About Us About One Section Strategic Report Section Two Governance Section Three Financial StatementsFinancial Four Section Other Information Section Five

Ecclesiastical Annual Report & Accounts 2019 Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information Each day together are we capable of than more can you imagine Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information Each day we help inspire the thinkers of the future the of thinkers the inspire help we day Each Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information Each day we help millions of people celebrate their beliefs their celebrate people of millions help we day Each Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information Each day we help thousands of charities make a difference make charities of thousands help we day Each Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information

Graham Lacdao © St Paul’s Cathedral Each day we help protect the irreplaceable the protect help we day Each Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information Each day we help support the unstoppable the support help we day Each About Us About One Section

Ecclesiastical Annual Report & Accounts 2019 1

Contents

Section One About Us 3 Building a movement for good 4 Strategic Report Section Two Ecclesiastical at a glance 6 Our businesses 10

Section Two Strategic Report 15 Chairman’s Statement 16 A trusted business 22 Chief Executive’s Report 24 Transforming lives 30 Global trends in financial services 34 Our business model and strategy 40 Strategy in action 44 Key Performance Indicators 50 Governance Section Three Financial Performance Report 54 Risk Management Report 62 Principal risks 68 Corporate Responsibility Report 80 Non-Financial Information Statement 90 Strategic Report approval 92

Section Three Governance 95 Board of Directors 96 Directors’ Report 100

Corporate Governance 106 StatementsFinancial Four Section

Section Four Financial Statements 163 Independent Auditor’s Report 164 Consolidated statement of profit or loss 176 Consolidated and parent statement of comprehensive income 177 Consolidated and parent statement of changes in equity 178 Consolidated and parent statement of financial position 179 Consolidated and parent statement of cash flows 180 Notes to the financial statements 181

Section Five Other Information 247 Other Information Section Five Directors, executive management and company information 248 United Kingdom regional centres 250 United Kingdom business division and international branches 251 Insurance subsidiaries and agencies 252 Notice of meeting 253 Notes 254 About Us About One Section

Section One About Us – 2 Ecclesiastical Annual Report & Accounts 2019 3

Section One About Us

Building a movement for good 4 Ecclesiastical at a glance 6 Strategic Report Section Two Our businesses 10 Governance Section Three Financial StatementsFinancial Four Section Other Information Section Five About Us About One Section

Section One About Us – Building a Movement for Good 4 Ecclesiastical Annual Report & Accounts 2019 5 Strategic Report Section Two Each day, since the day our business Our strongly held values, together with was founded in 1887, we’ve wanted deep expertise in our chosen markets, to do business differently. To work give us a competitive edge. This has in a way that makes a difference to helped us deliver robust financial society and to the lives of others. returns which in turn help change people’s lives for the better. So by Owned by a charity, we’re a commercial daring to be different – and working Governance Section Three business with a purely charitable in a way that’s good, not just a little purpose. We manage a successful, less bad – everyone benefits. ethically run portfolio of businesses and give a significant proportion of Each day we are capable of more our profits to our owner, Allchurches than you can imagine. Together we’re

Trust, which donates independently building a movement for good. StatementsFinancial Four Section to good causes. We make our own considerable donations. And we help our customers and partners address the issues that matter to them. Other Information Section Five About Us About One Section

Section One About Us – Ecclesiastical at a glance 6 Ecclesiastical Annual Report & Accounts 2019 7

Ecclesiastical at a glance Strategic Report Section Two

Who we are What we do

An independent, Since the 1880s specialist financial 132 Ecclesiastical has services group been providing specialist years’ experience insurance and risk owned by a charity management support

Established in 1887 Governance Section Three to provide fire protection to its customers to Anglican churches Main insurer for the UK’s Grade I Award winning listed buildings ethical investment £10 0 m Moneyfacts ‘Best Ethical Investment Provider’ for 11th successive year (2009 to 2019) Our aim is to give £100m to good causes by the end of 2020 – we’ve made great progress donating £96.5m so far* Award Leading StatementsFinancial Four Section *Cumulative total 2016 – 2019 Trusted by winning insurer for independent 50,000+ We are proud that our charities and not for profit group’s people, products the Anglican schools for organisations insured in the One of the S&P Rating and services continue to over 55 years UK alone Excellent achieve industry acclaim church UK’s largest in all our territories A- Stable charitable (last affirmed July 2019) A leading Gold standard donors multi-faith insurer Home Insurance Protecting churches, Awarded 1st place Gold synagogues, Ribbon by Fairer Finance Other Information Section Five £3.1bn mosques and Hindu, as most trusted provider Sikh and Buddhist – 10th time in a row Funds under management temples across our (£2.7bn in previous year) territories About Us About One Section

Section One About Us – Ecclesiastical at a glance 8 Ecclesiastical Annual Report & Accounts 2019 9 Strategic Report Section Two

Trusted to do the right thing A different kind of business We are a financial Best for developing 97% + 98% 97% young people of our UK customers of key brokers satisfied services group that Ecclesiastical satisfied with how their with our service Canada recognised claim is handled exists to give its as Top 100 Employer UK overall customer satisfaction 98% in UK for Young people across all the sectors we measure profits to charity for the 8th

consecutive year Governance Section Three

CII Chartered Status Leading the way in Our aim is to be Ecclesiastical UK & Ireland and Lycetts have Health and Safety the most trusted been awarded Corporate Chartered status by Rated best insurer by UK brokers 83% the Chartered Insurance Institute* First insurer to register and ethical in the charity, commercial heritage, of staff are positive about *A corporate Chartered title is a commitment to an overall the statement ‘I am proud commitment to Health specialist financial standard of excellence and professionalism, and evidence education and faith sectors* to work for this company’ and Safety Executive (HSE) of commitment to customers, partners and employees ‘Helping Great Britain services group *Independent survey by FWD Work Well’ strategy Financial StatementsFinancial Four Section

Making a difference Our financial performance £32.5m Movement for Good £394.0m We launched our biggest ever giving campaign £73.3m 91.1% – through our Movement for Good Awards we gave gross written premium profit before tax combined operating ratio given to charity £1 million to help change people’s lives. (£357.0m in previous year) in 2019 (£15.4m in previous year) (86.4% in previous year) (£18.8m in previous year) Other Information Section Five £30m to our charitable owner and Over 7,000 charities £2.5m Ecclesiastical Group giving 60%+ have benefitted from of our employees our giving volunteer About Us About One Section

Section One About Us – Our businesses 10 Ecclesiastical Annual Report & Accounts 2019 11 Strategic Report Section Two Specialist Insurance Our businesses Ecclesiastical UK / Ansvar UK / Ansvar Australia / Ecclesiastical Canada / Ecclesiastical Ireland

Our insurance businesses offer insurance products and risk management services We are organised into three divisions: to customers in the faith, heritage, charity, education and real estate markets. We have particular expertise in valuing and protecting distinctive properties Specialist Insurance; Investment both old and new – from cathedrals to concert halls, schools to stately homes Management; and Broking and and iconic modern buildings to youth hostels. We also provide a discrete range of specialist products including household Advisory. All are underpinned insurance for churches and congregations and fine art insurance to the by a reputation for delivering an high net worth market. Governance Section Three outstanding service to our customers. Investment Management EdenTree Investment Management (EdenTree)

Our multi-award-winning Investment Management team manages and sells ethically screened and non-screened investment products to institutional customers, We provide products and services including the charity and faith markets, and to retail customers through the advisory to businesses, organisations and market. EdenTree also manages the majority of the Group’s financial investments.

retail customers, both directly and Broking and Advisory SEIB Insurance Brokers (SEIB) / Ecclesiastical Financial Advisory Services through intermediaries. Operating (EFAS) / Ecclesiastical Planning Services Ltd* (EPSL) / Lycetts Insurance StatementsFinancial Four Section Brokers* (Lycetts) / Lycetts Financial Services* primarily from the UK, our divisions Our specialist brokers, SEIB and Lycetts, provide tailored insurance products for customers, particularly those in the high net worth, farming and rural estates, and their associated companies are: 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.

* These businesses are owned by Ecclesiastical Insurance Group plc (EIG) which is the parent company of Ecclesiastical Insurance Office plc (EIO). This Annual Report and Accounts for EIO does not include the results of EIG. Where helpful, we’ve included some additional information about these busineses. Other Information Section Five Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information

To support yourself and your pupils, your support and yourself To Ecclesiastical by resource this for toolkit free a provides Insurance secondaryprimary and teachers.” I love this resource. My class had been outside problems safeguarding having of school using WhatsApp. This was a great platform to sort out and share their issues. The resources are ready to use. Saved me lots of time. Thank you.” Primary teacher school TES Five Star review @TeacherToolkit “ 

I’ve taught internet safety over the last two decades. As a busy classroom teacher, it has always been tough a task to keep up with constant technological advances, as well as ensure that you are as knowledgeable about the benefits and risks of online safety. problem-solving techniques, our lesson techniques, our problem-solving pupils engaging in succeeded plan and driving home important safety messages. In recognition of its success, Cyber Ready Risk won the CIR 2019 Management Award for Public Safety, the understanding of our demonstrating challenges faced by schools and our them. solve helping to commitment “ 

In creating the kit, it was important to fully understand the problems and issues children faced. So we spoke to pupils, parents, and teachers to build up a clear picture. From talking to teachers, it was soon obvious that many teaching resources were out of date and unappealing. Teachers felt under pressure to meet 2020 government-led safety measures to protect children from online harm. into solution proposed our took We the classroom to get frank, constructive feedback before refining the final design. By taking a collaborative approach and coming up with innovative Cracking down on cyberbullying down Cracking is cyberbullying of threat the world, a digital in up growing children For responsibility our was it felt we schools, of insurer So as a leading ever-present. teachers help to designed was kit, Ready, lesson Cyber free Our action. take to as an extension intended was and online safe stay to how students their show activities. teaching existing to Ecclesiastical UK Ecclesiastical About Us About One Section

Section Two Strategic Report – 14 Ecclesiastical Annual Report & Accounts 2019 15

Section Two Strategic Report

Chairman’s Statement 16 A trusted business 22 Strategic Report Section Two Chief Executive’s Report 24 Transforming lives 30 Global trends in financial services 34 Our business model and strategy 40 Strategy in action 44 Key Performance Indicators 50 Financial Performance Report 54 Risk Management Report 62 Principal risks 68 Corporate Responsibility Report 80 Non-Financial Information Statement 90 Strategic Report approval 92 Governance Section Three Financial StatementsFinancial Four Section Other Information Section Five About Us About One Section

Section Two Strategic Report – Chairman’s Statement 16 Ecclesiastical Annual Report & Accounts 2019 17

Chairman’s Statement Strategic Report Section Two

My first year A strong set of results This is my first annual statement as Chairman and it’s been a pleasure and privilege It is our unique charitable purpose that makes us special. Our charitable ownership to have led the Group following my appointment in March 2019. Over the past year, continuously influences the way we do our I’ve enjoyed visiting our businesses across the UK and also in Canada and Ireland, and am business and our approach to growth. looking forward to visiting our Australia business this year. I’ve had the opportunity to meet We believe in taking the long-term view and we believe growth must be sustainable. some of our customers and talented colleagues and I have been thoroughly impressed to It is a business model that works, and see, at firsthand, just how much our customers value our expertise. We put customers at I am delighted that the Group’s strong performance has allowed us to donate the heart of everything we do and because of that, I am delighted to say it’s been another £30m to our charitable owner, and over successful year. My heart-felt thanks to everyone who has worked so hard to deliver these £2m to the good causes we support directly, We ended Governance Section Three significant financial results that enable us to recycle our profits back into the communities through our Corporate Social Responsibility programme. We ended 2019 having given 2019 having in which we do our business. The more we make, the more we can give away. over £96m in total to good causes since 2016, and are now only a short way from given over reaching our £100m target by the end of 2020. £96m in total

Achievements and reflections to good causes In the past few years, the Group has been since 2016, through a period of change. This change programme has continued to strengthen and are now our core insurance business as well as expand only a short our other portfolios and specialisms. In 2019, our immediate parent, Ecclesiastical Insurance

way from StatementsFinancial Four Section Group plc, expanded the broking business with investments in Robertson-McIsaac reaching our and Lloyd & Whyte, which both offer niche specialist insurance services. £100m target

In late 2020, we will relocate our Gloucestershire by the end head office to a purpose-built unit which will house all of our people in the area. of 2020. I am pleased that sustainability, energy efficiency and environmental impacts have been a significant consideration for this development.

We have also invested in the development of a new system for the UK General Insurance

business to provide our customers and Other Information Section Five brokers with an enhanced experience and give us better processes and capacity. About Us About One Section

Section Two Strategic Report – Chairman’s Statement 18 Ecclesiastical Annual Report & Accounts 2019 19 Strategic Report Section Two

Board developments The future and governance As the Board looks towards the next In 2019, we were delighted to welcome chapter for Ecclesiastical, it is especially Denise Cockrem, the Group’s Chief Financial critical that we respond to broader issues Officer, as an Executive Director to the of sustainability and climate change. Board. We were also delighted to welcome Our people are often on the frontline of Angus Winther and Francois-Xavier flooding and other natural catastrophes, Boisseau to the Board as Non-Executive and it has never been more important to ‘It is our unique Directors during the year and Neil Maidment focus on our risk management services as a Non-Executive Director in January and try to prevent disaster before it happens. charitable purpose that 2020. Their diversity of skills and experience Given the depth of our expertise, we are across the insurance and financial services well-placed to play our part in making a Governance Section Three sector adds to the constructive challenge better, safer future for all. Added to that, makes us special. and support the Board provides to the we believe we are also proving that a executive management team. different way of doing business is possible. Our charitable The Board and I were also delighted that A way that makes returns beyond We believe Tim Carroll, who has served on the Board conventional shareholders to a broader, since 2013, has now taken up the position diverse group of stakeholders, including ownership continuously we are also of Chairman of our charitable parent company, the most vulnerable and needy in society. proving that Allchurches Trust Limited. We thank Tim for Nothing would please us more than to influences the way we his service to the Ecclesiastical Group and encourage others to join us and create a different look forward to working with him in his a movement for good. new role. do our business and our way of doing David Henderson We are also committed to supporting our Chairman

business is people right across the business, at every approach to growth.’ StatementsFinancial Four Section level and from every background, so we can possible. develop a sustainable pool of talent and allow them to develop their careers with us. Other Information Section Five Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information

Simon Sadinsky, Deputy Executive Director Education of Foundation Prince’s The Student Walker, Esme Prince’s Foundation Building Craft Programme and skills required to design, build build design, to required skills and local communities.” preserve our and There’s only so much you can get from the literature, it’s the firsthand experience that is so priceless. On this course they really take youunder their wing.”

“  Ecclesiastical’s support will help us to continue to equip our young education the craftspeople with After the programme, most students secure work in the heritage sector or go on to undertake further training, with around 90% starting careers in craft skills immediately after completing the course. The Prince’s Foundation is giving opportunity, unique students a equipping them with the craft skills and techniques needed to help preserve some of our irreplaceable come. to generations for buildings “ 

For more than ten years we’ve insured Dumfries House in Ayrshire, headquarters of The Prince’s Foundation. We’ve been Craft Building supporting their Programme for the last two years. Established to help preserve valuable craft skills, which are gradually being lost, the BCP takes place at The Prince’s Foundation’s training facilities in Shoreditch, London and Dumfries House, Ayrshire – where students complete a live build project. Many of the skills, such as stonemasonry and lime plastering, aren’t taught in college but are learnt through years of exposure working alongside masters of the art. Preservation the next for generation how UK, the know in we buildings I listed Grade of insurer leading As the looking buildings unique these keeping in are craft skills important traditional Foundation Prince’s The to £225,000 pledged we’ve best. why their That’s part charity’s take to the in students 36 enable to years three over CraftBuilding Programme (BCP). Ecclesiastical UK Ecclesiastical About Us About One Section

Section Two Strategic Report – A trusted business 22 Ecclesiastical Annual Report & Accounts 2019 23

A trusted business Strategic Report Section Two

Here are a selection of the awards our Group received for the way we do business

Our UKGI business won Top Employer Top of the Ecclesiastical for Young People Fairer Finance tables Canada won the • Commercial Lines Team CNA Canada • Rising Star Ecclesiastical Canada

Award for Governance Section Three was awarded Top For the 10th time running, Excellence in at the Insurance Post Claims Awards Employer for Young Ecclesiastical UK Home Insurance Philanthropy People status for the was once again placed top for 8th consecutive year and Community customer trust Service

Best Ethical Investment Provider

EdenTree won StatementsFinancial Four Section Moneyfacts Best SEIB won Ethical Investment Insurance Broker of the Year Provider award for SEIB won at the Women in Insurance awards the 11th year running Personal Lines EFAS won Broker of the Best Firm, Year at the British South West Claims Awards Our UKGI business won at the NatWest the Public Safety Award at the Local Hero Awards Ecclesiastical Canada CIR Risk Management Awards was recognised as a Other Information Section Five Greater Toronto Top Employer About Us About One Section

Section Two Strategic Report – Chief Executive’s Report 24 Ecclesiastical Annual Report & Accounts 2019 25

Chief Executive’s Report Strategic Report Section Two

A unique business with a clear and caring purpose Owned by a charity, we are not driven by the Of course, whilst it is easy to focus on need to grow at any cost in order to satisfy the impressive numbers that headline this In the world of financial services, Ecclesiastical treads a very different path. short-term shareholder demands. Instead achievement, it is the positive impact these Over 130 years ago, our founders created a commercial company with a charitable we are driven to build a sustainable, ethical, donations have made to so many people’s values-driven business that supports and lives which is truly inspiring. We are very purpose. Today, we are one of the largest corporate donors to charity in the UK, cares for its customers, their communities proud to have supported charities tackling contributing to thousands of good causes in this country and abroad. and society as a whole. We do this by using so many different and important issues. our specialist expertise to provide products, Their work is lifting people out of poverty, cover and service that customers value making society more inclusive and and trust. strengthening communities. But their work also shares a common aim – to change lives We seek to provide insurance that you can for the better and make a positive impact. Governance Section Three believe in rather than cheap insurance that “To work may not provide the cover you expected at Looking at all the charities we’ve supported, your time of need. and the many thank you letters received, together is a humbling and uplifting experience. It to be the It is for this reason that we continue to be is an experience that inspires us all to get trusted to protect and preserve so much behind our charitable purpose and build and most trusted of the country’s irreplaceable heritage and widen our movement for good so that more history, covering many of the nation’s most people can benefit. and ethical iconic palaces, castles, estates, World Heritage Sites, churches and cathedrals. Always learning specialist In fact, we are a leading insurer of Grade I listed buildings in England, including places from our customers financial like St Paul’s Cathedral and Westminster As a business, we strive to do the right thing; services group, Abbey that are recognised by millions of it is part of our DNA. But we are only human people around the world. and, given the breadth and depth of our giving £100m global Group, it is inevitable there will be times StatementsFinancial Four Section Building a Movement for Good, – hopefully few and far between – when we to charity.” fall short of our own high standards. When this thanks to your support happens, it is important that we learn from this In 2016, we announced a new strategic and recognise where we can do things better. goal for the Group that built on our ethical foundations. It was clear, stretching and Over the years, this approach of continuous inspirational. learning has led to exceptionally high UK customer satisfaction levels, at 97%-99% “To work together to be the most trusted across all sectors. and ethical specialist financial services group, giving £100m to charity.” Overall, we successfully deal with thousands Thanks to the incredible support of our of claims every year and I am pleased to customers, brokers, business partners, report that 98% of surveyed customers employees and all our supporters, I am were satisfied with how we handled their

pleased to report that in 2019, together, claim last year, and 93% being very and Other Information Section Five we donated over £32m to charities. extremely satisfied, which is consistent This takes our total donations to over £96m with previous years. and we have now supported over 7,000 charities worldwide. With this wide-ranging However, there have been a few claims support, we are now within short reach of relating to historical sexual abuse over our £100m target and hope to achieve it 30 years ago, which have been difficult to by the end of 2020. handle to the satisfaction of all concerned. About Us About One Section

Section Two Strategic Report – Chief Executive’s Report 26 Ecclesiastical Annual Report & Accounts 2019 27 Strategic Report Section Two

I am speaking here of claims for physical one with a purpose like ours. I am delighted And recognising our focus is on more than just Taking a long-term perspective, together and sexual abuse, which represent a very that these efforts have led to external providing outstanding service to our customers: with maintaining our strong solvency ratio, small percentage of our total claims (less recognition on a wide front. continues to enable us to hold a greater than 0.4%), but are particularly traumatic • Ecclesiastical won the ‘Best Corporate proportion of higher-risk investment assets and challenging for victims and survivors and Delivering for society Communications Campaign’ and ‘Best Low which are designed to deliver greater must therefore be conducted with sensitivity, Budget Campaign’ for the Movement for returns. Notwithstanding the uncertainty empathy and compassion. Sadly, for a very and our customers Good Awards PR campaign at the in the external environment which affected small number of survivors, the experience We recognise there remains a lack of trust CIPR Awards the markets during the latter parts of 2018 of bringing a claim has been a difficult in businesses, and every year the leading and the majority of 2019, our long-term and painful process, not helped by the global trust survey shows the financial • Ecclesiastical Canada won ‘Excellence investment approach remained consistent, adversarial nature of the civil justice system services sector as having the lowest level in Philanthropy and Community Service’ resulting in investment income in the year within which we must all work. of trust1. Against this background, at the Insurance Business Awards of £34.8m (2018: £35.3m) and fair value Governance Section Three I am especially pleased that some of our We continued gains of £52.1m (2018: fair value losses To this end, we welcome the work of the businesses were positively recognised by Of course, awards such as these only transpire of £35.4m). Underwriting results in the Independent Inquiry into Child Sexual Abuse, independent bodies for their exceptional to focus on following years and years of focus by dedicated year were strong across the Group at IICSA, and have contributed positively to contributions. Of note, in 2019: individuals working hard to do the right thing. £20.0m (2018: £29.2m) and reflected the the Inquiry’s consideration of how the civil delivering A few deserve a special mention this year: anticipated reduction in reserve releases justice system can better deliver reparations • Ecclesiastical was rated as the profits that are compared with prior year. to victims and survivors. Ecclesiastical works ‘Most Trusted’ home insurer in the UK • Our SEIB Deputy CEO was awarded hard to settle claims fairly on a full and final by Fairer Finance. It also scored top for sustainable ‘Insurance Broker of the Year’ at the Our diverse portfolio of companies, not basis with the agreement of its claimants customer happiness Women in Insurance Awards least in the core insurance businesses, and with the benefit of such claimants for the have supported our objective for delivering • Our EdenTree Chief Investment Officer normally having received independent • Ecclesiastical won the ‘Public Safety Award’ sustainable and profitable growth for the once again made it to the ‘FE Alpha legal advice. While we do not always get at the CIR Risk Management Awards for long-term, long term. Manager Hall of Fame’ for long-term everything right, Ecclesiastical Insurance their Cyber Ready toolkit Office itself strives for the highest standards so we can performance and consistency Group Gross Written Premium (GWP) has in the industry and we were the first insurer grown 10.4% to £394m (2018: £357m).

• Our UK General Insurance business StatementsFinancial Four Section to introduce and publish clear guiding continue to • One of our talented claims team won claimed two Insurance Post ‘Claims Awards’, During the year, we continued to focus on principles having obtained survivors input. the ‘New Professional of the Year’ award recognising the exceptional service and deliver our delivering profits that are sustainable for the We have also taken a lead in working with from the Chartered Insurance Institute. lengths our teams go to in order to ensure long term, so we can continue to deliver our a number of claimant solicitors to improve our customers are in safe hands charitable charitable purpose. the claims experience within the current The trust placed in us is not something civil justice system and have introduced purpose. we take for granted and we will continue several positive changes including offering • Ecclesiastical Canada was recognised as to invest and work hard to ensure our Our strategy the services of psychological rehabilitation a ‘Top Employer in Greater Toronto’ and customers receive exceptional service specialists Moving Minds to offer counselling for the 8th consecutive year as one of and performance. for a sustainable future support for every claimant. Canada’s ‘Top Employers for Young People’ Over the last few years, we have made A sustainable good progress on our journey to become That said, it is clearly impossible to turn back • EdenTree, our pioneering Investment the most trusted and ethical specialist time and undo the damage of childhood Management business picked up the and resilient business financial services group and have given abuse, and so we all continue to learn Moneyfacts ‘Best Ethical Investment I am pleased to report that we concluded significantly to good causes. We empowered how best to support and help those who Provider’ for the 11th year running 2019 in a position of financial strength, and invested in our people who have

have experienced it within the Church reporting a pre-tax profit of £73.3m (2018: transformed the Group with an ambitious Other Information Section Five or elsewhere. Moreover, we encourage • Ecclesiastical Financial Advisory Services £15.4m) and have benefitted from the more change programme, which continues to gain and support the Church and many of our was recognised as the ‘Best Firm, South favourable investment markets in 2019. momentum. As such, we now enter 2020 customers on the implementation of strong West’ in the Local Hero Mortgage Awards This robust performance has not only enabled from a position of strength. We still have safeguarding practices so that childhood us to make a £30m charitable grant, it has our sights firmly set on reaching £100m abuse is prevented in the first place. • SEIB, our broking business, won ‘Personal further strengthened our capital position to charity in 2020 and believe we are well Striving for continual improvement is Lines Broker of the Year’ at the British which provides us with both security today positioned to capture the opportunities that essential for any business, but is vital for Claims Awards. and flexibility for the future. lie ahead.

1 2019 Edelman Trust Barometer Global Report About Us About One Section

Section Two Strategic Report – Chief Executive’s Report 28 Ecclesiastical Annual Report & Accounts 2019 29 Strategic Report Section Two

A year or so ago, at around the time of our critical services to our customers. Serving our 130th year as ‘Ecclesiastical’, we took the customers and the health, safety and well-being decision to take a fresh look at our brand. of our employees will be our priority throughout At a time when businesses continue to come the duration of the outbreak. under scrutiny for questionable behaviours, we concluded that it has never been so important to celebrate our charitable ownership and Working together the unique business model that differentiates for the greater good us from others. Over the coming years, With our £100m charitable target within our near while keeping faithful to our origins, we will ‘With our £100m term grasp, we remain energised and inspired to be introducing some changes to our brand work together for our customers and society. to better reflect the diversity of financial businesses within the Ecclesiastical Group. charitable target within Governance Section Three Our depth The progress we have made and the speed we have done it would not be possible were of expertise, In addition to investing in our people and it not for the dedication of our specialist our near term grasp, brand, we have also continued to invest in teams worldwide. As such, the Board and I reputation new systems and technology, helping our say “Thank you” to our exceptional colleagues businesses to innovate with purpose and who, no matter where they might be in the we remain energised and focus on increase our agility and efficiency. Some of business, will always put doing what is right these projects will span over a number of doing the right for our customers and our charitable purpose years, not least the development of a new and inspired to work at the centre of everything they do. And thank strategic UK General Insurance system which, thing for our you all for helping those who need it most once live, will help us to provide our customers with your tireless fundraising, volunteering and brokers with an enhanced experience together for our customers put and nomination of good causes. us in a position and give us better processes and capacity. Moreover, thank you to our customers, brokers customers and society.’ The insurance market remains a highly and business partners for trusting us with their of strength. StatementsFinancial Four Section competitive one, and we see this continuing. business and allowing us to champion the However, we are confident we can continue many worthwhile causes they care about. to confront such challenges as our depth of expertise, reputation and focus on doing To those who are reading about Ecclesiastical the right thing for our customers put us in a for the first time, I invite you to join us, whether position of strength. Coupled with our financial as a colleague, customer or business partner, strength and an ethical approach, this provides and experience for yourself how it is possible the foundation on which we will continue to to do business differently. Because I believe build our business and deliver our vision. that, together, we are creating something very special – a movement for good that touches In early 2020, the existence of a new and transforms lives in our homes, in our coronavirus, now known as COVID-19, was communities, in this country and abroad. confirmed and since this time it has spread across the globe and is now characterised Each day, we each make a small step by the World Health Organisation as a forward – helping our customers or pandemic. We are managing the impact of beneficiaries. Each day, we’re building a Other Information Section Five COVID-19, utilising business continuity and risk movement for good. And, together, we are management processes where appropriate. capable of more than you can imagine. Our capital resources can withstand significant short-term temporary market disruption. Whilst By order of the Board there is the potential for the outbreak to impact on our day to day operations, we have plans in Mark Hews place to ensure that we can continue to provide Group Chief Executive About Us About One Section

Section Two Strategic Report – Transforming lives 30 Ecclesiastical Annual Report & Accounts 2019 31

I’ve seen the darkest sides of life imaginable but Street Talk saved me Strategic Report Section Two Each day, together, we transform lives Amina* is a victim of trafficking and just one of the women helped by charity Street Talk, We are proud of our ambition to give £100m to good causes by the end of 2020. a vital counselling and art To date, our Group has given £96.5m in grants and donations, helping to tackle the therapy service, which received a £10,000 grant from our ethical big issues in society and changing people’s lives for the better. Here are some of the investment business EdenTree. people whose lives we have changed. You can read more about these stories in our *Name changed to protect ‘Amina’. Impact Report, available on our website www.ecclesiastical.com/impactreport I’ve been able to I’ve stopped feeling break down barriers dreadfully lonely – now I around disability have something to look forward to Christopher has a rare condition Governance Section Three called microcephaly. Lycetts has Anne is just one of many older helped to build Christopher’s people whose lives have been confidence through a work transformed by Linking Lives UK, placement – part of their support a charity working to reduce social for specialist education and care isolation, which received a £1,500 I’ve now got a roof over charity Learning for Life. grant from Allchurches Trust. my head for my family

Mark and his family now have a brighter future thanks to the work of Focus Ireland, a charity that aims to prevent families, young people and individuals I’ve helped give homeless from becoming homeless. girls and their babies a Ecclesiastical Ireland raised safe place to call home StatementsFinancial Four Section over €15,000 to support their vital work. Michelle has seen firsthand the positive benefits of Ansvar Australia’s support to the Lighthouse Foundation, a charity dedicated to ending youth homelessness.

I’ve had the chance I’ve seen a real difference to learn from master in our schoolchildren craftspeople – they’re happier and I’ve got my life I’ve seen what a huge more positive back on track with difference education makes Esme has benefitted from a help from Phoenix to the welfare of horses Building Crafts Apprenticeship Tim, a primary school deputy

– an initiative to equip students head, has experienced firsthand Chris is just one of the many Gemma has seen how the Other Information Section Five with specialist craft skills, the noticeable difference made young people Phoenix has £50,000 grant, given by SEIB helping to preserve these by Ansvar UK’s ongoing support helped to become more to The British Horse Society, valuable techniques for future to Coram Life Education independent and find their place is boosting their essential equine generations. Ecclesiastical UK – a charity dedicated to in life. Ecclesiastical Canada welfare work – helping to prevent has supported The Prince’s ensuring that primary school has supported the life-changing cases of cruelty and neglect. Foundation by pledging children stay strong and safe in work of Phoenix through their The BHS is dedicated to improving £225,000 over three years. their most formative years. impact grant. the lives of horses across the UK. Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information Mr Davies, Chairman Davies, Mr Club Railway Model Deeping Market Natasha Baugh, Leader, Team Claims Department, Ansvar UK settlement based upon our knowledge of the industry, so we were really surprised by how they responded to claim.” our By taking a pragmatic approach to a complex claim, we were able to put the customer at ease and ensure they immediately had access to funds.”

“  I was staggered by Ansvar’s service. expectedWe to be fighting for To raise additionalTo funds, the club set up a JustGiving page, which raised including donation a £10,000 £107,947 from Sir Rod Stewart. Now established as a registered charity, the Market Deeping Model Railway Club aims to create youth projects, fund new model railway clubs and raise awareness of modelling the across underinsurance world. So, while club members were deeply affected by the vandalism, the incident has enabled them to make a real difference in the community. “  The very next we day, appointed our specialist to meet with club representatives and help them with the claim process. It was immediately clear that this was a complex loss. Despite this, we settled the claim in full the same day. The club had set up for its annual show when vandals struck, destroying the painstakingly built models – one of which had taken years 25 to make. damage, the repairing about Talking Peter Davies, club Chairman, pointed out, ‘Some of us simply don’t have that amount of timeleft in our lives’. Getting a model railway club back on track on back club railway a model Getting specialist of areas our of some just are churches and charities groups, Voluntary Model Deeping Market the 2019, May in So, when knowledge. insurance headlines made – which vandalism extraordinary of victim the was Club Railway ahead. steam full went – we worldwide Ansvar UK About Us About One Section

Section Two Strategic Report – Global trends in financial services 34 Ecclesiastical Annual Report & Accounts 2019 35

Global trends in financial services Strategic Report Section Two

As part of our everyday business management, we monitor a number of global trends that we believe have the potential to impact our business in the future. Our insight into these trends is shown over the next few pages and our response is demonstrated within Strategy in action (page 44).

Trend Our perspective Trend Our perspective

Low trust in financial The financial services sector continues to rebuild its reputation, with trust in financial services at Climate change The world’s climate has changed over the past decade, with average temperatures continuing services its highest since the Edelman Trust Barometer (ETB) started tracking by sector. Financial services to rise and setting new records. This is expected to lead to less predictable and more extreme Governance Section Three remains the least trusted global business sector and is significantly less trusted than the technology, weather events (such as hurricanes, severe freezes, floods, extreme heatwaves and droughts). automotive and entertainment sectors. Among the global population, trust in financial services has Rising urbanisation is placing pressure on natural defences, leaving increasing numbers of people increased over the past five years, reaching a neutral position rather than one of trust. Despite this vulnerable to rising sea levels. These factors are likely to result in a greater concentration of improvement, only the institutions of media and government are less trusted than financial services. insurance losses and will require changes in the way risk is evaluated and managed. The ETB is now in its twentieth year and recognises that trust is built on competence and ethics. Only non-governmental organisations are seen as ethical due to their focus on protecting the For the first time, the World Economic Forum’s Global Risks Report is dominated by the environment, environment, civil and human rights, and addressing poverty, illiteracy and disease. The ETB sees and specifically the climate emergency. The world’s leading economists now believe the top five ethical behaviour as being driven by being purpose-driven, honest, with a vision, and fair. There global risks in terms of likelihood are all environmental, with extreme weather events as the top is a clear opportunity for ethical and trusted businesses to demonstrate a proven track record in global risk. In terms of impact, climate inaction is the top global risk. There is growing recognition upholding high standards. that governments need to do more to respond to these environmental risks.

Ecclesiastical aims to be the most trusted and ethical financial services group. This distinct Our responsible investment business, EdenTree, has continued its work on climate change, especially positioning is supported by our business model which drives our behaviours – and is evidenced engaging with companies on the risks and opportunities in this area. Our insurance businesses by a high level of trust that is rare amongst financial services businesses. As shown in Strategy continue to investigate and trial innovative tools to help our customers prevent losses from occurring, in action (page 44) this trusted and ethical ethos is recognised: our UK insurance business is the as shown in Strategy in action (page 44). consumer’s most trusted provider for the tenth consecutive time; our investment business has a market-leading reputation both as the best ethical investment provider (receiving this award for the The UN Intergovernmental Panel on Climate Change (IPCC) has warned that global warming must StatementsFinancial Four Section eleventh consecutive year) and as an ethical investor raising awareness of environmental, social and be kept to a maximum of 1.5°C within 12 years; after this, even a 0.5°C increase will increase the governance issues; and our financial advice business has been recognised as a ‘local hero’ for their risk of extreme weather leading to floods, drought and poverty for hundreds of millions of people. outreach and advocacy. Meeting this ambitious 1.5°C target could also prevent the eradication of corals and suppress the changes to the Arctic which is seeing more pronounced changes than other parts of the globe.

In 2019, climate change became significantly more visible with increased momentum to address the In addition to environmental concerns referenced in the previous section, uncertainty and volatility Geopolitical challenge. There are clear examples of growing concern: the environmental activist Greta Thunberg prevail in the wider geopolitical landscape. There is significant turbulence across the world, with landscape was awarded Personality of the Year by Time magazine; children boycotted school across several challenges ahead: international power-play politics; friction in trade with increased protectionism, countries; bridge-blocking protests were organised; and the UK House of Commons approved a vote tariffs and trade wars; escalating tensions in the Middle East (especially the growing isolation of Iran) and to declare an environment and climate emergency. This year’s Australian bushfires are unprecedented the weakness of Europe. There are concerns around the potential for fragmentation of long-standing and provide a strong insight into the potential impact on the world if insufficient action is taken by alliances with Europe appearing more divided and fragile than at any time in recent history. governments and people. The next decade will be crucial in tackling global warming. Governmental approaches to economic and social issues have led to disapproval and public concern, provoking protests around the world. This is magnified by domestic political polarisation, which reinforces feelings of discontent and uncertainty in many countries.

Ecclesiastical is mindful of these global trends and all our businesses continue to monitor the global Other Information Section Five landscape, to understand and respond to the potential impacts from uncertainty. About Us About One Section

Section Two Strategic Report – Global trends in financial services 36 Ecclesiastical Annual Report & Accounts 2019 37 Strategic Report Section Two Trend Our perspective Trend Our perspective

Regulation In 2019, regulators have continued to focus on governance, culture and accountability. In the UK, Changing demographics Since the turn of the twenty-first century, there has been significant change in demographics across further insights into the Insurance Distribution Directive (IDD) were provided in several key reports and social trends our key markets and territories. Populations are ageing in much of the developed world, leading from the Financial Conduct Authority (FCA). The Senior Managers and Certification Regime to a fall in the working population and delayed retirement for workers, although some pressure is (SM&CR) became applicable to insurers in 2018 and to almost all UK regulated firms in 2019. being relieved by higher immigration. Workers also face the threat of increased automation which is removing some lower-skilled roles and increasing productivity. While the Financial Conduct Authority’s regulations only apply in the UK, other regulators have already introduced similar regimes or are consulting on their introduction. These jurisdictions Migration is likely to lead to greater ethnic diversity which in turn will provide new opportunities for include Australia, Hong Kong, the Republic of Ireland and Singapore. Often, new regulations are businesses, particularly those operating in faith markets. Alongside Ecclesiastical’s roots in the implemented first within banks before being extended to other financial services organisations. Anglican Church, our faith customers span a broad spectrum of risks including sacred places of Strong governance is seen as critical alongside good culture and conduct within financial worship for Muslims, Hindus and Jews. institutions. Individual accountability is now being applied by several regulators – its introduction provides significant indication of potential outcomes where failings are identified. Young people are showing strong appetite for ethical employers and businesses. Increased standards in public life are influencing expectations from businesses with customers and business The IDD focuses on the needs of the customer and requires judgement from financial organisations partners actively seeking proven ethical and trusted providers. Additionally, the pace of change Governance Section Three as to how they can best meet the regulatory requirements while taking into account their particular (particularly in technology) leads to increased expectations from customers and business partners, customer demographic and their own operating model. The rule requiring firms to act in the best who are seeking tailored propositions that meet their specific needs with enhanced levels of service. interests of the customer is gaining focus, as regulators begin to assess and collate evidence from As trusted providers, our businesses continue to attract and retain prestigious customers across our firms as to how they have adapted to these requirements both before and since the introduction geographies, as shown in Strategy in action (page 44). of the IDD.

Technology is another area of focus for regulators. Systems used by financial institutions continue to There is an increasingly held view that data has now surpassed oil as the world’s most valuable be scrutinised to ensure operational resilience. Harnessing technology is seen as essential given the Developments in asset. The insurance industry is a key consumer of this incredibly valuable asset with an increasing evolving methods used to perpetrate financial crime in an increasingly digitalised and interconnected technology, data number of insurers adopting data-driven strategies. This allows them to create a competitive world. This is intrinsically linked to data management – financial organisations must make best and analytics advantage and improve their operating ratios. By embedding powerful analytical tools in their use of this key asset. Ongoing data management and monitoring of controls is essential for infrastructure, recruiting data scientists or partnering with experts, they are able to capture data financial organisations. This criticality has been reinforced by the application of large fines imposed and convert it into insights in real time to optimise pricing, create new business models, improve risk on worldwide organisations following the implementation of the EU’s General Data Protection selection and automate some underwriting tasks, especially in the SME sector. Regulation (GDPR). Data is not only used to improve operating ratios. Insurers are moving towards customer-led The basis of the UK’s withdrawal from the European Union (Brexit) remains unresolved in terms StatementsFinancial Four Section propositions that can offer tailored products or provide timely, personalised guidance to consumers of transitional arrangements, but is likely to have a significant impact on insurance and investment who have become accustomed to a personalised service in other parts of their digital lives. management businesses. Insurers are also now remodelling fundamental processes through the deployment of Robotic Ecclesiastical and its businesses have prepared for potential outcomes arising from Brexit. Process Automation (RPA). The use of bots to automate tasks from email administration, customer Ecclesiastical has one business based in the EU, its Ireland branch. An application has been made services and bordereaux processing to claims handling is on the rise – specific robotics positions to the Central Bank of Ireland for approval of the Ireland business as a Third Country Branch, to have been created to manage these processes. The integration of various forms of machine substitute for the current approach that enables passporting of UK authorisation. This has been learning with robotics, such as text and handwriting recognition, will increase the effectiveness agreed in principle to commence from the point existing EU law ceases to apply. of this technology, which can open up new opportunities to insurers, including the integration of unstructured data which may sit in a wide range of documents stored in legacy systems. Contingency plans have been made for the transfer of data between the UK and the Ireland branch. Appropriate action has been taken so that our businesses continue to operate in a lawful manner, The ability to work with current and emerging technologies or become a customer-centric continuing to support our clients and business partners whatever the transition scenario. organisation requires the adoption of new tools and mind-sets to make insurers more nimble, These actions will safeguard our ability to trade in the Republic of Ireland. responsive to customers’ needs and able to accelerate the execution of ideas. The adoption of techniques such as Design Thinking have allowed insurers to rapidly test new ideas with customers and validate their assumptions before committing resource to a course of action. Other Information Section Five The World Economic Forum’s Global Risks Report identifies cyber-attacks as a key global risk. As the global dependency on technology continues to increase, cyber security is of paramount importance to businesses. Cyber-attacks have the potential to have far-reaching implications and present significant risks to governments, businesses and individuals. Our businesses continue to raise awareness of this risk, as shown in Strategy in action (page 44). Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information Caeva O’Callaghan,Caeva Managing Director, O’Callaghan Insurance Ecclesiastical provided the expertise the provided Ecclesiastical and support we needed, enabling us to present a viable and competitive alternative.”

connection with the key decision-maker. decision-maker. key connection the with proposedWe a meeting with the client and the broker, believing this to be the best way to get all the relevant underwriting facts and to build more trust and familiarity with our specialist we meeting, our Following proposition. instruction, an received demonstrating how critical our trilateral approach is in parties. all in confidence building “ of heritage buildings and four schools, so we were able to leverage our different areas of specialism. Another step towards building a wider book of faith risks in Ireland was securing, through their broker, significant religious order the of congregation Redemptorists. A brothers, most of whom are priests living in the community, Redemptorists are passionate about preaching the Gospel, especially to those living on the edges of church and society. While the broker, at that time, didn’t hold the risk, they had a strong Since 1883, the Brothers of Charity Services Ireland has been providing a variety of services and support to people with mental health issues who are in danger of being marginalised. support approximately they Today, 6,500 people with an intellectual disability or autism, along with their families, throughout Counties Clare, Cork, Galway, Kerry, Limerick, Tipperary Roscommon, Waterford. and Through our relationship with their broker, we secured the Brothers of Charity Services Ireland’s business. They are a registered charity with a portfolio that includes a large number Building on strong our faithBuilding foundation the to bring we expertise deep and understanding unique the value clients Our these of – one clients faith new significant win us saw last year And sector. faith valuable Charity Services provide of who Ireland, Brothers the was clients new were we who and needs, health mental with people young vulnerable to support 2019. early in with working begin to proud Ecclesiastical Ireland About Us About One Section

Section Two Strategic Report – Our business model and strategy 40 Ecclesiastical Annual Report & Accounts 2019 41

Our business model and strategy Strategic Report Section Two

We are a commercial business with a charitable owner and purpose, with a distinctive positioning that sets us apart from other businesses in the financial services sector. Our purpose is to deliver growing financial returns to our shareholder and owner, which are then distributed to charitable causes and communities, contributing to society’s greater good. We use our distinctive proposition to create competitive advantage. Governance Section Three

Fulfil our charitable purpose – we’re owned by a charity

Strive to be the Deliver growing The most trusted specialist insurer most trusted and financial returns Our aim is to be the most trusted specialist insurer, offering unrivalled ethical financial to our owner services group 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 Financial StatementsFinancial Four Section

The most trusted specialist adviser Contribute to society’s We aim to be the most trusted specialist adviser in our chosen markets, greater good providing our customers with the best independent and impartial insurance or financial advice in order to meet their needs

The best ethical investment provider Provide products We aim to be the best ethical investment provider and thought leader Build enduring and services that relationships, on socially responsible investment. Building on an impressive track our customers based on trust record, we will continue to enhance our proposition and our ethical value and trust credentials, leading the debate on the ethical investment issues that matter to our customers

Develop Other Information Section Five deep specialist understanding and expertise About Us About One Section

Section Two Strategic Report – Our business model and strategy 42 Ecclesiastical Annual Report & Accounts 2019 43

Section Two Strategic Report

Strategy in action 44

Strategic Report Section Two

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 Governance Section Three 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 shareholders and demonstrating that a distinctly ethical, specialist financial services group can succeed in competitive markets. Financial StatementsFinancial Four Section Other Information Section Five About Us About One Section

Section Two Strategic Report – Strategy in action 44 Ecclesiastical Annual Report & Accounts 2019 45

Strategy in action Strategic Report Section Two

Our strategic goal is: Most trusted specialist insurer

To be the most trusted and ethical specialist financial services group, giving £100m We achieve Customer focused – keeping customers at Real specialists – building a deep knowledge this by being the heart of our business and aiming to deliver and expertise in our specialist areas of financial to charity by the end of 2020. exceptional customer service services

Disciplined in our underwriting – having Prepared to invest – investing in our Our business has made considerable progress towards this target: during 2019, £32.5m a well-defined risk appetite that supports operational capability, to create the best was donated to good causes and the total now stands at £96.5m. This achievement profitability and sustainability in our business mix possible experience for our customers, our business partners and our people has been made possible through the endeavours of all our businesses across the Focused on relationships – building strong, lasting relationships, with a focus on trilateral Governance Section Three Ecclesiastical Insurance Group, which are focused on meeting the needs of their relationships between brokers, customers customers and business partners. and ourselves

This charitable purpose underpins our business strategy. Our business continues to be Strategy in action • Attracted and retained prestigious customers • Deepened relationships with our Church the only insurer in the UK’s top ten corporate donors. The GivX Community Investment across all our segments in all our territories customers through our team of Church Index shows that Ecclesiastical has market-leading levels of employee-led community Insurance Consultants (CICs) • Recognised externally for our expertise and investment: our charitable ethos is demonstrated by a wide variety of activities including ethical approach, with an 83% Net Promoter • Supported over 5,000 brokers, affinity groups volunteering, employee-nominated charitable grants and employee fundraising. Score for Ecclesiastical UK Claims and 98% and customers on specialist topics via our overall satisfaction for our claims service Ansvar regional forums (Australia)

• 100% of brokers that place business with • Seeking new methods to prevent theft of We have continued to deliver the key elements of our strategy while investing in our Ecclesiastical UK rate us as trusted and metal, using modern sensors to develop a businesses and delivering value to our customers. 100% believe we are an ethical business more affordable option for church customers

to deter and detect the removal of lead StatementsFinancial Four Section • Sponsored key skills in aligned trades including The Prince’s Foundation Building • Testing new technologies in a joint project Craft programme with English Heritage at Kenwood House, a 17th century property in London, to provide • Sponsored awards including The Governor advance identification of electrical fires and General’s History Award for Excellence in machinery breakdown Museums (Canada) and Anglicare Awards (Australia) • Investing in a new office building to accommodate all Gloucester-based people • Launched Cyber Ready, our award-winning in a fresh, flexible and modern working lesson plan to help schools to manage digital environment from late 2020 resilience and prevent cyberbullying Other Information Section Five About Us About One Section

Section Two Strategic Report – Strategy in action 46 Ecclesiastical Annual Report & Accounts 2019 47 Strategic Report Section Two

Most trusted specialist insurer Best ethical investment provider

Awards and UK Canada We achieve this by Promoting socially responsible investment Listening to our clients – we have implemented accreditations – we have an industry-leading reputation for a client feedback programme to create greater • Fairer Finance: most trusted home insurer • Top Employers for Young People (for the 8th our socially responsible investment funds and proximity to our clients and their evolving needs (for the 10th consecutive time) consecutive year) investment thought leadership Enhancing our infrastructure – we are • CIR Risk Management Awards: Public • Greater Toronto’s Top Employer 2019 Delivering long-term performance – we use building a platform for growth and increased Safety award a consistent, proven approach to deliver long-term processing efficiency • Insurance Business Awards, Excellence in investment success • CIPR PRide Awards: Best Corporate and Philanthropy and Community Service Business Communications Campaign Developing our products – we are Governance Section Three developing and deepening our fund offering • CIPR PRide Awards: Best Low Budget with particular focus on institutional investors Campaign and charities

• Insurance Claims Awards: Commercial Lines Team of the Year Strategy in action • Recognised for responsible and sustainable • Published our acclaimed specialist Amity investment with a strong long-term Insights research with topics including • Insurance Claims Awards: Rising Star performance record Sustainability, The Life Code and Economic Award Inequality • Acknowledged as a pioneer and thought • Chartered Insurance Institute: New leader in our markets • Reinforced our thought leadership position Professional of the Year with responsible investment expert briefings • Established regional IFA Client Forums to get on topics ranging from The How and Why of • Insurance Institute of Cheltenham and a greater understanding of client needs Voting to Oppressive Regimes Gloucester: Achiever of the Year • Engaged across the responsible investment • Continued to strengthen our capabilities • Insurance Institute of Cheltenham and StatementsFinancial Four Section landscape with membership of IIGCC including investing in our back-office Gloucester: Lifetime Achievement Award (Institutional Investors Group on Climate systems and began scoping a new customer Change), BBFAW (Business Benchmark on relationship management (CRM) solution

Farm Animal Welfare) and The 30% Club

• Made accelerated progress in building our

institutional business client base and asset

gathering

Awards and • Retained Tier I Status under the Stewardship • Moneyfacts Best Ethical Investment Provider accreditations Code (11th consecutive award)

• Sustained A+ rating for the UN Principles of • Financial Express Alpha Manager Hall of Responsible Investment (UN PRI) Fame 2019, EdenTree Chief Investment Officer Other Information Section Five • Gained seventh accreditation under the European SRI Transparency Code

About Us About One Section

Section Two Strategic Report – Strategy in action 48 Ecclesiastical Annual Report & Accounts 2019 49

Section Two Strategic Report

Key Performance Indicators Financial 50 Strategic Report Section Two Non-financial 52

Most trusted specialist adviser

We achieve this by Providing excellent service – building Building our business – delivering growth by long-term sustainable relationships with our developing new offerings and schemes which customers and their insurers complement our existing niche markets

Strengthening our proposition – deepening Working more closely together – developing our expertise further in our chosen markets, closer operational links across the Group to offer cementing our position as market leaders in solutions that meet our customers’ needs these areas Governance Section Three Strategy in action • High levels of customer satisfaction in broking • Collaborated to present a larger portfolio with 96% of customers extremely or very to carriers in common (SEIB/Lycetts*) satisfied with the service (SEIB) and 92% of customers extremely or very satisfied with the • Competed in the 2019 British Insurance service (EFAS) Broking Association (BIBA) hackathon with our Group Head of Innovation as • Created new schemes in response to a hackathon mentor understanding specialist client needs such as property management companies • Held a ‘Best Livery Yard’ competition for the equestrian sector with awards for best • Launched an online tool to enhance access to full livery yard, best riding school and best risk management support for funeral directors do-it-yourself (DIY) livery yard (SEIB) (SEIB in collaboration with Ecclesiastical)

• Continued to meet the key financial concerns

of clergy and church-related people and StatementsFinancial Four Section offered financial support seminars in a number of dioceses (EFAS)

Awards and • NatWest Local Mortgage Hero Awards, Best • British Claims Awards, Personal Lines Broker accreditations Firm South West (EFAS) of the Year (SEIB) • Women in Insurance, Broker of the Year (SEIB)

* part of Ecclesiastical Insurance Group (EIG) Other Information Section Five About Us About One Section

Section Two Strategic Report – Key Performance Indicators 50 Ecclesiastical Annual Report & Accounts 2019 51

Key Performance Indicators Financial Strategic Report Section Two

Measure Performance Measure Performance

Donations An improved investment return together with (£m) Profit before tax Total profit before tax increased to £73.3m (£m) a good underwriting result1 has enabled us in 2019, benefitting from the more favourable The amount donated by to increase our charitable giving to its highest 40 - The Group’s profit before investment markets. 100 - Ecclesiastical to charities, level ever. £32.5m of donations were made 32.5 deduction of tax. 82.2 including our charitable to good causes in 2019. Our Broking and Advisory business continued to 80 - 73.3 30 - 27.5 owner, each year. This is the 24.7 Each year, refreshed targets contribute consistent profits to the Group result 62.5 main measure of our ambition, are set in relation to the This includes grants of £30.0m to our 20.6 while our Investment Management business 60 - 53.6 which is to give £100m to charitable owner, Allchurches Trust Limited, 18.8 Group’s business plans for reported a small loss due to continued investment charity by the end of 2020. 20 - profit before tax. Details of and takes the total amount of giving towards to deliver future growth plans. 40 - our £100m target up to £96.5m. the target that was set for 2019 can be found in the 1 10 - More information on underwriting performance Governance Section Three 20 - 15.4 Group Remuneration Report is given below. on page 134. Our short-term 0 - target is to generate sufficient See the Financial Performance Report on page 0 - 2015 2016 2017 2018 2019 profit to enable us to meet 54 for more details. 2015 2016 2017 2018 2019 our targets for charitable donations. PBT Regulatory capital1 Ecclesiastical’s capital cover under Solvency (£m) Solvency II capital cover (%) Underwriting profit1 II has remained stable in 2019. The Group’s regulatory capital (unaudited) requirements are defined under 600 - - 250% Investment assets have grown over the year, Combined operating The COR has increased in 2019. This reflects (%) the Solvency II directive as which has increased capital but has also 500 - 1 the anticipated reduction in reserve releases issued by the European Union - 200% ratio (COR) raised the SCR due to an increase in Market compared to prior year from the run-off of the 105 - and adopted by the Prudential Risk. Equity returns have been strong in 400 - The sum of Ecclesiastical’s liability business we exited in 2012 and 2013. Regulation Authority (PRA). - 150% 2019, increasing exposure to future market general insurance incurred 300 - 198 269 100 - falls. Capital cover has remained constant 199 295 306 losses and expenses divided The Group continues to keep underwriting and As the Group assessment 285 278 292 as the increases in the SCR have been 257 264 - 100% by earned premiums for each pricing discipline at the centre of its strategy, is conducted at the level 200 - 95 - partially offset by a change in the basis used financial year. prioritising profit over growth in the competitive of Ecclesiastical Insurance 92.0 StatementsFinancial Four Section to calculate the loss absorbing capacity of - 50% business environment. 91.1 Group plc, the following refers 100 - 89.8 deferred tax. Approval of the methodology by Each year, refreshed targets 90 - to the regulatory capital 86.9 the PRA has enabled us, to a greater extent, 0 - - 0 % are set in relation to the In 2019, the ratio continued to outperform 86.4 of Ecclesiastical Insurance to recognise a reduction in the net deferred 2015 2016 2017 2018 2019 Group’s business plans for our longer-term target, supported by prior year Office plc (Ecclesiastical 85 - tax liabilities following a loss event. (i) (i) (ii) the Group COR. Details of releases due to favourable developments in Insurance Office Group’s the target that was set for liability claims. parent company) and 80 - The figures for 2019 are based on the 2019 can be found in the excludes the impact of SCR (£m) 2015 2016 2017 2018 2019 information provided to the Board as part of Group Remuneration Report For a breakdown of how COR is calculated, Ecclesiastical Life Limited Excess own funds (£m) their ongoing management of the business on page 134. Our target over see note 36 on page 244. and Ansvar Insurance Limited. Capital cover (%) Longer-term target and are unaudited. the longer term is to achieve a 95% COR. See the Financial Performance Report on page The Solvency Capital We continue to balance the need to retain (i) the 2016 and 2017 figures are audited and 54 for more details. Requirement (SCR) is a risk- reflect figures from the Company’s published profit within the business, to support our based statistical calculation Solvency and Financial Condition Report which strategy for future growth and investment in is available via the Company’s website that quantifies risks specific technology and innovation, with our aspiration to our business. The Group to meet charitable giving targets. (ii) the 2018 own funds are audited and reflect sets a target level of capital figures from the Company’s published Solvency Other Information Section Five that is in excess of the SCR to and Financial Condition Report, which is available via the Company’s website ensure ongoing compliance.

1 Alternative performance measure, refer to note 36 to the financial statements for further explanation. 1 Alternative performance measure, refer to note 36 to the financial statements for further explanation. About Us About One Section

Section Two Strategic Report – Key Performance Indicators 52 Ecclesiastical Annual Report & Accounts 2019 53

Section Two Strategic Report

Measure Performance Financial Performance Report 54

Net expense ratio1 Our NER decreased in 2019 to 53% driven (%) Strategic Report Section Two (NER) by a 6% increase in net earned premium. Our programme of strategic investment in 100 - Total expenses as technology, innovation and in our people has a proportion of the net continued in 2019 but there was no repeat of 80 - premium earned in the the one-off costs in the prior year in relation year. These expenses to the announced closure to future accrual of include acquisition costs, 60 - 53.6 54.5 53.0 the UK defined benefit pension scheme and 46.1 51.5 administration costs, the Lloyd’s Bank court ruling on Guaranteed the movement in deferred Minimum Pension equalisation. 40 - acquisition costs and commission paid less For a breakdown of how NER is calculated, 20 - commission received. see note 36 on page 244.

Our aim is to make 0 - year-on-year improvements 2015 2016 2017 2018 2019

in the NER. However, in the Governance Section Three short term we expect NER to reflect a planned increase in strategic investment.

Net inflows1 Despite political and economic challenges (£m) (Investment during the year, global equities delivered robust gains in 2019. Bond markets also produced 250 - Management) positive returns over the period, benefitting from 225 Net inflows are the difference safe haven status as trade war escalation and between the funds invested weaker economic growth dampened investor risk 200 - 181 and the funds withdrawn appetite. UK equities and sterling were boosted during the period by third in the final month of the year following a decisive parties in the range of funds general election outcome signalling some relief 150 - 121 our Investment Management around Brexit uncertainty.

division offers. StatementsFinancial Four Section 2019 saw record gross new money inflows at 100 - Net inflows contribute to over £0.5bn. Total net new inflows recorded funds under management the highest ever level at £225m, driven by our 50 - which is a key driver of the institutional business. The Charity pooled funds made excellent progress over the year and overall 15 division’s revenue. -28 our pooled funds saw positive net inflows of 0 - Each year, refreshed targets £38m, driven by strong sales of our bond funds are set which take into and mixed asset fund. account current market -50 - conditions and potential 2015 2016 2017 2018 2019 new initiatives.

