REG - Chesnara PLC - Half-year Report <Origin Href="QuoteRef">CSN.L</Origin> - Part 3
31/08/2017 07:06
- Part 3: For the preceding part double click ID:nRSe3461Pb
Adverse movements in yields on fixed interest securities The group maintains portfolios of fixed interest securities (i) in order to match its insurance contract liabilities, in terms of yield and cash flow characteristics, and (ii) as an integral part of the investment funds it manages on behalf of
policyholders and investors. It is exposed to mismatch losses arising from a failure to match its insurance contract liabilities or from the fact that sharp and discrete fixed interest yield movements may not be associated fully and immediately with
corresponding changes in liability valuation interest rates.
Failure of outsourced service providers to fulfil contractual obligations The group's business model includes outsourcing arrangements with providers that deliver policyholder administration and other key business functions, particularly in the UK. In the event of failure by any of the service providers to fulfil their
contractual obligations, in whole or in part, to the requisite standards specified in the contracts, the group may suffer losses, poor customer outcomes, or reputational damage as its functions degrade or underperform.
Key man dependency The nature of the group is such that it relies on a number of key individuals who have particular knowledge, experience and know how. The group is, accordingly, exposed to the sudden loss of the services of these individuals.
Adverse regulatory and legal changes The group operates in jurisdictions which are currently subject to significant change arising from regulatory and legal requirements. These may either be of a local nature, or of a wider nature, following from EU-based regulation and law. This risk has
been compounded by the increased geopolitical political uncertainties particularly within the EU but also on a global scale. The group is therefore exposed to the one-off costs of addressing regulatory change as well as any permanent increases in the cost
base in order to meet enhanced standards. Further, the group is exposed to the risk of fines or censure in the event that it fails to deliver changes to the required regulatory standards on a timely basis.
Inconsistent regulation across territories Chesnara currently operates in three regulatory domains and is therefore exposed to inconsistent application of regulatory standards across divisions, such as the imposition of higher Capital Buffers over and above regulatory minimums.Potential
consequences of this risk for Chesnara include constraining the efficient and fluid use of capital within the group, or creating a non-level playing field with respect to future deal assessments.
Availability of future acquisitions Chesnara's inorganic growth strategy is dependent on the availability of attractive future acquisition opportunities. Hence, the business is exposed to the risk of a reduction in the availability of suitable acquisition opportunities in Chesnara's current
target markets, for example arising as a result of a change in competition in the consolidation market or from regulatory change influencing the extent of life company strategic restructuring.
Defective acquisition due diligence Through the execution of acquisitions, Chesnara is exposed to the risk of erosion of value or financial losses arising from risks inherent within businesses or funds acquired which are not adequately priced for or mitigated within the transaction.
IT/data security risk and the risk of cyber crime Cyber crime is a growing risk affecting all companies, particularly those who are custodians of customer data. The most pertinent risk exposure relates to information security (i.e. protecting business sensitive and personal data) and can arise from
failure of internal processes and standards, but increasingly companies are becoming exposed to potential malicious cyber attacks, organisation specific malware designed to exploit vulnerabilities, phishing attacks etc. The extent of Chesnara's exposure
to such threats also includes third party service providers.The main potential impacts of this risk include financial losses, inability to perform critical functions, disruption to policyholder services, loss of sensitive data and corresponding
reputational damage or fines.
Liquidity risk Chesnara and each of its subsidiaries have obligations to make future payments, which are not always known with certainty in terms of timing or amounts, prior to the payment date. This includes primarily the payment of policyholder claims, reinsurance
premiums, debt repayments and dividends. The uncertainty of timing and amounts to be paid gives rise to potential liquidity risk, should the funds not be available to make payment.
Going concern
The directors have considered the ability of the group to continue on a going concern basis. As such the board has
performed an assessment as to whether the group can meet its liabilities as they fall due for a period of at least 12
months from which this half year report has been signed.
