REG - Chesnara PLC - Final Results <Origin Href="QuoteRef">CSN.L</Origin> - Part 4
31/03/2015 07:30
- Part 4: For the preceding part double click ID:nRSe9226Ic
Depreciation charge on property and equipment (22) - - (22) (187) - (209)
Other (7,663) (9,878) (114) (17,655) (14,870) (3,839) (36,364)
Other operating expenses
Charge for amortisation of acquired value of in-force business (2,358) (774) (169) (3,301) (4,229) - (7,530)
Charge for amortisation of acquired value of customer relationships - - - - (301) - (301)
Other (924) (1,143) (391) (2,458) (4,085) 60 (6,483)
Segmental expenses (263,762) (138,323) (1,015) (403,100) (267,255) (3,779) (674,134)
Segmental income less expenses 22,753 35,675 25 58,453 5,180 (3,575) 60,058
Share of profit from associates - - - - 1,252 - 1,252
Profit arising on business combinations - - - - - 2,807 2,807
Financing costs - (4) - (4) (2,140) (1,383) (3,527)
Profit/(loss) before tax 22,753 35,671 25 58,449 4,292 (2,151) 60,590
Income tax credit/(expense) (11,604) (423) 800 (11,227)
Profit/(loss) after tax 46,845 3,869 (1,351) 49,363
(iv) Segmental balance sheet as at 31 December 2013
CA S&P PL Movestic Other Group Activities Total
£000 £000 £000 £000 £000 £000
Total assets 1,899,700 1,263,269 181,059 1,853,374 40,319 5,237,721
Total liabilities (1,824,706) (1,169,406) (125,783) (1,791,943) (78,781) (4,990,619)
Net assets/(liabilities) 74,994 93,863 55,276 61,431 (38,462) 247,102
Investment in associates - - - 4,088 - 4,088
Additions to non-current assets - - 20,211 17,787 - 37,998
4. Borrowings
31 December
2014 2013
£000 £000
Bank loan 64,327 73,040
Amount due in relation to financial reinsurance 22,969 21,337
Total 87,296 94,377
Current 17,198 13,967
Non-current 70,098 80,410
Total 87,296 94,377
The bank loan subsisting at 31 December 2014, comprises the following:
· on 7 October 2013 tranche one of a loan 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 the year, £4.4m of the debt was
repaid.
· on 27 November 2013 tranche two of the 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 the year,
£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 this loan has been 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 31 December 2014 was £64,800,000 (31 December 2013: £73,800,000).
The fair value of amounts due in relation to financial reinsurance was £23,767,650 (31 December 2013: £21,657,269). The
fair value of other borrowings is not materially different from their carrying value.
Bank loans are presented net of unamortised arrangement fees. Arrangement fees are recognised in profit or loss using the
effective interest rate method.
5. Earnings per share
Year ended 31 December 2014 2013
Profit for the year attributable to shareholders (£000) 25,575 49,363
Weighted average number of ordinary shares 115,711,981 114,851,282
Basic earnings per share 22.10p 42.98p
Diluted earnings per share 22.08p 42.98p
The weighted average number of ordinary shares in respect of the years ended 31 December 2014 is based upon 126,552,427
shares in issue less 154,031 own shares held in treasury. The weighted average number of ordinary shares in respect of the
years ended 31 December 2013 was based upon 115,047,662 shares in issue less 196,380 own shares held in treasury.
There were 117,000 share options outstanding at 31 December 2014 (2013: nil). Accordingly, there is dilution of the
average number of ordinary shares in issue in respect of 2014.
6. Retained earnings
Year ended 31 December
2014£000 2013£000
Retained earnings attributable to equity holders of the parent company comprise:
Balance at 1 January 155,561 126,297
Profit for the year 25,575 49,363
Share based payment 114 -
Dividends
Final approved and paid for 2012 - (12,921)
Interim approved and paid for 2013 - (7,178)
Final approved and paid for 2013 (13,357) -
Interim approved and paid for 2014 (7,374) -
Balance at 31 December 160,519 155,561
The interim dividend in respect of 2013, approved and paid in 2013 was paid at the rate of 6.25p per share. The final
dividend in respect of 2013, approved and paid in 2014, was paid at the rate of 11.63p per share so that the total dividend
paid to the equity shareholders of the Parent Company in respect of the year ended 31 December 2013 was made at the rate of
17.88p per share.
