REG - Chesnara PLC - Final Results <Origin Href="QuoteRef">CSN.L</Origin> - Part 4
31/03/2016 07:06
- Part 4: For the preceding part double click ID:nRSe6231Tc
Decrease in insurance contract provisions (201,453) (44,940)
Increase in investment contract liabilities 149,011 369,838
Decrease in provisions (1,893) (4,600)
(Decrease)/increase in reinsurance payables (578) 222
Increase in payables related to direct insurance and investment contracts 1,708 12,820
Decrease in other payables (1,630) (7,402)
Net cash generated from operations 5,863 64,564
Income tax paid (4,248) (8,839)
Net cash generated from operating activities 1,615 55,725
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired 54,258 -
Development of software (2,418) (1,079)
Purchases of property and equipment (265) (224)
Proceeds from the disposal of property and equipment - 152
Net cash generated from/( utilised by) investing activities 51,575 (1,151)
Cash flows from financing activities
Proceeds from issue of share capital - 34,573
Repayment of borrowings (7,815) (4,469)
Sale treasury shares - 44
Dividends paid (23,498) (20,731)
Interest paid (3,382) (2,593)
Net cash (utilised by)/generated from financing activities (34,695) 6,824
Net increase in net cash and cash equivalents 18,495 61,398
Net cash and cash equivalents at beginning of year 240,510 183,136
Effect of exchange rate changes on net cash and cash equivalents 906 (4,024)
Net cash and cash equivalents at end of the year 259,911 240,510
Note: Net cash and cash equivalents includes overdrafts.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2015
Share capital Share premium Other reserves Treasury shares Retained earnings Total
£000 £000 £000 £000 £000 £000
Equity shareholders' funds at 1 January 2015 42,600 76,523 (641) (168) 160,519 278,833
Profit for the year - - - - 39,788 39,788
Dividends paid - - - - (23,498) (23,498)
Foreign exchange translation differences - - (173) - - (173)
Share based payment - - - - 212 212
Sale of treasury shares - (7) - 7 - -
Equity shareholders' funds at 31 December 2015 42,600 76,516 (814) (161) 177,021 295,162
Year ended 31 December 2014
Share capital Share premium Other reserves Treasury shares Retained earnings Total
£000 £000 £000 £000 £000 £000
Equity shareholders' funds at 1 January 2014 42,024 42,526 7,203 (212) 155,561 247,102
Profit for the year - - - - 25,575 25,575
Dividends paid - - - - (20,731) (20,731)
Foreign exchange translation differences - - (7,844) - - (7,844)
Share based payment - - - - 114 114
Issue of new shares 576 33,971 - - - 34,547
Sale of treasury shares - 26 - 44 - 70
Equity shareholders' funds at 31 December 2014 42,600 76,523 (641) (168) 160,519 278,833
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - IFRS BASIS
1. Basis of presentation
The preliminary announcement is based on the Group's financial statements for the year ended 31 December 2015, which are
prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union
('Adopted IFRSs') as adopted by the EU.
2. Significant accounting policies
The accounting policies applied by the Group in determining the IFRS basis results in this report are the same as those
previously applied in the Group's consolidated financial statements.
3. Business Combination
On 19 May 2015, Chesnara plc acquired the entire issued share capital (100%) of the Waard Group, a closed life assurance
company based in the 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 represents 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 £16.6m calculated as follows:
Book value Provisional fair value adjustments Fair value
£000 £000 £000
Assets
Intangible assets
Acquired value of in-force business - 5,506 5,506
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 1,824 - 1,824
Income taxes 255 - 255
Cash and cash equivalents 104,381 - 104,381
Total assets 196,941 5,506 202,447
Liabilities
Insurance contract provisions 125,045 - 125,045
Other provisions 3,025 - 3,025
Deferred tax liabilities 2,099 1,377 3,476
Reinsurance payables 72 - 72
Payables related to direct insurance contracts 2,241 - 2,241
Income taxes 70 - 70
Other payables 1,751 - 1,751
Total liabilities 134,303 1,377 135,680
Net assets 62,638 4,129 66,767
Net assets acquired 66,767
Total consideration, paid in cash (50,123)
Profit arising on business combination 16,644
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. In our interim
financial statements, the profit arising upon business combination was reported at £16.2m. This has subsequently been
revised to reflect more accurately the fair value of the net assets acquired. The adjustment includes an increase in the
expense assumptions used to calculate the Acquired value of in-force business and also the recognition of a deferred tax
asset, which existed at the acquisition date but was not recognised due to uncertainty surrounding its ability to be
utilised against future profit emergence. This has subsequently been established as being off-settable against future
profit emergence within the Waard fiscal tax unity and is now recognised on the acquisition balance sheet.