1 Alternative performance measure, refer to note 36 to the financial statements for further explanation.

Key Performance Indicators Other Information Section Five Non-Financial We place equal importance on financial and non-financial key performance indicators. Details of the non-financial performance indicators can be found within our Strategy in action section starting on page 44 and our Corporate Responsibility Report starting on page 80. About Us About One Section

Section Two Strategic Report – Financial Performance Report 54 Ecclesiastical Annual Report & Accounts 2019 55

Financial Strategic Report Section Two Performance Report The recovery of the market from Q4 2018 The underwriting result on the property and subsequent favourable investment account was similar to 2018 due to an market conditions resulted in fair value gains absence of large weather events, although Our 2019 results have delivered a pre-tax profit of £73.3m (2018: £15.4m) and are on financial instruments of £56.0m (2018: we experienced an increase in theft and losses of £35.5m) and our underwriting profit subsidence claims during 2019. The current a demonstration of our long-term objective to deliver sustainable profitable growth. remained strong at £20.0m, (2018: £29.2m). year loss ratios are better than expectations We continue to be a trusted partner to our brokers and customers, and this is reflected due to the absence of catastrophe events. in our high retention and satisfaction levels, which supports our growth in revenue. To support our growth and sustainability The underwriting result from the liability ambitions, we have continued to invest in account continues to perform favourably. Our business is managed for a long-term view of risk and, as a result, we have a strong our people, technology and our real estate. capital position that can withstand short-term volatility. The development of our new general The claims releases that we have seen this insurance underwriting platform is year have come from historical claims that progressing well and has been designed have settled more favourably than expected. to provide an outstanding customer, The run-off of unprofitable business broker and employee experience. exited in 2012 and 2013, combined with Governance Section Three the prudent approach to reserving have We made charitable grants of £32.5m positively impacted the overall result over (2018: £18.8m) for the year as part of our the last four years. commitment towards the £100m target by 2020 and have seen the positive and In 2019, GWP grew by 6.2% to £257m substantial impact this charitable giving (2018: £242m). Trading conditions across makes to people’s lives. the year remained competitive and we expect they will continue to be so. The education General insurance sector was particularly competitive, although we observed some market hardening in 1 Our underwriting performance for the year property, specifically for risks with large was in line with expectations and returned exposures such as heritage buildings. a profit of £20.0m (2018: £29.2m profit), We have continued to achieve high levels of 1 and a Group COR of 91.1% (2018: 86.4%). retention across our UK and Ireland business We delivered good growth and steady whilst also carrying positive rate change, underwriting profits. We’ve seen the results which demonstrates the strength of our StatementsFinancial Four Section of strengthening reserves in the Australian proposition and reputation for exceptional and Canadian businesses and began to see service. Our Real Estate and Art & Private the impacts of anticipated lower prior year Client business delivered particularly strong releases. growth. GWP in respect of our Faith business remained in line with the prior year, reflecting United Kingdom a good result in a competitive market.

and Ireland We expect the market to continue to The UK and Ireland reported an harden in property, and casualty may underwriting profit of £20.4m (2018: follow. Education is likely to remain a key £29.4m profit) and a COR of 86.8% competitive area as the Government’s risk (2018: 80.2%). This represents another protection arrangement (RPA) now attracts good performance with a favourable result local authority maintained schools in addition on the liability account and a solid outturn to academies. This has left the independent

on the property book. As expected, the level schools sector exposed to competition from Other Information Section Five of prior year releases in 2019 was all education insurers. significantly lower than in 2018 and this has resulted in an overall reduction in the This hardening of certain parts of the underwriting result in 2019. We anticipate property market provides us with the this reduction to continue, with a greater opportunity to improve overall rate strength contribution coming from our current year and to acquire good-quality new business underwriting performance. at profitable rates.

1 Alternative performance measures, refer to note 36 to the financial statements for further information. About Us About One Section

Section Two Strategic Report – Financial Performance Report 56 Ecclesiastical Annual Report & Accounts 2019 57 Strategic Report Section Two

Our strategy over the medium term as reserves were strengthened in older Our directly-held sterling bond Long-term insurance is to deliver moderate GWP growth, years for PSA claims. portfolio underperformed the FTSE Gilts while maintaining our strong underwriting benchmark by 2.8% due to our greater Our life insurance business, which is closed to new business, reported a profit before tax discipline and our philosophy to seek profit Other insurance operations exposure to short dated bonds, which we over growth. We will continue to deepen our hold for liability matching and liquidity of £0.3m for the year (2018: £1.6m). Assets specialist capabilities through investment General insurance profits benefitted from management purposes. In the final quarter, and liabilities are well matched, and the small in technology and innovation, and to provide favourable releases of prior year reserves as yields improved, we saw the benefit of profit is in line with our expectations for this propositions that our customers value and from our businesses in run-off resulting our shorter dated portfolio in our portfolio’s business as it runs off. excellent service. in an overall profit of £0.6m (2018: £1.0m performance. The fixed interest portfolio profit). As expected, the level of prior year also benefitted as a result of allocation to Broking and advisory reserve releases in 2019 was lower than Ansvar Australia corporate bonds where narrowing credit Overall, broking and advisory had modest experienced in 2018. spreads drove higher returns relative

growth in income and profit, reporting a Governance Section Three Our Australian business reported an to gilts. underwriting loss of AUD$6.0m resulting in profit before tax of £2.1m (2018: £2.0m). Investments This area of our business includes our a COR of 114.1% (2018: AUD$2.5m profit, The downward movement in bond yields COR of 93.7%). The liability account was We saw a far less volatile end to 2019 insurance broker, South Essex Insurance compared with 2018, with strong returns in led to a decrease in the discount rate Brokers (SEIB), our financial advisory adversely impacted by the strengthening of applied to long-tail general insurance physical and sexual abuse (PSA) reserves. UK and worldwide stock markets resulting businesses, Ecclesiastical Financial in a net investment return of £74.4m (2018: liabilities. The change in discount rate on Advisory Services (EFAS) and Ansvar We saw a higher than expected number those liabilities resulted in a £12.4m loss of claims, a strengthening across industry £4.0m). Income from financial assets Risk Management Services (ARMS). remained stable at £26.2m (2018: £27.0m) recognised within investment returns SEIB reported an increase in profit before as the process for claimants evolves (2018: £4.1m profit). following the conclusion of the Royal reflecting the continued low interest rate tax to £2.6m (2018: £2.4m). EFAS Commission, together with development environment and downwards pressure reported a loss of £0.4m in the year in some high-profile cases. The property on yields. Fair value gains on financial Investment Management (2018: £0.2m loss). account was also adversely impacted by instruments of £56.0m contrasted with losses of £35.5m in 2018, as both equities The Group’s Investment Management higher claims handling expenses and risk business, EdenTree, continued to develop Outlook margins following the Townsville flood event. and bonds strengthened over the year, with the UK market in particular benefitting its presence in the charity and institutional The Group takes a long-term view to

GWP grew by 24.6% in local currency to StatementsFinancial Four Section latterly from renewed confidence. In spite markets. Net inflows of £219m managing and investing in the business AUD$126.5m (2018: AUD$101.6m) with (2018: £181m) were the highest in and our 2019 financial results, including strong retention and rate increases. of this strong 2019 result, there remains as ever political and economic uncertainty EdenTree’s history. our strong capital position is reflective of this which could impact the performance of approach. The decisions we take are also Canada our investments, and as for all businesses, Global equity markets delivered double made with a focus on delivering sustainable Our Canadian business continued its we are subject to the consequences of digit returns over the year and coupled profitability and our vision to be the most track record of delivering premium disruption that events such as the current with strong net fund inflows resulted in trusted and ethical financial services group. growth, reporting a 17% increase in the Coronavirus outbreak can have on financial total funds under management increasing As we look forward to 2020 and beyond, we branch’s contribution towards Group GWP markets. Nevertheless we remain confident by 14% to £3.1bn (2018: £2.7bn). will exercise caution where our businesses at CAD$109.5m (2018: CAD$93.5m) in our long-term value investment philosophy, may need to operate around uncertainty and supported by strong retention, growth in and are relatively defensively positioned Fee income was marginally ahead at market disruption. We will continue to focus new business and rating increases. and well diversified across a broad range £12.8m (2018: £12.6m). Overheads have on delivering sustainable profit growth and of asset classes. increased by 13% in the year primarily remain optimistic about the opportunities Canada reported underwriting profit of from our continued investment in people to continue to evolve our business for and technology to support delivery of future the greater good of society and to make CAD$3.4m resulting in a COR of 95.1% Within our UK equity portfolio, the mid-cap

growth plans. As a result, our Investment a positive impact on people’s lives. Other Information Section Five (2018: CAD$4.5m loss, COR of 106.5%). bias proved beneficial as the FTSE 250 Management business reported a loss The property book performed well with good index outperformed the FTSE All-Share before tax of £0.3m (2018: profit before Denise Cockrem current year experience driven by fewer index by 10%, driven in large part by fourth tax £0.9m). Group Chief Financial Officer large losses and the favourable development quarter strength as the election of a majority of prior year claims, helping to offset the Government reduced Brexit uncertainty. impact of a series of weather events during the first and third quarters. The underwriting result from the liability account was adverse Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information

Duncan Snook, Finance Director Secretary Company and The British Horse Society bespoke healthcare vehicle was vandalised. and ransacked stolen, In a far from straightforward situation for us, involving specialist equipment and the healthcare vehicle itself, sensible sensitive, a experienced we and personal service from SEIB who simplified the complicated process of dealing with multiple insurers, suppliers and engineers adjusters, loss process.” claims the throughout

The British Horse Society welfare team was devastated when our vehicle with their own vehicles to block it in until the police arrived, loyalties of strength the demonstrating within the equestrian community. Sadly, the healthcare vehicle was damaged in the incident but we were able to get it repaired fast. also We persuaded our insurer partners to supply a suitable hire vehicle for the BHS welfare team pre-arranged their missions. on use to In short, we went all out to ensure that the vital work of the BHS wasn’t halted because of the theft. “  Horse welfare is one of the roles key of the BHS. And their healthcare vehicle, purchased using a £50,000 grant in through our2018 SEIB Giving charity campaign, enables them to move vital equipment as well as to transport horses to veterinary hospitals. After consulting the BHS PR department, we both decided to spread the news of the stolen healthcare vehicle across social platforms. Within a few hours of the posts going live, it was found just a few miles from where it was stolen. The equestrian community in the local area even surrounded the healthcare Keeping horse welfare moving welfare horse Keeping one remain we industry, equestrian the in experience years’ 50 over With understand we ourselves, owners Horse field. specialist this in leaders the of Horse British the a call from got can we So, arise. when that issues unique the stolen, been had vehicle healthcare their that us telling Society (BHS) be serious. could horses neglected and ill for consequences the knew we work. to straight get to had we knew also We SEIB About Us About One Section

Section Two Strategic Report – Financial Performance Report 60 Ecclesiastical Annual Report & Accounts 2019 61

Section Two Strategic Report

Risk Management Report 62 Principal risks 68 Strategic Report Section Two

‘We will continue to deepen our specialist capabilities through Governance Section Three investment in technology and innovation, and to provide propositions that our customers value

and excellent service.’ StatementsFinancial Four Section Other Information Section Five About Us About One Section

Section Two Strategic Report – Risk Management Report 62 Ecclesiastical Annual Report & Accounts 2019 63

Risk Management Report Strategic Report Section Two

Introduction The risk management framework is Key to the successful operation of the integrated into the culture of the Group and internal control framework is the deployment Strong governance is fundamental to what we do and drives the ongoing embedding is owned by the Board. Responsibility for of a strong Three Lines of Defence of our enterprise-wide risk management framework. This provides the tools, guidance, implementation and oversight is delegated Model whereby: policies, standards and defined responsibilities to enable us to achieve our strategy and via the Group Chief Executive to the Group Risk Function, led by the Group Chief Risk • 1st Line (Business Management) objectives and ensure that individual and aggregated risks to our objectives are identified Officer (CRO). is responsible for strategy execution, and managed on a consistent basis. performance and identification and The risk management process demands management of risks and application accountability and is embedded in of appropriate controls performance measurement and reward, thus promoting clear ownership for risk • 2nd Line (Reporting, Oversight and and operational efficiency at all levels. On Guidance) is responsible for assisting Governance Section Three an annual basis, the Group Risk Committee the Board in formulating risk appetite, (on behalf of the Board) carries out a formal establishing minimum standards, review of the key strategic risks for the Group developing appropriate reporting, oversight with input from the Group Management and challenge of risk profiles and risk Board (GMB) and the Strategic Business management activities within each of the Risk Units (SBUs). The Group Risk Committee business units. This includes Executive strategy (GRC) allocates responsibility for each of Risk Management Committees (Insurance, the risks to individual members of the Market and Investment and Operational, Group’s executive management team. Regulatory and Conduct Risk) and is Formal monitoring of the key strategic risks subject to oversight and challenge by Risk appetite is undertaken quarterly, including progress the GRC of risk management actions, and is overseen by the Executive Risk Committees. • 3rd Line (Assurance) provides Risk policies and standards Risk reporting and monitoring independent and objective assurance Ecclesiastical has clearly defined the of the effectiveness of the Group’s systems StatementsFinancial Four Section accountabilities, roles and responsibilities of internal control. This activity principally of all key stakeholders in implementing comprises the Internal Audit function and maintaining its Risk Management which is subject to oversight and challenge Internal model Framework. These are defined, documented by the Group Audit Committee. and implemented through the terms of reference (TORs) of board sub-committees, management and executive forums, position Stress and descriptions and functional charters. scenario ORSA testing Risk Business The Group’s Risk Management Internal control frameworkmanagement and three lines of defence performance and Framework itself is part of a wider process capital management Internal Control Framework. Systems of internal control are designed to manage rather than eliminate the risk of failure to

achieve business objectives, and provide Other Information Section Five Values and culture People, systems and processes reasonable, but not absolute assurance as to the prevention and detection of financial misstatements, errors, fraud or violation Governance of law or regulations. About Us About One Section

Section Two Strategic Report – Risk Management Report 64 Ecclesiastical Annual Report & Accounts 2019 65 Strategic Report Section Two

We seek to develop and improve our risk and objectives, producing risk profiles and Within the insurance businesses of the impact on our service to customers as well management framework and strategy on an capital requirements for different scenarios, Group and in the wider markets, firms as sizeable regulatory fines and reputational ongoing basis to ensure it continues to support informing risk-taking guidelines, informing continue to enhance their analytical skills damage. The increased societal focus on the delivery of our strategy and objectives. and defining the Group risk appetite and and deepen their portfolio knowledge. data security and appropriateness of use, Investment Strategy, and determining risk Therefore, high-quality technical through regulations such as GDPR, results The Group risk appetite defines the level mitigation mechanisms and responses to underwriting standards, pricing and portfolio in increased scrutiny and prominence. of risk-taking that the Board feels is regulatory capital requirements. management abilities are increasingly appropriate for the Group as we pursue important to ensure business written and The Group aims to be the most trusted, our business objectives. It is defined in line Risk environment retained is profitable. Our strategy is to specialist insurer and, therefore, maintaining with the different categories of risk that the achieve controlled and profitable growth a positive reputation is critical. Our reputation The risk environment is monitored on an Group faces, and provides the backdrop within our defined niches. could potentially be damaged as a result of ongoing basis and key areas of concern against which the business plan is developed a range of factors including poor business are escalated to the GRC. Governance Section Three and validated. This ensures that the risk The potential for adverse development practices and behaviours. High standards of conduct are a core part of the Group’s brand, profile resulting from the business plan is The uncertainty around Brexit continued of long-tail liability claims, particularly values and culture, and there is an ongoing in line with the risk-taking expectations of during 2019 although reduced by year end. in respect of PSA claims, remains focus on ensuring this is maintained. the Board. Compliance with the risk appetite The main risk identified for the Group as a a key risk that we continue to actively is formally monitored every quarter and result of Brexit was the loss of its ability to manage. The Independent Inquiry into Climate change presents increasing levels reported to the GRC at each meeting. carry out business in the Republic of Ireland Child Sexual Abuse in the UK is of risk to our businesses and our customers. using the freedom to provide services progressing and we have participated Whilst the greatest impacts of these risks The risk appetite is formally reviewed currently afforded by the UK’s membership in one of the investigations during 2019. are expected to materialise in the medium annually with approval and sign-off of the EU. This risk has been mitigated, We are monitoring this inquiry, and also to long term, we are considering the actions by the Board and there are ongoing as during 2019 approval in principle was developments in the other territories that we should be taking to mitigate and assessments to ensure its continued obtained for the Ireland branch to become in which we operate to determine the manage these risks now. Our potential appropriateness for the business. regulated by the Central Bank of Ireland potential impacts on these claims. exposures include transition risk, primarily as a Third Country branch after Brexit. related to our investment portfolio, and The Own Risk and Solvency Assessment The Group has no other material business Competitor activity is an ever-present physical risk affecting the insurance risks (ORSA) process is carried out at least elsewhere in the EU. The remaining risk across all our business operations that we cover. StatementsFinancial Four Section once a year and is a key part of the business uncertainty of the outcome of Brexit has and chosen niches. This could have an management and governance structure. the potential to result in adverse economic adverse impact on our ability to charge the The Group considers COVID-19 a new This integrates the risk management, conditions and affect the value of our appropriate price for a risk, threaten our emerging risk. The Group has business business planning and capital management investments and our customers. We have growth plans or even lead to a decline in continuity plans in place and a crisis activities and ensures that risk, capital and not identified any further material risks to scale with resultant adverse financial impact. management team has been active in solvency considerations are built into the our business as a result of Brexit and we preparing for responses to this event. development and monitoring of the Group’s continue to monitor this position as well Regulatory change continued during The Group will continue to monitor the business strategy and plans and all key as the potential impact of other risks such 2019 including the extension of the Senior situation and the advice from Governments decision-making. as global trade disputes. Managers and Certification Regime to additional companies within the Group. and relevant health authorities in the The Company has regulatory approval for the During 2019, we maintained our existing Management of change in the regulatory countries we operate in as the outbreak use of an Internal Model to determine our investment approach and made no material environment continues to be a focus to evolves and will take appropriate action. regulatory capital requirement. In addition, changes to our asset mix. We continue ensure that we operate within relevant the Internal Model’s capability to quantify to hold a diversified portfolio of assets legal, regulatory and consumer protection material risks and assess the impacts on including equities which we believe remain requirements and guidelines and that our capital requirements across a range of a good prospect for long-term returns. people maintain the highest standards Other Information Section Five scenarios allows us to gain a deeper insight Consequently, we take a relatively high level of conduct. into the relationship between risk and capital of market risk which is well understood management. and closely managed. The defined benefit Cyber risk continues to evolve at a pace. pension scheme was closed to future We hold customer data and therefore any The Internal Model is used extensively to accrual from June 2019 which will enable event involving a significant loss of such data inform key business decisions across the further reductions in the risk associated could result in harm to the data subjects, Group, including setting business strategies with the scheme. significant operational disruption and an Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information We areWe witnessing a sea change in attitudes towards responsible and no clients Most investing. sustainable barrier. a performance as view longer While this is welcome news for us, we believe that much more needs to be done to explain the nuances of ethical to failure A investing. responsible and communicate effectively makes the greenwashing to vulnerable industry mis-selling.” and Neville White, Head of RI Policy & Research Management Investment EdenTree “ 

Sue Round, Chief Executive Officer Management Investment EdenTree We seeWe the increased appetite for sustainable investing as a huge opportunity – however we also believe significant brings challenges this that and risks. And we continue to act as a respected and authoritative voice in the concerns.” these addressing market,

for the eleventh consecutive year. Proof perhaps, that after 30 years of innovation we’re still leading the charge, bringing responsible and sustainable investing the mainstream. into “ 

A key partA key of this process was in 2019 the publication of our Amity Insight: Sustainability report, which set out how we define and integrate sustainability into our investment process in order to be clear and transparent. Steps like these keep us at the forefront of the increasingly vibrant conversation around responsible and sustainable investing. continue We to embrace that role and it’s clear that our clients look up to us as a firm that can lead by example. In September we took home the award for ‘Best Ethical Investment Provider’ at the Investment Life & Pensions Moneyfacts 2019, Awards Evolution with convictionEvolution this fast, in as and a pioneer changing is market investment responsible The movement. this of forefront the at remains EdenTree years 30 over for space the to respond to us enabling ahead, a step us keeps agility and expertise Our to commitment our whilst market, a growing of opportunities and challenges unshakable. remains trust with funds client managing in resolve our and integrity do, we what better defining of important step the taken we’ve year, This calling it ‘responsible and sustainable’ investment. EdenTree Investment Management Investment EdenTree About Us About One Section

Section Two Strategic Report – Principal risks 68 Ecclesiastical Annual Report & Accounts 2019 69

Principal risks Strategic Report Section Two

There is an ongoing risk assessment process which has identified the current principal risks for the Group as follows:

Insurance risk The risk that arises from the fluctuation in the timing, frequency and severity of insured events relative to the expectations of the firm at the time of underwriting.

Risk detail Key mitigants Change from last year* Risk detail Key mitigants Change from last year*

Underwriting risk1 • A robust pricing process is in place There have not been material Catastrophe risk1 • Modelling is undertaken to understand the risk profile and There have been no • The Underwriting Licencing process has been refreshed changes to this risk during the inform the purchase of reinsurance material changes to this risk.

The risk of failure to The risk of large-scale Governance Section Three • A documented underwriting strategy and risk appetite year. We continue to focus • There is a comprehensive reinsurance programme in place to We continue to monitor our price insurance products extreme events giving is in place together with standards and guidance and monitored on managing our portfolios protect against extreme events. All placements are reviewed aggregations and exposures adequately and failure rise to significant insured by SBUs through various initiatives and approved by the Group Reinsurance Board to such events and ensure to establish appropriate losses. Through our general • This is supported by formally documented authority in order to mitigate this risk • A Catastrophe Risk Management Group provides oversight and careful management utilising underwriting disciplines. insurance business we are levels for all underwriters which must be adhered to. as our insurance business sign-off of reinsurance modelling appropriate protections. The premium charged exposed to significant natural Local checking procedures ensure adherence develops. • The Group Risk Appetite specifies the reinsurance purchase must be appropriate for the catastrophes in the territories • Monitoring of rate strength compared with technical rate levels and retention levels for such events nature of the cover provided in which we do business. is undertaken on a regular basis within SBUs • Local risk appetite limits have been established to manage and the risk presented • There are ongoing targeted underwriting training programmes concentrations of risk and these are monitored by SBUs to the Group. Disciplined in place • Exposure monitoring is undertaken on a regular basis underwriting is vital to ensure that only business within risk appetite and desired niches • We take a long-term view of reinsurance relationships The level of this risk has is written. Reinsurance risk to deliver sustainable capacity remained broadly similar since The risk of failing to access • A well-diversified panel of reinsurers is maintained for each last year. and manage reinsurance element of the programme Reserving risk1 • Claims development and reserving levels are closely monitored This risk is not considered capacity at a reasonable

• A Group Reinsurance Board is in place which approves all StatementsFinancial Four Section by the Group Reserving team to have changed materially price. Reinsurance is a central Reserving risk is the risk strategic reinsurance decisions • For statutory and financial reporting purposes, prudential during the year. No significant component of our business of actual claims payments margins are added to a best estimate outcome to allow developments have impacted model, enabling us to insure exceeding the amounts we for uncertainties this risk. a portfolio of large risks in are holding in reserves. • Claims reserves are reviewed and signed-off by the Board proportion to our capital base. This arises primarily from our acting on the advice and recommendations of the Group Chief long-tail liability business. Actuary following review by the Reserving Committee. Failure to interpret emerging An independent review is also conducted by the Actuarial experience or fully understand Function Director the risks written could result in the Group holding insufficient reserves to meet our obligations. Other Information Section Five

1 Link to viability statement – risk included in stress and scenario analysis *change arrows reflect movement in underlying risks About Us About One Section

Section Two Strategic Report – Principal risks 70 Ecclesiastical Annual Report & Accounts 2019 71 Strategic Report Section Two Other financial risks The risk that proceeds from financial assets are not sufficient to fund the obligations arising from insurance contracts.

Risk detail Key mitigants Change from last year* Risk detail Key mitigants Change from last year*

Market and investment • An investment strategy is in place which is reviewed annually Overall, the market risk profile Liquidity risk • We hold a high proportion of our assets in readily realisable There have been no material 1 and signed-off by the Finance and Investment Committee (F&I). has not materially changed investments to ensure we could respond to such a scenario changes to this risk since risk The risk that the Group, • We maintain cash balances that are spread over several banks last year. This includes consideration of the Group’s liabilities and capital and we remain invested for although solvent, either does The risk of adverse • We have arrangements within our reinsurance contracts for requirements the long term. We continue not have sufficient financial movements in net asset reinsurers to pay recoverables on claims in advance of the • A Market and Investment Risk Committee is in place and to monitor the remaining resources available to enable values arising from a change claim settlement provides oversight and challenge of these risks and the uncertainty from the outcome it to meet its obligations as in interest rates, equity and agreed actions. There is a formalised escalation process of Brexit as well as the they fall due, or can secure property prices, credit spreads Governance Section Three to the Group Management Board (GMB) and F&I in place potential impact of other risks them only at excessive cost. and foreign exchange rates. • There are risk appetite metrics in place which are agreed by such as global trade disputes. We may need to pay significant This principally arises from the Board and include limits on exposures and counterparties Since the end of 2019 amounts of claims at short investments held by the Group. • Derivative instruments are used to hedge elements markets have shown notice if there is a natural We actively take such risks of market risk, notably equity and currency. Their use increased uncertainty due to catastrophe or other large to seek enhanced returns on is monitored to ensure effective management of risk the COVID-19 outbreak and event in order to deliver on these investments. • There is tracking of risk metrics to provide early warning we are continuing to monitor our promise to our customers. indicators of changes in the market environment the situation. The Group’s balance sheet is also exposed to market Further information on this risk is given in note 4 Climate change • There is an established ethical and responsible investment This risk has been added risk within the defined to the financial statements on page 197. policy in place for our funds and property investments to the Group Risk Register benefit pension fund. The financial risks arising through climate change. • We are developing catastrophe modelling with reinsurers during 2019. A programme The key impacts for the Group to support better understanding of climate risk of work is underway to 1 Credit risk • Strict ratings criteria are in place for the reinsurers that we The level of this risk is are the long-term impact on fully analyse the risks and contract with and a Reinsurance Security Committee approves materially unchanged from develop an appropriate risk The risk that a counterparty, the risks insured, particularly all of our reinsurance partners last year. management response. for example a reinsurer, through changes to the nature, • Group Reinsurance monitors the market to identify changes in StatementsFinancial Four Section fails to perform its financial scale and frequency of future the credit standing of reinsurers catastrophe events; and the obligations to the Group or • There are risk appetite limits in place in respect of reinsurance does not perform them in impacts on the investment counterparties which are agreed by the Board portfolio due to developments a timely manner resulting in • Strong credit control and risk management processes are in a loss for the Group. in how the firms invested place to manage broker exposures, policyholder exposures and in respond to movements other elements of credit risk The principal exposure towards a lower carbon economy. to credit risk arises from Further information on this risk is given in note 4 to the financial reinsurance, which is central statements on page 197. to our business model. Other elements are our investment in debt securities, cash deposits and amounts owed to us by intermediaries and policyholders. Other Information Section Five

1 Link to viability statement – risk included in stress and scenario analysis *change arrows reflect movement in underlying risks About Us About One Section

Section Two Strategic Report – Principal risks 72 Ecclesiastical Annual Report & Accounts 2019 73 Strategic Report Section Two Operational risk1 The risk of loss arising from inadequate or failed internal processes, people and systems, or from external events.

Risk detail Key mitigants Change from last year* Risk detail Key mitigants Change from last year*

Systems risk • Systems monitoring is in place together with regular systems During 2019, a new claims Operational Resilience • A recovery and resilience framework is in place aligned to the This risk has changed and data backups system was implemented and delivery of customer services materially since 2019 year The risk of inadequate, ageing • A strategic systems programme is underway to deliver improved strategic systems programme The risk that the Group • Recovery exercises including IT systems are regularly end. The COVID-19 outbreak or unsupported systems and systems, processes and data continued to make progress. does not anticipate, prepare performed across the Group with actions identified addressed has the potential to result in infrastructure and system • Business recovery plans are in place for all critical systems The scale and complexity for, respond and adapt to within an agreed timescale significant operational impact. failure preventing processing and are tested according to risk appetite of this programme results incremental change and • All suppliers are subject to ongoing due diligence This is being managed closely efficiency. Systems are in heightened change risk sudden disruptions resulting • There is ongoing maintenance and monitoring of our systems and developments monitored. critical to enable us to provide in an inability to continue

during the development and infrastructure in order to prevent and detect issues A Crisis Management Team Governance Section Three excellent service to our and implementation period. to deliver customer critical has been active in preparing customers. services. for required responses in line with advice from Governments The Group provides a wide and relevant health authorities range of services to a diverse for the countries we operate customer base and has a within. Cyber risk • A number of security measures are deployed to ensure Although the threats continue reputation for delivering protected system access to evolve, we proactively review The risk of criminal or excellent service. Therefore, • Security reviews and assessments are performed on and update our controls and we seek to minimise the unauthorised use of electronic an ongoing basis therefore the overall residual information, either belonging to potential for any such • There is ongoing maintenance and monitoring of our systems level of risk is unchanged but disruption that would impact the Group or its stakeholders and infrastructure in order to prevent and detect cyber we acknowledge the need for e.g. customers, employees etc. on the service provided to security attacks vigilance and strong security our customers. Cyber security threats from measures. malicious parties continue to increase in both number Data Management • Group Data Governance and Group Data Management The level of this risk is and sophistication across all and Information Security Policies are in place materially unchanged from

and Governance StatementsFinancial Four Section industries. • A Group Data Optimisation Programme is in place which is last year. It is being monitored The risk that the confidentiality, responsible for ensuring the delivery of the data strategy and and managed in the context integrity and/or availability of all aspects relating to the governance, management, use and of major change programmes. Change risk • We ensure that there is adequate resourcing for change The level of this risk has Data held across the Group control of the Group’s data in line with regulatory requirements The risk of failing to manage projects using internal and external skills where appropriate not materially changed. is compromised, or Data is the change needed to • A Group Development Director is in place with responsibility There continues to be a misused. The Group holds transform the business. for overseeing the delivery of all strategic initiatives significant volume of change significant amounts of customer A number of strategic • A Change Board and change governance processes have within the business which and financial data and there initiatives are underway been established and are operated on an ongoing basis is monitored closely. could be significant implications under six themes, including • The GMB undertakes close monitoring and oversight of if this is compromised or is a transformation of our core the delivery of the strategic initiatives and key Group found to be inaccurate. system and key processes, change programmes which will deliver significant change for the company over the next few years. There are a number of material risks associated with major Other Information Section Five transformation, not only on the risks to project delivery itself, but the potential impacts on business as usual.

1 Link to viability statement – risk included in stress and scenario analysis *change arrows reflect movement in underlying risks About Us About One Section

Section Two Strategic Report – Principal risks 74 Ecclesiastical Annual Report & Accounts 2019 75 Strategic Report Section Two Regulatory and conduct risk Reputation risk The risk of regulatory sanction, operational disruption or reputational damage from The risk that our actions lead to reputational damage in the eyes of customers, brokers or other non-compliance with legal and regulatory requirements or the risk that Ecclesiastical’s behaviour key stakeholders. may result in poor outcomes for the customer.

Risk detail Key mitigants Change from last year* Risk detail Key mitigants Change from last year* Brand • There is ongoing training of core customer facing staff to Maintaining a positive Regulatory risk • We undertake close monitoring of regulatory developments There continues to be and reputation risk ensure high skill levels in handling sensitive claims reputation is critical to and use dedicated project teams supported by in-house and a significant volume of • We adopt a values led approach to ensure customer-centric the Group’s vision of being The risk of regulatory external legal experts to ensure appropriate actions regulatory change. We remain The Group aims to be the outcomes the most trusted and ethical sanction, operational to achieve compliance focused on the management most trusted specialist insurer • Dedicated Marketing and PR function responsible for the specialist financial disruption or reputational • An ongoing compliance monitoring programme is in place of regulatory change and and, as a consequence, implementation of the marketing and communication strategy services group. damage from non- across all our SBUs therefore the overall risk level this brings with it high • Ongoing monitoring of various media to ensure appropriate compliance with legal and

• Regular reporting to the Board of regulatory compliance issues is unchanged. expectations from all of responses Risks to our brand and Governance Section Three regulatory requirements. and key developments is undertaken our stakeholders, be they reputation are inherently We operate in a highly consumers, regulators or high in an increasingly regulated environment which the wider industry. interconnected environment, is experiencing a period with the risks of external of significant change. Whilst we aim to consistently threats such as cyber meet and where possible security attacks, and viral Conduct risk • Ongoing staff training to ensure that customer outcomes are The level of this risk is exceed these expectations, campaigns through social fully considered in all business decisions unchanged from last year. increasing consumer media always present. The The risk of unfair outcomes • Customer charters have been implemented in all SBUs awareness and increased ongoing IICSA inquiry and arising from the Group’s • Conduct Risk Reporting to relevant governing bodies is regulatory scrutiny across related PSA issues continue conduct in the relationship undertaken on a regular basis the sector exposes the to be a key area of executive with customers, or in • Customer and conduct measures are used to assess Group to an increased risk of management focus. performing our duties and remuneration reputational damage should obligations to our customers. we fail to meet them, for We place customers at example as a consequence of the centre of the business, poor business practices and aiming to treat them fairly and behaviours. StatementsFinancial Four Section ethically, while safeguarding the interests of all other key stakeholders. Other Information Section Five

1 Link to viability statement – risk included in stress and scenario analysis *change arrows reflect movement in underlying risks About Us About One Section

Section Two Strategic Report – Principal risks 76 Ecclesiastical Annual Report & Accounts 2019 77

Longer-term viability statement The assessment of the Group’s prospects by the directors covers the three years to It is fundamental to the Group’s longer-term 2022 and is underpinned by management’s strategy that the directors manage and 2020-22 business plans which make Section Two monitor risk taking into account all key assumptions relating to: the prevailing risks the Group faces, including longer-term economic climate and global economy; insurance risks, so that it can continue to the structural challenges facing the financial Strategic Report meet its obligations to policyholders. services sector; and the costs associated The Group is also subject to extensive with delivering the Group’s strategy. Corporate Responsibility Report regulation and supervision including Solvency They also include projections of the Group’s II. Against this background, the directors 2019 highlights 80

capital, liquidity and solvency. While the Strategic Report Section Two have assessed the prospects of the Group directors have no reason to believe the Overview 82 in accordance with Provision 31 of the Group will not be viable over a longer Our workplace 83 2018 UK Corporate Governance Code, with period, a three-year outlook period has reference to the Group’s current position and been selected. Given the rate of change in Our community 84 prospects, its strategy, risk appetite, and the the markets in which the Group operates, Our marketplace 85 potential impact of the principal risks and three years provides an appropriate balance Our environment 86 how these are managed. between the period of outlook and degree of clarity over specific, foreseeable risk events The risks presented by COVID-19 have been that could impact on the viability of the considered. The Group has business continuity Group. Stress and scenario analysis has been plans in place that support the continued performed with reference to the principal operation of business activity and has capital risks of the Group, which are documented on resources that can withstand significant pages 68 to 75. The stresses are designed temporary market disruption. At this stage to be severe, but plausible, and assess the there is no perceived material risk to the impact of certain events on the Group’s Governance Section Three Group’s viability resulting from the COVID-19 profitability and capital strength. outbreak. The risks presented by Brexit have They include: been considered and at this stage there is no perceived material risk to the Group’s viability.

Scenario Principal risks Increase in attritional claims Underwriting risk 1 in 50 year deterioration in PSA reserves Reserving risk 10% reduction in GWP year on year Underwriting risk CAT windstorm combined with reinsurer default Catastrophe and credit risk 10% increase in annual operating expenses Operational risk Combined 1 in 20 investment market fall and CAT windstorm Market and investment risk, and catastrophe risk Financial StatementsFinancial Four Section Scenario testing found that the combined 1 in borrowing and the dividend expectations 20 investment market fall and CAT windstorm of its owner. The Group has fixed annual scenario puts most strain on capital but does dividend payments of £9.2m in respect of not result in a direct breach of regulatory its non-cumulative irredeemable preference requirements. A range of plausible mitigating shares. The Group makes regular grants to actions has been identified and documented. its ultimate charitable owner, Allchurches Trust Limited. There is a regular cycle of The solvency position of the Group has discussion with Allchurches Trust Limited been projected as part of the Own Risk and to determine the appropriate level of grants, Solvency Assessment (ORSA), which is a in which the Group’s capital position and future private, internal, forward-looking assessment business needs are taken into account. of own risk, required as part of the Solvency II regime. The forward-looking emphasis of the Confirmation of viability ORSA ensures that business strategy and plans are formulated with full recognition of Based on the Group’s strong capital position, the risk profile and future capital needs. the strong risk management framework in Other Information Section Five place and the Group’s resilience to the variety The analysis confirms that the Group has of adverse circumstances as demonstrated in sufficient capital resources to cover its the results of the stress testing and potential capital requirements for the period of the mitigating actions, the directors confirm that business plan. they have a reasonable expectation that the Group will continue in operation and be able The directors have also considered the to meet its liabilities as they fall due over the Group’s ability to service its preference share next three years. Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information Foster MacKenzie Foster ContractingHabermehl They love their church, it’s a very intimate part of their community, so to bring some of their features forward and to include them in the design was important.” very

“  enough to be able to acquire an altar, and candelabra chairs, tabernacle, other items from churches that were no longer in use. a meetingAt to show the community these lucky finds – along with the new-build plans – feedback was extremely positive. The meeting was also a great opportunity for us to show how we really listen to our customers and to demonstrate the lengths we’re prepared to go to when dealing with claims. The architect of this new project quickly understood the importance of keeping certain memories of the old place of worship.

beautiful stained-glass stained-glass beautiful Our claims team swiftly met with representatives, architects,church engineers and others to discuss plans for a new church. And it quickly became apparent that it needed to retain some of the character of the original. much-loved One of the saddest losses was St Paul’s windows, so our claims team immediately set to work to try and painstaking After replacements. find research, they managed to track down some wonderful old stained-glass windows from churches that were due for closure. They were also fortunate Restoring hope set was Ecclesiastical what was fire of risk the from churches Protecting changed, have may manage we risks the while And 1887. in back do to up Paul St 114-year-old the 2018, June In threat. an ever-present remains fire flames in Canada, engulfed was Brunswick, New Bas-Caraquet, in Church town, small heart this the at of was church the Since destroyed. totally and important respond to was it knew we so devastated, was community the try to fast spirits. lift and their Ecclesiastical CanadaEcclesiastical About Us About One Section

Section Two Strategic Report – Corporate Responsibility Report 80 Ecclesiastical Annual Report & Accounts 2019 81

Corporate Responsibility Report 2019 highlights Strategic Report Section Two

Our workplace Our marketplace

Winner of Best Ethical 83% Investment Provider >30% 70% and Fairer Finance of staff are positive about the statement ‘I am proud of senior management roles globally of suppliers paid within 30 Gold standard for to work for this company’ filled by women (2018: 29.9%) days, published as part of (2018: 86%) more than a decade the Payment Practices and Performances Reporting Governance Section Three (2018: 69%)

3rd cohort of global People Leaders leadership development Academy launched programme delivered Advisory Panels set up to in the UK listen to customer groups

Our community Our environment StatementsFinancial Four Section £32.5m 100,000 87% Carbon total charitable giving nominations for 7,000 charities during footprint electricity from renewable CO (2018: £18.8m) our Movement for Good Awards 2 sources (2018: 78%) of all EdenTree equity funds better than their respective benchmarks

60% 90%+ ClimateWise 1,425 tonnes Other Information Section Five of employees of employees member of voluntary total carbon emissions, took up volunteering engaged in giving industry initiative Scopes 1-3 (2018: 1,118 t o n n e s) time (2018: 60%) (2018: 90%) About Us About One Section

Section Two Strategic Report – Corporate Responsibility Report 82 Ecclesiastical Annual Report & Accounts 2019 83

Our workplace Strategic Report Section Two

Overview We believe in supporting diversity and development Corporate responsibility at Ecclesiastical We use a materiality approach to drive has an established structure and our strategy, responding to new responsible and building an open and responsible culture. governance which includes Board visibility business challenges which impact our and responsibility for overarching strategy; customers, partners and communities. a senior-level Steering Group providing Key issues we continue to focus on include leadership; and local business ownership climate change, cyber security, charitable of activity. giving, diversity and governance. Leadership and culture development A higher proportion of our senior roles are activities in 2019 included continuing our being filled by women resulting in a falling Independent assessment and accreditation global Leadership Development Programme pay gap. Three years since signing up to is an important aspect of maintaining and which has now supported nearly 50 senior the Women in Finance Charter, women now raising standards. We continue to hold Governance Section Three and aspiring leaders. All of our leadership make up 30% of our senior management standards including Living Wage, Women in population benefitted from ‘leadership roles globally. Finance and the Fairer Finance Gold Ribbon masterclasses’ covering emotional and we are a member of ClimateWise. intelligence and high performance. We continued to uphold Living Wage status Our ethical investment business EdenTree in the UK. Ecclesiastical Canada was maintains a number of memberships We continued to support a range of included in Canada’s Top 100 Employers including the UK Sustainable Investment professional and technical qualifications for Young People for the eighth consecutive and Finance Association, UN Principles for and training including adherence to the year. Employee engagement across the Responsible Investment and the Institutional Senior Managers and Certification Regime Group remains high, with 83% positive Investors Group on Climate Change. and Conduct rules. We launched a ‘People about the statement ‘I am proud to work Leaders Academy’ in the UK and Ireland for this company’. for all managers and rolled out ‘confident conversations’ workshops to over 200 Gender by level managers to support with management responsibilities.

Male Female Total StatementsFinancial Four Section

Group Management Board* 4 4 8 To continue to drive and develop our culture Senior Leader 72 31 103 we relaunched an updated Code of Conduct, Manager 246 174 420 Team Member 382 618 1000 achieving 96% employee signup. We also Total 704 827 1531 established an ‘Office Life Network’ of employees at our head office to help prepare and plan for our move to a new build. We involved employees in designing the Gender pay gap working environment, planning travel and facilities. We have committed to design it 2019 2018 2017 to a Fitwel Standard to support greater Fixed pay gap mean/median 27.6% / 22.4% 30.6% / 23.5% 30.7% / 25.0% employee wellbeing. Bonus pay gap mean/median 50.1% / 32.4% 55.8% / 36.5% 53.5% / 33.1% Other Information Section Five

Ethnicity White Prefer not to say BME Total 1259 192 80 1531

* Includes Executive Directors About Us About One Section

Section Two Strategic Report – Corporate Responsibility Report 84 Ecclesiastical Annual Report & Accounts 2019 85

Our community Our marketplace Strategic Report Section Two

We believe business should give more and we’re proud We believe in putting customers and partners at the to support thousands of charities through our giving. heart of everything we do, focusing on good governance, service and support.

We have always been a different kind of Across our Group, giving is directed at Our outstanding commitment to customers We uphold good practices regarding human business, but over recent years we have causes close to our businesses and charities and partners was reflected in numerous rights, anti-corruption and anti-bribery challenged ourselves to give even more to making a difference in communities awards across our Group in 2019. through a range of measures including good causes and champion corporate giving. local to them. In Australia, for example, They include recognition for our claims, robust risk management, employee Code of We have now given £96.5m towards our the Community Education Programme risk management, financial advice and Conduct and employee regulatory training on Governance Section Three target of £100m by 2020 and continue to reaches neglected young people through investment service and expertise. Our people topics such as data protection. We continue be a leading corporate giver to charity. the Lighthouse Foundation. In Ireland, won Achiever and Lifetime Achievement to submit our Modern Slavery Act declaration we’re helping the homeless through the awards from the Chartered Insurance and are pleased that the Payment Practices In 2019, our ambition was boosted by our charity Focus. In Canada, our Impact Grants Institute in the UK and our Canadian and Performance Reporting demonstrates biggest ever giving campaign. We launched Programme supports vital services for young business was recognised for excellence our commitment to fair payment for all the Movement for Good Awards in the UK, people provided by the charity Phoenix. in philanthropy and community service. our suppliers. giving £1m to good causes. We wanted Our ethical investment business, EdenTree, We’re proud of the number of awards we’ve to reach the greatest possible number of helps trafficked women through the charity won, but we’re equally proud of winning charities, and we achieved this. Five hundred Street Talk. UK brokers Lycetts support consistently year-on-year. Notably, we have charities received £1,000 donations with people with disabilities working with Learning won Best Employer for Young People in nearly 100,000 nominations from supporters for Life and SEIB are improving equine Canada eight times, and we’ve been Best for around 7,000 charities. We also wanted welfare through funding for the British Ethical Investment Provider and top of the to support charities with substantial multi-year Horse Society. Read our Impact Report on Fairer Finance table for a decade. funding for innovative and exciting projects www.ecclesiastical.com to find out more.

really making a difference, and we achieved Understanding and listening to our customers StatementsFinancial Four Section this. We gave ten £50,000 grants to charity Allchurches Trust, our charitable owner, underpins this positive recognition. As well projects which supported causes including gave a record amount in grants in 2019 as surveying and feedback programmes, survivors of modern slavery, tackling loneliness – more than £17.8 million – benefitting in the UK we’ve also gathered together and isolation among older people and bringing more than 1,200 good causes across the sector representatives to establish advisory greater support to young carers. UK and Ireland. At the heart of the Trust’s groups. We convened groups from the giving is making a positive difference in education and heritage sectors to discuss Giving led by our employees and partners partnership. As well as supporting churches risk and responded by launching a cyber continues to be a cornerstone of our activity. and charities who play a vital role in tackling risk toolkit and scenario planner for schools. Employee giving was sustained at high levels social isolation, giving hope to those in need Our partnerships with sector bodies in all of in 2019, with every part of our Group getting and supporting young people to flourish, the markets and geographies we operate behind charity fundraising, volunteering and Allchurches provides funding to protect and continue to help us understand and connect giving efforts. In tota,l this generated over preserve heritage buildings and traditional with our customers, ensuring our products £350,000. We work closely with a number skills. Under the auspices of Allchurches and services truly deliver. of brokers in the UK and, through our ‘Select’ Trust, our Australian and Canadian programme, we gave nearly £100,000 to businesses also offered grants programmes charities our brokers care about. In our that changed lives and communities for the Other Information Section Five #12days of Giving campaign 120 charities better. Find out more about Allchurches received £1,000 donations at Christmas Trust’s giving on their website at thanks to nominations from employees, www.allchurches.co.uk partners, brokers and supporters. About Us About One Section

Section Two Strategic Report – Corporate Responsibility Report 86 Ecclesiastical Annual Report & Accounts 2019 87

Our environment Strategic Report Section Two

We believe in running our business in a sustainable way to tackle climate change and encourage others to do more.

In 2019, we completed voluntary In our continuing efforts to reduce our An overview of our Group’s ClimateWise reporting to assess our direct impact on the environment, Enhance Be 2019 ClimateWise report reporting accountable performance and provide challenge for we increased the proportion of our UK The size of the sectors reflects ClimateWise Recognising improvement. The report is aligned to the electricity sourced from renewables to 87%. the weighting applied by

membership climate Governance Section Three Taskforce on Climate-related Financial We benchmarked the carbon footprint of and including change in our ClimateWise Disclosures (TCFD) and is summarised EdenTree’s equity funds once again and they climate Group Risk in the graphic here. The positive action all continue to report a lower carbon intensity change in Framework, Customer/client CR assigning we are taking includes: than their respective benchmarks, reflecting awareness reporting management the thorough screening process and an responsibility Informing customers and reporting • An established ethical and responsible active process to look for companies with and partners through Strategies to the Board and investments investment policy for our funds and strong environmental practices. key communications – for example, flood Including climate property investments advice for insurance change in our strategic • Approaches to scenario analysis in our risk We incorporated sustainable thinking customers or thought emerging risk and management process to assess the impact into our new UK head office planning leadership publications scenario analysis on ethical issues for processes; adhering to of climate change on our business – committing to the Building Research advisers and investors our Group ethical and • Carbon footprint disclosure and third-party Establishment Environmental Assessment Our Group responsible investment and property verification Method, installing solar panels and investment policies • Developing catastrophe modelling with completing employee travel engagement. climate change reinsurers to support better understanding Informing response of climate risk public policy StatementsFinancial Four Section Supporting industry • Specific products and policy conditions initiatives and bodies reflecting climate change – including such as FloodRe, ABI, a crop failure product for example CDP, IIGCC, Montreal Pledge; working with • Informing our customers and partners reinsurance partners to Managing through flood advice and a series of develop modelling climate risk thought leadership publications on topics Our Managing climate including energy, sustainable cities and own risk through business impact activity including fossil fuel divestment responsible investment Disclosing strategy and • Transparent responsibility for, and reporting a verified screening/engagement of, climate change risk, in particular in footprint and approach; product working to response to the PRA’s requirements for development and reduce it greater visibility on the financial impacts innovation of climate change. Other Information Section Five Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information Ansvar’s history, knowledge and expertise within these segments was important to our decision to continue our long-term relationship as we look to ensure we not only have the best policies in place but also a befitting programme. Management Risk Greg McLean, Manager Insurance National Churches of Christ Australia “  against the organisation’s strategic organisation’s the against objectives. These workshops were key in helping them to launch and roll out their new strategic plan. Ansvar worked with Churches of Christ review comprehensive a implement to process management change and the enhanced systematically that risk management framework of the organisation. And the fact that they chose to renew their insurance with us was largely down to the quality of Enterprise and provided work Management Risk the confidence in Ansvar Risk and the trusted relationships we’ve built.

people in their communities. their in people complexity has operational Their increased significantly, so they contacted us to see if we could help to approach their strengthen them ensure to management, risk enterprise they would have effective governance. Our Senior Risk Consultant worked closely with Churches of Christ’s Board Directors, Executives and a selection of devised specially in – Managers Senior workshops – to identify risk key themes Churches of Christ in Queensland, Australia provides care and social services to some of the most vulnerable

Helping to identify and manage faith-specific risk risk faith-specific manage and identify to Helping understanding in-depth has Ansvar Australia, in insurer faith leading As the division, risk our through And risks. and needs unique sector’s the of governance capability, services build management risk our Risk, Ansvar people vulnerable support to organisations of sustainability and expertise Christ of Churches client our that expertise this was It lives. their improve to 2019. in for looking were Australia, Queensland, in Ansvar Australia About Us About One Section

Section Two Strategic Report – Non-Financial Information Statement 90 Ecclesiastical Annual Report & Accounts 2019 91

Non-Financial Information Statement Strategic Report Section Two

Non-financial information Social matters The Non-Financial Reporting requirements contained in sections 414CA and 414CB of the • We were founded over 130 years ago with Companies Act 2006 are addressed below: a charitable purpose and this remains what motivates us today. We believe business Non-financial information Disclosure Section Pages has a social responsibility and should give Business model Our business model and Strategic report 40 more to support charities and communities. information on how we do – Our Business model More information about how we support business differently and strategy our communities can be found in the Key performance indicators Our KPIs set out how we are Strategic report 44 Corporate responsibility report on page (KPIs) doing against our strategic goal – Strategy in action 80. The Group does not make political donations.

Principal risks Our key risks and their Strategic report 68 • Our tax strategy supports our group Governance Section Three management – Principal risks strategy and the ethical way we do Our policies We have a range of policies and See below business. We are committed to managing guidance in place to support the all aspects of tax transparently and in key outcomes for our stakeholders. accordance with current legislation. These also ensure consistent governance on environmental We work to achieve the spirit of legislation matters, our employees, social and not just the letter of the law in each tax matters, human rights and jurisdiction. Our tax strategy is available on anti-bribery and corruption 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

Our key policies / activities and promoting and anti-bribery StatementsFinancial Four Section statements of intent and corruption culture across the Group. • We have established and uphold good Environmental matters Employees practices regarding human rights, • We are committed to running the business • Our Code of Conduct policy is centred anti-corruption and anti-bribery through in a sustainable way to tackle climate on ‘Doing the right thing’ and sets the a range of measures including robust risk change and encourage others to do more. standards of conduct and behaviour management, employee Code of Conduct • We assess performance against expected from employees. and employee training on topics such as ClimateWise reporting which is aligned • The Board aims to ensure it is comprised data protection and vulnerable customers. to Taskforce on Climate-related Financial of persons who are fit and proper to direct • We comply with relevant legislation Disclosures (TFCD) reporting. the business. The Board’s diversity policy concerning our supply chain – the Modern • We aim to reduce our direct impact on the sets out the approach to diversity in the Slavery Act 2015 and the Payment environment and seek to use renewable leadership population. Practices and Performance regulations sources of energy. • Other information on our commitments – to drive good practice and transparency. • Other information on environmental to supporting diversity and development matters is included within the is included in the workplace section of the • The marketplace section of our Corporate Other Information Section Five Our environment section of the Corporate Corporate responsibility report on page 80. responsibility report contains more responsibility report on page 80. Also included within the Corporate information including our commitment to Governance report on page 106 is putting customers and partners at the heart information about the composition of everything we do, focusing on good and diversity of the Board. governance, service and support.

About Us About One Section

Section Two Strategic Report – Strategic Report approval 92 Ecclesiastical Annual Report & Accounts 2019 93

Section 172 Statement Strategic Report Section Two

This section of the Strategic Report describes how the directors have had regard to the matters set out in section 172(1) (a) to (f), and forms the directors’ statement required under section 414CZA, of the Companies Act 2006. The Directors recognise that the long-term success of the Group is dependent on having regard to the interests of its stakeholders. The Board has identified and documented its stakeholders in the Group Governance Framework. Key stakeholders include its shareholder, employees, customers and clients, regulators and intermediary partners (including brokers and other suppliers). ‘Key issues we continue Stakeholder engagement is considered as part of the decision making process of the

Board. Given the new disclosure requirements, board and committee papers templates to focus on include Governance Section Three were updated to better focus on stakeholder interest, which has been embedded across the Group. climate change, cyber security, charitable giving, Strategic Report approval diversity and governance.’

The Strategic Report, outlined on pages 24 to 92, incorporates the Chief Executive’s Review, the Business Model and Strategy, the Key Performance Indicators, reviews of Financial Performance and Position and Risk Management, the Corporate Responsibility Financial StatementsFinancial Four Section Report and the Section 172 Statement and, when taken as a whole, is considered by the directors to be fair, balanced and understandable.

By order of the Board

Mark Hews Group Chief Executive 17 March 2020 Other Information Section Five About Us About One Section

Section Three Governance – 94 Ecclesiastical Annual Report & Accounts 2019 95

Section Three Governance

Board of Directors 96 Directors’ Report 100 Strategic Report Section Two Corporate Governance 106 Governance Section Three Financial StatementsFinancial Four Section Other Information Section Five About Us About One Section

Section Three Governance – Board of Directors 96 Ecclesiastical Annual Report & Accounts 2019 97

Key to membership of Group Board Committees (a) Group Finance and Investment (b) Group Nominations (c) Group Risk

(d) Group Audit Strategic Report Section Two Board of Directors (e) Group Remuneration

David Henderson (a) (b) (e) Denise Cockrem Chris Moulder (b) (c) (d) Caroline Taylor (a) (b) (e) Chairman, Independent Non-Executive Director Group Chief Financial Officer Senior Independent Non-Executive Director Independent Non-Executive Director David Henderson was appointed to the Board in April Denise Cockrem was appointed Group Chief Financial Officer Chris Moulder was appointed to the Board in Caroline Taylor was appointed to the Board in September

2016. David began his career specialising in personal on 10 December 2018 and joined EIO Board on 6 September September 2017. Chris is also a director of the 2014. Until May 2012, she was an Executive Director Governance Section Three tax and UK trusts. He spent ten years as a banker with 2019. Denise is a Chartered Accountant with significant industry company’s ultimate parent, Allchurches Trust Limited. of Goldman Sachs Asset Management International Morgan Grenfell and, following that, 11 years in financial experience, predominantly in financial services. She spent her early Chris retired in 2017 after five years at the Bank and was previously a Director of Goldman Sachs services executive recruitment with Russell Reynolds career in corporate finance and banking roles for EY, Barclays, of England as Director of General Insurance at the Luxembourg and Dublin-based SICAV Funds, having Associates. He joined the Board of Kleinwort Benson RBS and Direct Line. She then joined RSA as Group Financial Prudential Regulation Authority. Prior to this he had spent her executive career in financial services, Group plc as Personnel Director in 1995. He was Controller, spending 9 years with them in various roles culminating spent 26 years with KPMG as a partner in its Financial principally in asset management. She is currently appointed Chief Executive of Kleinwort Benson Private in UK & Western Europe Finance Director. Denise most recently Sector practice. He is also a Director of the Insurance a Non-Executive Director of Brewin Dolphin Holdings Bank Ltd (now Kleinwort Benson) in June 1997. held the position of Chief Financial Officer at Good Energy Group Board of Lloyds Banking Group and of Tokio plc and Floors Castle Outdoor Events Ltd. He was Chairman of Kleinwort Benson from 2004 plc, an AIM-listed renewable energy company who provide 100% Marine Kiln. to 2008 and a Senior Adviser to the Bank until 2019. renewable electricity and carbon neutral gas. Denise is also a He holds several external Non-Executive Directorships. Non-Executive Director of the Skipton Building Society and a Trustee of MacIntyre Academy Trust, which provides special schools and specialist alternative provision for children and young people. Financial StatementsFinancial Four Section

Mark Hews Andrew McIntyre (c) (d) S. Jacinta Whyte Angus Winther (a) (e) Group Chief Executive Independent Non-Executive Director Deputy Group Chief Executive Independent Non-Executive Director Mark Hews was appointed Group Chief Executive in Andrew McIntyre was appointed to the Board in April Jacinta Whyte was appointed Deputy Group Chief Angus Winther was appointed to the Board in March 2019. May 2013 and was previously the Group Chief Financial 2017. Andrew is the Senior Independent Director Executive and joined the Board in July 2013 with Angus co-founded Lexicon Partners, a London-based Officer. He was appointed to the Board in June of C. Hoare & Co where he chairs the Audit, Risk responsibility for the Group’s General Insurance investment banking advisory firm, where he specialised 2009 and appointed to the Board of MAPFRE RE in and Compliance Committee, and an independent business globally. She was also appointed to the in advising clients in the insurance and financial December 2013 and became a Trustee of The Windsor Non-Executive Director of Lloyds Bank Corporate Ansvar Australia Board during 2013. Jacinta joined services sectors. He was closely involved in Lexicon Leadership Trust in November 2017. He was formerly a Markets plc, where he also chairs the Audit Committee. Ecclesiastical in 2003 as a General Manager Partners’ leadership until it was acquired by Evercore Director of HSBC Life and Chief Executive of M&S Life. He is an Independent Non-Executive Director of and Chief Agent of the Group’s Canadian business. in 2011 and served as a senior Adviser at Evercore until Prior to this he was Finance Director at Norwich Union National Bank of Greece S.A. and chairs its Audit Having commenced her career as an underwriter for October 2016. He is currently a Non-Executive Director Other Information Section Five Healthcare. He started his financial career at Deloitte Committee. Previously, Andrew was for 24 years a RSA in Dublin in 1974, she moved with them to Canada and Chair of the audit committee at Trinity Exploration (formerly Bacon and Woodrow) as a consultant partner in EY, and was for nine years Chairman of the in 1988, holding a number of senior executive positions & Production plc and a Non-Executive director of and actuary. Board of Southern Housing Group, one of the largest in both Ireland and Canada. Lloyd’s managing agent, Hiscox Syndicates Limited. housing associations in the UK. Angus is also Churchwarden of Holy Trinity Brompton, Deputy Chair of the Church Revitalisation Trust and a trustee of the St Paul’s Theological Centre. About Us About One Section

Section Three Governance – Board of Directors 98 Ecclesiastical Annual Report & Accounts 2019 99

Key to membership of Group Board Committees (a) Group Finance and Investment (b) Group Nominations (c) Group Risk

(d) Group Audit Strategic Report Section Two (e) Group Remuneration Board diversity

2019 2018

Balance of Non-Executive Directors and Executive Directors Non-Executive Directors : Executive Directors 8:3 7:2

The Very Reverend Christine Wilson (b) (e) Francois-Xavier Boisseau (c) (d) Gender Balance Independent Non-Executive Director Independent Non-Executive Director Christine Wilson was appointed to the Board in June Francois-Xavier Boisseau was appointed to the Board Male : Female 7:4 6:3

2012 and has served for 20 years in ordained ministry. in March 2019. Francois-Xavier has more than 30 years’ Governance Section Three She was Archdeacon of Chesterfield in the Diocese experience working in the insurance industry, 25 years of Derby until October 2016, when she was installed in the UK. He was CEO Insurance Ageas (UK) until as Dean of Lincoln. She was a member of the Church December 2018. Prior to that, Francois-Xavier was CEO Length of Tenure of England General Synod from 2010 to 2015. of Groupama and CEO of GUK Broking Services as well From December 2013 to 2016, she was participant as being Non-Executive Chairman of Lark, Bollington (Chairman and Non-Executive Directors) observer on the House of Bishops. She is a member and Carole Nash. He is also a Non-Executive Director of The University of Lincoln Court. She has also been of Argo Managing Agency Ltd. 0 – 3 years 5 3 Chair of a number of charities. 3 – 6 years 2 2 6 – 9 years 1 1 10 years + 0 1

Geographical Mix Financial StatementsFinancial Four Section United Kingdom 9 7 Rest of Europe 1 1 North America 1 1 Rest of World 0 0 Neil Maidment (c) (d) (e) Independent Non-Executive Director Neil Maidment was appointed to the Board in January Age 2020. Neil is an Independent Non-Executive Director at Lloyd’s of London. He has over 35 years’ experience 35 – 45 0 0 in the insurance market. He was previously a Director of Beazley plc and was Chief Underwriting Officer 45 – 55 2 1 of the company and Active Underwriter of its Lloyd’s syndicates from 2008 to 2018. He was Chairman of 55 – 65 8 6 Other Information Section Five the Lloyd’s Market Association from 2016 to 2018 and served as an elected working member of the Council 65 + 1 2 of Lloyd’s during the same period.