The interim dividend in respect of 2014, approved and paid in 2014, was paid at the rate of 6.42p per share to equity
shareholders of the Parent Company registered at the close of business on 12 September 2014, the dividend record date.
A final dividend of 11.98p per share in respect of the year ended 31 December 2014 payable on 22 May 2015 to equity
shareholders of the Parent Company registered at the close of business on 10 April 2015, the dividend record date, was
approved by the Directors after the balance sheet date. The resulting total final dividend of £15.1m has not been provided
for in these financial statements and there are no income tax consequences.
The following summarises dividends per share in respect of the year ended 31 December 2014 and 31 December 2013:
Year ended 31 December
2014p 2013p
Interim - approved and paid 6.42 6.25
Final - proposed/paid 11.98 11.63
Total 18.40 17.88
SUPPLEMENTARY INFORMATION - EUROPEAN EMBEDDED VALUE BASIS
Summarised EEV consolidated income statement
31 December
2014 2013
£000 £000
Operating profit of covered business 37,522 8,901
Other operational result (7,409) (2,276)
Operating profit 30,113 6,625
Variation from longer-term investment return 32,040 54,646
Effect of economic assumption changes (7,451) 16,447
Profit before tax and before exceptional item 54,702 77,718
Exceptional items
Profit recognised on business combination - 12,283
Effect of modelling adjustments - 4,073
Profit before tax 54,702 94,074
Tax (10,455) (7,307)
Profit for the period attributable to the equity holders of the parent company 44,247 86,767
Earnings per share
Based on profit for the year 38.24p 75.55p
Diluted profit per share
Based on profit for the year 38.20p 75.55p
Summarised EEV consolidated balance sheet
31 December
2014 2013
Assets £000 £000
Value of in-force business 243,671 262,161
Deferred acquisition costs arising on unmodelled business 523 487
Acquired value of customer relationships 245 419
Property and equipment 477 673
Investment in associate 4,388 4,088
Deferred tax asset 1,827 509
Reinsurers' share of insurance contract provisions 295,350 328,810
Amounts deposited with reinsurers 34,510 33,102
Investment properties 5,520 20,387
Financial assets
Equity securities at fair value through income 475,983 479,617
Holdings in collective investment schemes at fair value through income 3,516,424 3,440,992
Debt securities at fair value through income 377,193 370,666
Insurance and other receivables 45,360 46,382
Prepayments 4,821 4,889
Policyholders' funds held by the Group 164,858 130,237
Derivative financial instruments 3,580 2,956
Total financial assets 4,588,219 4,475,739
Reinsurers' share of accrued policy claims 14,722 11,399
Income taxes 1,962 2,608
Cash and cash equivalents 241,699 184,263
Total assets 5,433,113 5,324,645
Liabilities
Insurance contract provisions 2,266,196 2,323,643
Other provisions 729 5,348
Financial liabilities
Investment contracts at fair value through income 2,396,953 2,293,836
Borrowings 94,323 100,290
Derivative financial instruments 49 387
Liabilities relating to policyholders' funds held by the Group 164,858 130,237
Total financial liabilities 2,656,183 2,524,750
Reinsurance payables 10,150 11,154
Payables related to direct insurance and investment contracts 58,789 47,137
Income taxes 4,168 8,012
Other payables 18,467 27,104
Bank overdraft 1,189 1,127
Total liabilities 5,015,871 4,948,275
Net assets 417,242 376,370
Equity
Share capital 42,600 42,024
Share premium 76,523 42,526
Treasury shares (168) (212)
Foreign exchange reserve (3,335) 13,927
Other reserves 50 50
Retained earnings 301,572 278,055
Total shareholders' equity 417,242 376,370
Notes to the EEV Supplementary Information
1 Basis of preparation
The EEV Supplementary Information is supplementary to the Group's primary financial statements which have been prepared in
accordance with International Financial Reporting Standards ('IFRS'), as adopted by the EU. The EEV Supplementary
Information has been prepared 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,
using the methodology and assumptions set out on pages 180 to 183 of the Chesnara 2014 Annual Report & Accounts. The
principles provide a framework intended to improve comparability and transparency in embedded value reporting across
Europe.
