - - - - (313) 269 17,603 - 1,703 1,703 - - - - 19,306 18,230 - 18,230 - (627) (627) - - - - 17,603 7,036 - 1,017 1,017 - - - - - 8,053 7,067 - 7,067 - (31) (31) - - - - - 7,036 Retained earnings £000 491,981 11,938 (7,628) 4,310 (9,181) (20,000) 3,800 46 470,956 425,290 494 425,784 61,495 30,580 92,075 (9,181) (21,000) 3,990 313 491,981 420,088 23,572 (7,628) 15,944 (9,181) (20,000) 3,800 (105) 359 410,905 348,644 494 349,138 66,335 30,580 96,915 (9,181) (21,000) 3,990 (87) 313 420,088 Total £000 634,961 11,938 (5,925) 6,013 (9,181) (20,000) 3,800 - 615,593 569,228 494 569,722 61,495 29,935 91,430 (9,181) (21,000) 3,990 - 634,961 552,502 23,572 (6,611) 16,961 (9,181) (20,000) 3,800 (105) - 543,977 481,420 494 481,914 66,335 30,531 96,866 (9,181) (21,000) 3,990 (87) - 552,502 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 Assets classified as held for distribution 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 Retirement benefit obligations Deferred tax liabilities Current tax liabilities Deferred income Subordinated liabilities Other liabilities Liabilities classified as held for distribution Total liabilities Notes 31 December 2022 Group £000 Parent £000 Restated* 31 December 2021 Group £000 Parent £000 Restated* 1 January 2021 Group £000 Parent £000 17 18 30 19 20 21 22 28 24 25 16 26 28 33 34 29 19 30 31 32 31 16 30,255 52,526 8,565 15,338 31,405 140,846 870,749 306,962 4,212 310,788 104,664 14,999 1,891,309 120,477 4,632 490,484 615,593 979,300 58,479 19,062 5,961 4,960 36,723 308 33,167 25,818 101,443 10,495 1,275,716 28,158 42,130 31 15,338 30,906 140,846 636,637 201,246 4,212 269,017 66,569 3,722 1,438,812 120,477 4,632 418,868 543,977 696,024 - 18,712 5,870 4,960 35,905 228 26,929 25,818 80,389 - 894,835 52,512 46,027 8,480 28,304 35,245 163,355 883,770 253,436 5 240,910 114,036 - 1,826,080 120,477 4,632 509,852 634,961 939,069 15,519 22,738 6,373 7,058 48,965 1,232 28,385 24,433 97,347 - 1,191,119 27,501 36,740 - 28,304 32,771 162,822 707,106 170,909 5 194,808 48,437 - 1,409,403 120,477 4,632 427,393 552,502 669,375 - 20,806 6,068 7,058 46,733 819 21,951 24,433 59,658 - 856,901 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 4,632 444,613 569,722 868,155 - 25,450 6,499 6,530 29,846 1,293 25,908 - 93,561 - 1,067,648 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 4,632 356,805 481,914 615,708 - 22,838 5,842 6,530 28,562 1,293 18,858 - 55,087 - 765,124 Total shareholders' equity and liabilities 1,891,309 1,438,812 1,826,080 1,409,403 1,637,370 1,247,038 *The comparative financial statements have been restated as detailed in note 40. The financial statements of Ecclesiastical Insurance Office plc, registered number 24869, on pages 126 to 201 were approved and authorised for issue by the Board of Directors on 16 March 2023 and signed on its behalf by: *The comparative financial statements have been restated as detailed in note 40. David Henderson Chair Mark Hews Group Chief Executive The revaluation reserve represents cumulative net fair value gains on owner-occupied property. Further details of the translation and hedging Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc reserve are included in note 27. Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 126 126 126 Page 127 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsConsolidated and parent statements of cash flows Consolidated and parent statements of cash flows for the year ended 31 December 2022 for the year ended 31 December 2022 Notes to the financial statements Notes to the financial statements Notes 2022 Restated* 2021 1 Accounting policies (Loss)/profit before tax from continuing operations Profit before tax from discontinued operations Adjustments for: Depreciation of property, plant and equipment (Profit)/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 losses/(gains) on financial instruments and investment property Dividend and interest income Finance costs Adjustment for pension funding Changes in operating assets and liabilities: Net increase in insurance contract liabilities Net increase in 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/(used) by operations Purchases of financial instruments and investment property Sale of financial instruments and investment property Dividends received Interest received Tax paid Net cash (used by)/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 Disposal of subsidiary, net of cash disposed Net cash from/(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 (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash classified as held for distribution Exchange gains/(losses) on cash and cash equivalents Cash and cash equivalents at end of year 22 25 *The comparative financial statements have been restated as detailed in note 40. Group £000 (4,773) 14,115 6,261 (9) 3,558 - - (14,293) 94,121 (22,906) 2,528 695 21,449 42,961 (47,597) (5,349) (84,292) 21,944 (159) 28,254 (208,588) 156,110 7,177 17,022 (6,487) (6,512) (3,234) 28 (3,900) 36,355 29,249 (2,528) (3,267) - - (9,181) (15,000) (29,976) (7,239) 114,036 (5,177) 3,044 104,664 Parent £000 21,030 - 5,373 - 3,351 - (161) (20,146) 66,658 (20,075) 2,456 695 17,835 - (28,660) (4,710) (73,573) 22,214 (205) (7,918) (109,878) 115,561 10,795 10,732 (6,324) 12,968 (2,934) - (3,900) 45,197 38,363 (2,456) (2,605) (5,157) - (9,181) (15,000) (34,399) 16,932 48,437 - 1,200 66,569 Group £000 79,178 459 6,155 24 856 4,765 - - (58,340) (21,802) 2,364 1,646 81,352 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 90,319 - 5,285 11 622 87 - (5) (58,384) (18,822) 2,276 1,646 54,839 - (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 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 IAS applicable at 31 December 2022. 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 financial statements. In accordance with IFRS 4, Insurance Contracts, on initial application of UK adopted IAS, 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 2022, and are therefore applicable for the 31 December 2022 financial statements. None had a significant impact on the Group. 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 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. The Group's disposal of a subsidiary on the 30 December 2022, as detailed in note 16 to the financial statements, had no impact on the Group's ability to defer the application of IFRS 9, 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. 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. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 127 127 127 Page 130 Page 129 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements 1 Accounting policies (continued) Notes to the financial statements 1 Accounting policies (continued) Expected impact on financial statements There will be no change in the way debt and equity instruments are classified and measured in the financial statements, which will continue to be measured at fair value through profit or loss. The Group expects to recognise expected credit losses (ECLs) on certain financial assets classified and measured at amortised cost. No changes are expected from the more principles-based hedge accounting requirements. In accordance with the transition requirements of IFRS 9, the comparative period is not currently expected to be restated and any differences in carrying amounts will be reported in opening retained earnings as at 1 January 2023. 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. Effective date Applicable to annual reporting periods beginning on or after 1 January 2023. Expected impact on financial statements IFRS 17 is a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Key relevant concepts for the Group are: - Expected profits (represented by the contractual service margin, “CSM”) are explicitly spread over the lifetime of the contract in a formulaic manner matched to the provision of current and future coverage, rather than for example embedded within ongoing releases from a prudent reserving basis. Discounting of the claims The Group already incorporates discounting into its measurement techniques and the discount rates have been reserves reviewed to ensure they are compatible with IFRS 17 principles. The Group’s adoption of IFRS 17 and the discounting requirements is not expected to be significantly different to the Group’s application of existing accounting policies. Risk adjustment The risk adjustment is defined as the compensation required by the entity for bearing non-financial risks. 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, also allowing special uncertainties relating to events not in the data. The Group reviews and refines the approach that it uses to calibrate risks and uncertainties on an ongoing basis, and in relation to IFRS 17 is aligning the distribution measurement approaches, and allowance for diversification between risk types, to risk management and appetite in order to reflect each entity’s compensation required. The Group is reviewing and quantifying what the resulting confidence level to be disclosed in the 2023 annual accounts will be. 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 expects to continue deferring acquisition costs. Amendments to other standards in issue but not yet effective are not expected to materially impact the Group. Use of estimates The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements. 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 - Expected losses (arising on onerous contracts) are recognised up front and as and when identified. material impact on the financial statements are disclosed in note 2. Where contracts are serviced over a long coverage period, such as for life insurance, the impact of this conceptual change is potentially significant, requiring new valuation models. Applying IFRS 17 to shorter duration insurance coverage (such as annual general insurance policies, which make up the vast majority of the Group’s insurance contracts), does not lead to conceptual change to the basis, because previous practices allowed for the deferral of expected future profits and initial recognition of losses. However, the changes in presentation and disclosure are significant, leading to more aggregated line items in the financial statements, and changes which impact key performance indicators (for example Gross Written Premium is no longer an accounting line). It is not yet practicable to quantify the overall additional impact on the Group’s financial statements expected at transition, however a number of individual decisions that will impact the net assets quantum are well progressed, with the following being the most important areas: Key item Impact Operating profit or loss Operating profit or loss is stated before finance costs. Basis of consolidation Subsidiaries Subsidiaries are those entities over which the Company, directly or indirectly, has control, with control being achieved when the Company has power over the investee, is exposed to variable return from its involvement with the investee and has the ability to use its power to affect its returns. The results and cash flows relating to subsidiaries acquired or disposed of in the year are included in the consolidated statement of profit or loss, and the consolidated statement of cash flows, up to the date of disposal, and are included within discontinued operations where appropriate. All inter-company transactions, balances and cash flows are eliminated, with the exception of those between continuing and discontinued operations. Transitional Fair Value of The Group has a portfolio of life insurance contracts supporting pre-paid funeral plans, which ceased to be written In the Parent statement of financial position, subsidiaries are accounted for within financial investments at cost less impairment, in accordance with Whole of Life insurance from 2013. An assessment has been carried out regarding the availability of suitable data to enable a full International Accounting Standard (IAS) 27, Separate Financial Statements. policies retrospective calculation, concluding that this would be impracticable. Level of aggregation for portfolios and groups of Within the general insurance business, the Group has identified seven portfolios of insurance contracts and five portfolios of reinsurance contracts as at the effective transition date. For the majority of product lines, the Group insurance and reinsurance issues packaged policies incorporating a range of lines of business within a single contract. Accounting policy contracts development has focussed on applying the IASB’s Transition Resource Group’s guidance to identify when it is appropriate to unbundle individual components and treat as separate contracts. In the majority of cases, the Group’s contracts should not be unbundled below the legal contract level. The most material determinant of portfolios of significant risks that are managed together is the geographic territories in which the Group underwrites its core general insurance products. An outcome from this is instances of up front recognition of losses on groups of onerous contracts within a portfolio will be triggered at a more granular level than previously, 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 The Group expects to use the premium allocation approach for the majority of its general business insurance contracts. Definitions of what constitutes reasonably expected assumption changes on future profitability, and measuring the differences between the general measurement model and the premium allocation approach as a proportion of exposure, indicates that all of the Group’s core insurance products and associated reinsurance is currently eligible. The Group uses the acquisition method of accounting to account for business combinations. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the acquisition date. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Non-controlling interests are measured either at fair value or at a proportionate share of the identifiable net assets of the acquiree. Goodwill is measured as the excess of the aggregate of the consideration transferred, the fair value of contingent consideration, the amount of non-controlling interests and, for an acquisition achieved in stages, the fair value of previously held equity interest over the fair value of the identifiable net assets acquired. If the cost of acquisition is less than the fair value of the net assets acquired, the difference is recognised directly through profit or loss. For business combinations involving entities or businesses under common control, the cost of the acquisition equals the value of net assets transferred, as recognised by the transferor at the date of the transaction. No goodwill arises on such transactions. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 128 128 128 Page 131 Page 132 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements 1 Accounting policies (continued)Notes to the financial statements 1 Accounting policies (continued)Notes to the financial statements 1 Accounting policies (continued) Notes to the financial statements 1 Accounting policies (continued) Discontinued operations and operations held for sale or distribution Assets and liabilities for a disposal group which are held for sale outside the Group or distribution within the Group are reported as assets or 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 liabilities held for sale or distribution and shown separately in the consolidated statement of financial position and carried at the lower of their financial investments and investment properties. Dividends on equity securities are recorded as revenue on the ex-dividend date. Interest and rental carrying amount and fair value less estimated selling costs. Discontinued operations comprise activities either disposed of or classified as held for income is recognised as it accrues. sale or distribution. The results of discontinued operations and profit or loss on disposal of discontinued operations are presented separately in the consolidated statement of profit or loss. Comparatives are restated where applicable. 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 Foreign currency translation The assets and liabilities of foreign operations are translated from their functional currencies into the Group's presentation currency using year- losses on investments disposed of in the accounting period. end exchange rates, and their income and expenses using average exchange rates for the year. Exchange differences arising from the translation The impact of discount rate changes on insurance contract liabilities is also presented within net investment return in order to match with the of the net investment in foreign operations are taken to the currency translation reserve within equity. On disposal of a foreign operation, such corresponding movements of assets backing the liabilities. exchange differences are transferred out of this reserve, along with the corresponding movement on net investment hedges, and are recognised in the statement of profit or loss as part of the gain or loss on sale. Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the date of the transactions. Exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised through profit or loss. Product classification Contracts under which the Group accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder or other beneficiary if a specified uncertain future event (the insured event) adversely affects the policyholder are classified as insurance contracts. Contracts that do not transfer significant insurance risk are classified as investment or service contracts. All of the Group's life business contracts 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 Claims General insurance claims incurred include all losses occurring during the year, whether reported or not, related handling costs, a reduction for the value of salvage and other recoveries, and any adjustments to claims outstanding from previous years. Claims handling costs include all internal and external costs incurred in connection with the negotiation and settlement of claims. Life business claims and death claims are accounted for when notified. Insurance contract liabilities General insurance provisions (i) Outstanding claims provisions General insurance outstanding claims provisions are based on the estimated ultimate cost of all claims incurred but not settled at the year-end date, whether reported or not, together with related claims handling costs. Significant delays are experienced in the notification and settlement of certain types of general insurance claims, particularly in respect of liability business, the ultimate cost of which cannot be known with certainty at the year-end date. An estimate is made representing the best estimate plus an uncertainty margin within a range of possible outcomes. Insurance liabilities are remeasured to reflect current market interest rates. The Group’s accounting policy for general insurance outstanding claims provisions has previously been to apply discounting only to certain longer term liabilities. The accounting policy has been changed to discount general insurance liabilities that have not previously been discounted. This change in accounting policy resulted in a credit of £13.2m recognised in this financial year and a credit of £2.6m in the prior year, both within net investment return. For further information on the prior year restatement, see note 40. confirmed. Those proportions of premiums written in a year which relate to periods of risk extending beyond the end of the year are carried The Group considers this change in accounting policy provides more reliable and relevant information. This is because, if the impact of discounting forward as unearned premiums. were not more widely applied during a period of higher interest rates (as in 2022), it would create excessive prudence in the implied claim reserves. Furthermore, this change to accounting policy better reflects the impact of the Group’s objective of matching assets with insurance liabilities when Premiums written include adjustments to premiums written in prior periods and estimates for pipeline premiums and are shown net of insurance managing exposure to interest rate risk. premium taxes. Life insurance business Insurance contract premiums are recognised as income when receivable, at which date the liabilities arising from them are also recognised. (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. Fee and commission income Fee and commission income consists primarily of reinsurance commissions and reinsurance profit commissions which are accounted for in (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 accordance with IFRS 4, Insurance contracts . It also includes distribution fees from mutual funds and commission revenue from the sale of mutual deferred acquisition costs over unearned premiums, using the current estimates of future cash flows under its contracts. Unexpired risks are fund shares which are accounted for in accordance with IFRS 15, Revenue from contracts with customers . assessed separately for each class of business. As with general insurance premiums, reinsurance commissions are accounted for in the period in which the risk commences. Those proportions of Surpluses and deficits are offset where business classes are considered to be managed together and a provision is held for any net deficit. 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 UK adopted IAS requirements, insurance contract liabilities are measured using accounting policies consistent with those adopted Other operating income Other operating income consists of the return of surplus reserves from a government-backed reinsurance scheme. It is recognised when the previously. distribution is declared. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 129 129 129 Page 133 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements 1 Accounting policies (continued)Notes to the financial statements 1 Accounting policies (continued)Notes to the financial statements 1 Accounting policies (continued) Notes to the financial statements 1 Accounting policies (continued) 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 Where the fair value of an individual property is below original cost, any revaluation movement arising during the year is recognised within net arise from contracts in-force at the year-end date. The methods and assumptions used in calculating the provision are approved by the directors investment return in the statement of profit or loss. Valuations are carried out at least every three years by external qualified surveyors. All other based on advice from the Chief Actuary, including assumptions relating to future interest rates, inflation, mortality, expenses and investment return. items classed as property, plant and equipment within the statement of financial position are carried at historical cost less accumulated Changes in the life business provision are recognised in the statement of profit or loss. depreciation and impairment. Reinsurance Land is not depreciated. No depreciation is provided on owner-occupied properties since such depreciation would be immaterial. Depreciation is The Group assumes and cedes reinsurance in the normal course of business, with retention limits varying by line of business. Premiums on calculated to write down the cost of other assets to their residual values over their estimated useful lives as follows: reinsurance assumed are recognised as revenue in the same manner as direct business. Outwards reinsurance premiums are accounted for in the same accounting period as the related premiums for the direct or inwards reinsurance business being reinsured. Estimates are included for premiums not notified by the year end and provision is made for the anticipated lapse of renewals not yet confirmed. The proportion of premiums ceded in a year which relates to periods of risk extending beyond the current year is carried forward as unearned. The Group does not reinsure its life business. Computer equipment Motor vehicles Fixtures, fittings and office equipment Right-of-use assets 3 - 5 years straight line 4 years straight line 3 - 10 years or length of lease straight line Over the term of the lease 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 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. reinsured policies and in accordance with the relevant reinsurance contract. Repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Further details on insurance contract liabilities are included in note 28. Investment contract liabilities For products that have no significant insurance risk and therefore classified as 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 strategy. 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. 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. The classification depends on the nature and purpose of the financial assets and liabilities, and is determined at the time of initial recognition. Assets and liabilities held at fair value are disclosed according to a hierarchy that reflects the significance of observable market inputs in calculating those fair values. The three levels of the fair value hierarchy are included within note 4. Financial instruments are initially measured at fair value. Their subsequent measurement depends on their classification: - Financial instruments designated as fair value through profit or loss, those held for trading, and hedge accounted derivatives under IFRIC 16, Hedges of a Net Investment in a Foreign Operation, are subsequently carried at fair value. To the extent to which they are effective, changes to the fair value of hedging instruments are recognised in other comprehensive income, with all other fair value changes recognised through profit Computer software Computer software is carried at historical cost less accumulated amortisation and impairment, and amortised over a useful life of between three or loss in the period in which they arise. and ten years, using the straight-line method. Amortisation and impairment charges incurred for the period are included in the statements of profit - All other financial assets and liabilities are measured at amortised cost, using the effective interest method (except for short-term receivables or loss within other operating and administrative expenses. and payables when the recognition of interest would be immaterial). Software costs that cannot be classified as intangible assets are charged to profit or loss during the period in which they are incurred. 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. Property, plant and equipment Owner-occupied properties are stated at fair value and movements are taken to the revaluation reserve within equity, net of deferred tax. When such properties are sold, the accumulated revaluation surpluses are transferred from this reserve to retained earnings. Offset of financial assets and financial liabilities Financial assets and liabilities are offset, and the net amount reported in the statement of financial position, when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Financial investments The Group accounts for financial assets under IAS 39 and classifies its financial investments as either financial assets at fair value through profit or loss (designated as such or held for trading), as financial assets at fair value through other comprehensive income or as loans and receivables. (a) Financial assets at fair value through profit or loss Financial investments are classified into this category if they are managed, and their performance evaluated, on a fair value basis. Purchases and sales of these investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the assets, at their fair value adjusted for transaction costs. Financial investments within this category are classified as held for trading if they are derivatives that are not accounted for as a net investment hedge or are acquired principally for the purpose of selling in the near term. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 130 130 130 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements 1 Accounting policies (continued)Notes to the financial statements 1 Accounting policies (continued)Notes to the financial statements 1 Accounting policies (continued) Notes to the financial statements 1 Accounting policies (continued) The fair values of investments are based on quoted bid prices. Where there is no active market, fair value is established using a valuation technique based on observable market data where available. Derivative financial instruments and hedging Derivative financial instruments include foreign exchange contracts and other financial instruments that derive their value from underlying equity instruments. 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 All derivatives are initially recognised in the statement of financial position at their fair value, which usually represents their cost, including any of three months or less and bank overdrafts. 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 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 recognised as an asset in the statement of financial position within cash and cash equivalents. shorter of the asset’s useful life and the lease term on a straight-line basis. 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. Lease liabilities are determined using the net present value of the payments over the lease term with the rate used to discount payments reflecting the rate implicit in the lease or, if it not readily determinable, the Group's incremental borrowing rate, and include: - Fixed payments less any lease incentives receivable; - - - - Payments and penalties from terminating the lease, if the lease term reflects the lessee exercising that option. Variable lease payments that are based on an index or rate; Amounts expected to be payable by the lessee under residual value guarantees; The exercise price of an option if the lessee is reasonably certain to exercise that option; and Right-of-use assets are initially measured at cost and subsequently measured as cost less accumulated depreciation and comprises: The amount of the initial measurement of lease liability; Any lease payment made at or before the commencement date, less any lease incentives received; - - - Any initial direct costs; and - Restoration costs. Right-of-use assets are presented within property, plant and equipment in the statement of financial position. 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. 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. Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the foreign currency translation reserve 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 are reclassified to profit or loss on disposal of the related investment. occupied by the Group. (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 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. as impaired. Subsequent recoveries are credited to profit or loss. 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 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 expense using the effective interest rate method. Deferred acquisition costs 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. 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 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 which the related revenues are earned. The reinsurers’ share of deferred acquisition costs is amortised in the same manner as the underlying outflow of resources, embodying economic benefits, will be required to settle the obligation, and a reliable estimate of the amount of the obligation asset. 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. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 131 131 131 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements 1 Accounting policies (continued)Notes to the financial statements 1 Accounting policies (continued)Notes to the financial statements 1 Accounting policies (continued) Notes to the financial statements 1 Accounting policies (continued) 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. 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 38 provides details of how these key performance indicators reconcile to the results reported under IFRS. Accounting policies applicable to discontinued operations Discontinued operations comprise of the Group’s broking and advisory and investment management businesses. Further details are included in note 16 to the financial statements. The following accounting policies are applicable only to the results of discontinued operations or balances related to the businesses sold in the year or held for sale or distribution. Revenue Revenue from discontinued operations consists of income from the Group's insurance broking activities and investment fund management fees and are accounted for in accordance with IFRS 15, Revenue from contracts with customers. Income generated from the Group's insurance broking activities is recognised at the point at which the performance obligation is satisfied, being the inception date of the insurance cover, or, where this income is variable, the point at which it is reasonably certain that no significant reversal of the amount recognised would occur. An estimate is made for the amount of fees and commission that may be clawed back as a result of policy cancellations or amendments in relation to performance obligations satisfied in the year. This is deducted from fee and commission income and recognised in provisions. Where commission or fees are received in advance of the inception date of cover, deferred income is recognised. Receivables are recognised in other debtors on inception date of cover in respect of fees or commissions that the Group has an unconditional right to receive. Fees charged for investment management services are variable based on funds under management and are recognised over time as the services are provided, once it is reasonably certain that no significant reversal of the amount recognised would occur. Fees charged for investment management services for institutional and retail fund management are also recognised on this basis. 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. 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 comprehensive income. Independent actuarial valuations are carried out at the end of each reporting period. Other benefits Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the year-end date. Taxation Income tax comprises current and deferred tax. Income tax is recognised in the statement of profit or loss except to the extent that it relates to items recognised in other comprehensive income, in which case it is recognised in the statement of comprehensive income. Current tax is the expected tax payable on the taxable result for the period, after any adjustment in respect of prior periods. Deferred tax is provided in full on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Deferred tax is measured using tax rates expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled, based on tax rates and laws which have been enacted or substantively enacted at the year-end date. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Appropriations Dividends Dividends on Ordinary shares are recognised in equity in the period in which they are declared and, for the final dividend, approved by shareholders. Dividends on Non-Cumulative Irredeemable Preference shares are recognised in the period in which they are declared and appropriately approved. Charitable donation 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. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 132 132 132 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements 1 Accounting policies (continued)Notes to the financial statements 1 Accounting policies (continued)Notes to the financial statements Notes to the financial statements 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) 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 - 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 reviewed and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the from past patterns; 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 - 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 uncertainties surrounding the estimates of claims payments for the various classes of business are discussed further in note 3. General business insurance liabilities include a margin for risk and uncertainty in addition to the best estimates for future claims. The sensitivity of profit or loss to changes in the ultimate settlement cost of claims reserves is presented in note 28(a). Future benefit payments arising from life insurance contracts The determination of the liabilities under life insurance contracts is dependent on estimates made by the Group. Estimates are made as to the expected number of deaths for each of the years in which the Group is exposed to risk. The Group bases these estimates on standard industry and national mortality tables, adjusted to reflect recent historical mortality experience of the Group's portfolio, with allowance also being made for expected future mortality improvements where prudent. The estimated mortality rates are used to determine forecast benefit payments net of forecast premium receipts. Estimates are also made as to future investment returns arising from the assets backing life insurance contracts. These estimates are based on 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 current market returns as well as expectations about future economic and financial developments. contributions. The Group applies judgement in determining the asset ceiling in accordance with IFRS Interpretations Committee Interpretation 14 (IFRIC 14). 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 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 presented in note 28(b)(iii). 