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Scottish Equitable Plc Solvency and Financial Condition Report 2018

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Scottish Equitable Plc Solvency and Financial Condition Report 2018 Scottish Equitable plc Solvency and Financial Condition Report 2018 Table of contents Scope of the Report ...................................................................................................................... 4 Basis of Preparation ..................................................................................................................... 4 Summary ..................................................................................................................................... 5 Introduction ......................................................................................................................................... 5 A. Business and Performance .......................................................................................................... 5 B. System of Governance ................................................................................................................ 6 C. Risk Profile ................................................................................................................................... 7 D. Valuation for Solvency Purposes ................................................................................................. 8 E. Capital Management ................................................................................................................... 8 A. Business and Performance ...................................................................................................... 10 A.1 Business ....................................................................................................................................... 10 A.2 Underwriting performance ......................................................................................................... 13 A.3 Investment performance ............................................................................................................ 16 A.4 Performance of other activities .................................................................................................. 19 A.5 Any other information ................................................................................................................ 20 B. System of Governance ............................................................................................................ 21 B.1 General Information on the System of Governance ................................................................... 21 B.2 Fit and proper requirements ....................................................................................................... 27 B.3 Risk management system including the Own Risk and Solvency Assessment ............................ 29 B.4 Internal Control system ............................................................................................................... 34 B.5 Internal Audit function ................................................................................................................ 37 B.6 Actuarial Function ....................................................................................................................... 38 B.7 Outsourcing ................................................................................................................................. 38 B.8 Any other information ................................................................................................................. 39 C. Risk Profile ............................................................................................................................. 40 C.1 Underwriting risk ......................................................................................................................... 43 C.2 Market risk .................................................................................................................................. 45 C.3 Credit risk .................................................................................................................................... 48 C.4 Liquidity risk ................................................................................................................................ 52 C.5 Operational risk ........................................................................................................................... 54 C.6 Other material risk ...................................................................................................................... 56 C.7 Any other information ................................................................................................................. 56 D. Valuation for Solvency Purposes ............................................................................................. 56 D.1 Assets .......................................................................................................................................... 58 D.2 Technical provisions .................................................................................................................... 65 D.3 Other liabilities ............................................................................................................................ 73 D.4 Alternative methods for valuation .............................................................................................. 80 D.5 Any other information ................................................................................................................ 80 E. Capital Management .............................................................................................................. 81 2 General .............................................................................................................................................. 81 E.1 Own Funds ................................................................................................................................... 83 E.2 Solvency Capital Requirement and Minimum Capital Requirement ........................................... 86 E.3 Use of the duration-based equity risk sum-module .................................................................... 88 E.4 Differences between standard formula and partial internal model used ................................... 88 E.5 Non-compliance with capital requirements ................................................................................ 90 E.6 Any other information ................................................................................................................. 90 F. Governing Body Certification ............................................................................................... 91 G. Report of the External Independent Auditors to the Directors of Scottish Equitable plc ........ 93 Appendix A: Acronyms .............................................................................................................. 98 Appendix B: Glossary ................................................................................................................ 100 Appendix C: Quantitative Reporting Templates ......................................................................... 103 3 Scope of the Report Solvency II (SII) Pillar 3 regulatory reporting requires firms to produce two key reports containing both qualitative and quantitative information: the Solvency and Financial Condition Report (SFCR) – Firms are required to disclose this report publicly and to the Prudential Regulation Authority (PRA) on an annual basis; and the Regular Supervisory Report (RSR) – This is a private report to the supervisor and is not disclosed publicly. Firms submit this report to the PRA in full at least every three years and in summary every year. The Company has produced a full RSR voluntarily for 2017. This report is Scottish Equitable plc’s (‘SE plc’) SFCR for the year ending December 31, 2018. This report informs SE plc’s stakeholders about SE plc’s: Business and performance; System of governance; Risk profile; Valuation for solvency purposes; and Capital management. Basis of Preparation This report is prepared in accordance with the requirements of Solvency II Directive and Delegated Regulation (in particular article 51 of the Solvency II Directive and articles 290-298 of the Delegated Regulation, and relevant European Insurance and Occupational Pensions Authority (EIOPA) Guidelines, in particular ‘Guidelines on reporting and public disclosure’ (EIOPA-BoS-15/109) as issued by EIOPA). Scottish Equitable plc is referred to in this document as ‘SE plc’ or ‘the Company’. A set of acronyms and glossary of terms can be found in appendix A and B of this document. The figures reflecting monetary amounts in the SFCR are presented in pounds sterling, and rounded to the nearest £0.1 million, unless otherwise stated. All ratios and variances are calculated using the underlying amount rather than the rounded amount. In cases where IFRS figures are disclosed, the figures are prepared in accordance with the International Financial Reporting Standards as adopted by the EU (‘IFRS’). The 2018 SFCR of SE plc has been prepared and disclosed under the responsibility of the SE plc Board. The Company is required to ensure that its SFCR is subject to approval by its governing body and that the governing body takes responsibility for ensuring that the SFCR has been properly prepared in all material respects in accordance with the PRA rules and Solvency II Regulations. Other Information In line with PRA requirements, Chapters D. Valuation for Solvency Purposes and E. Capital Management of the Solvency
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