TIDMFBH
RNS Number : 0149V
FBD Holdings PLC
05 August 2022
FBD HOLDINGS PLC
5 August 2022
FBD HOLDINGS PLC
Half yearly Report
For the Six Months ended 30 June 2022
KEY HIGHLIGHTS
-- Profit Before Tax of EUR19m compared to EUR22m in 2021.
-- GWP of EUR193m increased by 3.3% on prior year (excluding
impact of Covid-19 related rebates) and policy count increased by
3.1%.
-- Retention levels of existing business are at their highest level in 5 years.
-- Average premium is flat across the portfolio with Private Motor down 8%.
-- Strong underwriting performance with Combined Operating Ratio
of 79% including reserve releases of EUR19m.
-- Negative investment returns through the Income Statement of
-EUR15m and through Other Comprehensive Income of -EUR64m due to
significant interest rate rises and associated market
volatility.
-- Our capital position remains strong with a Solvency Capital
Ratio of 209% (unaudited) compared to 213% at 31 December 2021.
Losses on the investment portfolio have been largely mitigated by
underwriting profits, higher discounting of claims liabilities and
a reduction in the Solvency Capital Requirement.
-- Return on Equity of 8%.
-- The Covid-19 Business Interruption best estimate reduced by
EUR1m to EUR43m net of reinsurance since year-end 2021.
-- Silver accreditation achieved from Investors in Diversity
Ireland as we continue our D&I journey.
-- Winner of the European Sponsorship Award for Best Sport
Sponsorship (< EUR1m) for Team Ireland.
FINANCIAL SUMMARY
30 Jun 30 Jun
2022 2021
EUR000s EUR000s
Gross written premium 192,638 181,433
Underwriting profit 34,544 13,022
Profit before taxation 18,927 21,991
Loss ratio 52.1% 66.3%
Expense ratio 26.9% 25.7%
Combined operating ratio 79.0% 92.0%
Cent Cent
Basic earnings per share 47 55
Net asset value per share 1,129 1,137
-- Gross Written Premium (GWP) EUR193m (2021: EUR181m) increased
by 3.3% excluding EUR5m of pandemic related premium rebates in
2021. Written policy count increased by 3.1%.
-- Underwriting profit of EUR35m (2021: profit of EUR13m),
equating to a COR of 79% (2021: 92%), due to positive claims
frequency and severity trends , benign weather and reserve releases
of EUR19m.
-- A difficult start to the year for both equity and fixed
income investments has resulted in a loss through the Income
Statement of -EUR15m (2021: EUR10m). Significant interest rate
increases and spread widening has reduced bond valuations and led
to negative mark to market (MTM) returns of -EUR64m (2021: -EUR5m)
through Other Comprehensive Income (OCI).
-- Expense ratio of 26.9% (2021: 25.7%), the increase primarily
reflects increased staff costs and a higher inflationary
environment in 2022.
-- Net Asset Value per share 1,129 cent has reduced from 1,338
cent at the end of 2021 as investment losses and the dividend
payment made in May have reduced net assets.
Commenting on these results Tomás Ó'Midheach, Group Chief
Executive, said:
"I am pleased to report a profit for the first half of 2022. Our
focus has been on driving value for our stakeholders and we have
made positive progress against this. This is despite the difficult
economic backdrop as investment volatility impacts our results.
Investment markets had an exceptionally challenging first six
months to the year, the increase in inflation and resultant higher
interest rates is impacting our returns and reducing the valuation
of the FBD bond portfolio. Spreads have also widened which
increased bond yields further. A positive side to this is the
higher reinvestment yields that will now be available to us in the
future.
The Personal Injury Guidelines appear to be having the desired
effect of lowering costs for minor injury claims justifying the
premium reductions given to our customers. We await the outcome of
the remaining challenges to the Guidelines and their application by
the courts.
A further hearing is scheduled in our Business Interruption test
case in November 2022 to determine the quantification of partial
losses in respect of the bar counter and the treatment of
Government subsidies.
Our strategic focus on our customers continues as we consider
new propositions for loyal customers and to improve our customer
experience supported by technology. Research continues to show that
customers are loyal for many reasons including our excellent claims
experience and value led propositions. We really appreciate the
loyalty of our customers and want to continue to deliver increased
value for those who stay with us and encourage new customers to
switch for value and service.
FBD's success is dependent on our people including our Claims,
Local Offices and Mullingar Service Centre employees who continue
to provide incredible personal service to our customers, supported
by Head Office. In many cases hybrid working has become a feature
of our lives and I would like to thank all our employees who
continue to put our customers at the heart of what we do.
The economic conditions in general are challenging as our
customers and all businesses face higher inflation impacting
purchasing power and more subdued growth rates. Inflation is
feeding into the cost of settlement of Motor Damage and Property
claims. Market risk will remain high for the foreseeable future,
although we expect to benefit from higher yields on bond
reinvestment.
It is testament to the great work of our people that customer
policy numbers are increasing as we build on our strong customer
base and drive more value from the business. There are
opportunities and challenges ahead as we tackle increasing
inflation and a more challenging economic environment. I am
thankful for a supportive Board and strong Executive Management
Team with the requisite skills and ambition to deliver on our
strategic goals on behalf of all our stakeholders including our
employees and customers."
A presentation will be available on our Group website
www.fbdgroup.com from 9.00 am today.
Enquiries Telephone
FBD
Michael Sharpe, Investor Relations +353 87 9152914
Drury Communications
Paddy Hughes +353 87 616 7811
Paul Clifford +353 87 327 2161
About FBD Holdings plc ("FBD")
FBD is one of Ireland's largest property and casualty insurers,
looking after the insurance needs of farmers, consumers and
business owners. Established in the 1960s by farmers for farmers,
FBD has built on those roots in agriculture to become a leading
general insurer serving the needs of its direct agricultural, small
business and consumer customers throughout Ireland. It has a
network of 34 branches nationwide.
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 Euronext Dublin UK Listing Authority
Listing Category Premium Premium (Equity)
Trading Venue Euronext Dublin London Stock Exchange
Market Main Securities Market Main Market
ISIN IE0003290289 IE0003290289
Ticker FBD.I or EG7.IR FBH.L
OVERVIEW
The Group reported a profit before tax of EUR18.9m (2021 profit:
EUR22.0m), supported by a strong underwriting performance due to
positive claims frequency and severity trends, reserve releases of
EUR19.4m and benign weather, offset by negative investment returns
of EUR15.2m.
The Group reported an underwriting profit of EUR34.5m (2021
profit: EUR13.0m) and GWP of EUR192.6m (2021: EUR181.4m) which is
3% higher than prior year when the pandemic related premium rebates
are excluded.
A Business Interruption hearing in the test case is scheduled
for November 2022 to determine the quantification of partial losses
in respect of the bar counter and the treatment of Government
subsidies. The net best estimate in respect of Business
Interruption reduced by EUR1m to EUR43m since year-end 2021.
UNDERWRITING
Premium income
Gross written premium (excluding rebates) was 3.3% higher than
2021 levels as written policy count increased by 3.1% with average
premiums remaining relatively flat. GWP was EUR192.6m (2021:
EUR181.4m). Commercial customers' Covid-19 related rebates of
EUR4.8m were deducted from 2021 premium and reflected reduced risk
exposure while businesses were closed. Retention rates for
customers marginally increased despite competitive market
challenges, reaching another five year high.
Average premium remained relatively flat across the portfolio.
Private Motor average premium reduced by 8.1% and Commercial Motor
reduced by 3.3% reflecting the expected reduction in claims costs
as a result of the new Personal Injury Guidelines and an
improvement in underlying claims experience. Commercial Business
average premium increased 6.2% and Farm average premium increased
by 2.2% as a result of increases in property elements as sums
insured increased due to inflation in construction costs, offset by
the expected reduction in claims costs as a result of the new
Personal Injury Guidelines. Commercial customers increased their
liability cover as trading conditions improved following the
pandemic and this positively impacted average premium. Average
Tractor premium increased by 5.0% due to a higher proportion of
newer tractors and the increasing value of existing tractors. The
increase in Home average premium was contained at 2.4% despite
increasing sums insured due to inflation.
Reinsurance
The reinsurance programme for 2022 was successfully renegotiated
with a similar structure to the expiring programme. The negotiation
of the 2022 renewal reflects market rate increases that incorporate
recent global events and overall we saw an increase in reinsurance
rates of 7%.
Claims
Net claims incurred (Figure includes net claims and benefits
plus movements in Other provisions lines) reduced by EUR21.9m to
EUR85.6m (2021: EUR107.5m) with the main changes relating to
reserve releases of EUR19.4m (2021: EUR7.2m) and no requirement for
a consequential payments provision in 2022 (2021: EUR13.4m).
Claims volumes overall increased 5% year on year and injury
notifications increased in line with this. Motor damage
notifications increased in 2022 by 29% as traffic volumes have
returned to pre-Covid levels, more policyholders have taken out
comprehensive cover and inflation on parts and labour is increasing
the cost of repair which we believe is encouraging more people to
claim as opposed to paying for the repair outside of their
insurance. Excluding Business Interruption claims, Property damage
claims notifications are in line with the 2021 experience.
The average cost of injury claims settlements continues to be
slightly lower than that experienced pre-Covid. This is due to a
change in the mix of settled cases which has been affected by a
backlog of cases in the courts system and the slowdown in
settlements related to the ongoing legal challenges to the
introduction of the Personal Injury Guidelines. Claims being
settled under the new guidelines are approximately 40% lower in
value when compared to the previous Book of Quantum. We have
reflected the impact of this in premium reductions. However, the
level of acceptance of Personal Injuries Assessment Board (PIAB)
awards continues to be significantly lower than the acceptance rate
prior to the introduction of the guidelines. This means that more
claims may now go through the courts system which would have an
adverse impact of increasing compensation and legal costs. It has
yet to be seen what impact the new guidelines will have on claims
settled after the PIAB process has been completed and with the
current legal challenges it may take a number of years for the full
effect of the new guidelines to be known.
