Ecclesiastl.8fe Regulatory News (ELLA)

for the 6 months to 30 June 2011

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Equalisation

Revaluation

Translation

Retained

capital

premium

reserve

reserve

reserve

earnings

Total

£000

£000

£000

£000

£000

£000

£000

2011

At 1 January

 120,477

 4,632

 18,679

 924

 28,620

 283,575

 456,907

Total comprehensive income attributable to equity holders of the parent

-

-

-

-

 1,283

 12,611

 13,894

Dividends

-

-

-

-

-

(4,591)

(4,591)

Reserve transfers

-

-

(1,012)

-

-

 1,012

-

At 30 June

 120,477

 4,632

 17,667

 924

 29,903

 292,607

 466,210

2010

At 1 January

 80,477

 4,632

 21,674

 980

 18,496

 266,561

 392,820

Total comprehensive income attributable to equity holders of the parent

-

-

-

-

 2,218

(10,043)

(7,825)

Dividends

-

-

-

-

-

(2,866)

(2,866)

Net charitable grant to ultimate parent

-

-

-

-

-

(7,200)

(7,200)

Reserve transfers

-

-

(5,864)

-

-

 5,864

-

At 30 June

 80,477

 4,632

 15,810

 980

 20,714

 252,316

 374,929

2010

At 1 January

 80,477

 4,632

 21,674

 980

 18,496

 266,561

 392,820

Total comprehensive income attributable to equity holders of the parent

-

-

-

(56)

 10,124

 34,445

 44,513

Issue of share capital

 40,000

-

-

-

-

-

 40,000

Dividends

-

-

-

-

-

(5,731)

(5,731)

Net charitable grant to ultimate parent

-

-

-

-

-

(13,860)

(13,860)

Group tax relief in excess of standard rate

-

-

-

-

-

(835)

(835)

Reserve transfers

-

-

(2,995)

-

-

 2,995

-

At 31 December

 120,477

 4,632

 18,679

 924

 28,620

 283,575

 456,907

The equalisation reserve is not distributable and must be kept in compliance with the insurance companies' reserves regulations. The revaluation reserve represents cumulative net fair value gains on owner occupied property. The translation reserve arises on consolidation of the Group's foreign operations.

at 30 June 2011

Note

30.06.11

30.06.10

31.12.10

£000

£000

£000

Assets

Goodwill and other intangible assets

 25,478

 26,154

 25,923

Deferred acquisition costs

 39,880

 40,286

 41,482

Deferred tax assets

 4,762

 3,294

 4,520

Pension assets

 31,222

 27,660

 30,185

Property, plant and equipment

 8,918

 9,525

 9,417

Investment property

 27,026

 24,471

 24,641

Financial investments

 10

 887,391

 1,009,114

 834,163

Reinsurers' share of contract liabilities

 552,307

 371,263

 286,194

Current tax recoverable

 2,621

 277

 110

Other assets

 153,409

 146,841

 136,661

Cash and cash equivalents

 116,117

 201,111

 164,805

Total assets

 1,849,131

 1,859,996

 1,558,101

Equity

Share capital

 120,477

 80,477

 120,477

Share premium account

 4,632

 4,632

 4,632

Retained earnings and other reserves

 341,101

 289,820

 331,798

Total shareholders' equity

 466,210

 374,929

 456,907

Liabilities

Insurance contract liabilities

 1,252,630

 1,061,760

 965,309

Investment contract liabilities

10

-

 50,512

-

Unallocated divisible surplus

10

-

 22,363

-

Finance lease obligations

 1,889

 1,781

 1,898

Provisions for other liabilities

 10,162

 14,188

 11,227

Retirement benefit obligations

 9,714

 6,733

 8,652

Deferred tax liabilities

 41,979

 38,340

 42,321

Current tax liabilities

 5,412

 2,004

 2,700

Deferred income

 19,690

 21,289

 20,562

Other liabilities

 41,445

 66,977

 48,525

Net asset value attributable to unitholders

 10

-

 199,120

-

Total liabilities

 1,382,921

 1,485,067

 1,101,194

Total shareholders' equity and liabilities

 1,849,131

 1,859,996

 1,558,101

for the 6 months to 30 June 2011

Restated

30.06.11

30.06.10

31.12.10

6 Months

6 Months

12 Months

£000

£000

£000

Profit/(loss) before tax

 15,573

(7,554)

 50,443

Adjustments for:

Loss before tax on discontinued operations

-

(2,368)

(1,858)

Depreciation of property, plant and equipment

 1,134

 1,225

 2,490

Loss on disposal of property, plant and equipment

 77

 143

 356

Amortisation of intangible assets

 1,057

 949

 2,050

Net fair value (gains)/losses on financial instruments & investment property

(8,698)

 3,778

(44,048)

Dividend and interest income

(19,014)

(29,290)

(53,685)

Finance and share issue expenses

 130

 200

 501

Changes in operating assets and liabilities:

Net increase in insurance contract liabilities

 268,137

 78,538

 140,245

Net increase in reinsurers' share of contract liabilities

(250,002)

(27,453)

(78,914)

Net (decrease)/increase in investment contract liabilities

-

(1,309)

 4,005

Net decrease/(increase) in deferred acquisition costs

 1,793

(1,696)

(2,561)

Net increase in other assets

(17,042)

(24,029)

(18,787)

Net (decrease)/increase in operating liabilities

(8,030)

 10,087

 486

Net (decrease)/increase in other liabilities

(10)