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 £4.1m, 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 on the previous page, a gain of £16.6m 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 £3.5m. £2.5m of these costs have been
included in Administration Expenses, of which £1.9m was 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 the 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 £1.1m, with contribution to
overall consolidated profit before tax of £0.9m, 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 £2.2m, and would have contributed £2.1m to the overall consolidated profit before tax.
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 31 December 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 of 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 historical business of Save & Prosper Insurance
Limited and its then 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'. 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 pensions and savings business and providing some life and health product offerings.
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 year ended
31 December 2015.
(i) Segmental income statement for the year ended 31 December 2015
CA S&P UK Total Movestic Waard Group Other Group Activities Total
£000 £000 £000 £000 £000 £000 £000
Net insurance premium revenue 47,880 5,413 53,293 13,515 1,130 - 67,938
Fee and commission income 30,216 2,513 32,729 33,502 18 - 66,249
Net investment return 24,539 37,605 62,144 87,163 (1,238) 445 148,514
Total revenue (net of reinsurance payable) 102,635 45,531 148,166 134,180 (90) 445 282,701
Other operating income 2,854 11,331 14,185 4,399 2 - 18,586
Segmental income/(expenses) 105,489 56,862 162,351 138,579 (88) 445 301,287
Net insurance contract claims and benefits incurred (54,093) (37,282) (91,375) (6,079) 2,587 - (94,867)
Net change in investment contract liabilities (13,240) 641 (12,599) (87,137) - - (99,736)
Fees, commission and other acquisition costs (1,986) (21) (2,007) (21,864) 83 - (23,788)
Administrative expenses:
Amortisation charge on software assets - - - (1,340) - - (1,340)
Depreciation charge on property and equipment (22) - (22) (180) - - (202)
Other (10,691) (9,628) (20,319) (9,884) (1,715) (7,841) (39,759)
Operating expenses (1,501) - (1,501) (4,481) - - (5,982)
Financing costs - - - (1,340) - (2,116) (3,456)
Share of profit from associates - - - 455 - - 455
Profit before tax and consolidation adjustments 23,956 10,572 34,528 6,729 867 (9,512) 32,612
Other operating expenses:
Charge for amortisation of acquired value of in-force business (4,975) (661) (5,636) (3,282) (356) - (9,274)
Charge for amortisation of acquired value of customer relationships - - - (107) - - (107)
Fees, commission and other acquisition costs - - - 2,913 - - 2,913
Segmental income less expenses 18,981 9,911 28,892 6,253 511 (9,512) 26,144
Profit arising on business combinations - - - - - 16,644 16,644
Profit before tax 18,981 9,911 28,892 6,253 511 7,132 42,788
Income tax (expense)/credit (4,139) (14) (124) 1,277 (3,000)
Profit after tax 24,753 6,239 387 8,409 39,788
(ii) Segmental balance sheet as at 31 December 2015
CA S&P Movestic Waard Group Other Group Activities Total
£000 £000 £000 £000 £000 £000
Total assets 1,809,494 1,181,272 2,134,143 188,993 53,900 5,367,802
Total liabilities (1,702,363) (1,125,113) (2,070,860) (120,216) (54,088) (5,072,640)
Net assets 107,131 56,159 63,283 68,777 (188) 295,162
Investment in associates - - 4,707 - - 4,707
Additions to non-current assets - 26 17,368 73 - 17,467
(iii) 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) (23,014) - (25,031)
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)
Operating expenses (1,809) (411) (2,220) (6,104) (647) (8,971)
Financing costs - (4) (4) (663) (2,341) (3,008)
Share of profit from associates - - - 855 - 855
Profit before tax and consolidation adjustments 46,815 (9,186) 37,629 4,935 (7,672) 34,892
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 customer relationships - - - (132) - (132)
Charge for amortisation of deferred acquisition cost - - - 3,324 - 3,324
Segmental income less expenses 42,037 (9,887) 32,150 4,325 (7,672) 28,803
Profit arising on business combinations - - - - - -
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
* Now includes Protection Life segment (previously shown separately).