The average cost of property claims increased by 17% due to a
change in mix and inflation, with further inflation expected on
domestic building costs. Motor damage claims costs continue to
experience high inflation with an increase of 12% in the last 12
months as costs of parts, paint and average labour hours per repair
increase.
Movement in other provisions reduced by EUR13.3m to EUR5.2m
(2021: EUR18.5m), the reduction primarily relates to the additional
provision required in 2021 of EUR13.4m for FSPO consequential
payments. The main elements of the Other Provision is the Motor
Insurers Bureau of Ireland (MIBI) levy and the Motor Insurers
Insolvency Compensation Fund (MIICF) contribution.
Industry Environment
Two separate court challenges to the Personal Injury Guidelines
have been dismissed. The Judge dismissed the challenge in the case
of Bridget Delaney v PIAB on all grounds. In the second challenge
the Judge indicated there is no express term in the guidelines
themselves that requires a written explanation of the rationale of
arriving at a PIAB decision. There are still a number of challenges
over the constitutionality of the laws underpinning the guidelines
that are due before the courts. Whatever the outcome they are
likely to be appealed due to the novelty of the constitutional
issues involved. We continue to experience a build-up of older,
higher value injury claims as a result of slowdowns although
backlogs in the courts are reducing in 2022.
The recommendations from the public consultation on the personal
injury discount rate in the Republic of Ireland which started in
June 2020 are still not available and the outcome of the review
will now need to consider the higher interest rate environment that
exists.
Final regulations in respect of Differential Pricing were issued
in March 2022 with material changes from the original consultation
paper including an extension of the definition of customers in
scope. All planned changes for compliance with price walking
elements were delivered in time for the 1st July deadline. Work is
ongoing to finalise auto-renewals elements and finalise the pricing
practice review process. We are actively monitoring the impact of
the changes on our portfolio.
FBD continues to review all contracts of insurance to ensure we
have the wording enhancements and clarity of coverage required
following the enactment of the Consumer Insurance Contracts Act
2019.
IFRS 17 is the new insurance accounting standard that will come
into effect from 1 January 2023. IFRS 17 provides consistent
principles for all aspects of accounting for insurance contracts.
It aims to enable investors, analysts and others to meaningfully
compare companies, insurance contracts and industries while
increasing transparency. IFRS 17 will significantly impact the
measurement and presentation of insurance financial statements. FBD
will disclose the transitional impact of IFRS 17 in the year-end
2022 financial statements.
A number of legislative changes impacting insurance are expected
to be enacted shortly:
-- The next phase of the Motor Third Party Liability project
(MTPL) will require sharing of additional data on insured vehicles
and drivers with Regulatory Authorities.
-- The Road Traffic Act (RTA) legislation is to be extended to
better regulate the use of scramblers/quads and e-bike/e-scooters
and introduce legislation to require sharing of additional data on
insured vehicles and drivers with Regulatory Authorities through
MTPL.
-- The Motor Insurance Directive (MID) primarily deals with the
scope of compulsory insurance broadening the potential scenarios
where RTA cover will apply.
-- Amendment to Occupiers Liability Act 1995 broadens the
circumstances in which an occupier may be relieved of
liability.
-- The Insurance (Miscellaneous Provisions) Bill aims is to give
effect to a number of measures in primary legislation and amend
existing legislation to address certain insurance-related
issues.
-- A new provision for disclosure of information under the
Consumer Contracts of Insurance Act (CICA) introduces a requirement
on Insurers/Consumers to exchange expert reports that either
support or prejudice the validity of a claim within 60 days.
Weather, Claims Frequency and Large Claims
No significant weather events of note occurred in the first six
months of 2022.
2020 and 2021 saw a significant reduction in frequency of injury
claims due to lockdowns arising from Covid-19. Injury claims
frequency continues to remain below pre Covid-19 levels as a large
part of the countries workforce continue to work from home for at
least part of the week.
Large injury claims, defined as a value greater than EUR250k,
notified to date in 2022 are slightly higher than the average of
previous pre-Covid years.
Expenses
The Group's expense ratio was 26.9% (2021: 25.7%). Other
underwriting expenses were EUR44.3m which is higher than the
previous year reflecting the inflationary environment in relation
to employee costs, utility costs and IT expenditure.
GENERAL
FBD's Combined Operating Ratio ("COR") was 79.0% (2021: 92.0%)
generating an underwriting profit of EUR34.5m (2021: profit of
EUR13.0m).
Investment Return
FBD's actual investment return for the first six months of 2022
was -6.6% (2021: 0.45%). -1.3% (2021: 0.9%) is recognised in the
Consolidated Income Statement and -5.3% (2021: -0.45%) in the
Consolidated Statement of Other Comprehensive Income (OCI). Bond
valuations were significantly impacted by the rising interest rate
environment in the first six months of 2022 which led to the large
negative movement through the OCI. Interest rates rose as central
banks tried to control the rate of inflation which has risen to
multi decade highs in many developed market countries. This has
been exacerbated by the energy crisis, particularly impacting
Europe, which was caused by the Russian invasion of Ukraine.
The last three months also saw corporate bond spreads widen as
the outlook for the global economy deteriorated and fears of
recession grew. This has contributed to the negative OCI figure for
the bond portfolios and also to negative returns through the Income
Statement for those risk assets which have a spread risk component
e.g. high yield bonds and emerging market debt. Equity markets
fared little better as the outlook for global growth deteriorated
and effects of inflation and rising rates took its toll. Both US
and European market benchmarks were down roughly 20% putting them
in bear market territory. FBD's equity fund which tracks a world
index was down by roughly the same percentage and its sustainable
equity fund underperformed due to its lack of exposure to the
energy sector (the one sector to outperform in the year to date).
FBD had very minor exposure, c. EUR1m, to Russian securities
through its Emerging Market funds prior to the invasion of Ukraine
which has now been largely written down to zero.
Financial Services
The Group's financial services operations returned a profit
before tax of EUR0.9m for the period (2021: loss of EUR0.1m).
Revenue increased by EUR0.8m reflecting improved direct debit
income and an increase in Life and Pensions commission reported
relative to 2021. FBD Holding Company costs reduced by EUR0.1m to
EUR3.1m.
Profit per share
The diluted profit per share was 46 cent per ordinary share,
compared to a profit of 53 cent per ordinary share in 2021.
STATEMENT OF FINANCIAL POSITION
Capital position
Ordinary shareholders' funds at 30 June 2022 amounted to
EUR401.8m (December 2021: EUR472.4m). The decrease in shareholders'
funds is driven by the following:
-- Profit after tax for the half year of EUR16.5m;
-- An increase of EUR1.2m due to share based payments;
-- An increase in the defined benefit pension scheme surplus of EUR3.4m after tax;
-- Dividend payments of EUR35.9m; and
-- Mark to market losses on Available for Sale investments of EUR55.8m after tax.
Net asset value per ordinary share is 1,129 cent, compared to
1,338 cent per share at 31 December 2021.
Investment Allocation
The Group has a conservative investment strategy that ensures
that its technical reserves are matched by cash and fixed interest
securities of similar nature and duration. Maintaining a well
matched position has allowed FBD to mitigate the impact of interest
rate rises on its solvency position as lower liabilities (due to
discounting at a higher interest rate) offset reduced bond
valuations. The Company invested an additional EUR25m cash in
corporate bonds and other risk assets in the first six months of
the year. The average credit quality of the corporate bond
portfolio has remained at A- and has seen a reduction in allocation
to BBB rated bonds (43% vs 47% at 31 December 2021).
The allocation of the Group's investment assets is as
follows:
30 June 2022 31 December 2021
EURm % EURm %
Corporate bonds 566 49% 589 49%
Government bonds 286 25% 303 25%
Deposits and cash 160 14% 164 14%
Other risk assets 90 8% 88 7%
Equities 40 3% 50 4%
Investment property 16 1% 16 1%
1,158 100% 1,210 100%
-------- ------ ---------- --------
Solvency
The half year Solvency Capital Ratio (SCR) is 209% (unaudited).
The audited Solvency Capital Ratio (SCR) at 31 December 2021 was
213%. FBD holds fixed income assets which are well matched to its
liabilities and this has mitigated the impact on the Solvency
Capital Ratio from lower investment valuations. Claims liabilities
reduced as they are discounted under Solvency II at risk free
rates, which are now higher and offset the reduction in bond
valuations. The underwriting profit and reduced market risk charge
also positively impacted the SCR. The Group is committed to
maintaining a strong solvency position.
RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group are
outlined on pages 18 to 25 of the Group's Annual Report for the
year ended 31 December 2021 and continue to apply to the six month
period ended 30 June 2022. In the recent period most developed
economies, including Ireland, are experiencing higher inflation
than was previously evident. This is impacting operational costs,
the cost of Motor Damage and Property claims and has the potential
to impact the cost of injury claims. In addition there has been
increased volatility in investment markets which has resulted in
negative returns and has increased market risk.
The claims environment has been experiencing delays in the
settlement of claims due to continuing court backlogs albeit
reducing, and the reluctance of claimants to settle claims until
the Personal Injury Guidelines challenges have been heard. As a
result a higher degree of uncertainty still exists in the
environment as the claims payment patterns and average settlement
costs from the pandemic years are a less reliable future indicator
and must be carefully considered by the Actuarial function when
arriving at claims projections.
The Russian invasion of Ukraine has had no direct impact on the
business of the Group other than the minor exposure to Russian
securities noted in the Investment return above. The knock on
impact on energy costs is driving increased general inflation.
Supply chain issues in respect of materials and labour shortages
particularly in respect of Construction and the Motor industry are
impacting claims costs and will increase settlements costs in
future years and may have a knock on impact to injury claims in the
near future as pressure mounts on salary inflation.
Legal costs in respect of the High Court and Circuit Court have
significantly increased in the last twelve months. The increase is
in respect of the proportion of cases settled with plaintiff costs
in higher bands and we will be watching this trend closely.
