Turning to our overseas businesses, the Ireland team has
instituted extensive change over the last two years after the
liability account drove significant losses in the territory. The
early 2014 storms affected the profitability of the property
account but due to the initiatives pursued, the Irish business has
contributed consistent profits over the last three quarters and
reported a positive return for the year. This is a remarkable
achievement in such a short time for a territory that reported
losses of GBP15.3m over the past two years.
Our Australian business achieved an underlying underwriting
profit in the year, when excluding the impact of movements in
discount rates. This is again a transformation given underwriting
losses of GBP9.4m over the last two years and is testimony to the
development and execution of a business-wide change programme by
the new leadership team. Both the property and liability portfolios
have performed as expected in 2014, and although falling discount
rates led to a reported underwriting loss overall; this latter
component was offset by corresponding positive asset growth.
In Canada we also saw a return to underwriting profits as the
territory did not suffer the same level of weather events it
experienced in 2013. Work to deliver a new administration platform
continues at pace. Premiums grew 7% before translation as
good-quality business continues to be identified and won by the
team.
Gross written premiums have fallen by 16% in the year across the
Group following the actions we have taken to address underwriting
performance. Retention of business in our core niches remained
strong and we are strengthening our relationships with customers
and brokers to support our aim for controlled profitable growth
over the medium term.
Best ethical investment provider
Our Investment Management division continues to go from strength
to strength, with both our funds and our managers winning awards
for investment performance and our ethical approach. Gross inflows
for 2014 totalled GBP292m, a record figure for a single year. Our
performance was strong within a volatile investment market and this
has been demonstrated by our 2014 net inflows totalling close to
GBP100m for a second year in a row. Funds under management have now
passed GBP2.3 billion.
During 2014 we delivered a new IT back-office platform and also
worked with our outsource partners to improve the way we work
together. The cost and efficiency savings captured by these
initiatives helped to drive the strong profit before tax of GBP3.2m
in 2014, a new record. Our investment management team moved into
new offices in the City of London at the start of 2015 which will
provide a better environment for growing the business.
In parallel, the investment returns on our general insurance
funds were GBP33m. This was down on last year (GBP65m), when world
markets saw particularly strong returns (FTSE All Share Index
return of 20.8% compared to 1.2% in 2014), and we believe this
reflects a more normal return on our portfolio.
Most trusted specialist adviser
South Essex Insurance Brokers (SEIB), our insurance broker,
continued to grow and provide a stable flow of income for the
Group. We acquired the specialist broking firm Lansdown Insurance
Brokers, which has widened our broker proposition to include new
specialist areas. Profit before tax grew to just over GBP3m for
2014, supported in part by this successful acquisition and the
synergies that are starting to flow.
Our team of fully independent advisors, Ecclesiastical Financial
Advisory Services (EFAS), continues to review and refine their
offering to the Anglican clergy, and closer operational links are
being developed between our advisory and broking businesses.
For a more detailed analysis of our financial results, please
see the Financial Performance section.
Working together for the greater good
Our vision, goals and how we intend to achieve them sets us
apart from other financial services companies. We wish to work
together, for the greater good, by living up to the highest
standards of values and ethics. We share the same values as our
charitable owner, which allows us to work towards these goals in a
way that delivers real benefit to our colleagues, our customers,
our charities and our communities.
We are not driven by growth; we are driven by doing the right
thing. In the long term, we believe this approach will drive
ethical and sustainable growth. This belief is being encapsulated,
for the first time in 2015, by including ethical conduct measures
as a material element of our Group bonus calculation, as well as
incorporating them into our long-term incentive plan (LTIP). We
have set a high bar for the behaviour we expect from ourselves and
our colleagues and recognise that achieving these standards should
be rewarded.
We are also launching a 'Greater Giving Programme' in early 2015
to build on the best of what Ecclesiastical already does, to tie us
more closely to our markets and to encompass our new approach to
life. This framework will highlight and emphasise our giving to our
charitable owner, our giving to good causes, our giving to our
customers (in terms of the ethical and fair products and services
we provide), our giving to our communities (via opportunities for
our employees to volunteer), and our giving to our employees (in
terms of reward, training, development and our working
environment). More information on our new Greater Giving Programme
can be found in the Corporate Responsibility Report in the full
financial statements.
In addition, it was pleasing to see that our Canadian business
was recognised as being one of Canada's Top 100 Employers for Young
People for the third successive year. This highlights the Group's
philosophy of seeking to invest heavily in the development and
training of our employees, ensuring we have a high calibre
professional workforce aligned behind our goals. Our doors are
always open to talented like-minded individuals who share these
aspirations.
Looking ahead to 2015
Our capital strength has been maintained throughout the
challenges of the last few years and our net assets have ended the
year at GBP495m, after payment of grants to ATL. Available capital
relative to our regulatory capital requirements remains very
strong.
This financial strength, alongside our committed ethical
approach, gives us robust foundations upon which we can build and
invest, as well as face challenges from the competitive environment
in which we operate.
The transformation delivered in 2014 represents an important
step in Ecclesiastical's history. It is a moment where the Group
has successfully changed the course of its underwriting
performance, and there is increasing energy and passion around our
new vision, both from within and outside the Group.
In 2015 we wish to build on this success and increase our
momentum. We have clear and consistent business plans. We have an
ambitious Group-wide change programme part implemented, and we have
an increasingly high-performing, aligned team, with ethics running
through their bloodstream, working hard to make a difference. We
thank all our employees for their enormous contribution and
commitment throughout what has been a year of extensive and, at
times, unsettling change. They complete the year knowing that their
efforts are already reaping rewards for those in need.
Equally, we thank our customers and our business partners whom
we seek to serve, and serve extremely well. It is only with their
ongoing loyal support that we can give so much to good causes and
build our combined momentum, working together for the greater
good.
Business Review
Financial Performance
In 2014 we achieved a pre-tax profit of GBP48.2m (2013:
GBP66.9m). We saw the benefit of the actions taken over the last
two years to turn around our general insurance business performance
and report our first underwriting profit since 2009. Our investment
and broker businesses also continued to grow their contribution to
our profits.
General insurance
Our underwriting performance for the year was a profit of
GBP9.2m (2013: GBP8.2m loss), resulting in a Group COR of 95.9%
(2013: 102.9%). As already discussed in the Group Chief Executive's
Review, each of our core underwriting areas saw an improvement in
performance this year with every territory making a positive
contribution to the turnaround in performance.
United Kingdom
Our insurance businesses in the UK reported an underwriting
profit of GBP9.8m (2013: GBP9.8m).
Refocusing on our core niches and putting into place our new
regional structure has seen the core UK business improve its
performance over recent years, and this performance was sustained
in 2014.
The storms and floods that hit the UK at the start of 2014 had a
net cost to our property account of GBP8m. However, with no further
significant weather events during 2014, the profitability of our
property account exceeded expectations over the year as a
whole.
Having withdrawn from the non-charitable care sector and focused
on pricing risks appropriately, the performance of the non-abuse
related liability account has improved considerably. However, we
have taken the opportunity to strengthen reserves in respect of
physical and sexual abuse claims during the year. We recognise and
welcome the increase in transparency and openness that means
victims of abuse feel able to come forward, and believe we are now
appropriately reserved for potential claims. This action has,
however, resulted in the overall liability account remaining
loss-making despite the turnaround in underlying performance.
Ecclesiastl.8fe (LSE:ELLA)
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