Ecclesiastl.8fe Regulatory News (ELLA)

Total gross written premiums increased by 8.8% compared with the prior interim period. General business premiums increased by 9.3% and long term business premiums decreased by 1.4%.

Group result before tax was a £9.9m loss (H1 2009: £25.7m profit). The general business underwriting result was a loss of £15.5m, mainly driven by adverse claims experience (H1 2009: £15.1m profit), with a combined operating ratio of 111.3% (H1 2009: 87.9%). The long term business contributed a £2.9m loss (H1 2009: £1.4m loss) to the group result before tax. Insurance broking activities contributed £0.9m profit (H1 2009: £0.5m profit).

Group net investment return (including amounts attributable to policyholders and unitholders) was £23.6m (H1 2009: £24.9m).

Group loss after tax was £10.0m (H1 2009: £18.7m profit).

Shareholders' equity decreased to £374.9m (31 December 2009: £392.8m). Shareholders' equity at the end of the interim prior period, 30 June 2009, was £353.0m. Our results include a special grant of £10.0m (£7.2m net of tax relief) to Allchurches Trust Limited, the ultimate parent undertaking, in respect of the profits made in 2009. Our total grant recognised during the full year 2009 was £8.5m (£6.1m net of tax relief).

The 2010 interim period underwriting result has been heavily impacted by a number of catastrophe claims events which have occurred in our general insurance underwriting territories, coupled with an increase in liability claims frequency and some resurgence of theft of metal losses. The highest profile loss event in the period was the earthquake in Chile on 27 February 2010 with a net loss to our London Market business of £8.5 million. This followed the earlier Haiti earthquake, and March saw severe hailstorms in Australia. The winter weather in the UK and Ireland was the coldest for many years. The overall level of claims incurred is in contrast to the low level witnessed throughout 2009. The decline in the combined operating ratio to 111.3% reflects this change in claims experience.

The UK underwriting market shows little evidence to date of meaningful rate hardening. We have successfully implemented increases in Australia and Canada where the market allows. The growth in our general business premiums includes the 100% reinsurance of Cornish Mutual, which commenced in the latter stages of 2009. On a constant exchange rate basis, underlying growth has been 1.5%.

Ansvar UK, which specialises in the not-for-profit sector, has produced healthy profits in the first half. In addition our broking business has had a successful period, weathering the current climate well with a 4% increase in income, and the record growth of our ethical investment funds has continued to exceed expectations.

The group has entered into an agreement, subject to regulatory and court approval, to dispose of a substantial proportion of its long term business assets and liabilities. The group has also reinsured part of this business with the prospective purchaser, effective from 1 January 2010. This has materially reduced reported net earned premiums for the half year, although the net impact on profit is not material. Further detail is provided in notes 9 and 10 to the condensed set of financial statements.

We remain cautious over the future outlook: the financial climate is still uncertain and the insurance market is highly competitive. It is as important as ever that we maintain our underwriting discipline, continue to do the right things for our customers and rise to the challenges that are ahead.

Related party transactions

Related party transactions and changes to them since the last annual report are disclosed in note 7 to the condensed set of financial statements.

Principal risks and uncertainties

The principal risks and uncertainties that could have a material impact on the group's performance, such that actual results differ from expected and historical results, are detailed in note 1 to the condensed set of financial statements. There have been no material changes to the principal risks and uncertainties that were disclosed in notes 3 and 4 to our latest annual report, and no changes are anticipated in the next six months, with the exception of the reduction in exposure to long term business insurance risk as referred to above, and in notes 9 and 10 to the condensed set of financial statements.

Going concern

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, despite the current uncertain economic outlook. Accordingly, we continue to adopt the going concern basis in preparing the half-yearly financial report.

Events subsequent to the reporting period date are detailed in note 9 to the condensed set of financial statements.

Michael Tripp

Group Chief Executive

We confirm that to the best of our knowledge:

(a)

the condensed set of financial statements has been prepared in accordance with IAS 34, "Interim Financial Reporting";

(b)

the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c)

the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the board,

Michael Tripp

Mark Hews

Group Chief Executive

Chief Financial Officer

26 August 2010

for the 6 months to 30 June 2010

30.06.10

30.06.09

31.12.09

6 Months

6 Months

12 Months

£000

£000

£000

Net fair value losses on property

-

-

(422)

Gain/(loss) on currency translation differences

 2,218

(2,286)

 6,670

Net income/(expense) recognised directly in equity

 2,218

(2,286)

 6,248

(Loss)/profit for the period after tax

(10,043)

 18,741

 56,190

Total comprehensive (expense)/income attributable to equity holders of the parent

(7,825)

 16,455

 62,438

for the 6 months to 30 June 2010

Share

Share

Equalisation

Revaluation

Translation

Retained

capital

premium

reserve

reserve

reserve

earnings

Total

£000

£000

£000

£000

£000

£000

£000

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

2009

At 1 January

 80,477

 4,632

 18,012

 1,402

 11,826

 225,961

 342,310

Total comprehensive income attributable to equity holders of the parent

-

-

-

-

(2,286)

 18,741

 16,455

Dividends

-

-

-

-

-

(2,866)

(2,866)

Net charitable grant to ultimate parent

-

-

-

-

-

(2,880)

(2,880)

Reserve transfers

-

-

 1,988

-

-

(1,988)

-

At 30 June

 80,477

 4,632

 20,000

 1,402

 9,540

 236,968

 353,019

2009

At 1 January

 80,477

 4,632

 18,012

 1,402

 11,826

 225,961

 342,310

Total comprehensive income attributable to equity holders of the parent

-

-

-

(422)

