Ecclesiastical Insurance Office Plc - Half-year Report

2019 INTERIM RESULTS

Ecclesiastical Insurance Office plc                                                                                             20 August 2019

Ecclesiastical Insurance Office plc ("Ecclesiastical"), the specialist financial services group, today announces its 2019 interim results. A copy of the 2019 interim results will be available on the Company's website at www.ecclesiastical.com

Highlights

·       Gross written premiums (GWP) up 7% from the same period last year at £185.0m (H1 2018: £172.7m), supported by strong retention, new propositions and benefiting from favourable foreign exchange

·       Profit before tax of £42.8m (H1 2018: £19.4m)

·       Investment returns of £42.0m (H1 2018: £17.7m), where markets have recovered since the end of 2018

·       Continuing to see steady measured progress in our insurance business with underwriting profits* of £9.5m giving a combined operating ratio (COR) of 91.4% (H1 2018: profit of £8.0m, COR 92.3%)

·       We will grant a further £5m to our charitable owner in September to give to good causes. This will take us to £70m towards our target of £100m in charitable donations by the end of 2020.

Mark Hews, Group Chief Executive Officer of Ecclesiastical, said: "Our purpose at Ecclesiastical is to contribute to the greater good of society. By delivering sustainable, profitable, long-term growth, we are able to support thousands of good causes across the UK through our charitable giving. I'm very proud that in April we launched the Movement for Good Awards, giving away £1m to charities in 2019.

"Alongside this we're announcing today a further £5m will be granted to our charitable owner in September. This will bring us to £70m towards our target of £100m by the end of 2020.

"This giving is made possible thanks to the hard work and dedication of everyone at Ecclesiastical. I'm delighted to report a positive financial performance in the first half of 2019, underpinned by continued strong underwriting performance. This is a result of our disciplined underwriting approach, and a benign environment in the first half of the year. Positive growth in global stock markets has also delivered strong investment returns, demonstrating the benefit of our long term equity investment strategy.

 "Our strategic goal is to be the most trusted and ethical specialist financial services group and we continue to win external accolades for the way we do business. 

"Ecclesiastical home insurance was once again rated first by Fairer Finance overall and came first for trust and first for customer happiness. Ecclesiastical Canada was awarded Top Employer for Young people 2019 for the seventh consecutive year.

"Our reputation for claims excellence was also enhanced with our UKGI business being the only insurer to win multiple awards at the Insurance Post Claims Awards."

*The Group uses APMs to help explain performance. More information on APMs is included in note 12.

Key Financial Performance Data

 

H1 2019

H1 2018

Gross written premiums

£185.0m

£172.7m

Group underwriting result*

£9.5m

£8.0m

Group combined operating ratio*

91.4%

92.3%

Investment return

£42.0m

£17.7m

Profit before tax

£42.8m

£19.4m

 

30 June 2019

31 Dec 2018

Net asset value

 

£617m

£586m

Solvency II capital cover (solo)

226%

215%

*The Group uses APMs to help explain performance. More information on APMs is included in note 12.

Interim Management Report

It has been a good first half of the year with a stable underwriting performance and strong investment returns, with stock markets recovering from the falls seen at the end of 2018.  We report a profit before tax of £42.8m (H1 2018: £19.4m).

Our strategy over the medium term continues to deliver moderate GWP growth, by maintaining our strong underwriting discipline and focusing on profit over growth. We have deep specialist capabilities, which we continue to develop through investment in technology and innovation, and by providing appealing customer propositions and excellent service.

We have delivered good growth and steady underwriting profits in the first half with underwriting profit of £9.5m (H1 2018: £8.0m). This reflects improved current year performance which benefited from benign weather and favourable large loss experience in most of our territories compared with previous years with the COR of 91.4% (H1 2018: 92.3%).

Gross written premiums grew by 7.1% to £185.0m (H2 2018: £172.7m), benefiting from strong retention, new business wins and favourable currency movements.

Investment markets have partially recovered from a poor Q4 2018 where worldwide markets fell but remain around 3% below half year 2018 levels. Interest rates have been held and there has been less volatility from quarter to quarter than in the prior year. The unrealised investment losses we suffered at the end of 2018 were partially recovered as we have benefited from unrealised gains in H1 2019. Our overall investment return for the first half of the year was above our expectations at £42.0m (H1 2018: £17.7m). We are expecting further volatility in the second half of the year as the uncertainty around Brexit and global economic conditions continues.

These positive half-year results allow us to make a grant of £5m (H2 2018: £5m) to our charitable owner, Allchurches Trust, which has been approved by the Board and will be paid in September 2019.

Strategic Update

Investment in both our business and our people continues under a broad range of initiatives.  Within the UK, a new private client product has been launched to help capitalise on growth opportunities available in this market.  In May we launched a series of enhancements to our education proposition with a redesigned survey report, e-learning support, cyber guidance and a lesson kit for teachers to assist with the promotion of digital resilience with primary and secondary pupils.   Investment in our staff continues to take place through our General Insurance Academy and as part of this a national training plan has been created, focusing on the continued development of our underwriters. 

Investment in new technology is also progressing well: our new policy administration system for the UK and Ireland is under development; the UK's new claims workflow and document repository system is expected to go live shortly; and our Australian subsidiary has begun development of its new policy administration system.  Our UK broking business has completed a successful trial of a new claims portal and will begin to roll this out more widely during 2019.

Our work in innovation and loss prevention continues.  The UK has successfully piloted thermal imaging equipment that identifies electrical faults before they can cause a fire, with the rollout of training and equipment now underway.  Work continues on the use of drones and their potential to support our risk management proposition. The UK has undertaken a series of trial drone flights. This will enable us to develop our understanding of how this technology can be embedded within our current survey approach.  We are exploring how connected technology can prevent common losses thus saving the customer time and expense on the cost of property maintenance, including a trial of a smart water leak detector and equipping a heritage property with a wide range of sensors to identify potential risks.

Our purpose is to contribute to the greater good of society.  Earlier this year we launched our £1m Movement for Good Awards, and recently announced awards of £1,000 each to 500 charities.  Further grants totalling £500,000 to 10 charities will be announced during September.  We continue to be motivated by our target to donate £100m to charity by the end of 2020 - after the £5m grant, we will have donated £70m towards this goal.  Together with our customers and business partners, we are building a movement for good - championing a more caring, ethical and trusted way of doing business.