Final Results

ECCLESIASTICAL INSURANCE OFFICE PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008

Total gross written premiums increased by 4.3% in 2008. General business premiums increased by 5.2% and long term business premiums decreased by 10.8%, as anticipated following the change to a multi-tie sales offering towards the end of 2007.

Group result before tax was a loss of £22.5m (2007: £35.6m profit). General business operations contributed an £8.6m loss before tax (2007: £39.5m profit before tax), including investment return, to this result. This includes an underwriting loss of £1.9m (2007: £6.7m loss) with an improved global combined operating ratio of 100.8% (2007: 102.9%).The long term business result was adversely impacted by the falls in equity markets and rises in credit spreads. The consequence was to reduce the value of assets more than the value of liabilities, and this contributed to an £8.2m loss (2007: £4.3m loss) within the group result before tax.

In 2008 we saw a number of key banks fail and widespread volatility which affected equity and credit markets. We are now in the midst of what is the most serious financial crisis to hit the UK, and indeed the world, for at least 80 years. Total net investment return for the group (including investment income and net fair value movements) was a loss of £52.6m (2007: £69.4m gain). Total investment income increased by 21.0% to £70.6m.

Group result after tax was a £15.4m loss (2007: £26.3m profit).

Shareholders' equity decreased to £342.3m (2007: £362.1m).

The underlying strength of the business in terms of solvency margins and combined operating ratio is such that we are able to increase our ordinary grant to Ecclesiastical's charitable owner Allchurches Trust to £7.0m from £4.2m in 2007. This represents our biggest ordinary grant ever, building upon the past few years of exceptional results where we also gave 'special' grants.

Theft of metal continued to put pressure on the underwriting result in 2008, continuing the trend seen in the latter half of 2007, when commodity prices soared. We have taken action to reduce our exposure, strengthen risk management practices and increase prices. Our proactive approach was recognised with a win at the 2008 British Insurance Awards in the risk management category.

Our core UK and Ireland insurance results for 2008 have been more than satisfactory, showing excellent progress on 2007 and ending 2008 in a strong position with a combined operating ratio of 94.5% (2007: 107.3%).

The acquisition of South Essex Insurance Brokers (SEIB) on 1 April 2008 marked a strategic step for us. The business is performing in line with expectations, with £4.7 million of fee and commission income for the nine months since acquisition.

The rating agencies Standard & Poor's and A M Best both maintained our rating which is quite an achievement in these difficult economic conditions.

The group has considerable financial resources and, as a consequence, the directors believe the group is well placed to continue in operational existence for the foreseeable future, despite the current uncertain economic outlook. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

Michael Tripp

Group Chief Executive

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2008

2008 

2007 

£000 

£000 

Gross written premiums

403,608

386,915

Outward reinsurance premiums

(140,043)

(132,094)

Net change in provision for unearned premiums

(2,300)

(1,183)

Net earned premiums

261,265

253,638

Fee and commission income 

38,764

37,990

Net investment return

(52,584)

69,396

Total revenue

247,445

361,024

Claims and change in insurance liabilities

(252,451)

(267,833)

Reinsurance recoveries

71,608

73,357

Fees, commissions and other acquisition costs

(74,582)

(70,563)

Other operating and administrative expenses

(66,645)

(56,986)

Change in provisions for investment contract liabilities

13,893

265

Change in net asset value attributable to unitholders

14,749

(1,097)

Total operating expenses

(293,428)

(322,857)

Operating (loss)/profit

(45,983)

38,167

Finance costs

(460)

(832)

Transfers from/(to) the unallocated divisible surplus

23,962

(1,731)

(Loss)/profit before tax

(22,481)

35,604

Tax credit/(expense)

7,088

(9,348)

(Loss)/profit attributable to equity holders of the parent

(15,393)

26,256

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the year ended 31 December 2008

2008

2007

£000

£000

Net fair value losses on property

(28)

(39)