(iv) 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
* Now includes Protection Life segment (previously shown separately).
5. Borrowings
31 December
2015 2014
£000 £000
Bank loan 52,522 64,327
Amount due in relation to financial reinsurance 26,503 22,969
Total 79,025 87,296
Current 18,448 17,198
Non-current 60,577 70,098
Total 79,025 87,296
The bank loan subsisting at 31 December 2015, 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, £6.0m 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,
£6.0m 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 2015 was £52,800,000 (31 December 2014: £64,800,000).
The fair value of amounts due in relation to financial reinsurance was £26,879,000 (31 December 2014: £23,767,650). 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.
6. Earnings per share
Year ended 31 December 2015 2014
Profit for the year attributable to shareholders (£000) 39,788 25,575
Weighted average number of ordinary shares 126,401,635 115,711,981
Basic earnings per share 31.48p 22.10p
Diluted earnings per share 31.41p 22.08p
The weighted average number of ordinary shares in respect of the years ended 31 December 2015 is based upon 126,552,427
shares in issue less 147,535 own shares held in treasury. The weighted average number of ordinary shares in respect of the
years ended 31 December 2014 was based upon 126,552,427 shares in issue less 154,031 own shares held in treasury.
There were 271,000 share options outstanding at 31 December 2015 (2014: 117,000). Accordingly, there is dilution of the
average number of ordinary shares in issue in respect of 2015.
7. Retained earnings
Year ended 31 December
2015£000 2014£000
Retained earnings attributable to equity holders of the parent company comprise:
Balance at 1 January 160,519 155,561
Profit for the year 39,788 25,575
Share based payment 212 114
Dividends
Final approved and paid for 2013 - (13,357)
Interim approved and paid for 2014 - (7,374)
Final approved and paid for 2014 (15,143) -
Interim approved and paid for 2015 (8,355) -
Balance at 31 December 177,021 160,519
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.
The interim dividend in respect of 2015, approved and paid in 2015, was paid at the rate of 6.61p per share to equity
shareholders of the Parent Company registered at the close of business on 11 September 2015, the dividend record date.
A final dividend of 12.33p per share in respect of the year ended 31 December 2015 payable on 23 May 2016 to equity
shareholders of the Parent Company registered at the close of business on 8 April 2016, the dividend record date, was
approved by the Directors after the balance sheet date. The resulting total final dividend of £15.6m 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 2015 and 31 December 2014:
Year ended 31 December
2015p 2014p
Interim - approved and paid 6.61 6.42
Final - proposed/paid 12.33 11.98
Total 18.94 18.40
8. Related parties
(a) Identity of related parties
The shares of the Company were widely held and no single shareholder exercised significant influence or control over the
Company.
The Company has related party relationships with:
(i) key management personnel who comprise only the Directors of the Company;
(ii) its subsidiary companies;
(iii) its associated company; and
(v) other companies over which the Directors have significant influence.
(b) Related party transactions
(i) Transactions with key management personnel.
Key management personnel comprise of the Directors of the Company. There are no executive officers other than certain of
the Directors. Key management compensation is as follows:
2015£000 2014£000
Short-term employee benefits 1,713 1,593
Post-employment benefits 71 65
Long-term employment benefits - 161
Total 1,784 1,819
In addition to their salaries the Company also provides non-cash benefits to Directors, and contributes to a post
employment defined contribution pension plan on their behalf, or where regulatory contribution limits are reached, pay an
equivalent amount as an addition to base salary.