In performing this work, the board has considered the current cash position of the group and company, coupled with the
group's and company's expected cash generation as highlighted in its most recent business plan, which covers a three year
period. The business plan considers the financial projections of the group and its subsidiaries on both a base case and a
range of stressed scenarios, covering projected IFRS, EcV and solvency positions. These projections also focus on the cash
generation of the life insurance divisions and how these flow up into the Chesnara parent company balance sheet, with these
cash flows being used to fund debt repayments, shareholder dividends and the head office function of the parent company.
The information set out in the 'Capital Management: Solvency II' section indicates a strong Solvency II position as at 30
June 2017 as measured at both the individual regulated life company levels and at the group level. As well as being
well-capitalised the group also has a healthy level of cash reserves to be able to meet its debt obligations as they fall
due, and does not rely on the renewal or extension of bank facilities to continue trading. The group's subsidiaries do,
however, rely on cash flows from the maturity or sale of fixed interest securities which match certain obligations to
policyholders, which brings with it the risk of bond default. In order to manage this risk we ensure that our bond
portfolio is actively monitored and well diversified. Other significant counterparty default risk relates to our principal
reinsurers. We monitor their financial position and are satisfied that any associated credit default risk is low.
In light of this information, the board has concluded that the group and company has adequate resources to continue in
operational existence for at least 12 months from the date of approval of this half year report, and as a result the IFRS
Financial Statements have been prepared on a going concern basis.
SECTION C: IFRS FINANCIAL STATEMENTS
DIRECTORS' RESPONSIBILITIES STATEMENT
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial
Reporting';
- the management report includes a fair review of the information required by DTR 4.2.7R (indication of important
events during the first six months and description of principal risks and uncertainties for the remaining six months of the
year); and
- the management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related
parties' transactions and changes therein).
By order of the Board
Peter Mason John Deane
Chairman Chief Executive Officer
30 August 2017 30 August 2017
INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF CHESNARA PLC
We have been engaged by the company to review the condensed set of consolidated financial statements in the half-yearly
financial report for the six months ended 30 June 2017 which comprises the condensed consolidated statement of
comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity,
the condensed consolidated statement of cash flows and related notes 1 to 9. We have read the other information contained
in the half-yearly financial report and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company 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. Our work has been undertaken so that we might state to the company those matters we are required to state
to it 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, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by
the European Union. The condensed set of financial statements included in this half-yearly financial report has been
prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European
Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the
half-yearly financial report 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 condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Manchester
United Kingdom
30 August 2017
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Note UnauditedSix months ended30 June Year ended 31 December
2017 2016 2016
£000 £000 £000
Insurance premium revenue 91,643 55,524 109,450
Insurance premium ceded to reinsurers (25,274) (22,586) (44,900)
Net insurance premium revenue 66,369 32,938 64,550
Fee and commission income 51,833 34,769 72,932
Net investment return 245,734 108,657 515,681
Total revenue net of reinsurance payable 363,936 176,364 653,163
Other operating income 9,377 9,397 17,614
Total income net of investment return 373,313 185,761 670,777
Insurance contract claims and benefits incurred