Gain on currency translation differences 

6,396

5,996

Net income recognised directly in equity 

6,368

5,957

Result for the year after tax

 (15,393)

26,256

Total recognised income and expense for the year

(9,025)

32,213

CONSOLIDATED BALANCE SHEET

At 31 December 2008

 2008 

 2007 

 £000 

 £000 

Assets

Goodwill and other intangible assets

26,419

4,807

Deferred acquisition costs

34,048

31,751

Deferred tax assets

2,589

2,755

Pension assets

24,974

21,276

Property, plant and equipment

11,094

10,522

Investment property

24,561

33,558

Financial investments

954,425

972,792

Reinsurers' share of contract provisions

198,921

189,259

Current tax recoverable

538

3,012

Other assets

106,606

105,249

Cash and cash equivalents

146,009

181,003

Total assets

1,530,184

1,555,984

Equity

Share capital

80,477

80,477

Share premium account

4,632

4,632

Retained earnings and other reserves

257,201

276,942

Total shareholders' equity

342,310

362,051

Liabilities

Insurance contract provisions

956,146

909,469

Investment contract liabilities

40,943

54,919

Unallocated divisible surplus

15,874

39,836

Finance lease obligations

1,586

1,607

Provisions for other liabilities and charges

13,589

8,207

Retirement benefit obligations

5,021

11,452

Deferred tax liabilities

32,358

47,677

Current tax liabilities

2,914

1,807

Deferred income

18,200

16,662

Other liabilities

44,401

33,307

Net asset value attributable to unitholders

56,842

68,990

Total liabilities

1,187,874

1,193,933

Total shareholders' equity and liabilities

1,530,184

1,555,984

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2008

 2008 

 2007 

 £000 

 £000 

Net cash from operating activities

63,610

35,862

Cash flows from investing activities

Purchases of property, plant and equipment

(2,138)

(1,609)

Proceeds from the sale of property, plant and equipment

48

75

Purchases of intangible assets

(2,392)

(573)

Acquisition of subsidiary, net of cash acquired

(20,781)

(905)

Purchases of financial investments and investment property

(492,376)

(339,961)

Sale of financial investments 

412,323

280,507

Net cash used by investing activities

(105,316)

(62,466)

Cash flows from financing activities

Payment of finance lease liabilities

(424)

(396)

Repayment of other borrowings

-

(8,750)

Payment of group tax relief in excess of standard rate

(72)

-

Dividends paid to company's shareholders

(5,731)

(6,281)

Donations paid to ultimate parent undertaking

(4,000)

(15,500)

Net cash used by financing activities

(10,227)

(30,927)

Net decrease in cash and cash equivalents

(51,933)

(57,531)

Cash and cash equivalents at beginning of year

181,003

234,425

Exchange gains on cash and cash equivalents

16,939

4,109

Cash and cash equivalents at end of year

146,009

181,003

NOTES TO THE PRELIMINARY ANNOUNCEMENT OF RESULTS 

For the year ended 31 December 2008

1. Basis of preparation

The company has prepared this preliminary announcement of its consolidated results using the same accounting policies and methods of computation as the full financial statements for the years ended 31 December 2007 and 31 December 2008 as prepared under International Financial Reporting Standards (IFRS) as adopted for use in the EU. 

4. General information

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. Full financial statements that comply with IFRS were approved by the Board of Directors on 24 March 2009 and are expected to be published in April 2009.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2008 or 2007, but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention any matters by way of emphasis without qualifying their report and did not contain statements under s237(2) or (3) Companies Act 1985.

This announcement was approved at a meeting of the Board of Directors held on 24 March 2009.

Ecclesiastical Insurance Office plc is a subsidiary of Ecclesiastical Insurance Group plc which is an investment holding company whose ordinary shares are not listed.

The ordinary shares of Ecclesiastical Insurance Office plc are not listed.

Copies of the audited financial statements are available from the registered office at Beaufort House, Brunswick Road, Gloucester GL1 1JZ.