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). 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 Significant insurance risk plans. 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 Group 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. (b) Key sources of estimation uncertainty In applying the Group’s accounting policies various transactions and balances are valued using estimates or assumptions. All estimates are based on management’s knowledge of current facts and circumstances, assumptions based on that knowledge and their predictions of future events and 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 19. The Group determines an appropriate discount rate at the end of each year, to be used to determine the present value of estimated future cash outflows expected to be required to settle the pension and other post-employment benefit obligations. The expected rate of medical expense inflation is determined by comparing the historical relationship of medical expense increases over a portfolio of UK-based post-retirement medical plans with the rate of inflation, making an allowance for the size of the plan and actual medical expense actions. experience. The following items are considered key estimates and assumptions which, if actual results differ from those predicted, may have significant impact Other key assumptions for the pension and post-employment benefit costs and credits are based in part on current market conditions. Additional on the following year’s financial statements: information including the sensitivity of pension and post-employment medical benefit scheme liabilities to changes in the key assumptions is 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 Unlisted equity securities The valuation of unlisted equity securities requires estimates to be made for the illiquidity discount and credit rating discount. Further details, such payments. There are various sources of estimation uncertainty as to how much the Group will ultimately pay with respect to such contracts. including the sensitivity of the valuation to these inputs, are shown in note 4(b). disclosed in note 19. Such uncertainty includes: Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 133 133 133 Page 141 Page 142 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 3 Insurance risk Through its general and life insurance operations, the Group is exposed to a number of risks, as summarised in the Risk Management section of the Strategic Report. The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount and timing of the resulting claim. Factors such as the business and product mix, the external environment including market competition and reinsurance capacity all may vary from year to year, along with the actual frequency, severity and ultimate cost of claims and benefits. This subjects the Group to underwriting and pricing risk (the risk of failing to ensure disciplined risk selection and to obtain the appropriate premium), claims reserving risk (the risk of actual claims payments exceeding the amount we are holding in reserves) and reinsurance risk (the risk of failing to access and manage reinsurance capacity at a reasonable price). (a) Risk mitigation Statistics demonstrate that the larger and more diversified the portfolio of insurance contracts, the smaller the relative variability in the expected outcome will be. The Group’s underwriting strategy is designed to ensure that the underwritten risks are well diversified in terms of type and amount of risk and geographical spread. In all operations pricing controls are in place, underpinned by sound statistical analysis, market expertise and appropriate external consultant advice. Gross and net underwriting exposure is protected through the use of a comprehensive programme of reinsurance using both proportional and non-proportional reinsurance, supported by proactive claims handling. The overall reinsurance structure is regularly reviewed and modelled to ensure that it remains optimum to the Group's needs. The 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 Notes to the financial statements Notes to the financial statements 3 Insurance risk (continued) 3 Insurance risk (continued) 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 £000 Whole of life £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) - - - - - - Total £000 301,236 178,552 93,365 39,002 91,610 70,056 486,211 287,610 314,276 191,592 91,610 70,056 405,886 261,648 (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 (business interruption). 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 For property insurance contracts, there can be variability in the nature, number and size of claims made in each period. 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: damage, theft and earthquake. Subsidence claims are particularly difficult to predict because the damage is often not apparent for some time. The The nature of claims may include fire, weather damage, escape of water, explosion (after fire), riot and malicious damage, subsidence, accidental 2022 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 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. 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 ultimate settlements can be small or large with a risk of a settled claim being reopened at a later date. Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net 255,418 119,847 55,266 5,886 73,779 47,335 384,463 173,068 255,418 119,847 73,779 47,335 329,197 167,182 71,575 68,128 42,978 36,037 34,982 31,914 149,535 136,079 71,575 68,128 34,982 31,914 106,557 100,042 20,006 10,259 918 868 - - 20,924 11,127 20,006 10,259 - - 20,006 10,259 3,086 100 536 101 - - 3,622 201 5,833 2,847 - - 5,833 2,847 7 7 - - - - 7 7 - - - - - - 350,092 198,341 99,698 42,892 108,761 79,249 558,551 320,482 352,832 201,081 108,761 79,249 461,593 280,330 Individual claims can vary in amount since the risks insured are diverse in both size and nature. The cost of repairing property varies according to the extent of damage, cost of materials and labour charges. Contracts are underwritten on a reinstatement basis or repair and restoration basis as appropriate. Costs of rebuilding properties, of replacement or indemnity for contents and time taken to bring business operations back to pre-loss levels for business interruption are the key factors that influence the cost of claims. Individual large claims are more likely to arise from fire, storm or flood damage. The greatest likelihood of an aggregation of claims arises from earthquake, weather or major spreading fire events. Claims payment, on average, occurs within a year of the event that gives rise to the claim. However, there is variability around this average with larger claims typically taking longer to settle and business interruption claims taking much longer depending on the length of the indemnity period involved. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 134 134 134 Page 143 Page 144 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report 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 4 Financial risk and capital management (continued) 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). There has been no change from the prior period in the nature of the financial risks to which the Group is exposed. The continued conflict in Ukraine and the cost of living crisis 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 Claims that may arise from the liability portfolios include damage to property, physical injury, disease and psychological trauma. The Group has a different exposure profile to most other commercial lines insurance companies as it has lower exposure to industrial risks. Therefore, claims for industrial diseases are less common for the Group than injury claims such as slips, trips and back injuries. The frequency and severity of claims arising on liability insurance contracts can be affected by several factors. Most significant are the increasing level of awards for damages suffered, legal costs and the potential for periodic payment awards. The severity of bodily injury claims can be influenced particularly by the value of loss of earnings and the future cost of care. The settlement value of claims arising under public and employers' liability is particularly difficult to predict. There is often uncertainty as to the extent and type of injury, whether any payments will be made and, if they are, the amount and timing of the payments, including the discount rate applied for assessing lump sums. Key factors driving the high levels of uncertainty include the late notification of possible claim events and the legal process. Late notification of possible claims necessitates the holding of provisions for incurred claims that may only emerge some years into the future. In particular, the effect of inflation over such a long period can be considerable and is uncertain. A lack of comparable past experience may make it difficult to quantify the number of claims and, for certain types of claims, the amounts for which they will ultimately settle. The legal and legislative framework continues to evolve, which has a consequent impact on the uncertainty as to the length of the claims settlement process and the ultimate settlement amounts. Claims payment, on average, occurs about three to four years after the event that gives rise to the claim. However, there is significant variability around this average. Provisions for latent claims The public and employers’ liability classes can give rise to very late reported claims, which are often referred to as latent claims. These can vary in nature and are difficult to predict. They typically emerge slowly over many years, during which time there can be particular uncertainty as to the number of future potential claims and their cost. The Group has reflected this uncertainty and believes that it holds adequate reserves for latent claims that may result from exposure periods up to the reporting date. Note 28 presents the development of the estimate of ultimate claim cost for public and employers' liability claims occurring in a given year. This gives an indication of the accuracy of the estimation technique for incurred claims. (d) Life insurance risks The Group provides whole-of-life insurance policies to support funeral planning products, for most of which the future benefits are linked to inflation and backed by index-linked assets. 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 business and administration of the policies. There is a risk that this is insufficient to meet the expenses incurred in future periods. 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. stress testing techniques. (a) Categories of financial instruments (i) Categories applying IAS 39 Group At 31 December 2022 Financial investments Other assets Cash and cash equivalents Lease obligations Subordinated liabilities Other liabilities Inv't contract liabilities Net other Total 869,880 - - - - - - - 869,880 At 31 December 2021 (restated*) Financial investments Other assets Cash and cash equivalents Lease obligations Subordinated liabilities Other liabilities Inv't contract liabilities Net other Total 882,350 - - - - - - - 882,350 Parent At 31 December 2022 Financial investments Other assets Cash and cash equivalents Lease obligations Subordinated liabilities Other liabilities Net other Total 593,061 - - - - - - 593,061 At 31 December 2021 (restated*) Financial investments Other assets Cash and cash equivalents Lease obligations Subordinated liabilities Other liabilities Net other Total 639,523 - - - - - - 639,523 ¹ Financial liabilities are held at amortised cost. Financial assets Financial liabilities Designated at fair value £000 Held for trading £000 Loans and receivables £000 Hedge accounted derivatives £000 Designated at fair value £000 Held for trading £000 Financial liabilities¹ £000 Hedge accounted derivatives £000 Other assets and liabilities £000 100 - - - - - - - 100 336 - - - - - - - 336 100 - - - - - - 100 481 - - - - - - 481 114 302,685 104,664 - - - - - 407,463 670 232,553 114,036 - - - - - 347,259 114 263,972 66,569 - - - - 330,655 670 190,478 48,437 - - - - 239,585 655 - - - - - - - 655 414 - - - - - - - 414 655 - - - - - - 655 269 - - - - - - 269 - - - - - - (58,479) - (58,479) - - - - - - (15,519) - (15,519) - - - - - - - - - - - - - - - - - - - - - (2,475) - - (2,475) - - - - - (331) - - (331) - - - - - (3,234) - (3,234) - - - - - (331) - (331) - - - (19,062) (25,818) (84,618) - - (129,498) - - - (22,738) (24,433) (83,622) - - (130,793) - - - (18,712) (25,818) (66,381) - (110,911) - - - (20,806) (24,433) (48,571) - (93,810) - - - - - (759) - - (759) - - - - - - - - - - - - - - - - - - - - - - - - - - 8,103 - - - (13,591) - (465,806) (471,294) - 8,357 - - - (13,394) - (443,718) (448,755) 42,707 5,045 - - - (10,774) (303,327) (266,349) 66,163 4,330 - - - (10,756) (292,952) (233,215) Total £000 870,749 310,788 104,664 (19,062) (25,818) (101,443) (58,479) (465,806) 615,593 883,770 240,910 114,036 (22,738) (24,433) (97,347) (15,519) (443,718) 634,961 636,637 269,017 66,569 (18,712) (25,818) (80,389) (303,327) 543,977 707,106 194,808 48,437 (20,806) (24,433) (59,658) (292,952) 552,502 *The comparative financial statements have been restated as detailed in note 40 and the tables above have been re-presented for the split between financial liabillities and other liabilities. Assets and liabilities classified as held for distribution (see note 16) are included within net other in the table above. 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. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 135 135 135 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report 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) (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 (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 facilitate comparison with entities applying IFRS 9, the table below sets out the Group's financial assets at the balance sheet date, split between hierarchy as follows: 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 Financial investments Cash and cash equivalents Other financial assets Total Parent SPPI financial assets £000 2022 Other financial assets £000 Total financial assets £000 SPPI financial assets £000 2021 Other financial assets £000 Total financial assets £000 114 104,664 302,685 407,463 870,635 - - 870,635 870,749 104,664 302,685 1,278,098 670 114,036 232,553 347,259 883,100 - - 883,100 883,770 114,036 232,553 1,230,359 SPPI financial assets £000 2022 Other financial assets £000 Total financial assets £000 SPPI financial assets £000 2021 Other financial assets £000 Total financial assets £000 Financial investments Cash and cash equivalents Other financial assets Total 114 66,569 263,972 330,655 593,816 - - 593,816 593,930 66,569 263,972 924,471 670 48,437 190,478 239,585 640,273 - - 640,273 640,943 48,437 190,478 879,858 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 2022 Financial assets at fair value through profit or loss Financial investments Equity securities Debt securities Structured notes Derivatives Financial assets at fair value through other comprehensive income Financial investments Hedged accounted derivatives Total financial assets at fair value At 31 December 2021 Financial assets at fair value through profit or loss Financial investments Equity securities Debt securities Structured notes Derivatives Financial assets at fair value through other comprehensive income Financial investments 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 Total £000 268,297 458,420 - - 726,717 - 1,299 56,138 100 57,537 85,726 - - - 85,726 354,023 459,719 56,138 100 869,980 - 726,717 655 58,192 - 85,726 655 870,635 281,169 515,953 - - 797,122 - 797,122 186 1,412 14,649 336 16,583 414 16,997 68,947 34 - - 68,981 350,302 517,399 14,649 336 882,686 - 68,981 414 883,100 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 136 136 136 Page 147 Page 148 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report 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) Parent At 31 December 2022 Financial assets at fair value through profit or loss Financial investments Equity securities Debt securities Derivatives Financial assets at fair value through other comprehensive income Financial investments Hedged accounted derivatives Total financial assets at fair value At 31 December 2021 Financial assets at fair value through profit or loss Financial investments Equity securities Debt securities Derivatives Financial assets at fair value through other comprehensive income Financial investments 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 Total £000 Parent 247,969 258,487 - 506,456 - 506,456 254,377 315,033 - 569,410 - 1,025 100 1,125 655 1,780 186 1,094 481 1,761 85,580 - - 85,580 333,549 259,512 100 593,161 - 85,580 655 593,816 68,799 34 - 68,833 323,362 316,161 481 640,004 At 31 December 2022 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 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 Financial assets at fair value through profit and loss Equity securities £000 Debt securities £000 68,800 16,780 85,580 16,781 59,508 9,292 68,800 9,292 33 (33) - (33) 551 (518) 33 (518) Total £000 68,833 16,747 85,580 16,748 60,059 8,774 68,833 8,774 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. - 569,410 269 2,030 - 68,833 269 640,273 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. In the current year derivative liabilities of the Group were measured at fair value through other comprehensive income if they were hedge accounted and at fair value through profit or loss otherwise. The derivative liabilities of the Parent were measured at fair value through profit or loss. In the prior year the derivative liabilities of the Group and Parent were measured at fair value through profit or loss. Derivative liabilities are categorised as level 2 (see note 23). 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. 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 2022 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 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 Financial assets at fair value through profit and loss Equity securities £000 Debt securities £000 68,947 16,779 85,726 16,780 59,688 9,259 68,947 9,259 34 (34) - (34) 551 (517) 34 (517) Total £000 68,981 16,745 85,726 16,746 60,239 8,742 68,981 8,742 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, normalised for performance measures where appropriate, 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 +/-£9m (2021: +/-£8m). 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. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 137 137 137 Page 149 Page 150 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report 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) (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 (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. interest rates, which represent a significant proportion of the Group’s assets, subordinated debt which has a fixed interest rate until 2030, and from Areas where the Group is exposed to credit risk are: insurance liabilities discounted 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 (2021: three years), reflecting the relatively short-term average duration of its general insurance liabilities. The mean term of discounted general insurance liabilities is disclosed in note 28(a)(iv). - - - - 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. 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 The Group is exposed to minimal credit risk in relation to all other financial assets. 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 2022 Assets Debt securities Cash and cash equivalents Liabilities (discounted) Life insurance business provision At 31 December 2021 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 6,491 11,854 18,345 22,815 - 22,815 45,678 - 45,678 74,984 11,854 86,838 4,856 15,756 33,293 53,905 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 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. The carrying amount of financial and reinsurance assets represents the Group's maximum exposure to credit risk. The Group structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty. Limits on the level of credit risk are regularly reviewed. Where available the Group also manages its exposure to credit risk in relation to credit risk ratings. Investment grade financial assets are classified within the range of AAA to BBB ratings, where AAA is the highest possible rating. Financial assets which fall outside this range are classified as sub- investment grade. ‘Not rated’ assets capture assets not rated by external ratings agencies. The following table provides information regarding the credit risk exposure of financial assets with external credit ratings from Standard & Poors or an equivalent rating from a similar agency. This includes financial assets that meet the definition of 'solely payments of principal and interest' (SPPI), as detailed in note 4(a)(ii). Group At 31 December 2022 AAA AA A BBB Below BBB Not rated At 31 December 2021 AAA AA A BBB Below BBB Not rated SPPI Cash and cash equivalents¹ £000 Reinsurance debtors £000 - 42,616 18,114 43,930 - 4 104,664 - 42,719 19,946 51,365 - 6 114,036 - 3,608 10,653 - - 1,009 15,270 - 2,651 9,424 3 - 505 12,583 Other financial assets £000 - - - - - 287,529 287,529 - - - - - 220,640 220,640 Non-SPPI Debt securities £000 Total SPPI £000 - 46,224 28,767 43,930 - 288,542 407,463 - 45,370 29,370 51,368 - 221,151 347,259 182,348 121,065 91,355 51,951 4,857 8,143 459,719 171,502 122,895 129,795 72,653 7,895 12,659 517,399 ¹ Cash includes amounts held on deposit classified within financial investments and disclosed in note 22. Cash balances which are not rated relate to cash amounts in hand. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 138 138 138 Page 151 Page 152 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report 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) Parent At 31 December 2022 AAA AA A BBB Below BBB Not rated At 31 December 2021 AAA AA A BBB Below BBB Not rated SPPI Cash and cash equivalents¹ £000 Reinsurance debtors £000 - 16,605 7,328 42,632 - 4 66,569 - 7,018 10,896 30,518 - 5 48,437 - 2,961 5,710 - - 758 9,429 - 1,828 5,585 3 - 585 8,001 Other financial assets £000 - - - - - 254,657 254,657 - - - - - 183,147 183,147 Non-SPPI Debt securities £000 Total SPPI £000 - 19,566 13,038 42,632 - 255,419 330,655 - 8,846 16,481 30,521 - 183,737 239,585 96,666 46,836 74,668 31,680 2,753 6,909 259,512 89,099 61,199 108,443 44,598 4,379 8,443 316,161 (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: 2022 Group £000 268,623 85,400 - 354,023 Parent £000 248,149 85,400 - 333,549 UK Europe Hong Kong Total 2021 Group £000 281,497 68,619 186 350,302 Parent £000 254,557 68,619 186 323,362 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. ¹ Cash includes amounts held on deposit classified within financial investments and disclosed in note 22. Cash balances which are not rated relate to cash amounts in hand. The Group exposure to foreign currency risk within the investment portfolios arises from purchased investments that are denominated in 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. currencies other than sterling. The Group's foreign operations create two sources of foreign currency risk: Group cash balances are regularly reviewed to identify the quality of the counterparty bank and to monitor and limit concentrations of 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 debt securities portfolio consists of a range of mainly fixed interest instruments including government securities, local authority issues, corporate loans and bonds, overseas bonds, preference shares and other interest-bearing securities. Limits are imposed on the credit ratings of the corporate bond portfolio and exposures regularly monitored. Group investments in unlisted securities represent 0% of this category in the current year and less than 1% prior year. - The equity investment in foreign branches and subsidiaries is translated into sterling using the exchange rate at the year-end date. The forward foreign currency risk arising on translation of these foreign operations is hedged by the derivatives which are detailed in note 23. The Group has designated certain derivatives as a hedge of its net investments in Canada and Australia, which have Canadian and Australian dollars The Group’s exposure to counterparty default on debt securities is spread across a variety of geographical and economic territories, as follows: respectively as their functional currency. 2022 2021 The largest currency exposures, before the mitigating effect of derivatives, with reference to net assets/liabilities are shown below, representing Group £000 176,749 131,232 125,225 26,513 459,719 Parent £000 101,767 131,232 - 26,513 259,512 UK Canada Australia Europe Total Group £000 265,506 119,622 104,530 27,741 517,399 Parent £000 168,798 119,622 - 27,741 316,161 UK Canada Australia Europe Total effective diversification of resources. 2022 Group £000 61,768 57,710 25,287 2,653 15 Parent £000 4,091 57,710 25,287 2,653 15 Aus $ Can $ Euro USD $ HKD $ 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 $ 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 exposure are detailed in note 23. 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. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 139 139 139 Page 153 Page 154 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 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report 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) (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 (i) Capital management The Group's primary objectives when managing capital are to: resources mainly from claims arising from insurance contracts. An estimate of the timing of the net cash outflows resulting from insurance contracts is provided in note 28. The Group has robust processes in place to manage liquidity risk and has available cash balances, other readily marketable assets and access to funding in case of exceptional need. This is not considered to be a significant risk to the Group. - - 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 Non-derivative financial liabilities consist of lease liabilities, for which a maturity analysis is included in note 34, and other liabilities for which a values. maturity analysis is included in note 31, and subordinated debt for which a maturity analysis is included in note 32. The Group is subject to insurance solvency regulations in all the territories in which it issues insurance and investment contracts, and capital is (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), 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 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 Prudential Regulation Authority (PRA). variables on retirement benefit schemes. Financial risk sensitivities for retirement benefit schemes are disclosed separately in note 19. Group Variable Interest rate risk Currency risk Equity price risk Parent Variable Interest rate risk Currency risk Equity price risk Potential increase/ (decrease) in profit 2022 £000 (4,618) 5,648 2,154 (1,763) 28,676 Restated* 2021 £000 (11,765) 9,475 4,118 (3,369) 28,375 Potential increase/ (decrease) in profit 2022 £000 (2,936) 4,218 2,154 (1,763) 27,017 Restated* 2021 £000 (9,966) 7,119 4,118 (3,369) 26,192 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 other equity reserves 2022 £000 (8) 7 13,123 (10,737) - 2021 £000 54 (48) 10,845 (8,873) - Potential increase/ (decrease) in other equity reserves 2022 £000 4 (4) 6,715 (5,494) - 2021 £000 10 - 5,303 (4,339) - 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. 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 Group's regulated entities, EIO and ELL, expect to meet the deadline for submission to the PRA of 6 April 2023 and their respective SFCRs will be 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 2023, with its SFCR also being made available on the Group’s website shortly after. 2022 2021 Ecclesiastical Insurance Office plc Parent £000 Ecclesiastical Life Limited £000 Ecclesiastical Insurance Office plc Parent £000 Ecclesiastical Life Limited £000 Solvency II Own Funds (unaudited) 630,058 54,172 616,905 55,235 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. *The comparative financial statements have been restated as detailed in note 40. The following assumptions have been made in preparing the above sensitivity analysis: - - - - The value of fixed income investments will vary inversely with changes in interest rates, and all territories experience the same interest rate movement; Currency gains and losses will arise from a change in the value of sterling against all other currencies moving in parallel; Equity prices will move by the same percentage across all territories; and Change in profit is stated net of tax at the standard rate applicable in each of the Group's territories. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 140 140 140 Page 155 Page 156 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements Notes to the financial statements Notes to the financial statements 5 Segment information (continued) 5 Segment information (continued) 5 Segment information (a) Operating segments The Group segments its business activities on the underwriting territory. Expenses relating to Group management activities are included within 'Corporate costs'. This reflects the management and internal Group reporting structure. As part of the streamlining of the Benefact Group, on 30 December 2022, the Group disposed of South Essex Insurance Holdings Limited and its wholly owned subsidiary, SEIB Insurance Brokers Limited. On 3 January 2023, the shares of EdenTree Investment Management Limited and Ecclesiastical Financial Advisory Services Limited were distributed to the Group's immediate parent company, Benefact Group plc. Discontinued operations are disclosed separately in note 16 and excluded from the segmental analysis. The prior period has been re-presented in line with the current year basis. 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. Segment revenue The Group uses gross written premiums as the measure for turnover of the general and life insurance business segments. 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. Continuing operations General business United Kingdom and Ireland Australia Canada Other insurance operations Total Life business Group revenue Re- presented* 2021 £000 297,235 93,365 91,610 4,010 486,220 (9) 486,211 2022 £000 344,788 99,698 108,761 5,297 558,544 7 558,551 Australia The Group has a wholly-owned subsidiary in Australia underwriting general insurance business under the Ansvar brand. Group revenues are not materially concentrated on any single external customer. Canada The Group operates a general insurance Ecclesiastical branch in Canada. Other insurance operations This includes the Group's internal reinsurance function, adverse development cover and operations that are in run-off or not reportable due to their immateriality. - Life business *The prior year has been re-presented for discontinued operations as detailed in note 16 to the financial statements. 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 38. Ecclesiastical Life Limited provides long-term policies to support funeral planning products. The business reopened in the year but The life business segment result comprises the profit or loss on insurance contracts (including return on assets backing insurance liabilities in the remains closed to new insurance business. long-term fund), shareholder investment return and other expenses. - 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. 2022 Continuing operations General business United Kingdom and Ireland Australia Canada Other insurance operations Life business Corporate costs Profit/(loss) before tax Combined operating ratio 86.7% 107.3% 90.6% 91.0% Insurance £000 Investments £000 24,239 (2,864) 7,025 (981) 27,419 3,552 - 30,971 (7,726) 3,667 3,570 135 (354) (7,191) - (7,545) Other £000 (2,075) (235) (146) - (2,456) - (25,743) (28,199) Total £000 14,438 568 10,449 (846) 24,609 (3,639) (25,743) (4,773) Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 141 141 141 Page 157 Page 158 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report 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 2021 (restated*) Continuing operations General business United Kingdom and Ireland Australia Canada Other insurance operations Life business 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 88,953 1,924 999 (133) 91,743 3,981 - 95,724 Other £000 (2,098) (34) (156) - (2,288) - (24,134) (26,422) Total £000 111,807 (11,416) 7,908 (10,085) 98,214 5,098 (24,134) 79,178 *The comparative financial statements have been restated as detailed in note 40. (b) Geographical information Gross written premiums from external customers and non-current assets, as attributed to individual countries in which the Group operates, are as follows: United Kingdom and Ireland Australia Canada 2022 2021 Gross written premiums £000 350,092 99,698 108,761 558,551 Non-current assets £000 319,485 3,052 5,601 328,138 Gross written premiums £000 301,236 93,365 91,610 486,211 Non-current assets £000 293,726 2,925 6,227 302,878 7 Fee and commission income During the year, in respect of continuing operations, the Group recognised £63,297,000 (2021: £55,019,000) fee and commission income in accordance with IFRS 4, Insurance Contracts and £236,000 (2021: £398,000) in accordance with IFRS 15, Revenue from contracts with customers. Fee and commission income from contracts with customers was recognised at a point in time rather than over time. 8 Net investment return Income from financial assets at fair value through profit or loss - equity income - debt income - structured note income Income from financial assets calculated using the effective interest rate method - cash and cash equivalents income - other income received Other income/(expense) - rental income - exchange movements Investment income Fair value movements on financial instruments at fair value through profit or loss Fair value movements on investment property Impact of discount rate change on insurance contract liabilities Net investment return Less: discontinued operations Net investment return of continuing operations 2022 £000 6,780 11,074 346 3,502 3,011 8,837 (1,416) 32,134 (72,912) (21,209) 66,857 4,870 (812) 4,058 Restated* 2021 £000 7,482 12,123 30 (24) 1,999 8,648 605 30,863 38,102 20,238 14,464 103,667 (770) 102,897 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. *The comparative financial statements have been restated as detailed in note 40. Included within fair value movements on financial instruments at fair value through profit or loss are gains of £3,733,000 (2021: £3,504,000 gains) in respect of derivative instruments. 6 Net insurance premium revenue For the year ended 31 December 2022 Gross written premiums Outward reinsurance premiums Net written premiums Change in the gross provision for unearned premiums Change in the provision for unearned premiums, reinsurers' share Change in the net provision for unearned premiums Earned premiums, net of reinsurance For the year ended 31 December 2021 Gross written premiums Outward reinsurance premiums Net written premiums Change in the gross provision for unearned premiums Change in the provision for unearned premiums, reinsurers' share Change in the net provision for unearned premiums Earned premiums, net of reinsurance General business £000 Life business £000 Total £000 ` 558,544 (238,069) 320,475 (30,619) 14,114 (16,505) 303,970 486,220 (198,601) 287,619 (24,504) 9,884 (14,620) 272,999 7 - 7 - - - 7 (9) - (9) - - - (9) 558,551 (238,069) 320,482 (30,619) 14,114 (16,505) 303,977 486,211 (198,601) 287,610 (24,504) 9,884 (14,620) 272,990 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 142 142 142 Page 159 Page 160 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements Notes to the financial statements Notes to the financial statements 9 Claims and change in insurance liabilities and reinsurance recoveries 11 (Loss)/profit for the year For the year ended 31 December 2022 Gross claims paid Gross change in the provision for claims Gross change in life business provision Claims and change in insurance liabilities Reinsurers' share of claims paid Reinsurers' share of change in the provision for claims Reinsurance recoveries Claims and change in insurance liabilities, net of reinsurance For the year ended 31 December 2021 Gross claims paid Gross change in the provision for claims Gross change in life business provision Claims and change in insurance liabilities Reinsurers' share of claims paid Reinsurers' share of change in the provision for claims Reinsurance recoveries Claims and change in insurance liabilities, net of reinsurance General business £000 Life business £000 214,032 67,317 - 281,349 (93,072) (43,435) (136,507) 144,842 191,685 75,605 - 267,290 (83,235) (40,587) (123,822) 143,468 5,074 - (743) 4,331 - - - 4,331 5,438 - (3,095) 2,343 - - - 2,343 Total £000 219,106 67,317 (743) 285,680 (93,072) (43,435) (136,507) 149,173 197,123 75,605 (3,095) 269,633 (83,235) (40,587) (123,822) 145,811 10 Fees, commissions and other acquisition costs Fees paid Commission paid Change in deferred acquisition costs Other acquisition costs Fees, commissions and other acquisition costs Less: discontinued operations Fees, commissions and other acquisition costs of continuing operations *The prior year has been re-presented for discontinued operations as detailed in note 16 to the financial statements. Re- presented* 2021 £000 21 75,601 (4,376) 26,805 98,051 (2,402) 95,649 2022 £000 115 87,695 (5,349) 28,426 110,887 (2,191) 108,696 Continuing operations (Loss)/profit for the year has been arrived at after charging/(crediting) Net foreign exchange losses/(gains) Depreciation of property, plant and equipment (Profit)/loss on disposal of property, plant and equipment Amortisation of intangible assets Decrease/(increase) in fair value of investment property Employee benefits expense including termination benefits, net of recharges 12 Auditor's remuneration Fees payable to the Company's auditor and its associates for the audit of the Company's annual accounts Fees payable to the Company’s auditor and its associates for other services: - The audit of the Company's subsidiaries Total audit fees - Audit-related assurance services - Other assurance services Total non-audit fees Total auditor's remuneration Re- presented 2021 £000 (601) 5,833 24 622 (20,238) 83,291 2021 £000 599 347 946 214 - 214 1,160 2022 £000 1,374 6,261 (9) 3,558 21,209 92,503 2022 £000 709 323 1,032 183 87 270 1,302 Amounts disclosed are net of services taxes, where applicable. Audit-related assurance services include Prudential Regulatory Authority (PRA) and other regulatory audit work. Auditor's remuneration of £143,000 relates to discontinued operations (2021: £153,000). Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 143 143 143 Page 161 Page 162 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements Notes to the financial statements Notes to the financial statements 13 Employee information 14 Tax expense The average monthly number of full-time equivalent employees of the Group and Parent, including executive directors, during the year by (a) Tax charged/(credited) to the statement of profit or loss geographical location was: Group United Kingdom and Ireland Australia Canada Parent United Kingdom and Ireland Canada General business No. 901 137 79 1,117 General business No. 901 79 980 2022 Life business No. 1 - - 1 2022 Life business No. 1 - 1 Re-presented* 2021 Life business No. 1 - - 1 Re-presented* 2021 Life business No. 1 - 1 General business No. 860 110 78 1,048 General business No. 860 78 938 Other No. 131 - - 131 Other No. 112 - 112 Other No. 107 - - 107 Other No. 107 - 107 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. Continuing operations 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 2022 Re-presented* 2021 Group £000 90,908 8,562 7,046 695 132 107,343 (14,509) (502) 92,332 Parent £000 79,033 8,562 6,134 695 132 94,556 (14,671) (502) 79,383 Group £000 81,186 7,592 6,207 1,646 83 96,714 (12,251) (1,446) 83,017 Parent £000 72,207 7,592 5,516 1,646 83 87,044 (12,260) (1,446) 73,338 *The prior year has been re-presented for discontinued operations as detailed in note 16 to the financial statements. The above Group figures do not include termination benefits of £248,000 (2021: £274,000) of which £77,000 (2021: £nil) was recharged to related undertakings of the Group. The above Parent figures do not include termination benefits of £248,000 (2021: £274,000), of which £77,000 (2021: £10,000) was recharged to related undertakings of the Parent. Current tax Deferred tax - current year - prior year adjustments - temporary differences - prior year adjustments - Impact of change in deferred tax rate Total tax (credit)/expense Less: tax expense of discontinued operations Total tax (credit)/expense of continuing operations 2022 £000 6,770 (293) (9,052) (21) - (2,596) (419) (3,015) Restated* 2021 £000 13,178 1,468 (4,646) (887) 9,029 18,142 (121) 18,021 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: (Loss)/profit before tax Profit/(loss) before tax (discontinued operations) Total pre-tax profit Tax calculated at the UK standard rate of tax of 19% (2021: 19%) Factors affecting (credit)/charge for the year: Expenses not deductible for tax purposes Non-taxable income Life insurance and other tax paid at non-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 (credit)/expense 2022 £000 (4,773) 14,115 9,342 1,775 805 (4,415) 13 (460) - - - (314) (2,596) Restated* 2021 £000 79,178 459 79,637 15,131 (1,265) (1,862) (1,234) 707 (379) (2,565) 9,029 580 18,142 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% (2021: 24%). *The comparative financial statements have been restated as detailed in note 40. (b) Tax charged/(credited) to other comprehensive income Current tax (credited)/charged on: Fair value movements on hedge derivatives Deferred tax (credited)/charged on: Actuarial movements on retirement benefit plans Fair value movements on hedge derivatives Impact of change in deferred tax rate Total tax (credited)/charged to other comprehensive income Tax relief on charitable grants of £3,800,000 (2021: £3,990,000) has been taken directly to equity. 2022 £000 2021 £000 (340) 313 (2,543) (485) - 9,665 (178) (1,519) (3,368) 8,281 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 144 144 144 Page 163 Page 164 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 15 Appropriations 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 2022 £000 2021 £000 9,181 9,181 20,000 (3,800) 16,200 21,000 (3,990) 17,010 16 Disposal of subsidiaries and discontinued operations On 30 December 2022 the Group disposed of South Essex Insurance Holdings Limited and its wholly owned subsidiary, SEIB Insurance Brokers Limited, to a related party. The related party is an associate of the Company's immediate parent company, Benefact Group plc. The results of the disposed subsidiaries are reported in the current and prior year as discontinued operations. (a) Disposal of subsidiaries Consideration received or receivable Carrying amount of net assets sold Gain on disposal before and after tax 2022 £000 45,197 (30,904) 14,293 The gain on disposal has been presented within profit attributable to discontinued operations in the consolidated statement of profit or loss. The carrying amounts of assets and liabilities as at the date of disposal were: Goodwill and other intangible assets Property, plant and equipment Other assets Cash and cash equivalents Total assets Lease obligations Provisions for other liabilities Current tax liabilities Deferred income Other liabilities Total liabilities Net assets 2022 £000 22,707 1,666 7,466 8,842 40,681 (1,215) (263) (1,010) (512) (6,777) (9,777) 30,904 2021 £000 - - - 2021 £000 - - - - - - - - - - - - Notes to the financial statements Notes to the financial statements 16 Disposal of subsidiaries and discontinued operations (continued) 16 Disposal of subsidiaries and discontinued operations (continued) On 3 January 2023 the Company approved a dividend in specie and distributed its entire holdings in EdenTree Investment Management Limited and Ecclesiastical Financial Advisory Services Limited to the Group's immediate parent company, Benefact Group plc. The results of these subsidiaries are reported in the current and prior year as a discontinued operations and associated assets and liabilities are presented as held for distribution in the current year statement of financial position. (b) Assets and liabilities of disposal group classified as held for distribution The following assets and liabilities were classified as held for distribution in relation to the discontinued operation at 31 December 2022: Other assets Cash and cash equivalents Total assets of disposal groups held for distribution Deferred income Other liabilities Total liabilities of disposal groups held for distribution (c) Financial performance of discontinued operations 2022 £000 9,822 5,177 14,999 261 10,234 10,495 Discontinued operations includes both the subsidiaries sold in the year and the assets held for distribution at the balance sheet date. Revenue Expenses Finance costs (Loss)/profit before tax of discontinued operations Tax expense (Loss)/profit after tax of discontinued operations Gain on disposal of subsidiaries after tax Profit from discontinued operations (d) Cash flow information for discontinued operations Net cash (outflow)/inflow from operating activities Net cash outflow from investing activities Net cash outflow from financing activities Net (decrease)/increase in cash generated by discontinued operations 2022 £000 23,695 (23,801) (72) (178) (419) (597) 14,293 13,696 2022 £000 (397) (8,987) (239) (9,623) 2021 £000 - - - - - - 2021 £000 31,286 (30,750) (77) 459 (121) 338 - 338 2021 £000 2,718 (104) (268) 2,346 Net cash outflow from investing activities includes an outflow of £8,842,000 (2021: £nil) from the disposal of South Essex Insurance Holdings Limited. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 145 145 145 Page 165 Page 166 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 17 Goodwill and other intangible assets Group Cost At 1 January 2022 Additions Disposals Exchange differences At 31 December 2022 Accumulated impairment losses and amortisation At 1 January 2022 Amortisation charge for the year Impairment losses for the year Disposals Exchange differences At 31 December 2022 Net book value at 31 December 2022 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 Computer software £000 Other intangible assets £000 45,335 3,900 - 255 49,490 17,931 3,304 - - 150 21,385 28,105 48,135 3,914 (6,641) (73) 45,335 19,179 575 - (1,876) 53 17,931 27,404 5,975 - (5,789) 10 196 5,158 254 - (5,276) 7 143 53 5,987 - - (12) 5,975 4,908 254 - - (4) 5,158 817 Goodwill £000 24,697 - (22,600) - 2,097 406 - - (406) - - 2,097 24,697 - - - 24,697 379 - 27 - - 406 24,291 Total £000 76,007 3,900 (28,389) 265 51,783 23,495 3,558 - (5,682) 157 21,528 30,255 78,819 3,914 (6,641) (85) 76,007 24,466 829 27 (1,876) 49 23,495 52,512 During the year the Group disposed of its interest in South Essex Insurance Holdings Limited resulting in the disposal of goodwill of £22,195,000 and intangible assets of £512,000. See note 16 for further information. Notes to the financial statements Notes to the financial statements Notes to the financial statements 17 Goodwill and other intangible assets (continued) 17 Goodwill and other intangible assets (continued) 17 Goodwill and other intangible assets (continued) Other intangible assets consist of acquired brand, customer and distribution relationships, which have an overall remaining useful life of three 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 (2021: one year). years on a weighted average basis (2021: one year). Parent Parent Cost Cost At 1 January At 1 January Additions Additions Disposals Disposals Exchange differences Exchange differences At 31 December At 31 December Amortisation Amortisation At 1 January At 1 January Charge for the year Charge for the year Disposals Disposals Exchange differences Exchange differences At 31 December At 31 December Net book value at 31 December Net book value at 31 December 2022 2022 Other Other intangible intangible assets assets £000 £000 185 185 - - - - 10 10 195 195 84 84 47 47 - - 7 7 138 138 57 57 Computer Computer software software £000 £000 43,372 43,372 3,900 3,900 - - 255 255 47,527 47,527 15,972 15,972 3,304 3,304 - - 150 150 19,426 19,426 28,101 28,101 2021 2021 Other Other intangible intangible assets assets £000 £000 198 198 - - - - (13) (13) 185 185 41 41 48 48 - - (5) (5) 84 84 101 101 Computer Computer software software £000 £000 41,330 41,330 3,914 3,914 (1,964) (1,964) 92 92 43,372 43,372 17,222 17,222 574 574 (1,876) (1,876) 52 52 15,972 15,972 27,400 27,400 Total Total £000 £000 43,557 43,557 3,900 3,900 - - 265 265 47,722 47,722 16,056 16,056 3,351 3,351 - - 157 157 19,564 19,564 28,158 28,158 Total Total £000 £000 41,528 41,528 3,914 3,914 (1,964) (1,964) 79 79 43,557 43,557 17,263 17,263 622 622 (1,876) (1,876) 47 47 16,056 16,056 27,501 27,501 18 Deferred acquisition costs 18 Deferred acquisition costs At 1 January At 1 January Increase in the period Increase in the period Release in the period Release in the period Exchange differences Exchange differences At 31 December At 31 December All balances are current. All balances are current. 2022 2022 Group Group £000 £000 46,027 46,027 52,539 52,539 (47,190) (47,190) 1,150 1,150 52,526 52,526 Parent Parent £000 £000 36,740 36,740 42,201 42,201 (37,491) (37,491) 680 680 42,130 42,130 2021 2021 Group Group £000 £000 41,989 41,989 46,122 46,122 (41,746) (41,746) (338) (338) 46,027 46,027 Parent Parent £000 £000 33,472 33,472 36,689 36,689 (33,520) (33,520) 99 99 36,740 36,740 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 146 146 146 Page 167 Page 168 Page 168 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements Notes to the financial statements Notes to the financial statements 19 Retirement benefit schemes (continued) 19 Retirement benefit schemes (continued) 19 Retirement benefit schemes Defined contribution pension plans The Group operates a number of defined contribution pension plans, for which contributions by the Group are disclosed in note 13. Defined benefit pension plans - 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. 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 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 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 for future service changed in August 2011 from a non-contributory final salary scheme to a contributory scheme in which benefits are based on term and manage the volatility of returns and overall funding level. 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 2023. 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. During 2022, the Trustees have implemented a number of changes to reduce the Fund’s exposure to market volatility and better protect the funding position. The Fund’s relative exposure to equity investments has been reduced and a specific allocation to infrastructure investments created to further diversify the Fund’s investments; and overall liquidity levels have increased. A liability-driven investment (LDI) allocation is maintained as a risk management tool in order to preserve some future protection for the Fund against falling yields and rising inflation, designed 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 suppressed, but not eliminated, volatility in the funding position. Actuarial valuations were reviewed and updated by an actuary at 31 December 2022 for IAS 19 purposes. As the Parent does not have an unconditional right to a refund of the surplus attributable to the former EIO Section of the scheme, it has been assessed against the economic The Trustees monitor investment performance and strategy over time to ensure the structure adopted continues to meet their objectives and to benefit available to the Parent as a reduction in future contributions in accordance with IFRIC 14. This has resulted in the recognisable surplus highlight opportunities to reduce investment risk and volatility where practical and affordable. Their aim is to establish a Long Term Funding Target being restricted by £57.1m. The Parent has an unconditional right to a refund of the surplus attributable to the former Ansvar Section of the in line with guidance from the Pensions Regulator. The Trustees intend that this long term target will be reached through investment performance Fund, which has been recognised in full in accordance with IFRIC 14. only and without requiring further contributions from the Parent. In the current year, actuarial gains arising from changes in financial assumptions of £153.2m (2021: £19.4m) have been recognised in the statement of other comprehensive income. £148.6m of this gain resulted from the 2.87% increase in the discount rate. In the prior year, the actuarial gains arising from changes in financial assumptions resulted from a 0.6% increase in the discount rate, partially offset by inflation- linked pension increases. The experience loss on the defined benefit obligation of £11.8m (2021: £0.9m) resulted from actual inflation exceeding the inflation assumptions. A review and update to certain demographic assumptions resulted in an actuarial gain of £3.4m (2021: £4.2m actuarial gain) being recognised in the current year. 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 The Trustees adopt a Responsible and Sustainable Investment Policy in relation 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 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 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 Effect of interest on asset ceiling Total, included in employee benefits expense The amounts recognised in the statement of other comprehensive income are as follows: Return on plan assets, excluding interest income Experience losses on liabilities Gains from changes in demographic assumptions Gains from changes in financial assumptions Change in asset ceiling Total included in other comprehensive income 2022 £000 (229,343) 301,773 72,430 (57,092) 15,338 28,304 (695) (12,271) 15,338 (573) (654) (7,064) 7,928 (332) (695) (117,766) (11,806) 3,368 153,225 (39,292) (12,271) 2021 £000 (377,113) 422,885 45,772 (17,468) 28,304 (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 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 147 147 147 Page 170 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 19 Retirement benefit schemes (continued) 19 Retirement benefit schemes (continued) Notes to the financial statements Notes to the financial statements 19 Retirement benefit schemes (continued) 19 Retirement benefit schemes (continued) 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: 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) *Single-equivalent rates are disclosed for the current year. 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 2022 £000 15,338 - 15,338 2021 £000 28,304 - 28,304 % 4.77 3.31 2.80 4.15 3.40 3.05 2.10 22.8 24.1 23.5 25.3 £000 36,779 44,797 - 42,200 86,997 46,988 - 68,372 21,241 89,613 (588) 41,984 301,773 % 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 47,665 422,885 ¹ Includes accrued income, prepayments and other debtors and creditors. The actual return on plan assets was a loss of £109,838,000 (2021: a gain of £39,258,000). The underlying assets of the LDIs are primarily UK government bonds and interest rate repurchase agreements at various rates and terms. 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 Interest cost Pension benefits paid and payable Experience losses on liabilities Gains from changes in demographic assumptions Gains from changes in financial assumptions At 31 December Asset ceiling At 1 January Effect of interest on the asset ceiling 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) 2022 £000 422,885 7,928 (117,766) (11,274) 301,773 377,113 573 654 7,064 (11,274) 11,806 (3,368) (153,225) 229,343 17,468 332 39,292 57,092 2019 £000 (371,179) 379,684 8,505 - 8,505 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 2022 £000 (229,343) 301,773 72,430 (57,092) 15,338 2021 £000 (377,113) 422,885 45,772 (17,468) 28,304 2020 £000 (403,709) 394,356 (9,353) - (9,353) The weighted average duration of the defined benefit obligation at the end of the reporting period is 15.9 years (2021: 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 2022 £000 (16,133) 18,176 12,552 (12,101) 2,285 (2,136) 7,215 (7,479) 2021 £000 (35,010) 40,505 29,134 (26,435) 5,540 (5,128) 16,402 (16,021) 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 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 surveyors using standard industry methodology to determine a fair market value. All other investments either have a quoted price in active markets frequency of valuation are similar to those used for the defined benefit pension plans. or are valued based on observable market data. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 148 148 148 Page 171 Page 172 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 19 Retirement benefit schemes (continued) 19 Retirement benefit schemes (continued) The provision of the plan leads to a number of risks as follows: Notes to the financial statements Notes to the financial statements 20 Property, plant and equipment Land and buildings £000 Motor vehicles £000 Furniture, fittings and equipment £000 Computer equipment £000 Right-of- use asset £000 1,465 - - - 1,465 - - - - - 1,465 2,440 - - (975) - 1,465 - - - - - 1,465 112 45 (140) - 17 74 19 (78) - 15 2 146 34 (68) - - 112 107 17 (50) - 74 38 15,336 123 (1,212) 150 14,397 6,532 1,220 (1,075) 59 6,736 7,661 14,971 2,444 (2,087) - 8 15,336 7,247 1,377 (2,087) (5) 6,532 8,804 8,622 3,067 (654) 56 11,091 6,444 1,829 (473) 43 7,843 3,248 11,363 1,155 (3,880) - (16) 8,622 8,738 1,599 (3,880) (13) 6,444 2,178 30,194 771 (4,188) 286 27,063 7,434 3,193 (2,712) 119 8,034 19,029 31,766 746 (2,241) - (77) 30,194 6,278 3,162 (1,952) (54) 7,434 22,760 Total £000 55,729 4,006 (6,194) 492 54,033 20,484 6,261 (4,338) 221 22,628 31,405 60,686 4,379 (8,276) (975) (85) 55,729 - 22,370 6,155 (7,969) (72) 20,484 35,245 - Interest rate risk: The reserves are assessed using market rates of interest to discount the liabilities and are therefore subject to volatility in the Group 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; Cost or valuation At 1 January 2022 Additions Disposals Exchange differences At 31 December 2022 Depreciation At 1 January 2022 Charge for the year Disposals Exchange differences At 31 December 2022 Net book value at 31 December 2022 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 - 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 (gains)/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 2022 £000 4,960 7,058 132 (2,100) (130) 4,960 132 132 2021 £000 7,058 6,530 83 643 (198) 7,058 83 83 The weighted average duration of the net obligations at the end of the reporting period is 10.5 years (2021: 12.8 years). The main actuarial assumptions for the plan are a long-term increase in medical costs of 7.31% (2021: 7.4%) and a discount rate of 4.77% (2021: 1.9%). An actuarial gain of £2,012,000 has been recognised in the current year due to the increase in the discount rate. A small actuarial gain has also been recognised due to changes in mortality assumptions. In the prior year, an actuarial loss from experience of £814,000 was recognised following a review of the medical cost scale. This was partially offset by an actuarial gain of £130,000 arising from changes in financial assumptions and a small actuarial gain arising from 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 2022 £000 (239) 260 497 (433) 372 (340) 2021 £000 (421) 464 875 (743) 513 (480) Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 149 149 149 Page 173 Page 174 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 20 Property, plant and equipment (continued) 20 Property, plant and equipment (continued) Parent Cost or valuation At 1 January 2022 Additions Disposals Exchange differences At 31 December 2022 Depreciation At 1 January 2022 Charge for the year Disposals Exchange differences At 31 December 2022 Net book value at 31 December 2022 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 Land and buildings £000 Motor vehicles £000 Furniture, fittings and equipment £000 Computer equipment £000 Right of use asset £000 1,465 - - - 1,465 - - - - - 1,465 2,040 - - (575) - 1,465 - - - - - 1,465 14 - - - 14 14 - - - 14 - 53 - (39) - - 14 40 2 (28) - 14 - 14,841 95 (710) 149 14,375 6,192 1,174 (710) 58 6,714 7,661 14,439 2,438 (2,045) - 9 14,841 6,922 1,321 (2,045) (6) 6,192 8,649 7,511 2,840 - 29 10,380 5,635 1,644 - 21 7,300 3,080 10,283 1,013 (3,795) - 10 7,511 7,989 1,432 (3,793) 7 5,635 1,876 26,314 506 (624) 194 26,390 5,533 2,555 (452) 54 7,690 18,700 27,802 678 (2,195) - 29 26,314 4,940 2,530 (1,940) 3 5,533 20,781 Total £000 50,145 3,441 (1,334) 372 52,624 17,374 5,373 (1,162) 133 21,718 30,906 54,617 4,129 (8,074) (575) 48 50,145 19,891 5,285 (7,806) 4 17,374 32,771 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 (2021: £1,464,000). The value of land and buildings of the Parent on a historical cost basis is £1,464,000 (2021: £1,464,000). Depreciation expense has been charged in other operating and administrative expenses. Notes to the financial statements Notes to the financial statements 21 Investment property Fair value at 1 January Transfers from property, plant and equipment Disposals Fair value (losses)/gains recognised in profit or loss Fair value at 31 December 2022 2021 Group £000 163,355 - (1,300) (21,209) 140,846 Parent £000 162,822 - (767) (21,209) 140,846 Group £000 142,142 975 - 20,238 163,355 Parent £000 142,142 575 - 20,105 162,822 The Group’s investment properties were last revalued at 31 December 2022 by Cluttons LLP, an independent professional firm of chartered surveyors who have recent experience in the location and type of properties. Valuations were carried out using standard industry methodology to determine a fair value. There has been no change in the valuation technique during the year. All properties are classified as level 3 assets. There have been no transfers between investment categories in the current year. Investment properties are held for long-term capital appreciation rather than short-term sale. Rental income arising from the investment properties owned by both the Group and Parent amounted to £8,837,000 (2021: £8,648,000) and is included in net investment return. 22 Financial investments Financial investments summarised by measurement category are as follows: Financial investments at fair value through profit or loss Equity securities - listed - unlisted Debt securities - government bonds - listed - unlisted Structured notes Derivative financial instruments - options - forwards Financial investments at fair value through other comprehensive income Derivative financial instruments - forwards Total financial investments at fair value Loans and receivables Other loans Parent investments in subsidiary undertakings Shares in subsidiary undertakings Total financial investments Current Non-current All investments in subsidiary undertakings are unlisted. The Group’s exposure to interest rate risk is detailed in note 4(c). 2022 Group £000 Parent £000 2021 Group £000 Parent £000 268,623 85,400 206,394 253,325 - 56,138 100 - 869,980 248,149 85,400 101,738 157,774 - - 100 - 593,161 281,682 68,620 204,071 313,294 34 14,649 334 2 882,686 254,743 68,619 100,631 215,496 34 - 334 147 640,004 655 870,635 655 593,816 414 883,100 269 640,273 114 114 670 670 - 42,707 - 66,163 870,749 636,637 420,626 450,123 322,007 314,630 883,770 447,418 436,352 707,106 392,530 314,576 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 150 150 150 Page 175 Page 176 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements Notes to the financial statements Notes to the financial statements 20 Property, plant and equipment (continued) 23 Derivative financial instruments 24 Other assets The Group utilises derivatives to mitigate equity price risk arising from investments held at fair value, foreign exchange risk arising from investments denominated in foreign currencies, and foreign exchange risk arising from investments denominated in Sterling that contain underlying foreign currency exposure. These 'non-hedge' derivatives either do not qualify for hedge accounting or the option to hedge account has not been taken. The Group has also formally designated certain derivatives as a hedge of its net investments in Australia and Canada. A loss of £4,514,000 (2021: gain of £1,912,000) in respect of these 'hedge' derivatives has been recognised in the hedging reserve within shareholders' equity, as disclosed in note 27. The Group has formally assessed and documented the effectiveness of derivatives that qualify for hedge accounting in accordance with IAS 39, Financial Instruments: Recognition and Measurement . Group Non-hedge derivatives Equity/Index contracts Options Foreign exchange contracts Forwards (Euro) Hedge derivatives Foreign exchange contracts Forwards (Australian dollar) Forwards (Canadian dollar) Contract/ notional amount £000 2022 Fair value asset £000 Fair value liability £000 Contract/ notional amount £000 2021 Fair value asset £000 Fair value liability £000 100 100 - 34,695 93,712 - 2,475 99,369 55,742 48,442 197,996 - 655 755 759 - 3,234 40,512 37,609 212,185 334 2 145 269 750 296 35 - - 331 Receivables arising from insurance and reinsurance contracts - due from contract holders - due from agents, brokers and intermediaries - due from reinsurers Other receivables - accrued interest and rent - other prepayments and accrued income - amounts owed by related parties - debtors arising from broking activities - net investment in finance leases - other debtors Current Non-current 2022 2021 Group £000 62,418 84,751 15,270 4,122 8,248 125,644 - - 10,335 310,788 185,157 125,631 Parent £000 62,019 56,247 9,429 3,007 5,190 131,368 - - 1,757 269,017 134,838 134,179 Group £000 52,706 67,333 12,583 3,927 8,606 68,900 7,008 111 19,736 240,910 181,346 59,564 Parent £000 52,629 43,712 8,001 3,096 4,425 80,688 - 111 2,146 194,808 134,574 60,234 The Group has recognised a net charge of £280,000 (2021: net charge of £554,000) in other operating and administrative expenses in the statement of profit or loss for the impairment and reversal of impairment of its trade and other receivables during the year. The Parent has recognised a net charge of £260,000 (2021: net charge of £578,000). There has been no significant change in the recoverability of the Group's or Parent's other assets, for which no collateral is held. The directors consider that the amounts are recoverable at their carrying values, which are stated net of an allowance for doubtful debts for those debtors that are individually determined to be impaired. 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 Included within amounts due from agents, brokers and intermediaries of the Group and Parent is a letter of credit for £2,000,000 (2021: £2,000,000) and included within amounts owed by related parties of the Parent is £11,110,000 (2021: £12,152,000) pledged as collateral in respect which is classified as a non-hedge derivative. of an insurance liability. All contracts designated as hedging instruments were fully effective in the current and prior year. Included within other receivables of the Group is £1,699,000 (2021: £1,584,000) classified as contract assets and £nil (2021: £1,618,000) classified The notional amounts above reflect the aggregate of individual derivative positions on a gross basis and so give an indication of the overall scale of the derivative transactions. They do not reflect current market values of the open positions. Derivative fair value assets are recognised within financial investments (note 22) and derivative fair value liabilities are recognised within other liabilities (note 31). as receivables in accordance with IFRS 15. Movement in the allowance for doubtful debts Balance at 1 January Movement in the year Balance at 31 December 2022 2021 Group £000 985 128 1,113 Parent £000 881 105 986 Group £000 723 262 985 Parent £000 574 307 881 Included within other assets of the Group is £42,256,000 (2021: £13,702,000) overdue but not impaired, of which £33,279,000 (2021: £11,754,000) is not more than three months overdue at the reporting date. Included within trade receivables of the Parent is £17,556,000 (2021: £2,012,000) overdue but not impaired, of which £15,571,000 (2021: £1,884,000) is not more than three months overdue at the reporting date. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 151 151 151 Page 177 Page 178 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements Notes to the financial statements Notes to the financial statements 25 Cash and cash equivalents 27 Translation and hedging reserve Cash at bank and in hand Short-term bank deposits 2022 2021 Group £000 58,175 46,489 104,664 Parent £000 35,020 31,549 66,569 Group £000 75,982 38,054 114,036 Parent £000 30,038 18,399 48,437 Included within short-term bank deposits of the Group and Parent are cash deposits of £8,810,000 (2021: £2,830,000) pledged as collateral by 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 amounts of £866,000 (2021: £820,000) held in accordance with the third country branch requirements of the European Union. Included within Group cash at bank and in hand are amounts of £15,109,000 (2021: £23,072,000) pledged as collateral by way of cash calls from reinsurers, and £nil (2021: £4,604,000) of restricted cash held on an agency basis. 26 Share capital Group At 1 January 2022 Gains on currency translation differences Losses on net investment hedges Attributable tax At 31 December 2022 At 1 January 2021 Losses on currency translation differences Gains on net investment hedges Attributable tax At 31 December 2021 Parent At 1 January 2022 Gains on currency translation differences Losses on net investment hedges Attributable tax At 31 December 2022 At 1 January 2021 Gains on currency translation differences Losses on net investment hedges Attributable tax At 31 December 2021 Translation reserve £000 Hedging reserve £000 13,196 5,392 - - 18,588 15,552 (2,356) - - 13,196 6,969 2,470 - - 9,439 6,418 551 - - 6,969 4,407 - (4,514) 825 718 2,678 - 1,912 (183) 4,407 67 - (1,938) 485 (1,386) 649 - (713) 131 67 Total £000 17,603 5,392 (4,514) 825 19,306 18,230 (2,356) 1,912 (183) 17,603 7,036 2,470 (1,938) 485 8,053 7,067 551 (713) 131 7,036 Issued, allotted and fully paid 2022 £000 14,027 106,450 120,477 2021 £000 14,027 106,450 120,477 350,678 350,678 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. 106,450 106,450 Ordinary shares of 4p each 8.625% Non-Cumulative Irredeemable Preference shares of £1 each The number of shares in issue are as follows: Ordinary shares of 4p each At 1 January and 31 December 8.625% Non-Cumulative Irredeemable Preference shares of £1 each At 1 January and 31 December On winding up, the assets of the Company remaining after payment of its liabilities are to be applied to holders of the Non-Cumulative Irredeemable Preference shares in repaying the nominal capital sum paid up on the shares and an amount equal to all arrears of accrued and unpaid dividends up to the date of the commencement of the winding up. The residual interest in the assets of the Company after deducting all liabilities belongs to the Ordinary shareholders. Holders of the Non-Cumulative Irredeemable Preference shares are not entitled to receive notice of, or to attend, or vote at any general meeting of the Company unless at the time of the notice convening such meeting, the dividend on such shares which is most recently payable on such shares shall not have been paid in full, or where a resolution is proposed varying any of the rights of such shares, or for the winding up of the Company. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 152 152 152 Page 179 Page 180 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements Notes to the financial statements Notes to the financial statements 28 Insurance liabilities and reinsurance assets (continued) 28 Insurance liabilities and reinsurance assets (continued) 28 Insurance liabilities and reinsurance assets (iv) Discounting General insurance outstanding claims provisions have been discounted by applying currency and term specific discount rates in the following 2022 Restated* 2021 territories: 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 Group £000 635,944 289,451 53,905 979,300 203,147 103,815 306,962 432,797 185,636 53,905 672,338 Parent £000 460,850 235,174 - 696,024 122,165 79,081 201,246 338,685 156,093 - 494,778 510,629 468,671 391,448 304,576 206,339 100,623 140,109 61,137 Group £000 612,002 253,158 73,909 939,069 165,347 88,089 253,436 446,655 165,069 73,909 685,633 445,119 493,950 171,831 81,605 Parent £000 466,986 202,389 - 669,375 106,478 64,431 170,909 360,508 137,958 - 498,466 343,714 325,661 116,302 54,607 *The comparative financial statements have been restated as detailed in note 40. (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 smaller reserving classes, 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. Geographical territory UK and Ireland Canada Australia Discount rate 2022 Restated* 2021 3.6% to 5.4% 4.5% to 5.2% 3.8% -0.5% to 2.1% 1.2% to 2.1% 1.5% Mean term of liabilities (years) 2022 7.5 4.3 3.9 Restated* 2021 8.2 4.5 4.7 *The comparative financial statements have been restated as detailed in note 40. Parent consists of UK, Ireland and Canada. Group also includes Australia. The above rates of interest are based on government bond yields of the relevant currency and term at the reporting date. Adjustments are made, where appropriate, to reflect portfolio assets held. At the year end the undiscounted gross outstanding claims liability was £734,145,000 for the Group (2021 restated: £644,211,000), and £542,524,000 for the Parent (2021 restated: £496,881,000). The impact of discount rate changes on the outstanding claims liability is presented within net investment return (note 8). At 31 December 2022, it is estimated that a fall of 1% in the discount rates used would increase the Group's net outstanding claims liabilities by £16,444,000 (2021 restated: £25,056,000). 