John Hylands resigned as a director on 19 March 2019. Tim Carroll resigned as a director on 31 December 2019. About Us About One Section

Section Three Governance – Directors’ Report 100 Ecclesiastical Annual Report & Accounts 2019 101

Directors’ Report Strategic Report Section Two

The directors submit their Annual Report and Accounts for Ecclesiastical Insurance Office Principal activities In line with the Financial Reporting Council’s (FRC) 2018 UK Corporate Governance plc, together with the consolidated financial statements for the year ended 31 December The Group operates principally as a provider Code (the Code), the Board has voluntarily 2019. The Group Chief Executive’s Review, Strategic Report and Corporate Governance of general insurance in addition to offering a chosen to comply with the recommended range of financial services, with offices in the annual re-election of directors. With the section (this includes Board Governance, the Group Finance and Investment Committee UK, Ireland, Canada, and Australia. A list of exception of Christine Wilson who will Report, the Group Nominations Committee Report, the Group Risk Committee Report, the Company’s subsidiary undertakings are retire at the annual general meeting (AGM), given in note 34 to the financial statements the Group Audit Committee Report, and the Group Remuneration Report) are all all directors who have served since the on page 242 and details of international last AGM will be proposed for re-election incorporated by reference into this Directors’ Report. branches are shown on page 251. at the forthcoming AGM. Mrs Cockrem and Mr Maidment will be recommended Ownership for election at the forthcoming AGM Governance Section Three At the date of this report, the entire issued following recommendation from the Group Ordinary share capital of the Company Nominations Committee. and 3.16% of the issued 8.625% Non-Cumulative Irredeemable Preference The Company has made qualifying third-party Shares of £1 each (‘Preference shares’) indemnity provisions for the benefit of its were owned by Ecclesiastical Insurance directors and directors of any associated Group plc. In turn, the entire issued Ordinary company. These were in place throughout share capital of Ecclesiastical Insurance the year and remain in force at the date Group plc was owned by Allchurches Trust of this report. Limited, the ultimate parent of the Group. Neither the directors nor their connected persons held any beneficial interest in any Board of directors Ordinary shares of the Company during the The directors of the Company during the year ended 31 December 2019. There has year and up to the date of this report are been no change in this position since the stated on pages 96 to 98. end of the financial year and the date of StatementsFinancial Four Section this report. John Hylands resigned as a director and Chairman of the Company on 19 March 2019 and was succeeded by David Henderson as Chairman.

Tim Carroll resigned as a Non-Executive Director on 31 December 2019. Francois-Xavier Boisseau and Angus Winther were appointed as Non-Executive Directors on 19 March 2019. In addition, Neil Maidment was appointed as a Non-Executive Director on 6 January 2020.

Denise Cockrem, Group Chief Financial

Officer was appointed as an Executive Other Information Section Five Director on 6 September 2019. About Us About One Section

Section Three Governance – Directors’ Report 102 Ecclesiastical Annual Report & Accounts 2019 103 Strategic Report Section Two

The following directors of the Company, and their connected persons, held Preference shares In 2019, we gave additional focus to mental The Group also has a strong risk in the capital of the Company at 31 December 2019: health. Partnering with a mental health charity, management framework and solvency we conducted an audit of our approach to position, is well placed to withstand Director Nature of interest Number of Non-Cumulative supporting employees who face mental health significant short-term market disruption Irredeemable Preference issues to identify where improvements could and has proved resilient to stress testing. Shares held be made. We also provided specialist training to As a consequence, the directors have a Mark Hews Connected person 75,342 managers to help support positive management reasonable expectation that the Group of mental health issues in our workplace. is well placed to manage its business risks There have been no changes to their holdings between the end of the financial year and the successfully and continue in operational date of this report. Principal risks existence for at least 12 months from the date of this report. Accordingly, they and uncertainties continue to adopt the going concern basis in

No contract of significance existed during or at the end of the financial year in which a director Governance Section Three was or is materially interested. The directors have carried out a robust preparing the Annual Report and Accounts. assessment of the principal risks facing the Group including those that threaten Auditor and the disclosure of its business model, future performance, solvency and liquidity. The principal risks and information to the auditor uncertainties, together with the financial risk So far as each person who was a director management objectives and policies of the at the date of approving this report is aware, Group, are included in the Risk Management there is no relevant audit information that the Dividends Employees section of the Strategic Report and can be auditor is unaware, that could be needed by Dividends paid on the Preference shares The Group is committed to nurturing a found on page 62. the auditor in order to prepare their report. were £9,181,000 (2018: £9,181,000). culture and work environment in which all employees can fulfil their potential. Events after the Having made enquiries of fellow directors The directors do not recommend a final Our Equality and Diversity Standard and and the Group’s auditor, each director dividend on the Ordinary shares (2018: Guidance sets our expectations for an open reporting period has taken all the steps that they ought to £nil), and no interim dividends were paid in and inclusive workplace and we place the Note 37 to the financial statements contains have taken as a director, in order to make respect of either the current or prior year. care and wellbeing of our employees at the disclosures of events after the reporting period. themselves aware of any relevant audit StatementsFinancial Four Section heart of our employment policies. information, and to establish that the auditor Charitable and Going concern is aware of that information. Information on engaging and involving political donations employees is provided on page 109. The Financial Performance section on This confirmation is given and should be Charitable donations made in the year page 54 and Risk Management section of interpreted in accordance with the provisions amounted to £32.5 million (2018: £18.8 Throughout the employee lifecycle from the Strategic Report starting on page 62 of Section 418 of the Companies Act 2006. million). recruitment onwards, we carefully consider provide a review of the Group’s business adjustments to our processes and practices activities and describe the principal risks The Group Audit Committee reviews During the last 10 years, a total of and look for solutions to remove barriers and uncertainties, including exposures the appointment of the auditor, including the £188.2 million (2018: £165.0 million) for those employees with disabilities. to insurance financial risk, operational auditor’s effectiveness and independence, has been provided by Group companies When needed, we engage with third-party and strategic risk. and recommends the auditor’s reappointment for church and charitable purposes. and Occupational Health specialists who and remuneration to the Board. Further provide us with expert advice and ensure The Group has considerable financial details are disclosed in the Group Audit It is the Company’s policy not to make we are offering the best support we can. resources: financial investments of £857.9m, Committee Report on page 124.

political donations. No political donations Through our adjusted work approach, we 91% of which are liquid (2018: financial Other Information Section Five were made in the year (2018: £nil). provide an environment in which disabled investments of £799.0m, 92% liquid), cash In accordance with Section 489 of the employees can fully participate in all and cash equivalents of £74.8m and no Companies Act 2006, a resolution proposing Financial instruments opportunities provided by the Group from borrowings (2018: cash and cash equivalents that PricewaterhouseCoopers LLP be continued employment to training, job moves of £109.4m and no borrowings). Liquid appointed as auditor of the Group will be Information about the use of financial and promotions. financial investments consist of listed equities put to the forthcoming AGM. instruments by the Group is given in note 23 and open-ended investment companies, to the financial statements. government bonds and listed debt. About Us About One Section

Section Three Governance – Directors’ Report 104 Ecclesiastical Annual Report & Accounts 2019 105

Section Three Governance

Corporate Governance 106 Group Finance and Investment Committee Report 114 Strategic Report Section Two Group Nominations Committee Report 116 Group Risk Committee Report 122 Directors’ responsibilities the Companies Act 2006. They are also Group Audit Committee Report 124 responsible for safeguarding the assets Group Remuneration Report 134 The directors are responsible for preparing of the Company and hence for taking the Annual Report and the financial reasonable steps for the prevention and statements in accordance with applicable detection of fraud and other irregularities. law and regulations. The directors are responsible for the Company law requires the directors maintenance and integrity of the corporate to prepare financial statements for each and financial information included on the financial year. Under that law, the directors Company’s website. Legislation in the United are required to prepare the Group financial Kingdom governing the preparation and statements in accordance with International dissemination of financial statements may Financial Reporting Standards (IFRSs) as differ from legislation in other jurisdictions. Governance Section Three adopted by the European Union and Article 4 of the International Accounting Standards (IAS) Regulation and have also chosen Responsibility statement to prepare the parent company financial We confirm that to the best of our statements under IFRSs as adopted by knowledge: the European Union. Under company law, • The financial statements, prepared in the directors must not approve the accounts accordance with IFRS, give a true and unless they are satisfied that they give fair view of the assets, liabilities, financial a true and fair view of the state of affairs position and profit or loss of the Company of the Company and of the profit or loss and the undertakings included in the of the Company for that period. consolidation taken as a whole. • The Strategic Report (which is incorporated In preparing these financial statements, IAS 1 into this Directors’ Report) includes a fair requires that directors: review of the development and performance

• properly select and apply accounting of the business and the position of the StatementsFinancial Four Section policies; Company and the undertakings included in • present information, including accounting the consolidation taken as a whole, together policies, in a manner that provides relevant, with a description of the principal risks and reliable, comparable and understandable uncertainties that they face. information; • The Annual Report and financial • provide additional disclosures when statements, taken as a whole, are fair, compliance with the specific requirements balanced and understandable, and provide in IFRSs are insufficient to enable users the information necessary for shareholders to understand the impact of particular to assess the Company’s position and transactions, other events and conditions performance, business model and strategy. on the Company’s financial position and financial performance; and By order of the Board • make an assessment of the Company’s ability to continue as a going concern. David Henderson Mark Hews Chairman Group Chief Executive Other Information Section Five The directors are responsible for keeping 17 March 2020 17 March 2020 adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with About Us About One Section

Section Three Governance – Corporate Governance 106 Ecclesiastical Annual Report & Accounts 2019 107

Corporate Governance Strategic Report Section Two

The Board of directors is committed to applying the highest standards of corporate At each Board meeting, the directors discuss It is the Board’s policy to record any strategic and business matters, financial, unresolved concerns about the running of governance and believe that the affairs of the Company should be conducted in operational and governance issues, and other the Company or any proposed action in the accordance with best business practice. Accordingly, although the Company does not relevant business items that arise. Following Board minutes. During 2019, no director Committee meetings, the Board receives had any such concerns. have shares with a premium listing on the London Stock Exchange and, therefore, does oral reports from the Chairman of each not need to adhere to requirements, the Company has voluntarily chosen to comply with Committee at the next Board meeting. Culture the Principles and Provisions of the 2018 UK Corporate Governance Code (the Code) The Board is responsible for setting the right Purpose, value and strategy values and culture within the Group and throughout the year ended 31 December 2019 where relevant. A copy of the Code can The Group’s purpose is to contribute to ensuring the fair treatment of customers. be found on the FRC’s website. The Corporate Governance Statement also includes the the greater good of society. In particular, The target culture is described below. the Group strives to improve the lives of reports from Group Audit Committee, the Group Finance and Investment Committee, customers, beneficiaries and society as This is embedded across the Group’s Governance Section Three the Group Nominations Committee, Group Remuneration Committee and the a whole. This is achieved by managing a employee lifecycle, from recruitment portfolio of businesses that operates on the through performance management and our Group Risk Committee.* highest ethical principles. It seeks to diversify behaviour model, personal development and and bring an ethical dimension to more communications. The Board monitors cultural aspects of society; and all of its businesses alignment through the MySay survey results. need to set a high bar, putting its customers first and setting an example to others.

See page 40 for more details.

The following aspects of the Code are not Board leadership considered appropriate for the Company given ownership structure: and company purpose Our Target Culture

• provisions relating to outcomes from Role of the Board StatementsFinancial Four Section shareholder votes (Provision 4) The Board is responsible to the Group’s • shareholding requirements for Executive shareholders for the long-term success Ambitious and driven... Working collaboratively We outperform We value our diversity Directors (Provision 36). of the Group, its purpose, values, strategy, our business goals and work well together culture and its governance. Great importance During the year, the Company did not comply is placed on a well-informed and decisive with the following provision of the Code: Board, and Board meetings are scheduled • with the exception of the GCEO, pension and held regularly throughout the year. contribution rates for Executive Directors ...For the greater good Inspiring each other are aligned to those available to the A one-year rolling plan of business for We contribute to the We energise each greater good of society other to deliver wider workforce (Provision 38). Further discussion is reviewed and agreed by the information is contained in the Directors’ Board annually to ensure that the Board is Remuneration Report. Given current focused on the right issues at the right times market practice, the Group Remuneration and sufficient time is allowed for appropriate Passionate about customers Empowered to deliver Committee is currently content with consideration and debate. We offer unrivalled high We trust our colleagues the contribution rates for all Executive standards of customer to make decisions Other Information Section Five Directors. This will be monitored as part The Board sets annual objectives for each relationships and care of the Committee’s review of market year in addition to setting the Group’s developments. strategic direction. These are implemented through approval and regular assessment Ethical and trusted Innovative in our thinking of the business plan and strategy process. We can be trusted We are bold, pro-active to do the right thing and creative, always improving

* Committees of the Company also perform the same Committee functions for Ecclesiastical Insurance Group plc, the Company’s immediate parent undertaking. About Us About One Section

Section Three Governance – Corporate Governance 108 Ecclesiastical Annual Report & Accounts 2019 109 Strategic Report Section Two

Board activity Stakeholder engagement expectations of the Group, strategy for the • a variety of communication channels including During 2019, the Board made decisions development of business and the grant from intranet, all staff emails (including weekly on the following business issues and routine The Board recognises the importance of the Group. news, results, achievements and changes), matters: engaging with stakeholders, understanding their briefings, conferences and publishing of views and interests in order to be successful This ensures that the views of Allchurches financial reports and feedback and discussion Strategic matters over the long term. Dialogue with stakeholders Trust Limited are communicated to the Board is adopted (including to make employees can help the Board to understand significant Group Chief Executive’s Reports as a whole, which enables Allchurches Trust aware of financial and economic factors changes in the landscape, predict future Limited to effectively communicate its views affecting the performance of the company); Group Chief Financial Officer’s Report developments and trends, and re-align strategy. Financial performance and statements and expectations to the Board. In turn, the • an engagement survey (MySay survey) Common Directors are able to support the is conducted twice a year across all Charitable donations and gift aid The Board has identified its stakeholders directors of Allchurches Trust Limited to companies and territories in the Group. Performance, strategic and business plans and associated engagement mechanisms. understand the performance and strategic The survey allows the tracking of for the Group Employees, customers, shareholders, issues faced by the Company. engagement and provides employee views Governance Section Three Views from the Shareholder suppliers, reinsurers, external auditors, on a range of matters affecting them. Broker Acquisition Strategy regulators, credit rating agencies, banks and A conflict of interest policy which sets out The results are reviewed at both Board Ansvar Australia Update other creditors, trade unions and community how actual and perceived conflicts of interest and Group level and are cascaded to groups have been identified as current between the two companies are managed is individual teams. Managers discuss local Routine matters stakeholders. Further information is provided in place. results with employees and create action in the Corporate Responsibility Report. Board’s annual objectives plans to respond to concerns; Risk management, appetite, and registers As was done in August and November • whistleblowing policy and procedures; Shareholder engagement 2019, when determining if it is appropriate to • direct engagement and consultation Dividends Ecclesiastical Insurance Group plc owns make a distribution in the form of a grant to through employee representative forums Setting and reviewing budgets the entire issued Ordinary share capital the company’s ultimate parent undertaking, including the Group’s recognised Union Committee reports and recommendations of Ecclesiastical Insurance Office plc. Allchurches Trust Limited, the Board considers and informal Employee Working Groups Directors’ Conflicts of Interests The directors of the Boards of both companies advice from the Group Chief Financial Officer. (such as ‘The Explainers’ and ‘The Office are identical. Ecclesiastical Insurance Group A key area for the Board’s deliberation is the Life Network’) is encouraged; Operational matters plc in turn is wholly owned by Allchurches company’s capital position and the affordability • ‘Town Hall’ meetings are hosted by senior Internal Model Trust Limited with whom the Board has an of the grant based on a range of stressed management where employees can ask Financial StatementsFinancial Four Section Group reinsurance arrangement open and constructive relationship. circumstances as well as the views of the questions and provide feedback; Health and Safety Chairman of Allchurches Trust Limited. • a performance-related bonus scheme is Protocols for the exchange of information Employee engagement operated, which directly links individual between Allchurches Trust Limited and Employee engagement objectives and business performance to Directors and Officers Liability Insurance Ecclesiastical Insurance Group plc and its The Board recognises employees as the encourage employees to participate in the Group Technical Provisions subsidiaries (including Ecclesiastical Insurance Group’s biggest asset given their specialist overall financial success of the Group; and GI Claims Reserves Adequacy Office plc) are in place and cover performance, skills and knowledge and propensity to • a range of training, development and operations and financial position. There is at go above and beyond. Members of the volunteering activities are available to Projects and other matters least one “Common Director” (i.e. a Director who management team and subject matter employees, including technical courses, Directors’ travel and expenses policy is a member of the Boards of Allchurches Trust experts are invited to Board and Committee mentoring, coaching and community Project Horizon (UK and Irish GI IT and Limited, Ecclesiastical Insurance Group plc and meetings to present on items and input into opportunities. transformation programme) Ecclesiastical Insurance Office plc) who discussion. Directors also visit subsidiaries IICSA is expected to attend every Board Meeting. and other SBUs and Project teams to gain Customer engagement Tim Carroll and Chris Moulder (until the former’s a good understanding of employees’ views. Customers are the lifeblood of the Group. Governance and regulatory matters resignation from the Company on 31 December In order to engage, involve and inform The Board considers that customers should Board and Committee composition and delegation 2019) were appointed as “Common Directors”. employees, the following methods are used: be at the heart of everything we do, ensuring Other Information Section Five The Common Directors present a summary • Caroline Taylor was appointed as the any actions or decisions demonstrate our Board Diversity Policy of highlights from Allchurches Trust Limited designated Non-Executive Director for passion for customers and make us first Capital requirements, solvency position and ORSA Board meetings to the Directors. There is also employee engagement on 4 February 2020. choice for customers both today and in the Determining NEDs’ fees for recommendation engagement between respective Board and The designated Non-Executive Director future. During the year, the Board received at a general meeting Committee Chairmen and the Group Chief is briefed on employee survey results and updates on customer issues via the Group Audit Tender Executive Officer. Moreover regular dialogue feedback and reports relevant findings to Chief Executives’ Report and reports on takes place on Allchurches Trust Limited’s the Board; strategic initiatives. In addition, the Board About Us About One Section

Section Three Governance – Corporate Governance 110 Ecclesiastical Annual Report & Accounts 2019 111 Strategic Report Section Two

considered customers’ needs, knowledge For employee-led community investment, The responsibility for ensuring the It is the Board’s policy to record any and expectations as part of the development the Group ranks second in the UK². effectiveness of internal whistleblowing unresolved concerns about the running of of the next chapter for the Group and arrangements, including arrangements for the Company or any proposed action in the as part of Project Horizon (the GI IT and The Group is focused on long-term and protecting whistleblowers against detrimental Board minutes. During 2019, no director had Transformational Programme). strategic charitable giving by tackling treatment (on behalf of the Whistleblowing any such concerns. the shortage of heritage skills working Champion) has recently transferred to Group Regular meetings are held between with a number of partners including the HR; including ownership of the associated Division of responsibilities management and key customers to understand Prince’s Foundation. A key priority for the policy and guidance documents. The responsibilities of the Board, its their needs and perspectives. In addition, Group’s giving is to support young people’s Committees, Chairman, Group CEO and SID the Group has regular engagement with mental health and has been working with the During the year, Group Internal Audit are set out in writing and are available on the customers (including conducting listening oldest children’s charity, Coram. The Group’s undertook a review of whistleblowing Company’s website. exercises, surveys, holding focus or consultative businesses continue to support causes arrangements. The output from this work will groups, monitoring customer complaints and which are important to their customers be taken forward by Group HR. This includes The Chairman and the Governance Section Three satisfaction data) and key outcomes are shared and contribute to their local communities. developing reportable metrics, providing line Group Chief Executive with the Board. Our commitment to customers Employees are supported to give to managers with material to help recognise The roles of the Chairman and the Group and clients is further demonstrated by the causes they care about through MyGiving. potential instances of whistleblowing and Chief Executive are undertaken by separate tailored Customer Promises that have been This enables them to offer support with providing training to the whistleblowing individuals. The Chairman, David Henderson, developed for key SBUs. volunteering, small grants and fundraising contacts named in the policy to ensure is responsible for leadership of the Board. matching to create direct involvement and they can handle a whistleblowing incident The day-to-day management of the Supplier engagement help to drive charitable giving at a local level. correctly. business is undertaken by the Group Chief The importance of the role that suppliers Executive, Mark Hews, assisted by the Group play in ensuring a reliable service is delivered Regulators Conflicts of Interest Management Board. to customers is recognised by Directors. The Board recognises the importance of Consequently, the Group Risk Committee open and honest dialogue with regulators A Register of Directors’ Conflicts is Senior Independent Director oversees the Procurement, Purchasing and (including those in the UK, Australia, Canada maintained by the Group Company Secretary Chris Moulder was appointed as the Senior Outsourcing Policy and receives regular and the Republic of Ireland). It has discussed to monitor and manage any potential conflicts Independent Director (SID) on 14 January updates on the Group’s material outsourcing outcomes and the response to the PRA’s of interest. Training on the Companies Act 2020. The SID supports and acts as a contracts. Periodic Summary Meeting. In addition, 2006 has been given to all directors and sounding board for the Chairman and is StatementsFinancial Four Section the Board (via its Committees) has received directors are regularly reminded of their responsible for overseeing the governance In addition, Executive Directors hold regular regular updates on legal, regulatory and duties. Any conflicts are declared at the practices of the Company and leading the meetings with key suppliers to understand compliance matters. first Board meeting at which the director directors in their appraisal of the Chairman. their perspectives. becomes aware of a potential conflict and Along with the Chairman, the SID is the Whistleblowing then recorded in the Conflicts Register. The primary contact for the shareholder and they Community and environment Board considers all conflicts in line with the meet regularly with the shareholder to share Executive Directors have considered an initial The Board (via the Group Audit Committee) provisions set out in the Company’s Articles. and understand views. plan to address climate change requirements is responsible for reviewing the Group’s The directors are required to review their across the Group on a consolidated basis. whistleblowing procedures and receives interests recorded in the Conflicts Register Non-Executive Directors Moreover, recognising the importance of regular updates. on a biannual basis. Non-Executive Directors have a responsibility climate change, the Board agreed to add it as to uphold high standards of integrity and a separate risk to the Group Risk Register. The Group’s approach to whistleblowing is set In addition, the Board oversees the procedure probity including acting as both internal out in a Standard and Guidance Document for managing actual and potential conflicts and external ambassador of the Company. During the year, the Board has considered (which is available internally on the Group’s of interest in the trading relationship As part of their role as members of a unitary the payment of grants to Allchurches Trust intranet). The Chairman of the Group Audit with owned brokers (Lycetts and SEIB board, Non-Executive Directors should

Limited for charitable purposes. It also Committee is designated the Group’s / Lansdown) and the general insurance constructively challenge and help develop Other Information Section Five monitors outcomes from the Greater Good ‘Whistleblowing Champion’ having responsibility business. It is underpinned by the desire to proposals on strategy. Programme strategic initiative and is proud to ensure the independence, autonomy and put the customer interest at the forefront of that the Group continues to retain its leading effectiveness of the Group’s policies and their dealings and seek to deliver the best position as a corporate donor: Ecclesiastical procedures on whistleblowing including the customer outcome. is the UK’s fourth largest corporate donor procedures for protection of staff that raise and the only insurer in the top ten¹. concerns from detrimental treatment.

1 Directory for Social Change, the UK Guide to Corporate Giving 2018-19 2 GivX, community investment benchmark 2019 About Us About One Section

Section Three Governance – Corporate Governance 112 Ecclesiastical Annual Report & Accounts 2019 113 Strategic Report Section Two

Company Secretary Systems of internal control are designed Ecclesiastical Board of Directors The Company Secretary is responsible for to manage rather than eliminate the risk of compliance with board procedures, advising failure to achieve business objectives, and Group Finance and Group Nominations Group Risk Group Audit Group Remuneration the Board on all governance matters, can provide reasonable, but not absolute Investment Committee Committee Committee Committee Committee supporting the Chair and helping the Board assurance as to the prevention and detection and its Committees to function efficiently. of financial misstatements, errors, fraud or All Directors have access to the advice of violation of law or regulations. Board Committees Attendance at meetings the Company Secretary. The Group has five Board Committees which Directors are required to attend all Board By order of the Board are shown above. meetings and strategy days as well as Internal Controls Committee meetings where they are The Board is ultimately responsible for the Mrs. R. J. Hall Details of all the Board Committees are members. In 2019, the Board held five systems of risk management and internal Group Company Secretary contained within their respective reports that scheduled meetings, three ad hoc meetings control maintained by the Group and reviews 17 March 2020 Governance Section Three follow: the Group Finance and Investment and a strategy day. In addition, the Board their appropriateness and effectiveness Committee Report on page 114; the Group participated in regular training sessions. annually. The Board views the management Nominations Committee Report on page of risk as a key accountability and is the 116; the Group Risk Committee Report David Henderson met with the Non- responsibility of all management and believes on page 122; the Group Audit Committee Executive Directors without the Executive that, for the period in question, the Group has Report on page 124; and the Group Directors present on a number of occasions maintained an adequate and effective system Remuneration Report on page 134. throughout the year. of risk management and internal control that complies with the Code. Further details are set out in the Risk Management Report on page 62. Below is a record of the directors’ attendance for the Board meetings (including the strategy day) during 2019: The Group embeds risk management into its strategic and business planning activities Board attendance table whereby major risks that could affect the Executive Directors Director since Meetings eligible Meetings business in the short and long term are Financial StatementsFinancial Four Section to attend attended identified by the relevant management Mark Hews June 2009 9 9 together with an assessment of the S. Jacinta Whyte July 2013 9 8 effectiveness of the processes and controls Denise Cockrem September 2019 2 2 in place to manage and mitigate these risks.

Non-Executive Directors Director since Meetings eligible Meetings The Group’s internal control framework to attend attended is vital in setting the tone for the Group and in creating a high degree of control David Henderson (Chairman) April 2016 9 8¹ consciousness in all employees. Francois-Xavier Boisseau March 2019 7 6³ Tim Carroll April 2013 9 8¹ Andrew McIntyre April 2017 9 8¹ A Code of Conduct and a Code of Ethics are Chris Moulder September 2017 9 8¹ embedded into the culture of the Group and Caroline Taylor September 2014 9 7¹ is accessible to all staff via the intranet. Christine Wilson June 2012 9 2² Angus Winther March 2019 7 6¹ Assurance on the adequacy and

John Hylands (former Chairman) September 2007 2 2 effectiveness of internal control systems Other Information Section Five is obtained through management reviews, 1 It had been agreed in advance that only the quorum of the Board (namely two members) needed to attend a telephone control self-assessment and internal audits. Board Meeting considering custody arrangements. All members of the Board were given opportunity to provide feedback on the business of the meeting ahead of the call. 2 The Very Reverend Christine Wilson did not attend seven meetings due to taking a leave of absence from the Group for personal reasons from April 2019. 2 Mr Boisseau was unable to attend an ad hoc Board Meeting called at the last minute to consider the potential Ecclesiastical Insurance Group plc investment in the Lloyd and Whyte Group Limited. About Us About One Section

Section Three Governance – Group Finance and Investment Committee Report 114 Ecclesiastical Annual Report & Accounts 2019 115

Group Finance and Investment Committee Report Strategic Report Section Two

Chairman’s introduction Membership I am pleased to present this report, my first as Committee Chair, describing the work The members of the Group Finance and Investment Committee and their attendance during the undertaken by the Committee during the past year. I was appointed as Chair of the year are shown below: Committee on 1 January 2020, having been a member since April 2019. I take this Committee member Member since Meetings eligible to attend Meetings attended*

opportunity to thank Tim Carroll, who stepped down from the Committee on 31 December Tim Carroll (Chairman)** August 2013 7 7 2019, for his Chairmanship since 2014. Mark Hews stepped down from the Committee Caroline Taylor March 2016 7 7 David Henderson June 2016 7 7 on 27 November 2019 and we are grateful for his contribution. Mark Hews*** August 2018 7 6 Angus Winther**** April 2019 5 4

* Mark Hews and Angus Winther were unable to attend a meeting called at short notice Governance Section Three ** Tim Carroll was the Chair and a member of the Committee until 31 December 2019 *** Mark Hews was a member of the Committee until 27 November 2019 **** Angus Winther was appointed to the Committee on 3 April 2019 and was appointed Chair on 1 January 2020

Committee meetings The Committee also reviewed a major investment proposal for Ecclesiastical The Committee comprised the directors Insurance Group plc, which was subsequently shown in the table above who were agreed by the Board. appointed by the Board.

The Committee considered the outlook for StatementsFinancial Four Section The Committee held four scheduled and the financial markets and in particular the three ad hoc meetings during the year. likely impact of the UK’s withdrawal from the European Union on the Group’s investment The Committee’s key responsibility is to portfolio. Together with the Group Risk ensure that, within designated financial limits, Committee, the Committee also oversaw a the management of the Group’s financial review of the Group’s Authorities Framework. assets, including its investment portfolio, is The Committee also reviewed its Terms of properly governed, controlled and performing Reference and made recommendations as expected. The Committee also considers to the Board. In addition, the Committee and approves major financial decisions undertook a review of its own performance including acquisitions and disposals on and set objectives. behalf of the Board. By order of the Board During the year, the Committee reviewed the Group’s business plan investment Angus Winther assumptions; and the overall investment Other Information Section Five Chairman of the Group Finance strategy. The latter included consideration and Investment Committee of the ongoing use of equity derivatives; 17 March 2020 the approach and classification of listed infrastructure; concentration risk and the management of cash. About Us About One Section

Section Three Governance – Group Nominations Committee Report 116 Ecclesiastical Annual Report & Accounts 2019 117

Group Nominations Committee Report Strategic Report Section Two

Dear Stakeholder Committee Composition I am pleased to present to you the report of the work of the Group Nominations The members of the Group Nominations Committee and their attendance at meetings during Committee for 2019. I was appointed as Chair of the Committee on 14 January 2020 the year are shown below: having been a member of the Board since September 2017. Caroline Taylor and I were Committee member Member since Meetings eligible Meetings appointed as members of the Committee in November 2019. I would like to take the to attend attended opportunity to thank The Very Reverend Christine Wilson and David Henderson for their Chris Moulder1 November 2019 0 0 Christine Wilson2 March 2016 4 2 leadership of the Committee during 2019. John Hylands and Tim Carroll stepped down David Henderson January 2019 4 4 Caroline Taylor3 November 2019 0 0 from the Committee during the year and we are grateful for their contribution. John Hylands4 May 2013 2 2 5

Tim Carroll January 2019 4 4 Governance Section Three

1 Chris Moulder was appointed to the Committee on 27 November 2019. 2 The Very Reverend Christine Wilson did not attend two meetings due to taking a leave of absence from the Group for personal reasons from 18 April 2019. 3 Caroline Taylor was appointed to the Committee on 27 November 2019. 4 John Hylands was a member of the Committee until 19 March 2019. 5 Tim Carroll was a member of the Committee until 31 December 2019.

Meetings of the Committee Board diversity The Committee held three scheduled Ecclesiastical recognises the benefits of meetings in 2019 (in February, June and having a diverse Board. It is committed Financial StatementsFinancial Four Section October) which were attended by the to improving diversity on the Board in the Group Chief Executive and Group Company broadest sense and acknowledges that Secretary (2018: three meetings). In addition diversity both improves performance of the an ad hoc meeting was held in January to Board and strengthens the business. consider an update on NED recruitment. The Board’s objective, by 2020, was to Composition of the Board meet the targets set out in the ‘Hampton- Alexander Review’, being 33% of women and senior management on boards. As at 17 March 2020, the Board The Committee considered the composition of had appointed four female members in a the Board and its Committees, subsidiaries and current membership of 11, which meets senior management (including members of the the 2020 targets. The Board via the Group GMB, heads of SBUs and senior functions). Nominations Committee will consider the This included consideration of skills, knowledge, progression of women to key roles including and experience, length of tenure, independence Chair, Senior Independent Director and and diversity in the context of the Group’s Executive Directors as part of its regular Other Information Section Five long-term strategic priorities. review of succession planning. In addition, the Board has agreed to have regard to During the year, the Committee recommended the Parker Review by 2020 looking across that only independent NEDs should be the composition of the various Boards members of the Board Committees, of Directors that comprise the wider which was accepted by the Board. Ecclesiastical Group. This target has been met.

About Us About One Section

Section Three Governance – Group Nominations Committee Report 118 Ecclesiastical Annual Report & Accounts 2019 119 Strategic Report Section Two

Ecclesiastical aspires to having a Board Skills and experience Succession planning and recommended to the Group Nominations that is diverse and encourages external Committee. After consideration, the Group

search firms to identify and present on the Board The Committee considered the Group’s Board Nominations Committee recommended the candidates from all backgrounds, and The skills and experience of Board members and Leadership succession plan to ensure appointment of the two candidates to the with diverse skills and personal qualities. is provided on page 96. that a rigorous and phased approach is Board and Mr Boisseau and Mr Winther were As demonstrated in the Board Diversity adopted, taking into account the challenges appointed as Non-Executive Directors at the and opportunities facing the Group. table, the Company has a balanced and Independence and time conclusion of the Board Meeting held on diverse Board. All Board appointments are 19 March 2019. made on merit, in the context of the overall commitment In respect of each leadership role, emergency, short-term and long-term requirements for Board diversity in terms The Board believes that all the NEDs were Neil Maidment succession plans are considered and of the skills, experience, background, age, independent throughout 2019. Independence Following his retirement as an Executive challenged to ensure that appropriate skills disability, gender and ethnic diversity is reviewed as part of each director’s annual Director from Beazley plc Neil Maidment was

are in place to support the Group’s short Governance Section Three required for the Board to be effective. appraisal, considered by the Committee, recommended to the Company as a potential and long-term strategy and ensure a diverse and agreed by the Board annually. In 2019, candidate to succeed Mr Carroll. An extensive pipeline of talent is in place. The Board will take the opportunity, one NED, John Hylands, served for more interview process was undertaken with the as and when appropriate, to further improve than nine years on the Board and retired Board. Neil Maidment was appointed to the diversity in the wider sense and from all in March 2019 and Christine Wilson has Appointments to the Board Board on 6 January 2020. backgrounds as part of its Board recruitment served for more than six years and will retire Chairman practice. The Board has also committed to in June 2020. In addition, two directors, Common Directors, Chris Moulder John Hylands resigned as Chairman on meeting the targets set out in the ‘Hampton- Tim Carroll and Chris Moulder were directors A joint Company and Allchurches Trust 19 March 2019. David Henderson was Alexander Review’ being to extend the 33% of Allchurches Trust Limited. The Committee Limited Nominations Committee Meeting appointed Chairman on the same date. women on boards target to leadership teams has considered the circumstances and is held on an annual basis, amongst other He was independent on appointment as in the FTSE 250 by 2020. Given various relationships of all NEDs and, following things to consider the appointment of Chairman. An explanation on the associated changes planned to the Board in 2020, rigorous review, the Committee confirmed common directors. appointment process is provided in the 2018 it is recognised that female representation to the Board that all NEDs remained Annual Report and Accounts on page 109. on the Board will decrease in the short term. independent in character and judgement. Group Chief Financial Officer, The Committee will actively seek to address No individual participated in the discussions Denise Cockrem Senior Independent Director,

this matter during the course of 2020. relating to their own independence. Ian Campbell resigned as Chief Financial StatementsFinancial Four Section At 17 March 2020, female representation Chris Moulder Officer in August 2018. Denise Cockrem on the Group Management Board stands The Committee evaluates the time NEDs During the year, the Board agreed that joined the Group as Group Chief Financial at 43%. spend on the Company’s business annually Mr Chris Moulder would be appointed Senior Officer and was appointed as an Executive and is satisfied that, in 2019, the NEDs Independent Director to succeed Dean Wilson. Director on 6 September 2019. The Company was a founding signatory continued to be effective and fulfilled their Non-Executive Directors to the Women in Finance Charter and has time commitment as stated in their letters of Francois-Xavier Boisseau Induction and training appointed Denise Cockrem, as a Senior appointment. Executive responsible for diversity. During and Angus Winther. All new directors undertake a formal, the year, the Company reported publicly on External directorships are considered to An Appointments Panel comprising Christine comprehensive and tailored induction to the progress made against the initiative. Further be valuable in terms of broadening the Wilson, Tim Carroll, David Henderson and Group upon joining the Board. This includes information is provided in the Corporate experience and knowledge of Executive Mark Hews was formed to commence the sessions with the Group Company Secretary, Responsibility Report. Directors, provided there is no actual recruitment of two additional Non-Executive Group Compliance, Group Finance, Group or potential conflict of interest, and the Directors, one from an insurance and Risk, Actuarial, Group Strategy, Human Further information on diversity is provided commitment required is not excessive. All broking background and the other from an Resources and heads of the Group’s trading on page 82. appointments are subject to approval by the investment or corporate finance background. businesses. New directors also meet Board, and the Conflicts Register maintained Spencer Stuart & Associates Ltd (which individually with the Chairman of Allchurches Other Information Section Five by the Group Company Secretary is used had no other connection to the Group and Trust Limited, the Group Chairman, the Directors’ length of service to monitor external interests. Any monetary which is a signatory to the Voluntary Code Senior Independent Director, and each of the The Committee monitors the length of payments received by Executive Directors of Conduct on gender diversity and best Executive Directors. This is to ensure they tenure of all directors as shown in the table from outside directorships are paid over to practice) assisted the Appointments understand the significant risks, strategic and on page 99. and retained by the Group. Panel with the recruitment. Following an commercial issues affecting the Group and external search and a series of interviews, the markets in which it operates as well as two preferred candidates were identified their duties and responsibilities as a director. About Us About One Section

Section Three Governance – Group Nominations Committee Report 120 Ecclesiastical Annual Report & Accounts 2019 121 Strategic Report Section Two

The Group Company Secretary maintains A desk-based review was undertaken annual CPD records for all directors, which including consideration of the Group’s the Chairman reviews as part of their annual Governance Framework and Board and appraisal. Training and development needs Committee packs. In addition, questionnaires of Board members are also reviewed by the were completed by directors and one-to-one ‘Ecclesiastical recognises Committee. In 2019 a number of training interviews held. Grant Thornton also attended sessions took place and covered the 2018 Board and Committee Meetings in Q1 2020 the benefits of having UK Corporate Governance Code (by Ernst to enable them to evaluate the Board’s & Young), Investment Training – Actions in processes and behaviours. a volatile market (by the Actuarial Function a diverse Board. It is Director), Group Catastrophe (by the Claims All directors receive an annual appraisal from Director) Management and Innovation the Chairman. The Chairman is appraised by in Insurance (by the Head of Business the Board, in his absence, led by the Senior committed to improving Governance Section Three Improvement and Innovation). In 2020 Independent Director. sessions have been planned on the Internal Model (by the Group Chief Actuary) and By order of the Board diversity on the Board Safeguarding (by the Claims Director). Chris Moulder in the broadest sense Board evaluation Chairman of the Group Nominations Committee It is the Board’s policy for its evaluations to 17 March 2020 be facilitated every two years. and acknowledges that The Committee led an external evaluation diversity both improves of the Board and Committees, assisted by the Company Secretariat. An external board evaluation provider, Grant Thornton (which performance of the acts as our co-source provider for internal audit on UK and Canada and has no other StatementsFinancial Four Section connection with the Group), conducted this Board and strengthens evaluation. The outcome of the evaluation will be considered by the Board at their meeting on 17 March 2020. The Committee the business.’ will monitor the implementation of all recommendations arising from the review. Other Information Section Five About Us About One Section

Section Three Governance – Group Risk Committee Report 122 Ecclesiastical Annual Report & Accounts 2019 123

Membership The members of the Group Risk Committee and their attendance at meetings during the year are shown below:

Committee member Member since Meetings eligible Meetings Group Risk to attend attended Chris Moulder (Chairman) September 2017 5 5 S. Jacinta Whyte* February 2014 5 5 Strategic Report Section Two Committee Report Tim Carroll** August 2013 5 5 Andrew McIntyre August 2017 5 5 Francois-Xavier Boisseau*** April 2019 4 4

Chairman’s introduction * Jacinta Whyte stepped down from the Committee on 27 November 2019 I am pleased to present this report, describing the work undertaken by the Group Risk Committee ** Tim Carroll stepped down from the Committee on 31 December 2019 *** Francois-Xavier Boisseau was appointed to the Committee on 3 April 2019 during the past year. The Group has voluntarily chosen to include a Group Risk Committee Report in addition to the disclosures in the Risk Management Report and Principal Risks sections Committee meetings to define those appetites which are reserved for the Board and delegate the starting on page 62. Francois-Xavier Boisseau was appointed as a member of the Committee The Group Risk Committee comprised the in April 2019. We also welcome Neil Maidment, who joined as a member of the Committee on remainder to the Group Management Board directors shown in the table above who were (including allowing the Group Management 2 March 2020. Jacinta Whyte and Tim Carroll stepped down from the Committee in November appointed by the Board. Board to directly own some of the less material measures). This work concluded in and December 2019, respectively. John Schofield was appointed Group Compliance Director in The Committee held five meetings during November, culminating in a recommendation the year, which were attended by the Group December 2019 following John Titchener’s retirement. Debra Weekes has resigned as Group to the Board, which was approved. Chief Risk Officer and will leave the business in July 2020. The process to recruit her successor Chairman, Group Chief Risk Officer, Group Governance Section Three Chief Financial Officer, Group Chief Actuary Additionally, during the year, the Committee is underway and the Group Head of Risk will act as Chief Risk Officer in the interim if required. and Group Compliance Director. has overseen the ongoing development of the Group’s data management model; the Own The Committee’s key responsibility is to assist Risk and Solvency Assessment and Control the Board in monitoring the appropriateness Risk Self-Assessment processes; and effectiveness of the Group’s risk strategy, and monitored material outsourcing risks. appetite and profile; and risk management The Committee has received regular reports culture and framework. In addition, the on compliance monitoring and breaches, Committee oversees the material risks of the fraud and financial crime, business continuity, Group. The Committee is also responsible for cyber security, information security and the reviewing Group capital management and Money Laundering Reporting Officer’s Report. Internal Model scope, governance and validation.

The Group’s principal risks and uncertainties Together with the Group Finance and are set out on pages 68 to 75. The Investment Committee, the Committee Committee has reviewed these in detail also oversaw a review of the Group’s StatementsFinancial Four Section and is comfortable that the business has Authorities Framework. The Committee also addressed them appropriately within its reviewed its Terms of Reference and made ongoing operating model and identification recommendations to the Board. In addition, of strategic priorities. the Committee undertook a review of its own performance and set objectives. A focus of the Committee’s work this year has been to ensure transition of the Internal Model The Group Chief Risk Officer reports to the post-regulatory approval. This has included Committee and has direct access to the monitoring the ongoing development, Committee Chairman and the Non-Executive governance, methodology and calibration of Directors. The Committee ensures that it the Internal Model; overseeing the validation meets with the Group Chief Risk Officer at cycle; agreeing Management Actions and least annually without management present. reviewing the Profit and Loss Attribution. The Committee also oversaw the successful The Director of Group Compliance also application of a major model change in the reports to the Committee regularly and meets year. Finally, the Committee continues to review with the Committee at least once a year Other Information Section Five the Group’s ongoing capital and solvency without management present. requirements and other key Model uses. By order of the Board Another key focus for the Committee in 2019 was to oversee a review of the Board’s Chris Moulder risk appetite. This has included reviewing the Chairman of the Group Risk Committee Group Chief Risk Officer’s recommendations 17 March 2020 About Us About One Section

Section Three Governance – Group Audit Committee Report 124 Ecclesiastical Annual Report & Accounts 2019 125

Group Audit Committee Report Strategic Report Section Two

Chairman’s overview Francois-Xavier Boisseau joined the has maintained a robust risk management Committee in April 2019. We also welcome and internal controls culture, supported by I am pleased to be able to report on the Group Audit Committee’s safeguarding of the Neil Maidment, who joined as a member of strong overall governance processes. interests of Ecclesiastical for the benefit of its shareholder. The Committee plays a crucial the Committee on 2 March 2020. Tim Carroll stepped down at the end of 2019 after serving In 2019 we completed a rigorous external role in oversight and scrutiny of the Group’s financial reporting, internal and external audit on the Committee since April 2013. Members auditor tender process. This resulted in the arrangements, internal control environment and risk management. of the Committee were delighted that Tim selection of PricewaterhouseCoopers LLP Carroll has taken up the position of Chairman (PwC) who will be the Group’s statutory auditor at our ultimate parent company and charity, for the year ending 31 December 2020. Allchurches Trust Limited. Dan O’Loughlin was The Committee has overseen the start of confirmed as the Group’s Chief Internal Auditor preparations for the auditor transition and look in June 2019, having been appointed on an forward to working with PwC. I would like to acting basis in January 2019. thank Deloitte LLP for the audit service they Governance Section Three have provided the Group with over the past The Committee has considered the processes 22 years. underpinning the production and approval of this year’s Annual Report & Accounts. During 2019, we have overseen the successful The significant accounting and reporting issues implementation of the new leases accounting considered in detail by the Committee are set standard, IFRS 16 and preparation is underway out on pages 130 to 131. for the new insurance contracts standard, IFRS 17. The Committee seeks to ensure that the identification and management of significant Andrew McIntyre risks is embedded across all areas of the Chairman of the Group Audit Committee business, with continued and effective oversight from the Group Management Board (GMB). We remain satisfied that the business Financial StatementsFinancial Four Section

Members of the Committee Committee members 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. Further information about the experience of each member of the Committee can be found on page 96. 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 nine meetings held during the year are shown below. Francois-Xavier Boisseau, Tim Carroll and Chris Moulder were unable to attend one or more unscheduled meetings called at short notice.

Committee member Member since Meetings eligible Meetings to attend attended Other Information Section Five Andrew McIntyre (Chairman) April 2017 9 9 Francois-Xavier Boisseau March 2019 7 5 Tim Carroll* April 2013 9 8 Chris Moulder September 2017 9 8 Caroline Taylor February 2018 9 9

* Tim Carroll was a member of the Committee until 31 December 2019 ** Caroline Taylor stepped down from the Committee on 27 November 2019.

About Us About One Section

Section Three Governance – Group Audit Committee Report 126 Ecclesiastical Annual Report & Accounts 2019 127 Strategic Report Section Two

Committee meetings Auditor appointment, their knowledge of the business and operating Firms were evaluated using the following environment, discussions with management selection criteria: In addition to the members of the Committee, independence and and the half-year review. The fee for the audit - Audit firm and auditor independence the Chairman of the Board, the Group Chief non-audit services is also proposed as part of this discussion. Executive, the Group Chief Financial Officer, including the firm’s practices that would the Deputy Group Chief Executive and the The Committee has primary responsibility ensure compliance with independence for overseeing the relationship with, and For the year ended 31 December 2019, the requirements and freedom from any Group Chief Internal Auditor attend meetings Group was charged £676,000 (ex VAT) by by invitation. Other relevant people from the performance of, the external auditor. conflicts of interest. This includes making the recommendation Deloitte for audit services. The fees for other business are invited to attend certain meetings assurance services required by legislation - Strength of the audit team, including in order to provide insight into key issues and on the appointment, reappointment and relevant industry experience and removal of the external auditor, assessing their and/or regulation amounted to £164,000, developments. The Group’s external auditor is making total fees from Deloitte of £840,000. working style of the lead partner, invited to attend meetings and, during 2019, independence on an ongoing basis and for actuarial partner and senior members agreeing the audit fee. attended all six scheduled meetings. There were no other non-audit services of the audit team. Governance Section Three provided by Deloitte during the year. More - Technical criteria, including the proposed During the year, the Committee met privately Deloitte were initially appointed as the detail can be found in note 12 to the financial audit approach, including transition, and use with the Group Chief Internal Auditor and the Group’s external auditor in 1998 and were statements on page 213. of tools in the audit. Group’s external auditors without management re-appointed in 2015 following a formal present. The Committee reviews its terms of tender process. The external audit has been - Track record of audit quality, including reference, its performance and activities over led by the Deloitte senior statutory auditor Audit tender reviews and findings from the Financial the previous year as part of an annual cycle Paul Stephenson for five years. The Company Reporting Council’s Audit Quality Reviews. Last year’s Committee report referred to to confirm that its activities were in line with confirms that it complied with the provisions of a decision to commence an audit tender - Ability to provide insight and challenge. its remit. the Competition and Markets Authority’s Order for the financial year under review. process in 2019 to take effect for the - Cultural fit, including whether the firm’s financial year ending 31 December 2020. The Committee’s key responsibilities include: value and ethics are consistent with The tender was completed in 2019 • monitoring the integrity of the financial Both the Board and the external auditor have Ecclesiastical’s. and resulted in the proposal, subject to statements; safeguards in place to protect the independence shareholder approval at the 2020 AGM, to - Audit fees that provide value for money • challenging the Group’s financial reporting, and and objectivity of the external auditor. appoint PricewaterhouseCoopers LLP (PwC) without compromising audit quality. reporting upon anything that it is not satisfied

The Committee is responsible for the as external auditor. StatementsFinancial Four Section with; development, implementation and monitoring There were several stages in the audit • reviewing regulatory reports; of the Group’s policy on the provision of non- The scope of the tender consisted of tender process. First, an assessment of • reviewing tax strategy and policies; audit services by the external auditor. Ecclesiastical Insurance Office plc, its the audit market was made to identify firms • reviewing the Committee’s effectiveness The policy is reviewed annually by the immediate parent Ecclesiastical Insurance to be invited to tender, which resulted in annually; Committee. The purpose of the policy is to Group plc, along with statutory audits of expressions of interest being sought from • reviewing the Group’s whistleblowing safeguard the independence and objectivity subsidiaries of Ecclesiastical Insurance Group six firms. Shortlisted firms were invited arrangements; of the external auditor and to comply with the plc. The scope excluded dormant companies to put forward proposals to provide audit • reviewing the Group’s audit arrangements, ethical standards of the Financial Reporting and those exempt from statutory audit. services. A data room was opened for both externally and internally; and Council (FRC). firms to receive information and responses • reviewing the effectiveness of the Group’s The purpose of the audit tender was to select to questions. Firms were invited to meet systems of internal controls and the risk The Committee oversees the plans for the the most appropriate auditor in terms of with Ecclesiastical’s key business leaders, management. external audit to ensure it is comprehensive, audit quality and value. The Committee had including the Group Chief Executive Officer, risk based and cost effective. Deloitte drafted ultimate authority over the competitive tender Deputy Group Chief Executive Officer, A summary of the main activities of the their audit plan for the 2019 audit and process and the evaluation of firms, and for Group Chief Financial Officer and Group Committee during the year is set out below: presented it for review by the Committee at making the recommendation for appointment Chief Risk Officer. Firms were also given

its November meeting. The plan described the to the Board. To ensure a transparent and the opportunity to meet with Committee Other Information Section Five proposed scope of the work and the approach robust selection process, the Committee members and certain members of to be taken, and also proposed the materiality was responsible for overseeing the design management who work with the levels to be used which are described on page and execution of the tender and selecting Group’s auditors. 169. In order to focus the audit work on the the evaluation criteria. The Committee was right areas, the auditors identify particular risk supported by the Group Chief Financial Officer Firms were asked to respond to and provide issues based on various factors, including and members of Group Finance team. views on some topical and technical areas About Us About One Section

Section Three Governance – Group Audit Committee Report 128 Ecclesiastical Annual Report & Accounts 2019 129 Strategic Report Section Two

to allow them to demonstrate their technical the Committee recommended to the Board In respect of these annual financial capability relevant to the Ecclesiastical that Deloitte be re-appointed under the statements, the Committee paid particular audit. Written proposals were then received current external audit contract as auditor attention to the significant judgements and firms gave final oral presentations of for the 2019 financial year. set out below, the going concern and their proposal to certain members of the viability statements, review of the corporate Committee, including the Group Chief Examination governance disclosures and monitoring of Financial Officer and key members of of acquisition activity the external audit process. management in attendance. The Committee is also constituted as a The Committee reviewed and challenged the The Committee evaluated the performance committee of the Company’s immediate Group’s annual regulatory submissions under of firms across the entire tender process and parent Ecclesiastical Insurance Group plc Solvency II in the second quarter of the year. concluded that each shortlisted firm had the and provides the same functions. During the The Committee focused on the reporting experience and competencies required to year, the Company, Ecclesiastical Insurance requirements of the publicly filed SFCR and Governance Section Three carry out an effective audit. The Committee Group plc, acquired a non-controlling equity QRTs and privately filed RSR Annual Update. recommended a preference for PwC due to interest in the specialist insurance broker their demonstration of actuarial expertise Lloyd & Whyte. The Committee considered The significant areas of focus considered and depth of knowledge of the business and examined various matters in relation by the Committee in relation to the 2019 and industry the Group operates in. This to this transaction including the expected accounts, and how these were addressed, recommendation made to the Board resulted earnings contribution, application of IFRS are outlined below. These were discussed in a resolution by the Board to recommend control principles and financial reporting and agreed with management during the PwC to shareholders at the 2020 AGM. impacts further acquisition steps are course of the year, and also discussed with expected to have. Deloitte at both the half year and year end. The Committee and the Group’s Finance The nature of these issues and how they are teams have been and will be working closely Appropriateness of mitigated is explained in more detail in the with Deloitte and PwC during the 2020 the Group’s external Risk Management Report on page 62, and also note 2 to the financial statements on financial year to ensure an efficient and financial reporting orderly transition of the external audit. page 191.

The primary role of the Committee in relation StatementsFinancial Four Section to financial reporting is to review, challenge External audit effectiveness and agree the appropriateness of the half- The Committee assesses the effectiveness year and annual financial statements and of the external auditor annually against a annual regulatory reporting under Solvency II, number of criteria including, but not limited concentrating on, amongst other matters: to, accessibility and knowledgeability of audit • the quality and acceptability of the Group’s team members, the efficiency of the audit accounting policies and practices; process including the effectiveness of the • the clarity of the disclosures and audit plan, and the quality of improvements compliance with financial and regulatory recommended. reporting standards, and relevant financial and governance reporting requirements; The Committee reviewed a report based • material areas in which significant on questionnaires completed by senior judgements have been made by the Group management, business unit leaders and or there has been discussion with the those members of staff most involved in external auditor; the external audit process. The Committee • whether the Group’s Annual Report and Other Information Section Five recognised the strengths of the external Accounts, taken as a whole, are fair, auditor and provided challenge to the auditor balanced and understandable and provide for areas that could be improved. the information necessary for shareholders The process demonstrated to the Committee to assess the Group’s position and that the external auditor continued to perform performance, business model and strategy; independently, effectively and to provide • any correspondence from regulators in robust challenge. Following the review, relation to financial reporting. About Us About One Section

Section Three Governance – Group Audit Committee Report 130 Ecclesiastical Annual Report & Accounts 2019 131 Strategic Report Section Two

Matter considered Action Matter considered Action

General insurance The Committee considered detailed reports provided by the Group’s Reserving Actuary Carrying value The Committee received detailed reporting from management and challenged the appropriateness reserves on the adequacy of the Group’s general insurance reserves at both the half year and the of goodwill of the assumptions made, including: full year and discussed and challenged management across a wide range of assumptions The estimation of the liability and key judgements. This is an area of focus for • the consistent application of management’s methodology; arising from claims under the Committee given the • the achievability of the business plans; general business insurance This is a major area of audit focus and Deloitte also provided detailed reporting on these matters materiality of the Group’s • assumptions in relation to long-term growth in the businesses at the end of the plan period; and contracts is a critical to the Committee. goodwill balances (£23m as • discount rates. accounting estimate. at 31 December 2019) and There is uncertainty as to The Committee considered in detail the favourable development of prior years’ reserves for the the inherent subjectivity in The Committee paid particular attention to the business plans and management’s proposed cash the total number of claims liability accounts and acknowledged the key drivers to be favourable experience on larger claims impairment testing. flows attributable to each Cash Generating Unit (CGU), and the determination of the discount rate on each class of business, than expected. Taking into account the Group Reserving Actuary’s assessment of the sufficiency used in the calculation. Detailed support for these assumptions was provided by management. Governance Section Three the amounts that such claims of these reserves, the Committee challenged management on whether the proposed releases were The judgements in relation to will be settled for and the reasonable and that the reserves remained appropriately prudent. goodwill impairment continue The Committee considered the proposal and provided robust challenge to the assumptions, timings of any payments. to relate primarily to the notably the evidence to support the discount rate and the appropriateness of the future cashflow The Committee continues to maintain a focus on the longer-term reserves relating to asbestos and assumptions underlying the assumptions. PSA claims and reviewed actual claims experience against expectations throughout the year. calculation of the value in use The Committee noted and supported management’s decision to continue to hold an additional of the business, being the After its reviews, the Committee concluded that the assumptions were reasonable. margin in respect of future PSA claims as the IICSA investigations develop. achievability of the business plans and the macroeconomic Goodwill is disclosed in note 17 to the financial statements. Following all of our reviews and discussions, the Committee’s opinion was that the reserving process and related modelling and outcomes were robust and well managed and that the overall reserves set were reasonable as assumptions underlying the disclosed in notes 9 and 28 to the financial statements. valuation process.

