REG - Chesnara PLC - Half Yearly Report <Origin Href="QuoteRef">CSN.L</Origin> - Part 5
28/08/2015 07:01
- Part 5: For the preceding part double click ID:nRSb3703Xd
26 - 44 - 70
Equity shareholders' funds at 31 December 2014 42,600 76,523 (641) (168) 160,519 278,833
The notes and information below form part of these financial statements.
notes to the CONDENSED consolidated financial statements
(unaudited)
1 Basis of preparation
This condensed set of consolidated financial statements has been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the EU. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority,
the condensed set of consolidated financial statements has been prepared applying the accounting policies and presentation
which were applied in the preparation of the Group's published consolidated financial statements for the year ended 31
December 2014.
The Group's published consolidated financial statements for the year ended 31 December 2014 were prepared in accordance
with IFRS as adopted by the EU. Any judgements and estimates applied in the condensed set of financial statements are
consistent with those applied in the preparation of the Group's published consolidated financial statements for the year
ended 31 December 2014.
The financial information shown in these interim financial statements is unaudited and does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006.
The comparative figures for the financial year ended 31 December 2014 are not the Company's statutory accounts for that
financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies.
The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and (iii) did not contain a statements under section 498(2) or
(3) of the Companies Act 2006.
Particular segment information
The Group acquired Waard Group on 19 May 2015 which represents the Group's Dutch life and general insurance business. As a
result, a further operating segment has been added in Note 4. Furthermore, following the Part VII transfer on 31 December
2014 of the long-term business of Protection Life Company Limited into Countrywide Assured plc, the business of Protection
Life (PL) is now reported within the CA segment, effective from 1 January 2015. Previously PL was reported as a separate
segment. Comparative information has been restated to reflect this change.
2 Earnings per share
Earnings per share are based on the following:
Unaudited Six months ended 30 June Year ended 31 December
2015 2014 2014
Profit for the period attributable to shareholders (£000) 28,260 22,820 25,575
Weighted average number of ordinary shares 126,398,396 114,851,282 115,711,981
Basic earnings per share 22.36p 19.87p 22.10p
Diluted earnings per share 22.33p 19.87p 22.08p
The weighted average number of ordinary shares in respect of the six months ended 30 June 2015 is based upon 126,552,427
shares in issue, less 154,031 own shares held in treasury.
The six months ended 30 June 2014 is based upon 115,047,662 shares in issue, less 196,380 own shares held in treasury at
the beginning of the period, and 115,047,662 shares in issue less 196,380 own shares held in treasury at the end of the
period.
On 5 December 2014, 11,504,765 new shares were issued to existing shareholders, as part of a fund raising exercise in
respect of the proposed acquisition of the Waard Group. The weighted average number of ordinary shares in respect of the
year ended 31 December 2014 is based upon 115,047,662 shares in issue, less 194,183 own shares held in treasury at the
beginning of the period, and 126,552,427 shares in issue, less 154,031 own shares held in treasury at the end of the
period..
There were 180,765 share options outstanding during this period (30 June 2014: nil). Accordingly, there is dilution of the
average number of ordinary shares in issue in respect of 2015. There were 116,373 share options outstanding as at 31
December 2014.
3 Retained earnings
Unaudited Six months ended 30 June Year ended 31 December
2015 2014 2014
£000 £000 £000
Retained earnings attributable to equity holders of the parent company comprise:
Balance at 1 January 160,519 155,561 155,561
Profit for the period 28,260 22,820 25,575
Share based payment 96 - 114
Dividends:
Final approved and paid for 2013 - (13,357) (13,357)
Interim approved and paid for 2014 - - (7,374)
Final approved and paid for 2014 (15,143) - -
Balance at period end 173,732 165,024 160,519
The interim dividend in respect of 2014, approved and paid in 2014 was paid at the rate of 6.42p per share.