FBD model forward looking projections of key financial metrics
on a periodic basis based on an assessment of the likely operating
environment over the next number of years. The projections reflect
changes of which we are aware and other uncertainties that may
impact future business plans and includes assumptions on the
potential impact on revenue, expenses, claims frequency, claims
severity, investment market movements and in turn solvency. The
output of the modelling demonstrates that the Group is likely to be
profitable and remain in a strong capital position. However, the
situation can change and unforeseen challenges and events could
occur. The solvency of the Group remains solid and is currently at
209% (31 December 2021: 213%).
The next Business Interruption hearing is scheduled for November
2022. The two macro issues remaining are the quantification of
partial closure losses in respect of the bar counter and whether
FBD is correct in deducting Government subsidies from claims
settlements.
Potential future adverse events are assessed when the Group is
considering the margin for uncertainty which is a provision held as
an amount over the best estimate of claims liabilities net of
expected reinsurance recoveries.
Rising inflation in developed markets has led to increasing risk
free interest rates. A risk remains as to how high inflation will
go and to the policy response in order to control it. Future
financial market movements and their impact on balance sheet
valuations, pension surplus and investment income are unknown and
market risk is expected to remain high for the foreseeable
future.
The Group's Investment Policy, which defines investment limits
and rules and ensures there is an optimum allocation of
investments, is being continuously monitored. Regular review of the
Group's reinsurers' credit ratings, term deposits and outstanding
debtor balances is in place. All of the Group's reinsurers have a
credit rating of A- or better. All of the Group's fixed term
deposits are with financial institutions which have a minimum A-
rating. Customer defaults are at pre-pandemic levels and support is
provided to customers when required.
The Group continues to manage liquidity risk through ongoing
monitoring of forecast and actual cash flows and currently holds a
higher allocation to short-term cash and corporate bonds in order
to meet future expected claims. The Group's cash flow projections
from its financial assets are well matched to the cash flow
projections of its liabilities and it maintains a minimum amount
available on term deposit at all times. The Group's asset
allocation is outlined on page 7.
As employment reaches the highest level in the history of the
state, attracting and retaining a talented workforce is an on-going
challenge for all businesses. FBD continue to support employee
engagement through flexible working, wellbeing initiatives and
continuous development opportunities to differentiate ourselves in
the recruitment and retention of our employees.
OUTLOOK
The economic outlook in 2022 and beyond is now more challenging
given the headwinds of higher inflation resulting in higher
interest rates and more moderate growth rates.
The early indications are the Personal Injury Guidelines have
reduced awards justifying the reduced premiums charged to
customers. Challenges to the Personal Injury Guidelines have so far
been dismissed although a number of challenges have yet to be heard
in court and along with the concern around the adoption of the
guidelines by the Judiciary with the full impact being unclear.
PIAB acceptance rates and claims going through the system have
reduced as claimants await the outcome of the challenges.
Differential pricing requirements are in place since 1 July
2022, although it will take time to see the full effects of the
changes on pricing in the market as the insurance industry adapts,
creating potential opportunities and challenges.
Insurance companies have struggled over the last decade to
generate meaningful income on their bond portfolios and the
increase in interest rates means that the income projections on the
bond portfolio have increased for the years ahead.
Sustainability is brought into more focus as we continue our
journey of integration into the business. Our Governance is in
place and we are working towards target setting and metric
development as we consider the multiple reporting and disclosure
requirements. It will take time to fully embed and some elements
will be easier to integrate than others. FBD always has a strong
Social focus supporting employee engagement, the communities we
work and live in and Diversity and Inclusion. The Environmental
metrics and disclosures are less developed as we assess exactly
what our targets should be and how we aim to achieve them.
There are always new challenges to face as a business and higher
inflation with the knock on impact on interest rates affects the
business, our customers and our employees. FBD provides value to
our customers through excellent customer service and products
providing the basis for growth. We continue to evolve our offerings
while keeping the customer at the heart of what we do with the
support of our dedicated employees.
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Income Statement
For the half year ended 30 June 2022
Half year Half year Year ended 31/12/21 (audited)
ended ended
30/06/22 30/06/21
Notes (unaudited) (unaudited)
EUR000s EUR000s EUR000s
Revenue 3 204,957 191,545 386,661
------------------ ------------------- ------------------------------
Income
Gross written premium 192,638 181,433 366,328
Reinsurance premium (20,101) (16,319) (32,652)
------------------ ------------------- ------------------------------
Net written premium 172,537 165,114 333,676
Change in net provision for unearned premiums (8,071) (2,868) 571
------------------ ------------------- ------------------------------
Net premium earned 164,466 162,246 334,247
Net investment return (15,227) 10,324 15,679
Financial services income - Revenue from contracts with
customers 1,752 1,127 2,930
- Other
financial
services
income 2,233 2,038 4,375
------------------ ------------------- ------------------------------
Total income 153,224 175,735 357,231
Expenses
Net claims and benefits 4 (iii) (80,370) (88,980) (123,538)
Other underwriting expenses 4 (44,311) (41,728) (93,369)
Movement in other provisions (5,241) (18,516) (22,143)
Financial services and other costs (3,103) (3,248) (6,138)
Impairment of property, plant and equipment - - 937
Finance costs (1,272) (1,272) (2,545)
Profit before taxation 18,927 21,991 110,435
Income taxation charge (2,379) (2,738) (14,026)
------------------ ------------------- ------------------------------
Profit for the period 16,548 19,253 96,409
------------------ ------------------- ------------------------------
Attributable to:
Equity holders of the parent 16,548 19,253 96,409
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Income Statement
For the half year ended 30 June 2022
Half year Half year
ended ended 30/06/21 Year ended 31/12/21 (audited)
30/06/22 (unaudited)
(unaudited)
Notes
Earnings Cent Cent Cent
per share
Basic 7 47 55 274
----------------- -------------------- --------------------------------
Diluted 7 46(1) 53(1) 268(1)
----------------- -------------------- --------------------------------
(1) Diluted earnings per share reflects the potential vesting of
share based payments.
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Comprehensive Income
For the half year ended 30 June 2022
Half year Half year
ended 30/06/21
ended (unaudited) Year ended
30/06/22 31/12/21
(audited)
(unaudited)
EUR000s EUR000s EUR000s
Profit for the period 16,548 19,253 96,409
-------------- ---------------- -----------------
Items that will or may be reclassified
to profit or loss in subsequent
periods :
Movement on available for sale assets (63,984) (4,682) (11,169)
Movement transferred to the Consolidated
Income Statement on disposal during
the period 77 (718) (1,033)
Taxation credit relating to items
that will or may be reclassified
to profit or loss in subsequent
periods 7,988 675 1,525
Items that will not be reclassified
to profit or loss in subsequent
periods:
Actuarial movement on retirement
benefit obligations 3,899 (849) 280
Property held for own use revaluation
movement - - 4
Taxation charge relating to items
not to be reclassified in subsequent
periods (487) (124) (265)
-------------- ---------------- -----------------
Other comprehensive expense after
taxation (52,507) (5,698) (10,658)
-------------- ---------------- -----------------
Total comprehensive (expense)/income
for the period (35,959) 13,555 85,751
-------------- ---------------- -----------------
Attributable to:
Equity holders of the parent (35,959) 13,555 85,751
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Financial Position
At 30 June 2022
ASSETS 30/06/22 30/06/21 31/12/21
(unaudited) (unaudited) (audited)
Notes EUR000s EUR000s EUR000s
Property, plant and equipment 23,439 23,899 24,178
Policy administration system 27,081 35,287 27,982
Intangible assets 10,074 7,340 9,031
Investment property 16,053 17,054 16,055
Right of use asset 4,683 5,245 5,078
Loans 537 650 577
Deferred taxation asset 4,739 - -
Financial assets
Available for sale investments 853,025 859,091 893,715
Investments held for trading 130,363 134,223 137,547
Deposits with banks 20,000 10,000 -
-------------- ------------- -----------
1,003,388 1,003,314 1,031,262
-------------- ------------- -----------
Reinsurance assets
Provision for unearned premiums 2,018 1,741 1,711
Claims outstanding 149,640 162,469 195,249
-------------- ------------- -----------
151,658 164,210 196,960
-------------- ------------- -----------
Retirement benefit surplus 8 14,800 10,000 10,901
Current taxation asset 10 - 4,602 -
Deferred acquisition costs 36,976 33,638 35,458
Other receivables 67,685 68,781 58,047
Cash and cash equivalents 140,372 166,832 164,479
-------------- ------------- -----------
Total assets 1,501,485 1,540,852 1,580,008
-------------- ------------- -----------
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Financial Position (
continued)
At 30 June 2022
EQUITY AND LIABILITIES 30/06/22 30/06/21 31/12/21 (audited)
(unaudited) (unaudited)
Notes EUR000s EUR000s EUR000s
Equity
Called up share capital presented as equity 6 21,583 21,409 21,409
Capital reserves 28,738 25,786 27,406
Revaluation reserve 752 749 752
Retained earnings 350,708 350,622 422,815
Equity attributable to ordinary equity holders of
the parent 401,781 398,566 472,382
Preference share capital 2,923 2,923 2,923
-------------- ------------- -------------------
Total equity 404,704 401,489 475,305
Liabilities
Insurance contract liabilities
Provision for unearned premiums 193,025 188,115 184,648
Claims outstanding 784,652 819,118 800,756
-------------- ------------- -------------------
977,677 1,007,233 985,404
Other provisions 11 10,618 26,073 13,492
Subordinated debt 49,632 49,573 49,603
Lease liability 4,974 5,489 5,349
Deferred taxation liability 10 - 3,583 2,761
Current taxation liability 10 13,520 - 6,437
Payables 40,360 47,412 41,657
--------------
Total liabilities 1,096,781 1,139,363 1,104,703
-------------- ------------- -------------------
Total equity and liabilities 1,501,485 1,540,852 1,580,008
-------------- ------------- -------------------
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Cash Flows
For the half year ended 30 June 2022
Half year Half year ended 30/06/21 Year
ended (unaudited) ended 31/12/21 (audited)
30/06/22
(unaudited)
EUR000s EUR000s EUR000s
Cash flows from operating
activities
Profit before taxation 18,927 21,991 110,435
Adjustments for:
Movement on investments held for