Claims and benefits paid to insurance contract holders (204,085) (159,552) (346,117)
Net increase/(decrease) in insurance contract provisions 47,368 (8,485) 11,392
Reinsurers' share of claims and benefits 22,640 34,372 62,364
Net insurance contract claims and benefits (134,077) (133,665) (272,361)
Change in investment contract liabilities (156,783) (13,147) (274,724)
Reinsurers' share of investment contract liabilities 1,762 1,918 5,617
Net change in investment contract liabilities (155,021) (11,229) (269,107)
Fees, commission and other acquisition costs (10,600) (11,050) (23,838)
Administrative expenses (33,229) (20,253) (46,615)
Other operating expenses
Charge for amortisation of acquired value of in-force business (5,225) (4,645) (10,419)
Charge for amortisation of acquired value of customer relationships (50) (114) (236)
Other (2,894) (2,911) (4,394)
Total expenses net of change in insurance contract provisions and investment contract liabilities (341,096) (183,867) (626,970)
Total income less expenses 32,217 1,894 43,807
Share of profit/(loss) of associate 682 (428) 150
Profit recognised on business combination 20,742 - -
Financing costs (2,011) (1,226) (3,272)
Profit before income taxes 4 51,630 240 40,685
Income tax (expense)/credit (4,878) 237 (5,405)
Profit for the period 3,4 46,752 477 35,280
Foreign exchange translation differences arising on the revaluation of foreign operations 7,084 15,188 20,114
Revaluation of pension obligations 8 (71) - -
Total comprehensive income for the period 53,765 15,665 55,394
Basic earnings per share (based on profit for the period) 2 31.22p 0.38p 27.67p
Diluted earnings per share (based on profit for the period) 2 31.04p 0.38p 27.56p
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
Note UnauditedSix months ended30 June Year ended 31 December
2017 2016 2016
£000 £000 £000
Assets
Intangible assets
Deferred acquisition costs 55,281 43,083 48,318
Acquired value of in-force business 126,659 67,753 62,943
Acquired value of customer relationships 698 841 736
Software assets 7,123 7,133 6,560
Property and equipment 4,684 584 519
Investment in associates 6,221 4,721 5,433
Investment properties 1,255 245 245
Reinsurers' share of insurance contract provisions 244,459 276,304 254,859
Amounts deposited with reinsurers 38,147 34,642 37,437
Financial assets
Equity securities at fair value through income 497,569 479,452 485,165
Holdings in collective investment schemes at fair value through income 5,043,537 3,682,362 4,104,602
Debt securities at fair value through income 1,611,176 494,774 474,091
Policyholders' funds held by the Group 245,687 209,073 229,397
Mortgage loan portfolio 52,624 - 54,756
Insurance and other receivables 86,383 55,775 39,646
Prepayments 21,143 6,079 5,271
Derivative financial instruments 2,414 3,443 2,773
Total financial assets 7,560,533 4,930,958 5,395,701
Defined benefit pension scheme surplus 416 - -
Reinsurers' share of accrued policyholder claims 18,026 21,367 19,307
Income taxes 3,497 1,693 3,352
Cash and cash equivalents 244,760 253,369 260,353
Total assets 4 8,311,759 5,642,693 6,095,763
Liabilities
Insurance contract provisions 3,971,521 2,260,524 2,242,446
Other provisions 1,857 925 823
Financial liabilities
Investment contracts at fair value through income 3,281,368 2,678,190 3,028,269
Liabilities relating to policyholders' funds held by the Group 245,687 209,073 229,397
Borrowings 6 139,622 83,737 86,843
Derivative financial instruments 23,188 3,884 1,348
Total financial liabilities 3,689,865 2,974,884 3,345,857
Deferred tax liabilities 22,688 7,246 5,420
Reinsurance payables 5,461 6,743 6,899
Payables related to direct insurance and investment contracts 97,187 66,772 61,416
Deferred income 5,071 5,815 5,438
Income taxes 3,445 1,660 8,624
Other payables 84,511 21,203 23,657
Bank overdrafts 1,469 1,509 1,622
Total liabilities 4 7,883,075 5,347,281 5,702,202
Net assets 428,684 295,412 393,561
Shareholders' equity
Share capital 43,766 42,600 43,766
Share premium 142,064 76,516 142,058
Treasury shares (157) (161) (161)
Other reserves 26,384 14,374 19,300
Retained earnings 3 216,627 162,083 188,598
Total shareholders' equity 428,684 295,412 393,561
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
UnauditedSix months ended30 June Year ended 31 December
2017 2016 2016
£000 £000 £000
Profit for the period 46,752 477 35,280
Adjustments for:
Depreciation of property and equipment 203 93 173
Amortisation of deferred acquisition costs 5,228 5,233 12,162