The final dividend in respect of 2014, approved and paid in 2014, was paid at the rate of 11.98p per share so that the
total dividend paid to the equity shareholders of the Parent Company in respect of the year ended 31 December 2014 was made
at the rate of 18.40p per share.
An interim dividend of 6.61p per share in respect of the year ending 31 December 2015 payable on 15 October 2015 to equity
shareholders of the Parent Company registered at the close of business on 11 September 2015, the dividend record date, was
approved by the Directors after the balance sheet date. The resulting total final dividend of £8.4m has not been provided
for in these financial statements and there are no income tax consequences.
The following table summarises dividends per share in respect of the six month period ended 30 June 2015 and the year ended
31 December 2014:
Six months ended Year ended 31
30 June 2015 December 2014
p p
Interim - approved/paid 6.61 6.42
Final - proposed/paid - 11.98
Total 6.61 18.40
4 Operating segments
The Group considers that it has no product or distribution-based business segments. It reports segmental information on the
same basis as reported internally to the Chief Operating Decision Maker, which is the Board of Directors of Chesnara plc.
The segments of the Group as at 30 June 2015 comprise:
CA: This segment is part of the Group's UK life insurance and pensions run-off portfolio and comprises the original
business of Countrywide Assured plc, the Group's principal UK operating subsidiary, and City of Westminster Assurance
Company Limited which was acquired in 2005 and the long-term business of which was transferred to Countrywide Assured plc
during 2006. This segment also contains the business of Protection Life, which was purchased on 28 November 2013.
Following the Part VII transfer on 31 December 2014 of the long-term business of Protection Life Company Limited into
Countrywide Assured plc, the business of Protection Life (PL) is now reported within the CA segment, effective from 1
January 2015. Previously PL was reported as a separate segment. Comparative information has been restated to reflect this
change. CA is responsible for conducting unit-linked and non-linked business.
S&P: This segment, which was acquired on 20 December 2010, comprises the business of Save & Prosper Insurance Limited and
its subsidiary Save & Prosper Pensions Limited. It is responsible for conducting both unit-linked and non-linked business,
including a with-profits portfolio, which carries significant additional market risk, as described in Note 6 'Management of
financial risk' in the Chesnara plc 2014 Annual Report and Accounts. On 31 December 2011 the whole of the business of this
segment was transferred to Countrywide Assured plc under the provisions of Part VII of the Financial Services and Markets
Act 2000.
Movestic: This segment comprises the Group's Swedish life and pensions business, Movestic Livförsäkring AB ('Movestic')
and its subsidiary and associated companies, which are open to new business and which are responsible for conducting both
unit-linked and non-linked business.
Waard Group: This segment represents the Group's Dutch life and general insurance business, which was acquired on 19 May
2015 and comprises the three insurance companies Waard Leven N.V., Hollands Welvaren Leven N.V. and Waard Schade N.V., and
a servicing company, Tadas Verzekering. The Waard Group's policy base is predominantly made up of term life policies,
although also includes unit-linked policies and some non-life policies, covering risks such as occupational disability and
unemployment.
Other Group Activities: The functions performed by the parent company, Chesnara plc, are defined under the operating
segment analysis as Other Group Activities. Also included therein are consolidation and elimination adjustments.
The accounting policies of the segments are the same as those for the Group as a whole. Any transactions between the
business segments are on normal commercial terms in normal market conditions. The Group evaluates performance of operating
segments on the basis of the profit before tax attributable to shareholders and on the total assets and liabilities of the
reporting segments and the Group. There were no changes to the measurement basis for segment profit during the six months
ended 30 June 2015.
