Ecclesiatical Insurance Office Plc – Half Year Report

Highlights

·        Gross written premiums (GWP) up 4% from the same period last year at £172.7m (H1 2017: £166.0m), supported by strong retention and new propositions

·        Profit before tax of £19.4m (H1 2017: £42.2m)

·        Investment returns of £17.7m (H1 2017: £40.1m), returning to more normal levels following exceptional gains last year

·        Underwriting profit of £8.0m giving a combined operating ratio (COR) of 92.3% (H1 2017: profit of £9.6m, COR 90.5%) supported by risk management initiatives and continued favourable claims settlements in the UK

·        Continued external recognition of the Group as a trusted and specialist financial services organisation, including 1st place Gold Ribbon by Fairer Finance as most trusted provider of UK Home Insurance, Insurance Times Claims Excellence Award, and three Insurance Post Claims Awards for Ecclesiastical, and SEIB winning Personal Lines Broker of the Year at the British Claims Awards

·        Confirmation that the Group's Canadian Business retained its Top Employer for Young People status for the sixth consecutive year

·        Continued investment in our Art & Private Client capability, with a number of new appointments made and systems enhancements in plan. Successfully developed new relationships with key brokers in the Schemes market. Also supported brokers with the delivery of our insight programme, helping them to understand and address key issues and challenges facing clients in their sectors. Major investment planned in new systems to make it easier for brokers to do business with us

·        Publication of the Group's first Impact Report, demonstrating how the Group is changing people's lives for the better

·        £5m will be granted to our charitable owner in September 2018 to give to good causes. This will take our donations to over £100m to charity over the last five years

Mark Hews, Group Chief Executive Officer of Ecclesiastical, said:  “I am delighted to be announcing that a further £5m will be donated to charity following our financial performance in 2018.  This is a major personal milestone for me as it means that we have now donated over £100m to charitable causes since I took the role of CEO just over five years ago.  Alongside this, we have provided financial support directly to a number of programmes and projects with key partners including The Princes Foundation, Historic England, and children's charity Coram.

“Ecclesiastical is unlike any other financial services group – we are a commercial company with a wholly charitable purpose and one of the top five corporate donors in the UK. On behalf of the thousands of beneficiaries worldwide I would like to thank all our customers, brokers, business partners, colleagues and supporters.  Together we are transforming people's lives for the better.

“The achievement is made all the more special through independent feedback from the UK's home insurance customers that recognised Ecclesiastical once again as the most trusted insurer in the UK.

“Our ambition is that, together, we can build a movement for good and champion a more caring, ethical and trusted way of doing business.”

Key Financial Performance Data

*Alternative performance measures as detailed in note 13.

** Solvency II capital requirements are only calculated at the year end, unless there is a material change in business activity or environment.  There were no such changes in business activity or environment during the six months to 30 June 2018.

Interim Management Report

It has been a good first half of the year with our continued investment driving growth across the group.  We report a profit before tax of £19.4m (H1 2017: £42.2m), more in line with what we would expect following the exceptional investment returns we achieved last year.

Our focus continues to be on building a sustainable, ethical, values-driven business over the longer term as we work towards our strategic goal of being the most trusted and ethical business in our chosen markets.

We continue to apply rigour in our underwriting discipline, focusing on profitability over growth, and have again delivered stable underwriting profits in the first half. The underwriting profit of £8.0m (H1 2017: £9.6m) reflects more normal weather and large loss experience in most of our territories compared to previous years with the COR of 92.3% (H1 2017: 90.5%) closer to what we expect over the longer term.

Gross written premiums grew by 4% to £172.7m (H1 2017: £166.0m), a level of growth that we are aiming to achieve.

Investment markets have performed very differently this year after a long period of low volatility.  Equity markets in particular saw strong gains in the last quarter of 2017, reaching all-time highs in the UK, and we were prepared for low returns in 2018.  This proved to be the case in the first quarter of the year as volatility returned to the markets, interest rates rose and equity markets fell. However, performance recovered quickly in the second quarter, with rising equity markets and slower than expected interest rate rises meaning that our overall investment return for the first half of the year is close to what we had expected at £17.7m (H1 2017: £40.1m).

These positive half-year results allow us to make a grant of £5m (H1 2017: £12m) to our charitable owner, Allchurches Trust, which has been approved by the Board and will be paid in September.

Strategic Update

We continue to invest in our businesses and our people with a broad range of initiatives. Our General Insurance Academy is well established, providing targeted training and further deepening the expertise of our people in our underwriting businesses.  Our new competency framework has been rolled out to provide consistency of approach and striving for excellence in our behaviours.  

A major investment programme has been approved to implement a new policy administration system for the UK and Ireland insurance businesses.  Significant work is underway to develop systems enhancements to support our propositions in Art and Private Client and in the Faith sector and development is advancing for the implementation of a new claims workflow and document repository system.   New products have been launched for charities which are traded online through the Acturis platform. 

We have continued to innovate to support our business operations, and have a number of projects underway.  For example, thermography is being used to assist with the early detection and prevention of electrical faults and water leakages.  Our Australian business is offering surveys using drone technology as a key element of its strategic risk management support for its customers. 

Our purpose is to contribute to the greater good of society.  By September we will have donated over £100m to charity over the last five years.  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.