The following amounts were payable to Directors in respect of bonuses and incentives:
2015£000 2014£000
Annual bonus scheme (included in the short-term employee benefits above) 495 493
Long-term incentive plan - 161
Compensation for loss of office - 384
Total 495 1,038
These amounts have been included in Accrued Expenses.
The amounts payable under the annual bonus scheme were payable within one year.
(ii) Transactions with subsidiaries
The Company undertakes centralised administration functions, the costs of which it charges back to its operating
subsidiaries. The following amounts which effectively comprised a recovery of expenses at no mark up were credited to the
Consolidated Statement of Comprehensive Income of the Company for the respective periods:
Year ended 31 December
2015 2014
£000 £000
Recovery of expenses 3,054 2,629
(iii) Transactions with associate
Movestic Livförsäkring AB and its associate Modernac SA
Year ended 31 December
2015 2014
£000 £000
Reinsurance premiums paid (8,456) (9,829)
Reinsurance recoveries received 4,200 4,600
Reinsurance commission received 1,570 1,853
(2,686) (3,376)
Amounts outstanding as at balance sheet date (5,321) (4,654)
Movestic Livförsäkring AB had the following amounts outstanding at the balance sheet date:
2015 2014
Amounts owed by associate£000 Amounts owed to associate £000 Amounts owed by associate£000 Amounts owed to associate £000
Modernac S.A. - 5,321 - 4,654
These amounts have been included in other payables.
SUPPLEMENTARY INFORMATION - EUROPEAN EMBEDDED VALUE BASIS
SUMMARISED EEV CONSOLIDATED INCOME STATEMENT
31 December
2015 2014
£000 £000
Covered business
New business contribution 6,061 9,698
Return from in-force business:
Expected return 6,300 7,149
Experience variances 10,754 541
Operating assumption changes 8,394 11,000
Return on shareholder net worth (28) 9,134
Operating profit of covered business 31,481 37,522
Variation from longer-term investment return 12,195 32,040
Effect of economic assumption changes (698) (7,451)
Profit of covered business before tax and gain on acquisition 42,978 62,111
Tax thereon 2,676 (12,237)
Profit of covered business after tax and gain on acquisition 45,654 49,874
Profit recognised on business combination 21,313 -
Non-covered business and other group activities (10,403) (7,409)
Tax on uncovered business 947 1,782
Profit for the year attributable to the equity holders of the parent company 57,511 44,247
Earnings per share
Based on profit for the year 50.17p 38.24p
Diluted profit per share
Based on profit for the year 50.06p 38.20p
SUMMARISED EEV CONSOLIDATED BALANCE SHEET
31 December
2015 2014
Assets £000 £000
Value of in-force business 264,765 243,671
Adjusted shareholder net worth 190,411 173,571
Net assets 455,176 417,242
Equity
Share capital 42,600 42,600
Share premium 76,516 76,523
Treasury shares (161) (168)
Foreign exchange reserve (5,531) (3,335)
Other reserves 50 50
Retained earnings 341,702 301,572
Total shareholders' equity 455,176 417,242
SUMMARISED EEV STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2015£'000 2014£'000
Shareholders' equity at beginning of the year 417,242 376,370
Profit for the year attributable to shareholders before modelling adjustments 57,511 44,247
Effect of modelling adjustments 5,903 -
Profit for the year 63,414 44,247
Issue of new shares
Share premium - 576
Share premium (7) 33,971
Sale of treasury shares 7 70
Share based payment 212 -
Foreign exchange reserve movement (2,194) (17,261)
Dividends paid (23,498) (20,731)
Shareholders' equity at end of the year 455,176 417,242
Effect of modelling adjustments
Year ended 31 December 2015
During the year ended 31 December 2015 an adjustment of £5.9m has been reported relating to a tax error in the EEV model
which resulted in the tax charge in the EEV model being overstated at 31 December 2014. This has been corrected in the
year.