(i) Segmental income statement for the six months ended 30 June 2015
CA S&P UK Total Movestic Waard Group Other Group Activities Total
£000 £000 £000 £000 £000 £000 £000
Net insurance premium revenue 24,548 2,871 27,419 6,716 163 - 34,298
Fee and commission income 15,160 1,225 16,385 16,940 2 - 33,327
Net investment return 26,519 28,191 54,710 129,068 (1,780) 233 182,231
Total revenue (net of reinsurance payable) 66,227 32,287 98,514 152,724 (1,615) 233 249,856
Other operating income 1,411 5,792 7,203 3,943 367 - 11,513
Segmental income/(expenses) 67,638 38,079 105,717 156,667 (1,248) 233 261,369
Net insurance contract claims and benefits incurred (33,938) (24,912) (58,850) (3,357) 1,050 - (61,157)
Net change in investment contract liabilities (12,781) (771) (13,552) (128,842) - - (142,394)
Fees, commission and other acquisition costs (1,038) (11) (1,049) (9,454) (9) - (10,512)
Administrative expenses:
Amortisation charge on software assets - - - (2,188) - - (2,188)
Depreciation charge on property and equipment (22) - (22) (187) - - (209)
Other (5,214) (4,922) (10,136) (3,594) 267 (3,265) (16,728)
Other operating expenses:
Charge for amortisation of acquired value of in-force business (2,495) (330) (2,825) (1,661) (94) - (4,580)
Charge for amortisation of acquired value of customer relationships - - - (112) - - (112)
Other (652) (6) (658) (3,913) 7 (3,532) (8,096)
Segmental (expenses)/income (56,140) (30,952) (87,092) (153,308) 1,221 (6,797) (245,976)
Segmental income less expenses 11,498 7,127 18,625 3,359 (27) (6,564) 15,393
Share of profit from associates - - - 405 - - 405
Profit arising on business combinations - - - - - 16,209 16,209
Financing costs - (1) (1) (687) - (921) (1,609)
Profit/(loss) before tax 11,498 7,126 18,624 3,077 (27) 8,724 30,398
Income tax (expense)/credit (3,628) (14) (12) 1,516 (2,138)
Profit/(loss) after tax 14,996 3,063 (39) 10,240 28,260
(ii) Segmental balance sheet as at 30 June 2015
CA S&P Movestic Waard Group Other Group Activities Total
£000 £000 £000 £000 £000 £000
Total assets 1,903,488 1,227,757 2,048,599 194,583 74,888 5,449,315
Total liabilities (1,803,562) (1,174,449) (1,991,196) (127,288) (66,140) (5,162,635)
Net assets 99,926 53,308 57,403 67,295 8,748 286,680
Investment in associates - - 4,453 - - 4,453
Additions to non-current assets - 26 8,607 26 - 8,659
(iii) Segmental income statement for the six months ended 30 June 2014 (re-stated)*
CA* S&P UK Total Movestic Other Group Activities Total
£000 £000 £000 £000 £000 £000
Net insurance premium revenue 28,627 3,411 32,038 7,967 - 40,005
Fee and commission income 15,968 1,152 17,120 17,753 - 34,873
Net investment return 36,007 28,975 64,982 134,106 224 199,312
Total revenue (net of reinsurance payable) 80,602 33,538 114,140 159,826 224 274,190
Other operating income 1,542 5,779 7,321 5,146 - 12,467
Segmental income 82,144 39,317 121,461 164,972 224 286,657
Net insurance contract claims and benefits incurred (39,941) (26,498) (66,439) (3,613) - (70,052)
Net change in investment contract liabilities (10,851) (802) (11,653) (133,817) - (145,470)
Fees, commission and other acquisition costs (934) (16) (950) (10,176) - (11,126)
Administrative expenses:
Amortisation charge on software assets - - - (2,188) - (2,188)
Depreciation charge on property and equipment (22) - (22) (187) - (209)
Other (5,138) (4,721) (9,859) (5,921) (1,804) (17,584)
Other operating expenses:
Charge for amortisation of acquired value of in-force business (2,397) (350) (2,747) (1,974) - (4,721)
Charge for amortisation of acquired value of customer relationships - - - (136) - (136)
Other (928) (467) (1,395) (5,092) - (6,487)
Segmental expenses (60,211) (32,854) (93,065) (163,104) (1,804) (257,973)
Segmental income less expenses 21,933 6,463 28,396 1,868 (1,580) 28,684
Share of profit from associates - - - 608 - 608
Financing costs - (3) (3) (724) (1,187) (1,914)
Profit/(loss) before tax 21,933 6,460 28,393 1,752 (2,767) 27,378
Income tax (expense)/credit (6,021) 868 595 (4,558)
Profit/(loss) after tax 22,372 2,620 (2,172) 22,820
(iv) Segmental balance sheet as at 30 June 2014 (re-stated)*
CA* S&P Movestic Other Group Activities Total
£000 £000 £000 £000 £000
Total assets 2,017,631 1,212,296 1,945,101 71,089 5,246,117
Total liabilities (1,888,456) (1,142,965) (1,885,696) (77,080) (4,994,197)
Net assets/(liabilities) 129,175 69,331 59,405 (5,991) 251,920
Investment in associates - - 4,367 - 4,367
Additions to non-current assets - - 8,691 - 8,691
* Includes Protection Life Company Limited (previously shown separately).