In order to improve understanding of the Group's financial position and performance, certain of the information presented
in these financial statements is presented on a segmental basis: the business segments are the same as those described in
Note 3 to the IFRS basis Financial Statements referred to above.
2 Summarised statement of changes in equity and analysis of profit
(a) Changes in equity may be summarised as:
Statement of changes in equity
Year ended 31 December 2014£'000 2013£'000
Shareholders' equity at beginning of the year 376,370 311,145
Profit for the year attributable to shareholders before modelling adjustments 44,247 82,694
Effect of modelling adjustments - 4,073
Profit for the year 44,247 86,767
Issue of new shares
Share premium 576
Share premium 33,971 3
Sale of treasury shares 70 5
Foreign exchange reserve movement (17,261) (1,451)
Dividends paid (20,731) (20,099)
Shareholders' equity at end of the year 417,242 376,370
Effect of modelling adjustments
Year ended 31 December 2013
Positive modelling adjustments during 2013 of £4.1m relate entirely to the Movestic business. These have arisen due to
refinements being made to the way in which modelling of commission is performed, which is now performed at a more granular
level.
(b) The profit/(loss) for the year before modelling adjustments is analysed as:
Year ended 31 December 2014 CA S&P PL UKTotal Movestic Other GroupActivities Total
£000 £000 £000 £000 £000 £000 £000
Covered business
New business contribution 794 - - 794 8,904 - 9,698
Return from in-force business
Expected return 1,490 (548) 1,062 2,004 5,145 - 7,149
Experience variances 6,110 (4,803) (673) 634 (93) - 541
Operating assumption changes 23,766 (4,632) (2,915) 16,219 (5,219) - 11,000
Return on shareholder net worth 1,626 7,508 - 9,134 - - 9,134
Operating profit/(loss) of covered business 33,786 (2,475) (2,526) 28,785 8,737 - 37,522
Variation from longer-term investment return 21,373 (8,582) 1,085 13,876 18,164 - 32,040
Effect of economic assumption changes (5,163) (3,121) 512 (7,772) 321 - (7,451)
Profit/(loss) of covered business before tax 49,996 (14,178) (929) 34,889 27,222 - 62,111
Tax thereon (12,237) - - (12,237)
Profit of covered business after tax 22,652 27,222 - 49,874
Results of non-covered business and of other group companies
Profit/(loss) before tax - 262 (7,671) (7,409)
Tax - 894 888 1,782
Profit/(loss) after tax 22,652 28,378 (6,783) 44,247
Year ended 31 December 2013 CA S&P PL UKTotal Movestic Other GroupActivities Total
£000 £000 £000 £000 £000 £000 £000
Covered business
New business contribution 704 13 - 717 7,196 - 7,913
Return from in-force business
Expected return 1,389 151 61 1,601 3,929 - 5,530
Experience variances 7,590 4,695 - 12,285 (6,490) - 5,795
Operating assumption changes (4,295) 4,458 - 163 (10,233) - (10,070)
Return on shareholder net worth 185 (452) - (267) - - (267)
Operating profit/(loss) of covered business 5,573 8,865 61 14,499 (5,598) - 8,901
Variation from longer-term investment return 22,394 11,414 - 33,808 20,838 - 54,646
Effect of economic assumption changes (3,596) 22,463 - 18,867 (2,420) - 16,447
Profit of covered business before tax 24,371 42,742 61 67,174 12,820 - 79,994
Tax thereon (7,639) - - (7,639)
Profit of covered business after tax 59,535 12,820 - 72,355
Results of non-covered business and of other group companies
Profit/(loss) before tax - 2,677 (4,953) (2,276)
Exceptional profit arising on purchase of Protection Life - - 12,283 12,283
Tax - (468) 800 332
Profit/(loss) after tax 59,535 15,029 8,130 82,694
The results of the non-covered business and of other group companies before tax and before exceptional item are presented
as 'other operational result' in the consolidated income statement.