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 in notes 5 to 7 below. 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 analysis of profit/(loss)
The profit for the year before modelling adjustments is analysed as:
Year ended 31 December 2015 CA S&P UKTotal Movestic Waard Group Other GroupActivities Total
£000 £000 £000 £000 £000 £000 £000
Covered business
New business contribution 361 - 361 5,700 - - 6,061
Return from in-force business
Expected return 3,267 713 3,980 3,044 (724) - 6,300
Experience variances 6,943 2,461 9,404 127 1,223 - 10,754
Operating assumption changes (2,599) 5,077 2,478 5,661 255 - 8,394
Return on shareholder net worth 382 (410) (28) - - - (28)
Operating profit/(loss) of covered business 8,354 7,841 16,195 14,532 754 - 31,481
Variation from longer-term investment return 802 2,848 3,650 8,545 - - 12,195
Effect of economic assumption changes 1,619 (2,950) (1,331) 864 (231) - (698)
Profit/(loss) of covered business before tax 10,775 7,739 18,514 23,941 523 - 42,978
Tax thereon 2,676 - - - 2,676
Profit of covered business after tax 21,190 23,941 523 - 45,654
Results of non-covered business and of other group companies
Profit recognised on business combination - - - 21,313 21,313
Effect of modelling adjustments - - - 5,903 5,903
(Loss)/profit before tax - (1,282) 389 (9,510) (10,403)
Tax (33) - 980 947
Profit after tax 21,190 22,626 912 18,686 63,414
Year ended 31 December 2014 CA S&P UKTotal Movestic Other GroupActivities Total
£000 £000 £000 £000 £000 £000
Covered business
New business contribution 794 - 794 8,904 - 9,698
Return from in-force business
Expected return 2,552 (548) 2,004 5,145 - 7,149
Experience variances 5,437 (4,803) 634 (93) - 541
Operating assumption changes 20,851 (4,632) 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 31,260 (2,475) 28,785 8,737 - 37,522
Variation from longer-term investment return 22,458 (8,582) 13,876 18,164 - 32,040
Effect of economic assumption changes (4,651) (3,121) (7,772) 321 - (7,451)
Profit of covered business before tax 49,067 (14,178) 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
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 2015, 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 and the Waard Group for the year ended 31
December 2015 as the reported level of new business contribution is not considered to be material.
Embedded value New businesscontribution
UK business Swedishbusiness Dutchbusiness Swedishbusiness
CA Pre-tax S&PPre-tax Tax UKPost-tax Post-tax Post-tax
£m £m £m £m £m £m £m
Published value as at 31 December 2015 186.9 62.1 (15.0) 234.0 145.4 61.3 5.6
Changes in embedded value/new business contribution arising from:
Economic sensitivities
100 basis point increase in yield curve (4.5) 7.1 - 2.6 1.0 (3.4) (0.2)
100 basis point reduction in yield curve 4.9 (8.6) (1.4) (5.1) (1.0) 1.8 0.2
10% decrease in equity and property values (7.4) (11.4) 2.6 (16.2) (14.5) - (0.2)
Operating sensitivities
10% decrease in maintenance expenses 3.3 4.1 (0.8) 6.6 7.4 0.9 0.8
10% decrease in lapse rates 2.0 (1.2) - 0.8 9.8 - 1.4
5% decrease in mortality/morbidity rates:
Assurances 2.6 0.4 (0.2) 2.8 0.1 1.3 -
Annuities (2.2) (0.5) (0.1) (2.8) n/a n/a -
Reduction in the required capital to statutory minimum 1.5 0.4 (0.5) 1.4 - 0.2 -
Embedded value New businesscontribution
UK business Swedishbusiness Swedishbusiness
CA Pre-tax S&PPre-tax Tax UKPost-tax Post-tax
£m £m £m £m £m £m
Published value as at 31 December 2014 233.3 61.3 (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 (4.2) 9.7 (1.1) 4.4 1.0 (0.2)
100 basis point reduction in yield curve 5.8 (9.8) 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 3.3 4.8 (1.0) 7.1 7.0 0.8
10% decrease in lapse rates 2.7 (1.0) - 1.7 9.0 1.5
5% decrease in mortality/morbidity rates:
Assurances 2.5 0.5 (0.2) 2.8 0.1 -
Annuities (2.1) (0.3) - (2.4) n/a n/a
Reduction in the required capital to statutory minimum 1.7 0.4 - 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
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