(v) Segmental income statement for the year ended 31 December 2014 (re-stated)*
CA* S&P UK Total Movestic Other Group Activities Total
£000 £000 £000 £000 £000 £000
Net insurance premium revenue 54,946 6,330 61,276 15,462 - 76,738
Fee and commission income 30,773 2,333 33,106 33,486 - 66,592
Net investment return 115,757 90,292 206,049 224,278 346 430,673
Total revenue (net of reinsurance payable) 201,476 98,955 300,431 273,226 346 574,003
Other operating income 3,011 11,664 14,675 6,086 2,863 23,624
Segmental income 204,487 110,619 315,106 279,312 3,209 597,627
Net insurance contract claims and benefits incurred (104,341) (106,986) (211,327) (7,891) - (219,218)
Net change in investment contract liabilities (38,319) (2,637) (40,956) (223,912) - (264,868)
Fees, commission and other acquisition costs (1,991) (26) (2,017) (19,690) - (21,707)
Administrative expenses:
Amortisation charge on software assets - - - (2,188) - (2,188)
Depreciation charge on property and equipment (22) - (22) (187) - (209)
Other (11,190) (9,741) (20,931) (11,273) (7,893) (40,097)
Other operating expenses: -
Charge for amortisation of acquired value of in-force business (4,778) (701) (5,479) (3,802) - (9,281)
Charge for amortisation of acquired value of customer relationships - - - (263) - (263)
Other (1,809) (411) (2,220) (5,973) (647) (8,840)
Segmental expenses (162,450) (120,502) (282,952) (275,179) (8,540) (566,671)
Segmental income less expenses 42,037 (9,883) 32,154 4,133 (5,331) 30,956
Share of profit from associates - - - 855 - 855
Financing costs - (4) (4) (663) (2,341) (3,008)
Profit/(loss) before tax 42,037 (9,887) 32,150 4,325 (7,672) 28,803
Income tax (expense)/credit (5,045) 929 888 (3,228)
Profit/(loss) after tax 27,105 5,254 (6,784) 25,575
(vi) Segmental balance sheet as at 31 December 2014 (re-stated)*
CA* S&P Movestic Other Group Activities Total
£000 £000 £000 £000 £000
Total assets 2,020,863 1,234,780 1,999,102 83,301 5,338,046
Total liabilities (1,870,682) (1,181,721) (1,940,262) (66,548) (5,059,213)
Net assets 150,181 53,059 58,840 16,753 278,833
Investment in associates - - 4,388 - 4,388
Additions to non-current assets - - 17,297 - 17,297
* Includes Protection Life Company Limited (previously shown separately).