Life insurance reserves The Committee considered a report from the Chief Actuary of Ecclesiastical Life Limited (‘ELL’) Valuation of defined During 2019, the Committee received reports from management on the proposed approach to the (the Group’s life business) which set out recommendations for the basis and methodology to apply for: benefit pension valuation of the pension scheme. As the pension scheme is sensitive to changes in key assumptions, The calculation of the Group’s management completed an assessment as to the appropriateness of the assumptions used, taking StatementsFinancial Four Section life insurance reserves • the valuation of policy liabilities for inclusion in the report and accounts of ELL at 31 December scheme liability advice from independent actuarial experts and including where appropriate, benchmark data, and requires management to 2019, and Although the Group’s defined reported its findings to the Committee. Following this review, management concluded that in addition make significant judgements • the calculation of technical provisions in accordance with Solvency II regulations at 31 December benefit scheme is in surplus, to updating assumptions to reflect economic market conditions at 31 December 2019, the gap about bond yields, 2019. the liabilities of the scheme between CPI and RPI measures of inflation should be reduced to reflect the potential for changes to discount rates, credit risk, are material in comparison the RPI measure of inflation. mortality rates and current The Committee noted that no material changes in methodology were proposed, for either to the Group’s net assets expectations of future the accounts or Solvency II reporting basis, from those used for the valuations at 31 December and the valuation requires The Committee requested management update the assumption used for future improvements in expense levels. 2018. many actuarial assumptions, mortality annually. Following consideration, the Committee concluded that the assumptions proposed including judgements in were appropriate and in line with normal market practice. The Committee reviewed the work done by the Chief Actuary to assess whether the methodology relation to long-term interest remained appropriate, with a particular focus on mortality assumptions, interest and inflation rate rates, inflation, longevity and After careful consideration of the requirements of International Financial Reporting Interpretations assumptions. investment returns. Committee 14 (IFRIC 14), the Committee concluded that recognition of the full surplus in the Group’s main defined benefit scheme was appropriate. Following its review, and after consideration of Deloitte’s report, the Committee was satisfied that Judgement is applied in the assumptions proposed were appropriate and overall the judgements made in respect of the determining the extent to The impact of updating assumptions to reflect those in force at the balance sheet date on the valuation at 31 December 2019 are explained in note 19 to the financial statements on page 219. reserves were reasonable. The assumptions are disclosed in note 28(b) to the financial statements. which a surplus in the Group’s Other Information Section Five defined benefit scheme can be recognised as an asset. About Us About One Section

Section Three Governance – Group Audit Committee Report 132 Ecclesiastical Annual Report & Accounts 2019 133 Strategic Report Section Two Fair, balanced Oversight of the Group’s • transactions are recorded as required Where necessary, changes to the agreed to permit the preparation of financial plan are identified as a consequence of the and understandable systems of internal control statements; and Group’s changing risk profile. All proposed At the request of the Board, the Committee including the internal • the Group is able to report its financial changes to the agreed internal audit plan are has considered whether in its opinion, the audit function statements in compliance with IFRS. reviewed, challenged and approved by the 2019 Annual Report and Accounts were fair, Committee during the year. balanced and understandable and provided Assessment of internal controls Due to inherent limitations, internal control the information necessary for shareholders to The Group’s approach to internal control and over financial reporting may not prevent or Throughout the year, GIA submitted quarterly assess the Group’s position and performance, risk management is set out in the Corporate detect misstatements. Risk management and reports to the Committee summarising business model and strategy. The Committee Governance Report on page 106. control systems provide reasonable assurance findings from audit activity undertaken and has reviewed and provided feedback on early that the financial reporting does not contain the responses and action plans agreed with drafts of the Annual Report and Accounts, In reviewing the effectiveness of the system any material inaccuracies. Through its review management. During the year, the Committee highlighting any areas where further clarity of internal control and risk management of reports received from management, along monitored progress of the most significant was required in the final version. during 2019, the Committee has: with those from internal and external auditors, management action plans to ensure that • reviewed the findings and agreed the Committee did not identify any material these were completed in a timely manner Governance Section Three The Committee was provided with management actions arising from both weaknesses in internal controls over financial and to a satisfactory standard. comprehensive verification of all the external and internal audit reports issued reporting during the year. The financial information and facts in the Annual Report during the year; systems are deemed to have functioned Legal and regulatory and Accounts, and any statements of belief • monitored management’s responsiveness properly during the year under review, and were highlighted and considered separately to the findings and recommendations of the there are no current indications they will not developments by the Committee. When forming its opinion, Group Chief Internal Auditor; continue to do so in the forthcoming period. The Committee receives regular reports and the Committee reflected on information it • met with the Group Chief Internal Auditor considers the impact of legal and regulatory had received and its discussions throughout once during the year without management Group Internal Audit (GIA) developments on the UK Group to control the year as well as our own knowledge of being present to discuss any issues arising GIA is monitored by the Committee and legal and regulatory risk. It monitors the the business and its performance. A suitably from internal audits carried out; and provides independent, objective assurance application and impact of any actions required qualified employee of the Group, who does • considered a report prepared by the Group to the Board that the governance processes, by the business or organisation through to not work in a financial or actuarial area and is Chief Internal Auditor giving his assessment management of risk and systems of internal completion. Reports are shared with relevant not involved in the production of the Annual of the strength of the Group’s internal control are adequate and effective to mitigate business areas, and with relevant subsidiary Report and Accounts or financial results, controls based on internal audit activity the most significant risks to the Group. GIA Boards and Board Committees. reviewed a near-final draft and gave their during the year. operates a co-sourcing arrangement in the opinion on whether they consider it to be UK and Ireland where specialist resource is The year ahead StatementsFinancial Four Section fair, balanced and understandable. Guidance Internal control over financial reporting required to supplement existing resources. on what is meant by these statements and Internal control over financial reporting is In addition, GIA oversees and monitors the In 2020, the Committee will continue to aspects the employee might wish to consider a process designed to provide reasonable, outsourced internal audit arrangements in provide oversight of financial reporting and when forming an opinion was provided. but not absolute, assurance regarding the Australia and Canada. internal controls of the Group. A key area of reliability of management and financial focus for the Committee will be the effective The employee produced a written report reporting in accordance with generally The Committee has oversight responsibility transition of the incoming statutory auditor for the Committee which gave an overall accepted accounting principles. Controls over for GIA and is satisfied that GIA has the to ensure that PwC is able to make effective opinion on the Annual Report and Accounts financial reporting policies and procedures appropriate resources. In January 2019, the preparations to become Ecclesiastical’s auditor. and also set out their view of the strengths include controls to ensure that: Committee appointed Dan O’Loughlin as • through clearly defined role profiles and and any areas for development. Following Acting Group Chief Internal Auditor and, in The Committee remains committed to its vital financial mandates, there is effective a review, the Committee was of the opinion July 2019, his permanent appointment was role in overseeing the integrity of financial delegation of authority; that the 2019 Annual Report and Accounts confirmed. The Group Chief Internal Auditor reporting and effectiveness of controls. was representative of the year and was fair, • there is adequate segregation of duties in is accountable to the Committee Chairman balanced and understandable. respect of all financial transactions; and has access to the Chairman of the Board. • commitments and expenditure are By order of the Board appropriately authorised by management; GIA’s annual programme of work is risk Other Information Section Five • records are maintained which accurately based and designed to cover areas of Andrew McIntyre and fairly reflect transactions; higher risk or specific focus across the Group. Chairman of the Group Audit Committee • any unauthorised acquisition, use or disposal The plan is approved annually in advance 17 March 2020 of the Group’s assets that could have a by the Committee and is regularly reviewed material effect on the financial statements throughout the year to ensure that should be detected on a timely basis; it continues to reflect areas of higher priority. About Us About One Section

Section Three Governance – Group Remuneration Report 134 Ecclesiastical Annual Report & Accounts 2019 135

Group Remuneration Report Strategic Report Section Two

Group Remuneration Committee Chair’s statement 2019 performance and incentive Discretion outcomes To ensure that results have been achieved As Chair of the Group Remuneration Committee (the Committee), I am pleased to introduce As described in the Strategic Report starting within the Group’s risk appetite and to the Group Remuneration Report for 2019 and to highlight some of the key aspects of the on page 16, the Group has delivered another inform the Committee’s judgements in strong set of results, with a robust set of relation to any risk adjustment of awards, Committee’s work during the financial year. I was appointed as Chair of the Committee on underwriting results1 across the Group of the Committee, supported by the Group 21 June 2019, having been a member of the Committee since 2014. I would like to take £20.0m (2018: £29.4m) and GWP growth Chief Risk Officer (CRO), considered risk this opportunity to thank David Henderson for his leadership of the Committee during of 10.4% to £394.0m (2018: £357.0m). management outcomes across the Group Investment returns were particularly strong, as part of its deliberations. Following this 2018 and his ongoing support of the Committee’s work. This year, Angus Winther joined with an investment income in the year of review, the Committee did not consider risk the Committee in April 2019 and Chris Moulder stepped down from the Committee in £34.8m (2018: £35.3m) and fair value adjustment of the awards to be necessary. gains of £52.1m (2018: fair value losses The Committee further agreed that the bonus November 2019. I would also like to welcome Neil Maidment, who became a member of of £35.4m), resulting in pre-tax profits of and LTIP awards were a fair reflection of the Governance Section Three the Committee and of the Group Risk and Group Audit Committees on 2 March 2020. £73.3m (2018: £15.4m). overall performance achieved and, having considered all relevant factors, determined In considering the annual bonus outcomes that no discretionary adjustment of awards for Executive Directors, the Committee was necessary. reflected on the financial, strategic, customer and conduct performance of the Group, Base salary including the very strong performance Executive Directors’ salaries are reviewed against Group PBT and COR targets, and at the same time as other employees. the strong delivery against the Group’s After careful consideration, the Committee strategic change programme and customer decided that the base salaries of Executive and conduct targets. The Committee Directors would be increased by 2.5% additionally gave consideration to the Group's (effective 1 April 2020). contribution to the Independent Inquiry into Child Sexual Abuse, IICSA, as set out in the Key Committee activities during the year Chief Executive's report on page 24. Further

During the year, the Committee reviewed the StatementsFinancial Four Section details of performance against the targets Group’s Remuneration Policy and determined set for 2019 are disclosed on page 152 of that it remains effective and continues this report. In its assessment of individual to drive the sustained and long-term performance during the year, the Committee performance of the Group. The Committee recognised the excellent performance determined that the remuneration packages against Executive Directors’ personal of Executive Directors remain appropriately financial, strategic and wider objectives. aligned with the Group’s strategic objectives Annual bonus awards for 2019 are 96% and reflective of the experience and track of maximum for the Group Chief Executive, record of the Executive Directors and 96% for the Deputy Group Chief Executive comparative benchmarking. and 90% for the Group CFO reflecting the very strong performance of the Group during As announced in September 2019, Denise the year. In line with the Group’s deferral Cockrem, Group CFO, was appointed to policy, bonuses above 75% of the maximum the Board. The Committee gave careful are deferred for three years. consideration to the remuneration package

for the Group CFO, in line with the Group’s Other Information Section Five The long-term incentive plan (LTIP) granted Remuneration Policy. Her remuneration for in 2017 vested at 86%, reflecting the the period she served as a Director during Group’s very strong performance against the the year is included in this report. financial, strategic, customer and conduct targets over the 2017-2019 period.

1 Alternative performance measure, refer to note 36 to the financial statements for further explanation About Us About One Section

Section Three Governance – Group Remuneration Report 136 Ecclesiastical Annual Report & Accounts 2019 137 Strategic Report Section Two

2019 also saw a number of changes in nature this has contributed to our median Committee member Member since Meetings eligible Meetings within the wider leadership of the Group. gender pay gap reducing to 22.4% from to attend attended In relation to these changes, the Committee 25.0% in 2017. The Group continues to be considered the remuneration package for committed to promoting diversity and gender David Henderson1 September 2016 6 6 2 the Group Chief Actuary on his appointment balance at every level in the business and Caroline Taylor November 2014 6 6 The Very Reverend Christine Wilson3 February 2018 6 2 to the Group Management Board. ensuring that all employees have a fair and Chris Moulder4 June 2018 6 5 Also the packages for the Group Director equal pay opportunity appropriate to Angus Winther5 April 2019 4 3 of Broking and Advisory and Group Chief their role. Internal Auditor on their appointments. 1 David Henderson relinquished the chairmanship of the Committee with effect from 19 March 2019 on his appointment The Managing Director, UKGI announced 2019 saw the introduction of disclosures on as Group Chairman. his intention to retire in 2020 and the the pay ratio of the CEO to UK employees 2 Caroline Taylor was appointed Chairman of the Committee on 21 June 2019. Committee considered the remuneration for listed companies. While our Group 3 The Very Reverend Christine Wilson did not attend four meetings due to taking a leave of absence from the Group for personal reasons from April 2019. Dean Wilson had previously been a member of the Committee from April 2013 to Governance Section Three package for his successor, who joined the structure does not require us to comply with September 2016. Group in February 2020, as well as for the the regulations governing the disclosure 4 Chris Moulder was a member of the Committee until 27 November 2019. Mr Moulder was unable to attend one meeting newly appointed President of the Group’s of executive remuneration to which quoted during the year because of a prior commitment with another Board. Canadian business. The Committee also companies are subject, we have chosen 5 Angus Winther was appointed to the Committee on 3 April 2019. Mr Winther was unable to attend a meeting as it was considered the contractual entitlements to disclose the ratio of the Group Chief called at short notice. applicable to the Group Compliance Director Executive’s pay to that of other UK employees on his retirement and to the Group Brand in order to provide greater transparency and and Communications Director. further details are set out on page 155. Group Remuneration Advisers to the Committee During the year, the Committee received The Committee continued to oversee the Conclusion Committee external advice from Aon in relation to development and application of remuneration Finally, I value the continued support from our Purpose and membership the review of the Group’s Remuneration policy and incentive scheme design across charitable owner and ultimate shareholder The Committee is responsible for Policy; the determination of appropriate the wider Group, continuing to align reward Allchurches Trust Limited, and remain mindful recommending to the Board the Remuneration remuneration packages for Executive policies across all Group entities with the of our responsibilities to drive sustained and Policy for Executive Directors and for setting Directors, members of the GMB and heads Group’s strategic objectives and financial improved performance over the long term the remuneration packages for each Executive of Strategic Business Units and remuneration targets. The Committee also considered through our remuneration strategy, policy Director, members of the Group Management market trends and regulation. Aon also acts StatementsFinancial Four Section the changes arising from the 2018 UK and principles. Board (GMB), Material Risk Takers and heads in the capacity of Actuary to EIO Trustees Corporate Governance Code and Companies of Strategic Business Units. None of the Ltd in respect of the Group’s legacy defined (Miscellaneous Reporting) Regulations, Caroline Taylor Executive Directors were involved in discussions benefit pension scheme. The Committee further details of which are set out in Chair of the Group Remuneration Committee relating to their own remuneration. The also had access to benchmarking reports this report. 17 March 2020 Committee also has overarching responsibility from Willis Towers Watson and McLagan, for the Group-wide Remuneration Policy. each of which also provides data to support Fees for NEDs and the Chairman were the determination of pay and conditions reviewed by the Board and the Committee During 2019, the Committee held six throughout the Group. respectively during 2019, in line with meetings in total. The Group Remuneration its two-year review cycle. The increases Committee members and their attendance Fees paid to Aon during 2019 for (set out on page 159) reflect the demands at meetings during the year are set out in the professional advice to the Committee were and responsibilities of the NED roles and table above. All members are independent £48,722 (2018: £54,808). The Committee will ensure that the Group will continue to NEDs and have the necessary experience is satisfied that the advice received during be able to attract NEDs with the range of and expertise to meet the Committee’s 2019 from Aon was impartial, as Aon is a experience and skill levels required. responsibilities. There was cross membership signatory to the voluntary code of conduct of the Group Risk Committee and the of the Remuneration Consultants Group. Other Information Section Five The Group’s gender pay report for 2019 Committee to promote alignment of the showed a continuing downward trend in the Group’s Risks and Remuneration Policies Where appropriate, the Committee received Group’s gender pay gap. We are pleased and consideration of risk management and input from the Chairman Group Risk to see that the actions we have taken have outcomes in setting reward. Committee, Group Chief Executive, Group resulted in a higher proportion of women HR Director, CRO and Group Reward filling senior roles and that whilst many of the Director. Such input, however, never relates actions we have put in place are long term to their own remuneration. About Us About One Section

Section Three Governance – Group Remuneration Report 138 Ecclesiastical Annual Report & Accounts 2019 139 Strategic Report Section Two

Directors’ Remuneration Policy • Reward structures will achieve a balance • Proportionality – that the link between between short- and long-term incentives, individual remuneration outcomes and The Directors’ Remuneration Policy (the supporting the overall aim of the Group’s the delivery of the Group’s strategy and ‘Policy’) described in this part of the report is Remuneration Policy of promoting the long-term long-term performance is clear and that intended to apply for the year from January success of the Group. The balance between remuneration outcomes are proportionate to December 2020. The Policy is aligned to short- and long-term incentive pay is largely and do not reward poor performance delivery of the Group’s strategic objectives driven by role and seniority, with generally and establishes a set of principles which a greater contribution to reward provided • Alignment to culture – that remuneration underpin the Group’s reward structures for by long-term incentives for more senior arrangements drive behaviours consistent all Group employees: employees. with the Group’s purpose, values, culture and strategy, with remuneration outcomes • Reward structures will promote the delivery • Ecclesiastical is committed to ensuring that reflecting both what has been delivered

long-term sustainable returns Governance Section Three of . As such, all employees have a fair and equal pay and the way in which such deliveries the performance measures in the annual opportunity appropriate to their role. have been achieved. bonus and LTIP will reflect and support the Group’s underlying strategic goals and risk • The Group will strive to adhere to the The Committee reviews the Group’s appetite and are comprised of both financial highest standards of remuneration-related Remuneration Policy annually to ensure that it and non-financial targets. regulatory compliance and best practice remains aligned with the needs of the Group guidelines, while ensuring that the Group’s and its longer-term strategy and that it remains • Reward payments will be performance- remuneration policies are appropriately appropriately aligned with the external market. related, reflecting individual and business tailored to its circumstances, challenges performance, including both what has and strategic goals. Balancing short- and long-term been delivered and the way in which such remuneration deliveries have been achieved. However, the When determining the remuneration policy The Committee has established the Group will adopt a prudent and considered for Executive Directors, the Committee remuneration elements set out in this report approach when determining what portion considers the following factors, which are in line with the Group’s Remuneration Policy of an employee’s package should be embedded in the above principles: principles described above. Fixed annual performance-linked and/or variable so as

elements, including salary, pension and StatementsFinancial Four Section to ensure that irresponsible conduct and • Clarity and simplicity – that remuneration benefits, are set in order to recognise the behaviours are neither encouraged nor arrangements are straightforward and responsibility and experience of the Group’s rewarded and that customer experience is simple for everyone to understand, Executive Directors and to ensure current and not prejudiced in any way by the operation providing transparency for executives and future market competitiveness. The annual of its pay arrangements. our shareholder regarding the business and long-term incentives are set in order to and individual performance sought incentivise and reward the Group’s Executive • Reward structures will be straightforward Directors for making the Group successful and simple for everyone to understand. • Risk – that incentive plans are designed to on a sustainable basis. manage and mitigate the reputational and set by • Remuneration packages will be other risks that can arise from excessive reference to levels for comparable roles rewards, together with the behavioural risks in comparable organisations. However, benchmark data will be only one of a • Predictability – that the range of possible number of factors that will determine values of reward for performance remuneration packages. outcomes together with the limits and discretion applicable to the remuneration Other Information Section Five • Reward structures will deliver an appropriate arrangements are identified and clearly balance of fixed to variable pay in order explained to foster a performance culture, with the proportion of ‘at risk’ pay typically increasing with seniority. However, high levels of leverage are not appropriate for the Group. About Us About One Section

Section Three Governance – Group Remuneration Report 140 Ecclesiastical Annual Report & Accounts 2019 141 Strategic Report Section Two

Future policy table (Executive Directors) The following table provides a summary of the key components of the remuneration package for the Executive Directors.

How the element supports the Operation of the element Maximum potential value and payment Performance measures used, Change from 2019 Group’s strategic objectives at threshold weighting and time period applicable

Salary To provide a core reward at Salaries are paid in 12 equal monthly instalments during the year. When the annual review is conducted various Group and individual performance None the level needed to attract Salaries are reviewed annually with changes taking effect from factors are taken into account, including Group and

and retain the required level 1 April each year. individual performance, relevant market information Governance Section Three of talent. and levels of pay increases in the wider UK or relevant territory population.

Benefits To provide a market- Benefits normally comprise a car allowance, a private healthcare Benefits are set at a level taking into account Not applicable None competitive reward package scheme, income protection and medical assessments. Executive benefit packages offered by comparable and promote the wellbeing of Directors also receive life assurance cover on the same basis as organisations for comparable roles; benefits employees. the wider employee population and in the case of the Deputy Group offered to the wider employee population and with Chief Executive, health and dental cover and accidental death and the overall objective of promoting the wellbeing dismemberment cover on the same basis as the wider employee of employees. The costs are those relating to population in the Group’s Canadian branch. providing the benefit.

Pension To aid retention and provide UK Defined Contribution Scheme: UK-based Executive The level of pension contribution is set at a level taking Not applicable None Financial StatementsFinancial Four Section a market competitive provision Directors are eligible to participate in the Group Personal Pension into account pension benefits offered by comparable for post-retirement income. plan. Contributions are made by the employee and employer. organisations for comparable roles and benefits offered to the wider employee population. Canadian EIO plc Defined Contribution Pension plan: the Canadian Defined Contribution plan is applicable to The employer contribution rate to the UK Defined Ecclesiastical’s Canadian staff. The Deputy Group Chief Contribution Scheme for existing Executive Directors is Executive participates under this plan and does not participate in 15% and for new Executive Directors is 12% of basic salary, the UK Defined Contribution Scheme. Contributions are made by in line with the wider employee population. the employer. The employer contribution rate to the Canadian EIO plc Defined Contribution Pension plan is 12% of basic salary subject to the Government’s annual contribution limits. Amounts in excess are contributed to a SERP.

Group annual

bonus scheme Other Information Section Five To incentivise the Executive This cash bonus is paid annually, normally three months after the Maximum opportunity of 100% of salary of which The Group annual bonus is subject to a None Directors to achieve key end of the financial year to which it relates. Targets are set annually 50% is payable for a target level of performance. range of challenging metrics linked to key financial and strategic goals and award levels are determined by the Committee based on strategic priorities. For 2020, these are: and targets for the financial performance against these targets. • Ecclesiastical Insurance Group (EIG) PBT year. Deferral provides further (including fair value investment gains/losses) alignment with shareholders’ Any bonus earned in excess of 75% of an individual’s maximum • Group COR interests and promotes bonus opportunity is deferred over a period of three years. • Strategic targets retention. • Customer and conduct targets • Personal performance targets About Us About One Section

Section Three Governance – Group Remuneration Report 142 Ecclesiastical Annual Report & Accounts 2019 143 Strategic Report Section Two

Future policy table (Executive Directors) continued

How the element supports the Operation of the element Maximum potential value and payment Performance measures used, Change from 2019 Group’s strategic objectives at threshold weighting and time period applicable

Group LTIP To focus the executives and Cash awards under the Group LTIP vest dependent on Under the rules of the LTIP, awards can be made The Group LTIP is subject to a range None incentivise the achievement the Committee’s assessment of performance against the of up to 150% of salary in the case of the Group of challenging conditions linked to key of the Group’s long-term performance conditions over the relevant three-year period. Chief Executive and of up to 100% of salary in the strategic priorities. For 2020 awards objectives; to align the Targets are set annually for each successive three-year LTIP case of other Executive Directors. relating to the performance period Executive Directors’ interests period. 2020-2022, the following performance Governance Section Three with those of shareholders At on-target performance, a target opportunity conditions will apply: and to promote attraction of 50% of the award applies. Threshold business • Group EIG PBT (excluding fair value and retention of talented performance results in vesting of no more than investment gains/losses) individuals. 20% of the award. The Group LTIP plan granted • Group EIG PBT (including fair value in respect of 2018-2020 and 2019-2021 will investment gains/losses) continue to vest under the previously applicable • Group COR policy. • Strategic targets and • Customer and conduct targets.

Notes to policy table Remuneration Committee discretion, Due to the Group’s ownership structure, in a Group entity and the individual regulatory malus and clawback provisions particular that its ultimate parent company is requirements applying thereto. Performance measures and targets The Committee has discretion to reduce a charity, it is not possible to deliver variable All employees of the Group are entitled The Committee selected the performance any annual bonus and LTIP prior to award remuneration in the form of shares. Cash to a salary, benefits, pension and annual conditions used for the annual bonus and in certain circumstances, including (but not awards under the Group Annual Bonus and bonus. However, remuneration for Executive long-term incentives because they are central limited to): (i) issues regarding the Group’s Group LTIP arrangements are not subject to Directors is more heavily weighted towards to the Group’s overall strategy and are key StatementsFinancial Four Section underlying financial strength and position; a post-vesting holding period. variable rewards, through a higher annual metrics used in measuring the performance (ii) actual or potential regulatory censure; bonus opportunity and participation in the of the Group. The performance conditions are (iii) if the Group is in material breach of its Changes to the Policy from that Group LTIP. Such variable remuneration reviewed and set annually by the Committee, risk policies (including conduct risk) and/or operating in 2019 is conditional on the achievement of following consultation with the CRO, including its values/ethics; and (iv) a material diminution performance targets that are linked to on the extent to which the schemes operate No changes were made to the Policy from in the regard by which the Group is held by the successful delivery of the Group within the Group’s risk appetite. that operating in 2019. its customer base as a result of executive strategy. The greater weighting towards mismanagement. variable remuneration thereby aligns the The Committee is of the opinion that the Remuneration arrangements interests of Executive Directors with those performance targets are commercially elsewhere in the Group Bonus already paid or deferred, LTIP already of shareholders. sensitive to the Group and that disclosure at vested and any unvested LTIP are subject to The Group’s approach to Executive Director the beginning of the financial year may be malus/clawback in certain circumstances, and wider employee remuneration is based detrimental to its interests. The Committee including (but not limited to): (i) misstatement on the common set of principles set out in will keep this under review, meanwhile targets of performance; (ii) regulatory censure, the Group’s Remuneration Policy on page will be disclosed at the end of the relevant material reputational damage and/or material 145. However, given the size of the Group financial year in that year’s Remuneration

non-adherence to the Group’s risk tolerances; and the range of its operations, the manner Other Information Section Five Report provided they are not considered and (iii) misconduct. A three-year time limit in which these principles are implemented commercially sensitive at that time. applies in respect of clawback from the date varies with seniority and, where appropriate, of bonus payment and LTIP vesting. with the nature of the business transacted by About Us About One Section

Section Three Governance – Group Remuneration Report 144 Ecclesiastical Annual Report & Accounts 2019 145 Strategic Report Section Two

Remuneration scenario charts Notes to the charts: Approach to recruitment remuneration to offer some form of ‘buy-out’ award, Ecclesiastical is a specialist financial services the size of which will, in the normal course of The remuneration scenario charts below • Fixed pay is base salary for 2020 plus the group competing for talent across a variety events, reflect the commercial value of the illustrate what each Executive Director could value of pension and benefits. of markets. award foregone (and the vesting timetable earn in respect of the policy for 2020, under • Base salary is the aggregate of the salary of the awards foregone) and will also (where different performance scenarios: applicable at 1 January 2020 for January The Committee’s approach is to pay a fair possible) be subject to some form of clawback • Minimum: fixed pay only (being basic to March 2020 and the salary applicable market value to attract appropriate candidates if the individual leaves Ecclesiastical within salary, pension or cash in lieu of pension at 1 April 2020 for April to December 2020. to the role, taking into consideration their a set timeframe. and benefits) with no annual bonus and no • The value of pension is calculated as individual skills and experience and the ethos vesting of the LTIP; described in the Future Policy table. of the Group. Any new Executive Director’s package would • On target: fixed pay (being basic salary, • The value of benefits in-kind is taken from include the same elements and generally be pension or cash in lieu of pension and the single figure table for 2019, (pro-rated to Where it is thought necessary to compensate subject to the same constraints as existing

benefits) with annual bonus of 50% of basic the full year value in the case of the Group Governance Section Three for an individual’s awards resulting from Executive Directors. salary and 50% vesting of the LTIP; CFO), which can be found on page 151. previous employment, the Committee may, as • Maximum: fixed pay (being basic salary, • The Group operates a cash LTIP scheme for far as practicable, seek to match the expected pension or cash in lieu of pension and the reasons set out above. No share price value of such awards through the use of the benefits) with maximum bonus of 100% of appreciation has therefore been included in Group’s existing incentive arrangements. basic salary and 100% vesting of the LTIP. the remuneration scenario charts. Where this is not possible, it may be necessary

Mark Hews: Effect of the application of this policy in financial year 2020 Element of Remuneration Maximum percentage of salary

Salary - Minimum 100% Total £547k Annual bonus 100% On-Target 48% 21% 31% Total £1,132k LTIP 150% – Group Chief Executive Maximum 32% 28% 40% Total £1,717k 100% – Deputy Group Chief Executive and Group CFO Financial StatementsFinancial Four Section Pension contribution/allowance 12% UK Defined Contribution Scheme 12% Canadian EIO plc Defined Contribution Pension Plan S. Jacinta Whyte: Effect of the application of this policy in financial year 2020 subject to the Government’s annual contribution limits. Amounts in excess are contributed to a SERP. Minimum 100% Total £461k

On-Target 54% 23% 23% Total £850k

Maximum 37% 32% 31% Total £1,239k

D. Cockrem: Effect of the application of this policy in financial year 2020

Minimum 100% Total £350k Other Information Section Five

On-Target 54% 23% 23% Total £654k

Maximum 37% 32% 31% Total £958k

Fixed Pay Annual Variable LTIP About Us About One Section

Section Three Governance – Group Remuneration Report 146 Ecclesiastical Annual Report & Accounts 2019 147 Strategic Report Section Two

Service contracts and policy on payment Service contracts and policy on payment for loss of office for loss of office continued

Standard provision Policy Details Standard provision Policy Details

Notice periods in Executive Twelve months by the Group Executive Directors may be Mitigation Except in the case of the The Committee will take Directors’ service contracts or Executive Director for the required to work through their Group Chief Executive, account of the circumstances Group Chief Executive and notice period, or may be paid Executive Directors’ service of the termination and the six months by the Group or in lieu of notice if they are contracts expressly provide director’s performance during Executive Director for the not required to work the full for mitigation on termination the period of qualifying

Deputy Group Chief Executive notice period. by allowing for payment in service to determine whether Governance Section Three and Group CFO. instalments over the balance the exercise of any discretion of the notice period. is appropriate.

Payment in lieu of notice The Group may decide if it Payable as a lump sum within wishes to make a payment in 14 days of termination date in Treatment of annual bonus No payment is to be made Good leavers are entitled to a lieu of notice of an amount the case of the Group Chief on termination or change of unless the executive is bonus payment subject to the prescribed under the contract, Executive. Payable in monthly control under plan rules employed on the date of achievement of bonus criteria comprising of salary (and in instalments over the balance bonus payment except for which is pro-rated down to the case of the Group Chief of the notice period in the ‘good leavers’ as defined in reflect their service during the Executive, benefits) for the case of the Deputy Group the plan rules (e.g. death, performance year unless the balance of the notice period, Chief Executive and Group ill health, redundancy, Committee determines that a excluding bonus and accrued CFO. retirement) and other higher amount is justified. holiday entitlement. circumstances at the A similar provision would apply Committee’s discretion. if there were a change of control event. Bonus payments Severance payment for The Deputy Group Chief The Executive’s entitlement If there is a change of control for good leavers are subject to Deputy Group Chief Executive Executive’s pre-existing arises in the case of any event, then an early payment deferral, malus and clawback. StatementsFinancial Four Section contract of employment termination by the Group for can be calculated and made. before her appointment as ‘No Cause’ as defined and Deputy Group Chief Executive represents the sum of £512k contained severance and the provision of dental and Treatment of long-term All awards lapse except for For good leavers, vesting is provisions in line with health insurance cover and life incentive awards on ‘good leavers’ as defined in determined based on the Canadian law and practice. assurance cover for a period of termination or change of the plan rules (e.g. death, application of the performance The policy of the Group 21 months after the termination control under plan rules ill health, redundancy, conditions and any award is has been to honour these date of her employment. retirement) and other reasons then pro-rated down based on commitments insofar as they at the discretion of the the proportion of the 36-month relate to accrued service up The sums due may be made in Committee. performance period that the to the date of her appointment monthly instalments to allow for employee has served since to her new role, but not in mitigation. If there is a change of control the grant date unless the respect of service after event, then an early payment Committee determines that that date. In addition, any sums otherwise can be made at the discretion a higher amount is justified. due under the rules of any of the Committee. A similar provision would apply bonus or cash incentive plan

if there were a change of Other Information Section Five in respect of the bonus year in control event. For good leavers, which the termination date falls grants vest on the original or in any subsequent year are anniversary date. only payable to the extent that they would otherwise exceed £151k. About Us About One Section

Section Three Governance – Group Remuneration Report 148 Ecclesiastical Annual Report & Accounts 2019 149 Strategic Report Section Two

Service contracts and policy on payment NEDs’ fees policy for loss of office continued How the element supports Operation of the element Maximum potential value and Performance measures used, the Group’s strategic payment at threshold weighting and time period Standard provision Policy Details objectives applicable

Exercise of discretion Discretion is intended to be The Committee’s To attract NEDs who have a NEDs’ fees, including the Current fee levels are NEDs are not eligible relied upon only in certain determination will take into range of experience and skills Committee Chairman’s fees, shown in the section on to participate in any circumstances as set out on account the circumstances to oversee the implementation are approved by the Board implementation of policy. performance-related page 142. of the Executive Director’s of the Group’s Strategy and at a general meeting, arrangements. departure and the recent following recommendation by

performance of the Group the Chairman and Executive Governance Section Three when using discretion in Directors. relation to short- or long-term bonus payments. NEDs take no part in the discussion relating to their own fees. The Chairman’s and the Other matters The Group’s policy is to SID’s fees are considered and honour commitments approved by the Board in the made under contractual absence of the Chairman and arrangements that may SID. have been entered into with an employee prior to them Fees are paid in 12 equal becoming a director. monthly instalments during the year. Fees are reviewed every There are no other provisions two years against those for for termination payments NEDs in companies of a similar or payments for loss of office scale and complexity.

in standard directors’ StatementsFinancial Four Section service contracts. NEDs are not eligible to receive benefits and do not participate in incentive or Non-Executive Directors Each NED is appointed for pension plans. an initial three-year term and is subject to election by the shareholder at the first AGM following their appointment. In addition, the Board has agreed that all directors (including NEDs) will be subject to annual re-election by the shareholder at each AGM.

NEDs are entitled to receive Other Information Section Five a pro-rata proportion of their fees that they have accrued up to the date of termination of their contract. About Us About One Section

Section Three Governance – Group Remuneration Report 150 Ecclesiastical Annual Report & Accounts 2019 151 Strategic Report Section Two

Consideration of employment Annual Report Executive Fixed pay Variable pay Pension Total remuneration conditions elsewhere in the Group Director (£000) (£000) (£000) (£000) The remuneration of employees across the on Remuneration* This section of the Directors’ Remuneration Salary Benefits1 Annual bonus2 LTI P 3 Pension Total Group is a key consideration when setting Report sets out how the above Remuneration benefit4 the policy and determining outcomes for Policy was implemented in 2019 and the Executive Directors and the Committee 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 resulting payments each Executive Director is mindful of the importance of aligning Mark Hews 461 449 14 14 444 380 510 339 60 58 1,489 1,240 received. The financial information contained executive and wider employee pay 5 6 6 in this report has been audited where S. Jacinta Whyte 382 373 22 22 369 306 298 296 57 58 1,127 1,056 and conditions. As part of its work, the indicated. 7 Committee has oversight of pay, incentive Ian Campbell 0 200 0 18 0 0 0 0 0 26 0 244 arrangements and conditions applicable to Denise Cockrem8 95 0 4 0 86 0 0 0 10 0 196 0 Single total figure of remuneration for employees more widely and oversees the Total 938 1,022 41 54 899 686 808 635 126 142 2,812 2,540 incentive plans and material changes to Executive Directors (audited) Governance Section Three employee pay and conditions across the The table on the following page shows a single total figure of remuneration received Group’s businesses. The level of the pay 1 Benefits include items such as a car allowance and private medical insurance which are valued at their taxable value. They also include travel and accommodation review for UK Ecclesiastical employees is in respect of qualifying services for the 2019 benefits, valued at their grossed-up tax and NI value. Provision of benefits during 2019 was in line with the previous year and the Directors’ Remuneration Policy, a key consideration in setting the level of financial year for each Executive Director, and no exceptional benefits were paid. 2 any salary increase for Executive Directors. together with comparative figures for 2018. In line with the deferral policy, annual bonus earned in excess of 75% of the maximum bonus opportunity is deferred over a period of three years. In 2019, the value of Executive Directors’ annual bonuses that were deferred is: £97k (Group Chief Executive), £80k (Deputy Group Chief Executive) and £46k (Group CFO). When reviewing and setting the performance 3 LTIP represents the amount payable in respect of the three-year LTIP performance period 2017-2019 for 2019 and 2016-2018 for 2018. The Group operates a measures, targets and deferral arrangements 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. for Executive Directors’ annual bonuses and * The information in the previous part of the Directors' 4 LTIPs, the Committee considers the extent Remuneration Report is not subject to audit and is only The Group Chief Executive and Group CFO received a cash allowance in lieu of pension, in line with company policy that a cash allowance of 15% (Group Chief to which these should be cascaded to other subject to audit from this point onwards where stated in Executive) or 12% (Group CFO) of salary (net of NI contributions) can be paid to UK-based Executive Directors where continued company contributions would result in a breach of the HMRC annual and/or lifetime allowance. employees. The Committee additionally has the section header. 5 An average 2019 exchange rate of 1.6981 Canadian dollars to 1 GBP has been used in respect of both 2019 and 2018. oversight of the remuneration arrangements 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 for designated senior managers and material Deputy Group Chief Executive are included in the figures shown. risk-takers below the Executive Directors. 7 Ian Campbell resigned from the Board on 31 August 2018. 8

Denise Cockrem was appointed to the Board on 6 September 2019. Her remuneration for the period she served as a Director during the year is included in the StatementsFinancial Four Section The Group consults with its recognised above table. Union, Unite, regarding remuneration for employees within relevant UK businesses. Mark Hews is a NED for MAPFRE RE and was appointed to their Board in December 2013. The fee of £33k (2018: £30k) Additionally, employees can provide feedback 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. on the Group’s remuneration policies via the Group’s employee engagement survey and Denise Cockrem is a NED for Skipton Building Society and was appointed to their Board in September 2015. The fee that to their managers or HR. The Group HR Denise Cockrem earns in respect of this role is paid directly to the Group by Skipton Building Society and is not received by Director attends the Committee meetings Denise Cockrem. The fee received in respect of the period since her appointment to the Ecclesiastical Board on 6 September and advises the Committee in relation to HR 2019 was £16.2k. strategy, including the effectiveness of the Group’s remuneration policies and how they are viewed by employees.

Consideration of shareholder views The Committee, through the Board, consults

with the shareholder on any changes to this Other Information Section Five policy in order to understand expectations with regard to Executive Directors’ remuneration and any changes in the shareholder’s views. The Committee consults with the shareholder in respect of Non-Executive Director and the Chairman’s fees. About Us About One Section

Section Three Governance – Group Remuneration Report 152 Ecclesiastical Annual Report & Accounts 2019 153

The Strategic Targets performance condition measures delivery of the Group’s change programme. The agreed priorities for 2019 continued the strategic programme of change launched in 2016, Strategic Report Section Two in support of the Group’s strategic goal to be the most trusted and ethical specialist financial services group, giving £100m to charity by the end of 2020. As set out in more detail in the Strategy in Action report on pages 44 to 48, the Group has continued to deliver across a wide front through Additional requirements in respect For 2019, these were Group COR (40%); its strategic programme of change, investing in its businesses and enabling it to sustain and build of the single total figure table Group EIG PBT (including fair value on the distinctive position it occupies in its markets. Considerable progress has been made on the investment gains and losses) (30%); delivery second phase of the Group’s change programme, resulting in an outturn of 90.4% being achieved Annual bonus outcomes for 2019 (audited) of Group strategic initiatives in line with the against the strategic targets measure for 2019. The annual bonuses payable to Executive Group’s strategic plan (15%); and Customer Directors in respect of 2019 are assessed and Conduct performance (15%). Results in In line with the Group’s commitment to delivering exceptional customer service and the highest taking into account both Group and individual respect of each performance condition are standards of conduct, the Customer and Conduct performance condition measures delivery against performance. assessed against the required performance the high standards set across a range of customer and conduct metrics and across all Group levels set at threshold, target and maximum, businesses. The Group delivered an outturn of 97.0% against the customer and conduct metrics for Individual performance is subject to delivery in order to calculate the aggregate Group 2019 reflecting the Group’s strong customer and conduct culture and effective systems of control. of personal performance objectives and performance multiplier as shown in the Targets in respect of customer satisfaction; claims service; complaints handling; data security; performance in line with the Group’s second table below. regulatory feedback; compliance with the Group’s risk appetite and timely resolution of internal audit behavioural competency framework for and compliance findings were met by all businesses. The Group’s rolling programme of product Governance Section Three strategic leaders. A personal performance The overall bonus outturn for each Executive reviews was achieved by the majority of businesses. percentage of between 0% and 75% may Director is the product of the personal Bonuses are earned in respect of the financial year and are paid in March following the end of the be awarded in respect of this element of the performance percentage and the aggregate financial year. Any proportion of a bonus outcome above 75% of the maximum bonus outcome is annual bonus. The personal performance Group performance multiplier. The maximum deferred over three years, in cash. All annual bonus outcomes are subject to malus and clawback percentage is reviewed and agreed by opportunity under the annual bonus plan is as set out on page 142. the Committee. 100% of salary. LTIP outcomes in 2019 (audited) Group performance is subject to the four The targets relating to the Group annual The LTIP amount included in the single total figure of remuneration is the cash award resulting from performance conditions which together form bonus for the financial year 2019 were: the Group LTIP grant in 2017 for the period 2017-2019. Vesting was dependent on performance the Group performance multiplier. over the three financial years ending on 31 December 2019 and continued service until March 2020.

The 2017-2019 Group LTIP is subject to the five performance conditions: Group COR (20%); Group EIG PBT (excluding fair value investment gains and losses) (20%); Group EIG PBT (including fair value investment gains and losses) (20%); delivery of Group strategic initiatives in line with the Performance condition Threshold Target Maximum Weighting Group’s strategic plan (20%); and Customer and Conduct performance (20%). Results in respect of (0.5x) (1.0x) (1.5x) each performance condition are assessed against the required performance levels set at threshold, StatementsFinancial Four Section target and maximum as shown below. Group COR 98.6% 93.6% 89.5% 40% Group EIG PBT £10.9m £33.5m £71.0m 30% Strategic Targets 50% 75% 100% 15% Performance Threshold – Target – Maximum – Actual Vesting Customer and Conduct 85% 90% 100% 15% condition 20% vesting 50% vesting 100% vesting (% of maximum for performance The results relating to the Group annual bonus for the financial year 2019, and the resultant aggregate condition) Group performance multiplier, are shown below. Group COR 98.7% 93.5% 91.5% 88.2% 100% Performance condition Result Multiplier Weighting Weighted multiplier Group PBT £74.4m £115.9m £139.2m £125.2m 70% (excluding fair Group COR 91.1% 1.3 40% 0.52 value investment Group EIG PBT1 £70.8m 1.5 30% 0.45 gains/losses)1 Strategic Targets 90.4% 1.3 15% 0.20 Group PBT £64.4m £110.3m £159.2m £171.7m 100% Customer and Conduct 97.0% 1.4 15% 0.20 (including fair

value investment Other Information Section Five Aggregate Group performance multiplier 1.37 gains/losses)1 Strategic Targets 50% 75% 100% 91.6% 83% Customer and 80% 90% 100% 95.3% 77% Conduct Total 86.0%

1 Audited to EIO Group level 1 Audited to EIO Group level About Us About One Section

Section Three Governance – Group Remuneration Report 154 Ecclesiastical Annual Report & Accounts 2019 155 Strategic Report Section Two

The Group LTIP outcome that vests in respect of each executive director in respect of The information provided in this part of the Annual Report on Remuneration is not subject 2017-2019 is shown below. to audit

Chief Executive pay ratio LTIP grant Total LTIP vesting The Group structure means that it does not have to comply with the regulations governing the % of salary £000 % of maximum disclosure of executive remuneration to which quoted companies are subject. The Group has Mark Hews 150% 510 86.0% nonetheless chosen to disclose the ratio of the Group Chief Executive’s pay to that of other UK employees in the Group in order to provide greater transparency. S. Jacinta Whyte1 100% 298 86.0% Ian Campbell2 100% 0 0% The table below sets out the ratio between the Group Chief Executive’s salary and total remuneration and that of the 25th percentile (P25), median (P50) and 75th percentile (P75) 1 An average 2019 exchange rate of 1.6981 Canadian dollars to 1 GBP has been used in respect of 2019. UK-based employees of Ecclesiastical Insurance Office plc (excluding SEIB), which constitute 2 Ian Campbell resigned from the Board on 31 August 2018 the large majority of the UK workforce. Total remuneration reflects all remuneration received Governance Section Three Scheme interests awarded during 2019 (audited) by the individual in the relevant year, including base salary, benefits, pension, annual bonus and, During 2019, awards comprising of a cash sum were granted under the 2019-2021 Group where relevant, the long-term incentive that vests, but excludes taxable company car benefits LTIP to each Executive Director as set out below. These awards will vest, and the cash sum in 2019 for administrative reasons. Of the three available calculation methods, the Group has will be transferred to the award holder, in March 2022, to the extent that the applicable chosen to apply Option A as described under the regulations for listed companies, as the most performance targets are met. The vesting date for these awards is the date on which the accurate way of identifying employees at the 25th percentile, median and 75th percentile. Group’s 2021 results are announced, anticipated to be during March 2022. Calculations have been carried out on a full-time equivalent basis as at 31 December 2019.

Executive Award Maximum Face value Cash award End of the Performance Year Methodology Pay Element P25 P50 P75 director date cash sum of award if threshold period over measures2 used (lower quartile) (median) (upper quartile) subject to at grant performance which the the award £000s achieved performance Pay Ratio 40:1 29:1 21:1 (% base (% base targets salary) salary) have to be 2019 Option A Total £37,675 £51,015 £71,632 fulfilled Remuneration 2019-2021 Group LTIP

Salary £29,389 £39,596 £50,814 StatementsFinancial Four Section Mark Hews 13 Aug 150% 678 20% 31 December • Group COR 2019 2021 25% The Committee is satisfied that the individuals identified appropriately reflect the employee • Group remuneration profile at the lower, median and upper quartile and that the overall picture EIG PBT presented by the ratios is consistent with the Group’s wider policies pay, reward and progression (excluding fair value policies for the Group’s UK-based employees. The CEO is paid 29 times the median employee. investment The Committee has reviewed this and is confident that this is consistent with the remuneration S. Jacinta 13 Aug 100% 375 20% 31 December gains/losses) policy and market positioning for the firm’s employees. It will keep the position under review on Whyte1 2019 2021 25% an ongoing basis. • Group EIG PBT (including Percentage change in remuneration of Group Chief Executive fair value The table below shows the percentage year-on-year change in salary, benefits and annual investment bonus (from 2018 to 2019) for the Group Chief Executive compared with UK-based gains/losses) employees1. The Committee has selected this comparator group as being the most appropriate Denise 13 Aug 100% 230 20% 31 December 25% because the composition and structure of remuneration for this group most closely reflects that Cockrem2 2019 2021 • Strategic of the Group Chief Executive. targets 15% • Customers Other Information Section Five Group Chief Executive Average UK-based employees1 and conduct % change % change targets 10% Salary 2.6% 4.2% Taxable benefits2 1.5% 1.5% 1 An average 2019 exchange rate of 1.6981 Canadian dollars to 1 GBP has been used. 2 Denise Cockrem was appointed to the Board on 6 September 2019. Annual bonus 17.0% 31.9% 3 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 1 UK-based employees of Ecclesiastical Insurance Office plc; excluding employees in SEIB; matched sample basis. year for which the Group LTIP awards vest. 2 Based on contractual P11D taxable benefits for the tax year ending 5 April in the relevant year. About Us About One Section

Section Three Governance – Group Remuneration Report 156 Ecclesiastical Annual Report & Accounts 2019 157 Strategic Report Section Two

Relative importance of spend on pay The table below shows the single figure of total remuneration for the incumbent, Mark Hews, The table below sets out, for 2019 and 2018, the actual costs of employee remuneration, and prior Group Chief Executive, Michael Tripp, for the ten years to 31 December 2019. grants paid to Allchurches Trust Limited, and dividends paid to Preference shareholders. PBT in each year is provided for context. Financial year ending 31 December Financial Group Chief 2010 2 011 2012 2013 2014 2015 2016 2017 2018 2019 2019 2018 % change year Executive1 £000 £000 Total Mark Hews N/A N/A N/A 569 907 1,089 1,370 1,212 1,240 1,489 Remuneration paid to all Group employees 88,137 84,335 5%1 remuneration (single Gross charitable grants to the ultimate parent company, 30,000 17,000 176% Michael 430 416 390 330 162 N/A N/A N/A N/A N/A figure) £000 Allchurches Trust Limited Tripp Non-Cumulative Irredeemable Preference share dividend 9,181 9,181 Nil Annual Mark Hews N/A N/A N/A 45% 78% 88% 97% 99% 84% 96% bonus Governance Section Three PBT 73,264 15,371 477% received Michael 23% 0% 0% N/A N/A N/A N/A N/A N/A N/A (% of 2 1 Tripp The increase in staff remuneration costs in 2019 reflects the higher number of employees and salary inflation. In 2018 maximum) there was a one-off company contribution to pension costs following closure of the defined benefit pension plan to future accrual. See note 13 to the financial statements on page 214. Long-term Mark N/A N/A N/A 4% 60% 70% 88% 75% 88% 86% incentive Hews3 vesting (% Group Chief Executive pay for performance comparison Michael 27% 34% 0% 4% 47% N/A N/A N/A N/A N/A of maximum) As Ecclesiastical does not have equity shares traded on a regulated market, total equity shareholder Tripp4 funds growth over time as reported each year (plus the grant to Allchurches Trust Limited) have been 1 Michael Tripp resigned from the Board on 21 May 2013 and Mark Hews was appointed Group Chief Executive on 1 May 2013, having used in the performance graph compared with the FTSE All-Share. Total equity excludes Preference previously held the position of Group Chief Financial Officer. The total remuneration single figure value for both Michael Tripp and Mark Hews shareholders’ capital since this is not attributable to Allchurches Trust Limited. 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. Ecclesiastical Insurance Office plc 10 year to 2019 3 The LTIP vesting relevant to Mark Hews represents the amount vesting in respect of the three-year LTIP performance period 2012-2014 for TSR performance against the FTSE All-Share 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 250 - 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. Financial StatementsFinancial Four Section 4 Michael Tripp received a 2013 LTIP payment in respect of performance in the years 2011 and 2012 (only) under the 2011-2013 LTIP. 200 - He received a 2014 LTIP payment in respect of performance in 2012 (only) under the 2012-2014 LTIP.

150 -

100 -

50 -

Value of hypothetical holding £100 0 - Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19

FTSE Allshare Total Return Ecclesiastical Total Shareholder Return Other Information Section Five About Us About One Section

Section Three Governance – Group Remuneration Report 158 Ecclesiastical Annual Report & Accounts 2019 159 Strategic Report Section Two

Statement of directors’ shareholdings Single total figure of remuneration Non-Executive Directors Fees Fees Benefits Benefits and share interests for NEDs (audited) (£000) 2019 (£000) 2018 (£000) 2019 (£000) 2018 Directors’ shareholdings and share interests NEDs do not participate in any of the Group’s David Henderson2 118 68 1 1 are set out in the Directors’ Report on page incentive arrangements nor do they receive The Very Revd Christine Wilson3 65 - 5 0 122. Due to the Group’s ownership structure, any benefits. in particular that its ultimate parent company Andrew McIntyre4 65 65 0 0 is a charity, it is not possible to deliver The Board believes that it is appropriate Chris Moulder5 65 60 2 2 variable remuneration in the form of shares. that the level of fees paid to NEDs should Caroline Taylor6 59 53 5 6 Directors’ shareholdings are not subject to reflect equivalent fees paid by organisations 7 post-employment shareholding requirements. of similar size and complexity whilst being Francois-Xavier Boisseau 41 - 0 - mindful that the Group is owned by a charity. Angus Winther7 41 - 0 - Directors’ service agreements This will enable the Group to attract NEDs Tim Carroll8 63 63 1 2 Mark Hews has a service contract which of the calibre required to help the Group to Governance Section Three 9 provides for a notice period of 12 months by implement its future strategy. John Hylands 29 133 9 21 the Company. S. Jacinta Whyte and Denise Anthony Latham10 - 29 - 3 Cockrem have service contracts which NED fees were last reviewed by the Board Denise Wilson11 - 41 - 4 provides for a notice period of six months in November 2019 with increased fees Total 545 510 23 39 by the Company. No NED has a service becoming effective from 1 January 2020. contract. The fees set out below are commensurate 1 Benefits include travel and accommodation benefits, valued at their grossed up tax and NI value, in accordance with Group’s travel and expenses policy. with the demands and responsibilities of the 2 David Henderson was appointed as Chairman on 19 March 2019. Prior to this Mr Henderson was Chairman of the Group Remuneration Payments for loss of office (audited) NED roles. Committee and a NED of EdenTree Investment Management Limited (EIM). David Henderson waived his fee as Chairman of the Group No termination payments were made to Remuneration Committee and received an additional fee of £15k in 2018 and £3k in 2019 for his services as a NED of EIM. 3 The Very Revd Christine Wilson was appointed as Senior Independent Director on 1 November 2017. Christine Wilson chose to donate Executive Directors in 2019. her fee to charity in 2019. No fee has been paid in 2018 to Christine Wilson as she waived her right to a fee. The Group chose to donate £65k to charity in 2018. Early vesting of LTIP award 4 Andrew McIntyre was appointed as a NED and Chairman of the Group Audit Committee on 4 April 2017. There is no early vesting of the Executive 5 Chris Moulder was appointed as a NED on 27 September 2017 and became Chairman of the Group Risk Committee on 1 June 2018. Directors’ LTIP. 6 Caroline Taylor was appointed as Chairman of the Group Remuneration Committee on 21 June 2019. 7 Francois-Xavier Boisseau and Angus Winther were appointed as a NEDs on 19 March 2019.

8 Tim Carroll retired from the Board on 31 December 2019. StatementsFinancial Four Section 9 John Hylands retired as Chairman of the Group and from the Board on 19 March 2019. 10 Anthony Latham retired from the Board on 14 June 2018. 11 Denise Wilson resigned from the Board on 21 August 2018. Other Information Section Five About Us About One Section

Section Three Governance – 160 Ecclesiastical Annual Report & Accounts 2019 161 Strategic Report Section Two

The information provided in this part of the Annual Report on Remuneration is not LTIP for 2020-2022 subject to audit The 2020-2022 LTIP performance conditions and targets have been set in accordance with the Directors’ Remuneration Policy above. The 2020-2022 Group LTIP will be subject to Total aggregate emoluments of directors the following performance conditions (which are unchanged from 2019): Group EIG PBT The total aggregate remuneration of the directors in respect of qualifying services during 2019 (excluding fair value investment gains and losses) (25%); Group EIG PBT (including fair value was £2,446k (2018: £2,311k). After inclusion of amounts receivable under long-term incentive investment gains and losses) (25%); Group COR (25%); delivery of Group strategic initiatives schemes and pension benefits, the total aggregate emoluments of the directors was £3,379k in line with the Group’s strategic plan (15%); and Customer and Conduct performance (10%). (2018: £3,088k). Awards under the 2020-2022 Group LTIP will be up to 150% of salary in the case of the Group Chief Executive and up to 100% of salary in the case of the Deputy Group Chief EdenTree Executive and Group CFO. EdenTree has been subject to the FCA Remuneration Code since 1 January 2011. EdenTree operates a remuneration policy which is compliant with the Remuneration Code, details of which Fees (Non-Executive Directors) can be found in the EdenTree Pillar 3 statement on EdenTree’s website (www.edentreeim.com). The following fee structure will apply from 1 January 2020. Governance Section Three

Statement of implementation of Remuneration Policy in 2020 Fees (£000) The implementation of the remuneration policy will be consistent with that outlined in the Directors’ Remuneration Policy above. Details of how this policy will apply in 2020 All-inclusive fee for the Group Chairman 145 are set out below. All-inclusive fee for the Senior Independent Director 75 Basic fee for a NED (including Committee Membership) 55 Salary (Executive Directors) Fee for chairing the Group Audit Committee 13 Executive Directors’ salaries are reviewed annually in line with the Directors’ Remuneration Policy. The following salaries will apply from 1 April 2020. Fee for chairing the Group Remuneration Committee 13 Fee for chairing the Group Risk Committee 13 Name Salary Salary Percentage Fee for chairing the Group Finance and Investment Committee 11 (£000) (£000) increase Fee for chairing the Group Nominations Committee1 11 1 April 2020 1 April 2019 2 1 The fee for chairing the Group Nominations Committee is included within the all-inclusive fee for the Senior Mark Hews 475 463 2.5% Independent Director for 2019 Financial StatementsFinancial Four Section S. Jacinta Whyte1 394 384 2.5% Denise Cockrem2 308 300 2.5%

1 An average 2019 exchange rate of 1.6981 Canadian dollars to 1 GBP has been used. By order of the Board 2 Denise Cockrem was appointed to the Board on 6 September 2019. Her salary was increased to £300k with effect from 1 July 2019 upon her taking up her wider responsibilities as Group CFO and Executive Director. Caroline Taylor Chair of the Group Remuneration Committee Annual bonus for 2020 17 March 2020 The annual bonus performance conditions and targets have been set in accordance with the Directors’ Remuneration Policy above, on the same basis as 2019.

As in 2019, the annual bonuses payable to Executive Directors in respect of 2020 will be assessed based on both Group and individual performance. Individual performance is subject to delivery of personal performance objectives and performance in line with the Group’s behavioural competency framework for strategic leaders. Group performance is subject to the

four performance conditions which together form the Group performance multiplier. For 2020, Other Information Section Five these will continue to be Group COR (40%); Group EIG PBT (including fair value investment gains and losses) (30%); delivery of Group strategic initiatives in line with the Group’s strategic plan (15%); and Customer and Conduct performance (15%). The overall bonus outturn for each Executive Director is the product of personal performance percentage and the aggregate Group performance multiplier. The maximum opportunity under the annual bonus plan in 2020 is unchanged at 100% of salary. Annual bonuses in respect of 2020 will be subject to deferral, over a period of three years, of any bonus earned in excess of 75% of an Executive Director’s maximum bonus opportunity. About Us About One Section

Section Four Financial Statements 162 Ecclesiastical Annual Report & Accounts 2019 163

Section Four Financial Statements

Independent Auditor’s Report 164 Consolidated statement of profit or loss 176 Strategic Report Section Two Consolidated and parent statement of comprehensive income 177 Consolidated and parent statement of changes in equity 178 Consolidated and parent statement of financial position 179 Consolidated and parent statement of cash flows 180 Notes to the financial statements 181 Governance Section Three Financial StatementsFinancial Four Section Other Information Section Five About Us About One Section

Section Four Independent Auditor’s Report 164 Ecclesiastical Annual Report & Accounts 2019 165

Independent Auditor’s Report Strategic Report Section Two

Report on the audit Summary of our audit approach

of the financial statements Key audit matters Materiality Scoping Significant changes in our approach Opinion The financial reporting framework that In our opinion: has been applied in their preparation is The key audit matters that we The materiality that we As in the prior year, our During 2019, we reassessed applicable law and IFRSs as adopted by the identified in the current year used for the group financial group audit included the the key audit matter identified • the financial statements of Ecclesiastical European Union and, as regards the parent were: statements was £11.6m which audit of subsidiary entities in the prior year in relation to Insurance Office plc (the ‘parent company’) company financial statements, as applied was determined on the basis and branches in the United the valuation of the defined and its subsidiaries (the ‘group’) give a true in accordance with the provisions of the • General insurance reserves; of 2% of total shareholders’ Kingdom and in Australia, as benefit scheme liability for and fair view of the state of the group’s and Companies Act 2006. and equity. It was capped at well as the parent company’s the employees of the parent of the Parent Company’s affairs as at 31 • Life insurance reserves. 95% of the Ecclesiastical branches in Canada, Northern company. As a result, we

December 2019 and of the group’s profit for Basis for opinion Insurance Group materiality. Ireland and the Republic of concluded that this was no Governance Section Three the year then ended; We conducted our audit in accordance with Within this report, key audit Ireland. longer considered a key audit International Standards on Auditing (UK) (ISAs matters are identified as matter in the current year • the group financial statements have been (UK)) and applicable law. Our responsibilities follows: and have consequently not properly prepared in accordance with under those standards are further described in included this in our auditor’s International Financial Reporting Standards the auditor’s responsibilities for the audit of the Newly identified report. (IFRSs) as adopted by the European Union; financial statements section of our report. Increased level of risk Similar level of risk • the parent company financial statements We are independent of the group and the Decreased level of risk have been properly prepared in accordance Parent Company in accordance with the with IFRSs as adopted by the European ethical requirements that are relevant to our Union and as applied in accordance with the audit of the financial statements in the UK, provisions of the Companies Act 2006; and including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to • the financial statements have been prepared listed public interest entities, and we have in accordance with the requirements of the fulfilled our other ethical responsibilities Companies Act 2006 and, as regards the in accordance with these requirements. StatementsFinancial Four Section Group financial statements, Article 4 of the We confirm that the non-audit services IAS Regulation. prohibited by the FRC’s Ethical Standard were not provided to the group or the parent We have audited the financial statements company. which comprise: • the consolidated statement of profit or loss; We believe that the audit evidence we have • the consolidated and parent statement obtained is sufficient and appropriate to of comprehensive income; provide a basis for our opinion. • the consolidated and parent statement of changes in equity; • the consolidated and parent statement of financial position; • the consolidated and parent statement of cash flows; and

• the related notes 1 to 37 excluding the Other Information Section Five capital adequacy disclosures in Note 4.i calculated in accordance with the Solvency II regime which are marked as unaudited. About Us About One Section

Section Four Independent Auditor’s Report 166 Ecclesiastical Annual Report & Accounts 2019 167 Strategic Report Section Two

Conclusions relating to going concern During 2019, we reassessed the key audit General insurance reserves We are required by ISAs (UK) to report in matter identified in the prior year in relation respect of the following matters where: to the valuation of the defined benefit Key audit matter description How the scope of our audit responded to the key audit matter Key observations • the directors’ use of the going concern scheme liability for the employees of EIO. basis of accounting in preparation of the We concluded that since the scheme was The general insurance reserves We reviewed management’s general insurance reserving Overall we consider that financial statements is not appropriate; or closed to future accrual in July 2019, remain the largest single area papers for the 2019 year-end as presented to the the methodology applied • the directors have not disclosed in the the calculation of the liability is less complex of judgement within the group’s Group Audit Committee. and significant assumptions financial statements any identified material than in 2018. Therefore, this was no longer financial statements. Gross used by management in the uncertainties that may cast significant doubt considered a key audit matter in the current provisions for outstanding claims Key assumptions used within the calculation of the UK PSA 2019 general insurance about the group’s or the parent company’s year and consequently we have not included and incurred but not reported and asbestos IBNR reserves such as claims frequency, IBNR reserving process are ability to continue to adopt the going a key audit matter in respect of valuation of (‘IBNR’) claims amount to £482m severity, inflation and discounting, as well as models and reasonable and consistent concern basis of accounting for a period the defined benefit scheme liability in our (2018: £457m), as set out in note methodologies applied in projecting claim amounts were with the prior year. challenged with the assistance of our general insurance Governance Section Three of at least 12 months from the date when auditor’s report. 28 to the financial statements. specialists, taking into account market trends and claims the financial statements are authorised The accounting policies and development patterns. We also applied our wider industry for issue. critical accounting estimates knowledge, taking into account factors specific to the Group’s and judgements are set out in PSA and asbestos portfolios. We have nothing to report in respect notes 1 and 2 respectively, with of these matters. insurance risk being discussed Uncertainty and management margins applied to these classes in note 3. Due to the high level of business individually, and in total, were challenged with the Key audit matters of judgement and estimates assistance of our general insurance specialists, considering Key audit matters are those matters that, involved, we have identified this current legal, market and industry developments, as well as in our professional judgement, were of most key audit matter as a fraud risk consistency of application of such margins. significance in our audit of the financial to our financial statement audit. statements of the current period and include We obtained an understanding of relevant controls governing the most significant assessed risks of We have pinpointed our key audit the actuarial assumption setting process. material misstatement (whether or not due matter to certain assumptions to fraud) that we identified. These matters used in the valuation models of We have performed direct testing over the underlying claims and premiums data extracted from the policy administration system, included those which had the greatest effect UK liability IBNR reserves for StatementsFinancial Four Section on: the overall audit strategy; the allocation physical and sexual abuse (‘PSA’) as well as testing the design and implementation and operating effectiveness of relevant reconciliation controls over this data of resources in the audit; and directing the and asbestos claims, as referred from input to output of the reserving modelling software. efforts of the engagement team. to by the Group Audit Committee in their report on page 130. We reconciled the output of the actuarial reserving process to These matters were addressed in the context the general ledger and the financial statements. of our audit of the financial statements as a Management judgement and whole, and in forming our opinion thereon, estimates, including in respect and we do not provide a separate opinion on of actuarial assumptions, are these matters. required when setting these technical reserves. The value of these long-tailed technical reserves is sensitive to the movement in discount rates, which can be volatile as a result of uncertain market conditions. Other Information Section Five

Discounting and future inflation assumptions, claims frequency and claims severity have a material impact on the valuation of these portfolios. In particular, claims frequency is difficult to predict for both PSA and asbestos cases. About Us About One Section

Section Four Independent Auditor’s Report 168 Ecclesiastical Annual Report & Accounts 2019 169 Strategic Report Section Two

Life insurance reserves Our application of materiality

Key audit matter description How the scope of our audit responded to the key audit matter Key observations We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work The life book comprises We reviewed management’s life reserving papers as presented to Overall, we are satisfied and in evaluating the results of our work. prepaid funeral plan business the Group Audit Committee. that the assumptions used and continues to be closed and the judgements applied Based on our professional judgement, we determined materiality for the financial statements to new business; however, We challenged the key judgements within the calculation of in the 2019 valuation are as a whole as follows: the Group retains long-term the life insurance reserves by working with our life insurance reasonable and have been set exposure in respect of funeral actuarial specialists, to specifically assess the movements from consistently with the Group’s plan life insurance business prior year reserves and material changes in methodology and reserving methodology. Group financial statements Parent company financial written in the past. In arriving assumptions applied. statements at the technical provision, Governance Section Three there are a number of key The key assumptions (valuation rate of interest, mortality rates Materiality £11.6m (2018: £11.6m) £9.9m (2018: £9.8m) actuarial assumptions applied, and expenses assumptions) were assessed for appropriateness in particular: and consistency with input from our specialists, and benchmarked using our wider industry knowledge as well as taking into account Basis for determining 2% of group total shareholders’ 2% of the parent company’s • Valuation rate of interest; any factors specific to the group’s funeral plan book. materiality equity (2018: 2% total shareholders’ shareholders’ equity (2018: • Mortality rates; and equity), which is capped at 95% 2% shareholders’ equity), • Expense assumptions. We also obtained an understanding of relevant controls of Ecclesiastical Insurance Group which is capped at 85% of governing the actuarial models, assumption setting process and materiality. group materiality. Due to the inherently uncertain data flows. nature of these assumptions, they are subject to significant In 2019, management used OAC plc for the actuarial modelling management estimates and, of the reserves. We assessed the competence, capability and Rationale for the We have used total shareholders’ equity as a benchmark for our materiality due to the size of the balance objectivity of OAC plc. benchmark applied to reflect the group’s strategic ambition to deliver longer-term value and to (2019: £79.2m, 2018: £81.9m) support charitable giving. By using total shareholders’ equity as a basis, our as set out in note 28 to the We performed direct testing of the completeness and accuracy judgement on materiality is in line with the focus and risk profile of both the financial statements, could of key underlying data used in the life reserving process, in group and parent company, taking into account the regulated status of the Financial StatementsFinancial Four Section materially affect the financial particular policyholder data, expense data as well as data in parent as an insurer as well as the unusual ownership structure of the group, statements if incorrectly or relation to the assets backing the life insurance reserves. with the ultimate Parent Company being a UK registered charity. inconsistently determined or applied. The accounting We reconciled the output of the actuarial reserving process to policies and critical accounting the general ledger and the financial statements. estimates and judgements are set out in notes 1 and 2 respectively, with insurance risk being discussed in note 3. Shareholders’ equity £608m Group materiality £11.6m Due to the high level of judgement and estimates involved, we have identified this key audit matter as a fraud risk Component to our financial statement audit. materiality range The Group Audit Committee £9.9m to £4.9m refers to this key audit matter in Other Information Section Five their report on page 130.