trading 18,923 (6,970) (10,839)
Movement on investments available
for sale 1,687 971 2,429
Interest and dividend income (5,895) (3,925) (8,106)
Depreciation/amortisation of
property, plant and equipment,
intangible assets and policy
administration
system 4,943 5,434 18,012
Depreciation of right of use asset 395 390 790
Share-based payment expense 1,227 1,030 2,650
Fair value movement on investment
property 1 (3) 996
Revaluation of property, plant and
equipment - - (937)
Operating cash flows before movement
in working capital 40,208 18,918 115,430
Movement on insurance contract
liabilities 37,575 (12,141) (66,720)
Movement on other provisions (2,874) 14,006 1,425
Movement on receivables and deferred
acquisition costs (11,170) (3,817) 5,460
Movement on payables (18) 3,963 (394)
Interest on lease liabilities 106 117 236
Purchase of investments held for
trading (16,154) (36,628) (58,432)
Sale of investments held for trading 4,415 26,306 48,653
-------------- ------------------------- --------------------------
Cash generated from operations 52,088 10,724 45,658
Interest and dividend income
received 5,909 4,802 8,620
Income taxes received/(paid) 4,706 178 (75)
-------------- ------------------------- --------------------------
Net cash movement from operating
activities 62,703 15,704 54,203
-------------- ------------------------- --------------------------
Cash flows from investing
activities
Purchase of available for sale
investments (166,911) (93,452) (210,499)
Sale of available for sale
investments 142,007 91,868 166,034
Purchase of property, plant and
equipment (453) (194) (1,273)
Additions to policy administration
system (2,021) (2,103) (4,685)
Purchase of intangible assets (1,873) (2,756) (5,398)
Movement on loans and advances 40 (49) 24
Maturities of deposits invested with
banks (20,000) 30,000 40,000
Net cash movement from investing
activities (49,211) 23,314 (15,797)
-------------- ------------------------- --------------------------
Cash flows from financing
activities
Ordinary and preference (35,869) - -
dividends paid
Interest payments on subordinated
debt (1,250) (1,250) (2,500)
Principal elements of lease payments (480) (471) (962)
Net cash movement from financing
activities (37,599) (1,721) (3,462)
-------------- ------------------------- --------------------------
Movement in cash and cash
equivalents (24,107) 37,297 34,944
Cash and cash equivalents at the
beginning of the period 164,479 129,535 129,535
Cash and cash equivalents at the end
of the period 140,372 166,832 164,479
-------------- ------------------------- --------------------------
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Changes in Equity
(UNAUDITED)
For the half year ended 30 June 2022
Called up Capital Revaluation Retained Attributable Preference Total
to
share Reserves Reserve earnings Ordinary share capital equity
capital shareholders
presented as
equity
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
------------- --------- ------------ ------------------ ------------- -------------- ----------
Balance at 1
January 2022 21,409 27,406 752 422,815 472,382 2,923 475,305
Profit after
taxation - - - 16,548 16,548 - 16,548
Other
comprehensive
expense - - - (52,507) (52,507) - (52,507)
21,409 27,406 752 386,856 436,423 2,923 439,346
Dividends paid
and approved
on ordinary
and
preference
shares - - - (35,869) (35,869) - (35,869)
Issue of
ordinary
shares * 174 105 - (279) - - -
Recognition of
share based
payments - 1,227 - - 1,227 - 1,227
Balance at
30 June 2022 21,583 28,738 752 350,708 401,781 2,923 404,704
------------- --------- ------------ ------------------ ------------- -------------- ----------
Balance at 1
January 2021 21,409 24,756 978 336,838 383,981 2,923 386,904
Profit after
taxation - - - 19,253 19,253 - 19,253
Other
comprehensive
expense - - (229) (5,469) (5,698) - (5,698)
21,409 24,756 749 350,622 397,536 2,923 400,459
Recognition of
share based
payments - 1,030 - - 1,030 - 1,030
Balance at
30 June 2021 21,409 25,786 749 350,622 398,566 2,923 401,489
------------- --------- ------------ ------------------ ------------- -------------- ----------
* In April 2022 new ordinary shares were allotted to employees
of FBD Holdings plc as part of the performance share awards scheme
in 2019. A total of 290,078 ordinary shares were issued at a
nominal value of EUR0.60 each. The adjustment to ordinary share
capital was EUR174,000. The movement on the capital reserves of
EUR105,000 relates to the share premium reserve movement of
EUR2,669,000 net of share based payments reserve movement of
EUR2,564,000. The adjustment to retained earnings was
EUR279,000.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 1 - Statutory information
The half yearly financial information is considered
non-statutory financial statements for the purposes of the
Companies Act 2014 and in compliance with section 340(4) of that
Act we state that:
-- the financial information for the half year to 30 June 2022
does not constitute the statutory financial statements of the
company;
-- the statutory financial statements for the financial year
ended 31 December 2021 have been annexed to the annual return and
delivered to the Registrar;
-- the statutory auditors of the company have made a report
under section 391 Companies Act 2014 in respect of the statutory
financial statements for year ended 31 December 2021; and
-- the matters referred to in the statutory auditors' report
were unqualified, and did not include a reference to any matters to
which the statutory auditors drew attention by way of emphasis
without qualifying the report.
This half yearly financial report has not been audited but has
been reviewed by the auditors of the Company.
Note 2 - Accounting policies
Basis of preparation
The annual financial statements of FBD Holdings plc are prepared
in accordance with International Financial Reporting Standards
("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 IAS 34 'Interim Financial
Reporting', as adopted by the European Union.
Going concern
The Directors have, at the time of approving the interim
financial statements, a reasonable expectation that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future being a period of not less
than 12 months from the date of this report.
In making this assessment the Directors considered up to date
solvency, liquidity and profitability projections for the Group.
The basis of this assessment was the latest quarterly forecast for
2022 and projections for 2023 which reflect the latest assumptions
used by the business. The economic environment may impact on
premiums including potential reductions in exposures, new business
and retention levels. An increase in traffic volumes to
pre-pandemic levels may impact on claims frequency and severity.
Expense assumptions can change depending on the level of premiums
as discretionary spend and resources are adjusted and inflationary
pressures are taken into account.
A number of scenario projections were also run as part of the
ORSA process, including a number of more extreme stress events, and
in all scenarios the Group's capital ratio remained in excess of
the Solvency Capital Requirement and in compliance with liquidity
policies.
The Directors considered the liquidity requirements of the
business to ensure it is projected to have cash resources available
to pay claims and other expenditures as they fall due. The business
is expected to have adequate cash resources available to support
business requirements as well as claims in relation to public house
Business Interruption claims as they fall due. In addition the
Group has a highly liquid investment portfolio with over 50% of the
portfolio invested in corporate and sovereign bonds with a minimum
A- rating. In the worst case scenario run the Group's Capital Ratio
remained in excess of the Solvency Capital Requirement and in
compliance with liquidity policies.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 2 - Accounting policies (continued)
On the basis of the projections for the Group, the Directors are
satisfied that there are no material uncertainties which cast
significant doubt on the ability of the Group or Company to
continue as a going concern over the period of assessment being not
less than 12 months from the date of this report. Therefore the
Directors continue to adopt the going concern basis of accounting
in preparing the financial statements.
Consistency of accounting policy
The accounting policies and methods of computation used by the
Group to prepare the interim financial statements for the six month
period ended 30 June 2022 are the same as those used to prepare the
Group Annual Report for the year ended 31 December 2021.
Standards adopted in the period
The impact of new standards, amendments to existing standards
and interpretations issued and effective for annual periods
beginning on or after 1 January 2022 has been assessed by the
Directors and none have had or are expected to have a material
effect for the Group.
Standards and interpretations not yet effective
IFRS 17 Insurance Contracts
IFRS 9 Financial instruments
Details about the Group's IFRS 17 and IFRS 9 joint project and
key aspects of the impact were disclosed on pages 108 - 110 of the
Group's Annual Report for the year ended 31 December 2021. The
Group will adopt IFRS 17 and IFRS 9 from the effective date of 1st
January 2023.
The 'build' phase of the programme is expected to be
substantially completed by the end of the third quarter of 2022
allowing for appropriate testing and dry-running of models,
technology and infrastructure and reporting processes in advance of
'go-live' on 1 January 2023. Testing of certain components of the
Group's overall IFRS 17/IFRS 9 solution took place in the first
half of 2022 and the key methodology and decision papers are
expected to be completed in the fourth quarter of 2022.
Industry practice and interpretation of the standard are still
developing, in particular, the approach to calculating the risk
adjustment and the determination of the appropriate discount rate.
As a result the Group has not finalised its risk adjustment
methodology and discount rate and therefore the financial impact on
transition remains uncertain. The impact in the period of initial
application (i.e. 2023) of IFRS 17 and IFRS 9 will be affected by
the Group's specific business and economic conditions at that date,
the composition of its portfolios and circumstances which cannot be
fully anticipated prior to the effective date. Refinement of the
quantitative information for the opening balance sheet of the
comparative period (i.e. 1 January 2022) is ongoing, however, the
Group has the following expectations:
IFRS 17
-- IFRS 17 requires a company to determine the level of
aggregation for applying its requirements. FBD manages insurance
contracts issued by product lines, where each product line includes
contracts that are subject to similar risks. All insurance
contracts within a product line represent a portfolio of contracts.
Each portfolio is further disaggregated into groups of contracts
that are issued within a calendar year (annual cohorts) and are (i)
contracts that are onerous at initial recognition; (ii) contracts
that at initial recognition have no significant possibility of
becoming onerous subsequently; or (iii) a group of remaining
contracts.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 2 - Accounting policies (continued)
IFRS 17 (continued)
-- The Premium Allocation Approach under IFRS 17 is in line with
the Group's current earnings methodology which means that gross
earned premium is expected to be materially unchanged under IFRS
17. However 'Insurance Revenue' will now include interest on
instalment premiums.