5 Business combinations
On 19 May 2015, Chesnara plc acquired the entire issued share capital (100%) of the Waard Group, a closed life assurance
company based in Netherlands, from DSB Beheer B.V., a Dutch financial services group for a total consideration of
£50,123,000. The acquired companies comprise of the three insurance companies Waard Leven N.V., Hollands Welvaren Leven
N.V. and Waard Schade N.V., and a service company, Tadas Verzekering. The Waard Group's policy base is predominantly made
up of term life policies, although also includes unit-linked policies and some non-life policies, covering risks such as
occupational disability and unemployment. The acquisition represented an attractive opportunity to purchase a closed book
with the potential to generate significant cash flow over the near-to-medium term, while also providing a platform to
participate in further consolidation within the Dutch and other European markets.
The acquisition of this shareholding has given rise to a profit on acquisition of £16.2m calculated as follows:
Book value Provisional fair value adjustments Fair value
£000 £000 £000
Assets
Intangible assets
Acquired value of in-force business - 6,680 6,680
Software assets 25 - 25
Property and equipment 13 - 13
Reinsurers' share of insurance contract provisions 5,522 - 5,522
Financial assets:
Equity securities at fair value through income 170 - 170
Holdings in collective investment schemes at fair value through income 45,131 - 45,131
Debt securities at fair value through income 37,793 - 37,793
Insurance and other receivables 679 - 679
Prepayments 64 - 64
Total financial assets 83,837 - 83,837
Reinsurers' share of accrued policyholder claims 1,084 - 1,084
Deferred tax asset 508 - 508
Income taxes 255 - 255
Cash and cash equivalents 104,381 - 104,381
Total assets 195,625 6,680 202,305
Liabilities
Insurance contract provisions 113,633 - 113,633
Other provisions 3,025 - 3,025
Deferred tax liabilities 1,594 1,670 3,264
Reinsurance payables 72 - 72
Payables related to direct insurance contracts 2,337 - 2,337
Deferred income 11,316 - 11,316
Income taxes 576 - 576
Other payables 1,750 - 1,750
Total liabilities 134,303 1,670 135,973
Net assets 61,322 5,010 66,332
Net assets acquired 66,332
Total consideration, paid in cash (50,123)
Profit arising on business combination 16,209
The assets and liabilities at the acquisition date in the table above are stated at their provisional fair values and may
be amended for 12 months after the date of acquisition in accordance with IFRS 3, Business Combinations.
Acquired receivables: Within the net assets acquired are reinsurance related and other receivable balances totalling
£7.3m, which are held at fair value. For all receivables other than reinsurers' share of insurance contract provisions the
gross contractual amounts receivable are equal to fair value. The reinsurers' share of insurance contract provisions
receivable balance of £5.5m is discounted as a result of the long-term nature of this asset. Gross contractual amounts
receivable are estimated as being £6.4m.
Acquired value of in-force business: The acquisition has resulted in the recognition of net of tax intangible asset
amounting to £5.0m, which represents the present value of the future post-tax cash flows expected to arise from policies
that were in force at the point of acquisition. The asset has been valued using a discounted cash flow model that projects
the future surpluses that are expected to arise from the business. The model factors in a number of variables, of which
the most influential are; the policyholders' ages, mortality rates, expected policy lapses, expenses that are expected to
be incurred to manage the policies and future investment growth, as well as the discount rate that has been applied. This
asset will be amortised over its expected useful life.
Gain on acquisition: As shown previously a gain of £16.2m has been recognised on acquisition. Under IFRS 3, a gain on
acquisition is defined as being a "bargain purchase". At the point of price negotiation and subsequent deal completion,
the Waard Group was owned by DSB Bank N.V. (a wholly-owned subsidiary DSB Beheer B.V.) which was subject to bankruptcy
proceedings in the Netherlands. In the opinion of the Directors this resulted in a disposal pricing strategy for the Waard
Group that would have differed to that which would have been used had the businesses been sold by a Group that was a going
concern.
Acquisition-related costs: The costs in respect of the transaction amounted to £3.7m. £2.7m of these costs have been
included in Administration Expenses, of which £1.7m have been recognised within the Consolidated Statement of Comprehensive
Income in 2014, with the remainder recognised in the current period. Transaction costs of £1.0m were incurred in respect of
the equity fund-raising and were deducted from equity in 2014.