Amortisation of acquired value of in-force business 5,225 4,645 6,797
Amortisation of acquired value of customer relationships 50 114 172
Amortisation of software assets 1,032 549 794
Share based payment 350 171 623
Tax paid /(recovery) 4,488 (53) 5,405
Interest receivable (4,400) (7,997) (20,882)
Dividends receivable (15,458) (18,076) (30,209)
Interest expense 2,011 1,226 3,272
Fair value gains on financial assets (209,345) (203,005) (205,870)
Profit arising on business combination (20,742) - -
Share of (profit)/loss of associate (682) 428 (150)
Interest received/(paid) 3,788 8,096 (16,448)
Dividends received 14,695 16,897 20,281
(Increase)/decrease in intangible assets related to insurance and investment contracts (10,903) (8,848) 29,446
Changes in operating assets and liabilities:
Decrease/(increase) in financial assets 78,496 140,550 (280,333)
Decrease in reinsurers share of insurance contract provisions 14,111 9,400 34,177
Increase in amounts deposited with reinsurers (710) (701) (3,496)
(Increase)/decrease in insurance and other receivables (27,031) (9,589) 10,294
(Increase)/decrease in prepayments (2,851) 902 1,795
Decrease in defined benefit pension scheme surplus 765 - -
(Decrease)/increase in insurance contract provisions (61,584) 7,584 (16,530)
Increase in investment contract liabilities 220,932 46,916 362,641
Increase/(decrease) in provisions 1,020 (1,125) (1,306)
Decrease in reinsurance payables (1,515) (3,581) (3,660)
Increase/(decrease) in payables related to direct insurance and investment contracts 2,738 3,233 (2,114)
Increase in other payables 46,069 4,978 2,808
Cash generated from/(utilised by) operations 92,732 (1,483) (54,878)
Income tax paid (22,287) (3,498) (4,709)
Net cash generated from/(utilised by) operating activities 70,445 (4,981) (59,587)
Cash flows from investing activities
Business combination (117,993) - -
Development of software (462) (2,404) (3,502)
Purchases of property and equipment (220) (84) 948
Net cash utilised by investing activities (118,675) (2,488) (2,554)
Cash flows from financing activities
Proceeds from issue of share capital 6 - 66,708
Net proceeds from borrowings 51,958 1,950 4,268
Sales of treasury shares 4 - -
Dividends paid (19,002) (15,586) (24,181)
Interest paid (1,834) (1,166) (3,095)
Net cash generated/(utilised by) from financing activities 31,132 (14,802) 43,700
Net decrease in net cash and cash equivalents (17,098) (22,271) (18,441)
Cash and cash equivalents at beginning of period 258,731 259,911 259,911
Effect of exchange rate changes on net cash and cash equivalents 1,658 14,220 17,261
Cash and cash equivalents at end of the period 243,291 251,860 258,731
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY(UNAUDITED)
Unaudited six months ended 30 June 2017
Share capital Share premium Other reserves Treasury shares Retained earnings Total
£000 £000 £000 £000 £000 £000
Equity shareholders' funds at 1 January 2017 43,766 142,058 19,300 (161) 188,598 393,561
Profit for the period - - - - 46,752 46,752
Dividends paid - - - - (19,002) (19,002)
Foreign exchange translation differences - - 7,084 - - 7,084
Revaluation of pension obligations - - - - (71) (71)
Sale of treasury shares - 6 - 4 - 10
Share based payment - - - - 350 350
Equity shareholders' funds at 30 June 2017 43,766 142,064 26,384 (157) 216,627 428,684
Unaudited six months ended 30 June 2016
Share capital Share premium Other reserves Treasury shares Retained earnings Total
£000 £000 £000 £000 £000 £000
Equity shareholders' funds at 1 January 2016 42,600 76,516 (814) (161) 177,021 295,162
Profit for the period - - - - 477 477
Dividends paid - - - - (15,586) (15,586)
Foreign exchange translation differences - - 15,188 - - 15,188
Share based payment - - - - 171 171
Equity shareholders' funds at 30 June 2016 42,600 76,516 14,374 (161) 162,083 295,412
Year ended 31 December 2016
Share capital Share premium Other reserves Treasury shares Retained earnings Total
£000 £000 £000 £000 £000 £000
Equity shareholders' funds at 1 January 2016 42,600 76,516 (814) (161) 177,021 295,162
Profit for the year - - - - 35,280 35,280
Dividends paid - - - - (24,181) (24,181)
Foreign exchange translation differences - - 20,114 - - 20,114
Share based payment - - - - 478 478
Sale of treasury shares 1,166 65,542 - - - 66,708
Equity shareholders' funds at 31 December 2016 43,766 142,058 19,300 (161) 188,598 393,561
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - IFRS BASIS (UNAUDITED)
1. Basis of presentation
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 2016.