-- Measurement of the liability for incurred claims, (previously
claims outstanding and incurred but not reported claims) is
determined on a discounted probability-weighted expected value
basis and includes an explicit risk adjustment for non-financial
risk. The liability for incurred claims includes the Group's
obligation to pay other incurred insurance expenses.
-- IFRS 17 requires that non-attributable expenses are presented
separately from the 'Insurance service result' within the profit or
loss.
-- Under IFRS 17 the Group's contribution to the Motor Insurers'
Insolvency Compensation Fund and the Motor Insurers' Bureau of
Ireland levy are not considered part of the cash flows within the
boundary of the underlying contracts and are presented separately
from the 'Insurance service result' within the profit or loss.
-- In accordance with IFRS 17 reinsurance contracts held are
presented separately from the expenses or income from insurance
contracts issued. Re-instatement premiums contingent on claims on
the underlying contracts are treated as part of the claims that are
expected to be reimbursed under the reinsurance contracts held and
were previously included within 'Net premium earned' under IFRS 4.
Similarly ceded commission not contingent on claims on the
underlying contracts are treated as a reduction in the premiums to
be paid to the reinsurer and were previously included within 'Other
underwriting expenses' under IFRS 4.
IFRS9
-- Collective investment scheme assets held for trading are
required to be classified as 'Fair value through Profit or Loss'
(FVTPL) under IFRS 9. This is no different to current reporting
under IAS 39 whereby assets are measured at fair value and all
dividend income and other gains and/or losses are recognised in
profit or loss.
-- Under IFRS 9 classification of debt instruments is based on two criteria as follows:
i. The business model criteria: How an entity manages bonds in
order to generate cash flows-either by collecting contractual cash
flows, selling the bonds or both.
ii. Contractual cash flow characteristics criteria: Assessment
as to whether the cash flows received are "Solely Payments of
Principal and Interest" (SPPI) on the principal amount
outstanding.
-- The Group's quoted debt securities as at the opening balance
sheet of the comparative period (i.e. 1 January 2022) are expected
to pass the SPPI and be classified as 'Fair value through other
comprehensive income' (FVOCI) as they are held within a business
model whose objective is achieved by both collecting contractual
cash flows and selling financial assets. FVOCI is different to
current reporting mainly in that there is a new requirement under
IFRS 9 to recognise a loss allowance for expected credit losses in
the income statement. Accumulated gains or losses on FVOCI
investments are reclassified to the profit and loss account on
liquidation similar to the current reporting treatment however
recycling to the income statement is net of the expected credit
losses under IFRS 9. The investments would be measured at fair
value similar to current reporting.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 2 - Accounting policies (continued)
-- Unquoted investments previously classified as 'Available for
sale' under IAS 39 are expected to be classified as FVTPL under
IFRS 9 as they are not expected to pass the SPPI test. This is
different to current reporting as all income and other gains and/or
losses are recognised in profit or loss.
-- FBD intend to restate comparative information on the initial
application of IFRS 9 and will apply the classification overlay
approach with the amendment to the transition requirements in IFRS
17 issued by the IASB at the end of 2021.
KPIs
-- The calculation of KPIs used under IFRS 4 will change
assuming the same KPIs are reported. 'Gross earned premium' and
'Gross written premium' numbers are expected to be materially
unaffected although they are no longer presented on the face of the
statement of profit or loss. 'Net earned premium' will increase by
the amount of any reinstatement premium incurred in the period and
reduce by the ceded commission incurred therefore the denominator
for the 'Expense ratio', 'Loss ratio' and 'Combined operating
ratio' as currently calculated under IFRS 4 would change.
Non-attributable expenses will not be included in the technical
result and therefore the 'Expense ratio' is expected to reduce. The
impact of introducing the new measurement model for claims
including the exclusion of the Motor Insurers' Insolvency
Compensation Fund and Motor Insurers' Bureau of Ireland levy from
the underwriting result will flow through to the 'Loss ratio' and
'Combined operating ratio'. There will be a one off impact on
transition on shareholders' funds, NAV and ROE when comparing IFRS
17 and IFRS 9 to IFRS 4 and IAS 39 results.
-- FBD measures and calculates capital using the Standard
Formula. The calculation of the Solvency II Capital Requirement
(SCR) is not expected to be impacted on adoption of IFRS 17.
Additional disclosures required by IFRS 17 and IFRS 9, including
quantitative information on the impact of transition, will be
provided in the Group's Annual report for the year ended 31
December 2022.
--
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 2 - Accounting policies (continued)
Summary of Key Accounting Choices under IFRS 17
IFRS 17 Options Planned approach
Premium Allocation Approach Subject to specified criteria, FBD is eligible to apply the IFRS 17.53
(PAA) Eligibility the PAA can be adopted as a Premium Allocation Approach
simplified approach to the IFRS based on the fact that the
17 general model insurance
contracts issued have a
duration of 12 months or less
-------------------------------- -------------------------------- ---------------
Insurance acquisition cash flows Where the coverage period of For all groups, insurance IFRS 17.59 (a)
for insurance contracts issued all contracts within a group is acquisition cash flows will be IFRS 17.28A,
no longer than one year, allocated to related groups of IFRS 17.B35A
insurance insurance
acquisition cash flows can contracts and amortised over
either be expensed as incurred, the coverage period of the
or allocated, using a related group. This will avoid
systematic timing
and rational method, to groups mismatches between revenue
of insurance contracts earnings patterns and the
(including future groups recognition of the associated
containing expenses.
insurance contracts are
expected to arise from
renewals) and then amortised
over the coverage
period of the related group.
For groups containing contracts
longer than one year then
insurance acquisition cash
flows
must be allocated to related
groups of insurance contracts
and amortised over the coverage
period of the related group.
-------------------------------- -------------------------------- ---------------
Liability for Remaining Coverage Where there is no significant No allowance for interest IFRS 17.56
(LFRC) adjusted for financial financing component in relation accretion will be made as the
risk and time value of money to the LFRC, or where the time premiums are received within
between providing each part of one year
the services and the related of the coverage period.
premium due date is no more
than
a year, an entity is not
required to make an adjustment
for accretion of interest on
the LFRC.
-------------------------------- -------------------------------- ---------------
Liability for incurred claims Where claims are expected to be FBD will discount cash flows IFRS 17.59 (b)
(LFIC) adjusted for the time paid within a year of the date when calculating the Liability
value of money that the claim is incurred, for Incurred Claims as the
it is not required to adjust claims
these amounts for the time are typically open for longer
value of money. than a 12 month duration.
-------------------------------- -------------------------------- ---------------
Insurance finance income and There is an option to The impact of LFIC from changes IFRS 17.88
expense disaggregate part of the in discount rates will be
movement in the LFIC resulting captured within the OCI, in
from changes line
in discount rates and present with the accounting for assets
this in Other comprehensive backing the relevant product
income (OCI). lines.
-------------------------------- -------------------------------- ---------------
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 2 - Accounting policies (continued)
Critical accounting estimates and judgements in applying
accounting policies
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities
that are not readily apparent from other sources. The key
judgements and the key sources of estimation uncertainty that have
the most significant effect on the amounts recognised in the
interim financial statements are detailed below. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. The estimates and
underlying assumptions are reviewed on an ongoing basis and actual
results may differ from these estimates.
Claims provisions
Claims provisions represent the estimation of the cost of claims
outstanding under insurance contracts written. Actuarial
techniques, based on statistical analysis of past experience, are
used to calculate the estimated cost of claims outstanding at the
period end.
Also included in the estimation of outstanding claims are
factors such as the potential for inflation. Provisions for more
recent claims make use of techniques that incorporate expected loss
ratios and average claims cost (adjusted for inflation) and
frequency methods. The average claims cost and frequency methods
are particularly relevant when calculating the ultimate cost of
claims for the 2020 and 2021 accident years as historic patterns
have been distorted by Covid-19.
Following the Judgement issued in January 2022 FBD went into
settlement talks with the plaintiffs but there remained a number of
issues yet to be reconciled. It was agreed that two further macro
issues would go before the Judge in November 2022. These are
-- The quantification of "partial closure" losses; and
-- The deduction of Government Subsidies and grants.
A ruling on these matters is not expected until early 2023 at
the earliest.
FBD has now received information from approximately 600 public
house policyholders in order to assess the claims and has been
making interim payments based on these assessments. The continued
increase in data provides more certainty in respect to a number of
assumptions underlying the best estimate of the Business
Interruption losses and will improve as the particulars of more
claims are received.
The calculations are particularly sensitive to the estimation of
the ultimate cost of claims for the particular classes of business
and the estimation of future claims handling costs. Actual claims
experience may differ from the assumptions on which the actuarial
best estimate is based and the cost of settling individual claims
may exceed that assumed.
As a result of the uncertainties noted, the Group sets
provisions at a margin above the actuarial best estimate, inclusive
of an amount specifically allocated to the Business Interruption
estimate.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 2 - Accounting policies (continued)
Critical accounting estimates and judgements in applying
accounting policies (continued)
Reinsurance assets
The Group spends substantial sums to purchase reinsurance
protection from third parties and substantial claims recoveries
from these reinsurers are included in the Statement of Financial
Position at the reporting date. A reinsurance asset (reinsurers'
share of claims outstanding and provision for unearned premium) is
recognised to reflect the amount estimated to be recoverable under
the reinsurance contracts in respect of the outstanding claims
reported under insurance liabilities. The amount recoverable from
reinsurers is initially valued on the same basis as the underlying
claims provision. The amount recoverable is reduced when there is
an event arising after the initial recognition that provides
objective evidence that the Group may not receive all amounts due
under the contract and the event has a reliably measurable impact
on the expected amount that will be recoverable from the
reinsurer.
To minimise default exposure, the Group's policy is that all
reinsurers should have a credit rating of A- or better or have
provided alternative satisfactory security.
The actual amount recovered from reinsurers is sensitive to the
same uncertainties as the underlying claims. To the extent that the
underlying claim settles at a lower or higher amount than that
assumed this will have a direct influence on the associated
reinsurance asset.