Results of Waard Group: The results of the Waard Group have been included in the consolidated financial statements of the
Group with effect from 19 May 2015. Net insurance premium revenue for the period was £0.2m, with contribution to overall
consolidated profit before tax of £0.2m, before the amortisation of the AVIF intangible asset. Had the Waard Group been
consolidated from 1 January 2015, the Consolidated Statement of Comprehensive Income would have included net insurance
premium revenue of £1.3m, and would have contributed £1.7m profit to the overall consolidated profit before tax.
6 Borrowings
Unaudited 30 June 31 December
2015 2014 2014
£000 £000 £000
Bank loan 64.431 73,190 64,327
Amount due in relation to financial reinsurance 23,406 22,030 22,969
Total 87,837 95,220 87,296
The bank loan subsisting at 30 June 2015 comprises the following:
- on 7 October 2013 tranche one of a new facility was drawn down, amounting to £30.0m. This facility is unsecured and
is repayable in five increasing annual instalments on the anniversary of the draw down date. The outstanding principal on
the loan bears interest at a rate of 2.25 percentage points above the London Inter-Bank Offer Rate and is repayable over a
period which varies between one and six months at the option of the borrower. During 2014, £4.4m of the debt was repaid.
- on 27 November 2013 tranche two of the new loan facility was drawn down, amounting to £31.0m. As with tranche one,
this facility is unsecured and is repayable in five increasing annual instalments on the anniversary of the draw down date.
The outstanding principal on the loan bears interest at a rate of 2.25 percentage points above the London Inter-Bank Offer
Rate and is repayable over a period which varies between one and six months at the option of the borrower. During 2014,
£4.6m of the debt was repaid.
- on 27 November 2013 a short-term loan of £12.8m was drawn down. This was originally repayable in full on 27 May 2015.
During 2014, the repayment date of the loan was extended to December 2018. The outstanding principal on the loan bears
interest at a rate of 2.75 percentage points above the London Inter-Bank Offer Rate.
The fair value of the bank loan at 30 June 2015 was £64,800,000 (31 December 2014: £64,800,000).
The fair value of amounts due in relation to financial reinsurance was £23,944,162 (31 December 2014: £23,767,650).
Bank loans are presented net of unamortised arrangement fees. Arrangement fees are recognised in profit or loss using the
effective interest rate method.
7 Financial instruments fair value disclosures
The table below shows the determination of the fair value of financial assets and financial liabilities according to a
three-level valuation hierarchy. Fair values are generally determined at prices quoted in active markets (Level 1).
However, where such information is not available, the Group applies valuation techniques to measure such instruments.
These valuation techniques make use of market-observable data for all significant inputs where possible (Level 2), but, in
some cases it may be necessary to estimate other than market-observable data within a valuation model for significant
inputs (Level 3).
The Group held the following financial instruments at fair value at 30 June 2015. There have not been any transfers of
assets or liabilities between levels of the fair value hierarchy. There are no non-recurring fair value measurements.
Fair value measurement at 30 June 2015 using
Level 1 Level 2 Level 3 Total
Financial Assets £000 £000 £000 £000
Equities
Listed 465,350 - - 465,350
Holdings in collective investment schemes 3,563,197 543 - 3,563,740
Debt securities - fixed rate
Government Bonds 292,549 - - 292,549
Listed 67,549 21,684 - 89,233
Debt securities - floating rate Listed 4,065 - - 4,065
Total debt securities 364,163 21,684 - 385,847
Policyholders' funds held by the group 176,267 - - 176,267
Derivative financial instruments 566 2,306 - 2,872
Total 4,569,543 24,533 - 4,594,076
Current 118,534
Non-current 4,475,542
Total 4,594,076
Financial liabilities
? Investment contracts at fair value through income - 2,408,122 - 2,408,122
Liabilities related to policyholders' funds held by the group 176,267 - - 176,267
Derivative financial instruments 49 607 - 656
Total 176,316 2,408,729 - 2,585,045
Included within Holdings in collective investment schemes are amounts held with JPMorgan Life Limited through a reinsurance
arrangement, under which the Group has reassured certain unit-linked liabilities. The contract does not transfer
significant insurance risk and is accounted for as Holdings in collective investment schemes, representing the substance of
the arrangement in place. These amounts have been classified as level 2 in the above hierarchy table as the reinsurance
contract itself is not quoted but is valued using market-observable data.