The Group's published consolidated financial statements for the year ended 31 December 2016 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 2016.
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 2016 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.
Scildon reports under IFRS and its accounting policies have been assessed as being in compliance with those of the Group.
As part of this assessment, it has been identified that the basis for measuring insurance contract liabilities differs to
other parts of the Chesnara Group. In particular, Scildon measures the majority of its insurance contract liabilities
using historical market rates of interest, as is customary in the Netherlands. This approach can lead to increased
volatility in IFRS profits by virtue of the assets that back the insurance contract provisions being reported on a fair
value basis (i.e. incorporating current market rates of interest) but with the liabilities using historical rates. Whilst
"IFRS 4 Insurance Contracts" permits this, the Group is planning on aligning the current approach adopted by Scildon with
those used in other parts of the group as it believes that this will make the financial statements more relevant to the
economic decision-making needs of users. This alignment is planned to be implemented prior to reporting the Group
financial statements for the year ending 31 December 2017. Note 5 Business combinations, has been prepared using the
current measurement basis adopted by Scildon. The Group does not anticipate that this alignment of measurement bases will
materially impact the reported profit arising on acquisition as any consequential change in insurance contract liabilities
is expected to result in an equal and opposite change to the "acquisition VIF", as reported in note 5.
2. Earnings per share
Earnings per share are based on the following:
UnauditedSix months ended30 June Year ended 31 December
2017 2016 2016
£000 £000 £000
Profit for the period attributable to shareholders (£000) 46,752 477 35,280
Weighted average number of ordinary shares 149,741,550 126,404,892 127,488,681
Basic earnings per share 31.22p 0.38p 27.67p
Diluted earnings per share 31.04p 0.38p 27.56p
The weighted average number of ordinary shares in respect of the six months ended 30 June 2017 is based upon 149,885,761
shares in issue, less 144,211 own shares held in treasury.
The six months ended 30 June 2016 is based upon 126,552,427 shares in issue, less 147,535 own shares held in treasury at
the beginning of the period, and 126,552,427 shares in issue less 147,535 own shares held in treasury at the end of the
period.
The weighted average number of ordinary shares in respect of the year ended 31 December 2016 is based upon 149,885,761
shares in issue less 147,535 own shares held in treasury.
There were 876,926 share options outstanding at 30 June 2017 (30 June 2016: 526,648). Accordingly, there is dilution of the
average number of ordinary shares in issue in respect of 2017. There were 526,648 share options outstanding as at 31
December 2016.
3. Retained earnings
UnauditedSix months ended30 June Year ended 31 December
2017 2016 2016
£000 £000 £000
Retained earnings attributable to equity holders of the parent company comprise:
Balance at 1 January 188,598 177,021 177,021
Profit for the period 46,752 477 35,280
Revaluation of pension obligations (71) - -
Share based payment 350 171 478
Dividends
Final approved and paid for 2015 - (15,586) (15,586)
Interim approved and paid for 2016 - - (8,595)
Final approved and paid for 2016 (19,002) - -
Balance at period end 216,627 162,083 188,598
The interim dividend in respect of 2016, approved and paid in 2016 was paid at the rate of 6.80p per share.
The final dividend in respect of 2016, approved and paid in 2016, was paid at the rate of 12.69p per share so that the
total dividend paid to the equity shareholders of the Company in respect of the year ended 31 December 2016 was made at the
rate of 19.49p per share.