 6,670

 56,190

 62,438

Dividends

-

-

-

-

-

(5,731)

(5,731)

Net charitable grant to ultimate parent

-

-

-

-

-

(6,120)

(6,120)

Group tax relief in excess of standard rate

-

-

-

-

-

(77)

(77)

Reserve transfers

-

-

 3,662

-

-

(3,662)

-

At 31 December

 80,477

 4,632

 21,674

 980

 18,496

 266,561

 392,820

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 2010

Note

30.06.10

30.06.09

31.12.09

£000

£000

£000

Assets

Goodwill and other intangible assets

 26,154

 26,557

 26,421

Deferred acquisition costs

 40,286

 37,039

 38,298

Deferred tax assets

 3,294

 2,438

 3,373

Pension assets

 27,660

 25,979

 27,495

Property, plant and equipment

 9,525

 10,817

 9,933

Investment property

 24,471

 24,561

 24,732

Financial investments

 10

 1,009,114

 953,356

 1,054,202

Reinsurers' share of contract liabilities

 10

 371,263

 201,750

 193,891

Current tax recoverable

 277

 1,127

 110

Other assets

 146,841

 134,493

 122,402

Cash and cash equivalents

 201,111

 159,629

 193,584

Total assets

 1,859,996

 1,577,746

 1,694,441

Equity

Share capital

 80,477

 80,477

 80,477

Share premium account

 4,632

 4,632

 4,632

Retained earnings and other reserves

 289,820

 267,910

 307,711

Total shareholders' equity

 374,929

 353,019

 392,820

Liabilities

Insurance contract liabilities

 1,061,760

 959,682

 979,318

Investment contract liabilities

 50,512

 42,711

 51,822

Unallocated divisible surplus

 22,363

 16,340

 21,489

Finance lease obligations

 1,781

 1,718

 1,696

Provisions for other liabilities

 14,188

 14,084

 14,230

Retirement benefit obligations

 6,733

 4,988

 6,115

Deferred tax liabilities

 38,340

 33,131

 41,127

Current tax liabilities

 2,004

 5,836

 7,458

Deferred income

 21,289

 20,164

 20,637

Other liabilities

 66,977

 56,586

 52,865

Net asset value attributable to unitholders

 10

 199,120

 69,487

 104,864

Total liabilities

 1,485,067

 1,224,727

 1,301,621

Total shareholders' equity and liabilities

 1,859,996

 1,577,746

 1,694,441

for the 6 months to 30 June 2010

30.06.10

30.06.09

31.12.09

6 Months

6 Months

12 Months

£000

£000

£000

(Loss)/profit before tax

(9,922)

 25,712

 78,982

Adjustments for:

Depreciation of property, plant and equipment

 1,225

 1,188

 2,584

Loss on disposal of property, plant and equipment

 143

 143

 14

Amortisation of intangible assets

 949

 926

 1,967

Loss on disposal of intangible assets

-

-

 91

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

investment property

 3,778

 552

(69,358)

Dividend and interest income

(29,290)

(21,892)

(48,950)

Finance expense

 200

 134

 185

Changes in operating assets and liabilities:

Net increase in insurance contract liabilities

 78,538

 6,909

 4,037

Net (increase)/decrease in reinsurers' share of contract liabilities

(27,453)

(3,218)

 11,453

Net (decrease)/increase in investment contract liabilities

(1,309)

 1,768

 10,878

Net increase in deferred acquisition costs

(1,696)

(3,258)

(3,209)

Net increase in other assets

(24,029)

(27,536)

(12,230)

Net increase in operating liabilities

 10,087

 14,210

 6,999

Net increase in other liabilities

 42,816

 13,572

 55,520

Cash generated by operations

 44,037

 9,210

 38,963

Dividends received

 9,810

 7,410

 12,730

Interest received

 19,367

 18,665

 37,763

Interest paid

(200)

(134)

(185)

Tax paid

(5,648)

(2,586)

(6,902)

Net cash from operating activities

 67,366

 32,565

 82,369

Cash flows from investing activities

Purchases of property, plant and equipment

(520)

(636)

(1,638)

Proceeds from the sale of property, plant and equipment

 13

 6

 55

Purchases of intangible assets

(648)

(593)

(1,505)

Acquisition of businesses, net of cash acquired

-

(184)

(200)

Disposal of businesses, net of cash transferred

(5)

-

-

Purchases of financial investments & investment property

(122,636)

(58,385)

(138,950)

Sale of financial instruments & investment property

 70,582

 53,936

 122,737

Net cash used by investing activities

(53,214)

(5,856)

(19,501)

Cash flows from financing activities

Payment of finance lease liabilities

(329)

(306)

(339)

Payment of group tax relief in excess of standard rate

-

-

(59)

Dividends paid to company's shareholders

(2,866)

(2,866)

(5,731)

Donations paid to ultimate parent undertaking

(4,500)

(3,000)

(7,000)

Net cash used by financing activities

(7,695)

(6,172)

(13,129)

Net increase in cash and cash equivalents

 6,457

 20,537

 49,739

Cash and cash equivalents at the beginning of the period

 193,584

 146,009

 146,009

Exchange gains/(losses) on cash and cash equivalents

 1,070

(6,917)

(2,164)

Cash and cash equivalents at the end of the period

 201,111

 159,629

 193,584

1. General information

The information for the year ended 31 December 2009 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 auditors reported on those accounts: their 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 26 August 2010. The group results for the six month periods to 30 June 2010 and 30 June 2009 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. A change during the interim period in the reinsurance of part of the group's long term business operations is disclosed in note 10.

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 premium 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.