The debt securities classified as Level 2 are structured bond-type or non-standard debt products, held by our newly
acquired Dutch subsidiaries, for which there is no active market. These products were structured such that the principal
amount invested was protected by high security assets, with the returns being linked to underlying pools of riskier,
higher-return assets. At acquisition and the balance sheet date, the underlying assets supporting the coupon had under
performed such that no coupon is being paid, resulting in these assets all now behaving like zero coupon bonds.
These assets are valued using counterparty or broker quotes and are periodically validated against third-party models.
These assets have been classified as Level 2 because the third-party valuation models include observable inputs to the
valuation of these assets, including counterparty default spreads, yield curve swaps and foreign exchange swaps.
Within derivative financial instruments is a financial reinsurance embedded derivative related to our Movestic operation.
The Group has entered into a reinsurance contract with a third party that has a section that is deemed to transfer
significant insurance risk and a section that is deemed not to transfer significant insurance risk. The element of the
contract that does not transfer significant insurance risk has two components and has been accounted for as a financial
liability at amortised cost and an embedded derivative asset at fair value.
The embedded derivative represents an option to repay the amounts due under the contract early at a discount to the
amortised cost, with its fair value being determined by reference to market interest rate at the balance sheet date. It is,
accordingly, determined at Level 2 in the three-level fair value determination hierarchy set out above.
The Investment contract liabilities in Level 2 of the valuation hierarchy represent the fair value of non-linked and
guaranteed income and growth bonds liabilities valued using established actuarial techniques utilising market observable
data for all significant inputs, such as investment yields.
Except as detailed in the following table, the Directors consider that the carrying value amounts of financial assets and
financial liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values:
Carrying amount Fair value
30 June 30 June 31 December 30 June 30 June 31 December
2015 2014 2014 2015 2014 2014
£000 £000 £000 £000 £000 £000
Financial liabilities:
Borrowings 87,837 95,220 87,296 88,744 96,009 88,568
Borrowings consist of bank loans and an amount due in relation to financial reinsurance.
The fair value of the bank loans are taken as the principal outstanding at the balance sheet date.
The amount due in relation to financial reinsurance is fair valued with reference to market interest rates at the balance
sheet date.
There were no transfers between levels 1, 2 and 3 during the period.
The Group holds no Level 3 liabilities as at the balance sheet date.
8 Approval of consolidated report for the six months ended 30 June 2015
This condensed consolidated report was approved by the Board of Directors on 27 August 2015. A copy of the report will be
available to the public at the Company's registered office, 2nd Floor, Building 4, West Strand Business Park, West Strand
Road, Preston, PR1 8UY and at www.chesnara.co.uk.
EEV BASIS SUPPLEMENTARY INFORMATION
directors' responsibilities statement in respect of the eev basis supplementary information
The Directors have chosen to prepare Supplementary Information in accordance with the EEV Principles issued in May 2004 by
the CFO Forum of European Insurance Companies and expanded by the Additional Guidance on European Embedded Value
Disclosures issued in October 2005.
When compliance with the EEV Principles is stated, those principles require the Directors to prepare supplementary
information in accordance with the Embedded Value Methodology ('EVM') contained in the EEV Principles and to disclose and
explain any non-compliance with the EEV guidance included in the EEV Principles.