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 reserving class 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 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 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 2022 2021 Gross £000 16,200 19,900 14,500 11,500 100 Net £000 14,500 15,200 7,300 3,300 100 Gross £000 18,900 18,000 12,200 9,000 100 Net £000 17,200 13,700 6,200 3,100 100 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 153 153 153 Page 181 Page 182 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 28 Insurance liabilities and reinsurance assets (continued) 28 Insurance liabilities and reinsurance assets (continued) (viii) Claims development tables 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 2013 £000 81,725 80,027 69,860 66,192 60,174 56,912 54,901 55,516 55,252 56,777 2014 £000 61,901 50,571 48,327 45,495 37,064 34,606 34,962 36,195 37,091 2015 £000 46,464 43,582 40,337 33,804 29,436 28,211 31,738 31,322 2016 £000 51,738 46,073 41,041 38,468 37,044 34,649 35,261 2017 £000 50,736 46,885 41,883 38,648 40,177 39,801 2018 £000 48,759 40,461 34,680 33,362 34,355 2019 £000 47,945 42,467 39,859 41,600 2020 £000 50,134 42,044 41,655 2021 £000 60,267 58,774 2022 £000 51,989 Total £000 56,777 37,091 31,322 35,261 39,801 34,355 41,600 41,655 58,774 51,989 428,625 (29,819) 7,272 (48,759) 8,018 to 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 (15,699) 18,656 (21,970) 9,352 (23,914) 11,347 (21,679) 18,122 (9,642) 32,013 (14,187) 27,413 (4,832) 53,942 (1,402) 50,587 (191,903) 236,722 (37,571) 199,151 151,714 350,865 Total £000 2013 £000 71,798 60,950 54,792 50,492 43,910 42,289 40,698 40,041 40,161 40,509 2014 £000 52,350 40,153 39,015 37,158 31,530 30,024 30,063 30,505 31,096 2015 £000 34,769 31,941 30,129 27,287 23,620 23,068 25,631 25,128 2016 £000 37,981 32,541 29,538 28,622 27,899 25,084 25,704 2017 £000 34,210 33,353 31,463 29,557 30,012 28,999 2018 £000 32,992 28,181 24,212 23,116 22,301 2019 £000 33,719 30,285 28,618 28,489 2020 £000 35,690 28,874 27,931 2021 £000 43,976 41,747 2022 £000 37,393 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 40,509 31,096 25,128 25,704 28,999 22,301 28,489 27,931 41,747 37,393 309,297 (35,611) 4,898 (26,494) 4,602 to 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 (16,500) 12,499 (18,573) 6,555 (10,618) 11,683 (9,264) 19,225 (17,781) 7,923 (6,192) 21,739 (2,648) 39,099 (667) 36,726 (144,348) 164,949 (26,681) 138,268 111,252 249,520 Notes to the financial statements Notes to the financial statements 28 Insurance liabilities and reinsurance assets (continued) 28 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 2013 £000 76,729 66,475 60,075 55,710 51,482 49,196 47,518 47,443 47,338 48,374 2014 £000 59,633 47,690 47,428 41,494 35,164 33,233 33,309 34,245 35,233 2015 £000 42,739 40,397 37,740 32,297 28,506 27,418 30,544 30,296 2016 £000 47,402 41,631 37,740 36,337 35,217 32,993 33,896 2017 £000 45,920 41,706 37,797 34,818 36,431 36,550 2018 £000 44,053 37,456 32,867 31,647 32,884 2019 £000 44,230 39,842 37,243 39,164 2020 £000 45,459 37,509 36,193 2021 £000 47,289 47,102 2022 £000 47,559 Total £000 48,374 35,233 30,296 33,896 36,550 32,884 39,164 36,193 47,102 47,559 387,251 (41,072) 7,302 (28,448) 6,785 to 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 (23,543) 10,353 (15,689) 17,195 (21,588) 14,962 (14,130) 25,034 (9,550) 26,643 (21,472) 8,824 (4,804) 42,298 (1,371) 46,188 (181,667) 205,584 (35,352) 170,232 128,615 298,847 Total £000 2013 £000 67,690 57,538 51,828 47,942 43,568 42,126 40,587 39,930 40,051 40,401 2014 £000 50,025 38,944 38,215 34,393 30,252 28,825 28,865 29,268 29,855 2015 £000 33,122 31,041 29,494 26,981 23,229 22,806 25,061 24,614 2016 £000 35,882 30,906 28,199 27,493 26,894 24,782 25,440 2017 £000 33,134 30,965 28,854 26,774 27,279 26,596 2018 £000 31,981 27,208 23,787 22,651 21,947 2019 £000 32,688 29,509 27,615 27,572 2020 £000 33,502 26,536 24,261 2021 £000 33,792 32,436 2022 £000 35,458 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 40,401 29,855 24,614 25,440 26,596 21,947 27,572 24,261 32,436 35,458 288,580 (35,507) 4,894 (25,260) 4,595 to 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 (16,500) 10,096 (18,074) 6,540 (17,585) 7,855 (10,616) 11,331 (9,254) 18,318 (6,100) 18,161 (2,624) 29,812 (636) 34,822 (142,156) 146,424 (25,183) 121,241 98,141 219,382 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 154 154 154 Page 183 Page 184 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 28 Insurance liabilities and reinsurance assets (continued) 28 Insurance liabilities and reinsurance assets (continued) (b) Life insurance contracts (i) Assumptions The most significant assumptions in determining life reserves are as follows: Notes to the financial statements Notes to the financial statements 28 Insurance liabilities and reinsurance assets (continued) 28 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 account has been taken of any correlation between the assumptions. 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 2022 and 2021 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: UK and overseas government bonds: non-linked UK and overseas government bonds: index-linked Corporate debt instruments: index-linked 2022 - 0.19% 1.00% 2021 - -2.71% -2.28% 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 The investment return assumption is determined by calculating an overall yield on all cash flows projected to occur from the portfolio of financial Group 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 3.79%. 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 £21.58 per annum (2021: £2.60 per annum). Previously, as a result of the business being in run-off a separate fixed expense reserve was held. However, as the company has now reopened to new business the need for that separate expense reserve has fallen away and this is why the unit renewal expense assumption has increased significantly from the level used last year end. Expense inflation is set with reference to the nominal and index-linked UK government bond rates of return and is assumed to be 4.30% per annum (2021: 4.69%). Tax It has been assumed that current tax legislation and rates enacted at 1 January 2023 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 decreased by £19.3m (2021: £0.1m increase). Claims outstanding At 1 January 2022 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 2022 Provision for unearned premiums At 1 January 2022 Increase in the period Release in the period Exchange differences At 31 December 2022 Life business provision At 1 January 2022 Effect of claims during the year Changes in assumptions Changes in methodology Change in discount rate Other movements At 31 December 2022 Change in variable Potential increase/ (decrease) in the result 2022 £000 40 (50) (400) 400 (300) 300 (200) 200 2021 £000 1,300 (1,500) - (400) (200) 200 (600) 500 +10% -10% +1% pa -1% pa +10% -10% +1% pa -1% pa Gross £000 Reinsurance £000 Net £000 612,002 (214,032) 284,744 (3,395) (57,784) 14,409 635,944 253,158 289,404 (258,785) 5,674 289,451 73,909 (4,467) (4) (2,310) (19,260) 6,038 53,906 (165,347) 93,072 (136,612) 105 10,188 (4,553) (203,147) (88,089) (103,664) 89,550 (1,612) (103,815) - - - - - - - 446,655 (120,960) 148,132 (3,290) (47,596) 9,856 432,797 165,069 185,740 (169,235) 4,062 185,636 73,909 (4,467) (4) (2,310) (19,260) 6,038 53,906 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 £2.3m decrease (2021: £0.2m increase). Total insurance contract liabilities and reinsurance assets 979,301 (306,962) 672,339 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 155 155 155 Page 185 Page 186 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 28 Insurance liabilities and reinsurance assets (continued) 28 Insurance liabilities and reinsurance assets (continued) Notes to the financial statements Notes to the financial statements 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 Restated* Reinsurance £000 Gross £000 Net £000 560,255 (191,685) (129,157) 83,235 431,098 (108,450) 252,310 14,980 (16,520) (7,338) 612,002 230,800 253,759 (229,255) (2,146) 253,158 76,857 (5,577) 2,493 147 (11) 73,909 (114,378) (9,444) 1,909 2,488 (165,347) (79,393) (88,464) 78,580 1,188 (88,089) - - - - - - 137,932 5,536 (14,611) (4,850) 446,655 151,407 165,295 (150,675) (958) 165,069 76,857 (5,577) 2,493 147 (11) 73,909 Total insurance contract liabilities and reinsurance assets 939,069 (253,436) 685,633 29 Provisions for other liabilities and contingent liabilities Group At 1 January 2022 Additional provisions Used during year Not utilised Disposal of business Exchange differences At 31 December 2022 Current Non-current Parent At 1 January 2022 Additional provisions Used during year Not utilised Exchange differences At 31 December 2022 Current Non-current Regulatory and legal provisions £000 Other provisions £000 2,619 1,783 (1,825) (157) - - 2,420 2,420 - 2,619 1,783 (1,825) (157) - 2,420 2,420 - 3,754 44 (1) - (263) 7 3,541 1,687 1,854 3,449 - (2) - 3 3,450 1,687 1,763 Total £000 6,373 1,827 (1,826) (157) (263) 7 5,961 4,107 1,854 6,068 1,783 (1,827) (157) 3 5,870 4,107 1,763 Parent Claims outstanding At 1 January 2022 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 2022 Provision for unearned premiums At 1 January 2022 Increase in the period Release in the period Exchange differences At 31 December 2022 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 466,986 (168,511) (106,478) 56,101 360,508 (112,410) 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. Dilapidations provisions The provision for other costs relates to costs in respect of dilapidations. Dilapidations provisions are based on the Group's best estimate of future expense required to restoring a leased property to its original state on completion of the lease. 208,107 (8,168) (44,562) 6,998 460,850 202,389 235,432 (205,765) 3,118 235,174 433,846 (165,227) 221,277 (9,317) (12,853) (740) 466,986 181,619 202,191 (181,753) 332 202,389 (66,565) (3,734) - (1,489) (122,165) (64,431) (79,069) 64,843 (424) (79,081) Restated* (78,323) 57,340 (102,576) 16,370 886 (175) (106,478) (56,066) (64,432) 56,049 18 (64,431) 141,542 (11,902) (44,562) 5,509 338,685 137,958 156,363 (140,922) 2,694 156,093 355,523 (107,887) 118,701 7,053 (11,967) (915) 360,508 125,553 137,759 (125,704) 350 137,958 *The comparative financial statements have been restated as detailed in note 40. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 156 156 156 Page 187 Page 188 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements Notes to the financial statements Notes to the financial statements 30 Deferred tax 31 Other liabilities and deferred income 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 2021 (as restated*) 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 (as restated*) (Credited)/charged to profit or loss Credited to other comprehensive income Transfer on disposal of subsidiary Exchange differences At 31 December 2022 Parent At 1 January 2021 (as restated*) 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 (as restated*) (Credited)/charged to profit or loss Credited to other comprehensive income Exchange differences At 31 December 2022 Unrealised gains on investments £000 Net retirement benefit assets £000 Equalisation reserve £000 Other differences £000 31,558 4,022 8,584 - - 5 44,169 (12,081) - - (23) 32,065 30,560 3,538 8,202 - - - 42,300 (8,072) - (3,020) (383) 632 9,665 (1,585) - 5,309 (174) (2,543) - - 2,592 (3,017) (383) 632 9,665 (1,585) - 5,312 (174) (2,543) 34,228 2,595 789 (789) - - - - - - - - - - 789 (789) - - - - - - - - (445) (8,383) (187) (178) 66 134 (8,993) 3,182 (485) 61 (264) (6,499) 349 (948) (170) (179) 66 3 (879) 406 (485) 9 (949) Total £000 28,882 (5,533) 9,029 9,487 (1,519) 139 40,485 (9,073) (3,028) 61 (287) 28,158 28,681 1,418 8,664 9,486 (1,519) 3 46,733 (7,840) (3,028) 9 35,874 *The comparative financial statements have been restated as detailed in note 40. 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 2022 2021 Group £000 36,723 (8,565) 28,158 Parent £000 35,905 (31) 35,874 Group £000 48,965 (8,480) 40,485 Parent £000 46,733 - 46,733 Included in the above are unused tax losses of £10,565,000 (2021: £10,565,000) arising from life business, which are available for offset against future tax profits and can be carried forward indefinitely. Creditors arising out of direct insurance operations Creditors arising out of reinsurance operations Derivative liabilities Creditors arising from broking activities Other creditors Amounts owed to related parties Accruals Current Non-current 2022 2021 Group £000 3,466 50,607 3,234 - 17,808 251 26,077 101,443 100,831 612 Parent £000 1,406 38,154 3,234 - 14,602 235 22,758 80,389 80,389 - Group £000 3,238 34,865 331 5,370 23,843 22 29,678 97,347 96,791 556 Parent £000 1,579 23,714 331 - 12,114 369 21,551 59,658 59,658 - Derivative liabilities are in respect of equity futures contracts and are detailed in note 23. Deferred income of the Group and Parent is a current liability in both the current and prior year. Included within deferred income of the Group is £nil (2021: £407,000) classified as contract liabilities in accordance with IFRS 15. 32 Subordinated liabilities Group and Parent 6.3144% EUR 30m subordinated debt 2022 £000 25,818 25,818 2021 £000 24,433 24,433 Subordinated debt consists of a privately-placed issue of 20-year subordinated bonds, maturing in February 2041 and callable after February 2031. 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. 33 Investment contract liabilities Group Investment contract liabilities 2022 £000 58,479 58,479 2021 £000 15,519 15,519 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. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 157 157 157 Page 189 Page 190 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 34 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 2022 Additions Disposals Depreciation expense Exchange differences At 31 December 2022 At 1 January 2021 Additions Disposals Depreciation expense Exchange differences At 31 December 2021 Parent At 1 January 2022 Additions Disposals Depreciation expense Exchange differences At 31 December 2022 At 1 January 2021 Additions Disposals Depreciation expense Exchange differences At 31 December 2021 Set out below are the carrying amounts of lease obligations: Current Non-current Land and buildings £000 Motor vehicles £000 Other equipment £000 21,588 359 (1,286) (2,879) 162 17,944 24,231 189 - (2,812) (20) 21,588 1,010 330 (172) (196) 1 973 1,068 448 (268) (236) (2) 1,010 162 82 (18) (118) 4 112 189 109 (21) (114) (1) 162 Land and buildings £000 Motor vehicles £000 Other equipment £000 19,669 96 - (2,278) 136 17,623 21,738 121 - (2,217) 27 19,669 987 330 (172) (180) - 965 993 448 (235) (219) - 987 125 80 - (97) 4 112 131 109 (20) (94) (1) 125 2022 2021 Group £000 2,446 16,616 19,062 Parent £000 2,438 16,274 18,712 Group £000 3,402 19,336 22,738 Total £000 22,760 771 (1,476) (3,193) 167 19,029 25,488 746 (289) (3,162) (23) 22,760 Total £000 20,781 506 (172) (2,555) 140 18,700 22,862 678 (255) (2,530) 26 20,781 Parent £000 2,691 18,115 20,806 Notes to the financial statements Notes to the financial statements 34 Leases (continued) 34 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 2022 £000 3,193 884 16 4,093 2021 £000 3,162 974 23 4,159 The Group had total cash outflows for leases, including interest paid, of £3,991,000 (2021: £4,206,000). The Parent had total cash outflows for leases, including interest paid, of £3,399,000 (2021: £3,406,000). The future cash outflows relating to leases that have not yet commenced are disclosed in note 35. 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 had a finance leasing arrangement as a lessor to sublease a commercial office space no longer occupied by the Group. The finance lease contract expired during 2022. Year 1 Undiscounted lease payments Less: unearned finance income Net investment in the lease 2022 Group £000 Parent £000 2021 Group £000 Parent £000 - - - - - - - - 111 111 - 111 111 111 - 111 Net investment in the lease is recognised in other assets as shown in note 24. Group profit for the year has been arrived at after crediting the following amounts in respect of finance lease contracts: Finance income on the net investment in finance leases 2022 £000 1 1 2021 £000 4 4 Operating leases The Group has entered into operating leases on its investment property portfolio. These leases have terms of up to 50 years. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. The lessee is also required to provide a residual value guarantee on the properties. Rental income on these properties recognised by the Group during the year is disclosed in note 21. Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows: Year 1 Year 2 Year 3 Year 4 Year 5 After 5 years 2022 2021 Group £000 8,110 7,734 6,532 5,244 4,748 16,554 48,922 Parent £000 8,110 7,734 6,532 5,244 4,748 16,554 48,922 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 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 158 158 158 Page 191 Page 192 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements Notes to the financial statements Notes to the financial statements 35 Commitments At the year end, the Group had capital commitments of £76,064 (2021: £nil) relating to development costs. 37 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. The Group has lease contracts for right-of-use assets that had not commenced at 31 December 2022. These leases will commence in 2023. Leases for land and buildings have a term of 10 years with expected cash outflow of £274,674 per annum. Leases for motor vehicles have a term of 4 years with expected Benefact Group plc is the Group and Parent's immediate parent company. Other related parties, of both Group and Parent, include subsidiary cash outflow of £20,580 per annum. undertakings of Benefact Group plc, the ultimate parent undertaking and the Group's pension plans. 