1 SCOTTISH WIDOWS LIMITED (3196171) CONSOLIDATED FINANCIAL STATEMENTS. SCOTTISH WIDOWS LIMITED. (Formerly Clerical Medical Investment Group Limited). ANNUAL REPORT. AND. FINANCIAL STATEMENTS. 31 DECEMBER 2015. Member of Lloyds Banking Group plc 1. SCOTTISH WIDOWS LIMITED (3196171) CONSOLIDATED FINANCIAL STATEMENTS. CONTENTS. Company Information 3. Group Strategic Report 4-8. Directors' Report 9-11. Independent Auditors' Report to the Member of SCOTTISH WIDOWS Ltd 12-13. Consolidated Statement of Comprehensive Income for the year ended 31 December 2015 14. Balance Sheets as at 31 December 2015 15. Statements of Cash Flows for the year ended 31 December 2015 16.
2 Statements of Changes in Equity for the year ended 31 December 2015 17. Notes to the Financial Statements for the year ended 31 December 2015 18-96. 2. SCOTTISH WIDOWS LIMITED (3196171) CONSOLIDATED FINANCIAL STATEMENTS. COMPANY INFORMATION. Board of Directors N E T Prettejohn (Chairman). M Christophers M G Culmer A M Parsons*. V Maru A M Blance C J Thornton*. R L M Wohanka J E M Curtis J F Hylands K A Cook A Lorenzo*. * denotes Executive Director Company Secretary J M Jolly Actuarial Function Holder R J McIntyre Independent Auditors PricewaterhouseCoopers LLP. Chartered Accountants and Statutory Auditors 2 Glass Wharf Bristol BS2 0FR.
3 Registered Office 25 Gresham Street London EC2V 7HN. Company Registration Number 3196171. 3. SCOTTISH WIDOWS LIMITED (3196171) CONSOLIDATED FINANCIAL STATEMENTS. GROUP STRATEGIC REPORT. The directors present their strategic report on SCOTTISH WIDOWS Limited ( the Company ) and its subsidiary undertakings (together referred to as the Group ) for the year ended 31 December 2015. The Company is limited by share capital and changed its name from Clerical Medical Investment Group Limited to SCOTTISH WIDOWS Limited on 31 December 2015. The Group contributes to the results of the Insurance division of Lloyds Banking Group ( LBG ).
4 Since SCOTTISH WIDOWS was founded 200 years ago, we have been focused on helping customers protect themselves today whilst preparing for a secure financial future. Our objective is to be the best insurance and retirement savings business for customers; providing simple, trusted, value for money products accessible through our customers preferred channels. The external business environment is changing rapidly driven by regulations, technology and customer preferences, and legislative changes. Increased regulatory intervention is changing the way customers are saving for and accessing their savings for retirement.
5 Rapid adoption of digital across Insurance is changing market dynamics with customers increasingly turning to these channels. Customer engagement is evolving from a fairly static relationship to more dynamic, service-oriented engagement. We have evolved our strategy in response to changing customer needs and prioritised investment on four core markets, where we see the opportunity to deliver sustainable growth by taking advantage of strong macro-trends. For Life and Pensions, the Group will become the Go To Group for Retirement for both personal and commercial customers, capturing the structural growth opportunity created by an ageing UK population as well as political and regulatory interventions (for example in relation to pensions freedom).
6 In Protection, we will rebuild direct relationships through a multi-channel, multi-brand engagement model and build scale through entry into the intermediary channel In corporate Pensions, we will increase capacity to build a scale and efficient business that serves our growing customer base, providing a better employer experience and improved member engagement. Additionally, we can build on banking relationships to selectively win new schemes in target segments In Retirement, we can capitalise on our unique opportunity of being part of the wider LBG and are looking to invest in the Retirement account proposition to further build on an already strong presence and help franchise customers navigate their retirement journey, offering simple, value-for-money products In Bulk Annuities, we have successfully entered a fast growing and profitable market whilst building on wider LBG.
7 Experience in asset origination and building on our Commercial Bank relationships to help employers de-risk their defined benefit pensions schemes We will respond to margin pressures by building scale, further reducing our cost base and simplifying our IT landscape to reduce complexity and to improve agility. Our Insurance Strategy will create a scalable and efficient business and deliver value for money propositions for our customers that are aligned to clear and growing customer needs. Principal activities The principal activity of the Group is the undertaking of ordinary long-term insurance and savings business and associated investment activities in the United Kingdom.
8 The Group also has branches operating within the EU, which write a relatively small amount of business, principally in Germany. The Group offers a wide range of life insurance products such as annuities, pensions, whole life, term life and investment type products through independent financial advisors, the LBG network and direct sales. The Group also reinsures business with insurance entities external to the Group. Result for the Year The result for the year ended 31 December 2015 is a Group profit after tax of 143m (2014: 105m). The result reflects improved valuation rates on the annuity business due to further investment in low risk higher yielding assets, positive market conditions in the year, as well as the continuing impact of German Insurance Business litigation as discussed below.
9 The Directors consider the result to be satisfactory in light of these factors. 4. SCOTTISH WIDOWS LIMITED (3196171) CONSOLIDATED FINANCIAL STATEMENTS. GROUP STRATEGIC REPORT (CONTINUED). corporate reorganisation During the year, a corporate restructuring exercise transferred ownership of the Company from SW Funding plc (previously SCOTTISH WIDOWS plc) to SCOTTISH WIDOWS Group Ltd (which is the holding company which directly and indirectly owns entities within the Insurance division of LBG). This restructure was undertaken as a step in advance of the insurance business transfer scheme which is described further below.
10 Insurance Business Transfer Scheme On 26 November 2015, the High Court of Justice approved the transfer of the long-term insurance business of each of the below entities (the transferors ), each a fellow group undertaking, to the Company, pursuant to an insurance business transfer scheme, under Part VII. of the Financial Services and Markets Act 2000: SW Funding plc (previously SCOTTISH WIDOWS plc). SCOTTISH WIDOWS Annuities Limited (SWA), SCOTTISH WIDOWS Unit Funds Limited (SWUF) and Pensions Management ( ) Limited (PM) (subsidiaries of SW Funding plc). Clerical Medical Managed Funds Limited (CMMF), Halifax Life Limited (HLL) and St Andrew's Life Assurance plc (SAL).