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FINANCIAL STATEMENTS
20 SHARE CAPITAL The allotted and issued ordinary share capital of the Group at 31 December 2019 is detailed below:
Merger reserve £m
Share premium £m
Share capital £m
Total £m
Number of £0.10 ordinary shares 941,068,882 94,012,782
94.1
94.5 532.7 721.3
At 1 January 2019
9.4
–
64.4
73.8
Shares issued
At 31 December 2019
1,035,081,664 103.5
94.5 94.2
597.1 795.1
At 1 January 2018
938,308,340
93.8
532.7
720.7
In respect of employee share schemes
2,760,542
0.3
0.3
–
0.6
At 31 December 2018
941,068,882
94.1
94.5
532.7
721.3
On 14 March 2019, the Company completed the placing of 94,012,782 ordinary shares of 10 pence each at a price of 80 pence per share to both existing and new ordinary equity shareholders, raising gross proceeds of £75m. The placing price represents a discount of 6.7% on the market price of 85.3 pence per share at the time of the placing. The placing was achieved by the Company acquiring 100% of the equity of a limited company for consideration of the 94,012,782 new ordinary shares issued. Accordingly, merger relief under section 612 of the Companies Act 2006 applies, and share premium has not been recognised in respect of this issue of shares. Amerger reserve has been recognised representing the premium over the nominal value of the shares issued. Consideration for the acquisition of 100% of the equity shares of Partnership Assurance Group plc in 2016 consisted of a new issue of shares in the Company. Accordingly, merger relief under section 612 of the Companies Act 2006 applies, and share premium has not been recognised in respect of this issue of shares. Amerger reserve has been recognised representing the difference between the nominal value of the shares issued and the net assets of Partnership Assurance Group plc acquired.
21 TIER 1 NOTES
Year ended 31 December 2019 £m
Year ended 31 December 2018 £m
–
At 1 January
– – – –
300.0
Issued in the period Issue costs, net of tax
(6.0)
At 31 December
294.0
In March 2019, the Group completed the issue of £300m fixed rate perpetual restricted Tier 1 contingent convertible notes, incurring issue costs of £6.0m, net of tax. The notes bear interest on the principal amount up to 26 April 2024 (the first call date) at the rate of 9.375% per annum, and thereafter at a fixed rate of interest reset on the first call date and on each fifth anniversary thereafter. Interest is payable on the notes semi-annually in arrears on 26 April and 26 October each year, commencing on 26 April 2019. During the year, interest of £16.8mwas paid to note holders. The Group has the option to cancel the coupon payment at its discretion and cancellation of the coupon payment becomes mandatory upon non- compliance with the solvency capital requirement or minimum capital requirement or where the Group has insufficient distributable items. Cancelled coupon payments do not accumulate or become payable at a later date and do not constitute a default. In the event of non-compliance with specific solvency requirements, the conversion of the Tier 1 notes into Ordinary Shares could be triggered. The Tier 1 notes are treated as a separate category within equity and the coupon payments are recognised outside of the profit after tax result and directly in shareholders’ equity.
22 INSURANCE CONTRACTS AND RELATED REINSURANCE Insurance liabilities
2019 £m
2018 £m
19,003.7 (3,732.0) 15,271.7
Gross insurance liabilities
17,273.8 (4,239.2) 13,034.6
Reinsurance
Net insurance liabilities
(a) Terms and conditions of insurance contracts The Group’s long-term insurance contracts include Retirement Income (Guaranteed Income for Life (“GIfL”), Defined Benefit (“DB”), and immediate needs and deferred Care Plans), and whole of life and term protection insurance. The insurance liabilities are agreed by the Board using recognised actuarial valuation methods proposed by the Group’s Actuarial Reporting Function. In particular, a prospective gross premium valuation method has been adopted for major classes of business.
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