The uncertainty in respect of the reinsurance asset for Business
Interruption is unchanged from year-end 2021 as the application of
the reinsurance contract has been agreed with reinsurers for the
expected impacted layers of the catastrophe program. Business
Interruption as with all uncertainties, is assessed when the Group
is considering the margin for uncertainty, being a provision held
as an amount over the best estimate of claims liabilities net of
expected reinsurance recoveries.
Uncertainties in impairment testing
As at the reporting date it is noted that the market
capitalisation, that is the quoted share price multiplied by the
number of ordinary shares in issue, is lower than the Shareholders'
Funds as per the Statement of Financial Position. There are a large
number of factors driven by market conditions that can influence
the market capitalisation of a company which includes but are not
limited to, a pandemic, volatile investment markets or other
factors such as shares being traded less frequently. The market
capitalisation being below net assets is considered to be an
external indicator of impairment and creates a necessity to make a
formal estimate of recoverable amount to test whether any actual
impairment exists. For tangible and intangible assets, the
recoverable amount of an asset is the higher of its value in use or
its fair value less costs to sell.
In the case of the Property, Plant and Equipment (excluding
Owner Occupied Property which is held at revalued amount), Policy
Administration System, Intangible Assets and Right of Use Assets
there is no reliable estimate of the price at which an orderly
transaction to sell the assets would take place and there are no
direct cash-flows expected from the individual assets. These assets
are an integral part of the FBD General Insurance business,
therefore, the smallest group of assets that can be classified as a
cash generating unit is the FBD General Insurance business.
The Value in Use of the cash generating unit has been determined
by estimating the future cash inflows and outflows to be derived
from continuing use of the group of assets, and applying a discount
rate to those future cash flows. As with all projections there are
assumptions made that will be different to actual experience,
however given the uncertainty surrounding the impact of the
Judicial Council changes to Personal Injury Guidelines, the
slowdown in claims settlements and the inflationary environment
these estimates are considered a critical accounting estimate as at
the reporting date.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 2 - Accounting policies (continued)
Critical accounting estimates and judgements in applying
accounting policies (continued)
The Value in Use cash flow projections are based on the latest
quarterly forecast for 2022 and the five year strategic projections
approved by the Board in December 2021. A projection for 2027 and
the first half year of 2028 use the same basic assumptions as 2026.
The total time period used in the cash flow projections is less
than the weighted average remaining useful life of the assets in
the FBD General Insurance business being assessed. This projection
and plan represent management's best estimate of future
underwriting profits, fee income for FBD and investments.
General Insurance business projections factors in both past
experience as well as expected future outcomes relative to market
data and the strategy adopted by the Board. The underlying
assumptions of these forecasts include average premium, number of
policies written, claims frequency, claims severity, weather
experience, commission rates, fee income charges and expenses. The
average growth rate used for 2023 is 2% followed by a 4% growth
rate for 2024-2026, the growth rate is assumed to be flat for later
years. Future cash flows are discounted using an estimated weighted
average cost of capital (WACC) of 12.2% which is considered a
reasonable estimate for market rate due to the recent increase in
risk free rates. The slowdown in payment patterns due to Business
Interruption and the pandemic has resulted in a higher level of
asset holdings which may need to be liquidated to settle the
delayed claims settlements and results in a change in assumptions
used in the model.
Sensitivity analysis was performed on the projections to allow
for possible variations in the amount of the future cash flows and
potential discount rate changes. The sensitivities include an
additional weather event each year, delayed benefits from the
Judicial Council Guidelines, additional inflation in claims
settlements, reduced growth rates and positive impacts of new
initiatives.
The level of headroom has increased since year end, and in all
scenarios run the value in use of the cash generating unit exceeded
the carrying value of the assets, demonstrating that no reasonably
possible change in key assumptions would result in an impairment of
the assets.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 3 - Segmental information
(a) Operating segments
The principal activities of the Group are underwriting of
general insurance business and financial services. For management
purposes, the Group is organised in two operating segments -
underwriting and financial services. The profit earned by each
segment is reported to the chief operating decision maker, the
Group Chief Executive, for the purpose of resource allocation and
assessment of segmental performance. Central administration costs
and Directors' salaries are allocated based on actual activity.
Income taxation is a direct cost to each segment. Discrete
financial information is prepared and reviewed on a regular basis
for these two segments. The accounting policies of the reportable
segments are the same as the Group accounting policies.
The following is an analysis of the Group's revenue and results
from continuing operations by reportable segments:
Half year ended 30/06/2022 Financial
Underwriting Services Total
EUR000s EUR000s EUR000s
Revenue 200,972 3,985 204,957
--------------- ---------- ----------
Investment return (15,227) - (15,227)
--------------- ---------- ----------
Finance costs (1,272) - (1,272)
--------------- ---------- ----------
Profit before taxation 18,044 883 18,927
Income taxation charge (2,256) (123) (2,379)
--------------- ---------- ----------
Profit after taxation 15,788 760 16,548
--------------- ---------- ----------
Other information
Capital additions 4,347 - 4,347
--------------- ---------- ----------
Impairment of other assets - - -
--------------- ---------- ----------
Depreciation/amortisation (4,943) - (4,943)
--------------- ---------- ----------
Statement of Financial Position
Segment assets 1,472,308 29,177 1,501,485
--------------- ---------- ----------
Segment liabilities 1,091,417 5,364 1,096,781
--------------- ---------- ----------
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 3 - Segmental information (continued)
(a) Operating segments (continued)
Half year ended 30/06/2021 Financial
Services Total
Underwriting
EUR000s EUR000s EUR000s
Revenue 188,380 3,165 191,545
-------------- ------------ -----------------
Investment return 10,324 - 10,324
-------------- ------------ -----------------
Finance costs (1,272) - (1,272)
-------------- ------------ -----------------
Profit/(Loss) before taxation 22,074 (83) 21,991
Income taxation (charge)/credit (2,759) 21 (2,738)
-------------- ------------ -----------------
Profit/(Loss) after taxation 19,315 (62) 19,253
-------------- ------------ -----------------
Other information
Capital additions 5,053 - 5,053
-------------- ------------ -----------------
Impairment of other assets - - -
-------------- ------------ -----------------
Depreciation/amortisation (5,434) - (5,434)
-------------- ------------ -----------------
Statement of Financial Position
Segment assets 1,519,572 21,280 1,540,852
-------------- ------------ -----------------
Segment liabilities 1,133,411 5,952 1,139,363
-------------- ------------ -----------------
Year ended 31/12/2021 Financial
Services
Underwriting Total
EUR000s EUR000s EUR000s
Revenue 379,356 7,305 386,661
-------------- ------------ -----------------
Investment return 15,679 - 15,679
-------------- ------------ -----------------
Finance costs (2,545) - (2,545)
-------------- ------------ -----------------
Profit before taxation 109,268 1,167 110,435
Income taxation charge (13,017) (1,009) (14,026)
-------------- ------------ -----------------
Profit after taxation 96,251 158 96,409
-------------- ------------ -----------------
Other information
Capital additions 8,545 - 8,545
-------------- ------------ -----------------
Impairment of other assets (59) - (59)
-------------- ------------ -----------------
Depreciation/amortisation (18,012) - (18,012)
-------------- ------------ -----------------
Statement of Financial Position
Segment assets 1,556,680 23,328 1,580,008
-------------- ------------ -----------------
Segment liabilities 1,098,654 6,049 1,104,703
-------------- ------------ -----------------
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 3 - Segmental information (continued)
(b) Geographical segments
The Group's operations are located in Ireland.
Note 4 - Underwriting result
Half year Half year Year
ended 30/06/22
(unaudited)
ended ended
30/06/21 31/12/21
(unaudited) (audited)
EUR000s EUR000s EUR000s
Gross written premium 192,638 181,433 366,328
----------------- -------------- --------------
Net earned premium 164,466 162,246 334,247
Net claims incurred (80,370) (88,980) (123,538)
Motor Insurers Bureau of Ireland Levy
and consequential payments (5,241) (18,516) (22,143)
----------------- -------------- --------------
Underwriting result before net operating
expenses 78,855 54,750 188,566
----------------- -------------- --------------
Gross management expenses (44,485) (40,191) (92,308)
Deferred acquisition costs 1,517 (441) 1,380
Reinsurers' share of expense 2,197 1,873 3,864
Broker commissions payable (3,540) (2,969) (6,305)
----------------- -------------- --------------
Net operating expenses (44,311) (41,728) (93,369)
----------------- -------------- --------------
Underwriting result 34,544 13,022 95,197
----------------- -------------- --------------
The Group's half yearly results are not subject to any
significant impact arising from seasonality of operations.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 4 - Underwriting result (continued)
See below written premium, earned premium, incurred claims
including claims handling expense and other underwriting expenses
split by product lines within the underwriting segment.