Audit Committee reporting threshold £0.6m

Shareholders’ equity Group materiality About Us About One Section

Section Four Independent Auditor’s Report 170 Ecclesiastical Annual Report & Accounts 2019 171 Strategic Report Section Two Performance materiality All financially significant components of Revenue Profit before tax Net assets We set performance materiality at a the group were subject to full scope audit level lower than materiality to reduce the procedures, which were executed to the 0.4% 1.7% 0.1% probability that, in aggregate, uncorrected lower of group component materiality ranging 99.6% 98.3% 99.9% and undetected misstatements exceed the from £4.9m to £9.9m, or their respective materiality for the financial statements as statutory materiality. a whole. Group performance materiality was set at 70% of group materiality for the At group level we tested the consolidation 2019 audit (2018: 70%). In determining process and carried out analytical procedures performance materiality, we considered the to confirm our conclusion that there were no following factors: significant risks of material misstatement of the aggregated financial information of the a. the quality of the control environment and remaining components that were not subject the fact that we were able to rely on key to full scope audit or subject to audit of

controls for some business processes; specified account balances. Governance Section Three Full audit scope Review at group level b. the consistency of operations even with Working with other auditors the turnover of finance personnel in the The group audit team follows a programme last two years; and of planned visits that has been designed so that a senior member of the group audit Other information Responsibilities c. the low level of corrected and uncorrected team visits each of the locations where the The directors are responsible for the other of directors misstatements identified in previous audits. group audit scope is focused at least once information. The other information comprises every three years. Our most recent visit to As explained more fully in the Directors’ the information included in the annual report, Error reporting threshold the overseas component in Australia took Responsibilities Statement, the directors other than the financial statements and our We agreed with the Group Audit Committee place in 2017 for the 2016 year-end audit are responsible for the preparation of the auditor’s report thereon. that we would report to the Group Audit whilst the Canadian component was last financial statements and for being satisfied Committee all audit differences in excess of visited in 2017 for the 2017 year-end audit. that they give a true and fair view, and Our opinion on the financial statements does £580k (2018: £579k), as well as differences The Group Audit Engagement Partner is also for such internal control as the directors below that threshold that, in our view, not cover the other information and, except determine is necessary to enable the the Audit Partner for the Group’s UK-based to the extent otherwise explicitly stated in warranted reporting on qualitative grounds. components and subsidiaries. preparation of financial statements that are We also report to the Group Audit Committee our report, we do not express any form of free from material misstatement, whether due StatementsFinancial Four Section assurance conclusion thereon. on disclosure matters that we identified when In 2019 we reassessed the three year to fraud or error. assessing the overall presentation of the rotational plan and the risks presented within In connection with our audit of the financial financial statements. each component and determined that a In preparing the financial statements, the statements, our responsibility is to read the directors are responsible for assessing the visit to Australia in the current year was not other information and, in doing so, consider An overview of the scope necessary. group’s and the parent company’s ability to whether the other information is materially continue as a going concern, disclosing as of our audit inconsistent with the financial statements applicable, matters related to going concern During the 2019 audit, we included the or our knowledge obtained in the audit or Identification and scoping of components component audit teams in our team and using the going concern basis of otherwise appears to be materially misstated. accounting unless the directors either intend Our Group audit was scoped by obtaining briefings, discussed their risk assessments, to liquidate the group or the parent company an understanding of the group and its remotely reviewed key audit work papers If we identify such material inconsistencies or to cease operations, or have no realistic environment, including group-wide controls, and documentation of findings from their or apparent material misstatements, we alternative but to do so. and assessing the risks of material work, and senior members of the group are required to determine whether there misstatement at the group level. engagement team attended local audit is a material misstatement in the financial committees via telephone conference statements or a material misstatement of Based on that assessment, we focused our where concluded to be necessary. Regular the other information. If, based on the work Other Information Section Five group audit scope primarily on the audit work conference calls are held with overseas we have performed, we conclude that there for the general and life insurance businesses component audit teams, including the is a material misstatement of this other in the UK, Australia and Canada, as well as Component Audit Partners and the Group information, we are required to report the UK insurance broker and investment Audit Partner. that fact. management subsidiaries, tailoring our procedures depending on the financial We have nothing to report in respect significance of the component to the group. of these matters. About Us About One Section

Section Four Independent Auditor’s Report 172 Ecclesiastical Annual Report & Accounts 2019 173 Strategic Report Section Two Auditor’s responsibilities performance including the design of the In addition, we considered provisions of estimates are indicative of a potential bias; Group’s remuneration policies, key drivers other laws and regulations that do not have a and evaluating the business rationale of any for the audit of the financial for directors’ remuneration, bonus levels direct effect on the financial statements but significant transactions that are unusual or statements and performance targets; compliance with which may be fundamental outside the normal course of business. Our objectives are to obtain reasonable • the group’s own assessment of the risks to the Group’s ability to operate or to avoid assurance about whether the financial that irregularities may occur either as a a material penalty. These included laws We also communicated relevant identified statements as a whole are free from material result of fraud or error that was approved by and regulations issued by the Financial laws and regulations and potential fraud risks misstatement, whether due to fraud or error, the board; Conduct Authority (‘FCA’) and the Prudential to all engagement team members including and to issue an auditor’s report that includes our • results of our enquiries of management, Regulation Authority (‘PRA’), including internal specialists and significant component opinion. Reasonable assurance is a high level of Group Internal Audit, and the Group Audit the Group’s regulatory solvency capital audit teams, and remained alert to any assurance, but is not a guarantee that an audit Committee about their own identification requirements. indications of fraud or non-compliance with conducted in accordance with ISAs (UK) will and assessment of the risks of irregularities; laws and regulations throughout the audit. always detect a material misstatement when it • any matters we identified having obtained Audit response to risks identified exists. Misstatements can arise from fraud or and reviewed the group’s documentation of As a result of performing the above, we their policies and procedures relating to: error and are considered material if, individually identified general insurance reserves and Governance Section Three or in the aggregate, they could reasonably be – identifying, evaluating and complying with life insurance reserves as key audit matters expected to influence the economic decisions laws and regulations and whether they were related to the potential risk of fraud. The key of users taken on the basis of these financial aware of any instances of non-compliance; audit matters section of our report explains statements. – detecting and responding to the risks of the matters in more detail and also describes fraud and whether they have knowledge of the specific procedures we performed in Details of the extent to which the audit was any actual, suspected or alleged fraud; response to those key audit matters. considered capable of detecting irregularities, – the internal controls established to including fraud and non-compliance with mitigate risks of fraud or non-compliance In addition to the above, our procedures laws and regulations are set out below. with laws and regulations; to respond to risks identified included the • the matters discussed among the audit following: A further description of our responsibilities engagement team including significant • reviewing the financial statement for the audit of the financial statements is component audit teams and involving disclosures and testing to supporting located on the FRC’s website at: www.frc.org. relevant internal subject matter experts documentation to assess compliance with uk/auditorsresponsibilities. This description and specialists, including tax, pensions, provisions of relevant laws and regulations forms part of our auditor’s report. IT, and actuarial specialists regarding how described as having a direct effect on the and where fraud might occur in the financial financial statements; StatementsFinancial Four Section statements and any potential indicators of Extent to which the audit • enquiring of management, the Group Audit fraud. Committee and in-house legal counsel was considered capable concerning actual and potential litigation of detecting irregularities, As a result of these procedures, we and claims; considered the opportunities and incentives • performing analytical procedures to identify including fraud that may exist within the organisation for any unusual or unexpected relationships We identify and assess the risks of material fraud and identified the greatest potential that may indicate risks of material misstatement of the financial statements, for fraud in the valuation of general and life misstatement due to fraud; whether due to fraud or error, and then insurance reserves. In common with all audits • reading minutes of meetings of those design and perform audit procedures under ISAs (UK), we are also required to charged with governance, reviewing internal responsive to those risks, including obtaining perform specific procedures to respond to audit reports and reviewing correspondence audit evidence that is sufficient and the risk of management override. with HMRC, the FCA, and the PRA; appropriate to provide a basis for our opinion. • engaging actuarial specialists to assess the We also obtained an understanding of the assumptions, methodology and judgement Identifying and assessing potential risks legal and regulatory framework that the used in calculating the general and life Other Information Section Five related to irregularities Group operates in, focusing on provisions insurance reserves and the pension In identifying and assessing risks of material of those laws and regulations that had a obligation; and misstatement in respect of irregularities, direct effect on the determination of material • in addressing the risk of fraud through including fraud and non-compliance with laws amounts and disclosures in the financial management override of controls, testing and regulations, we considered the following: statements. The key laws and regulations we the appropriateness of journal entries and • the nature of the industry and sector, considered in this context included the UK other adjustments; assessing whether the control environment and business Companies Act and relevant tax legislation. judgements made in making accounting About Us About One Section

Section Four Independent Auditor’s Report 174 Ecclesiastical Annual Report & Accounts 2019 175 Strategic Report Section Two Report on other legal and Directors’ remuneration Under the Companies Act 2006 we are also regulatory requirements required to report if in our opinion certain Opinions on other matters prescribed disclosures of directors’ remuneration have by the Companies Act 2006 not been made. In our opinion, based on the work undertaken in the course of the audit: We have nothing to report in respect • the information given in the strategic report of this matter. and the directors’ report for the financial year for which the financial statements are Other matters prepared is consistent with the financial statements; and Auditor tenure • the strategic report and the directors’ report Following the recommendation of the Group ‘We use a materiality have been prepared in accordance with Audit Committee, we were appointed by the applicable legal requirements. group’s Board of Directors on 1 November 1998 to audit the financial statements for approach to drive our Governance Section Three In the light of the knowledge and understanding the year ended 31 December 1998 and of the group and the parent company and subsequent financial periods. The period of strategy, responding to their environment obtained in the course of total uninterrupted engagement including the audit, we have not identified any material previous renewals and reappointments of the misstatements in the strategic report or the firm is 22 years, covering the years ended 31 new responsible business directors’ report. December 1998 to 31 December 2019. Consistency of the audit report with challenges which impact Matters on which the additional report to the Group we are required to Audit Committee report by exception Our audit opinion is consistent with the our customers, partners additional report to the Group Audit Adequacy of explanations received Committee we are required to provide in and accounting records accordance with ISAs (UK). and communities.’ Under the Companies Act 2006 we are Financial StatementsFinancial Four Section required to report to you if, in our opinion: Use of this report • we have not received all the information and This report is made solely to the company’s explanations we require for our audit; or members, as a body, in accordance with • adequate accounting records have not been Chapter 3 of Part 16 of the Companies Act kept by the parent company, or returns 2006. Our audit work has been undertaken adequate for our audit have not been so that we might state to the company’s received from branches not visited by us; or members those matters we are required • the parent company financial statements to state to them in an auditor’s report and are not in agreement with the accounting for no other purpose. To the fullest extent records and returns. permitted by law, we do not accept or assume responsibility to anyone other than We have nothing to report in respect the company and the company’s members of these matters. as a body, for our audit work, for this report, or for the opinions we have formed.

Paul Stephenson BA FCA Other Information Section Five Senior statutory auditor For and on behalf of Deloitte LLP Statutory Auditor London, United Kingdom 17 March 2020 Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 177 (77) 105 453 (747) (833) (457) £000 3,646 3,189 4,288 15,662 18,851 2018 105 (187) (747) £000 3,646 1,692 4,288 2,069 Group Parent (3,082) (1,577) 14,413 16,482 (14) 110 2019 - - (19) 640 (649) (747) £000 £000 1,198 1,198 (5,851) (5,851) (1,368) 525 (7,049) (7,049) (6,598) (5,865) Group Parent 55,215 64,286 61,813 70,151 19 27 27 27 Notes Ecclesiastical Annual Report Accounts & 2019 Consolidated and parent statement of comprehensive income of comprehensive statement and parent Consolidated 2019 31 December year ended for the Consolidated andConsolidated income statement parent comprehensive of 2019 December 31 ended year the for Actuarial (losses)/gains on retirement benefit plans Actuarial (losses)/gains Other comprehensive income Other comprehensive Fair value gains on property Attributable tax Profit for the year (Losses)/gains on currency translation differences Gains/(losses) on net investment hedges Attributable tax Net other comprehensive (expense)/income equity holders of the Total comprehensive income attributable to Parent Items that will not be reclassified to profit orItems loss: that may be reclassified subsequently to profit or loss: 176 (329) (958) 2018 £000 3,994 1,039 (5,241) 62,996 15,371 14,413 26,188 15,700 (66,346) 282,119 356,971 214,090 (137,640) (111,873) (114,388) (266,419) 544 (620) 2019 £000 73,263 71,240 61,813 52,800 73,883 74,438 (15,080) (72,740) (11,450) 225,986 372,208 393,952 (157,808) (120,577) (298,325) (152,886) 6 9 9 7 8 5 6 10 14 11 5, 6 Notes Financial Statements Consolidated statement of profit or loss of profit statement Consolidated 2019 31 December year ended for the Section Four Section Fees, commissions and other acquisition costs Other operating and administrative expenses Total revenue Expenses Claims and change in insurance liabilities Reinsurance recoveries Total operating expenses Operating profit Finance costs Other operating income Net investment return Profit before tax Tax expense of the Parent) Profit for the year (attributable to equity holders Gross written premiums Outward reinsurance premiums for unearned premiums Net change in provision Net earned premiums Fee and commission income Revenue Consolidated statementConsolidated or profit loss of 2019 December 31 ended year the for Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information - 179 10 Parent authorised 2018 59 £000 £000 4,632 4,632 1,379 1,379 2,905 2,243 5,2165,813 5,059 5,813 8,391 7,372 1,749 Group 19,90071,919 15,280 47,255 31,665 31,070 30,06433,90716,131 4,849 27,812 16,131 120,477 120,477 460,895586,004 369,738 720,049 494,847 531,439 858,846 639,538 152,182798,974140,346 152,182 636,688 100,238 153,630109,417 116,328 72,775 1,444,850 1,134,385 1,444,850 1,134,385 - - 2019 123 £000 £000 4,632 4,632 5,998 5,998 4,867 4,695 8,505 8,505 2,203 4,211 2,732 Group Parent 22,81576,952 16,981 45,566 35,649 34,428 12,923 10,328 38,65138,199 11,914 31,133 20,322 16,700 74,775 42,248 120,477 120,477 482,426 399,648 763,977 556,272 148,146857,913 148,146 697,153 159,556 106,701 178,358 133,793 607,535 524,757 923,304 674,268 1,530,839 1,199,025 1,530,839 1,199,025 26 31 31 28 30 19 29 19 17 18 30 20 21 22 28 24 25 32 Notes Mark Hews Group Chief Executive n Consolidated and parent statement of financial position of financial statement and parent Consolidated 2019 at 31 December Ecclesiastical Annual Report Accounts & 2019 David Henderson Chairma Total assets Equity Share capital Share premium account Retained earnings and other reserves Total shareholders' equity Liabilities Current tax liabilities Deferred income Other liabilities Total liabilities Insurance contract liabilities Deferred tax liabilities Total shareholders' equity and liabilities pages 176 to 245 were approved and The financial statements of Ecclesiastical Insurance Office plc, registered number 24869, on for issue by the Board of Directors on 17 March 2020 and signed on its behalf by: Retirement benefit obligations Lease obligations Provisions for other liabilities Pension assets Assets assets Goodwill and other intangible Deferred acquisition costs Deferred tax assets Property, plant and equipment Investment property Financial investments Reinsurers' share of contract liabilities Current tax recoverable Other assets Cash and cash equivalents Consolidated and parent statement financial of position 2019 December 31 at 178 (9,181) 64,286 15,662 (30,000) 586,004 494,847 586,004 499,096 5,497 5,497 on and hedging 3,559 3,189 3,559 2,069 (9,181) 61,813 61,813 14,413 14,413 (17,000) (17,000) 361,595 446,238 592,473 earnings Total Retained - (149) (149) - (9,181) (9,181) - (9,181) (9,181) - 3,230 3,230 - (17,000) (17,000) - 3,230 3,230 - - (30,000) - (9,181) - (9,181) (115) (115) - 4,920 4,920 - (30,000) (30,000) - 15,662 - - 70,151 70,151 (14) 64,300 (14) (5,851) (5,865) (747) 55,962 55,215 (747) (5,851) (6,598) (457) £000 £000 £000 (1,577) 17,972 16,482 (1,577) 19,071 441,259 20,648 reserve Translation and hedging ------87 87 (457) 19,221 18,851 87 87 565 565 7,578 565 7,564 391,519 524,757 565 18,324 463,537 607,535 478 565 19,071 441,259 565 7,578 361,595 494,847 478 8,035 365,474 £000 reserve Revaluation ------£000 4,632 4,632 4,632 4,632 4,632 4,632 4,632 4,632 Share premium ------£000 Share capital 120,477 120,477 120,477 120,477 120,477 120,477 120,477 120,477 15 15 15 15 15 15 Notes Financial Statements Consolidated and parent statement of changes in equity of changes statement and parent Consolidated 2019 31 December year ended for the Section Four Section Group At 1 January 2019 Group tax relief in excess of standard rate At 31 December 2018 Dividends Gross charitable grant Tax relief on charitable grant Other net income/(expense) Other net income/(expense) Other net expense At 1 January 2018 Profit for the year Total comprehensive income/(expense) Other net Total comprehensive income income/(expense)Dividends Profit for the year Profit for the year Profit for the year Total comprehensive (expense)/income Dividends Gross charitable grant At 1 January 2019 Total comprehensive income/(expense) Dividends Gross charitable grant At 31 December 2019 At 1 January 2018 The revaluation reserve represents cumulative net fair value gains on owner-occupied property. Further details of the translati The revaluation reserve represents cumulative net fair value gains on owner-occupied property. reserve are included in note 27. Tax relief on charitable grant Gross charitable grant Tax relief on charitable grant Group tax relief in excess of standard rate At 31 December 2019 Tax relief on charitable grant At 31 December 2018 Parent Consolidated and parent statement of changes in equity in changes of statement parent and Consolidated 2019 December 31 ended year the for Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 181 957 2019 £000 1,379 19,605 (1,579) (1,451) (4,969) (1,480) 12,462 by the l borrowing parative fications and 2018 to the e in rate applied to cing changes environment in operties and ified as in preparing the andard. There was d and domiciled in in preparing the in addition offers a the Group’s functional . These liabilities were measured at the present value of the remaining lease payments, Leases on adoption of IFRS the Group applied existing accounting practices for insurance and on adoption of IFRS the Group applied existing Insurance Contracts, Leases Notes to the financial statements to the financial Notes policies 1 Accounting Ecclesiastical Annual Report Accounts & 2019 The Group and Parent have adopted IFRS 16 using the modified retrospective approach, as permitted by the standard. The reclassi The Group and Parent have adopted IFRS 16 using weighted average lessee’s incrementa discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The Group’s lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 4.0%. The Parent’s weighted average lease commitments at 31 December the lease liabilities on 1 January 2019 was 3.9%. The following table reconciles the operating lease liability recognised on 1 January 2019 following the adoption of IFRS 16. the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019. Com the adjustments arising from the new leasing rules New and revised standards and amendments with effect from 1 January 2019: The Group has adopted the following standards - IFRS 16, been restated, as permitted under the specific transitional provisions in the st figures for the 2018 reporting period have not no impact on the Group or Parent’s opening equity. England, together with its subsidiaries (collectively, the ‘Group’) operates principally as a provider of general insurance and principally as a provider of general insurance subsidiaries (collectively, the ‘Group’) operates England, together with its Canada. The principal accounting policies adopted with offices in the UK & Ireland, Australia and range of financial services, of the Group and Parent are set out below. Standards (IFRS) financial statements International Financial Reporting Lease liability recognised as at 1 January 2019 Ecclesiastical Insurance Office plc (hereafter referred to as the ‘Company’, or ‘Parent’), a public limited company incorporate Office plc (hereafter referred to as the ‘Company’, Ecclesiastical Insurance of the Group’s entities are measured in the currency of the primary economic Items included in the financial statements of each Act 2006, a separate profit and loss account for the Company is not presented. As permitted by Section 408 of the Companies Discounted using the lessee’s incremental borrowing rate at the date of initial application which that entity operates (the 'functional currency'). The consolidated financial statements are stated in sterling, which is which that entity operates (the 'functional currency'). which had previously been class On adoption of IFRS 16, the Group and Parent recognised lease liabilities in relation to leases ‘operating leases’ under the principles of IAS 17, Contract elements reassessed as service agreements Payments due in periods covered by extension options that are included in the lease term Leases committed but not yet commenced at 31 December 2018 Short-term leases, sales taxes and other Finance liabilities recognised as at 31 December 2018 In accordance with IFRS 4, and presentation currency. Operating lease commitments disclosed as at 31 December 2018 certain financial instruments. European Union (EU). The financial statements have been prepared on the historical cost basis, except for the revaluation of pr European Union (EU). The financial statements Basis of preparation which ar prepared using the following accounting policies, and Parent's financial statements have been The Group’s consolidated and endorsed International Accounting Standards Board (IASB) at 31 December 2019 issued by the accordance with IFRS applicable consider that it is appropriate to continue to adopt the going concern basis As stated in the Director's Report, the directors accounts. appropriate to comply with the IFRS framework and applicable standards, introdu participating investment contracts, modified as information. only where they provide more reliable and relevant Notes to the financial statements 1 Accounting policies1 Accounting - - 180 43 (60) (58) 699 329 29,557 2018 - - - (274) - (174) (3) 55 (85) 949 329 (225) (329)(346) (329) (346) (777) (286) (309) £000 £000 2,437 2,212 2,931 2,931 9,790 13,146 5,838 6,950 1,684 9,422 Group Parent (9,181) (9,181) (4,998) (3,140) (2,371) (2,060) (4,363) (3,829) (1,822) (1,538) (3,078)(5,388) (2,364) (1,763) 35,506 16,431 9,514 17,347 11,153 15,371 15,762 47,646 52,293 16,42793,767 21,434 51,399 (27,107) (24,307) (42,161) (29,729) (17,000) (17,000) (26,856) (27,030) 149,562 118,173 109,417 72,775 (125,739) (96,461) - 84 589 610 504 815 825 2019 ------(40) 171 620 815 784 (620) (504) (198) 257 £000 £000 5,081 4,222 1,016 9,605 22,512 (9,181) (9,181) (8,296) (5,787) (9,613) (7,615) (2,787) (2,185) (4,394) (4,117) (4,553) (3,307) Group Parent 49,537 25,501 16,293 10,351 74,775 42,248 73,263 80,552 11,153 2,371 13,041 11,120 22,191 22,818 (52,091) (45,136) (26,218) (33,243) (30,000) (30,000) (21,265)(25,272) (6,543) (16,724) (14,047) (11,732) (42,588)(34,444) (41,870) (30,784) 148,308 107,414 109,417 72,775 (156,760) (122,792) 16 22 25 Notes Financial Statements Consolidated and parent statement of cash flows of cash statement and parent Consolidated 2019 31 December year ended for the Section Four Section Depreciation of property, plant and equipment Depreciation of property, plant and equipment Revaluation of property, subsidiary undertakings Impairment of shares in Loss/(profit) on disposal of property, plant and equipment Loss/(profit) on disposal of intangible assets Amortisation and impairment Net fair value (gains)/losses on financial instruments and Net fair value (gains)/losses on financial instruments investment property Dividend and interest income Finance costs Adjustment for pension funding Changes in operating assets and liabilities: liabilities Net increase/(decrease) in insurance contract Purchases of financial instruments and investment property Purchases of financial instruments and investment Sale of financial instruments and investment property Dividends received Payment of group tax relief in excess of standard rate Dividends paid to Company's shareholders Cash and cash equivalents at end of year Interest received Tax paid Proceeds from the sale of property, plant and equipment Purchases of intangible assets Acquisition of business, net of cash acquired Acquisition of shares issued by subsidiary Net cash used by investing activities Cash flows from financing activities Interest paid Payment of lease liabilities 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 Exchange (losses)/gains on cash and cash equivalents Adjustments for: Profit before tax Net cash from operating activities Cash flows from investing activities Purchases of property, plant and equipment Net (increase)/decrease in reinsurers' share of contract liabilities Net (increase)/decrease in reinsurers' share of Net increase in deferred acquisition costs Net increase in other assets Net increase in operating liabilities Net increase/(decrease) in other liabilities Cash generated by operations Consolidated and parent statement of cash flows of statement parent and Consolidated 2019 December 31 ended year the for Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 183 d as the fair imates which s and liabilities, t of non- ed in these f net assets ased on he Company has ent, in accordance ed statement of wer to affect its ree. Goodwill is assets acquired and nter-company uisition date. Non- ir value of the ence is recognised Applicable to annual reporting periods beginning on or after 1 January 2021 (subject to EU endorsement). A one-year deferral has tentatively been proposed by the IASB subject to due process. Effective date Annual periods beginning on or after 1 January 2018. Although can be deferred until 2021 for insurers. A further one- year deferral for insurers has tentatively been proposed subject to due process. and the '. Insurance Contracts Insurance contracts impact of the standard on the financial statements is still being impact of the standard on the financial statements to be the assessed. The Group's long-term business is expected expects to be most affected by the new standard. The company to the able to use the simplified premium allocation approach which majority of its general business insurance contracts, to IFRS applies mainly to short-duration contracts. Amendments 2019, the 17 were tentatively proposed by the IASB in January outcome of which is being monitored. It is expected that equity instruments will continue to be It is expected that equity profit or loss. There is a measured at fair value through of certain debt instruments will possibility that the measurement or fair value through other change to amortised cost No changes are expected from the more comprehensive income. accounting requirements. The Group is principles-based hedge which gives a eligible for, and has applied, the deferral approach, the effective temporary exemption from applying IFRS 9 until date of 'IFRS 17, for IFRS 17 is a comprehensive new accounting standard insurance contracts covering recognition and measurement, issued in May presentation and disclosure. The standard was 2017 as replacement for IFRS 4, Separate Financial Statements. Provides a new model for 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. 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. Financial Notes to the financial statements to the financial Notes 1 Accounting policies (continued) 1 Accounting IFRS 9, Basis of consolidation has the ability to use its po power over the investee, is exposed to variable return from its involvement with the investee and are included in the consolidat returns. The results and cash flows relating to subsidiaries acquired or disposed of in the year to the date of disposal. All i profit or loss, and the consolidated statement of cash flows, from the date of acquisition or up transactions, balances and cash flows are eliminated. at cost less impairm In the Parent statement of financial position, subsidiaries are accounted for within financial investments with International Accounting Standard (IAS) 27, acquisition date. Identifiable value of the assets given, equity instruments issued and liabilities incurred or assumed at the their fair values at the acq liabilities and contingent liabilities assumed in a business combination are measured initially at consideration, the amoun measured as the excess of the aggregate of the consideration transferred, the fair value of contingent equity interest over the fa controlling interests and, for an acquisition achieved in stages, the fair value of previously held acquired, the differ identifiable net assets acquired. If the cost of acquisition is less than the fair value of the net assets directly through profit or loss. the acquisition equals the value o For business combinations involving entities or businesses under common control, the cost of on such transactions. transferred, as recognised by the transferor at the date of the transaction. No goodwill arises Subsidiaries control being achieved when t Subsidiaries are those entities over which the Company, directly or indirectly, has control, with cost of an acquisition is measure The Group uses the acquisition method of accounting to account for business combinations. The net assets of the acqui controlling interests are measured either at fair value or at a proportionate share of the identifiable IFRS 17, Insurance not expected to materially impact the Group. Other standards in issue but not yet effective are Use of estimates the use of estimates and assumptions that affect the reported amounts of asset The preparation of financial statements requires at the date of the financial statements. Although these estimates are b and the disclosure of contingent assets and liabilities and actions, actual results ultimately may differ from those estimates. Those est management’s best knowledge of current events statements are disclosed in note 2. have the most material impact on the financial financial statements. The following standards were in issue but were either not yet effective or have been deferred and therefore have not been appli or have been deferred and therefore have not were in issue but were either not yet effective The following standards Standard Key requirements statements Expected impact on financial Contracts Instruments Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements policies1 Accounting (continued) 182 2019 2019 £000 £000 its e Group and liabilities At 1 January At 1 January ny prepaid or on ity immediately (5,504) (5,719) (45,575) (70,239) liabilities of the sing from insurance ead, for contracts £000 £000 (445) (503) 1,680 1,680 Determining whether an Adjustment Adjustment

2018 2018 £000 £000 (5,059) (5,216) (47,255) (71,919) . The Group qualifies for the temporary exemption, At 31 December At 31 December 7,372 7,132 14,504 8,391 10,353 18,744

(1,379) (7,940) (9,319) (1,379) (11,083) (12,462) 116,328 (427) 115,901 153,630 (447) 153,183

Insurance Contracts . Financial Statements Financial Instruments , is effective for periods beginning on or after 1 January 2018. However the Group has taken the option available , is effective for periods beginning on or after 1 January 2018. However the Group has taken Financial Instruments Notes to the financial statements to the financial Notes 1 Accounting policies (continued) 1 Accounting Section Four Section to insurers to defer the application of IFRS 9 as permitted by IFRS 4, Certain entities within the Group do not qualify for the temporary exemption from the requirements of IFRS 9. Further informati Certain entities within the Group do not qualify for the temporary exemption from the requirements detailing the adoption of IFRS 9 is disclosed in the statutory financial statements of these entities. The other standards adopted in the year do not significantly impact the Group. IFRS 9, - 1 January 2019 as short-term leases; a remaining term of less than 12 months as at the accounting for operating leases with - and initial direct costs for the measurement of right-of-use assets at the date of initial application; the exclusion of In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard: the first time, the Group has used the following In applying IFRS 16 for - of leases with reasonably similar characteristics; the use of a single discount rate to a portfolio Right-of-use assets have been measured at 1 January 2019 at an amount equal to the lease liability, adjusted by the amount of a equal to the lease liability, adjusted by the been measured at 1 January 2019 at an amount Right-of-use assets have accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018. relating to that lease recognised in the balance accrued lease payments liabil the carrying amount of the lease asset and lease as finance leases the Group recognised For leases previously classified lease liability at the date of initial application. carrying amount of the right of use asset and the before transition as the Other liabilities Lease obligations Provisions for other liabilities Arrangement contains a Lease. which is available until annual periods beginning on or after 1 January 2021, since at 31 December 2015 greater than 90% of its which is available until annual periods beginning on or after 1 January 2021, since at 31 December December 2015 greater than 80% of were within the scope of IFRS 4. The Parent qualifies for the temporary exemption since at 31 with insurance. Other liabilities were within the scope of IFRS 4 and it does not engage in significant activities unconnected or fulfils obligations ari Parent include employment benefit and tax liabilities which arise solely because the Parent insures, December 2015 and as a result, th contracts. There has been no significant change to the Group or Parent's operations since 31 Parent continue to apply IAS 39, Parent Property, plant and equipment Other assets Other liabilities Lease obligations Provisions for other liabilities Group Property, plant and equipment Other assets entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4, entered into before the transition date the Group items on the balance sheet: The adoption of IFRS 16 affected the following - the lease. in determining the lease term where the contract contains options to extend or terminate the use of hindsight a contract is, or contains, a lease at the date of initial application. Inst The Group has also elected not to reassess whether 1 Accounting policies1 Accounting (continued) Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 185 d for in . Amounts e included for the year is net deficit. Group does ed by the expired risks . Interest and emiums on tion of opted ed as a provision ssociated with alised gains or at the year-end e outcomes. , a reduction for ims. iod of risk. o match with the ion and settlement gains and losses on of expected claims be known with Notes to the financial statements to the financial Notes 1 Accounting policies (continued) 1 Accounting Ecclesiastical Annual Report Accounts & 2019 (i) Outstanding claims provisions Life business provisions losses on investments disposed of in the accounting period. losses on investments disposed recognised through profit or loss. The value of realised gains and losses includes an adjustment for previously recognised unre includes an adjustment for previously recognised or loss. The value of realised gains and losses recognised through profit rental income is recognised as it accrues. rental income is recognised during carrying value and original cost, and the movement are calculated as the difference between Unrealised gains and losses financial investments and investment properties. Dividends on equity securities are recorded as revenue on the ex-dividend date are recorded as revenue on the ex-dividend investment properties. Dividends on equity securities financial investments and reinsurance premiums are accounte reinsurance assumed are recognised as revenue in the same manner as direct business. Outwards being reinsured. Estimates ar the same accounting period as the related premiums for the direct or inwards reinsurance business carried forward as unearned. The premiums ceded in a year which relates to periods of risk extending beyond the current year is the reinsured policies and in accordance with the relevant reinsurance contract. Further details on insurance contract liabilities are included in note 28. Net investment return for the year, realised gains and losses, unrealised of dividends, interest and rents receivable Net investment return consists order t also presented within net investment return in rate changes on insurance contract liabilities is The impact of discount liabilities. corresponding movements of assets backing the Claims occurring during the year, whether reported or not, related handling costs General insurance claims incurred include all losses adjustments to claims outstanding from previous years. the value of salvage and other recoveries, and any costs incurred in connection with the negotiation and settlement of cla Claims handling costs include all internal and external for when notified. Life business claims and death claims are accounted in respect of liability business, the ultimate cost of which cannot of certain types of general insurance claims, particularly representing the best estimate plus a risk margin within a range of possibl certainty at the year-end date. An estimate is made to reflect current market interest rates. Designated insurance liabilities are remeasured payable to intermediaries, attributable to subsequent periods is deferr The proportion of written premiums, gross of commission is taken to profit or loss in order that revenue is recognised over the per for unearned premiums. The change in this provision test for any overall excess At each reporting date, the Group reviews its unexpired risks and carries out a liability adequacy cash flows under its contracts. Un and deferred acquisition costs over unearned premiums, using the current estimates of future are assessed separately for each class of business. and a provision is held for any Surpluses and deficits are offset where business classes are considered to be managed together policies consistent with those ad Under current IFRS requirements, insurance contract liabilities are measured using accounting methods and assumptions approv previously. The life business provision is held in respect of funeral plans and determined using directors based on advice from the Chief Actuary. Reinsurance varying by line of business. Pr The Group assumes and cedes reinsurance in the normal course of business, with retention limits not yet confirmed. The propor premiums not notified by the year end and provision is made for the anticipated lapse of renewals not reinsure its life business. for ceded insurance liabilities Reinsurance assets primarily include balances due from both insurance and reinsurance companies provisions or the settled claims a recoverable from reinsurers are estimated in a manner consistent with the outstanding claims Insurance contract liabilities General insurance are based on the estimated ultimate cost of all claims incurred but not settled General insurance outstanding claims provisions provisions claims handling costs. Significant delays are experienced in the notificat date, whether reported or not, together with related (ii) Provision for unearned premiums (iii) Liability adequacy Notes to the financial statements policies1 Accounting (continued) 184 e for in nted for in k as a tely proportions the mates are , deferred of insurance when the nt hedges, ate the that the Group iabilities to as with-profit are carried s satisfied, recognised. ewals not yet ght to receive arged for forward as ansactions. l of a foreign m fee and s. All of the Group's currency using year- are classified as that no significant . . It also includes income from the Group's insurance broking activities, investment fund Financial Statements Revenue from contracts with customers Insurance contracts Notes to the financial statements to the financial Notes 1 Accounting policies (continued) 1 Accounting Section Four Section management fees, distribution fees from mutual funds and commission revenue from the sale of mutual fund shares which are accou management fees, distribution fees from mutual funds and commission revenue from the sale accordance with IFRS 15, Other operating income reinsurance scheme. It is recognised Other operating income consists of the return of surplus reserves from a government-backed included for premiums not notified by the year end ("pipeline premiums") and provision is made for the anticipated lapse of ren included for premiums not notified by the year in a year which relate to periods of risk extending beyond the end of the year confirmed. Those proportions of premiums written forward as unearned premiums. distribution is declared. Premium income and are recognised over time as th Fees charged for investment management services are variable based on funds under management Life business General insurance to intermediaries and accounted for in the period in which the risk commences. Esti Premiums are shown gross of commission paid business translation of the net investment in foreign operations are taken to the currency translation reserve within equity. On disposa currency translation reserve within equity. On in foreign operations are taken to the translation of the net investment net investme along with the corresponding movement on differences are transferred out of this reserve, operation, such exchange or loss on sale. statement of profit or loss as part of the gain and are recognised in the a discretionary participating feature, which is defined as a contractual ri Both insurance and investment contracts may contain benefits. The Group does not have any such participating contracts (referred additional benefits as a supplement to guaranteed are referred to as non-profit contracts in the financial statements. contracts). The Group's long-term business contracts the end of the year, are carried of reinsurance commissions written in a year which relate to periods of risk extending beyond amount of commission can be accura deferred income. Reinsurance profit commissions are recognised at the point in time when the estimated. which it is reasonably certain being the inception date of the insurance cover, or, where this income is variable, the point at commission that may be clawed bac reversal of the amount recognised would occur. An estimate is made for the amount of fees and the year. This is deducted fro result of policy cancellations or amendments in relation to performance obligations satisfied in of the inception date of cover commission income and recognised in provisions. Where commission or fees are received in advance in respect of fees or commissions income is recognised. Receivables are recognised in other debtors on inception date of cover has an unconditional right to receive. would occur. Fees ch services are provided, once it is reasonably certain that no significant reversal of the amount recognised on this basis. investment management services for institutional and retail fund management are also recognised Product classification insurance risk from another party (the policyholder) by agreeing to compens Contracts under which the Group accepts significant commissions which are accounted Fee and commission income consists primarily of reinsurance commissions and reinsurance profit the performance obligation i Income generated from the Group's insurance broking activities is recognised at the point at which As with general insurance premiums, reinsurance commissions are accounted for in the period in which the risk commences. Those As with general insurance premiums, reinsurance commissions are accounted for in the period end exchange rates, and their income and expenses using average exchange rates for the year. Exchange differences arising from rates for the year. Exchange differences their income and expenses using average exchange end exchange rates, and and l and from the translation of monetary assets resulting from the settlement of such transactions, Exchange gains and losses currencies, are recognised through profit or loss. denominated in foreign future event (the insured event) adversely affects the policyholder policyholder or other beneficiary if a specified uncertain significant insurance risk are classified as investment or service contract insurance contracts. Contracts that do not transfer contracts. life business contracts are classified as insurance accordance with IFRS 4, Foreign currency translation functional currencies into the Group's presentation of foreign operations are translated from their The assets and liabilities of the tr using exchange rates prevailing at the date are translated into the functional currency Foreign currency transactions Insurance contract premiums are recognised as income when receivable, at which date the liabilities arising from them are also Insurance contract premiums are recognised as Fee and commission income Premiums written include adjustments to premiums written in prior periods and estimates for pipeline premiums and are shown net Premiums written include adjustments to premiums premium taxes. 1 Accounting policies1 Accounting (continued) Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 187 ised through o not qualify under IFRIC 16, he assets, at epending on fair values are ine with IFRIC 16 t-term a valuation asis. Purchases futures contracts is m underlying equity r as loans and r value through initial recognition. in the statement of gains and losses are a legally enforceable liability if they are derivatives heir cost, including any requires the classification of certain financial assets and liabilities into separate of certain financial assets and liabilities into requires the classification , are subsequently carried at fair value. To the extent to which they are effective, changes at fair value. To the extent to which they are , are subsequently carried Financial Instruments: Recognition and Measurement to the fair value of hedging instruments are recognised in other comprehensive income, with all other fair value changes recogn income, with all other fair value changes instruments are recognised in other comprehensive to the fair value of hedging profit or loss in the period in which they arise. Hedges of a Net Investment in a Foreign Operation Financial instruments designated as fair value through profit or loss, those held for trading, and hedge accounted derivatives held for trading, and hedge accounted derivatives as fair value through profit or loss, those Financial instruments designated at amortised cost, using the effective interest method (except for shor All other financial assets and liabilities are measured of interest would be immaterial). receivables and payables when the recognition Notes to the financial statements to the financial Notes 1 Accounting policies (continued) 1 Accounting Ecclesiastical Annual Report Accounts & 2019 - - Offset of financial assets and financial liabilities IAS 39, measurement depends on their classification: initially measured at fair value. Their subsequent Financial instruments are net amount reported in the statement of financial position, when there is Financial assets and liabilities are offset, and the is an intention to settle on a net basis, or realise the asset and settle the right to offset the recognised amounts and there Derivative that derive their value fro Derivative financial instruments include foreign exchange contracts and other financial instruments financialinstruments. instruments and usually represents t All derivatives are initially recognised in the statement of financial position at their fair value, which hedging as assets or liabilities The notional or contractual amounts associated with derivative financial instruments are not recorded by way of cash margins on financial position as they do not represent the fair value of these transactions. Collateral pledged recognised as an asset in the statement of financial position within cash and cash equivalents. risk management positions, d Certain Group derivative transactions, while providing effective economic hedges under the Group’s for trading. Their fair value for hedge accounting under the specific IFRS rules and are therefore treated as derivatives held which are hedge accounted in l recognised immediately in net investment return. The fair value gains and losses for derivatives are recognised in other comprehensive income. Financial instruments Financial instruments of assets and liabilities, and is determined at the time on the nature and purpose of the financial The classification depends simultaneously. Financial investments IAS 39 and classifies its financial investments as either financial assets at fai The Group accounts for financial assets under (a) Financial assets at fair value through profit or loss changes in the fair value d premium paid. They are subsequently remeasured at their fair value, with the method for recognising profit or loss (designated as such or held for trading), as financial assets at fair value through other comprehensive income o profit or loss (designated as such or held for trading), receivables. if they are managed, and their performance evaluated, on a fair value b Financial investments are classified into this category are carried as assets when the whether they are designated as hedges of net investments in foreign operations. All derivatives positive and as liabilities when the fair values are negative. and sales of these investments are recognised on the trade date, which is the date that the Group commits to purchase or sell t and sales of these investments are recognised their fair value adjusted for transaction costs. Financial investments within this category are classified as held for trading their fair value adjusted for transaction costs. Financial hedge or are acquired principally for the purpose of selling in the near term. that are not accounted for as a net investment bid prices. Where there is no active market, fair value is established using The fair values of investments are based on quoted available. technique based on observable market data where categories for which the accounting requirements differ. categories for which the Notes to the financial statements policies1 Accounting (continued) 186 of measure ill relating to stimated d earnings. of between h-generating overable tatement of cognised f profit or loss ernal qualified istorical cost ion less follows: al cost less hanges in fair nal qualified uired at the date of 3 - 5 years straight line 4 years straight line or 27% reducing balance 3 - 10 years or length of lease straight line Over the term of the lease Financial Statements Notes to the financial statements to the financial Notes 1 Accounting policies (continued) 1 Accounting Section Four Section Investment property comprises land and buildings which are held for long-term rental yields. It is carried at fair value with c Investment property comprises land and buildings which are held for long-term rental yields. It accumulated amortisation and impairment after acquisition. Amortisation is on a straight-line basis over the weighted average e accumulated amortisation and impairment after and impairment charge for the period is included in the statement o useful life of intangible assets acquired. The amortisation within other operating and administrative expenses. Property, plant and equipment market value and movements are taken to the revaluation reserve within equity, net Owner-occupied properties are stated at open accumulated revaluation surpluses are transferred from this reserve to retaine deferred tax. When such properties are sold, the is below original cost, any revaluation movement arising during the year is re Where the market value of an individual property profit or loss. Valuations are carried out at least every three years by exter within net investment return in the statement of and equipment within the statement of financial position are carried at h surveyors. All other items classed as property, plant less accumulated depreciation and impairment. on owner-occupied properties since such depreciation would be immaterial. Land is not depreciated. No depreciation is provided of other assets to their residual values over their estimated useful lives as Depreciation is calculated to write down the cost Computer equipment Motor vehicles Right-of-use assets or loss. amount, it is written down to its recoverable amount by way of an impairment charge to profit is valued annually by ext value recognised in the statement of profit or loss within net investment return. Investment property surveyors at open market value. Fixtures, fittings and office equipment are incurred. Repairs and maintenance are charged to profit or loss during the financial period in which they Investment property Computerless accumulated amortisation and impairment, and amortised over a useful life Computer software is carried at historical cost software Other intangible customer and distribution relationships, and are carried at cost at acquisit Other intangible assets consist of acquired brand, assets is greater than its estimated rec Where the carrying amount of an item carried at historical cost less accumulated depreciation Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill is allocated to cas impairment losses. Goodwill is allocated for impairment and carried at cost less accumulated Goodwill is tested annually Goodwill acq value of the identifiable assets and liabilities excess of the cost of an acquisition over the fair Goodwill represents the of transition to IFRS) is carried at book value (origin acquisitions prior to 1 January 2004 (the date acquisition. Goodwill on option to considered more relevant, the Group uses the less any subsequent impairment. Where it is amortisation) on that date, less any subsequent impairment. goodwill initially at fair value, of goodw of an entity include the carrying amount impairment testing. Gains and losses on the disposal units for the purpose of the entity sold. The amortisation and impairment charge for the period is included in the s three and ten years, using the straight-line method. expenses. profit or loss within other operating and administrative Intangible assets 1 Accounting policies1 Accounting (continued) Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 189 et, but only s: leases. eriod of the se is classified he unavoidable -administered operty no not significant the period of f providing bonds. The leases are leases nce leases. substantially all investment he interest ount of the ion is measured as er the period of the classified as probable that an n future employer esulting from this d as operating leases. sent obligation but either Notes to the financial statements to the financial Notes 1 Accounting policies (continued) 1 Accounting Ecclesiastical Annual Report Accounts & 2019 When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublea When the Group is an intermediate lessor, it accounts outstanding in respect of the leases. Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer Leases for which the Group is a lessor are classified the contract is classified as a finance lease. All other leases are classifie the risks and rewards of ownership to the lessee, the right-of-use asset arising from the head lease. as a finance or operating lease by reference to on a straight-line basis over the term of the relevant lease. Rental income from operating leases is recognised of the Group’s net investment in the Amounts due from lessees under finance leases are recognised as receivables at the amount of return on the Group’s net Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate when it is virtually certain that the reimbursement will be received. financial position. Any asset r resulting pension plan surplus or deficit appears as an asset or obligation in the statement of from the plan or reductions i calculation is limited to the present value of economic benefits available in the form of refunds period. contributions to the plan. Independent actuarial valuations are carried out at the end of each reporting obligation can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate ass obligation can be made. Where the Group expects a provision to be reimbursed, the reimbursement from a contract are less than t The Group recognises a provision for onerous contracts when the expected benefits to be derived an outflow of resources is not probable or the amount cannot be reliably estimated. Employee benefits yields for high-quality corporate the present value of the estimated future cash outflows using a discount rate based on market Provisions and contingent liabilities result of past events, and it is Provisions are recognised when the Group has a present legal or constructive obligation, as a a reliable estimate of the am outflow of resources, embodying economic benefits, will be required to settle the obligation, and costs of meeting the obligations under the contract. or if there is a pre Contingent liabilities are disclosed if there is a possible future obligation as a result of a past event, funds. The pension obligat pensions is charged to profit or loss so as to spread the regular cost over the service lives of employees. Pension obligations which are held in separate trustee The Group operates a number of defined benefit and defined contribution plans, the assets of Under this method, the cost o For defined benefit plans, the pension costs are assessed using the projected unit credit method. Right-of-use assets are initially measured at cost and subsequently measured as cost less accumulated depreciation and comprise as cost less accumulated depreciation initially measured at cost and subsequently measured Right-of-use assets are - of lease liability; the amount of the initial measurement - received; commencement date, less any lease incentives any lease payment made at or before the - any initial direct costs; and - restoration costs. in the statement of financial position. presented within property, plant and equipment Right-of-use assets are basis as an expense in profit or loss. Short-term short-term leases are recognised on a straight-line Payments associated with months or less. with a lease term of 12 of the risks and rewards of ownership was retained by the lessor, were In the prior period, leases, where a significant portion operating leases were charged to profit or loss on a straight-line basis over operating leases. Payments made as lessees under operating leases was credited to profit or loss on a straight-line basis ov the lease. Rental income received as a lessor under basis over the period of the lease. lease. Lease incentives were recognised on a straight-line and rewards of ownership was transferred to the Group, were classified as fina Leases, where a significant portion of the risks were capitalised as property, plant and equipment and were depreciated over the p Assets obtained under finance lease contracts included within liabilities net of finance charges allocated to future periods. T lease. Obligations under such agreements were to these financial statements. Group as with respect to some of its investment properties. The Group also sublets pr The Group enters into lease agreements as a lessor a lessorlonger occupied by the Group. element of the lease payments was charged to profit or loss over the period of the lease. Assets held under finance leases were element of the lease payments was charged to Notes to the financial statements policies1 Accounting (continued) 188 strategy been, highly g the effective forward as immediately in in a foreign ble, it is written d during which s the underlying asset is ranslation d over the period her tablished in other th original t and loss over the s are not included ining and nsaction, the Group ncluded in other he right-of-use asset Financial Statements Notes to the financial statements to the financial Notes 1 Accounting policies (continued) 1 Accounting Section Four Section Derivative instruments for hedging of net investments in foreign operations Lease liabilities include the net present value of: - fixed payments less any lease incentives receivable; - variable lease payments that are based on an index or rate; - amounts expected to be payable by the lessee under residual value guarantees; - the exercise price of an option if the lessee is reasonably certain to exercise that option; and - payments and penalties from terminating the lease, if the lease term reflects the lessee exercising that option. Leases at the date at which the lease From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability processing new business. Acquisition costs which are incurred during a financial year are deferred and amortised over the perio processing new business. Acquisition costs which the costs are expected to be recoverable, if applicable. Group as a lessee costs are charged to the profi available for use by the Group. Each lease payment is deducted from the lease liability. Finance the liability for each period. T lease period so as to produce a constant periodic rate of interest on the remaining balance of is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Deferred acquisition costs Life business direct costs such as initial commission and the indirect costs of obta For life insurance contracts, acquisition costs comprise Insurance broking debtors and creditors arising from such transaction Where the Group acts as an agent in placing the insurable risks of clients with insurers, debtors Loans and receivables, comprising loans and cash held on deposit for more than three months, are carried at amortised cost usin Loans and receivables, comprising loans and cash General insurance commission and other acquisition costs relating to unearned premiums is carried For general insurance business, a proportion of business operation (net investment hedge) and hedges the forward foreign currency rate. hedge) and hedges the forward foreign currency operation (net investment and the item, as well as the risk management objective between the hedging instrument and the hedged documents the relationship on an ongoing basis. risk in the hedged item, both at inception and effective in offsetting the hedging reserve. The gain or loss relating to the ineffective portion is recognised comprehensive income and accumulated in the return. profit or loss, and is included in net investment (c) Loans and receivables is advanced to borrowers. To the extent that a loan or receivable is uncollecta interest method. Loans are recognised when cash to profit or loss. off as impaired. Subsequent recoveries are credited outwards, as deferred income. Deferred acquisition costs are amortise deferred acquisition costs or, with regard to reinsurance share of deferred acquisition costs is amortised in the same manner a in which the related revenues are earned. The reinsurers’ asset. maturities of three months or less and bank overdrafts. a corresponding liability is es in the Group's assets. When the Group receives cash in respect of resultant premiums or claims, to clients, amounts due are i creditors in favour of the insurer or client. Where the Group provides premium finance facilities debtors, with the amount owing for onward transmission included in other creditors. Hedge accounting is used for derivatives designated in this way, provided certain criteria are met. At the inception of the tra certain criteria are met. At the inception of for derivatives designated in this way, provided Hedge accounting is used to the effective portion of the net investment hedge, are recognised in ot Gains and losses on the hedging instrument, relating Cash and cash equivalents highly liquid investments wi Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term (b) Financial assetsinvestment certain contracts as a hedge of a net contract is entered into, the Group designates On the date a foreign exchange at fair value through other comprehensive income to the effective portion of the hedge accumulated in the foreign currency t Gains and losses on the hedging instrument relating for undertaking the hedge transaction. The Group also documents its assessment of whether the hedge is expected to be, and has of whether the hedge is expected transaction. The Group also documents its assessment for undertaking the hedge of the related investment. reserve are reclassified to profit or loss on disposal 1 Accounting policies1 Accounting (continued) Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 191 f future re regularly th IAS 36. ment have ised in the the end of the e statement of timates are or as a reduction cise) it. The urther details, cant cost or reasonable under ise an extension umptions set out excess cash held hat have terms to assessment and discount rate, be included in the he directors have ed as level 3 the nature and ertain to be Notes to the financial statements financial to the Notes accounting in applying and judgements estimates accounting 2 Critical policies Ecclesiastical Annual Report Accounts & 2019 applying in judgements and estimates accounting 2 Critical policiesaccounting There is uncertainty as to the economic effect that Brexit will have in both the short and long term. The key estimates and ass There is uncertainty as to the economic effect that Brexit will have in both the short and long The Group makes estimates and judgements that affect the reported amounts of assets and liabilities. Estimates and judgements a of assets and liabilities. Estimates and and judgements that affect the reported amounts The Group makes estimates to be expectations of future events that are believed historical experience and other factors, including reviewed and based on the circumstances. in applying the Group’s accounting policies (a) Critical judgements that t which are dealt with separately below, judgements, apart from those involving estimations The following are the critical recogn have the most significant effect on the amounts applying the Group’s accounting policies and that made in the process of financial statements: Pension and other benefit obligations are discounted at a rate set by reference to market yields at The Group's pension and other post-employment post-employment that are denominated in the currency in which the benefits will be paid, and t reporting period on high-quality corporate bonds pension liability. Judgement is required when setting the criteria for bonds to maturity approximating the terms of the related benefits The most significant criteria considered for the selection of bonds includes population from which the yield curve is derived. of outliers which are excluded. Further details are disclosed in note 19. quality of the corporate bonds and the identification the extent to which a surplus in a defined benefit plan can be recognised in th The Group also applies judgement in determining the maximum future economic benefit available in the form of a refund financial position. Judgement is required in determining Financial Interpretations Committee Interpretation 14 (IFRIC 14). in future contributions in accordance with International Unlisted is no active market and therefore no observable market price, are classifi The value of unlisted equity securities, where there securities judgements in respect of the most appropriate valuation technique to apply. F financial assets. This requires the Group to make statements which are impacted by these judgements are shown in note 4(b). including the amounts recognised within the financial Goodwill (CGU) and assessed annually for impairment. The CGU is defined in accordance wi Goodwill is allocated to a cash-generating unit impairment and liabilities form part of the CGU, particularly in assessing the level of Judgement is required when assessing which assets CGU. above the working capital requirements of the Leases given to all facts and circumstances that create an economic incentive to exerc In determining the lease term, consideration is if the lease is reasonably c option or not exercise a termination option. Extension options are only included in the lease term extended. replace the assets without signifi Most extension options have not been included in the lease liability because the Group could business disruption. obliged to exercise (or not exer The lease term is reassessed if an option is exercised (or not exercised) or the Group becomes occurs, which affects this assessment of reasonable certainty is only revised if a significant event or change in circumstances is within the control of the Group. (b) Key sources of estimation uncertainty estimates or assumptions. All es In applying the Group’s accounting policies various transactions and balances are valued using that knowledge and their predictions o based on management’s knowledge of current facts and circumstances, assumptions based on events and actions. include but are not limited to below include variables which may be impacted (either positively or negatively) by Brexit. These outcomes of Brexit, manage inflation, long-term economic growth rate and investment market returns. Given the range of possible not altered any key estimates or assumptions for a specific Brexit scenario. Notes to the financial statements 190 ed over the d and for the asset is lated by not regard are approved. y performance provide useful that it relates to te. roved by d at the year-end d immediately in d through profit or reporting purposes

