TIDMFBH
RNS Number : 7508F
FBD Holdings PLC
16 November 2015
FBD Holdings plc
Interim Management Statement
16 November 2015
FBD Holdings plc ('FBD' or the 'Group') issues the following
Interim Management Statement covering the period from 1 July 2015
to date, in accordance with the reporting requirements of the EU
Transparency Directive.
Underwriting
The Group continues to prioritise profitability over volume
growth. Policy volumes have declined 9.2% year to date, offset by
average rate increases of 9.1%. The Group is focused on the
insurance needs of its farm and direct business customers. There is
evidence that market rates continue to harden for both car
insurance and business insurance.
The claims settlement environment remains challenging, though
experience since the end of quarter two has been in line with the
Group's expectation. The slowdown in the rate of our claims
settlements continued. The Group notes the recent decision of the
Court of Appeal in the case concerning the discount rates to be
applied to the cost of care and other elements of large injury
claims. While it is too early to be definitive, at this preliminary
stage our assessment is that this judgement should not have a
further material impact.
The underwriting action taken by the Group over the past
eighteen months is having a positive effect, with improvements in
claims frequency experienced despite the increased level of
activity in the wider economy. This improvement in attritional
claims has been offset somewhat by increased large claims
experience since the last market update.
The Group has made good progress on achieving targeted cost
savings.
Investment Income
Actual investment returns remain subdued, reflecting the
extraordinary stimulus measures implemented by Central Banks and
volatility in markets. Reinvestment yields on bank deposits and
government bonds are negligible, and the Group is reviewing its
strategic asset allocation. In the interim, the proceeds from
recent capital initiatives will be invested in an increased
allocation to corporate bonds.
Non Underwriting
While the operating environment for the Group's pensions and
investment consulting business remains challenging, FBD's financial
services businesses are performing broadly in line with
expectation.
The Group has concluded the sale of its share of the property
and leisure joint venture, following its approval by shareholders
on 22 October 2015.
Balance Sheet
The Group's capital position has improved since the last market
update. In the last market update the Group identified three
initiatives identified to strengthen FBD's capital base ahead of
the implementation of Solvency II.
As announced on 16 September last, the Group has entered into an
agreement with Fairfax Financial Holdings Limited ("Fairfax")
pursuant to which Fairfax will invest EUR70m in the Group through a
private placement of a convertible bond instrument carrying a
coupon of 7% per annum and a conversion price of EUR8.50, subject
to shareholder approval.
In advance of the execution of a final, definitive agreement
between the parties and shareholder approval, FBD Insurance plc,
the Group's principal subsidiary successfully issued a EUR70m tier
II debt instrument to Fairfax carrying a rate of 12% per annum. The
tier II Debt Instrument will be exchanged for the Convertible Bond
within 7 days of Group shareholders approving the issue of
Convertible Bond.
The Group has reached agreement with employees to close its
defined benefit scheme to future accrual. There has also been
considerable uptake in its enhanced transfer value offer to members
of the scheme. Following the changes, the IAS 19 deficit of
EUR50.9m recorded at 30 June 2015 has been eliminated, with a small
surplus now recorded at 30 September 2015. The changes remove
significant volatility from the Group's balance sheet and solvency
capital position.
The proceeds from the sale of the property and leisure joint
venture will be injected into FBD Insurance plc by way of fresh
equity capital.
The effect of these capital initiatives is that FBD Insurance
plc has capital in excess of its Solvency II capital requirement in
advance of its effective date of 1 January 2016.
Outlook
The Irish insurance market continues to grow in 2015, as
insurers increase rates following market losses arising from the
increased claims cost and frequency experienced as the economy
improves. Despite this, industry profitability continues to be
challenging, and the Group believes that the industry will continue
to be loss making for 2015 and 2016. It remains FBD's view that the
market has not increased rates sufficiently to compensate for the
significant deterioration in the claims environment.
FBD will continue to focus on the insurance needs of its farm
and direct business customers and on its consumer customers.
Enquiries Telephone
FBD
+353 1 409
Fiona Muldoon, Group Chief Executive 3208
Paul D'Alton, Chief Financial Officer
Peter Jackson, Head of Investor Relations
Murray Consultants
+353 1 498
Joe Heron 0300
Pat Walsh
About FBD Holdings plc ("FBD")
The Group was established in the 1960s and is one of Ireland's
largest property and casualty insurers looking after the insurance
needs of farmers, private individuals and business owners.
Forward Looking Statements
Some statements in this announcement are forward-looking. They
represent expectations for the Group's business, and involve risks
and uncertainties. These forward-looking statements are based on
current expectations and projections about future events. The Group
believes that current expectations and assumptions with respect to
these forward-looking statements are reasonable. However, because
they involve known and unknown risks, uncertainties and other
factors, which are in some cases beyond the Group's control, actual
results or performance may differ materially from those expressed
or implied by such forward-looking statements.
The following details relate to FBD's ordinary shares of EUR0.60
each which are publicly traded:
Listing Irish Stock Exchange UK Listing Authority
Listing Category Dual Premium (Equity)
Trading Venue Irish Stock Exchange London Stock Exchange
Market Main Securities Market Main Market
ISIN IE0003290289 IE0003290289
Ticker EG7.IR FBH.L
FBD Holdings plc FBD House, Bluebell, Dublin 12
Registered in Dublin, Ireland Registered Number 135882
This information is provided by RNS
The company news service from the London Stock Exchange
END
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