(i) Gross premium written Half Half year
year
ended ended
30/06/22 30/06/21
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
Motor 94,224 (8,985) 85,239 94,845 (8,370) 86,475
Fire and other damage
to property 56,859 ( 7,891) 48,968 51,729 (5,111) 46,618
Liability 38,876 (3,012) 35,864 32,264 (2,422) 29,842
Miscellaneous 2,679 (213) 2,466 2,595 (416) 2,179
---------- -------------- -------- -------- ------------- --------
192,638 (20,101) 172,537 181,433 (16,319) 165,114
---------- -------------- -------- -------- ------------- --------
(ii) Net premium earned Half Half year
year
ended ended
30/06/22 30/06/21
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
Motor 89,818 (8,735) 81,083 91,718 (7,732) 83,986
Fire and other damage
to property 55,155 (7,835) 47,320 52,457 (5,041) 47,416
Liability 36,839 (3,012) 33,827 31,278 (2,422) 28,856
Miscellaneous 2,449 (213) 2,236 2,404 (416) 1,988
-------- -------------- ---------- --------- ------------- ----------
184,261 (19,795) 164,466 177,857 (15,611) 162,246
-------- -------------- ---------- --------- ------------- ----------
(iii) Incurred claims Half Half year
including claims handling year
expenses
ended ended
30/06/22 30/06/21
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
Motor 41,912 743 42,655 41,281 (6,976) 34,305
Fire and other damage
to property 23,376 (5,926) 17,450 69,532 (31,877) 37,655
Liability 16,611 1,629 18,240 17,168 (2,670) 14,498
Miscellaneous 1,920 105 2,025 2,564 (42) 2,522
------------ -------------- -------- ---------- -------------- ------------
83,819 (3,449) 80,370 130,545 (41,565) 88,980
------------ -------------- -------- ---------- -------------- ------------
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 4 - Underwriting result (continued)
(iv) Other underwriting Half Half year
expenses year
ended ended
30/06/22 30/06/21
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
Motor 22,749 (1,272) 21,477 22,792 (1,081) 21,711
Fire and other damage
to property 13,727 (622) 13,105 12,431 (522) 11,909
Liability 9,385 (281) 9,104 7,754 (227) 7,527
Miscellaneous 647 (22) 625 624 (43) 581
------------ -------------- ------------ -------- ------------- ------------
46,508 (2,197) 44,311 43,601 (1,873) 41,728
------------ -------------- ------------ -------- ------------- ------------
Note 5 - Dividends
Half Year Half Year Year
ended 30/06/22 ended 30/06/21
(unaudited) (unaudited) ended
31/12/21
(audited)
Paid: EUR000s EUR000s EUR000s
2021 dividend of 8.4 cent (2020: 0.0
cent) per share on 14% non-cumulative 113 - -
preference shares of EUR0.60 each
2021 dividend of 4.8 cent (2020: 0.0
cent) per share on 8% non-cumulative 169 - -
preference shares of EUR0.60 each
2021 final dividend of 100.0 cent
(2020: 0.0 cent) per share on ordinary 35,587 - -
shares of EUR0.60 each
---------------- --- ---------------- --- -----------
Total dividends paid 35,869 - -
---------------- --- ---------------- --- -----------
2021 dividend payments were approved by the shareholders at the
Annual General Meeting on 12 May 2022 and paid on 19 May 2022.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 6 - Ordinary share capital
Half year Half year Year
ended 30/06/22 ended 30/06/21
(unaudited) (unaudited)
ended
31/12/21
(audited)
Number EUR000s EUR000s EUR000s
(i) Ordinary shares
of EUR0.60 each
Authorised:
At beginning and end
of period 51,326,000 30,796 30,796 30,796
------------ ---------------- ---------------- -----------
Issued and fully paid:
At beginning of period 35,461,206 21,277 21,277 21,277
Issued during the period 290,078 174 - -
At end of period 35,751,284 21,451 21,277 21,277
(ii) 'A' Ordinary shares
of EUR0.01 each
Authorised:
At beginning and end
of period 120,000,000 1,200 1,200 1,200
------------ ---------------- ---------------- -----------
Issued and fully paid:
At beginning and end
of period 13,169,428 132 132 132
------------ ---------------- ---------------- -----------
Total Ordinary Share
Capital 21,583 21,409 21,409
---------------- ---------------- -----------
The number of ordinary shares of EUR0.60 each held as treasury
shares at 30 June 2022 was 164,005. At 31 December 2021 the number
held was 164,005.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 7 - Earnings per EUR0.60 ordinary share
The calculation of the basic and diluted earnings per share
attributable to the ordinary shareholders is based on the following
data:
Half year Half year Year
ended ended 30/06/21 ended 31/12/21
(audited)
30/06/22 (unaudited)
(unaudited)
EUR000s EUR000s EUR000s
Earnings
Profit for the period for the purpose
of basic earnings per share 16,548 19,253 96,127
-------------- ---------------- ----------------
Profit for the period for the purpose
of diluted earnings per share 16,548 19,253 96,127
-------------- ---------------- ----------------
Number of shares No. No. No.
Weighted average number of ordinary
shares for
the purpose of basic earnings per
share (excludes treasury shares) 35,427,015 35,052,462 35,138,959
Weighted average number of ordinary
shares for
the purpose of diluted earnings
per share (excludes treasury shares) 36,346,524 35,987,399 35,930,762
-------------- ---------------- ----------------
Cent Cent Cent
Basic earnings per share 47 55 274
-------------- ---------------- ----------------
Diluted earnings per share 46 (1) 53 (1) 268 (1)
-------------- ---------------- ----------------
(1) Diluted earnings per share reflects the potential vesting of
share based payments.
The 'A' ordinary shares of EUR0.01 each that are in issue have
no impact on the earnings per share calculation. The 'A' ordinary
shares of EUR0.01 each are non-voting. They are non-transferable
except only to the Company. Other than a right to a return of paid
up capital of EUR0.01 per 'A' ordinary share in the event of a
winding up, the 'A' ordinary shares have no right to participate in
the capital or the profits of the Company.
There was no difference between the profit or loss attributable
to the parent entity for the amounts used as the numerators in
calculating basic and diluted earnings per share in each of the
periods.
The below table reconciles the weighted average number of
ordinary shares used as the denominator in calculating basic
earnings per share to the weighted average number of ordinary
shares used as the denominator in calculating diluted earnings per
share including the individual effect of each class of instruments
that affects earnings per share:
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 7 - Earnings per EUR0.60 ordinary share (continued)
Half year Half year Year
ended ended 30/06/21 ended 31/12/21
(audited)
30/06/22 (unaudited)
(unaudited)
No. No. No.
Weighted average number of ordinary
shares for the purpose of calculating
basic earnings per share 35,427,015 35,052,462 35,138,959
-------------- ---------------- ----------------
Weighted average of potential vesting
of share based payments 919,509 934,937 791,803
Weighted average number of ordinary
shares for the purpose of calculating
diluted earnings per share 36,346,524 35,987,399 35,930,762
Note 8 - Retirement Benefit Surplus
The Group operates a funded defined benefit retirement scheme
for qualifying employees that is closed to future accrual and new
entrants. The return on assets during the period reduced by less
than the decrease in scheme liabilities. The retirement benefit
liabilities decreased during the period as a result of the discount
rate increasing from 1.1% to 3.2%, offset to some extent by the
inflation assumption increasing from 1.9% to 2.3%. The plan assets
reduced as bond yields rose during the period.
The amounts recognised in the Condensed Consolidated Statement
of Financial Position are as follows:
30/06/22 30/06/21 31/12/21
(unaudited) (unaudited) (audited)
EUR000s EUR000s EUR000s
Fair value of plan assets 79,600 98,900 97,594
Present value of defined benefit
obligation (64,800) (88,900) (86,693)
--------------- ---------------- --------------
Net retirement benefit surplus 14,800 10,000 10,901
--------------- ---------------- --------------
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 9 - Financial Instruments and Fair Value Measurement
(a) Financial Instruments
30/06/22 30/06/21 31/12/21
(unaudited) (unaudited) (audited)
EUR000s EUR000s EUR000s
Financial Assets
At amortised cost:
Deposits with banks 20,000 10,000 -
Cash and cash equivalents 140,372 166,832 164,479
Other receivables 67,685 68,781 58,047
Loans 537 650 577
At fair value:
Available for sale investments 853,025 859,091 893,715
Investments held for trading 130,363 134,223 137,547
Financial Liabilities
At amortised cost:
Payables 40,360 47,412 41,657
Subordinated debt 49,632 49,573 49,603
Lease liability 4,974 5,489 5,349
------------ ------------ ----------
(b) Fair value measurement
The following table compares the fair value of financial
instruments not held at fair value with the fair value of those
assets and liabilities:
30/06/22 30/06/22 30/06/21 30/06/21 31/12/21 31/12/21
(unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited)
Fair Carrying Fair Carrying Fair Carrying
value value value value value value
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
Assets
Loans 645 537 780 650 693 577
Financial liabilities
Subordinated
debt 49,119 49,632 54,414 49,573 54,341 49,603
The carrying amount of the following assets and liabilities is
considered a reasonable approximation of their fair value:
-- Deposits with banks
-- Cash and cash equivalents
-- Other Receivables
-- Payables
-- Lease liability
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 9 - Financial Instruments and Fair Value Measurement
(continued)
(b) Fair value measurement (continued)
Certain assets and liabilities are measured in the Condensed
Consolidated Statement of Financial Position at fair value using a
fair value hierarchy of valuation inputs. The following table
provides an analysis of assets and liabilities that are measured
subsequent to initial recognition at fair value, grouped into
Levels 1 to 3 based on the degree to which the fair value is
observable.
Level Fair value measurements derived from quoted prices (unadjusted)
1 in active markets for
identical assets or liabilities.
* Available for sale investments - quoted debt
securities are fair valued using latest available
closing bid price.
* Collective investment schemes, held for trading
(Level 1) are valued using the latest available
closing NAV of the fund.
Level Fair value measurements derived from inputs other than quoted
2 prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e.
derived from prices). There are no assets/liabilities deemed
to be held at this level at 30 June 2022.
Level Fair value measurements derived from valuation techniques
3 that include inputs for the
asset or liability that are not based on observable market
data (unobservable inputs). Valuation techniques used are
outlined below;
* Collective investment schemes held for trading
(Infrastructure and Senior Private Debt funds) are
valued using the most up-to-date valuations
calculated by the fund administrator allowing for any
additional investments made up until period end.
* AFS unquoted investments securities are classified as
Level 3 as they are not traded in an active market.