the temporary current and past service costs, gains and losses on curtailments and settlements and net costs, gains and losses on curtailments and settlements current and past service Financial Statements Employee Benefits, Notes to the financial statements to the financial Notes 1 Accounting policies (continued) 1 Accounting Section Four Section interest expense or income (calculated by applying a discount rate to the net defined benefit liability or asset) are recognise (calculated by applying a discount rate to the interest expense or income they occur in other comprehensive income. are recognised in full in the period in which loss. Actuarial gains or losses a charge to profit or loss as incurred. of defined contribution plans are recognised as Contributions in respect Taxation in which case it is recognised in the statement of comprehensive income. items recognised in other comprehensive income, taxable result for the period, after any adjustment in respect of prior periods. Current tax is the expected tax payable on the on tax rates and laws which have been enacted or substantively enacte realised, or the deferred tax liability is settled, based date. Preference shares are recognised in the period in which they are declare shareholders. Dividends on Non-Cumulative Irredeemable appropriately approved. Charitable grant to ultimate parent undertaking charity. The Group does Payments are made via Gift Aid to the ultimate parent company, Allchurches Trust Limited, a registered equity in the period in which they these payments as being expenses of the business and, as such, recognises them net of tax in Use of Alternative Performance Measures (APM) although not defined under IFRS, As detailed in the Strategic Report, the Group uses certain key performance indicators which, indicators should be considered information and aim to enhance understanding of the Group's performance. The key performance provides details of how these ke complementary to, rather than a substitute for, financial measures defined under IFRS. Note 36 indicators reconcile to the results reported under IFRS. Some Group companies provide post-employment medical benefits to their retirees. The expected costs of these benefits are accru their retirees. The expected costs of these benefits provide post-employment medical benefits to Some Group companies Income tax is recognised in the statement of profit or loss except to the extent Income tax comprises current and deferred tax. Dividends on Ordinary shares are recognised in equity in the period in which they are declared and, for the final dividend, app Dividends on Ordinary shares are recognised in Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which Deferred tax assets are recognised to the extent Appropriations Dividends period of employment using an accounting methodology similar to that for defined benefit pension plans. Interest expense (calcu for defined benefit pension plans. Interest expense an accounting methodology similar to that period of employment using or loss. Actuarial gains and losses are recognise to the net obligations) is recognised through profit applying a discount rate actuaries value these obligations annually. other comprehensive income. Independent qualified leave as a result of services rendered by employees up to the year-end da estimated liability for annual leave and long service tax is measured using tax rates expected to apply when the related deferred tax and the amounts used for tax purposes. Deferred differences can be utilised. Other benefits service leave are recognised when they accrue to employees. A provision is made Employee entitlements to annual leave and long between the carrying amounts of assets and liabilities for financial Deferred tax is provided in full on temporary differences Other post-employment obligations In accordance with IAS 19, In accordance with IAS 1 Accounting policies1 Accounting (continued) Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 193 ong-term growth and sensitivities of se under this policy, credit rating Notes to the financial statements to the financial Notes 2 Critical accounting estimates and judgements in applying accounting policies (continued) accounting policies in applying and judgements accounting estimates 2 Critical Ecclesiastical Annual Report Accounts & 2019 Unlisted equity securities The valuation of unlisted equity securities requires estimates to be made for the price-to-book ratio, illiquidity discount and for the price-to-book ratio, illiquidity discount equity securities requires estimates to be made The valuation of unlisted Carrying value of goodwill to these estimates are provided in note 17. the carrying value of goodwill discount. Further details, including the sensitivity of the valuation to these inputs, are shown in note 4(b). including the sensitivity of the valuation to these discount. Further details, in u policies. In order to calculate the value for impairment as detailed in the Group’s accounting Goodwill is tested annually l to arise from the business unit, an appropriate make an estimation of the future cash flows expected the Group is required to the present value. Further details on these estimates flows and a suitable discount rate to calculate rate to apply to the cash Notes to the financial statements policies accounting applying in judgements and estimates accounting 2 Critical (continued) 192 rrent market ay apply to determine ases these differ s for these planation of ith respect to ses over a significant . Any changes that are e 3, and where through the es are based on and other post- for and the the end of each risk and to changes in the d actual medical unting estimate. and uncertainty are where aggregation medical expense Group's portfolio, ettlement cost of nges in the assumptions Financial Statements new types of claim, including latent claims, which arise from time to time; new types of claim, including latent claims, which retrospectively; (principally liability) will be interpreted in relation to unusual/latent claims the way in which certain reinsurance contracts and of claimants and exposure over time are issues; over the long term. whether all such reinsurances will remain in force whether a claim event has occurred or not and how much it will ultimately settle for; occurred or not and how much it will ultimately whether a claim event has and in the time taken to settle them, especially complex cases resolved variability in the speed with which claims are notified changes in the business portfolio affecting factors such as the number of claims and their typical settlement costs, which may changes in the business portfolio affecting factors including the discount rate applied in assessing lump sums, which m changes in legislation and court attitudes to compensation, courts; significantly from past patterns; Notes to the financial statements to the financial Notes 2 Critical accounting estimates and judgements in applying accounting policies (continued) accounting policies in applying and judgements accounting estimates 2 Critical Section Four Section - discount rates have been applied these are disclosed in note 28(a). General business insurance liabilities include a margin for discount rates have been applied these are disclosed future claims. The sensitivity of profit or loss to changes in the ultimate s uncertainty in addition to the best estimates for claims reserves is presented in note 28(a). - - - claims payments for the various classes of business are discussed further in not The uncertainties surrounding the estimates of The following items are considered key estimates and assumptions which, if actual results differ from those predicted, may have if actual results differ from those predicted, considered key estimates and assumptions which, The following items are - - - impact on the following year’s financial statements: impact on the following The effect of movements in the actuarial assumptions during the year, including discount rate, mortality, inflation, salary and The effect of movements in the actuarial assumptions during the year, including discount rate, estimates on standard industry and national mortality tables, adjusted to reflect recent historical mortality experience of the estimates on standard industry and national mortality mortality improvements where prudent. The estimated mortality rates are used with allowance also being made for expected future receipts. forecast benefit payments net of forecast premium current market returns as well as expectations about future economic and financial developments. expenses, margins for risk In addition to the best estimates of future deaths, inflation, investment returns and administration of profit or loss to cha added to these assumptions in calculating the liabilities of life insurance contracts. The sensitivity is presented in note 28(b)(iii). the charge to profit or los determined on an actuarial basis using a number of assumptions. The assumptions used in determining medical expense inflation benefits include the discount rate and, in the case of the post-employment medical benefits, expected plans. in these assumptions will impact profit or loss and may affect planned funding of the pension other comprehensive income. An ex inflation assumptions, on the pension and other post-employment liabilities are recognised in an appropriate discount rate at the actuarial gains recognised in the current year is included in note 19. The Group determines be required to settle the pension year, to be used to determine the present value of estimated future cash outflows expected to employment benefit obligations. of medical expense increa The expected rate of medical expense inflation is determined by comparing the historical relationship for the size of the plan an portfolio of UK-based post-retirement medical plans with the rate of inflation, making an allowance and credits are based in part on cu expense experience. Other key assumptions for the pension and post-employment benefit costs benefit scheme liabilities conditions. Additional information including the sensitivity of pension and post-employment medical key assumptions is disclosed in note 19. Pension and liabilities depend on factors The cost of these benefits and the present value of the pension and other post-employment benefit other post-employment benefits Estimates are also made as to future investment returns arising from the assets backing life insurance contracts. These estimat Estimates are also made as to future investment returns arising from the assets backing life insurance Future benefit contracts is dependent on estimates made by the Group. The determination of the liabilities under life insurance payments arising of deaths for each of the years in which the Group is exposed to risk. The Group b Estimates are made as to the expected number from life insurance contracts such contracts. Such uncertainty includes: such contracts. Such uncertainty The ultimate acco general business insurance contracts is a critical liability arising from claims made under The estimation of the ultimate liability arising from claims made under general business insurance contracts There is uncertainty as to the total number of claims made on each business class, the amounts that such claims will be settled class, the amounts that such claims will to the total number of claims made on each business There is uncertainty as pay w uncertainty as to how much the Group will ultimately There are various sources of estimation timing of any such payments. 2 Critical accounting estimates and judgements in applying accounting policies policies accounting applying in judgements and estimates accounting 2 Critical (continued) Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 195 rates. heir out ultimate t apparent for tion are the key perty insurance ies, of - - 300,045 197,227 - - - 245,888 - 155,129 54,157 42,098 - 42,100 - 54,158 - - 56,946 22,081 the indemnity ssess the final 21 219,331 21 356,971 2121 245,867 155,150 malicious damage, y varies according to d this average with he greatest likelihood £000 £000 Life insurance 645 £000 ------loss Other Funeral plans Total £000 1,073 169 1,115 1,009 10,657 16,922 2,784 10,657 645 16,922 2,784 11,730 814 18,037 3,793 10,657 645 financial Miscellaneous 51,490 General insurance £000 £000 3,550 17,289 208,792 71,547 172,191 53,949 16,922 2,784 Property Liability Gross Net 118,189 67,736 GrossNet 36,559 25,852 17,598 16,246 Net 92,337 GrossNet 243,432 121,741 91,688 85,025 Net 25,854 16,246 Gross 36,560 17,598 Net Gross 34,681 20,141 Gross Net 92,337 51,490 Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements to the financial Notes 3 Insurance risk (continued) 3 Insurance Notes to the financial statements 3 Insurance risk (continued) Total Parent Territory factors that influence the cost of claims. Individual large claims are more likely to arise from fire, storm or flood damage. T factors that influence the cost of claims. Individual large claims are more likely to arise from fire, The nature of claims may include fire, business interruption, weather damage, escape of water, explosion (after fire), riot and The nature of claims may include fire, business data to be received to a claims cost in the financial statements is much higher because there is insufficient time for adequate cost of claims. Costs of rebuilding propert Contracts are underwritten on a reinstatement basis or repair and restoration basis as appropriate. levels for business interrup replacement or indemnity for contents and time taken to bring business operations back to pre-loss of an aggregation of claims arises from earthquake, weather or major spreading fire events. depending on the length of larger claims typically taking longer to settle and business interruption claims taking much longer period involved. may also include cover for pecuniary loss through the inability to use damaged insured commercial properties. may also include cover for pecuniary loss through claims are particularly difficult to predict because the damage is often no subsidence, accidental damage and theft. Subsidence financial year, the uncertainty ab consequences, for example, subsidence claims. If a weather event happens near the end of the there is variability aroun Claims payment, on average, occurs within a year of the event that gives rise to the claim. However, 2018 Group Territory United Kingdom and Ireland Property for damage suffered to their property or for the value of property lost. Pro Property cover mainly compensates the policyholder classes reopened at a later date. some time. The ultimate settlements can be small or large with a risk of a settled claim being economic environment, and crime The number of claims made can be affected in particular by weather events, changes in climate, hurricanes and drought, and t Climate change may give rise to more frequent and extreme weather events, such as river flooding, For property insurance contracts, there can be variability in the nature, number and size of claims made in each period. For property insurance contracts, there can be The cost of repairing propert Individual claims can vary in amount since the risks insured are diverse in both size and nature. the extent of damage, cost of materials and labour charges. United Kingdom and IrelandCanada GrossTotal 172,233 53,949 Canada Australia (c) General insurance risks 194 64,457 49,800 ent 393,952 241,066 f a ) and nce) needs. The inues to ng market ce. The other gy, with ied in terms of t of claims and business: the uncertainty cal analysis, y. The with the Group's n the United - - 68,857 27,504 - - 64,457 49,800 - - 260,651 - 163,764 - - - 325,108 213,564 ability in the d to obtain the (13) 260,638 (13) 163,762 (13) (13) £000 £000 Life insurance 170 Other Funeral plans Total ------loss £000 £000 financial Miscellaneous General insurance £000 £000 5,083 21,053 1,198 42,331 24,41244,079 20,378 1,245 869 30,902 18,898 44,079 20,378 30,902 18,898 185,567 56,323 15,534 3,227 100,233 53,773 9,147 622 271,977136,218 101,113 93,724 16,779 10,345 4,096 792 185,567100,233 56,323 53,773 15,534 9,147 3,227 611 229,646 76,701 15,534 3,227 131,135 72,671 9,147 611 Property Liability Net Gross Gross Gross Net Gross Net Gross Net Net Gross Net Gross Net Financial Statements 3 Insurance risk 3 Insurance Notes to the financial statements to the financial Notes comprehensive programme of reinsurance using both proportional and non-proportional reinsurance, supported by proactive claims comprehensive programme of reinsurance using reviewed and modelled to ensure that it remains optimum to the Group's handling. The overall reinsurance structure is regularly with sustainable, long-term capacity to support its specialist business strate optimum reinsurance structure provides the Group at a reasonable cost. effective balance sheet and profit and loss protection the Group utilises the full range of proprietary catastrophe models and cont exposures. In conjunction with reinsurance brokers reflect the specialist nature of the portfolio. Reinsurance is purchased in line develop bespoke modelling options that better risk appetite. (b) Concentrations of risk with the principal classes of business written being property and liabilit The core business of the Group is general insurance, personal accident, fidelity guarantee and loss of money, income and licen miscellaneous financial loss class of business covers and also a small portfolio of motor policies, but this has been in run-off i class of business includes cover of legal expenses insurance policies support funeral planning products. Kingdom since November 2012. The Group's whole-of-life for the financial year, before and after reinsurance, by territory and by class of The table below summarises written premiums (a) Risk mitigation an extensive annual modelling exercise of gross and net (of proportional reinsura Catastrophe protection is purchased following Statistics demonstrate that the larger and more diversified the portfolio of insurance contracts, the smaller the relative vari Statistics demonstrate that the larger and more expected outcome will be. The Group’s underwriting strategy is designed to ensure that the underwritten risks are well diversif expected outcome will be. The Group’s underwriting In all operations pricing controls are in place, underpinned by sound statisti type and amount of risk and geographical spread. advice. Gross and net underwriting exposure is protected through the use o market expertise and appropriate external consultant Territory United Kingdom and Ireland Australia 2019 Group Canada Parent Territory United Kingdom and Ireland Total Canada Total of the amount and timing of the resulting claim. Factors such as the business and product mix, the external environment includi and product mix, the external environment of the resulting claim. Factors such as the business of the amount and timing cos with the actual frequency, severity and ultimate capacity all may vary from year to year, along competition and reinsurance an risk of failing to ensure disciplined risk selection Group to underwriting and pricing risk (the benefits. This subjects the in reserves exceeding the amount we are holding reserving risk (the risk of actual claims payments appropriate premium), claims capacity at a reasonable price). of failing to access and manage reinsurance reinsurance risk (the risk Through its general and life insurance operations, the Group is exposed to a number of risks, as summarised in the Risk Managem to a number of risks, as summarised in the Risk life insurance operations, the Group is exposed Through its general and and is the possibility that the insured event occurs Report. The risk under any one insurance contract section of the Strategic Section Four Section 3 Insurance risk Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 197 Total £000 (1,379) 74,775 42,248 72,775 (10,328) (45,566) (47,255) (71,919) (12,923) (76,952) 857,913 697,153 133,793 178,358 607,535 798,974 153,630 586,004 636,688 116,328 109,417 494,847 stic (292,543) (413,636) (402,719) (282,310) - - - (1,379) - - - - - ontinued to result 4,362 3,573 3,759 4,511 (8,644) (6,955) (9,023) ments in exchange 49,729 50,339 abilities. In particular, d to approximate to (292,543) (420,592) (248,264) 524,757 (413,636) (282,310) (235,167) ts insurance contracts. Other assets - - - - (402,719) ------£000 £000 (1,379) (36,543) (78,557) (65,634) (11,318) (60,969) (46,871) (37,994) (62,348) (406,852) Financial liabilities* and liabilities ------(1,379) ------£000 (2,306) (2,306) (2,306) (39,373) (2,306) Financial liabilities trading Held for ------(10,328) - - - (12,923) - - - 259 259 509 509 245 737 737 245 £000 Hedge accounted derivatives ------£000 5,766 9,930 9,928 42,248 74,775 72,775 178,234 254,541 130,220 195,272 149,119 112,569 receivables ------109,417 - - - - - 173,996 ------£000 5,823 5,331 268,466 5,331 3,311 3,311 3,061 5,770 3,061 Financial assets trading ------£000 638,088 638,088 848,573 848,573 782,976 782,976 570,353 5,823 570,353 t fair value Designated Held for Loans and a Notes to the financial statements to the financial Notes and capital management 4 Financial risk Ecclesiastical Annual Report Accounts & 2019 4 Financial risk and capital management At 31 December 2019 Parent Financial investments Other assets Cash and cash equivalents Finance lease obligations Other liabilities Net other Total Cash and cash equivalents Finance lease obligations Other liabilities Net other Total Financial investments Other assets Finance lease obligations Total modelling or stress testing techniques. modelling or stress testing The Group is exposed to financial risk through its financial assets, financial liabilities, reinsurance assets and insurance li liabilities, reinsurance assets and insurance financial risk through its financial assets, financial The Group is exposed to i not sufficient to fund the obligations arising from that the proceeds from its financial assets are the key financial risk is credit risk, equity price and currency risk. of financial risk are interest rate risk, The most important components has c risks to which the Group is exposed. Brexit from the prior period in the nature of the financial There has been no change move is exposed, including equity price volatility, relation to the economic risks to which the Group in greater uncertainty in by either stocha measurement of financial risks is informed growth prospects. The Group's management and rates and long-term UK The carrying value of those financial assets and liabilities not carried at fair value in the financial statements is considere The carrying value of those financial assets and liabilities not carried at fair value in the financial their fair value. At 31 December 2018 Cash and cash equivalents Other liabilities Net other Group Finance lease obligations Other liabilities Net other Total (i) Categories applying IAS 39 Financial investments Other assets At 31 December 2019 Financial investments Other assets Cash and cash equivalents At 31 December 2018 (a) Categories of financial instruments * Financial liabilities are held at amortised cost. Notes to the financial statements 196 factors that dical science into the future. lement process are linked to te applied for refore, claims for eived each year. a given year. This ate reserves for injured employees liabilities over the gnificant variability uncertainty as to and the legal ant are the experience may ma. The Group has a evels of mortality. e. The settlement settle. The legal and ssets held to back abilities. The small laims. These can vary assets of a similar term d. This is not one of the as to the extent and type Financial Statements Notes to the financial statements to the financial Notes 3 Insurance risk (continued) 3 Insurance Section Four Section could alter the expected mortality rates profile are epidemics, widespread changes in lifestyle and continued improvement in me could alter the expected mortality rates profile are epidemics, widespread changes in lifestyle on the assets backing the and social conditions. The primary risk on these contracts is the level of future investment returns by holding index-linked life of the policyholders. The interest rate and inflation risk within this has been largely mitigated bonds held to match the li to the expected liabilities profile. The main residual risk is the spread risk attached to corporate mortality risk is retained by the Group. (d) Life insurance risks changes in overall l Uncertainty in the estimation of the timing of future claims arises from the unpredictability of long-term Provisions rise to very late reported claims, which are often referred to as latent c The public and employers’ liability classes can give for latent claims Claims payment, on average, occurs about three to four years after the event that gives rise to the claim. However, there is si Claims payment, on average, occurs about three around this average. emerge slowly over many years, during which time there can be particular in nature and are difficult to predict. They typically cost. The Group has reflected this uncertainty and believes that it holds adequ the number of future potential claims and their up to the reporting date. latent claims that may result from exposure periods of ultimate claim cost for public and employers' liability claims occurring in Note 28 presents the development of the estimate technique for incurred claims. gives an indication of the accuracy of the estimation is a risk that returns on a inflation and backed by index-linked assets. Although assets are well matched to liabilities, there different from that assume liabilities are insufficient to meet future claims payments, particularly if the timing of claims is premiums now being rec Group's principal risks and new policies are no longer being written in the life fund, with only minimal experience. The most significant The Group bases these estimates on standard industry and national mortality tables and its own The Group provides whole-of-life insurance policies to support funeral planning products, for most of which the future benefits The Group provides whole-of-life insurance policies to support funeral planning products, for most The frequency and severity of claims arising on liability insurance contracts can be affected by several factors. Most signific of claims arising on liability insurance contracts The frequency and severity Liability classes protect policyholders from the liability to compensate in respect of liability insurance contracts which The main exposures are the holding of provisions for incurred claims that may only emerge some years Late notification of possible claims necessitates (employers' liability) and third parties (public liability). (employers' liability) and trau physical injury, disease and psychological the liability portfolios include damage to property, Claims that may arise from risks. The as it has lower exposure to industrial to most other commercial lines insurance companies different exposure profile as slips, trips and back injuries. common for the Group than injury claims such industrial diseases are less for periodic payment awards. for damages suffered, legal costs and the potential increasing level of awards liability is particularly difficult to predict. There is often uncertainty value of claims arising under public and employers' if they are, the amount and timing of the payments, including the discount ra of injury, whether any payments will be made and, levels of uncertainty include the late notification of possible claim events assessing lump sums. Key factors driving the high process. period can be considerable and is uncertain. A lack of comparable past In particular, the effect of inflation over such a long and, for certain types of claims, the amounts for which they will ultimately make it difficult to quantify the number of claims has a consequent impact on the uncertainty as to the length of the claims sett legislative framework continues to evolve, which and the ultimate settlement amounts. The severity of bodily injury claims can be influenced particularly by the value of loss of earnings and the future cost of car The severity of bodily injury claims can be influenced 3 Insurance risk (continued) Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 199 509 737 Total £000 5,331 851,634 852,143 492,515 496,842 788,307 789,044 through l currency and e inputs). This r liability, either - - - 3,061 - ed into a fair value category includes 404 261 66,703 356,058 67,107 45,034 Level 3 a market that is not active a market that is not active 190 509 246 44,773 286,134 737 4,451 67,107 4,960 7,547 1,200 Level 2 - 5,331 - - - 3,061 £000 £000 £000 Fair value measurement at the Level 1 780,076 780,076 490,911 289,165 241,115 495,348736,463 1,233 6,810736,463 45,034 end of the reporting period based on Notes to the financial statements to the financial Notes 4 Financial risk and capital management (continued) risk and capital 4 Financial Financial investments At 31 December 2019 or loss Financial assets at fair value through profit Debt securities Derivatives comprehensive Financial assets at fair value through other income Financial investments Derivatives Total financial assets at fair value At 31 December 2018 Financial assets at fair value through profit or loss Financial investments Equity securities Debt securities Equity securities Group Financial assets at fair value through other comprehensive income Financial investments Derivatives Total financial assets at fair value Derivatives (b) Fair value hierarchy asset o within level 1 that are observable for the using inputs other than quoted prices included Level 2: fair values measured includes listed debt or equity securities in indirectly (i.e. derived from prices). This category directly (i.e. as prices) or categories in the current year. There have been no transfers between investment The fair value measurement basis used to value those financial assets and financial liabilities held at fair value is categoris basis used to value those financial assets The fair value measurement hierarchy as follows: This markets for identical assets or liabilities. using quoted bid prices (unadjusted) in active Level 1: fair values measured and exchange-traded derivatives. listed debt securities in active markets listed equities in active markets, not exchange-traded. and derivatives that are asset or liability that are not based on observable market data (unobservabl Level 3: fair values measured using inputs for the Analysis of fair value measurement bases category includes unlisted debt and equities, including investments in venture capital, and suspended securities. Where a look- category includes unlisted debt and equities, including values are sourced from the investee, translated into the Group's functiona valuation approach is applied, underlying net asset with the fair values disclosed being directly sensitive to this input. adjusted to reflect illiquidity where appropriate, Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements (continued) capital and management risk 4 Financial 198 £000 £000 assets assets a d a 112,569 period. g period. 1,057,510 sing IAS 39. (SPPI), Total financial Total financial eet date, split sets. 109,417 - - 149,119 £000 £000 assets assets 2018 2018 Other financial Other financial £000 £000 assets assets 195,272 576,421 771,693 112,569 268,466 789,044 149,119 SPPI financial SPPI financial 9,928 576,421 586,349 9,930 789,044 798,974 72,775 - 72,775 109,417 - £000 £000 assets assets Total financial Total financial - 130,220 - 173,996 £000 £000 assets assets 2019 2019 Other financial Other financial £000 £000 assets assets 130,220 178,234 641,658 819,892 173,996 254,541 852,143 1,106,684 Financial Statements 5,766 641,658 647,424 SPPI financial 42,248 - 42,248 5,770 852,143 857,913 74,775 - 74,775 SPPI financial Notes to the financial statements to the financial Notes 4 Financial risk and capital management (continued) risk and capital 4 Financial £63,099,000 increase (2018: £60,766,000 decrease) in the fair value of other financial assets of the Group during the reporting £63,099,000 increase (2018: £60,766,000 decrease) There has been a £13,925,000 decrease (2018: £19,269,000 increase) in the fair value of SPPI financial assets of the Group, and There has been a £13,925,000 decrease (2018: There has been a £17,038,000 decrease (2018: £22,711,000 increase) in the fair value of SPPI financial assets of the Parent, an There has been a £17,038,000 decrease (2018: in the fair value of other financial assets of the Parent during the reportin £65,237,000 increase (2018: £50,138,000 decrease) Financial investments Other financial assets Total fair value Cash and cash equivalents Parent Other financial assets Total fair value Financial investments Cash and cash equivalents (ii) Categories of financial assets applying IFRS 9 (ii) Categories of financial u 9 and classifies and measures financial instruments the Group has chosen to defer application of IFRS As disclosed in note 1, sh sets out the Group's financial assets at the balance with entities applying IFRS 9, the table below To facilitate comparison of principal and interest on the principal outstanding contractual cash flows that are solely payments between those which have as on a fair value basis, and all other financial are held for trading or whose performance is evaluated other than those which Group Section Four Section 4 Financial risk and capital management (continued) capital and management risk 4 Financial Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information - 201 (3) sets rs' equity or the to-book ratios le forward tions and futures 5 2,633 5 2,661 - 14,213 (3) timated transaction bservable future sed on management's 404143 66,927 7,682 261143 45,032 7,682 125 42,402 261 45,032 liquidity discount and a iscounting and the discount or credit rating - through profit and loss (134) 134 Financial assets at fair value Financial assets at fair £000 £000 £000 7,539 2,628 7,539 2,656 Equity Debt 14,213 66,523 44,771 42,277 44,771 securities securities Total Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements to the financial Notes 4 Financial risk and capital management (continued) risk and capital 4 Financial Notes to the financial statements (continued) capital and management risk 4 Financial Total gains for the period included in profit or loss for assets Total gains for the period included in profit or loss held at the end of the reporting period Total gains recognised in profit or loss Closing balance Purchases Closing balance At 31 December 2018 Opening balance Transfers Total gains recognised in profit or loss Total gains recognised Parent At 31 December 2019 Opening balance discount applied changes by +/-10%, the value of unlisted equity securities could move by +/-£7m (2018: +/-£5m). discount applied changes by +/-10%, the value of unlisted equity securities could move by +/-£7m based on similar listed companies, and management's consideration of constituents as to what exit price might be obtainable. based on similar listed companies, and management's consideration of constituents as to what ratio chosen, an il The valuation is sensitive to the level of underlying net assets, the Euro exchange rate, the price-to-book the asset. If the illiquidity credit rating discount applied to the valuation to account for the risks associated with holding risk, and allowing for uno supporting the loan, discounted using observable market interest rates of similar loans with similar transaction costs. of any purchaser and es projected date of disposal of the asset, with the exit costs sensitive to an expected return on capital a significant impact on shareholde costs. Reasonably likely changes in unobservable inputs used in the valuation would not have net result. Unlisted inputs including comparable price- These financial assets are valued using observable net asset data, adjusted for unobservable equity securities (level 3) Unlisted approach to the underlying as Unlisted debt is valued using an adjusted net asset method whereby management uses a look-through (level 3) interest rate used for d The valuation is most sensitive to the level of underlying net assets, but it is also sensitive to the Disposal proceeds for assets Total gains for the period included in profit or loss held at the end of the reporting period All the above gainswithin the statement of profit or loss. or losses included in profit or loss forcategorised in levels 2 and 3 are described below. The valuation techniques used for instruments the period (for both the Group and Parent)Listed are presented indebt net pricing information that is regularly reviewed and internally calibrated ba These financial assets are valued using third-party investment and return equityknowledge of the markets. securities notNon-exchange-traded in active in active markets. Foreign currency forward contracts are valued using observab The Group's derivative contracts are not traded market equity or index op exchange rates corresponding to the maturity of the contract and the contract forward rate. Over-the-counter (level derivative 2)are valued by reference to observable index prices. contracts (level 2) - 200 (3) 259 245 Total Total £000 5,823 7,682 2,661 45,034 67,107 307,897 315,502 576,421 5 2,633 5 - 14,392 (3) - - - - 3,311 143 7,681 404 261 143 134 125 42,404 261 45,034 egorised as level 2 Debt 404 261 £000 66,523 330,191 66,927 641,658 44,771 254,851 45,032 - through profit and loss (134) Financial assets at fair value 832 259 190 246 245 852 £000 £000 £000 7,538 2,628 2,656 7,539 Equity 14,392 44,773 66,703 3,311 42,279 4,592 44,773 7,166 Level 2 Level 3 securities securities - 5,823 - - - £000 £000 Fair value measurement at the Fair value measurement Level 1 263,478 306,661 570,139 4,333 66,927 641,399 570,139 209,834 314,389 524,223 524,223 6,921 45,032 576,176 end of the reporting period based on end of the reporting period Financial Statements Notes to the financial statements to the financial Notes 4 Financial risk and capital management (continued) risk and capital 4 Financial Section Four Section Financial investments Equity securities Debt securities Derivatives Purchases At 31 December 2019 Opening balance Derivatives comprehensive Financial assets at fair value through other income Financial investments Derivatives Derivatives Total financial assets at fair value Group Total gains recognised in profit or loss Closing balance Total gains for the period included in profit or loss for assets held at the end of the reporting period At 31 December 2018 Total gains recognised in profit or loss Transfers Disposal proceeds Financial assets at fair value through other comprehensive Financial assets at fair value through other income Financial investments Fair value measurements based on level 3 Group and Parent consist of financial assets, analysed as follows: Fair value measurements in level 3 for both the Debt securities At 31 December 2018 or loss Financial assets at fair value through profit Financial investments Equity securities Total financial assets at fair value Parent At 31 December 2019 value through profit or loss Financial assets at fair Opening balance Closing balance Total gains for the period included in profit or loss for assets held at the end of the reporting period The derivative liabilities of the Group and Parent in the prior year were measured at fair value through profit or loss and cat The derivative liabilities of the Group and Parent (see note 23). 4 Financial risk and capital management (continued) capital and management risk 4 Financial Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 203 £000 9,495 9,296 9,537 89,563 91,471 12,197 tures the Non-SPPI rkets borrowers. e this range are al assets are s of principal and om Standard & - 126,227 - - 113,359 91 are regularly reviewed. £000 e not rated relate to cash amounts in - - - - - 26,104 63,148 40,829 142,426 115,026 - 42,716 - - 26,125 132,419 - 21,046 138,341 - £000 assets Total SPPI Debt securities Other financial 3 3 SPPI - - - - 763 137,524 138,294 £000 1,032 163,6152,788 8,058 164,654 8,856 1,286 debtors Reinsurance 7 7 - - - 91 £000 79,749 11,177 163,615 254,541 492,515 17,269 42,713 19,760 23,316 55,090 40,826 119,330 11,612 137,524 268,466 496,842 equivalents* Cash and cash reinsurers’ share of insurance liabilities (excluding provision for unearned premiums) and amounts due from reinsurers in premiums) and amounts due from reinsurers liabilities (excluding provision for unearned reinsurers’ share of insurance paid; and respect of claims already - - on loans and debt securities; counterparty default - banks; deposits held with - amounts due from insurance intermediaries and policyholders. Notes to the financial statements to the financial Notes 4 Financial risk and capital management (continued) risk and capital 4 Financial AAA AA A BBB Below BBB Not rated Not rated At 31 December 2018 Below BBB A BBB AA AAA Ecclesiastical Annual Report Accounts & 2019 (d) Credit risk ma of their obligations by counterparties and financial to credit risk, which is the risk of non-payment The Group has exposure is exposed to credit risk are: Areas where the Group to all other financial assets. The Group is exposed to minimal credit risk in relation assets represents the Group's maximum exposure to credit risk. The Group struc The carrying amount of financial and reinsurance its exposure to a single counterparty. Limits on the level of credit risk levels of credit risk it accepts by placing limits on to credit risk in relation to credit risk ratings. Investment grade financi Where available the Group also manages its exposure where AAA is the highest possible rating. Financial assets which fall outsid classified within the range of AAA to BBB ratings, assets capture assets not rated by external ratings agencies. classified as sub-investment grade. ‘Not rated’ This includes financial assets that meet the definition of 'solely payment Poors or an equivalent rating from a similar agency. interest' (SPPI), as detailed in note 4(a)(ii). At 31 December 2019 The following table provides information regarding the credit risk exposure of financial assets with external credit ratings fr The following table provides information regarding Group hand. *Cash includes amounts held on deposit classified within financial investments and disclosed in note 22. Cash balances which ar *Cash includes amounts held on deposit classified within financial investments and disclosed in note 22. Cash Notes to the financial statements (continued) capital and management risk 4 Financial 202 alue and have bles are subject - 4,527 - 2,584 bilities is borne by the relatively short- ng assets held to re independent of e of liabilities (e.g. market interest rates sed in note 28(a)(iv). ties. For funeral plan which discounting is on anticipated cash d include index-linked exposure by comparing - - Maturity £000 £000 £000 £000 2,584 8,6505,517 28,732 19,2234,380 65,0934,527 8,907 102,475 54,472 26,4285,728 26,428 79,212 67,630 19,988 67,630 98,438 102,965 56,248 81,964 6,066 28,732 65,093 99,891 1 year 1 & 5 years 5 years Total Within Between After Financial Statements Notes to the financial statements to the financial Notes 4 Financial risk and capital management (continued) risk and capital 4 Financial Section Four Section (c) Interest rate risk at fair v on financial investments that are measured interest rate risk arises primarily from movements The Group’s exposure to for assets, and from those insurance liabilities represent a significant proportion of the Group’s fixed interest rates, which risk in order to control the impact of interest rate rate. The Group's investment strategy is set applied at a market interest as portfolio of fixed income securities reduces values. The fair value of the Group's investment flows and asset and liability versa. value of discounted insurance liabilities, and vice rise as does the present portfolio is three years (2018: two years), reflecting average duration of the Group’s fixed income back the life business, the disclo of discounted general insurance liabilities is its general insurance liabilities. The mean term term average duration of Therefore, the interest rate risk on the invested assets supporting these lia the returns generated by interest-bearing assets. fixed interest investments with durations that match the profile of the liabili the Group. This risk is mitigated by purchasing Index (RPI). Assets backing these liabilities are also linked to the RPI, an policies, benefits are linked to the Retail Prices it is not possible to exactly match the durations due to the uncertain profil gilts and corporate bonds. For practical purposes therefore some interest rate risk will persist. The Group monitors its mortality risk) and the availability of suitable assets, and making appropriate adjustments to its investment portfolio. projected cash flows for these assets and liabilities business assets and liabilities that are exposed to interest rate risk. The table below summarises the maturities of life Interest rate risk concentration is reduced by adopting asset-liability duration matching principles where appropriate. Excludi matching principles where appropriate. is reduced by adopting asset-liability duration Interest rate risk concentration to support funeral planning products, benefits payable to policyholders a For the Group’s life business, consisting of policies Cash and cash equivalents Liabilities (discounted) Life business provision At 31 December 2018 Assets Debt securities Cash and cash equivalents Liabilities (discounted) to cash flow interest rate risk. This risk is not significant to the Group. Life business provision insurance instalment receiva Group financial investments with variable interest rates, including cash and cash equivalents, and Group life business At 31 December 2019 Assets Debt securities 4 Financial risk and capital management (continued) capital and management risk 4 Financial Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 205 £000 3,388 1,043 1,004 Parent 197 42,538 31,024 Australian ated in £000 ons generally Parent date. 44,821 end to hedge to hedge onsidered 209,833 e foreign ough profit or ailed in note 22. ugh the use of ies denominated in osed to on a ‘look below, representing and Parent are 2018 2018 197 £000 1,043 1,004 Group £000 47,838 31,024 42,538 Group 44,821 286,134 254,851 UK 241,116 Euro Total NZ $ Aus $ Can $ USD $ Europe Hong Kong 176 190 £000 2,282 2,028 Parent 65,305 2019 2019 176 190 £000 £000 £000 2,028 Group Parent Group 65,305 33,722 33,722 66,302 66,302 41,912 289,566 263,699 356,058 330,191 UK Total Euro Europe Aus $ Can $ USD $ HKD $ Hong Kong the operating resultsexchange rates prevailing during the period; and of the Group's foreign branches and subsidiaries is translated into sterling using the exchange rate at the year-end the equity investment in foreign branches and subsidiaries in the Group financial statements are translated at the average Notes to the financial statements to the financial Notes 4 Financial risk and capital management (continued) risk and capital 4 Financial (e) Equity price risk value thr held by the Group which are stated at fair equity price risk because of financial investments The Group is exposed to thro geographical regions and market sectors, and this risk by holding a diversified portfolio across loss. The Group mitigates of a fall in equity markets. time to time which would limit losses in the event derivative contracts from Group mitigating effect of derivatives, to which the price risk by geographical listing, before the The concentration of equity exposed is as follows: - - The Group exposure to foreign currency risk within the investment portfolios arises from purchased investments that are denomin The Group exposure to foreign currency risk within currencies other than sterling. assets/liabilities are shown The largest currency exposures, before the mitigating effect of derivatives, with reference to net effective diversification of resources. currency exposure are detailed in note 22. The Group operates internationally and its main exposures to foreign exchange risk are noted below. The Group's foreign operati The Group operates internationally and its main the Group and Parent at the year currency exposure, including exposures on a ‘look through’ basis. The open derivatives held by invest in assets and purchase reinsurance denominated in the same currencies as their insurance liabilities, which mitigates th invest in assets and purchase reinsurance denominated As a result, foreign exchange risk arises from recognised assets and liabilit currency exchange rate risk for these operations. and Parent enter into derivatives through’ basis in respect of collective investment schemes denominated in sterling. The Group (f) Currency risk operations. The Group mitigates this risk through the use of derivatives when c other currencies and net investments in foreign necessary. of foreign currency risk: The Group's foreign operations create two sources by the derivatives which are det The forward foreign currency risk arising on translation of these foreign operations is hedged Australia, which have Canadian and The Group has designated certain derivatives as a hedge of its net investments in Canada and dollars respectively as their functional currency. the Group and Parent are exp The figures in the table above, for the current and prior years, do not include currency risk that Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements (continued) capital and management risk 4 Financial 204 - £000 4,560 8,096 7,197 7,423 72,366 73,979 97,184 51,712 90,548 72,006 77,011 61,317 £000 Parent 72,301 24,503 or anding from rs and scrutinised to Non-SPPI redit ratings of of this ries, as follows: ation of their fair ions of risk. considered on a cyholder debtor The Group has no reinsurer fails to ncies, as well as uthority issues, - - - 2018 91 £000 9,323 £000 Group 72,301 24,503 82,901 e not rated relate to cash amounts - - 12,386 - 53,257 - - 21,313 - - - - 17,613 23,930 - £000 assets Total SPPI Debt securities UK 317,137 218,698 Total 496,842 315,502 Europe Canada Australia Other financial SPPI 3 3 - - - - 783 272 127,089 127,368 763 107,455 108,225 £000 2,865 3,923 127,089 178,234 307,897 1,704 5,128 107,455 195,272 315,502 2,658 debtors Reinsurance 7 7 - - - - 91 £000 £000 8,540 14,748 47,222 23,927 10,682 82,689 50,599 21,310 equivalents* Cash and cash 2019 £000 Group Parent 20,271 20,271 84,726 86,293 86,293 492,515 307,897 301,225 201,333 Financial Statements UK Total Europe Canada Australia Notes to the financial statements to the financial Notes 4 Financial risk and capital management (continued) risk and capital 4 Financial Section Four Section AAA AAA AA A Below BBB Not rated At 31 December 2018 AA The Group's credit risk policy details prescriptive methods for the collection of premiums and control of intermediary and poli The Group's credit risk policy details prescriptive methods for the collection of premiums and reports. These reports are balances. The level and age of debtor balances are regularly assessed via monthly credit management such balances are likely to be maj assess exposure by geographical region and counterparty of aged or outstanding balances. Any to pose minimal risk of default. international brokers that are in turn monitored via credit reference agencies and considered and policyholders. material concentration of credit risk in respect of amounts due from insurance intermediaries Reinsurance is used to manage insurance risk. This does not, however, discharge the Group's liability as primary insurer. If a Reinsurance is used to manage insurance risk. This does not, however, discharge the Group's pay a claim for any reason, the Group remains liable for the payment to the policyholder. The creditworthiness of reinsurers is pay a claim for any reason, the Group remains liable for the payment to the policyholder. The creditworthiness Committee assesses, monito regular basis through the year by reviewing their financial strength. The Group Reinsurance Security recognised credit rating age approves the creditworthiness of all reinsurers, reviewing relevant credit ratings provided by the also monitors the balances outst other publicly available data and market information. The Group Reinsurance Security Committee reinsurers and maintains an approved list of reinsurers. Parent At 31 December 2019 BBB Not rated Below BBB A BBB value. identify the quality of the counterparty bank and to monitor and limit concentrat Group cash balances are regularly reviewed to of mainly fixed interest instruments including government securities, local a The debt securities portfolio consists of a range shares and other interest-bearing securities. Limits are imposed on the c corporate loans and bonds, overseas bonds, preference monitored. Group investments in unlisted securities represent less than 1% the corporate bond portfolio and exposures regularly category in the current and prior year. debt securities is spread across a variety of geographical and economic territo The Group’s exposure to counterparty default on For financial assets meeting the SPPI test that do not have low credit risk, the carrying amount disclosed above is an approxim For financial assets meeting the SPPI test that *Cash includes amounts held on deposit classified within financial investments and disclosed in note 22. Cash balances which ar *Cash includes amounts held on deposit classified within in hand. 4 Financial risk and capital management (continued) capital and management risk 4 Financial Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 207 nd £000 website ) is er. EIG is also year figures in he Solvency II PS25/18 ed last year as e Office plc figures are not O group. Both (FCA) and the orting to the PRA. the deadline for Financial acts, and capital is y II Own Funds in 2018 Own Risk and (unaudited)* 215% 331% £000 Parent Life Limited 551,857294,959 52,583 36,704 (256,898) (15,879) Office plc Ecclesiastical Insurance Ecclesiastical 307% £000 2019 (unaudited) 216% £000 Parent Life Limited 570,083305,832 49,120 33,144 (264,251) (15,976) Office plc Ecclesiastical Insurance Ecclesiastical comply with the regulators' capital requirements of the markets in which the Group operates; and capital requirements of the markets in which comply with the regulators' vision a in accordance with its corporate mission, to continue to meet stakeholders' expectations safeguard the Group's ability values. - - Notes to the financial statements to the financial Notes 4 Financial risk and capital management (continued) risk and capital 4 Financial Solvency Capital Requirement is an integral part of the Economic capital is the Group’s own internal view of the level of capital required, and this measure Solvency II Own Funds Own Funds in excess of Solvency Capital Requirement of own risk, as required as part of t Solvency Assessment Report (ORSA) which is a private, internal forward-looking assessment Solvency II Capital Cover *Unaudited with the exception of EIO parent's Solvency II Own Funds. the regulatory SCR. regime. Risk appetite is set such that the target level of economic capital is always higher than managed and evaluated on the basis of both regulatory and economic capital, at a group and parent entity level. on the basis of both regulatory and economic managed and evaluated a separate independent audit, as part of the Group's process for Solvency II rep EIO’s Solvency II Own Funds will be subject to using an internal model which has been approved for use by the PRA. ELL’s EIO’s SCR is not subject to audit as it is calculated falling below the threshold calculation detailed in the PRA policy statement subject to an independent audit due to the company requirement). The Group's regulated entities, EIO and ELL, expect to meet (Solvency II: External audit of the public disclosure respective SFCRs will be made available on the Group's website shortly thereaft submission to the PRA of 7 April 2020 and their The Group is subject to insurance solvency regulations in all the territories in which it issues insurance and investment contr in which it issues insurance and investment insurance solvency regulations in all the territories The Group is subject to periodically submitted to the PRA. the PRA of 19 May 2020, with its SFCR also being made available on the Group’s expected to meet its deadline for submission to In the UK, the Group and its UK regulated entities are required to comply with rules issued by the Financial Conduct Authority In the UK, the Group and its UK regulated entities Prudential Regulation Authority (PRA). entity and group level. The PRA expects a firm, at all times, to hold Solvenc Capital is assessed at both individual regulated (SCR). Group solvency is assessed at the level of Ecclesiastical Insuranc excess of its calculated Solvency Capital Requirement (EIG). Consequently, there is no directly comparable solvency measure for EI (EIO)’s parent, Ecclesiastical lnsurance Group plc to the PRA, in addition to an annual narrative report, the Solvency and quarterly and annual quantitative returns are submitted on the company's website. A further report, the Regular Supervisory Report (RSR Condition Report (SFCR) which is also published unaudited and based on the latest information provided to management. The prior The current year figures in the table below are to management at the time the accounts were signed. they were estimated based on information available shortly after. the table below are as disclosed in the Company’s SFCRs, available on the Group’s website. These differ from the figures report the table below are as disclosed in the Company’s (i) Capital management when managing capital are to: The Group's primary objectives Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements (continued) capital and management risk 4 Financial 4 - - - 206 (6) (3) 2018 2018 £000 £000 7,613 2,674 (6,229) (2,188) me ces, other readily m insurance up. parately in note nd equity price - - its available cash 29 37 (19) (25) es not include the (decrease) in (decrease) in 2019 2019 £000 £000 7,628 3,224 (6,241) (2,638) Potential increase/ Potential increase/ her liabilities for which a her liabilities for which a other equity reserves other equity reserves 2018 2018 £000 £000 2,799 4,772 2,154 4,772 (3,904) (3,904) (3,558) (4,730) 23,177 20,643 2019 2019 £000 £000 4,133 6,330 3,028 6,331 (5,180) (5,179) (5,267) (6,724) 28,841 26,745 Potential increase/ (decrease) in profit Potential increase/ (decrease) in profit -10% -10% +10% +10% variable +/-10% +/-10% variable Change in Change in -100 basis points -100 basis points +100 basis points +100 basis points Financial Statements the value of fixed income investments will vary inversely with changes in interest rates, and all territories experience the sa the value of fixed income investments will vary inversely with changes in interest rates, and all moving in parallel; currency gains and losses will arise from a change in the value of sterling against all other currencies 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. interest rate movement; - - - - Notes to the financial statements to the financial Notes Section Four Section 4 Financial risk and capital management (continued) risk and capital 4 Financial 4 Financial risk and capital management (continued) capital and management risk 4 Financial Notes to the financial statements Non-derivative financial liabilities consist of lease liabilities, for which a maturity analysis is included in note 32, and ot liabilities consist of lease liabilities, for which a Non-derivative financial resources mainly from claims arising from insurance contracts. An estimate of the timing of the net cash outflows resulting fro of the timing of the net cash outflows resulting arising from insurance contracts. An estimate resources mainly from claims balan to manage liquidity risk and has available cash note 28. The Group has robust processes in place contracts is provided in the Gro This is not considered to be a significant risk to access to funding in case of exceptional need. marketable assets and in note 31. maturity analysis is included (g) Liquidity risk on when due. The Group is exposed to daily calls that funds may not be available to pay obligations Liquidity risk is the risk Variable Parent The following assumptions have been made in preparing the above sensitivity analysis: (h) Market risk sensitivity analysis to movements on market risk variables (comprising interest rate, currency a The sensitivity of profit and other equity reserves mitigating effect of derivatives, is shown in the table below. This table do risk), each considered in isolation and before the Financial risk sensitivities for retirement benefit schemes are disclosed se impact of variables on retirement benefit schemes. 19. Group Variable Equity price risk Equity price risk Interest rate risk Currency risk Currency risk Interest rate risk Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 209 21 634 Total urther 3,507 9,049 of the 56,946 in the gment ficiency. f each are detailed ities in the long- - - - 356,950 - 54,158 - 242,339 - - - 6,821 (65) (1,496) Non- 2018 - 12,601 12,601 - 9,049 - - - - (310) 2,062 (17,850) (310) (17,850) 2,062 21 £000 £000 £000 3,507 Gross written insurance 54,158 56,946 356,950 356,971 21,650 378,621 242,339 premiums services Total - - - 634 335 6,486 (13) £000 £000 £000 £000 20,353 69,539 (16,629) 73,263 Insurance Investments Other o g d - 3,516 - - 393,965 - 64,457 - 68,857 - 257,135 rati 86.8%95.1% 20,41291.1% 2,218 59,433 20,018 1,805 (292) 63,053 79,553 (174) (531) 3,849 82,540 114.1% (3,246) 1,815 2019 operatin Combine - 12,795 12,795 - 9,078 9,078 (13) £000 £000 £000 3,516 Gross Non- 64,457 68,857 written insurance 393,965 393,952 21,873 415,825 257,135 premiums services Total Notes to the financial statements to the financial Notes 5 Segment information (continued) 5 Segment Other insurance operations Life business Total 2019 General business United Kingdom and Ireland Australia Canada Other insurance operations Life business Investment management Broking and Advisory Group revenues are not materially concentrated on any single external customer. Group revenues are not materially concentrated in note 36. Corporate costs Group revenue Segment result insurance underwriting profit or loss, investment activities and other expenses o General business segment results comprise the standard net combined operating ratio (COR) as a measure of underwriting ef underwriting territory. The Group uses the industry which are alternative performance measures that are not defined under IFRS, details on the underwriting profit or loss and COR, profit or loss on insurance contracts (including return on assets backing liabil The life business segment result comprises the term fund), shareholder investment return and other expenses. IFRS. All other segment results consist of the profit or loss before tax measured in accordance with Profit/(loss) before tax Canada commission and underwriting expenses as a percentage of net earned premiums. F The COR expresses the total of net claims costs, Investment management consolidated statement of profit or loss. consolidated statement Segment revenue Turnover the general and life insurance business segments. premiums as the measure for turnover of The Group uses gross written parties. Se to services provided by the Group to third comprises fees and commissions earned in relation non-insurance segments revenue and commission income, which are reported within net investment return or general business fee revenues do not include is based. the geographical region in which the customer Revenue is attributed to Australia Broking and Advisory General business United Kingdom and Ireland Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements (continued) 5 Segment information ed ole 208 iness. S 9 exception of would also be surance, the y differ, but all he management Financial Statements This includes costs associated with Group management activities. The Group provides insurance broking through South Essex Insurance Brokers Limited, financial advisory services through The Group provides insurance broking through and risk advisory services through Ansvar Risk Management Services Pty Limit Ecclesiastical Financial Advisory Services Limited It is closed to new bus Ecclesiastical Life Limited provides long-term insurance policies to support funeral planning products. Other insurance operations adverse development cover and operations that are in run-off or not This includes the Group's internal reinsurance function, reportable due to their immateriality. United Kingdom and Ireland which operates in Australia. The Group's principal general insurance business operation is in the UK, where it operates under the Ecclesiastical and Ansvar The Group's principal general insurance business branch in the Republic of Ireland underwriting general business across the wh brands. The Group also operates an Ecclesiastical both internally and to third parties through EdenTree Investment The Group provides investment management services Management Limited. The Group operates a general insurance Ecclesiastical branch in Canada. The Group operates a general insurance Ecclesiastical Australia Canada of Ireland. underwriting general insurance business under the Ansvar brand. The Group has a wholly-owned subsidiary in Australia 5 Segment information Notes to the financial statements to the financial Notes the investment management and broking and advisory segments. These segments do not qualify for the temporary exemption from IFR the investment management and broking and advisory segments. These segments do not qualify The accounting policies of the operating segments are the same as the Group's accounting policies described in note 1, with the The accounting policies of the operating segments are the same as the Group's accounting policies - Life business terms and conditions that Inter-segment and inter-territory transfers or transactions are entered into under normal commercial available to unrelated third parties. for financial instruments ma available to insurers and as a result have adopted IFRS 9. Consequently, their accounting policies other accounting policies are the same as the Group. - Broking and advisory - Investment management The activities of each operating segment are described below. The activities of each operating - General business - Corporate costs (a) Operating segments underwriting territory. Expenses relating to Group management activities are included within 'Corporate costs'. This reflects t are included within 'Corporate costs'. This reflects relating to Group management activities underwriting territory. Expenses structure. and internal Group reporting The Group segments its business activities on the basis of differences in the products and services offered and, for general in in the products and services offered and, for general business activities on the basis of differences The Group segments its Section Four Section 5 Segment information Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 211 84 85 85 84 (56) (56) 302 839 230 302 839 230 2018 £000 2018 £000 8,238 4,144 3,994 9,794 1,289 4,144 3,994 9,794 8,238 1,289 Insurance Insurance 35,271 15,027 15,027 35,271 (35,450) (35,450) £1,873,000 - £1,873,000 - - . Fee and commission - - - 9,078 - . Fee and commission - - 9,078 - 60 60 605 334 9,049 605 334 9,049 2019 £000 £000 £000 2019 £000 £000 £000 8,519 9,580 1,795 9,580 8,519 1,795 (3,900) (3,900) 34,780 55,991 74,438 14,221 14,221 74,438 34,780 55,991 (12,433) (12,433) over time Total over time Total Recognised Recognised 302 108 12,687 12,795 230 101 12,500 12,601 302 108 12,687 12,795 230 101 12,500 12,601 £000 £000 9,078 9,488 12,6878,715 9,046 22,175 12,834 21,880 9,078 9,488 12,6878,715 9,046 22,175 12,834 21,880 Recognised at a point in time Recognised at a point in time Revenue from contracts with customers Revenue from contracts with customers and £22,175,000 (2018: £21,880,000) in accordance with IFRS 15, and £22,175,000 (2018: £21,880,000) in accordance with IFRS 15, Notes to the financial statements to the financial Notes income 7 Fee and commission 8 Net investment return Notes to the financial statements to the financial Notes income 7 Fee and commission 8 Net investment return Fair value movements on financial instruments at fair value through profit or loss Investment income - rental income - exchange movements Fair value movements on investment property Fair value movements on property, plant and equipment Net investment return Income from financial assets at fair value through profit or loss Included within fair value movements on financial instruments at fair value through profit or loss are gains of £162,000 (2018: Included within fair value movements on financial instruments at fair value through profit or loss During the year, the GroupContracts recognised £49,065,000 (2018: £41,116,000) fee and commission income in accordance with IFRS 4, - equity income - debt income Income from- cash and cash equivalents income financial- other income received assets Othercalculated income using the effective interest rate method Impact of discount rate change on insurance contract liabilities previously reported as a loss of £325,000) in respect of derivative instruments. For the year ended 31 December 2019 For the year ended 31 General business Investment management Broking and advisory For the year ended 31 December 2018 General business Investment management Broking and advisory income from contracts with customers was recognised as follows: income from contracts with Ecclesiastical Annual Report Accounts & 2019 Income from financial assets at fair value through profit or loss Contracts - debt income Fair value movements on investment property Fair value movements on property, plant and equipment Impact of discount rate change on insurance contract liabilities Net investment return are gains of £162,000 (2018: Included within fair value movements on financial instruments at fair value through profit or loss previously reported as a loss of £325,000) in respect of derivative instruments. During the year, the Group recognised £49,065,000 (2018: £41,116,000) fee and commission income in accordance with IFRS 4, - equity income Income from- cash and cash equivalents income financial assets Othercalculated income using the effective interest rate method General business Broking and advisory For the year ended 31 December 2018 General business Investment management Broking and advisory For the year ended 31 December 2019 For the year ended 31 Investment management income from contracts with customers was recognised as follows: income from contracts with Investment income Fair value movements on financial instruments at fair value through profit or loss - rental income - exchange movements - other income received Notes to the financial statements income commission and 7 Fee return investment 8 Net 210 963 941 963 941 £000 £000 3,396 4,018 2,045 £000 £000 3,396 4,018 2,045 (1,539) (1,539) 15,371 15,371 (15,080) (15,080) 225,986 219,331 223,416 218,119 225,986 219,331 223,416 218,119 de rights de rights operates, are re the assets operates, are re the assets 2018 2018 - - (11,005) - - 5,764 (5,241) - (944) - - (137,640) - (152,886) - - (23,829) 8,749 - - - (11,005) - - 5,764 (5,241) - (944) - - (137,640) - (152,886) - - (23,829) 8,749 - 21 356,971 21 214,090 21 21 356,971 21 214,090 21 (77) (13) 241,066 (13) 393,952 (13) (77) (13) 241,066 (13) 393,952 (13) Life 941 Life 941 £000 £000 Gross £000 £000 Gross written Non-current written Non-current 56,946 1,279 54,158 56,946 1,279 54,158 245,867 356,971 245,867 356,971 premiums assets premiums assets - - (16,829) (16,829) - 2,045 - - (16,829) (16,829) - 2,045 £000 £000 £000 2,073 5,764 8,749 £000 £000 £000 2,073 5,764 8,749 (5,241) (5,241) (11,005) (23,829) (15,080) (11,005) (23,829) (15,080) 241,079 assets 393,965 225,999 General 356,950 214,069 219,310 241,079 assets 393,965 225,999 General 214,069 356,950 219,310 (152,886) (137,640) (152,886) (137,640) business business Total business business Total - - - - 2019 - - - - 2019 963 963 £000 £000 1,642 (3,181) £000 £000 1,642 (3,181) £000 £000 30,832 (1,289) (14,172) £000 £000 30,832 (1,289) (14,172) Gross Gross 64,457 8,272 68,857 4,348 written Non-current 64,457 8,272 68,857 4,348 written Non-current 393,952 248,479 260,638 235,859 393,952 248,479 260,638 235,859 Insurance Investments Other Total Insurance Investments Other Total premiums premiums o g d o g d rati rati 86.4% 29,190 1,892 (329) 30,753 80.2% 29,426 (1,836) (252) 27,338 93.7% 1,400 86.4% 29,190 1,892 (329) 30,753 80.2% 29,426 (1,836) (252) 27,338 93.7% 1,400 106.5% (2,599) 1,655 106.5% (2,599) 1,655 operatin operatin Combine Combine Financial Statements 6 Net insurance premium revenue Notes to the financial statements to the financial Notes 5 Segment information (continued) 5 Segment 2018 General business United Kingdom and Ireland Australia Canada Other insurance operations Life business Investment management Broking and Advisory For the year ended 31 December 2019 Gross written premiums Change in the gross provision for unearned premiums For the year ended 31 December 2018 Change in the provision for unearned premiums, reinsurers' share Change in the net provision for unearned premiums (b) Geographical information and non-current assets, as attributed to individual countries in which the Group Gross written premiums from external customers as follows: Corporate costs Profit/(loss) before tax Earned premiums, net of reinsurance 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 Gross written premiums Outward reinsurance premiums Net written premiums Outward reinsurance premiums Net written premiums United Kingdom and Ireland Australia Canada the country in which the insurance contracts are issued. Non-current assets exclu Gross written premiums are allocated based on arising under insurance contracts, deferred tax assets, pension assets and financial instruments and are allocated based on whe arising under insurance contracts, deferred tax are located. 6 Net insurance premium revenue 6 Net insurance premium Notes to the financial statements financial to the Notes Section Four Section 5 Segment information (continued) 5 Segment 5 Segment information (continued) 5 Segment information Notes to the financial statements revenue premium insurance 6 Net 2018 General business United Kingdom and Ireland Australia Canada Other insurance operations Life business Investment management Broking and Advisory For the year ended 31 December 2019 Gross written premiums Change in the provision for unearned premiums, reinsurers' share Change in the net provision for unearned premiums Change in the gross provision for unearned premiums For the year ended 31 December 2018 (b) Geographical information and non-current assets, as attributed to individual countries in which the Group Gross written premiums from external customers as follows: Corporate costs Profit/(loss) before tax Earned premiums, net of reinsurance 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 Gross written premiums Outward reinsurance premiums Net written premiums Outward reinsurance premiums Net written premiums United Kingdom and Ireland Australia Canada the country in which the insurance contracts are issued. Non-current assets exclu Gross written premiums are allocated based on arising under insurance contracts, deferred tax assets, pension assets and financial instruments and are allocated based on whe arising under insurance contracts, deferred tax are located. Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 213 - - (3) (3) 56 18 56 18 (84) (84) 927 691 386 152 538 135 135 927 691 386 152 538 135 135 2018 2018 £000 £000 2018 2018 £000 £000 2,437 2,437 82,811 82,811 uthority and uthority and rporate rporate - - 17 17 (60) (60) 857 497 179 676 164 164 171 857 497 179 676 164 164 171 2019 2019 2019 2019 £000 £000 £000 £000 1,000 3,900 5,081 1,000 3,900 5,081 86,065 86,065 Notes to the financial statements to the financial Notes the year 11 Profit for 12 Auditor's remuneration Notes to the financial statements to the financial Notes the year 11 Profit for 12 Auditor's remuneration Amortisation of intangible assets Amortisation of intangible investment property Decrease in fair value of benefits, net of recharges Employee benefits expense including termination - The audit of associated pension schemes Total auditor's remuneration other regulatory audit work. Audit Committee Report in the Co The Company's policy on the use of the auditor for non-audit services is detailed in the Group Amounts disclosed are net of services taxes, where applicable. Audit-related assurance services include Prudential Regulatory A Amounts disclosed are net of services taxes, where Governance section of the Annual Report and Accounts. Fees payable to the Company's auditor and its associates for the audit of the Fees payable to the Company's auditor and Company's annual accounts its associates for other services: Fees payable to the Company’s auditor and - The audit of the Company's subsidiaries Total audit fees - Audit-related assurance services Total non-audit fees Profit for the year has been arrived at after (crediting)/charging Profit for the year has Net foreign exchange gains plant and equipment Depreciation of property, of property, plant and equipment Loss/(profit) on disposal - Other assurance services of associated pension schemes Fees payable to the Company's auditor in respect Amortisation of intangible assets Amortisation of intangible investment property Decrease in fair value of - The audit of associated pension schemes Total auditor's remuneration other regulatory audit work. Employee benefits expense including termination benefits, net of recharges Employee benefits expense including termination applicable. Audit-related assurance services include Prudential Regulatory A Amounts disclosed are net of services taxes, where Audit Committee Report in the Co The Company's policy on the use of the auditor for non-audit services is detailed in the Group Governance section of the Annual Report and Accounts. Fees payable to the Company's auditor and its associates for the audit of the Fees payable to the Company's auditor and Company's annual accounts its associates for other services: Fees payable to the Company’s auditor and - The audit of the Company's subsidiaries Total audit fees - Audit-related assurance services Total non-audit fees Profit for the year has been arrived at after (crediting)/charging Profit for the year has Net foreign exchange gains plant and equipment Depreciation of property, of property, plant and equipment Loss/(profit) on disposal - Other assurance services of associated pension schemes Fees payable to the Company's auditor in respect Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements 11 Profit for the year the for Profit 11 Auditor’s remuneration 12 212 15 15 2018 2018 £000 £000 (3,078) (3,078) (6,460) (6,460) 55,551 55,551 13,858 13,858 66,346 66,346 (11,992) (11,992) (48,691) (48,691) 144,783 144,783 111,873 111,873 - - - - (42,915) (42,915) - - 22,503 22,503 - - (26,188) (26,188) - - 18,260 18,260 - - - - (40,808) (40,808) - - (52,800) (52,800) 14 14 327327 157,808 157,808 Life Life 327327 105,008 105,008 (349) (349) (349)(349) 85,685 85,685 2019 2019 £000£000 £000 £000 £000 £000 5,562 5,562 6,1116,111 161,248 161,248 (5,235)(5,235) (5,235) (5,235) (4,553) (4,553) 15,145 15,145 72,740 72,740 62,134 62,134 businessbusiness Total Total - - (6,460) (6,460) - - £000 £000 18,260 18,260 86,034 86,034 22,503 22,503 (48,691) (48,691) (40,808) (40,808) (11,992) (11,992) (52,800) (52,800) (42,915) (42,915) (26,188) (26,188) 139,221 139,221 157,481 157,481 104,681 104,681 General General 112,222 112,222 155,137 155,137 business business Financial Statements 10 Fees, commissions and other acquisition costs 10 Fees, commissions and other acquisition costs 10 Fees, commissions and 9 Claims and change in insurance liabilities and reinsurance recoveries change in insurance liabilities 9 Claims and and reinsurance recoveries change in insurance liabilities 9 Claims and Notes to the financial statements to the financial Notes statements to the financial Notes Other acquisition costs Other acquisition costs Fees, commissions and other acquisition costs Fees, commissions and other acquisition costs For the year ended 31 December 2019 For the year ended 31 December 2019 For the year ended 31 Gross claims paid Gross claims paid for claims Gross change in the provision for claims Gross change in the provision Fees paid Fees paid Commission paid Commission paid Change in deferred acquisition costs Change in deferred acquisition costs Gross change in life business provision Gross change in life business provision Gross change in life business liabilities Claims and change in insurance Claims and change in insurance liabilities Reinsurers' share of claims paid Reinsurers' share of claims paid claims Reinsurers' share of change in the provision for claims Reinsurers' share of change in the provision for net of reinsurance Claims and change in insurance liabilities, net of reinsurance Claims and change in insurance liabilities, Claims and change in insurance liabilities Claims and change in insurance liabilities Reinsurance recoveries Reinsurance recoveries For the year ended 31 December 2018 For the year ended 31 December 2018 Gross claims paid Gross claims paid Gross change in the provision for claims Gross change in the provision for claims Gross change in life business provision Gross change in life business provision Reinsurers' share of claims paid Reinsurers' share of claims paid claims Reinsurers' share of change in the provision for claims Reinsurers' share of change in the provision for Reinsurance recoveries Reinsurance recoveries net of reinsurance Claims and change in insurance liabilities, net of reinsurance Claims and change in insurance liabilities, Section Four Section 9 Claims and change in insurance liabilities and reinsurance recoveries reinsurance and liabilities insurance in change and 9 Claims Notes to the financial statements 10 Fees, commissions and other acquisition costs acquisition other and Fees, commissions 10 Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 215 77 18 729 934 110 958 193 958 (112) (292) (213) (292) 2018 2018 2018 £000 £000 £000 2,920 8,873 (7,623) (1,538) 15,371 een provided n the following - 129 463 808 808 (110) (198) (433) 2019 2019 2019 £000 £000 £000 5,893 4,749 (1,198) (1,179) (3,110) 73,263 13,920 11,450 11,450 - temporary differences - prior year adjustments - current year Actuarial movements on retirement benefit plans Fair value movements on hedge derivatives Fair value movements on hedge derivatives Fair value movements on property Notes to the financial statements to the financial Notes 14 Tax expense Ecclesiastical Annual Report Accounts & 2019 Total tax (credited)/charged to other comprehensive income equity. Tax relief on charitable grants of £5,497,000 (2018: £3,230,000) has been taken directly to Profit before tax Factors affectingExpenses not deductible for tax purposes charge for the year: Deferred tax (credited)/charged on: Tax calculated at the UK standard rate of tax of 19% (2018: 19%) Tax calculated at the UK standard rate of tax of Current tax charged on: Deferred tax Total tax expense the United Kingdom standard rate of corporation tax for the reasons set out i Tax on the Group’s result before tax differs from reconciliation: Current tax (a) Tax charged/(credited) to the statement of profit or loss (a) Tax charged/(credited) Non-taxable income rates Life insurance and other tax paid at non-standard asset has been recognised Utilisation of tax losses for which no deferred tax Adjustments to tax charge in respect of prior periods Total tax expense tax from 19% to 17% will become effective from 1 April 2020. Deferred tax has b A change in the UK standard rate of corporation at an average rate of 17% (2018: 17%). income (b) Tax (credited)/charged to other comprehensive Notes to the financial statements 14 Tax expense Tax 14 214 - - 74 74 No. No. 235 481 259 173 173 Other d 000), of flection of 9 following year by 2018 1 1 1 1 - - Group No. No. Life Life 235 481 259 (342) (342) £000 £000 4,208 4,208 4,9245,821 4,924 5,4914,952 5,408 4,819 4,952 Group Parent (1,286) (7,153) 62,888 52,178 84,335 72,540 82,707 65,045 2018 2018 business Other 6 - - 77 9 77 No. No. 848 771 771 944 213 443 154 General General business business business 2019 - - - 82 82 No. No. 213 443 154 181 181 £000 £000 4,713 4,713 5,3696,567 5,369 4,5781,812 6,134 3,801 1,812 (1,340)(1,090) (8,278) (1,090) Group Parent 69,657 58,255 88,137 75,525 85,707 66,157 1 1 1 1 - - - No. No. Life Life 2019 2019 84 97 84 No. No. 865 781 781 962 General General business business Other business business Other Financial Statements 13 Employee information 13 Employee Notes to the financial statements to the financial Notes Section Four Section Notes to the financial statements Key management personnel Wages and salaries Pension costs - defined contribution plans Social security costs Other employees 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 undertakings of the Group (2018: £25,000). The above Parent figures do not include termination benefits of £135,000 (2018: £66, undertakings of the Group (2018: £25,000). The above Parent figures do not include termination which £33,000 (2018: £25,000) was recharged to related undertakings of the Parent. and in aggregate within the The remuneration of the directors (including non-executive directors), is set out both individually Remuneration Report in the Corporate Governance section of this report. closure of the defined benefit pension plan to future accrual. The above Group figures do not include termination benefits of £358,000 (2018: £129,000), none of which was recharged to relate The above Group figures do not include termination benefits of £358,000 (2018: £129,000), was paid by the Company during 201 Defined contribution pension costs in 2018 include a one-off contribution of £2,017,000 that The average monthly number of full-time equivalent employees of the Group and Parent, including executive directors, during the Group and Parent, including executive directors, of full-time equivalent employees of the The average monthly number geographical location was: Average numbers of full-time equivalent employees have been quoted rather than average numbers of employees to give a better re Average numbers of full-time equivalent employees United Kingdom and Ireland United Kingdom and Ireland Canada work is divided between more than one business area. the split between business areas, as some employees' Australia Group Canada Parent 13 Employee information Employee 13 Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 217 (4) (4) 17 16 22 (11) (11) (41) 927 ount £000 £8.4m). If ublished in rokers cific risks flows at the . ult in ings Limited. ctly impact the e Office for overable amounts he CGU. The - - - - (121) - - - - 9,613 - - 162 1,000 684 38,651 292 2,663 130 846 30,064 Other - - (4) (4) 17 (11) (11) (41) 838 797 Computer intangible - - - - - 2,371 (121) - - 9,613 - - -7 -7 -7 - - 16 22 328 17,686 4,530 22,544 344 18,537 4,692 23,573 306 16,941 4,400 21,647 328 17,686 4,530 22,544 £000 £000 £000 23,779 23,45323,779 5,376 33,069 52,608 5,376 62,224 23,435 14,532 23,779 21,21423,779 5,084 23,453 50,077 5,376 52,608 23,451 5,767 Goodwill software assets Total Notes to the financial statements to the financial Notes and other intangible assets 17 Goodwill The aggregation of assets for identifying the cash-generating unit (‘CGU’) changed in 2018 to select only the assets which dire The aggregation of assets for identifying the cash-generating unit (‘CGU’) changed in 2018 to equity of the entity containing t cash flow projections. In the prior year the CGU assets were based on the total shareholders’ Cost Additions Accumulated impairment losses and amortisation At 1 January 2019 Impairment losses for the year Disposals which will produce them. reason for the change in basis is to align the cash projections more accurately with the net assets Group Net book value at 31 December 2019 Exchange differences At 1 January 2019 Disposals Exchange differences Cost At 1 January 2018 Disposals Exchange differences At 31 December 2018 Accumulated impairment losses and amortisation At 1 January 2018 Amortisation charge for the year Impairment losses for the year At 31 December 2019 Amortisation charge for the year Exchange differences Disposals At 31 December 2018 Net book value at 31 December 2018 of South Essex Insurance Hold £16,885,000 of the goodwill balance in the current and prior year relates to the 2008 acquisition Brokers Limited during 2014 £4,392,000 of the current and prior period balance relates to the acquisition of Lansdown Insurance The recoverable amount of the investment in South Essex Insurance Holdings Limited exceeds its carrying amount by £8.8m (2018: The recoverable amount of the investment in South Essex Insurance Holdings Limited exceeds At 31 December 2019 Additions The calculations for all rec Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. business plans, or the disc the cumulative growth rate between 2020 and 2022 was 4.5% lower than assumed in management-approved investment in Lansdown Insurance B rate increased by 2.5%, then the recoverable amount would equal the carrying amount. For the impairment. external sources of information. Assumptions used are consistent with historical experience within the business acquired and use cash flow projections based on management-approved business plans, covering a three-year period, with forecast annual cash use cash flow projections based on management-approved business plans, covering a three-year to the key assumptions do not res Limited, the headroom above the carrying value is significant and reasonably possible changes end of the planning period continuing thereafter in perpetuity at the UK long-term average growth rate, usually sourced from th end of the planning period continuing thereafter in perpetuity at the UK long-term average growth based on medium-term rates p Budget Responsibility (OBR). The Group selected a rate of 1.6% (2018: 1.6%) as being appropriate, that the market would assess the spe the OBR's November report. The pre-tax discount rate of 9.2% (2018: 9.8%) reflects the way associated with the estimated cash flows. Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements 17 Goodwill and other intangible assets intangible other and Goodwill 17 67 67 216 292 292 292 292 292 292 225 225 id in id in £000 £000 2018 2018 £000 £000 uired uired 9,181 9,181 (3,230) (3,230) 13,770 13,770 17,000 17,000 d equine d equine the prior the prior e 2020. e 2020.