In preparing the EEV basis supplementary information, the Directors have:
- Prepared the supplementary information in accordance with the EEV Principles;
- Identified and described the business covered by the EVM;
- Applied the EVM consistently to the covered business;
- Determined assumptions on a realistic basis, having regard to past, current and expected future experience and to any
relevant external data, and then applied them consistently;
- Made estimates that are reasonable and consistent; and
- Described the basis on which business that is not covered business has been included in the supplementary information,
including any material departures from the accounting framework applicable to the Group's financial statements.
By order of the Board
Peter Mason John Deane
Chairman Chief Executive Officer
27 August 2015 27 August 2015
Independent Auditor's Report to the directors of chesnara plc on the EEV basis supplementary information
We have been engaged by the Company to review the EEV Basis Supplementary Information in the half-year financial report for
the six months ended 30 June 2015 which comprises the summarised EEV Consolidated Income Statement, the Summarised EEV
Consolidated Balance Sheet and the related notes 1 to 11. We have read the other information contained in the half-year
financial report and considered whether it contains any apparent misstatements or material inconsistencies with the
information in the EEV Basis Supplementary Information.
We have reported separately on the condensed financial statements of Chesnara plc for the six months ended 30 June 2015.
The information contained in the EEV Basis Supplementary Information should be read in conjunction with the condensed set
of financial statements prepared on an IFRS basis. This information is described within the Chesnara plc condensed set of
financial statements in the half-year financial report as having been reviewed.
This report is made solely to the Company's Directors in accordance with our engagement letter and solely for the purpose
of expressing an opinion as to whether anything has come to our attention that causes us to believe that the EEV Basis
Supplementary Information for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance
with the European Embedded Value ('EEV') principles issued in May 2004 by the European CFO Forum and supplemented by
Additional Guidance on EEV Disclosures issued by the same body in October 2005. Our work has been undertaken so that we
might state to the Company's Directors those matters we are required to state to them in an independent review report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company's Directors, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The EEV Basis Supplementary Information is the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the EEV Basis Supplementary Information in accordance with the European Embedded Value
('EEV') principles issued in May 2004 by the European CFO Forum and supplemented by Additional Guidance on EEV Disclosures
issued by the same body in October 2005.
Our responsibility
Our responsibility in relation to the EEV Basis Supplementary Information is to express to the Company a conclusion on the
EEV Basis Supplementary Information based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board
for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the EEV Basis Supplementary
Information for the six months ended 30 June 2015 has not been properly prepared in accordance with the EEV principles
using the methodology and assumptions set out on
Deloitte LLP
Chartered Accountants and Statutory Auditor
London,
United Kingdom
27 August 2015
EEv consolidated income statement (UNAUDITED)
Unaudited Six months ended 30 June Year ended 31 December
2015 2014 2014
Note £000 £000 £000
Operating profit of covered business 6(b) 14,974 37,168 37,522
Other operational result 6(b) (7,887) (673) (7,409)
Operating profit 7,087 36,495 30,113
Variation from longer-term investment return 6(b) 13,647 25,845 32,040
Effect of economic assumption changes 6(b) 2,263 (4,612) (7,451)
Profit before tax and before exceptional item 22,997 57,728 54,702
Exceptional items
Profit recognised on business combination 9 21,630 - -
Effect of modelling adjustments 6(a) 5,903 - -
Profit before tax 50,530 57,728 54,702
Tax 6(b) 285 (10,441) (10,455)
Profit for the period attributable to the equity holders of the parent company 50,815 47,287 44,247
Earnings per share
Based on profit for the period 10 40.20p 41.17p 38.24p
Diluted profit per share
Based on profit for the period 10 40.14p 41.17p 38.20p
- More to follow, for following part double click ID:nRSb3703XfRecent news on Chesnara
See all newsREG - Chesnara PLC - Director/PDMR Shareholding
AnnouncementREG - Chesnara PLC - Director/PDMR Shareholding
AnnouncementREG - Chesnara PLC - Block listing Interim Review
AnnouncementREG - Chesnara PLC - Notice of AGM
AnnouncementREG - Chesnara PLC - Director/PDMR Shareholding
Announcement