An interim dividend of 7.00p per share in respect of the year ending 31 December 2017 payable on 11 October 2017 to equity
shareholders of the Company registered at the close of business on 8 September 2017, the dividend record date, was approved
by the Directors after the balance sheet date. The resulting dividend of £10.5m 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 2017 and the year ended
31 December 2016:
Six months ended30 June Year ended 31 December
2017p 2016p
Interim - approved and paid 7.00 6.80
Final - proposed/paid - 12.69
Total 7.00 19.49
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 2017 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. 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 first 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, Waard Verzekeringen B.V.. During the period, the book of business in Hollands Welvaren Leven was
transferred to it's direct parent company, Waard Leven. 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. This segment is closed to new business.
Scildon: This segment represents the Group's latest Dutch life insurance business, which was acquired on 5 April 2017.
Scildon's policy base is predominantly made up of individual protection and savings contracts. It is open to new business
and sells protection, individual savings and group pension contracts via a broker-led distribution model.
Other Group Activities: The functions performed by the ultimate holding company within the Group, 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 2017.
(i) Segmental income statement for the six months ended 30 June 2017
CA S&P UK Total Movestic Waard Group Scildon Other Group Activities Total
£000 £000 £000 £000 £000 £000 £000 £000
Net insurance premium revenue 18,364 1,995 20,359 7,681 1,303 37,026 - 66,639
Fee and commission income 13,516 1,217 14,733 24,032 10 13,058 - 51,833
Net investment return 53,181 62,339 115,520 125,026 3,309 1,831 48 245,734
Total revenue (net of reinsurance payable) 85,061 65,551 150,612 156,739 4,622 51,915 48 363,936
Other operating income/(expense) 1,366 5,748 7,114 2,393 36 (166) - 9,377
Segmental income 86,427 71,299 157,726 159,132 4,658 51,749 48 373,313
Net insurance contract claims and benefits incurred (42,174) (50,029) (92,203) (3,154) (674) (38,046) - (134,077)
Net change in investment contract liabilities (28,786) (1,496) (30,282) (124,739) - - - (155,021)
Fees, commission and other acquisition costs (713) (8) (721) (13,634) (168) 686 - (13,837)
Administrative expenses:
Amortisation charge on software assets - - - (1,032) - (54) - (1,086)
Depreciation charge on property and equipment - - - (84) (21) (118) - (223)
Other (5,864) (5,116) (10,980) (6,358) (1,479) (7,254) (5,849) (31,920)
Operating (expenses)/income (473) 1 (472) (2,434) - - 12 (2,894)
Financing costs - (2) (2) (1,238) - - (771) (2,011)
Share of profit from associates - - - 682 - - - 682
Profit/(loss) before tax and consolidation adjustments 8,417 14,649 23,066 7,141 2,316 6,963 (6,560) 32,926
Other operating expenses:
Charge for amortisation of acquired value of in-force business (2,841) (271) (3,112) (1,739) (325) (49) - (5,225)
Charge for amortisation of acquired value of customer relationships - - - (50) - - - (50)
Fees, commission and other acquisition costs - - - 1,681 1,556 - - 3,237
Segmental income less expenses 5,576 14,378 19,954 7,033 3,547 6,914 (6,560) 30,888
Profit arising on business combination - - - - 20,742 - - 20,742
Profit before tax 5,576 14,378 19,954 7,033 24,289 6,914 (6,560) 51,630
Income tax (expense)/credit (3,235) (311) (838) (1,757) 1,263 (4,878)
Profit/(loss) after tax 16,719 6,722 23,451 5,157 (5,297) 46,752
(ii) Segmental balance sheet as at 30 June 2017
CA S&P Movestic Waard Group Scildon Other Group Activities Total
£000 £000 £000 £000 £000 £000 £000
Total assets 1,763,109 1,237,283 2,991,394 227,898 2,019,490 72,585 8,311,759
Total liabilities (1,689,073) (1,160,852) (2,906,248) (129,627) (1,893,450) (103,825) (7,883,075)
Net assets 74,036 76,431 85,146 98,271 126,040 (31,240) 428,684
Investment in associates - - 6,221 - - - 6,221
Additions to non-current assets - - 11,525 134 1,360 - 13,019
(iii) Segmental income statement for the six months ended 30 June 2016
CA S&P UK Total Movestic Waard Group Other Group Activities Total
£000 £000 £000 £000 £000 £000
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