tential future tential future alue, as shown alue, as shown t that time the t that time the 2019 2019 £000 £000 9,181 9,181 (5,497) (5,497) 24,503 24,503 30,000 30,000 Financial Statements 16 Acquisition of business 16 Acquisition of business 15 Appropriations 15 Appropriations Notes to the financial statements to the financial Notes statements to the financial Notes The acquisitions contributed £16,000 revenue and £14,000 to the Group's profit before tax between the dates of acquisition and The acquisitions contributed £16,000 revenue and £14,000 to the Group's profit before tax between the dates of acquisition and The acquisitions contributed £16,000 revenue and £14,000 to the Group's profit before tax between Charitable grants Charitable grants was £225,000. The net cash outflow arising on the acquisitions was £225,000. The net cash outflow arising on the acquisitions potential future payment in respect of contingent consideration was between £nil and £90,000. potential future payment in respect of contingent consideration was between £nil and £90,000. and the movement in the fair v At the balance sheet date, the fair value of contingent consideration is £23,000 (2018: £63,000) and the movement in the fair v At the balance sheet date, the fair value of contingent consideration is £23,000 (2018: £63,000) to 31 December 2019 the po in note 29, is due to amounts paid in the year. Based on the actual policies converted in the period to 31 December 2019 the po in note 29, is due to amounts paid in the year. Based on the actual policies converted in the period payment is between £23,000 and £32,000 (2018: £63,000 and £90,000). payment is between £23,000 and £32,000 (2018: £63,000 and £90,000). period balance sheet date. period balance sheet date. Contingent consideration agreement Contingent consideration agreement for the two 'earn-out' periods. A The fair value of contingent consideration at acquisition was £67,000 based on forecast sales for the two 'earn-out' periods. A The fair value of contingent consideration at acquisition was £67,000 based on forecast sales Non-Cumulative Irredeemable Preference share dividend (8.625 pence per share) Preference share dividend (8.625 pence Non-Cumulative Irredeemable per share) Preference share dividend (8.625 pence Non-Cumulative Irredeemable Limited to the ultimate parent company, Allchurches Trust Gross charitable grants Allchurches Trust Limited Gross charitable grants to the ultimate parent company, Tax relief Tax relief Net appropriation for the year Net appropriation for the year Intangible assets Intangible assets No material acquisition-related costs were incurred in relation to the transaction. No material acquisition-related costs were incurred in relation to the transaction. Total consideration Total consideration Total assets acquired Total assets acquired Satisfied by: Satisfied by: relationships acquired. The fair value of the identifiable intangible assets of £292,000 consists of the value of distributor relationships acquired. The fair value of the identifiable intangible assets of £292,000 consists of the value of distributor 2019 and 31 August 2020. The amount pa The contingent consideration arrangement requires a cash payment to be made on 31 August 2019 and 31 August 2020. The amount pa The contingent consideration arrangement requires a cash payment to be made on 31 August periods which end on 6 Jun each case is determined by the number of policies converted in the two consecutive annual 'earn-out' periods which end on 6 Jun each case is determined by the number of policies converted in the two consecutive annual 'earn-out' The aggregate amounts recognised in respect of the identifiable assets of both acquisitions are set out in the table below. The aggregate amounts recognised in respect of the identifiable assets of both acquisitions are set out in the table below. The aggregate amounts recognised in respect Dividends Dividends On 11 June 2018, South Essex Insurance Brokers Limited acquired certain assets of Equicover Limited and on 30 November 2018 acq On 11 June 2018, South Essex Insurance Brokers Limited acquired certain assets of Equicover Limited and on 30 November 2018 acq On 11 June 2018, South Essex Insurance Brokers assets of Equestrian World Services from Greenwood Moreland Insurance Brokers. Both acquisitions were in order to further expan assets of Equestrian World Services from Greenwood Moreland Insurance Brokers. Both acquisitions were in order to further expan assets of Equestrian World Services from Greenwood Cash Cash insurance broking services. insurance broking services. Amounts recognised as distributions to equity holders in the period: Amounts recognised as distributions to equity holders in the period: Amounts recognised as Section Four Section Notes to the financial statements 16 Acquisition16 of business 15 Appropriations 15 Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 219 the Statutory Investment risk: The Fund holds some of its investments in asset classes, such as equities, which have volatile market values and,Investment risk: The Fund holds some of its investments in asset classes, such as equities, which while could cause funding to be requiredthese assets are expected to provide the best returns over the long term, any short-term volatility if a event of a fall in equity markets.deficit emerges. Derivative contracts are used from time to time, which would limit losses in the liabilities and are thereforeInterest rate risk: Scheme liabilities are assessed using market rates of interest to discount the subject to any in profit or loss is alsovolatility in the movement of the market rate of interest. The net interest income or expense recognised calculated (LDIs) to hedge part of using the market rate of interest. The Group's defined benefit plan holds Liability Driven Investments the exposure of the scheme's liabilities to movements in interest rates. assets are expected to provideInflation risk: A significant proportion of scheme benefits are linked to inflation. Although scheme a good emerging. The Group's definedhedge against inflation over the long term, movements over the short term could lead to a deficit benefit plan holds LDIs to hedge part of the exposure of the scheme's liabilities to movements in inflation expectations. originally, and a deficitMortality risk: In the event that members live longer than assumed the liabilities may be understated may emerge if funding has not adequately provided for the increased life expectancy. liabilities are denominated in sterling,Currency risk: The Fund holds some of its investments in foreign denominated assets. As scheme Currency derivative contractsshort-term fluctuations in exchange rates could cause funding to be required if a deficit emerges. are used from time to time, which would limit losses in the event of adverse movements in exchange rates. Notes to the financial statements to the financial Notes benefit schemes 19 Retirement Ecclesiastical Annual Report Accounts & 2019 - - - - - Defined contribution pension plans Defined contribution pension in note 13. which contributions by the Group are disclosed of defined contribution pension plans, for The Group operates a number plans Defined benefit pension and Ansvar Section. includes two discrete sections, the EIO Section plan is operated by the Parent in the UK, which The Group's defined benefit a non-contributory final for future service changed in August 2011 from entrants on 5 April 2006. The terms of the plan The plan closed to new closed to future accrual career average revalued earnings. The scheme scheme in which benefits are based on salary scheme to a contributory 2019 retained certain year. Active members in employment at 30 June with the Company's announcement in the prior on 30 June 2019 in line accrual, including benefits in relation to death in service and ill health retirement. They will also enhanced benefits after the plan closed to future by the Parent. From 1 July 2019, active members in employment joined one of the retain the link to final salary whilst they remain employed Group’s defined contribution plans. separately from those of the Group by the Trustee of the Ecclesiastical Insurance Office plc The assets of the defined benefit plan are held Fund is subject to the Statutory Funding Objective under the Pensions Act 2004. An Staff Retirement Benefit Fund (the 'Fund'). The Trustee is responsible for undertaking triennial valuations to determine whether independent qualified actuary appointed by the plan are determined by the Trustee, having considered the advice of the actuary and having Funding Objective is met. Pension costs for the valuation was at 31 December 2016. As the scheme is closed to future accrual, no consulted with the employer. The most recent triennial in 2020 (2018: £1.3m to 30 June 2019). contribution is expected to be paid by the Group by an actuary at 31 December 2019 for IAS 19 purposes. The announcement of closure to Actuarial valuations were reviewed and updated surplus that the Parent can recognise in respect of the EIO Section of the Fund as it future accrual from 30 June 2019 limits the maximum of surplus. At 31 December 2019 the maximum surplus that could be recognised in the EIO does not have an unconditional right to a refund the surplus in this Section has been recognised in full in accordance with International Section is greater than the IAS 19 surplus, therefore (IFRIC 14). The Parent has an unconditional right to a refund of surplus in the Ansvar Section Financial Reporting Interpretations Committee 14 accordance with IFRIC 14. of the Fund which has been recognised in full in to Guaranteed Minimum Pensions (GMP) equalisation of the Lloyds Bank pension In the prior year, there was a High Court ruling relating of the Group’s defined benefit plan. The impact of the ruling was estimated at £1.5m and scheme which has implications for the EIO section of profit and loss. There has been no change in the estimated impact of the ruling in the presented as a past service cost in the statement current year. changes in financial assumptions of £59.7m (2018: actuarial gains of £27.0m) have been In the current year, actuarial losses arising from decrease in the discount rate partially offset by recognised in the statement of other comprehensive income. These losses resulted from a 0.8% favourable movements in inflation. changes in demographic assumptions. This is Actuarial gains of £13.2m have been recognised in the current year (2018: £nil) as a result of place of the CMI 2016 projections table, to mainly due to adopting the Continuous Mortality Investigation (CMI) 2018 projections table, in determine the future improvements in mortality assumption. The defined benefit plan typically exposes the Group to risks such as: Notes to the financial statements 19 Retirement benefitschemes Retirement 19 218 (11)(11) (11) (41) (11) (41) 699699 (121)(121) 20182018 £000£000 4,8494,849 2,060 2,060 21,49521,495 16,64616,646 19,567 15,999 19,567 15,999 (25,493)(25,493) ful life of one ful life of one 2018 2018 (4)(4) (4) (4) 5757 18 18 589589 (438)(438) (180) (180) 20192019 £000£000 £000 £000 £000£000 7,615 7,615 GroupGroup Parent Parent 29,16329,163 11,91411,914 17,24917,249 21,495 16,64616,646 21,495 31,26731,26734,04134,041 25,628 25,628 27,857 27,857 33,90733,907 27,812 27,812 (30,963)(30,963) Computer softwareComputer software 1414 31,13331,133 2019 2019 (261)(261) £000£000 £000 £000 GroupGroup Parent Parent 38,19938,199 33,90733,90738,52938,529 27,812 27,812 31,283 31,283 (33,976)(33,976) (27,976) (27,976) Financial Statements 18 Deferred acquisition costs18 Deferred acquisition costs Notes to the financial statements statements to the financial to the financial Notes Notes Section Four Section 17 Goodwill and other intangible assets (continued) assets (continued) and other intangible and other intangible 17 Goodwill 17 Goodwill 17 Goodwill and other intangible assets (continued) assets intangible other and Goodwill 17 Notes to the financial statements Release in the periodRelease in the period At 1 JanuaryAt 1 January Exchange differences Exchange differences At 31 DecemberAt 31 December All balances are current.All balances are current. Increase in the periodIncrease in the period Other intangible assets consist of acquired brand, customer and distribution relationships, which have an overall remaining use use relationships, which have an overall remaining relationships, which have an overall remaining consist of acquired brand, customer and distributionconsist of acquired brand, customer and distribution Other intangible assets Other intangible assets basis (2018: one year). basis (2018: one year). year on a weighted averageyear on a weighted average CostCost At 1 January At 1 January AdditionsAdditions DisposalsDisposals Exchange differencesExchange differences At 31 December At 31 December AmortisationAmortisation At 1 January At 1 January Charge for the yearCharge for the year DisposalsDisposals Exchange differences Exchange differences At 31 December At 31 December Net book value at 31 December Net book value at 31 December ParentParent 18 Deferred acquisition costs acquisition Deferred 18 Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information - 221 % 125 2.70 2.25 3.00 1.50 24.6 24.9 26.4 23.1 3.20 2.20 4.20 2018 £000 £000 2,440 (1,981) 23,351 90,772 70,397 22,818 37,857 44,702 16,131 16,131 77,179 64,981 147,701 341,869 alified d terms. e in active fair value is - % 270 1.90 2.35 2.80 1.50 23.9 24.1 25.7 22.4 3.00 2.30 4.30 2019 £000 £000 2,396 2,411 8,505 8,505 24,232 97,832 78,282 93,519 41,781 21,945 43,659 71,189 172,071 379,684 Notes to the financial statements to the financial Notes 19 Retirement benefit schemes (continued) benefit schemes 19 Retirement Ecclesiastical Annual Report Accounts & 2019 Future increase in pensions in deferment Future average pension increases (linked to RPI) Future average pension increases (linked to CPI) Mortality rate retiring at age 65, at the year-end date, is as follows: The average life expectancy in years of a pensioner UK quoted Male Female Liability driven investments The fair value of unquoted securities is measured using inputs for the asset that are not based on observable market data. The The fair value of unquoted securities is measured using inputs for the asset that are not based is valued annually by independent qu estimated and approved by the Trustee based on the advice of investment managers. Property either have a quoted pric surveyors using standard industry methodology to determine a fair market value. All other investments Plan assets are weighted as follows: Cash and other* Equity instruments UK unquoted Overseas quoted Debt instruments UK public sector quoted - fixed interest UK non-public sector quoted - fixed interest UK quoted - index-linked Derivative financial instruments Property Discount rate Inflation (RPI) Inflation (CPI) Future salary increases Male Female retiring at age 65, 20 years after the year-end date, is as The average life expectancy in years of a pensioner follows: The actual return on plan assets was a gain of £48,870,000 (2018: a loss of £15,705,000). agreements at various rates an The underlying assets of the LDIs are primarily UK government bonds and interest rate repurchase markets or are valued based on observable market data. The following is the analysis of the defined benefit pension balances: The following is the analysis were as follows: (expressed as weighted averages) The principal actuarial assumptions Group and Parent Pension assets Pension liabilities *Cash and other includes accrued income, prepayments and other debtors and creditors. Notes to the financial statements (continued) schemes benefit Retirement 19 - - 220 382 (974) (974) 2018 £000 1,548 5,542 4,124 8,137 2,611 (8,649) (3,601) (5,542) 26,981 20,036 16,131 16,131 16,131 (24,354) 341,869 (325,738) mployer. Key e Trustees ure to future ns from the nce the level of informed by ities over the long e factors and has - - eir key objectives are nteed benefits of the s they fall due. The (91) ion. tes and grow in line 433 2019 £000 2,101 8,628 8,505 8,505 2,130 8,505 1,286 (6,811) (9,090) (6,811) (2,101) 13,192 39,780 16,131 (59,692) 379,684 (371,179) Financial Statements Notes to the financial statements to the financial Notes Section Four Section 19 Retirement benefit schemes (continued) benefit schemes 19 Retirement 19 Retirement benefit schemes (continued) schemes benefit Retirement 19 Notes to the financial statements Gains from changes in demographic assumptions (Losses)/gains from changes in financial assumptions Total included in other comprehensive income Administration cost Return on plan assets, excluding interest income Experience losses on liabilities Past service cost Total, included in employee benefits expense The amounts recognised in the statement of other comprehensive income are as follows: Interest income on plan assets Interest expense on liabilities Net defined benefit pension scheme asset in the statement of financial position Net defined benefit pension scheme asset in the scheme asset recognised in the statement of Movements in the net defined benefit pension financial position are as follows: At 1 January At 31 December The amounts recognised through profit or loss are as follows: Current service cost Present value of funded obligations Amounts recognised in other comprehensive income Restrictions on asset recognised Expense charged to profit or loss* Contributions paid Group and Parent of financial position are determined as follows: The amounts recognised in the statement Fair value of plan assets factors addressed in setting strategy include the Fund’s liability profile, funding level and strength of employer covenant. Th funding level and strength of employer covenant. strategy include the Fund’s liability profile, factors addressed in setting its liabil due, reduce the risk of assets failing to meet meet members’ guaranteed benefits as they fall to ensure the Fund can of returns and overall funding level. term and manage the volatility through investment performance only and without requiring further contributio intend that this long term target will be reached employer. A blend of diversified growth assets (equities and property) and protection assets (bonds, gilts and cash) are deployed to bala assets (bonds, gilts and cash) are deployed assets (equities and property) and protection A blend of diversified growth The Trustees set the investment objectives and strategy for the Fund based on independent advice and in consultation with the e on independent advice and in consultation objectives and strategy for the Fund based The Trustees set the investment a liquidity to continue to meet members' obligations with confidence, a sufficient return and risk to that required to provide, inflat objective to be falls in bond yields and rising the key risks faced by the Fund in meeting this Trustees have identified ra to increase in value with decreases in interest Driven Investments’) portfolio, structured Assets include an LDI (‘Liability to hedge 60% of the interest rate and inflation rate risk of the guara with inflation expectations. This is estimated currently rates and inflation counter-balances exposure of the Fund's liabilities to thes Fund. Exposure of the Fund's assets to interest position. reduced, but not eliminated, volatility in the funding analysis and review of the Fund’s investment strategy in the first half of 2020, The Trustees will proceed to undertake further for the triennial valuation as at 31 December 2019 and reflecting the clos refreshed benefits and cashflow projections prepared Long Term Funding Target in line with guidance from the Pensions Regulator. Th accrual during 2019. Their aim is to establish a * Charge to profit or loss includes £289,000 (2018: £590,000) in respect of member salary sacrifice contributions. Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 223 259 259 259 397 758 513 (116) (360) (642) (469) 2018 2018 £000 £000 5,813 5,813 (5,262) 10,932 238 154 154 154 409 782 529 (207) (371) (662) (484) 2019 2019 £000 £000 5,998 5,813 5,998 in plan liabilities years). Increase/(decrease) 13.5 (2018: years 13.3 is period reporting the end of the at obligations net the Change in assumption Increase by 0.5% Decrease by 0.5% Decrease by 1.0% Increase by 1 year Decrease by 1 year of duration average weighted Interest rate risk: The reserves are assessed using market rates of interest to discount the liabilities and are therefore subject to discount the liabilities and are therefore are assessed using market rates of interest Interest rate risk: The reserves in to volatility reserves rate of interest would lead to an increase in the rates of interest. A reduction in the market the movement of the market required to be held. and advances number of factors including economic trends risk: Future medical costs are influenced by a Medical expense inflation in medical expense inflation would lead to an increase in the reserves required tomedical technology and sciences. An increase in be held. be volatile, exposing the Company to the risk of being required to pay over andMedical claims experience: Claims experience can above differs significantly from that experienced in previous years, this will increasethe assumed reserve. If future claims experience the risk to the Company. benefit includes a potential liability for members who pay contributions in Spouse and widows' contributions: The self-insured respect of There is the possibility that the contributions charged may not be sufficienttheir spouse and for widows who pay contributions. to cover the medical costs that fall due. the Company is exposed to the expense of medical claims for a longer period,Mortality risk: If members live longer than expected, with increased likelihood of needing to pay claims. Notes to the financial statements to the financial Notes 19 Retirement benefit schemes (continued) benefit schemes 19 Retirement The amounts recognised in the statement of financial position are determined as follows: The amounts recognised in the statement of financial Group and Parent in the statement of financial position Present value of unfunded obligations and net obligations in the statement of financial position are as follows: Movements in the net obligations recognised At 1 January in other comprehensive income Net actuarial losses/(gains) during the year, recognised Total expense charged to profit or loss Benefits paid At 31 December The amounts recognised through profit or loss are as follows: Interest cost Total, included in employee benefits expense (2018: 7.2%) and a discount rate of 1.9% The main actuarial assumptions for the plan are a long-term increase in medical costs of 7.0% in financial assumptions, primarily due to (2018: 2.7%). An actuarial loss of £473,000 has been recognised in the current year due to changes demographic assumptions as explained in the fall in discount rate. An actuarial gain of £235,000 has been recognised due to changes in used to measure the net obligation for relation to the Group's defined benefit plan. In the prior year, an actuarial review of the assumptions for setting the medical cost inflation assumption post-employment medical benefits was carried out. As a result of this review, the methodology recognised as a result of updating for actual was revised, generating an actuarial gain of £1,760,000. An experience gain of £3,269,000 was changes in the assumptions occurring at scheme experience. The sensitivity analysis below has been determined based on reasonably possible the end of the accounting period assuming that all other assumptions are held constant. Post-employment medical benefits Post-employment medical assumptions it chooses to self-insure. The method of accounting, medical benefit plan, for which The Parent operates a post-employment and pension plans. are similar to those used for the defined benefit the frequency of valuation leads to a number of risks as follows: The provision of the plan - - - - - The Assumption Discount rate Medical expense inflationLife expectancy Increase by 1.0% Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements (continued) schemes benefit Retirement 19 222 - 382 2018 2018 £000 £000 4,960 1,548 3,601 4,124 8,137 2,611 8,649 (4,750) (8,216) (8,216) 12,780 39,390 25,270 (12,780) (33,630) (25,070) (26,981) (24,354) 325,738 343,143 341,869 363,179 ring at the . lows: d salary increases - 91 433 2019 2019 £000 £000 5,600 2,130 8,628 1,286 9,090 in plan liabilities (5,400) 15,700 47,700 33,300 59,692 39,780 (15,600) (27,500) (40,500) (13,192) (12,341) (12,341) 371,179 325,738 379,684 341,869 Increase/(decrease) - (144) (7,283) - 2018 2017 2016 2015 £000 £000 £000 £000 16,131 20,036 (20,176) 17,936 16,131 20,036 (20,320) 10,653 341,869 363,179 329,394 294,498 (325,738) (343,143) (349,570) (276,562) - 2019 £000 8,505 8,505 379,684 (371,179) Financial Statements Decrease by 1 year Decrease by 0.5% Increase by 0.5% Decrease by 0.5% Increase by 1 year Change in assumption Decrease by 0.5% Increase by 0.5% Increase by 0.5% Notes to the financial statements to the financial Notes 19 Retirement benefit schemes (continued) benefit schemes 19 Retirement Salary increase Life expectancy Assumption Discount rate Inflation The movements in the fair value of plan assets and the present value of the defined benefit obligation over the year are as fol the defined benefit obligation over the year are value of plan assets and the present value of The movements in the fair Losses/(gains) from changes in financial assumptions At 31 December Experience losses on liabilities At 1 January Current service cost Interest cost Gains from changes in demographic assumptions Past service cost Fair value of plan assets Pension benefits paid and payable Pension benefits paid and Contributions paid At 31 December Defined benefit obligation Administration cost Pension benefits paid and payable Restrictions on asset recognised Surplus/(deficit) end of the reporting period assuming that all other assumptions are held constant. The weighted average duration of the defined benefit obligation at the end of the reporting period is 23 years (2018: 23 years) The weighted average duration of the defined benefit Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, inflation, expecte Significant actuarial assumptions for the determination of the defined benefit obligation are discount changes in the assumptions occur and mortality. The sensitivity analysis below has been determined based on reasonably possible Interest income Actual return on plan assets, excluding interest income Actual return on plan assets, Plan assets At 1 January History of plan assets and liabilities Present value of defined benefit obligations Section Four Section 19 Retirement benefit schemes (continued) schemes benefit Retirement 19 Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 3 - 225 28 (56) (35) (22) 165 (847) (647) Total 7,153 7,160 7,372 2,212 15,921 12,543 12,515 32,621 18,594 independent buildings of the ld, the al property is ried out using nt of profit or f - - 1,810 - - - - - 19,887 10,773 - - (448) - - 12,515 - - - 19,887 (5) Right o 5 5 (43) - - 781 - 9,181 (7) 3 - Furniture, - - (24) (11) - (15) - - (528) (75) (244) - (18) - (633) (76) (814) (1,523) 24 3,045 2,882 8,704 16,700 29 6,270 6,964 2,658 11 893 1,192 2,126 4,222 18 5,902 5,842 781 53 9,315 9,846 11,362 13 1,422 2,680 3,038 40 8,544 7,237 9,181 27,047 - 313 1,132 365 - (508) (62) (77) - 761 5,130 4,882 - - 356 821 1,035 - (318) (62) (68) - - 799 5,874 5,842 ------(781) 28 - - 799 5,874 5,842 ------(2,095) 74 165 £000 £000 £000 £000 £000 £000 2,045 1,880 2,330 7,424 6,960 2,045 2,0452,045 2,135 8,470 7,237 2,045 2,135 8,470 7,237 2,045 1,336 2,596 1,395 Land andbuildings Motor vehicles and fittings equipment Computer equipment use asset Notes to the financial statements to the financial Notes 20 Property, plant and equipment (continued) plant and equipment 20 Property, Ecclesiastical Annual Report Accounts & 2019 Exchange differences At 31 December 2019 Net book value at 31 December 2019 Cost or valuation At 1 January 2018 Charge for the year Disposals At 1 January 2019 IFRS 16 transition adjustment* Additions Exchange differences At 31 December 2018 Revaluation At 31 December 2019 Depreciation Disposals Additions At 1 January 2019 Cost or valuation At 31 December 2018 IFRS 16 transition adjustment* Disposals Revaluation Exchange differences At 31 December 2018 Depreciation At 1 January 2018 Charge for the year Net book value at 31 December 2018 Exchange differences At 31 December 2018 All properties of the Group and Parent were last revalued at 31 December 2018. Valuations were carried out by Cluttons LLP, an All properties of the Group and Parent were last revalued at 31 December 2018. Valuations were of properties. Valuations were car professional firm of chartered surveyors who have recent experience in the location and type level 3 assets. standard industry methodology to determine a fair market value. All properties are classified as tax. When such properties are so Movements in market values are taken to the revaluation reserve within equity, net of deferred the market value of an individu accumulated revaluation surpluses are transferred from this reserve to retained earnings. Where Parent on a historical cost basis is £2,044,000 (2018: £2,044,000). below original cost, any revaluation movement arising during the year is recognised within net investment return in the stateme below original cost, any revaluation movement arising during the year is recognised within net loss. There have been no transfers between investment categories in the current year. The value of land and The value of land and buildings of the Group on a historical cost basis is £2,444,000 (2018: £2,444,000). Depreciation expense has been charged in other operating and administrative expenses. Parent Disposals *The Parent has adopted IFRS 16 from 1 January 2019 as detailed in note1. Notes to the financial statements (continued) equipment and Property, plant 20 224 28 (22) (52) (34) 190 (137) (476) 5,081 2,092 20,322 32,025 21,644 21,644 11,326 13,253 f - - - - 20,098 - - 2,437 - (684) - - - - - 8,391 - 13,253 - £000 £000 - - 781 - 12,402 10,381 (9) (17) 4 - Furniture, - (26) (26) - - (16) (18) - - (559) (76) (252) (887) - - (730) (20) (76) (11) (843) (106) (1,649) 2587 981 6,536 1,296 7,539 2,779 3,291 17,453 59 3,305 3,209 11,304 14 1,459 2,92162 3,142 6,110 7,536 6,328 781 13,281 - 816 5,271 5,239 - 346 1,257 489 - - 373 889 1,175 - (545) (62) (77) - - - (346) 843 (62) 6,082 (68) 6,328 ------843 (781) 6,082 28 6,328 - (2,095) 74 190 £000 £000 £000 £000 2,445 2,227 9,058 7,914 2,445 2,255 2,426 7,889 7,528 2,445 1322,445 9,132 146 7,914 9,841 12,402 10,748 14,595 37,775 2,445 2,227 9,058 7,914 2,445 1,384 2,976 1,586 Land andbuildings Motor vehicles fittings and equipment Computer equipment use asset Right o Total Financial Statements 20 Property, plant and equipment 20 Property, Notes to the financial statements to the financial Notes Section Four Section At 31 December 2018 Depreciation Charge for the year Disposals Exchange differences At 31 December 2019 Net book value at 31 December 2019 Cost or valuation At 1 January 2018 Exchange differences At 1 January 2018 Additions Revaluation At 1 January 2019 Disposals IFRS 16 transition adjustment* Exchange differences At 31 December 2019 Depreciation At 31 December 2018 At 1 January 2019 IFRS 16 transition adjustment* At 31 December 2018 Additions Revaluation Charge for the year Exchange differences At 31 December 2018 Net book value at 31 December 2018 Group Cost or valuation Disposals Disposals *The Group has adopted IFRS 16 from 1 January 2019 as detailed in note1. Notes to the financial statements 20 Property, plant and equipment and plant Property, 20 Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information y - - - 227 £000 Fair value - 2,306 with IAS 39, lue asset of rlying foreign currency 245 492 taken. asset liabilit £640,000 (2018: gain £000 as disclosed in note 27. 5,331 6,068 2,306 e within one year. of the overall scale of the eign exchange contract is 2018 arising from investments arising from investments cognised within other liabilities t £000 87,514 63,077 27,157 57,264 amoun notional Fair value 235,012 Contract/ 259 250 2019 £000 £000 58,588 1,562 30,456 45,411 amount asset 116,603 1,499 251,058 3,570 notional Fair value Contract/ Notes to the financial statements to the financial Notes financial instruments 23 Derivative Ecclesiastical Annual Report Accounts & 2019 23 Derivative financialinstruments The Group has also formally designated certain derivatives as a hedge of its net investments in Australia and Canada. A gain of its net investments in Australia and Canada. A gain designated certain derivatives as a hedge of The Group has also formally in the hedging reserve within shareholders' equity, of these 'hedge' derivatives has been recognised of £1,692,000) in respect The Group has formally assessed and documented the effectiveness of derivatives that qualify for hedge accounting in accordance and documented the effectiveness of derivatives The Group has formally assessed Forwards (Euro) The derivative financial instruments of the Parent are the same as the Group, with the exception that the Australian dollar for The derivative financial instruments of the Parent derivative transactions. They do not reflect current market values of the open positions. denominated in foreign currencies, and foreign exchange risk arising from investments denominated in Sterling that contain unde investments denominated in Sterling that contain and foreign exchange risk arising from denominated in foreign currencies, with a contract/notional value of £17,997,000 (2018: £22,493,000), and fair va Included with Equity/Index contracts are options classified as a non-hedge derivative. All contracts designated as hedging instruments were fully effective in the current and prior year. and so give an indication The notional amounts above reflect the aggregate of individual derivative positions on a gross basis value liabilities are re Derivative fair value assets are recognised within financial investments (note 22) and derivative fair (note 31). The Group utilises derivatives to mitigate equity price risk arising from investments held at fair value, foreign exchange risk to mitigate equity price risk arising from investments The Group utilises derivatives been or the option to hedge account has not derivatives either do not qualify for hedge accounting exposure. These 'non-hedge' Financial Instruments: Recognition and Measurement. Options Forwards (Canadian dollar) than one year. All other derivatives in the current and prior period expir £734,000 (2018: £2,348,000), which expire in greater Forwards (Australian dollar) Group Non-hedge derivatives Equity/Index contractsForeign exchange contractsHedge derivatives Foreign exchange contracts Notes to the financial statements - - - - 226 14 14 (56) (56) 492 125 245 492 125 245 2018 £000 2018 £000 Parent Parent : n. Other : n. Other 152,238 152,182 152,238 152,182 hartered hartered y methodology y methodology ified as level 3 ified as level 3 2018 nvestment 2018 nvestment - - 50,339 - - 50,339 17 17 191 125 737 191 125 737 (327) (327) 2019 £000 £000 £000 2019 £000 £000 £000 5,331 5,331 9,913 9,914 5,331 5,331 9,913 9,914 Group Group (3,900) (3,900) 44,773 44,771 44,773 44,771 152,182 148,146 241,361 210,080 148,053348,664 85,470 229,907 788,307 576,176 789,044 576,421 798,974343,840455,134 636,688 300,773 335,915 152,182 148,146 241,361 210,080 148,053348,664 85,470 229,907 788,307 576,176 789,044 576,421 798,974343,840455,134 636,688 300,773 335,915 270 259 792 270 259 792 2019 2019 - 49,729 - 49,729 270 509 796 270 509 796 £000 £000 £000 £000 4,974 4,974 1,5621,499 1,562 1,749 4,974 4,974 1,5621,499 1,562 1,749 Group Parent Group Parent 66,304 66,303 66,304 66,303 289,754 263,888 338,001 216,372 154,244 91,255 851,634 641,399 852,143 641,658 857,913383,578474,335 697,153 346,980 350,173 289,754 263,888 338,001 216,372 154,244 91,255 851,634 641,399 852,143 641,658 474,335 350,173 857,913383,578 697,153 346,980 FinancialFinancial Statements Statements Financial Statements 22 Financial investments 21 Investment property 21 Investment Notes to the financial statements to the financial Notes 22 Financial investments 21 Investment property 21 Investment Notes to the financial statements to the financial Notes 22 Financial investments - listed - listed Financial investments at fair value through profit or loss Financial investments at fair value through Equity securities - unlisted Debt securities - government bonds - unlisted Derivative financial instruments Financial investments at fair value through other comprehensive income Derivative financial instruments Total financial investments at fair value Loans and receivables Cash held on deposit Group and Parent Fair value at 1 January expenditure Additions - subsequent Disposals - options - forwards - forwards Other loans Parent investments in subsidiary undertakings Shares in subsidiary undertakings Total financial investments Current Non-current All investments in subsidiary undertakings are unlisted. Financial investments summarised by measurement category are as follows: Financial investments summarised by measurement Investment properties are held for long-term capital appreciation rather than short-term sale. Rental income arising from the i Investment properties are held for long-term capital Fair value losses recognised in profit or loss Fair value losses recognised and type of properties. Valuations were carried out using standard industr surveyors who have recent experience in the location no change in the valuation technique during the year. All properties are class to determine a fair market value. There has been investment categories in the current year. assets. There have been no transfers between amounted to £8,519,000 (2018: £8,238,000) and is included in net investment retur properties owned by both the Group and Parent generating rental income. £38,000) is in respect of properties not currently Fair value at 31 December at 31 December 2019 by Cluttons LLP, an independent professional firm of c The Group’s investment properties were last revalued operating and administrative expenses include £683,000 (2018: £473,000) relating to investment property, of which £80,000 (2018 operating and administrative expenses include Group and Parent - listed - listed Fair value at 1 January expenditure Additions - subsequent Disposals profit or loss Financial investments at fair value through Equity securities - unlisted Debt securities - government bonds - unlisted Derivative financial instruments Financial investments at fair value through other comprehensive income Derivative financial instruments Total financial investments at fair value Loans and receivables Cash held on deposit Non-current All investments in subsidiary undertakings are unlisted. Fair value losses recognised in profit or loss Fair value losses recognised and type of properties. Valuations were carried out using standard industr surveyors who have recent experience in the location no change in the valuation technique during the year. All properties are class to determine a fair market value. There has been investment categories in the current year. assets. There have been no transfers between generating rental income. £38,000) is in respect of properties not currently - options - forwards - forwards Other loans Parent investments in subsidiary undertakings Shares in subsidiary undertakings Total financial investments Current Fair value at 31 December at 31 December 2019 by Cluttons LLP, an independent professional firm of c The Group’s investment properties were last revalued Financial investments summarised by measurement category are as follows: Financial investments summarised by measurement Investment properties are held for long-term capital appreciation rather than short-term sale. Rental income arising from the i Investment properties are held for long-term capital properties owned by both the Group and Parent amounted to £8,519,000 (2018: £8,238,000) and is included in net investment retur properties owned by both the Group and Parent £683,000 (2018: £473,000) relating to investment property, of which £80,000 (2018 operating and administrative expenses include Section Four Four Section Section Section Four Section 21 Investment property21 Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 229 (19) (19) (77) (77) 525 525 110 110 640 640 453 453 2018 2018 £000 £000 14,027 14,027 106,450 106,450 120,477 120,477 350,678 350,678 106,450 106,450 ble on such ble on such deducting all deducting all accrued and accrued and ulative ulative the cumulative the cumulative y general meeting y general meeting - - (3,082) (3,082) - - (833) (833) - - - - (1,368) (1,368) fully paid fully paid winding up of the winding up of the (19) (19) (77) (77) 973973110 110 7,578 7,578 434434 7,564 7,564 640 640 597597 8,035 8,035 453 453 973973 7,578 7,578 2019 2019 £000 £000 14,027 14,027 Issued, allotted and Issued, allotted and 106,450 106,450 120,477 120,477 350,678 350,678 106,450 106,450 - - - - 1,692 1,692 (187) (187) 1,692 1,692 (187) (187) ------(649) (649) (649) (649) - - 525 525 (833) (833) £000£000 £000 £000 £000 £000 6,605 6,605 7,130 7,130 7,438 7,438 6,605 6,605 (3,082) (3,082) (1,368) (1,368) 13,57213,572 4,752 4,752 18,324 18,324 14,94014,940 4,131 4,131 19,071 19,071 18,02218,022 2,626 2,62614,94014,940 20,648 20,648 4,131 4,131 19,071 19,071 reservereserve reserve reserve Total Total TranslationTranslation Hedging Hedging Notes to the financial statements to the financial Notes statements to the financial Notes share capital 26 Called up share capital 26 Called up reserve 27 Translation and hedging reserve 27 Translation and hedging 27 Translation and hedging reserve hedging and Translation 27 Ecclesiastical Annual Report Accounts & 2019 capital share up Called 26 Losses on currency translation differences Losses on currency translation differences Attributable tax Attributable tax At 31 December 2019 At 31 December 2019 At 1 January 2018 At 1 January 2018 Losses on currency translation differences Losses on currency translation differences Gains on net investment hedges Gains on net investment hedges Attributable tax Attributable tax At 31 December 2018 At 31 December 2018 Parent Parent At 1 January 2019 At 1 January 2019 Losses on currency translation differences Losses on currency translation differences Gains on net investment hedges Gains on net investment hedges Attributable tax Attributable tax At 31 December 2019 At 31 December 2019 At 1 January 2018 At 1 January 2018 Losses on currency translation differences Losses on currency translation differences Group Group At 1 January 2019 At 1 January 2019 Gains on net investment hedges Gains on net investment hedges Attributable tax Attributable tax Gains on net investment hedges Gains on net investment hedges At 31 December 2018 At 31 December 2018 amount of gains and losses on hedging instruments in respect of net investments in foreign operations. amount of gains and losses on hedging instruments in respect of net investments in foreign operations. The translation reserve arises on consolidation of the Group's and Parent's foreign operations. The hedging reserve represents The translation reserve arises on consolidation of the Group's and Parent's foreign operations. The hedging reserve represents The translation reserve arises on consolidation of the Group's and Parent's foreign operations. Ordinary shares of 4p each Ordinary shares of 4p each Irredeemable Preference shares of £1 each 8.625% Non-Cumulative Irredeemable Preference shares of £1 each 8.625% Non-Cumulative The number of shares in issue are as follows: The number of shares in issue are as follows: Ordinary shares of 4p each Ordinary shares of 4p each At 1 January and 31 December At 1 January and 31 December shares of £1 each 8.625% Non-Cumulative Irredeemable Preference shares of £1 each 8.625% Non-Cumulative Irredeemable Preference At 1 January and 31 December At 1 January and 31 December after payment of its liabilities are to be applied to holders of the Non-Cum On winding up, the assets of the Company remaining after payment of its liabilities are to be applied to holders of the Non-Cum On winding up, the assets of the Company remaining nominal capital sum paid up on the shares and an amount equal to all arrears of Irredeemable Preference shares in repaying the nominal capital sum paid up on the shares and an amount equal to all arrears of Irredeemable Preference shares in repaying the of the winding up. The residual interest in the assets of the Company after unpaid dividends up to the date of the commencement of the winding up. The residual interest in the assets of the Company after unpaid dividends up to the date of the commencement liabilities belongs to the Ordinary shareholders. liabilities belongs to the Ordinary shareholders. shares are not entitled to receive notice of, or to attend, or vote at an Holders of the Non-Cumulative Irredeemable Preference shares are not entitled to receive notice of, or to attend, or vote at an Holders of the Non-Cumulative Irredeemable Preference convening such meeting, the dividend on such shares which is most recently paya of the Company unless at the time of the notice convening such meeting, the dividend on such shares which is most recently paya of the Company unless at the time of the notice a resolution is proposed varying any of the rights of such shares, or for the 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 shares shall not have been paid in full, or where Company. Company. Notes to the financial statements - - - - 228 69 69 69 69 ting date. ting date. collateral collateral

of cash calls of cash calls n the n the of an of an 2018: ank and in 2018: ank and in : £nil) classified : £nil) classified 688,000 (2018: 688,000 (2018: those debtors those debtors 2018 2018 2018 2018 2018 2018 - - - - he Parent has he Parent has held. The directors held. The directors (20) (20) 168 188 168 188 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 4,6964,700 3,546 3,901 6,236 4,6964,700 3,546 3,901 6,236 Group Parent Group Parent Group Parent Group Parent Group Parent Group Parent 67,373 40,033 42,044 32,742 36,709 36,369 47,025 30,770 11,612 5,128 30,719 35,311 11,933 1,303 32,779 34,965 67,373 40,033 42,044 32,742 36,709 36,369 47,025 30,770 11,612 5,128 30,719 35,311 11,933 1,303 32,779 34,965 109,417 72,775 153,630120,851 116,328 81,363 109,417 72,775 153,630120,851 116,328 81,363 - - - - 69 69 69 69 366 366 2019 2019 2019 2019 2019 2019 (23) (23) 145 168 366 145 168 366 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 4,5194,526 3,431 3,710 6,509 4,5194,526 3,431 3,710 6,509 Group Parent Group Parent Group Parent Group Parent Group Parent Group Parent 47,155 23,781 27,62074,775 18,467 42,248 41,549 41,296 56,549 36,337 11,177 3,923 39,044 43,239 14,119 1,491 41,359 43,006 47,155 23,781 27,62074,775 18,467 42,248 41,549 41,296 56,549 36,337 11,177 3,923 39,044 43,239 14,119 1,491 41,359 43,006 136,999 90,787 178,358 133,793 136,999 90,787 178,358 133,793 Financial Statements 25 Cash and cash equivalents 24 Other assets Notes to the financial statements to the financial Notes 25 Cash and cash equivalents 24 Other assets Notes to the financial statements to the financial Notes Movement in the year Cash at bank and in hand Included within Parent cash at b from reinsurers, and £3,464,000 (2018: £3,206,000) of restricted cash held on an agency basis. Balance at 31 December receivables of the Parent is £3, £3,387,000) is not more than three months overdue at the reporting date. Included within trade than three months overdue at the repor £1,975,000) overdue but not impaired, of which £3,485,000 (2018: £1,874,000) is not more Short-term bank deposits (2018: £2,299,000) pledged as Included within short-term bank deposits of the Group and Parent are cash deposits of £1,007,000 by way of cash margins on open derivative contracts to cover derivative liabilities. pledged as collateral by way Included within Group cash at bank and in hand are cash deposits of £3,821,000 (2018: £4,090,000) cash. hand are £nil deposits (2018: £241,000) pledged as collateral and £nil (2018: £nil) restricted Included within other assets of the Group is £8,162,000 (2018: £3,828,000) overdue but not impaired, of which £7,253,000 (2018: Included within other assets of the Group is £8,162,000 (2018: £3,828,000) overdue but not Balance at 1 January Movement in the allowance for doubtful debts Receivables arising from insurance and reinsurance contracts Receivables arising from - due from contract holders - due from agents, brokers and intermediaries - due from agents, brokers - 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 Current carrying values, which are stated net of an allowance for doubtful debts for consider that the amounts are recoverable at their that are individually determined to be impaired. with IFRS 15. Included within other receivables of the Parent is £nil (2018 £1,095,000) classified as receivables in accordance as receivables in accordance with IFRS 15. as contract assets, and £nil (2018: £nil) classified The Group has recognised a net credit of £31,000 (2018: net charge of £30,000) in other operating and administrative expenses i The Group has recognised a net credit of £31,000 of the Group's or Parent's other assets, for which no collateral is There has been no significant change in the recoverability - other debtors reversal of impairment of its trade and other receivables during the year. T statement of profit or loss for the impairment and charge of £46,000). recognised a net credit of of £15,000 (2018: net of the Parent is £2,744,000 (2018: £3,395,000) pledged as collateral in respect Included within amounts owed by related parties insurance liability. is £1,255,000 (2018: £1,210,000) classified as contract assets, and £1,151,000 ( Included within other receivables of the Group Non-current

Cash at bank and in hand Short-term bank deposits by way of cash margins on open derivative contracts to cover derivative liabilities. Included within short-term bank deposits of the Group and Parent are cash deposits of £1,007,000 (2018: £2,299,000) pledged as Included within short-term bank deposits of the Group and Parent are cash deposits of £1,007,000 pledged as collateral by way Included within Group cash at bank and in hand are cash deposits of £3,821,000 (2018: £4,090,000) Movement in the year Included within Parent cash at b from reinsurers, and £3,464,000 (2018: £3,206,000) of restricted cash held on an agency basis. Included within other assets of the Group is £8,162,000 (2018: £3,828,000) overdue but not impaired, of which £7,253,000 (2018: Included within other assets of the Group is £8,162,000 (2018: £3,828,000) overdue but not Balance at 31 December receivables of the Parent is £3, £3,387,000) is not more than three months overdue at the reporting date. Included within trade than three months overdue at the repor £1,975,000) overdue but not impaired, of which £3,485,000 (2018: £1,874,000) is not more cash. hand are £nil deposits (2018: £241,000) pledged as collateral and £nil (2018: £nil) restricted Balance at 1 January Movement in the allowance for doubtful debts Receivables arising from insurance and reinsurance contracts Receivables arising from - due from contract holders - due from agents, brokers and intermediaries - due from agents, brokers - 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 Current carrying values, which are stated net of an allowance for doubtful debts for consider that the amounts are recoverable at their that are individually determined to be impaired. with IFRS 15. Included within other receivables of the Parent is £nil (2018 £1,095,000) classified as receivables in accordance as receivables in accordance with IFRS 15. as contract assets, and £nil (2018: £nil) classified The Group has recognised a net credit of £31,000 (2018: net charge of £30,000) in other operating and administrative expenses i The Group has recognised a net credit of £31,000 of the Group's or Parent's other assets, for which no collateral is There has been no significant change in the recoverability - other debtors reversal of impairment of its trade and other receivables during the year. T statement of profit or loss for the impairment and charge of £46,000). recognised a net credit of of £15,000 (2018: net of the Parent is £2,744,000 (2018: £3,395,000) pledged as collateral in respect Included within amounts owed by related parties insurance liability. is £1,255,000 (2018: £1,210,000) classified as contract assets, and £1,151,000 ( Included within other receivables of the Group Non-current