 42,816

 113,968

Cash (used)/generated by operations

(14,895)

 44,037

 114,691

Dividends received

 4,494

 9,810

 17,286

Interest received

 13,751

 19,367

 34,196

Interest paid

(130)

(200)

(152)

Tax paid

(3,183)

(5,648)

(9,085)

Net cash from operating activities

 37

 67,366

 156,936

Cash flows from investing activities

Purchases of property, plant and equipment

(401)

(520)

(1,536)

Proceeds from the sale of property, plant and equipment

 8

 13

 42

Purchases of intangible assets

(607)

(648)

(1,467)

Disposal of businesses, net of cash transferred

-

(5)

(587)

Cash derecognised on deconsolidation of OEICs

-

-

(31,554)

Purchases of financial investments & investment property

(251,186)

(122,636)

(333,903)

Sale of financial instruments & investment property

 207,502

 70,582

 168,538

Net cash used by investing activities

(44,684)

(53,214)

(200,467)

Cash flows from financing activities

Proceeds from the issue of shares

-

-

 39,827

Payment of finance lease liabilities

(295)

(329)

(336)

Payment of group tax relief in excess of standard rate

-

-

(111)

Dividends paid to company's shareholders

(4,591)

(2,866)

(5,731)

Donations paid to ultimate parent undertaking

-

(4,500)

(23,750)

Net cash (used by)/from financing activities

(4,886)

(7,695)

 9,899

Net (decrease)/increase in cash and cash equivalents

(49,533)

 6,457

(33,632)

Cash and cash equivalents at the beginning of the period

 164,805

 193,584

 193,584

Exchange gains on cash and cash equivalents

 845

 1,070

 4,853

Cash and cash equivalents at the end of the period

 116,117

 201,111

 164,805

1. General information

The information for the year ended 31 December 2010 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor reported on those accounts: its report was unqualified, did not draw attention to any matters by way of emphasis without qualifying the report, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The half-yearly financial report was approved by the board on 24 August 2011. The Group results for the six month periods to 30 June 2011 and 30 June 2010 are unaudited, but have been reviewed by Deloitte LLP whose review report is presented at the end of this report.

The principal risks and uncertainties of the Group are in respect of insurance risk and financial risk. The principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities, which may occur if the frequency or severity of claims and benefits are greater than estimated. Insurance events are unpredictable and the actual level of claims and benefits may vary from year to year from the estimates established using statistical techniques. The Group's insurance underwriting strategy aims to diversify the type of insurance risks accepted in order to reduce the variability of the expected outcome. The Group also manages insurance risk through a comprehensive reinsurance programme and proactive claims handling.

The most important components of financial risk are interest rate risk, credit risk, currency risk and equity price risk. The Group is exposed to equity price risk because of financial investments held by the Group and stated at fair value through the income statement. The Group mitigates this risk by holding a diversified portfolio across geographical regions and market sectors, and through the use of options and futures contracts from time to time which would limit losses in the event of a fall in equity markets. These principal risks and uncertainties, together with details of the financial risk management objectives and policies of the Group, are disclosed in the latest annual report.

The Group derives insurance premiums from a range of geographical locations and classes of business. Depending on the location and class of the risk, there may be a seasonal pattern to the incidence of claims. However, given the mix of business that the Group writes, overall the half-yearly results are not subject to any significant impact arising from the seasonality or cyclicality of operations.

The Group has considerable financial resources and, as a consequence, the directors believe the Group is well placed to manage its business risks successfully and continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly financial report.

2. Accounting policies

Ecclesiastical Insurance Office plc (hereafter referred to as the "Company"), a public limited company incorporated and domiciled in England, together with its subsidiaries (collectively the "Group") operates principally as a provider of general and long-term insurance with offices in the UK, Ireland, Canada, Australia and New Zealand.

The annual financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34, Interim Financial Reporting.

In the current year amendments to IAS 24, Related Party Disclosures which extends the definition of a related party and IAS 32, Financial instruments: Presentation on classification of rights issues are applicable. The IASB's 2010 annual improvements project makes minor changes to IAS 27, Consolidated and Separate Financial Statements, IFRS 3, Business combinations and IFRS 7, Financial Instruments: Disclosures. None of these changes have any impact on the financial statements.

IFRS 9, Financial Instruments was reissued, and new standards IFRS 10, Consolidated Financial Statements, IFRS 11, Joint Arrangements, IFRS 12, Disclosures of Interests in Other Entities and IFRS 13, Fair Value Measurement were issued, applicable from 1 January 2013. The Group does not intend to adopt these standards early.

The same accounting policies and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest audited annual financial statements.

The Group segments its business activities on the basis of differences in the products and services offered and, for general insurance, the underwriting territory. This reflects the management and internal Group reporting structure. Group activities that are not reportable operating segments on the basis of size are included within an 'all other segments' category. The activities of each operating segment are described below:

-

General business

United Kingdom and Ireland

The Group's principal general insurance business operation is in the UK where it operates under the Ecclesiastical and Ansvar brands. The Group operates a general insurance Ecclesiastical branch in Ireland. In addition, the Group holds a global portfolio of risks through its London Market operation, Ecclesiastical Underwriting Management Limited (EUML), which ceased underwriting on 30 September 2010 and will run-off over the next few years.

Australia and New Zealand

The Group has wholly owned subsidiaries in Australia and New Zealand undertaking general insurance business under the Ansvar brand.