36 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 companies are incorporated in England and Wales and copies of their financial statements are available from the registered office as shown in the Other Information section of this Annual Report and Accounts. The parent companies of the smallest and largest groups for which group financial statements are drawn up are Ecclesiastical Insurance Office plc and Benefact Trust Limited, respectively. Related undertakings The Company's interest in related undertakings at 31 December 2022 is as follows: Company Subsidiary undertakings Incorporated in the United Kingdom Company Registration Number Share Capital 2022 Holding of shares by Company Group 2021 Holding of shares by Company Group Activity 1 4 1 4 Ecclesiastical Financial Advisory Services Limited Ecclesiastical Group Healthcare Trustees Limited 1 Ecclesiastical Life Limited 1 EdenTree Investment Management Limited E.I.O. Trustees Limited SEIB Insurance Brokers Limited South Essex Insurance Holdings Limited 1 5 3 3 2046087 10988127 0243111 2519319 0941199 6317314 6317313 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Incorporated in Australia 2 Ansvar Insurance Limited Ansvar Insurance Services Pty Limited Ansvar Risk Management Services Pty Limited 2 5 007216506 Ordinary 162612286 Ordinary 623695054 Ordinary 2 100% 100% 100% 100% 100% - - 100% - - - - - - - - - - 100% 100% 100% 100% 100% 100% 100% - 100% 100% - - - - - - - 100% - Independent financial advisory Trustee company Life insurance Investment management Trustee company Insurance agents and brokers Investment holding company - 100% 100% Insurance Dormant company Risk management services 2022 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 2021 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 *Includes a loan of £121.0m (2021: £66.1m). Benefact Group plc £000 Subsidiaries £000 1,749 55,300 121,670 - 1,749 55,300 121,670 - 531 15,625 66,254 - 531 15,625 66,254 - - - - - 26,341 16,310 6,129 234 - - - - 17,700 25,971 12,278 9,458 Other related parties £000 64,916 11,342 4,385 101,661 9,259 3,177 3,563 - 14,188 5,706 2,646 79,219 960 1,438 2,156 10 **The insurance liabilities include an element of fixed expense reserves which are not due to a related party. ***Amounts owed to related parties of the Group in the prior year have been restated from £53,924,000, to better reflect the fair value of funeral 1 2 3 4 5 Registered office: Benefact House, 2000 Pioneer Avenue, Gloucester Business Park, Brockworth, Gloucester, GL3 4AW, United Kingdom plan liabilities. Registered office: Level 5, 1 Southbank Boulevard, Melbourne, VIC 3006, Australia On 30 December 2022, Ecclesiastical disposed of South Essex Insurance Holdings Limited and its wholly owned subsidiary SEIB Insurance Brokers Limited (together ‘SEIB’) to an associate of the Benefact Group Exempt from audit under s479 of the Companies Act 2006 Exempt from audit under s480 of the Companies Act 2006 On 30 December 2022, Ecclesiastical disposed of South Essex Insurance Holdings Limited and its wholly owned subsidiary SEIB Insurance Brokers Limited (together ‘SEIB’) to an associate of the Benefact Group for £45.2m, recognising a gain after tax of £14.3m, as detailed in note 16. Amounts owed by other related parties to the Group and Parent include £1.2m due from an associate for the Benefact Group, relating to the disposal of SEIB. During the year, the Company received premiums, commission and reinsurance recoveries via a related party insurance agency amounting to £11,000 (2021: £147,000) and paid reinsurance protection, commission and claims amounting to £16,000 (2021: £136,000). Trading, investment and other expenditure, including recharges, and amounts paid in the current year includes loans totalling £54.9m (2021: £24.9m), general business claims of £7.7m (2021: £11.2m) and acquisition of shares totalling £13.0m (2021: £nil). Trading, investment and other income, including recharges, and amounts received in the current year includes general business premiums totalling £4.9m (2021: £13.0m) and deposits received for life business totalling £35.0m (2021: £11.8m). Amounts owed to related parties by the Group and by the Parent include insurance liabilities which are included in note 28. Amounts owed to related parties by the Group also includes investment contract liabilities which are included in note 33. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 159 159 159 Page 193 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 37 Related party transactions (continued) 37 Related party transactions (continued) Notes to the financial statements Notes to the financial statements 38 Reconciliation of Alternative Performance Measures (continued) Transactions and services within the Group are made on commercial terms. With the exception of some insurance liabilities, amounts outstanding The table below provides a reconciliation of the COR and NER to its most directly reconcilable line item in the financial statements. Regulatory between Group companies are unsecured, are not subject to guarantees, and will be settled in cash. No provisions have been made in respect of capital does not have an IFRS equivalent and is covered in more detail in note 4(i). these balances. Group The total aggregate remuneration of the directors of the Company in respect of qualifying services during 2022 was £2,838,000 (2021: £2,801,000). After inclusion of amounts receivable under long-term incentive schemes and pension benefits, the total aggregate emoluments of the directors was £3,496,000 (2021: £3,564,000). 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. 2022 Inv'mnt Broking and mngt Advisory Inv'mnt return Corporate costs Total £000 £000 £000 £000 £000 Insurance General £000 Life £000 Key management personnel Wages and salaries Social security costs Pension costs - defined contribution plans Fees and benefits for non-executive directors 2022 2021 Group £000 5,411 750 308 625 7,094 Parent £000 5,411 750 308 625 7,094 Group £000 6,221 566 303 602 7,692 Parent £000 6,221 566 303 602 7,692 Charitable grants paid to the Group's ultimate Parent undertaking are disclosed in note 15. Contributions paid to and amounts received from the Group's defined benefits schemes are disclosed in note 19. 38 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 in the Key Performance Indicators section of the Strategic Report within this Annual Report and Accounts: regulatory capital, combined operating ratio (COR) and net expense ratio (NER) 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. 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 from continuing operations 558,544 (238,069) (16,505) 303,970 7 - - 7 - - - - 63,533 2,020 - 369,523 - - 8,523 8,530 - - (4,465) (4,465) (281,349) 136,507 (108,581) (88,681) (342,104) (4,331) - (115) (532) (4,978) 27,419 (2,456) 24,963 3,552 - 3,552 - - - (3,080) (3,080) (7,545) - (7,545) [1] [2] [3] [4] [6] - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 558,551 (238,069) (16,505) 303,977 63,533 2,020 4,058 373,588 - - - (25,743) (25,743) (285,680) 136,507 (108,696) (118,036) (375,905) [5] (25,743) - (25,743) (2,317) (2,456) (4,773) 14,115 9,342 (Loss)/profit before tax attributable to discontinued operations - - - (2,907) 17,022 - Profit/(loss) before tax for the year 24,963 3,552 (7,545) (2,907) 17,022 (25,743) Underwriting profit Combined operating ratio Net expenses ( = [2] + [3] + [4] + [5] ) Net expense ratio [6] 27,419 91.0% [7] (159,472) 52.5% 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]. Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 160 160 160 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 38 Reconciliation of Alternative Performance Measures (continued) 38 Reconciliation of Alternative Performance Measures (continued) Notes to the financial statements Notes to the financial statements Group Restated* 2021 Inv'mnt return Inv'mnt mngt Broking and Advisory Corporate costs 40 Prior year restatement The Group’s accounting policy for general insurance outstanding claims provisions has previously been to apply discounting only to certain longer term liabilities. The accounting policy has been changed to include discounting of the general insurance liabilities that have not previously been Total discounted. This change in accounting policy resulted in a credit of £13.2m recognised in this financial year and a credit of £2.6m in the prior year, £000 £000 £000 £000 £000 both within net investment return. Insurance General £000 Life £000 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 from continuing operations [1] [2] [3] [4] [6] 486,220 (198,601) (14,620) 272,999 (9) - - (9) - - - - 55,417 1,136 - 329,552 - - 3,939 3,930 - - 98,958 98,958 (267,291) 123,822 (95,628) (81,696) (320,793) (2,342) - (21) (450) (2,813) 8,759 (2,288) 6,471 1,117 - 1,117 - - - - (3,234) (3,234) 95,724 - 95,724 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 486,211 (198,601) (14,620) 272,990 55,417 1,136 102,897 432,440 [5] - - - (24,134) (24,134) (24,134) - (24,134) (269,633) 123,822 (95,649) (109,514) (350,974) 81,466 (2,288) 79,178 (Loss)/profit before tax attributable to discontinued operations - - (2,525) 2,984 - 459 Profit/(loss) before tax for the year 6,471 1,117 95,724 (2,525) 2,984 (24,134) 79,637 Underwriting profit Combined operating ratio Net expenses ( = [2] + [3] + [4] + [5] ) Net expense ratio [6] 8,759 96.8% [7] (146,041) 53.5% *The comparative financial statements have been restated as detailed in note 40. 39 Events after the balance sheet date On 3 January 2023, the shares of EdenTree Investment Management Limited and Ecclesiastical Financial Advisory Services Limited were distributed to the Group's immediate parent company, Benefact Group plc. Discontinued operations are disclosed separately in note 16. Under IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, a retrospective restatement of the prior period results is required. The effects of the restatement are detailed in this note, and included throughout the financial statement comparatives, where appropriate. As a result of the restatement, as at 1 January 2021 the Group recognised an increase in retained earnings of £0.5m. The prior year has also been re-presented for discontinued operations as detailed in note 16 to the financial statements. The Group considers that this change in accounting policy provides more reliable and relevant information. This is because, if the impact of discounting were not more widely applied during a period of higher interest rates (as in 2022), it would create excessive prudence in the implied claim reserves. Furthermore, this change to accounting policy better reflects the impact of the Group’s objective of matching assets with insurance liabilities when managing exposure to interest rate risk. Group Revenue Gross written premiums Outward reinsurance premiums Net change in provision for unearned premiums Net earned premiums Fee and commission income Other operating income Net investment return Total revenue Expenses Claims and change in insurance liabilities Reinsurance recoveries Fees, commissions and other acquisition costs Other operating and administrative expenses Total operating expenses Operating profit Finance costs Profit before tax Tax expense Profit for the year from continuing operations Net profit attributable to discontinued operations Profit for the year (attributable to equity holders of the Parent) As reported 2021 £000 Re-presented 2021 £000 Restatement £000 As restated 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 - 59,389 - - - - (26,130) - (770) (26,900) - - 247 26,118 26,365 (535) 76 (459) 121 (338) 338 - - - - - - - 2,600 2,600 - - - - - 2,600 - 2,600 (494) 2,106 - 2,106 486,211 (198,601) (14,620) 272,990 55,417 1,136 102,897 432,440 (269,633) 123,822 (95,649) (109,514) (350,974) 81,466 (2,288) 79,178 (18,021) 61,157 338 61,495 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 161 161 161 Page 197 Page 198 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 40 Prior year restatement (continued) 40 Prior year restatement (continued) Notes to the financial statements Notes to the financial statements 40 Prior year restatement (continued) 40 Prior year restatement (continued) Group Parent 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 Retirement benefit obligations Deferred tax liabilities Current tax liabilities Deferred income Subordinated liabilities Other liabilities Total liabilities Total shareholders' equity and liabilities As reported 31 December 2021 £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 1,827,093 Restatement £000 - - - - - - - (1,013) - - - (1,013) - - 2,600 2,600 (4,223) - - - - 610 - - - - (3,613) (1,013) As restated 31 December 2021 £000 As restated 1 January 2021 £000 52,512 46,027 8,480 28,304 35,245 163,355 883,770 253,436 5 240,910 114,036 1,826,080 120,477 4,632 509,852 634,961 939,069 15,519 22,738 6,373 7,058 48,965 1,232 28,385 24,433 97,347 1,191,119 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 4,632 444,613 569,722 868,155 - 25,450 6,499 6,530 29,846 1,293 25,908 - 93,561 1,067,648 1,826,080 1,637,370 Assets Goodwill and other intangible assets Deferred acquisition costs 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 Lease obligations Provisions for other liabilities Retirement benefit obligations Deferred tax liabilities Current tax liabilities Deferred income Subordinated liabilities Other liabilities Total liabilities Total shareholders' equity and liabilities As reported 31 December 2021 £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 1,410,416 Restatement £000 - - - - - - (1,013) - - - (1,013) - - 2,600 2,600 (4,223) - - - 610 - - - - (3,613) (1,013) As restated 31 December 2021 £000 As restated 1 January 2021 £000 27,501 36,740 28,304 32,771 162,822 707,106 170,909 5 194,808 48,437 1,409,403 120,477 4,632 427,393 552,502 669,375 20,806 6,068 7,058 46,733 819 21,951 24,433 59,658 856,901 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 4,632 356,805 481,914 615,708 22,838 5,842 6,530 28,562 1,293 18,858 - 55,087 765,124 1,409,403 1,247,038 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 162 162 162 Page 199 Page 200 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Notes to the financial statements Notes to the financial statements 40 Prior year restatement (continued) 40 Prior year restatement (continued) Profit before tax from continuing operations Profit before tax from discontinued operations Adjustments for: Depreciation 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 Profit on disposal of subsidiary Net fair value gains on financial instruments and investment property Dividend and interest income Finance costs Adjustment for pension funding Changes in operating assets and liabilities: Net increase in insurance contract liabilities Net increase in investment contract liabilities Net increase in reinsurers' share of contract 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 Disposal of subsidiary, net of cash disposed 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 Cash and cash equivalents at beginning of year Exchange losses on cash and cash equivalents Cash and cash equivalents at end of year As reported 31 December 2021 £000 77,037 - Group Restatement £000 2,141 459 As restated 31 December 2021 £000 As reported 31 December 2021 £000 79,178 459 87,719 - Parent Restatement £000 2,600 - As restated 31 December 2021 £000 90,319 - 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 - - - - - - - - - (2,600) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 6,155 24 856 4,765 - (58,340) (21,802) 2,364 1,646 81,352 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 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 (3,634) (3,451) 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 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 - - - - - - - - - (2,600) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5,285 11 622 87 (5) (58,384) (18,822) 2,276 1,646 54,839 - (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 Financial Statements Strategic Report – Chair’s Statement Financial Statements – Independent auditors’ report to the members of Ecclesiastical Insurance Office plc Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 163 163 163 Page 201 ContentsIndependent auditors’ report to the members of Ecclesiastical Insurance Office plcFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Strategic Report Section Four Other Information Directors, executive management and company information 165 Notice of meeting 165 Governance – Board of Directors Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 164 164 164 QuoteContentsFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Directors, executive management and Company information (unaudited) Directors, executive management and Company information (unaudited) Notice of meeting (unaudited) Notice of meeting (unaudited) Directors 1 1 1 1 1 1 1 1 R. D. C. Henderson FCA Chair R. Bajaj MA F. X. Boisseau MSc D. P. Cockrem, MA, FCA Group Chief Financial Officer M. C. J. Hews BSc (Hons), FIA Group Chief Executive Sir S. M. J. Lamport GCVO, DL N. P. Maidment MA, FCII A. J. McIntyre MA, ACA, FRCO C. J. G. Moulder MA, FCA Senior Independent Director S. J. Whyte MC Inst. M, ACII Deputy Group Chief Executive A. Winther BA Company Secretary Mrs R. J. Hall FCG Registered and Head Office Benefact House, 2000 Pioneer Avenue, Gloucester Business Park, Brockworth, Gloucester, GL3 4AW Tel: 0345 777 3322 Company Registration Number 00024869 Registrar Computershare Investor Services plc The Pavilions Bridgwater Road Bristol BS13 8AE 1 Non-Executive Directors NOTICE is hereby given that the Annual General Meeting of Ecclesiastical Insurance Office plc will be held at The Belfry, Lichfield Road, Wishaw, Sutton Coldfield, B76 9PR on Thursday, 22nd June 2023 at 12.35pm for the following purposes: Ordinary business (unaudited) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. To receive the Report of the Directors and Accounts for the year ended 31st December 2022 and the report of the auditors thereon. To re-elect Mrs R. Bajaj as a Director. 1 To re-elect Mr F. X. Boisseau as a Director. 1 To re-elect Mrs D. Cockrem as a Director. 1 To re-elect Mr R. D. C. Henderson as a Director. 1 To re-elect Mr M. C. J. Hews as a Director. 1 To re-elect Sir S. Lamport as a Director. 1 To re-elect Mr N. Maidment as a Director. 1 To re-elect Mr C. J. G. Moulder as a Director. 1 To re-elect Mrs S. J. Whyte as a Director. 1 To re-elect Mr A. Winther as a Director. 1 To consider the declaration of a dividend. 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 16 March 2023 1 Brief biographies of the Directors seeking election or re-election are shown in the Board of Directors area of the Governance section within this Annual Report and Accounts. All Non-Executive Directors seeking re-election have been subject to formal performance evaluation by the Chair who is satisfied that the performance of each Non-Executive Director is effective and sufficient time has been spent on the Company’s affairs. Only a member holding ordinary shares, or their duly appointed representative(s), is entitled to attend, vote and speak at the annual general meeting. A member holding ordinary shares is entitled to appoint a proxy or proxies (who need not be a member of the Company) to exercise all or any of their rights to attend, speak and vote on their behalf at the annual general meeting. Such a member may appoint more than one proxy in relation to the annual general meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that member. Any corporation which is a member holding ordinary shares can appoint one or more corporate representatives who may exercise, on its behalf, all of the same powers as that corporation could exercise if it were an individual member, provided that they do not do so in relation to the same share or shares and that they act within the powers of their appointment. This notice is sent purely for information to the holders of 8.625% Non-Cumulative Irredeemable Preference shares who are not entitled to attend and vote at the annual general meeting. Governance – Board of Directors Other Information Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 165 165 165 165 Page 202 Page 203 ContentsQuoteFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Notes Notes Governance – Board of Directors Other Information Strategic Report – Chair’s Statement Strategic Report – Chair’s Statement Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 Ecclesiastical Insurance Office plc Annual Report & Accounts 2022 166 166 166 166 ContentsQuoteFinancial StatementsOther InformationStrategic Report Financial StatementsOther InformationGovernance Financial StatementsOther InformationStrategic Report Annual Report & Accounts 2022 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 

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