Section Four Section 25 Cash and cash equivalents and Cash 25 24 Other assets Other 24 Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 231 5 17 15 Net 200 2018 4,200 18,800 tfolio is ce classes mate aims liabilities the terms of ments are nce level. l changes in scounted gross h discounted mptions include each portfolio ims. 2018 4 ncluded in these itigating effect on 17 12 of the factors that 200 2019 £000 £000 liabilities (years) 7,200 4,100 2,100 Gross 19,900 10,800 9,100 Mean term of discounted Net 200 2.3% 2018 2019 1.8% to 3.0% 2.2% to 2.7% 200 £000 £000 7,9004,900 4,800 1,900 Gross 19,70012,100 18,500 10,200 Discount rate 1.2% 2019 1.3% to 2.2% 1.9% to 2.0% - UK - Overseas - UK - Overseas - UK Notes to the financial statements to the financial Notes 28 Insurance liabilities and reinsurance assets (continued) reinsurance assets liabilities and 28 Insurance Ecclesiastical Annual Report Accounts & 2019 Liability Geographical territory UK and Ireland Canada Australia Property The ultimate amount of claims settlement is uncertain and the Group's aim is to reserve to at least the 75th percentile confide The ultimate amount of claims settlement is uncertain and the Group's aim is to reserve to at Parent consists of UK, Ireland and Canada. Group also includes Australia. Parent consists of UK, Ireland and Canada. Group exposure period as well as for earlier periods, together with a review with respect to ultimate claims liability for the recent used to determine the reserving methodology. The work conducted on each por have the most significant impact on the assumptions sign-off process. subject to an internal peer review and management The above rates of interest are based on government bond yields of the relevant currency and term at the reporting date. Adjust The above rates of interest are based on government held and to allow for future investment expenses. At the year end the undi made, where appropriate, to reflect portfolio assets for the Group (2018: £505,147,000), and £422,531,000 for the Parent (2018: outstanding claims liability was £516,068,000 £423,097,000). claims liability is presented within net investment return (note 8). The impact of discount rate changes on the outstanding of 1% in the discount rates used would increase the Group's net outstanding cl At 31 December 2019, it is estimated that a fall investments backing these liabilities are not hypothecated across general insuran by £17,065,000 (2018: £15,432,000). Financial and other equity reserves to interest rate risk, taking into account the m of business. The sensitivity of Group profit or loss asset values is provided in note 4(h). for outstanding claims on a regular basis. This involves an appraisal of The Group follows a process of reviewing its reserves the undiscounted general insurance reserves are the anticipated number and ulti The most significant assumptions in determining reinsurers will share in the cost. Factors which influence decisions on assu settlement cost of claims, and the extent to which about reinsurance are claims experience and developments in older or latent claims. Significant factors influencing assumptions individual and aggregated cla the reinsurance treaties, the anticipated time taken to settle a claim and the incidence of large There are no significant changes in assumptions. or lower than the reserves i If final settlement of the outstanding claims liability at the year end turns out to be 10% higher financial statements, the following pre-tax Group loss or profit will be realised: Motor (iv) Discounting following territories: provisions are held in the (v) Assumptions exceptional claims or substantia legal and judicial changes, significant weather events, other catastrophes, subsidence events, (vi) Changes in assumptions (vii) Sensitivity of results General insurance outstanding claims liabilities are undiscounted, except for designated long-tail classes of business for whic for designated long-tail classes of business claims liabilities are undiscounted, except General insurance outstanding Notes to the financial statements (continued) assets reinsurance and liabilities Insurance 28 - - 230 tter- priate, other verage cost recent loss on at least Sometimes a sed on onable guide ethods. the ircumstances, data. This eserve adequacy. best estimate. 2018 ons are calculated claims relating to £000 £000 Group Parent 81,964 78,731 54,357 81,964 37,558 25,592 61,615 45,881 720,049 531,439 579,703321,792 431,201 398,257 262,780 102,788 268,659 74,646 457,319180,766 381,631 149,808 140,346378,588 100,238 119,151 327,274 103,927 - - 2019 £000 £000 Group Parent 79,212 79,212 89,982 56,174 44,474 28,269 69,574 50,527 763,977 556,272 604,421354,977 449,571 409,000 282,020 115,082 274,252 78,432 481,669203,096 391,268 165,004 159,556391,687 106,701 133,522 335,094 114,477 Financial Statements 28 Insurance liabilities and reinsurance assets liabilities and reinsurance 28 Insurance Notes to the financial statements to the financial Notes Section Four Section Life business provision Total gross insurance liabilities Recoverable from reinsurers Life business provision Total net insurance liabilities Gross insurance liabilities Current Non-current Reinsurance assets Current Claims outstanding Non-current (a) General business insurance contracts used include the chain ladder, Bornhuetter-Ferguson and average cost m calculations and statistical analysis. Actuarial methods cannot be applied, provisi the 75th percentile confidence level for each portfolio. For smaller portfolios, where these methods cannot allow for changing c at a level intended to provide an equivalent probability of sufficiency. Where the standard methods claims. From time to time, additional uncertainty margins are added and are typically expressed as a percentage of outstanding by specific events that are not in management may elect to select an additional margin to reflect short-term uncertainty driven from the settlement of approach generally results in a favourable release of provisions in the current financial year, arising previous financial years, as shown in part (c) of the note. (iii) Calculation of provisions for latent claims and severity and benchmarking. The Group adopts commonly used industry methods including those based on claims frequency The selection of results for each accident year and for each portfolio depends on an assessment of the most appropriate method. The selection of results for each accident year and for each portfolio depends on an assessment (ii) Calculation of uncertainty margins margin is added to the To reflect the uncertain nature of the outcome of the ultimate settlement cost of claims, an uncertainty Gross Claims outstanding Unearned premiums Unearned premiums Total reinsurers’ share of insurance liabilities Net Claims outstanding Unearned premiums (i) Reserving methodology process and the Group adopts recognised actuarial methods and, where appro Reserving for non-life insurance claims is a complex or other methods such as Bornhue to future developments. Where this assumption is felt to be unreasonable, adjustments are made on expected loss ratios for the most Ferguson or average cost are used. The Bornhuetter-Ferguson method places more credibility the methods used in reviewing r years. For smaller portfolios the materiality of the business and data available may also shape by class of business and is ba combination of techniques is used. The average weighted term to payment is calculated separately Bootstrapping techniques, based The addition for uncertainty is assessed using actuarial methods including the Mack method and of claims, to ultimate claims based on the development of previous years. This method assumes that previous patterns are a reas of claims, to ultimate claims based on the development of previous years. This method assumes historical settlement patterns. Chain ladder methods extrapolate paid amounts, incurred amounts (paid claims plus case estimates) and the number of claims or a Chain ladder methods extrapolate paid amounts, 28 Insurance liabilities and reinsurance assets reinsurance and liabilities Insurance 28 Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 233 Total £000 (8,126) 173,171 117,843 291,014 133,726 109,227 242,953 141,852 183,363 (10,192) (213,053) 2019 2019 Total £000 £000 44,230 32,688 31,924 37,456 24,113 44,053 33,134 31,981 30,965 27,208 28,854 45,920 41,706 37,797 (6,546) (3,095) (764) 47,402 41,631 37,740 36,337 22,887 28,645 32,484 42,752 18,075 22,308 35,882 30,906 28,199 27,493 13,947 28,506 29,494 (14,559) (13,450) (9,152) (4,972) (1,478) (253,326) (11,692) (9,418) 35,164 33,233 (19,897) 10,071 10,587 (32,771) 74,36169,805 67,690 57,538 50,025 33,122 38,944 31,041 59,061 £000 £000 £000 £000 £000 £000 £000 £000 £000 68,057 73,735 60,075 47,428 37,740 7,182 7,670 7,138 6,368 5,765 5,018 7,816 8,928 11,537 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 46,965 57,758 55,97557,012 60,314 59,521 65,872 60,800 51,482 55,827 49,196 57,439 55,112 57,439 59,061 47,518 33,233 28,506 36,337 37,797 37,456 44,230 436,689 51,827 59,35249,598 61,79547,783 50,189 47,94246,951 49,029 51,766 34,393 48,858 50,762 26,981 42,126 50,079 40,587 28,825 73,218 75,302 88,24759,353 76,729 66,822 59,633 69,837 42,739 55,710 41,494 32,297 49,171 52,850 55,686 43,568 30,252 23,229 64,796 72,336 79,272 66,475 47,690 40,397 55,112 57,13549,060 59,011 48,250 59,873 59,997 65,297 51,828 38,215 47,519 48,977 46,965 48,977 50,079 40,587 28,825 23,229 27,493 28,854 27,208 32,688 354,905 57,05055,778 57,641 57,591 59,338 47,518 (40,597) (43,212) (45,061) (47,930) (49,769) (51,923) (37,447) (22,646) Notes to the financial statements to the financial Notes 28 Insurance liabilities and reinsurance assets (continued) reinsurance assets liabilities and 28 Insurance Ecclesiastical Annual Report Accounts & 2019 Parent Seven years later Eight years later Nine years later Current estimate of ultimate claims Cumulative payments to date Outstanding liability Effect of discounting Present value Discounted liability in respect of earlier years included in insurance liabilities in the statement of financial position Total discounted net liability (for liability classes) At end of year One year later Two years later Three years later Four years later Five years later Six years later Seven years later Eight years later Nine years later Current estimate of ultimate claims Cumulative payments to date Outstanding liability Effect of discounting Present value Discounted liability in respect of earlier years of financial position Total discounted net liability (for liability classes) included in insurance liabilities in the statement Group At end of year One year later Two years later Three years later Four years later Five years later Six years later Estimate of ultimate net claims Estimate of ultimate net Notes to the financial statements (continued) assets reinsurance and liabilities Insurance 28 232 Total £000 (8,126) 148,001 139,875 119,950 259,825 465,249 187,785 129,852 317,637 (10,192) (214,985) (267,272) itories. (764) £000 32,955 47,945 33,719 47,945 (1,478) is known. The tables on on 2018 2019 28,181 48,759 40,461 25,084 (4,973) £000 £000 41,883 40,461 31,463 34,210 32,992 33,353 50,736 46,885 41,883 51,738 46,073 41,041 38,468 38,468 37,981 32,541 29,538 (13,481) (9,152) £000 £000 £000 £000 £000 £000 23,620 29,436 43,582 40,337 29,436 33,804 46,464 (14,559) £000 £000 £000 £000 30,024 34,606 34,606 (21,076) (11,692) (9,450) (6,546) (3,097) 7,823 8,948 11,928 19,172 24,917 69,860 48,327 56,912 50,492 37,15842,289 27,28740,698 28,622 43,910 31,530 54,901 10,246 10,780 14,877 24,987 32,731 35,488 46,467 197,977 60,95054,792 40,153 39,015 31,941 30,129 66,192 45,495 (44,655) (23,826) (32,875) 7,323 £000 £000 £000 £000 61,213 63,068 50,092 78,196 60,560 56,225 69,580 62,712 77,629 88,046 80,027 50,571 67,980 60,174 37,064 72,516 51,872 50,791 100,612 81,725 61,901 £000 Financial Statements 82,095 76,371 60,653 57,790 71,543 52,985 49,127 49,040 63,770 62,587 68,587 60,841 59,914 57,950 57,939 50,355 6,376 5,771 5,027 7,261 7,817 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total 2010 2011 2012 2013 2014 2015 2016 2017 £000 £000 £000 48,499 60,037 59,199 57,790 60,560 54,901 47,527 47,527 49,040 50,092 40,698 30,024 23,620 28,622 31,463 28,181 33,719 362,986 47,523 48,927 53,390 60,155 59,199 84,476 75,550 62,239 61,871 69,230 66,864 84,511 71,798 52,350 34,769 66,422 61,330 62,074 50,526 60,202 50,834 48,082 51,031 (51,938) (49,973) (53,237) (41,151) (43,269) (45,065) Notes to the financial statements to the financial Notes Section Four Section 28 Insurance liabilities and reinsurance assets (continued) reinsurance assets liabilities and 28 Insurance 28 Insurance liabilities and reinsurance assets (continued) assets reinsurance and liabilities Insurance 28 Notes to the financial statements Three years later Four years later Five years later Six years later Seven years later Effect of discounting Present value Discounted liability in respect of earlier years Current estimate of ultimate claims Cumulative payments to date Outstanding liability Estimate of ultimate gross claims Estimate of ultimate gross Group Eight years later Nine years later Current estimate of ultimate claims Cumulative payments to date Outstanding liability Effect of discounting Present value Discounted liability in respect of earlier years Parent At end of year One year later Two years later Total discounted gross liability (for liability classes) included in insurance liabilities in the statement of financial positi Total discounted gross liability (for liability classes) Seven years later Eight years later Nine years later (viii) Claims development tables (viii) Claims development of years to settle and before the final liability of business is that claims may take a number The nature of liability classes all terr gross and net claims cost for these classes across of the undiscounted estimate of ultimate below show the development Total discounted gross liability (for liability classes) included in insurance liabilities in the statement of financial positi Total discounted gross liability (for liability classes) included in insurance liabilities in the statement At end of year One year later Two years later Three years later Four years later Five years later Six years later Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 235 Net 364 134 283 617 (709) (827) £000 2,483 (3,257) (1,305) (4,427) 119,151 604,421 391,687 134,526 133,522 378,588 121,272 - 88,141 - - - - 81,964 - (6,250) - - (5,733) - - 79,212 - - 81,964 790 722 (599) 9,950 (201) £000 5,888 (26,277) 61,416 (119,446) 40,808 (98,413) 48,691 (106,446) (78,731) 378,588 (61,615) (89,982) (58,688) 130,958 (53,855) Reinsurance 134 364 283 617 (827) £000 2,483 Gross (4,859) 1,602 (4,226) (2,027) (6,250) (1,499) (5,733) (4,459) 1,340 (3,119) 10,549 79,212 81,964 88,141 81,964 (32,165) (62,905) 27,667 (35,238) 457,319 180,766 481,669 204,691 (70,165) 189,646 203,096 (69,574) 763,977 (159,556) 457,319 (78,731) 720,049 (140,346) 579,703 175,127 509,319 (102,635) 406,684 171,788181,373 (56,573)180,766 (61,854) 115,215 119,519 (61,615) 119,151 (180,862) (139,221) (155,137) (170,368) 56,090 (114,278) Notes to the financial statements to the financial Notes 28 Insurance liabilities and reinsurance assets (continued) reinsurance assets liabilities and 28 Insurance Provision for unearned premiums At 1 January 2018 Increase in the period Release in the period Exchange differences At 31 December 2018 Life business provision At 1 January 2018 Exchange differences Change in liabilities/reinsurance assets Change in liabilities/reinsurance - change in discount rate Increase in the period Provision for unearned premiums At 1 January 2019 assets Total insurance contract liabilities and reinsurance Changes in assumptions Change in discount rate Other movements Total insurance contract liabilities and reinsurance assets Exchange differences At 31 December 2018 At 31 December 2018 Group At 1 January 2019 claims settled in the year Cash (paid)/received for claims - arising from prior year Other movements At 31 December 2019 - arising from current year claims - arising from current year Effect of claims during the year At 31 December 2019 Release in the period Exchange differences At 31 December 2019 Life business provision At 1 January 2019 Effect of claims during the year Changes in assumptions Change in discount rate - arising from current year claims - arising from prior year claims - change in discount rate (c) Movements in insurance liabilities and reinsurance assets (c) Movements in insurance Claims outstanding At 1 January 2018 Cash (paid)/received for claims settled in the year Change in liabilities/reinsurance assets Claims outstanding Ecclesiastical Annual Report Accounts & 2019 Notes to the financial statements (continued) assets reinsurance and liabilities Insurance 28 234 700 200 600 900 (600) (600) (900) 2018 2018 £000 (1,000) 0.98% -1.89% -1.38% company. level. The re mortality licy volumes (2018: £1.1 xpenses is held rtfolio of financial ngs inflation, and te. The risk- ult, liabilities have ness, the base s classed as n in the following 700 500 600 (700) (600) (900) 2019 2019 £000 1,000 (1,100) 0.61% -2.18% -1.64% -10% -10% +10% +10% -1% pa -1% pa +1% pa +1% pa variable in the result (decrease) Change in Potential increase/ Financial Statements Notes to the financial statements to the financial Notes Section Four Section 28 Insurance liabilities and reinsurance assets (continued) reinsurance assets liabilities and 28 Insurance 28 Insurance liabilities and reinsurance assets (continued) assets reinsurance and liabilities Insurance 28 Notes to the financial statements Decrease in expense inflation UK and overseas government bonds: non-linked improvements based on trends identified in population data. improvements based on UK and overseas government bonds: index-linked Tax (b) Life insurance contracts (i) Assumptions in determining life reserves are as follows: The most significant assumptions Funeral plans and actual expenses have been considered when setting the base renewal expense Numbers of policies in force and both projected renewal expense level and inflation Corporate debt instruments: index-linked Mortality of busi the type of contract. For the only material line of standard mortality is chosen depending on An appropriate base table Investment yields for each asset class less an allowance for credit risk, where appropria Projected investment returns are based on actual returns tables used are English Life Tables number 16F and English Life Tables number 16M. Where prudent, an allowance is made for futu number 16M. Where prudent, an allowance Life Tables number 16F and English Life Tables tables used are English for the current valuation are as follows: adjusted yields after allowance for investment expenses class of liabilities. assets which are assumed to back the relevant is £2.50 per annum (2018: £2.40 per annum). Additionally, now the in-force po unit renewal expense assumption for this business company have been reserved for in a separate exercise. A reserve for these e are expected to fall, much of the expenses of the at £5.7 million (2018: £5.4 million). The investment return assumption is determined by calculating an overall yield on all cash flows projected to occur from the po The investment return assumption is determined Improvement in base renewal expense level Deterioration in annuitant mortality Increase in fixed interest/cash yields Improvement in annuitant mortality Worsening of base renewal expense level Decrease in fixed interest/cash yields Increase in expense inflation is assumed to be 4.08% per annum (2018: 4.22%). on a profits basis. protection business and is expected to be taxed (ii) Changes in assumptions above) was a £0.4 million increase The effect on insurance liabilities of the changes to renewal expense assumptions (described million decrease). (iii) Sensitivity analysis insurance liabilities is show The sensitivity of profit before tax to changes in the key assumptions used to calculate the life table. No account has been taken of any correlation between the assumptions. Variable Expense inflation is set with reference to the index-linked UK government bond rates of return, and published figures for earni Expense inflation is set with reference to the index-linked applicable at 1 January 2020 will continue to apply. All in-force business i It has been assumed that tax legislation and rates There has been no change in the mortality assumptions. Projected investment returns have been revised in line with the changes in the actual yields of the underlying assets. As a res Projected investment returns have been revised in line with the changes in the actual yields of increased by £2.5 million (2018: £0.3 million). that are expected to be incurred by the The assumed future expenses of running the business have been revised based on expenses Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 237 (6) (3) (72) (72) 503 610 445 461 regulated cts the has been no s share of the s, including te 16. - - 4,778 - (5,552) - - 4,778 - (5,512) (6) (3) to services provided. 503 610 445 461 ------1,688 5,059 - - 2,133 5,504 - - - - - 2,130 4,695 - 1,669 4,234 - 63 1,782 5,216 63 2,285 5,719 2323 2,279 1,669 4,867 4,257 (40) £000 £000 £000 ------(72) (72) £000 3,371 3,371 4,778 2,565 2,565 3,371 3,371 4,778 2,565 2,565 (5,512) (5,512) and legal Contingent Other provisions consideration provisions Total Regulatory Notes to the financial statements to the financial Notes liabilities for other liabilities and contingent 29 Provisions Ecclesiastical Annual Report Accounts & 2019 liabilities other 29 for and Provisions liabilities contingent Group At 31 December 2018 At 1 January 2019 IFRS 16 transition adjustment* Used during year Not utilised Additional provisions Exchange differences At 31 December 2019 Current Non-current Parent At 31 December 2018 IFRS 16 transition adjustment* At 1 January 2019 Additional provisions Used during year Not utilised Exchange differences At 31 December 2019 Regulatory and legal provisions and is subject to regulatory requirements in the normal course of busines The Group operates in the financial services industry an assessment by the Group of it contributing towards any levies raised on UK general and life business. The provisions reflect total potential levies. complaints we may uphold. expected redress and associated administration costs that would be payable in relation to any Current relate to cases where there In addition, from time to time the Group receives complaints from customers and, while the majority of the provision, which refle The Group continues to reassess the ultimate level of complaints expected and the appropriateness Contingent consideration Limited as disclosed in no The provision for contingent consideration relates to the acquisition of certain assets of Equicover Other provisions The provision for other costs relates to costs in respect of dilapidations. Non-current services across a wide spectrum of customer detriment, we recognise that we have provided, and continue to provide, advice and customer complaints relating activities. We therefore believe that it is prudent to hold a provision for the estimated costs of *The Group has adopted IFRS 16 from 1 January 2019 as detailed in note1. *The Group has adopted IFRS 16 from 1 January 2019 Notes to the financial statements 236 14 Net (24,223) 353,797 - (5,156) - 7,862 95 (878) 59 69 (602) 24,498 (88,091) (56,174) 335,094 (45) (973) (671) £000 £000 £000 7,862 Gross Reinsurance (5,156) (1,112) 196 (916) (25,030) 807 (49,131) 18,014 (31,117) 391,268 149,808 (45,881) 103,927 381,631 (54,357)140,367 327,274 (27,217) 113,150 165,625 (50,631)165,004 114,994 (50,527) 114,477 142,769 (35,207)381,631 107,562 141,707 (54,357)149,959 (42,525) 327,274 (45,887)149,808 99,182 104,072 (45,881) 103,927 421,397 (67,600) (112,589) (150,384) 45,926 (104,458) (141,187) 42,462 (98,725) (127,136) 30,240 (96,896) Financial Statements Notes to the financial statements to the financial Notes 28 Insurance liabilities and reinsurance assets (continued) reinsurance assets liabilities and 28 Insurance Section Four Section Exchange differences At 31 December 2018 - arising from current year claims - arising from current year Provision for unearned premiums At 1 January 2018 Increase in the period Claims outstanding assets Change in liabilities/reinsurance - arising from prior year claims - arising from prior year - change in discount rate Parent Cash (paid)/received for claims settled in the year 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 2018 Exchange differences At 31 December 2019 Provision for unearned premiums At 1 January 2019 Release in the period At 1 January 2019 claims settled in the year Cash (paid)/received for Increase in the period Release in the period Exchange differences At 31 December 2019 Claims outstanding At 1 January 2018 28 Insurance liabilities and reinsurance assets (continued) assets reinsurance and liabilities Insurance 28 Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information ------239 54 54 (89) (38) (38) (89) 416 416 rs. Lease rs. Lease IFRS 15. IFRS 15. of property of property han security han security 2018 2018 ay not be used as 4 - ay not be used as 4 - - (570) - - - (570) (1) 5. (1) 5. (21) (591) (98) (2,126) (21) (591) (98) (2,126) 297297150 11,621 11,621 3,142 306 11,304 220220105 8,400 8,400 3,038 227 8,704 359 227 8,704 297297150 11,621 11,621 3,142 306 11,304 220220105 8,400 8,400 3,038 359 £000 £000 £000 £000 1,183 2,306 2,306 3,992 1,183 2,306 2,306 3,992 Group Parent Group Parent 24,85471,91971,560 19,390 47,255 47,255 23,764 15,351 15,816 9,738 24,85471,91971,560 19,390 47,255 47,255 23,764 15,351 15,816 9,738 - - - - (1) (1) - - - - 128 128 24 128 128 24 (128) (128) (323) (120) (2,779) (287) (128) (128) (323) (120) (2,779) (287) £000 £000 £000 £000 £000 £000 1,362 1,362 1,039 1,315 1,315 1,028 1,028 1,362 1,362 1,039 1,315 1,315 2019 2019 4 - 4 ------(87) (38) (38) (87) 419 419 (442) (442) (442) (442) £000 £000 £000 £000 £000 £000 9,962 9,962 2,864 9,961 6,865 6,865 2,805 7,449 2,215 1,418 4,258 7,449 9,962 9,962 2,864 9,961 6,865 6,865 2,805 2,215 1,418 4,258 (2,336) (1,741) (1,741) (2,336) Group Parent Group Parent 25,73876,95276,533 19,448 45,566 45,566 26,652 14,567 18,085 10,109 25,73876,95276,533 19,448 45,566 45,566 26,652 14,567 18,085 10,109 buildings vehicles equipment Total buildings vehicles equipment Total Land and Motor Other Land and Motor Other Notes to the financial statements to the financial Notes and deferred income 31 Other liabilities 32 Leases Notes to the financial statements to the financial Notes and deferred income 31 Other liabilities 32 Leases security for borrowing purposes. generally have terms of up to 15 years, while motor vehicles and other equipment generally have lease terms between 2 and 6 yea generally have terms of up to 15 years, while motor are secured by the lessor's title to the leased assets, and leased assets m interests. The Group's obligations under its leases At 31 December 2018 Transition to IFRS 16 At 1 January 2019 Additions Exchange differences At 31 December 2019 Parent At 31 December 2018 Transition to IFRS 16 At 1 January 2019 Additions Disposals Exchange differences At 31 December 2019 Included within deferred income of the Group is £278,000 (2018: £112,000) classified as contract liabilities in accordance with Included within deferred income of the Group is is £nil (2018: £nil) classified as contract liabilities in accordance with IFRS 1 Included within deferred income of the Parent Group as a lessee of property, motor vehicles and other equipment used in its operations. Leases The Group has lease contracts for various items contain different terms and conditions, but do not impose any covenants other t terms are negotiated on an individual basis and Disposals Amounts owed to related parties Accruals Current Non-current contracts and are detailed in note 23. Derivative liabilities are in respect of equity futures current liability in both the current and prior year. Deferred income of the Group and Parent is a Depreciation expense Depreciation expense Group Creditors arising out of reinsurance operations Creditors arising out of Creditors arising out of direct insurance operations Creditors arising out of Derivative liabilities Other creditors Creditors arising from broking activities Creditors arising from broking Ecclesiastical Annual Report Accounts & 2019 income deferred and liabilities Other 31 Leases 32 Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period. Set out below are the carrying amounts of right-of-use assets recognised and the movements security for borrowing purposes. interests. The Group's obligations under its leases are secured by the lessor's title to the leased assets, and leased assets m interests. The Group's obligations under its leases terms are negotiated on an individual basis and contain different terms and conditions, but do not impose any covenants other t terms are negotiated on an individual basis and At 31 December 2019 Amounts owed to related parties Accruals Current Non-current contracts and are detailed in note 23. Derivative liabilities are in respect of equity futures current liability in both the current and prior year. Deferred income of the Group and Parent is a £278,000 (2018: £112,000) classified as contract liabilities in accordance with Included within deferred income of the Group is Group as a lessee of property, motor vehicles and other equipment used in its operations. Leases The Group has lease contracts for various items vehicles and other equipment generally have lease terms between 2 and 6 yea generally have terms of up to 15 years, while motor Exchange differences Included within deferred income of the parent is £nil (2018: £nil) classified as contract liabilities in accordance with IFRS 1 Included within deferred income of the parent is At 31 December 2018 Transition to IFRS 16 At 1 January 2019 Additions Exchange differences At 31 December 2019 Parent At 31 December 2018 Transition to IFRS 16 At 1 January 2019 Additions Disposals Depreciation expense Disposals Depreciation expense Creditors arising out of reinsurance operations Creditors arising out of Creditors arising out of direct insurance operations Creditors arising out of Derivative liabilities Other creditors Creditors arising from broking activities Creditors arising from broking Group Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period. Set out below are the carrying amounts of right-of-use assets recognised and the movements Notes to the financial statements - 238 89 61 (18) 824 824 Total £000 4,749 (1,308) 34,428 31,070 36,654 29,916 37,164 re available ansfers to this et out by HM With effect from rior reporting period is 2018 of these losses owing is the 74 95 95 47 (66) (7,623) (18) (53) (6,900) £000 1,641 3,390 Group Parent (1,749) 31,66529,916 31,070 31,070 28,275 27,680 ------(110) (1,308) - (110) - 2,994 (1,683) Parent Equalisation Other - - - - -99 2019 Net 425 1,434 (2,494) 33,446 427 1,434 (582) 729 729 £000 £000 2,226 4,438 (2,203) Group 35,64933,446 34,428 34,428 31,220 29,990 - - - - (1,198) - - (1,198) 15 14 £000 £000 £000 £000 £000 6,500 (130) (770) (851) 5,875 (130) (770) (318) 4,657 (6,244) (523) (790) (5,534) (523) (790) 34,081 33,149 33,796 1,547 27,566 1,753 2,204 (1,607) 27,274 1,755 2,204 (163) 32,808 1,549 2,994 (187) gains on benefit Unrealised retirement investments assets reserve differences Financial Statements 30 Deferred tax 30 Deferred Notes to the financial statements to the financial Notes Exchange differences At 31 December 2019 by law and maintained in compliance with insurance companies' regulations. Tr The equalisation reserve was previously required as follows: (Credited)/charged to other comprehensive income and gave rise to deferred tax. reserve were deemed to be tax deductible under legislation that applied prior to 1 January 2016 6 years under the transition rules s the implementation date of Solvency II, 1 January 2016, these reserves become taxable over Treasury. An analysis and reconciliation of the movement of the key components of the net deferred tax liability during the current and p of the net deferred tax liability during the current of the movement of the key components An analysis and reconciliation Group Charged to other comprehensive income Exchange differences At 31 December 2018 Charged/(credited) to profit or loss Credited to other comprehensive income Exchange differences At 31 December 2019 Parent At 1 January 2018 Credited to profit or loss Exchange differences At 31 December 2018 Charged/(credited) to profit or loss Credited to other comprehensive income At 1 January 2018 Credited to profit or loss Deferred tax liabilities Deferred tax assets has been recognised in respect for offset against future profits and can be carried forward indefinitely. No deferred tax asset due to the unpredictability of future profit streams. The Group has unused tax losses of £13,361,000 (2018: £15,832,000) arising from life business and capital transactions, which a The Group has unused tax losses of £13,361,000 (2018: £15,832,000) arising from life business Certain deferred tax assets and liabilities have been offset where the Group has a legally enforceable right to do so. The foll Certain deferred tax assets and liabilities have been offset where the Group has a legally enforceable analysis of the deferred tax balances (after offset) for financial reporting purposes: Current Non-current Section Four Section 30 Deferred tax Deferred 30 Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 8 241 21 29 (13) 134 134 111 379 366 2019 £000 Parent y the Group. ear is disclosed l leases include e is also required 2019 2018 (13) 134 134 111 379 366 £000 £000 £000 £000 8,0007,3296,7906,056 8,000 5,739 7,329 6,790 6,056 5,739 Group Group Parent 32,47866,392 32,478 66,392 2019 £000 £000 8,2207,6436,850 8,220 6,160 7,643 6,850 6,160 6,455 6,455 Group Parent 29,065 29,065 64,393 64,393 Notes to the financial statements to the financial Notes 32 Leases (continued) 32 Leases Ecclesiastical Annual Report Accounts & 2019 to provide a residual value guarantee on the properties. Rental income on these properties recognised by the Group during the y to provide a residual value guarantee on the properties. in note 21. Selling profit for finance leases leases Finance income on the net investment in finance charge on an annual basis according to prevailing market conditions. The lesse a clause to enable upward revision of the rental Finance leases occupied b to sublease a commercial office space no longer into a finance leasing arrangement as a lessor The Group has entered an extension or early termination option. lease is 3 years. The contract does not include The term of the finance Year 1 Year 2 Year 3 Undiscounted lease payments Less: unearned finance income Net investment in the lease assets as shown in note 24. Net investment in the lease is recognised in other crediting the following amounts in respect of finance lease contracts: Group profit for the year has been arrived at after Operating its investment property portfolio. These leases have terms of up to 50 years. Al The Group has entered into operating leases on leases Group as a lessor Year 1 Year 2 Year 3 Year 5 Year 4 After 5 years The Group did not have lessor finance leasing arrangements in 2018. The Group did not have lessor finance leasing are as follows: Future minimum rentals receivable under non-cancellable operating leases as at 31 December Notes to the financial statements (continued) Leases 32 240 584 506 2019 £000 2,460 2,779 3,363 t to provide as 33. leases, including judgement in 2019 2018 nce leases under 506 £000 £000 £000 £000 3,4305,432 2,715 4,587 2,985 9,938 7,868 3,428 2,201 Group Parent Group Parent 12,923 10,328 10,74319,605 8,929 16,231 Financial Statements Leases. Notes to the financial statements to the financial Notes 32 Leases (continued) 32 Leases Within 1 year Between 1 & 5 years After 5 years Operating lease rentals charged to profit or loss during the year Total future minimum sublease payments expected to be received under non-cancellable subleases Group profit for the year has been arrived at after charging the following amounts in respect of lease contracts: Group profit for the year has been arrived at after Current Non-current Set out below are the carrying amounts of lease obligations: Set out below are the carrying In the previous year, the Group and Parent only recognised lease liabilities in relation to leases that were classified as fina in relation to leases that were classified as Group and Parent only recognised lease liabilities In the previous year, the IAS 17, interest, of £3,371,000 in 2019. The Parent had total cash outflows for The Group had total cash outflows for leases, including outflows relating to leases that have not yet commenced are disclosed in note interest, of £2,653,000 in 2019. The future cash extension and termination options. These options are negotiated by managemen The Group has several lease contracts that include future aggregate minimum lease payments under non-cancellable operating leases At the prior period reporting date the Group had follows: Depreciation expense of right-of-use assets Interest expense on lease liabilities and align with the Group's business needs. Management exercises significant flexibility in managing the leased-asset portfolio options are reasonably certain to be exercised, as disclosed in note 2. determining whether these extension and termination Section Four Section 32 Leases (continued) Leases 32 Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 1 - 243 529 867 498 872 Other parties related nting to al Report nts ve been made not included plans. eceived from 8.3m. - - - 1,736 1,157 61,276 - 2,033 - - 2,481 57,222 - 1,144 - 1,790 - - 2,249 - - 1,612 461 15,249 461 368 259 368259 5,751 3,685 £000 £000 £000 8,590 8,590 3,743 37,900 37,900 4,205 1,134 29,562 29,562 4,609 1,140 Group plc Subsidiaries Insurance Ecclesiastical Notes to the financial statements to the financial Notes transactions 35 Related party 35 Related party35 Related transactions Ecclesiastical Annual Report Accounts & 2019 Trading, investment and other income, including recharges, and amounts received Trading, investment and other income, including Amounts owed to related parties Trading, investment and other expenditure, including recharges, and amounts paid Trading, investment and other expenditure, including Amounts owed by related parties Amounts owed to related parties Parent recharges, and amounts paid Trading, investment and other expenditure, including Trading, investment and other income, including recharges, and amounts received Trading, investment and other income, including Amounts owed by related parties Amounts owed by related parties Group recharges, and amounts received Trading, investment and other income, including Amounts owed by related parties Amounts owed to related parties 2018 Group recharges, and amounts paid Trading, investment and other expenditure, including Parent recharges, and amounts received Trading, investment and other income, including Trading, investment and other expenditure, including recharges, and amounts paid Amounts owed to related parties a related party insurance agency amou During the year, the Company received premiums, commission and reinsurance recoveries via to £299,000 (2018: £340,000). £116,000 (2018: £187,000) and paid reinsurance protection, commission and claims amounting year includes loans totalling £ Trading, investment and other expenditure, including recharges, and amounts paid in the current be settled in cash. No provisions ha outstanding between Group companies are unsecured, are not subject to guarantees, and will in respect of these balances. 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 and by the Parent include insurance liabilities which of some insurance liabilities, amou Transactions and services within the Group are made on commercial terms. With the exception Governance section of the Annu The remuneration of the directors is disclosed in the Group Remuneration Report in the Corporate the Group's defined benefits schemes are disclosed in note 19. Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are parties, have been eliminated on consolidation Company and its subsidiaries, which are related Transactions between the are included within the Parent analysis below. in the Group analysis, but Ecclesiastical Insurance Group plc pension the ultimate parent undertaking and the Group's of Ecclesiastical Insurance Group plc, include subsidiary undertakings is the Group and Parent's immediate parent company. Other related parties, of both Group and Parent, 2019 in note 13. and Accounts. The remuneration of the key management personnel of the Group is disclosed paid to and amounts r Charitable grants paid to the Group's ultimate Parent undertaking are disclosed in note 15. Contributions Notes to the financial statements

242 has has d no d no tatements tatements vailable from vailable from Allchurches Allchurches Company RegistrationCompany ShareNumberRegistration ShareNumber Holding of shares by Capital Holding of shares by Capital Company Group Company Activity Group Activity 024311125193190243111 Ordinary09411992519319 Ordinary Ordinary0941199 100% Ordinary Ordinary6317314 100% 100% Ordinary63173136317314 100% Ordinary 100%6317313 - Ordinary 100% Ordinary - -007216506 Ordinary Life insurance - - - Ordinary 100% Investment management 007216506 Life insurance - - Ordinary 100% Trustee company Investment management 100% 100% Trustee company - 100% Insurance agents and brokers 100% - Investment holding company Insurance agents and brokers - Investment holding company - Insurance Insurance 162612286 Ordinary162612286 Ordinary - - 100% Dormant company 100% Dormant company Financial Statements Registered office: Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, United Kingdom Registered office: Level 5, Southbank Boulevard, Melbourne, VIC 3006, Australia Registered office: Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, United Kingdom Exempt from audit under s480 of the Companies Act 2006 Registered office: Level 5, Southbank Boulevard, Melbourne, VIC 3006, Australia Exempt from audit Exempt from audit under s480 of the Companies Act 2006 Exempt from audit † † 34 Related undertakings 34 Related undertakings 33 Commitments 33 Commitments Notes to the financial statements to the financial Notes statements to the financial Notes * ** * ^ ** ^ the registered office as shown on page 248. The parent companies of the smallest and largest groups for which group financial s the registered office as shown on page 248. The parent companies of the smallest and largest groups for which group financial s the registered office as shown on page 248. The *Ecclesiastical Financial Advisory Services Limited Ecclesiastical Life Limited * *Ecclesiastical Financial Advisory Services Limited EdenTree Investment Management Limited * Ecclesiastical Life Limited * 2046087E.I.O. Trustees Limited * ^ EdenTree Investment Management Limited * 2046087 Ordinary *Ecclesiastical Group Healthcare Trustees Limited E.I.O. Trustees Limited * ^ South Essex Insurance Brokers Limited * Ordinary *Ecclesiastical Group Healthcare Trustees Limited 100%South Essex Insurance Brokers Limited * 10988127 100%South Essex Insurance Holdings Limited * 10988127Incorporated Ordinary -Incorporated OrdinaryAnsvar Insurance Limited ** in Australia 100% -Ansvar Risk Management Services Pty Limited**Ansvar Insurance Limited ** Independent financial advisory in Australia 100%Ansvar Pty Insurance Services Limited ** † Ansvar Risk Management Services Pty Limited** financial advisory Independent Ansvar Pty Insurance Services Limited ** † - 623695054 - Ordinary Trustee company 623695054 Ordinary Trustee company 100% 100% - - Risk management services Risk management services Incorporated in the United Kingdom South Essex Insurance Holdings Limited * Related undertakings at 31 December 2019 is as follows: The Company's interest in related undertakings Related undertakings at 31 December 2019 is as follows: The Company's interest in related undertakings Company Company Subsidiary undertakings Subsidiary undertakings Incorporated in the United Kingdom Ultimate parent company and controlling party Insurance Group plc. Its ultimate parent and controlling company is The Company is a wholly-owned subsidiary of Ecclesiastical Ultimate parent company and controlling party Insurance Group plc. Its ultimate parent and controlling company is The Company is a wholly-owned subsidiary of Ecclesiastical At the year end, the Group and Parent had capital commitments of £2,559,000 (2018: £8,712,000) relating to computer software an (2018: £8,712,000) relating to computer and Parent had capital commitments of £2,559,000 At the year end, the Group and equipment. £1,207,000) relating to furniture, fittings capital commitments (2018: in 2020 and December 2019. The lease is expected to commence contract that has not yet commenced as at 31 The Group has a lease expected cash outflow is £1,300,000 per annum. a term of 15 years. The in 2020 and December 2019. The lease is expected to commence contract that has not yet commenced as at 31 The Group has a lease expected cash outflow is £1,300,000 per annum. a term of 15 years. The and operate in the United Kingdom and copies of their financial statements are a Trust Limited. Both companies are incorporated and operate in the United Kingdom and copies of their financial statements are a Trust Limited. Both companies are incorporated plc and Allchurches Trust Limited, respectively. are drawn up are Ecclesiastical Insurance Office plc and Allchurches Trust Limited, respectively. are drawn up are Ecclesiastical Insurance Office At the year end, the Group and Parent had capital commitments of £2,559,000 (2018: £8,712,000) relating to computer software an (2018: £8,712,000) relating to computer and Parent had capital commitments of £2,559,000 At the year end, the Group and equipment. £1,207,000) relating to furniture, fittings capital commitments (2018: Section Four Section 34 Related undertakings Related 34 33 Commitments Notes to the financial statements Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 245 -19 to be a -19 to be a y which y which now now s capital s capital - - 356,971 (137,640) - - (5,241) 214,090 - - 62,996 - - 1,039 3,994 282,119 - (111,873) - - 26,188 (66,346) - (329) - - (5,241) 214,090 - - 62,996 - - 1,039 3,994 282,119 - (111,873) - - 26,188 (66,346) - (329) - - 356,971 (137,640) xposure from xposure from the impact of the impact of ------299 299 2,0452,045 (16,829) 15,700 (16,829) 15,371 2,045 (16,829) 15,371 2,045 (16,829) 15,700 (8,111) [5] (16,829) (114,388) (8,111) [5] (16,829) (114,388) Broking Broking - - - - 13 808 13 808 2018 2018 £000 £000 £000 £000 mngt Advisory costs Total £000 £000 £000 £000 mngt Advisory costs Total 12,601 9,049 12,614 9,857 12,601 9,049 12,614 9,857 Inv'mnt and Corporate Inv'mnt and Corporate (11,673) (7,812) (16,829) (266,419) (11,673) (7,812) (16,829) (266,419) Inv'mnt Inv'mnt - 1,573 1,600 - 1,573 1,600 55% 55% (329) - - - (329) - - - £000 £000 £000 £000 £000 £000 Insurance return Insurance return 86.4% 1,039 - - 86.4% 1,039 - - (5,241) - - - (5,241) - - - 26,188 - -28,861 1,642 - (1,289) 941 26,188 - -28,861 1,642 - (1,289) 941 256,454 1,594 1,600 General Life 356,950 21 - - 256,454 1,594 1,600 General Life 356,950 21 - - (227,264) 48 (2,889) (137,640) - - - (112,222) 349 - - (227,264) 48 (2,889) (137,640) - - - (112,222) 349 - - [1] 214,069[2] 21 41,346 - - - - [6] 29,190 [7] (116,713) [6] 29,190 1,642 (1,289) 941 [6] 29,190 [7] (116,713) [1] 214,069[2] 21 41,346 - - - - [6] 29,190 1,642 (1,289) 941 Notes to the financial statements to the financial Notes 37 Events after the balance sheet date Notes to the financial statements to the financial Notes 37 Events after the balance sheet date 36 Reconciliation of Alternative Performance Measures (continued) Performance of Alternative 36 Reconciliation 37 Events after the balance sheet date sheet balance the after Events 37 Ecclesiastical Annual Report Accounts & 2019 36 Reconciliation of Alternative Performance Measures (continued) Performance of Alternative 36 Reconciliation non-adjusting post balance sheet event. The Group has plans in place to support continued operation of business activity and ha non-adjusting post balance sheet event. The Group has plans in place to support continued operation there to be any significant e resources that can withstand significant temporary market disruption. The Group does not consider at this time to determine insurance policies underwritten by the Group. Given the inherent uncertainties, it is not practicable COVID-19 on the Group or to provide a quantitative estimate of the impact. In early 2020, the existence of a new coronavirus, COVID-19, was confirmed. This virus has since spread across the globe and is In early 2020, the existence of a new coronavirus, COVID-19, was confirmed. This virus has since the emergence and spread of COVID has been reflected in recent fluctuations in UK and global stock markets. The Group considers characterised by the World Health Organization as a pandemic. COVID-19 has caused disruption to businesses and economic activit characterised by the World Health Organization as a pandemic. COVID-19 has caused disruption Total operating expenses Outward reinsurance premiums for unearned premiums Net change in provision 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 costsOther operating and administrative expenses [3] (65,687) [4] (75,543) (15)Profit before tax (286)Underwriting profit (2,889) - (10,730) Combined operating ratio (943) Net expenses ( = [2] + [3] + [4] + [5] ) Net expense ratio Revenue Gross written premiums Operating profit Finance costs Group In early 2020, the existence of a new coronavirus, COVID-19, was confirmed. This virus has since spread across the globe and is In early 2020, the existence of a new coronavirus, COVID-19, was confirmed. This virus has since to businesses and economic activit characterised by the World Health Organization as a pandemic. COVID-19 has caused disruption of business activity and ha non-adjusting post balance sheet event. The Group has plans in place to support continued operation there to be any significant e resources that can withstand significant temporary market disruption. The Group does not consider at this time to determine insurance policies underwritten by the Group. Given the inherent uncertainties, it is not practicable COVID-19 on the Group or to provide a quantitative estimate of the impact. has been reflected in recent fluctuations in UK and global stock markets. The Group considers the emergence and spread of COVID has been reflected in recent fluctuations in UK and global stock markets. The Group considers Underwriting profit Combined operating ratio Net expenses ( = [2] + [3] + [4] + [5] ) Net expense ratio Total operating expenses 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 costsOther operating and administrative expenses [3] (65,687) [4] (75,543) (15)Profit before tax (286) (2,889) - (10,730) (943) Operating profit Finance costs Outward reinsurance premiums for unearned premiums Net change in provision Revenue Gross written premiums Group Notes to the financial statements (continued) Measures Performance Alternative of Reconciliation 36 244 funds costs, - 225,986 - - 393,952 (152,886) - (15,080) - - 71,240 - - 544 74,438 372,208 - (157,808) - 52,800 - (72,740) - (620) st directly that reason, the tment ance Office plc's - 9,077 (7,760) (17,850) (298,325) Broking Advisory costs Total ------2019 (819) 476 (310) 2,151 (17,850) 73,883 (310) 2,062 (17,850) 73,263 (12,305) (8,236) [5] (17,850) (120,577) £000 £000 £000 £000 £000 Inv'mnt Inv'mnt and Corporate - 989 72,596 19 834 53% 544 - - - (531) - - - (89) £000 £000 Insurance return mngt 91.1% 52,800 - - 19,487 335 69,539 (15,080) - - - - General Life 393,965 (13) - -275,911 976 - 72,596 12,814 9,911 (152,886) - - (157,481) (327) - (255,893) (641) (3,057) (13,124) [1] 225,999[2] (13) 49,368 - - - 12,795 [6] 20,018 335 69,539 [6] 20,018 [7] (119,694) Financial Statements 36 Reconciliation of Alternative Performance Measures of Alternative Performance 36 Reconciliation Notes to the financial statements to the financial Notes Revenue Gross written premiums Total revenue Fee and commission income Group comparability of APM across companies might be limited. comparability of APM across during the year by third parties in a range of funds EdenTree Inves invested (gross inflows) less funds withdrawn (redemptions) is covered in more detail in note 4(i). Management Limited offers. Regulatory capital Outward reinsurance premiums Net change in provision for unearned premiums Net earned premiums Other operating income Net investment return Expenses Claims and change in insurance liabilities Fees, commissions and other acquisition costs [3] (72,383) (14) - Users of the accounts should be aware that similarly titled APM reported by other companies may be calculated differently. For by other companies may be calculated differently. be aware that similarly titled APM reported Users of the accounts should In line with the European Securities and Markets Authority guidelines, we provide a reconciliation of the COR and NER to its mo In line with the European Securities and Markets Regulatory capital and net inflows to funds managed by Ecclesiastical Insur reconcilable line item in the financial statements. Limited, do not have an IFRS equivalent. Net inflows are the difference between the subsidiary, EdenTree Investment Management Reinsurance recoveries The Group uses alternative performancemeasures measures included (APM) in in our additionratio key to (NER) performance and the indicators net figures are inflows which the understanding of the results. useful information and enhance set are are APM. out These prepared on measures in page are accordance 50: commonly with regulatory used IFRS. in capital, The the combined industries financial operating the ratio Group (COR), operates net in and expense are considered to provide Other operating and administrative expenses [4] (78,829) (300) (3,057) Total operating expenses Operating profit Profit before tax Finance costs - [7] / [1]. Combined operating ratio Net expenses ( = [2] + [3] + [4] + [5] ) Net expense ratio business. The underwriting profit of the Group is defined as the operating profit of the general insurance expresses the total of net claims The Group uses the industry standard net COR as a measure of underwriting efficiency. The COR as ( [1] - [6] ) / [1] ). commission and underwriting expenses as a percentage of net earned premiums. It is calculated premiums. It is calculated as The NER expresses total underwriting and corporate expenses as a proportion of net earned Underwriting profit Section Four Section 36 Reconciliation of Alternative Performance Measures Performance Alternative of Reconciliation 36 Notes to the financial statements About Us About One Section

Section Five Other Information 246 Ecclesiastical Annual Report & Accounts 2019 247

Section Five Other Information

Directors, executive management and company information 248 United Kingdom regional centres 250 Strategic Report Section Two United Kingdom business division and international branches 251 Insurance subsidiaries and agencies 252 Notice of meeting 253 Notes 254 Governance Section Three Financial StatementsFinancial Four Section Other Information Section Five Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 249 Bridgwater Road Bristol BS13 8AE Deloitte LLP London Services plc Computershare Investor The Pavilions Directors, executive management and company information and company management executive Directors, Auditor Registrar Ecclesiastical Annual Report Accounts & 2019 Directors, management and information company executive 248 Group Chief Executive Group Chief Executive Deputy Group Chief Executive Deputy Group Chief Executive Senior Independent Director Group Chief Financial Officer Group Chief Financial Officer Chairman M. C. J. Hews BSc (Hons), FIA M. C. J. Hews BSc (Hons), D. P. Cockrem, MA, FCA M. C. J. Hews BSc (Hons), FIA M. Bennett BSc, FIA D. R. Moore BA (Hons), MBA R. D. C. Henderson FCA R. D. C. Henderson FCA C. M. Taplin BSc (Hons), MSc, MBA S. J. Whyte MC Inst. M, ACII Mrs R. J. Hall FCG Beaufort House Brunswick Road Gloucester GL1 1JZ Tel: 0345 777 3322 24869 24 Monument Street London EC3R 8AJ Tel: 0800 358 3010 Charles Russell Speechlys LLP London DAC Beachcrofts LLP Leeds, London and Bristol Harrison Clark Rickerbys LLP Cheltenham Matheson Dublin William Fry Dublin Pinsent Masons LLP Birmingham and London D. P. Cockrem, MA, FCA D. P. Cockrem, MA, FCA C. J. G. Moulder MA, FCA ACII S. J. Whyte MC Inst. M, * * Non-Executive Directors * X. Boisseau MSc F. * Maidment MA, FCII N. P. * McIntyre MA, ACA, FRCO A. J. * * Finance H. Taylor BSc (Hons) Banking and International C. * A. Winther BA * The Very Reverend C. L. Wilson Other Information Directors, executive management and company information and company management executive Directors, Section Five Section Group Management Board Directors Company Secretary Registered and Head Office Company Registration Number Investment Management Office Legal advisers Directors, management and information company executive Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 251 31 St. Leonards Road P.O. Box 307 Toronto, Ontario M5K 1K2 K. Biermann BBA, CIP 100 Eileen Stubbs Avenue Suite 201 Dartmouth, Nova Scotia B3B 1Y6 K. Webster CRM, FCIP Suite 521, 10333 Southport Road S.W. Calgary, Alberta T2W 3X6 N de Souza Jensen BA, CIP Suite 1713, Three Bentall Centre 595 Burrard Street, Box 49096 Vancouver, British Columbia V7X 1G4 R. Jordan BBA, CRM, FCIP 2200-100 Wellington St W, TD West Tower P.O. Box 307 Toronto, Ontario M5K 1K2 D. G. Lane B.Comm (Hons), Certified Insurance Director 2nd Floor, Block F2 Eastpoint Dublin 3, DO3 T6P8 Eastbourne, East Sussex BN21 3UR Eastbourne, East Sussex W, TD West Tower 2200-100 Wellington St S. Cox ACII Chartered Insurer Ansvar House 0345 60 20 999 Deputy Group Chief Executive, and Ecclesiastical Insurance Agent:General Manager and Chief Chief Office: S. J. Whyte MC Inst M, ACII Regional Vice President: Regional Vice President: Regional Vice President: Regional Vice President: Managing Director: Office: Managing Director: Office: Tel: National Accounts: - Eastern Region: - Western Region: - Pacific Region: - Central Region and United Kingdom business division and international branches and international division Kingdom business United Canada Branch Ireland Branch Business Division Ansvar Insurance Ecclesiastical Annual Report Accounts & 2019 United Kingdom business division and branches international 250 12th Floor Alpha Tower Suffolk Street Queensway Birmingham B1 1TT 0345 605 0209 24 Monument Street London EC3R 8AJ 0345 608 0069 St Ann's House St Ann's Place Manchester M2 7LP 0345 603 7554 Office: Tel: Office: Tel: Office: Tel: Other Information United Kingdom regional centres Kingdom regional United Section Five Section London and South East North Central and South West United Kingdom regional centres regional Kingdom United Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 253 runswick Road, runswick Road, runswick Road, annual general annual general annual general To receive the Report of the Directors and Accounts for the year ended 31st December 2019 and the report of the auditors December 2019 and the report of the auditors the Directors and Accounts for the year ended 31st To receive the Report of thereon. as a director.* To re-elect Mr F. X. Boisseau To re-elect Mr R. D. C. Henderson as a director.* To re-elect Mr M. C. J. Hews as a director.* To re-elect Mr A. J. McIntyre as a director.* To re-elect Mr C. J. G. Moulder as a director.* To re-elect Mrs C. H. Taylor as a director.* To re-elect Mrs S. J. Whyte as a director.* To re-elect Mr A. Winther as a director.* To elect Mrs D. Cockrem as a director.* To elect Mr N. Maidment as a director.* To elect Sir S. Lamport as a director.* To consider the declaration of a dividend. and authorise the directors to fix their remuneration. To appoint PricewaterhouseCoopers LLP as auditors To re-elect Mr F. X. Boisseau as a director.* as a director.* To re-elect Mr F. X. BoisseauTo re-elect Mr F. X. Boisseau To re-elect Mr R. D. C. Henderson as a director.*To re-elect Mr R. D. C. Henderson as a director.* To re-elect Mr M. C. J. Hews as a director.* To re-elect Mr M. C. J. Hews as a director.* To re-elect Mr A. J. McIntyre as a director.*To re-elect Mr A. J. McIntyre as a director.* To re-elect Mr C. J. G. Moulder as a director.*To re-elect Mr C. J. G. Moulder as a director.* To re-elect Mrs C. H. Taylor as a director.*To re-elect Mrs C. H. Taylor as a director.* To re-elect Mrs S. J. Whyte as a director.*To re-elect Mrs S. J. Whyte as a director.* To re-elect Mr A. Winther as a director.*To re-elect Mr A. Winther as a director.* To elect Mrs D. Cockrem as a director.*To elect Mrs D. Cockrem as a director.* To elect Mr N. Maidment as a director.*To elect Mr N. Maidment as a director.* To elect Sir S. Lamport as a director.*To elect Sir S. Lamport as a director.* To consider the declaration of a dividend. To consider the declaration of a dividend. and authorise the directors to fix their remuneration. and authorise the directors to fix their remuneration. To appoint PricewaterhouseCoopers LLP as auditorsTo appoint PricewaterhouseCoopers LLP as auditors To receive the Report of the Directors and Accounts for the year ended 31st December 2019 and the report of the auditors December 2019 and the report of the auditors December 2019 and the report of the auditors the Directors and Accounts for the year ended 31stthe Directors and Accounts for the year ended 31st To receive the Report of To receive the Report of thereon.thereon. Notice of meeting Notice Ordinary business Notice of meeting of meeting Notice Notice Ordinary businessOrdinary business Ecclesiastical Annual Report Accounts & 2019 Ordinary business Gloucester, GL1 1JZ on Thursday, 18th June 2020 at 12:35pm for the following purposes: Thursday, 18th June 2020 at 12:35pm for the following Gloucester, GL1 1JZ on NOTICE is hereby given that the Annual General Meeting of Ecclesiastical Insurance Office plc will be held at Beaufort House, B Insurance Office plc will be held at Beaufort House, that the Annual General Meeting of Ecclesiastical NOTICE is hereby given 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 17 March 2020 * Brief biographies ofseeking the re-election directors have seeking beenexecutive director is effective and sufficient time has been spent on the Company’s affairs. re-election subject are to shown formal on performance pages evaluation 96 by to the 98 Chairman of who the is 2019meeting. satisfied Annual that Report. the All non-executive performance directors of each non- A member holding ordinary sharestheir is rights to entitled attend, to speak appointthe and a vote annual proxy on general or their proxies behalf meetingmember. (who at provided the need annual that not general be each meeting. a Such proxy member a is of member the may appointed appoint Company) to more to than exercise exercise one all the proxy or in rights any relation attached to of to a different share or shares held by that Only a member holding ordinary shares, or their duly appointed representative(s), is entitled to attend, vote and speak at the Only a member holding ordinary shares, or their duly appointed representative(s), is entitled to attend, Any corporation which is aof member the holding same ordinary powers shares as canor shares and that they act within the powers of their appointment. that appoint corporation one could or exercise more if corporate it representatives were who an individual may member, exercise, provided onThis that its notice they behalf, is do all sent not purely doand vote at the annual general meeting. for so in information relation to to the the holders same of share 8.625% Non-Cumulative Irredeemable Preference shares who are not entitled to attend By order of the Board Mrs R. J. Hall, Secretary Notice of meeting of Notice 2.2. 3.3. 4.4. 5.5. 6.6. 7.7. 8.8. 9.9. 10.10. 11.11. 12.12. 13.13. 14.14. 17 March 202017 March 2020 ** Brief Brief biographies biographies of ofseekingseeking the the re-election re-election directors directors have have seeking seeking been beenexecutive director is effective and sufficient time has been spent on the Company’s affairs.executive director is effective and sufficient time has been spent on the Company’s affairs. re-election re-election subject subject are are to to shown shown formal formal on on performance performance pages pages evaluation evaluation 96 96 by by to to the the 98 98 Chairman Chairman of of who who the the is is 2019 2019meeting.meeting. satisfied satisfied Annual Annual that that Report. Report. the the All All non-executive non-executive performance performance directors directors of of each each non- non- AA member member holding holding ordinary ordinary shares sharestheirtheir is is rights rights to to entitled entitled attend, attend, to to speak speak appoint appointthethe and and a a vote vote annual annual proxy proxy on on general general or or their their proxies proxies behalf behalf meeting meetingmember. member. (who (who at at provided provided the the need need annual annual that that not not general general be be each each meeting. meeting. a a Such Such proxy proxy member member a a is is of of member member the the may may appointed appointed appoint appoint Company) Company) to to more more to to than than exercise exercise exercise exercise one one all all the the proxy proxy or or in in rights rights any any relation relation attached attached to to of of to to a a different different share share or or shares shares held held by by that that Gloucester, GL1 1JZ on Thursday, 18th June 2020 at 12:35pm for the following purposes: purposes: Thursday, 18th June 2020 at 12:35pm for the followingThursday, 18th June 2020 at 12:35pm for the following Gloucester, GL1 1JZ on Gloucester, GL1 1JZ on vote and speak at the vote and speak at the Only a member holding ordinary shares, or their duly appointed representative(s), is entitled to attend,Only a member holding ordinary shares, or their duly appointed representative(s), is entitled to attend, AnyAny corporation corporation which which is is a aofof member member the the holding holding same same ordinary ordinary powers powers shares shares as as can canor shares and that they act within the powers of their appointment.or shares and that they act within the powers of their appointment. that that appoint appoint corporation corporation one one could could or or exercise exercise more more if if corporate corporate it it representatives representatives were were who who an an individual individual may may member, member, exercise, exercise, provided provided on onThisThis that that its its notice notice they they behalf, behalf, is is do do all all sent sent not not purely purely do doand vote at the annual general meeting.and vote at the annual general meeting. for for so so in in information information relation relation to to to to the the the the holders holders same same of of share share 8.625% 8.625% Non-Cumulative Non-Cumulative Irredeemable Irredeemable Preference Preference shares shares who who are are not not entitled entitled to to attend attend NOTICE is hereby given that the Annual General Meeting of Ecclesiastical Insurance Office plc will be held at Beaufort House, B B Insurance Office plc will be held at Beaufort House, Insurance Office plc will be held at Beaufort House, that the Annual General Meeting of Ecclesiasticalthat the Annual General Meeting of Ecclesiastical NOTICE is hereby given NOTICE is hereby given 1.1. By order of the BoardBy order of the Board Mrs R. J. Hall, SecretaryMrs R. J. Hall, Secretary 252 01708 850000 Southbank Melbourne VIC 3006 Beaufort House Brunswick Road Gloucester GL1 1JZ Beaufort House W. R. Hutcheon MBA, GAICD, Fellow ANZIIF (CIP) W. R. Hutcheon MBA, GAICD, Level 5 1 Southbank Boulevard Brunswick Road Gloucester GL1 1JZ B. W. Fehler South Essex House, North Road South Ockendon Essex RM15 5BE Office: Director: Office: Tel: Chief Executive Officer: Head Office: Head Office: Other Information Insurance subsidiaries and agencies subsidiaries Insurance Ecclesiastical Underwriting Management Limited South Essex Insurance Brokers Limited Ansvar Insurance Limited Ecclesiastical Life Limited Section Five Section Insurance subsidiaries andInsurance agencies Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information 255 Ecclesiastical Annual Report Accounts & 2019 254 Other Information Section Five Section Notes Section One Section Two Section Three Section Four Section Five About Us Strategic Report Governance Financial Statements Other Information Fable Design. Art Direction. Production. fablecreative.co.uk 256 Other Information Section Five Section Notes About Us About One Section Strategic Report Section Two Governance Section Three Financial StatementsFinancial Four Section

Annual Report & Accounts 2019 Ecclesiastical Insurance Office plc Beaufort House Brunswick Road Gloucester GL1 1JZ www.ecclesiastical.com Other Information Section Five

Ecclesiastical Insurance Office plc (EIO) Reg. No. 24869. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL11JZ, 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.