3 Sensitivities to alternative assumptions
The following tables show the sensitivity of the embedded value as reported at 31 December 2014, and of the new business
contribution of Movestic, to variations in the assumptions adopted in the calculation of the embedded value. Sensitivity
analysis is not provided in respect of the new business contribution of CA for the year ended 31 December 2014 as the
reported level of new business contribution is not considered to be material (see Note 3(a)).
Embedded value New businesscontribution
UKbusiness Swedishbusiness Swedishbusiness
CA Pre-tax S&PPre-tax PLPre-tax Tax UKPost-tax Post-tax
£m £m £m £m £m £m £m
Published value as at 31 December 2013 170.7 61.3 62.6 (22.8) 271.8 126.5 7.6
Changes in embedded value/new business contribution arising from:
Economic sensitivities
100 basis point increase in yield curve (1.2) 9.7 (3.0) (1.1) 4.4 1.0 (0.2)
100 basis point reduction in yield curve 2.5 (9.8) 3.3 0.4 (3.6) (1.0) 0.2
10% decrease in equity and property values (10.3) (12.6) - 2.5 (20.3) (13.2) (0.2)
Operating sensitivities
10% decrease in maintenance expenses 1.9 4.8 1.4 (1.0) 7.1 7.0 0.8
10% decrease in lapse rates 2.6 (1.0) 0.1 - 1.7 9.0 1.5
5% decrease in mortality/morbidity rates:
Assurances 0.9 0.5 1.6 (0.2) 2.8 0.1 -
Annuities (2.1) (0.3) n/a - (2.4) n/a n/a
Reduction in the required capital to statutory minimum 0.4 0.4 1.3 - 2.2 - -
The key assumption changes represented by each of these sensitivities are as follows:
Economic sensitivities
(i) 100 basis point increase in the yield curve: The reference rate is increased by 1% and the rate of future
inflation has also been increased by 1% so that real yields remain constant;
(ii) 100 basis point reduction in the yield curve: The reference rate is reduced by 1% and the rate of future
inflation has also been reduced by 1% so that real yields remain constant; and
(iii) 10% decrease in the equity and property values. This gives rise to a situation where, for example, a Managed Fund
unit liability with a 60% equity holding would reduce by 6% in value.
Operating sensitivities
(i) 10% decrease in maintenance expenses, giving rise to, for example, a base assumption of £20 per policy pa reducing
to £18 per policy pa;
(ii) 10% decrease in persistency rates giving rise to, for example, a base assumption of 10% of policy base lapsing pa
reducing to 9% pa;
(iii) 5% decrease in mortality/morbidity rates giving rise to, for example, a base assumption of 95% of the parameters
in a selected mortality/morbidity table reducing to 90.25% of the parameters in the same table, assuming no changes are
made to policyholder charges or any other management actions; and
(iv) the sensitivity to the reduction in the required capital to the statutory minimum shows the effect of reducing the
required capital from that defined in Note 3(b) to the minimum requirement prescribed by regulation.
In each sensitivity calculation all other assumptions remain unchanged except where they are directly affected by the
revised economic conditions: for example, as stated, changes in interest rates will directly affect the reference rate.
4 Earnings per share
Year ended 31 December
2014 2013
p p
Basic earnings per share
Based on profit for the year 38.24 75.55
Diluted earnings per share
Based on profit for the year 38.20 75.55
This information is provided by RNS
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