* Investment property and property held for own use
were fair valued by independent external professional
valuers at year end 2021 and a review of the
continued appropriateness of those valuations is
considered at the interim period end. Group occupied
properties have been valued on a vacant possession
basis applying hypothetical 10-year leases and
assumptions of void and rent free periods, market
rents, capital yields and purchase costs which are
derived from comparable transactions and adjusted for
property specific factors as determined by the
valuer. Group investment properties have been valued
using the investment method based on the long
leasehold interest in the subject property, the
contracted values of existing tenancies, assumptions
of void and rent free periods and market rents for
vacant lots, and capital yields and purchase costs
which are derived from comparable transactions and
adjusted for property specific factors as determined
by the valuer.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 9 - Financial Instruments and Fair Value Measurement
(continued)
(b) Fair value measurement (continued)
30 June 2022 (unaudited) Level Level Level Total
1 2 3
EUR000s EUR000s EUR000s EUR000s
Assets
Investment property - - 16,053 16,053
Property held for own use - - 16,327 16,327
Financial assets
Investments held for trading
- collective investment schemes 112,720 - 17,643 130,363
AFS(1) investments - quoted debt
securities 851,805 - - 851,805
AFS(1) investments - unquoted
investments - - 1,220 1,220
Total assets 964,525 - 51,243 1,015,768
-------- -------- -------- ----------
Total liabilities - - - -
-------- -------- -------- ----------
(1) Available for sale
The financial assets of the Group have reduced from
EUR1,031,262,000 at 31 December 2021 to EUR983,388,000 at 30 June
2022. This is a result of negative investment returns in the period
partially offset by an additional EUR25,000,000 invested in risk
assets and corporate bonds. There has been significant volatility
in investment markets due to concerns around inflation, higher
interest rates and the likelihood of a global economic downturn.
This has impacted bond and risk asset valuations. The reduction in
the mark-to-market of the Company's bond portfolios that are
classified as Available for Sale, resulted in a negative return of
EUR63,907,000 through the Other Comprehensive Income. The
investment returns through the Income Statement were negative
EUR15,227,000 primarily due to the reduction in the valuation of
the Company's risk asset portfolio.
30 June 2021 (unaudited) Level Level Level Total
1 2 3
EUR000s EUR000s EUR000s EUR000s
Assets
Investment property - - 17,054 17,054
Property held for own use - - 15,507 15,507
Financial assets
Investments held for trading
- collective investment schemes 124,209 - 10,014 134,223
AFS(1) investments - quoted debt
securities 858,279 - - 858,279
AFS(1) investments - unquoted
investments - - 812 812
Total assets 982,488 - 43,387 1,025,875
-------- -------- -------- ----------
Total liabilities - - - -
-------- -------- -------- ----------
(1) Available for sale
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 9 - Financial Instruments and Fair Value Measurement
(continued)
(b) Fair value measurement (continued)
31 December 2021 (audited) Level Level Level Total
1 2 3
EUR000s EUR000s EUR000s EUR000s
Assets
Investment property - - 16,055 16,055
Property held for own use - - 16,390 16,390
Financial assets
Investments held for trading
- collective investment schemes 123,661 - 13,886 137,547
AFS(1) investments - quoted debt
securities 892,495 - - 892,495
AFS(1) investments - unquoted
investments - - 1,220 1,220
Total assets 1,016,156 - 47,551 1,063,707
---------- -------- --------- ----------
Total liabilities - - - -
---------- -------- --------- ----------
(1) Available for sale
A reconciliation of Level 3 fair value measurement of financial
assets is shown in the table below:
30/06/22 30/06/21 31/12/21
(unaudited) (unaudited) (audited)
EUR000s EUR000s EUR000s
Opening balance Level 3 financial assets 47,551 42,159 42,159
Transfers-in - - -
Additions 4,415 930 4,522
Disposals (1,739) - (544)
Revaluation 1,080 - 1,531
Unrealised movements recognised in Consolidated Income Statement (64) 298 (117)
Closing balance Level 3 financial assets 51,243 43,387 47,551
------------ ------------ ----------
Available for sale investments grouped into Level 3 comprise
unquoted securities consisting of a number of small investments as
well as Investment property and property held for own use .
The values attributable to the unquoted investments are derived
from a number of valuation techniques including the net present
value of future cash flows based on operating projections. A change
in one or more of these inputs could have an impact on
valuations.
Investment property and property held for own use were fair
valued by independent external professional valuers at 31 December
2021 (refer to note 13 and note 16 in the Group Annual Report for
year ended 31 December 2021). The valuations at 31 December 2021
were reviewed at the period end 30 June 2022 including informal
discussions with external professional valuers and it was decided
that the valuations for owner occupied property and investment
property would remain unchanged from the 31 December 2021
valuation.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 10 - Taxation
The movement of EUR7,500,000 in the deferred taxation position
from a liability to an asset is primarily a result of the taxation
credit in respect of the unrealised losses on available for sale
investments in 2022.
The net current tax liability at 30 June 2022 represents
corporation taxation due to the Revenue Commissioners in respect of
the 2021 financial year and an accrual for corporation tax payments
in respect of the 2022 financial year. The balance at 31 December
2021 includes a refund receivable from the Revenue Commissioners of
EUR7,006,000, offset by amounts due to the Revenue Commissioners of
EUR2,379,000. The current period movement of EUR7,083,000 in the
current taxation liability is driven primarily by the release of
this receivable following settlement in early 2022. Amounts paid by
the Company in 2022 are largely offset by the current year charge.
The effective tax rate for the period was 12.6% (2021: 12.5%) which
is the best estimate of the weighted average annual income tax rate
expected for the full year.
Note 11 - Other Provisions
Premium Rebates MIICF Contribution MIBI Levy Consequential Payments Total
EUR000s EUR000s EUR000s EUR000s EUR000s
Balance at 1 January 2022 1,221 3,645 6,681 1,945 13,492
Provided/(released) in the six
months (469) 1,890 3,344 - 4,765
Net amounts paid (196) (3,645) (3,342) (456) (7,639)
---------------- ------------------- ---------- ----------------------- --------
Closing balance 30 June 2022 556 1,890 6,683 1,489 10,618
Balance at 1 January 2021 2,027 3,609 6,431 - 12,067
Provided in the six months 4,809 1,901 3,215 13,400 23,325
Net amounts paid (2,495) (3,609) (3,215) - (9,319)
---------------- ------------------- ---------- ----------------------- --------
Closing balance 30 June 2021 4,341 1,901 6,431 13,400 26,073
Premium Rebates
FBD committed to rebating certain elements of Commercial policy
premiums to reflect the changing claims environment and enforced
restrictions as a result of the Covid-19 pandemic. The total amount
of Commercial premium rebates released in the period was EUR469,000
(2021: provision of EUR4,809,000). The remaining EUR556,000
provision represents an estimate of the remaining Commercial
rebates due, expected to settle in advance of 31 December 2022.
MIICF Contribution
The Group's contribution to the Motor Insurers' Insolvency
Compensation Fund "MIICF" for 2022 is based on 2% of its Motor
Gross Written Premium. Payment is expected to be made in the first
half of 2023.
MIBI Levy
The Group's share of the Motor Insurers' Bureau of Ireland
"MIBI" levy for 2022 is based on its estimated market share in the
current year at the Statement of Financial Position date. Payments
of the total amount provided is made in equal instalments
throughout the year.
Consequential Payments
The balance of the provision of EUR1,489,000 is based on the
best estimate of the Consequential Payments provision in respect of
the FSPO decisions and we expect to make the remaining payments
when the Business Interruption test case is closed.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
Note 12 - Transactions with related parties
For the purposes of the disclosure requirements of IAS 24, the
term "key management personnel" (i.e. those persons having
authority and responsibility for planning, directing and
controlling the activities of the Group) comprises the Board of
Directors and Company Secretary of FBD Holdings plc and the members
of the Executive Management Team. Full disclosure in relation to
the compensation of the Board of Directors and details of
Directors' share options are provided in the Report on Directors'
Remuneration in the 2021 Annual Report. An analysis of share-based
payments to key management personnel is also included in Note 35 of
the 2021 Annual Report. The level and nature of related party
transactions in the first half of 2022 are consistent with the
transactions disclosed in the 2021 Annual Report.
Note 13 - Contingent liabilities and contingent assets
There were no contingent liabilities or contingent assets at 30
June 2022, 30 June 2021 or 31 December 2021.
Note 14 - Subsequent events
There have been no subsequent events that would have a material
impact on the interim financial statements.
Note 15 - Information
This half yearly report and the Annual Report for the year ended
31 December 2021 are available on the Company's website at
www.fbdgroup.com.
Note 16 - Approval of Half Yearly Report
The half yearly report was approved by the Board of Directors of
FBD Holdings plc on 4 August 2022.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2022
RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Half Yearly
Financial Report in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007 and the Central Bank of Ireland
(Investment Market Conduct) Rules 2019 and with IAS 34, Interim
Financial Reporting as adopted by the European Union.
We confirm that to the best of our knowledge:
a) the Group condensed set of interim financial statements have
been prepared in accordance with IAS 34 "Interim Financial
Reporting" as adopted by the European Union;
b) the interim management report includes a fair review of the
important events that have occurred during the first six months of
the financial year, and their impact on the condensed set of
interim financial statements and the principal risks and
uncertainties for the remaining six months of the financial
year;
c) the interim management report includes a fair review of
related party transactions that have occurred during the first six
months of the current financial year and that have materially
affected the financial position or the performance of the Group
during that period, and any changes in the related parties'
transactions described in the last Annual Report that could have a
material effect on the financial position or performance of the
Group in the first six months of the current financial year.
On behalf of the Board
Liam Herlihy Tomás Ó Midheach
Chairman Group Chief Executive
4 August 2022
FBD HOLDINGS PLC
APPIX
ALTERNATIVE PERFORMANCE MEASURES (APM's)
The Group uses the following alternative performance measures:
Loss ratio, expense ratio, combined operating ratio, annualised
investment return, net asset value per share, return on equity and
gross written premium.
Loss ratio (LR), expense ratio (ER) and combined operating ratio
(COR) are widely used as a performance measure by insurers, and
give users of the financial statements an understanding of the
underwriting performance of the entity. Investment return is used
widely as a performance measure to give users of financial
statements an understanding of the performance of an entities
investment portfolio. Net asset value per share (NAV) is a widely
used performance measure which provides the users of the financial
statements the book value per share. Return on equity (ROE) is also
a widely used profitability ratio that measures an entity's ability
to generate profits from its shareholder investments. Gross written
premium refers to the revenue of an insurance company and is widely
used across the general insurance industry.
The calculation of the APM's is based on the following data:
Half year Half year Year
ended ended ended 31/12/21
30/06/22 30/06/21 (audited)
(unaudited) (unaudited)
EUR000s EUR000s EUR000s
Loss ratio
Net claims and benefits 80,370 88,980 123,538
Movement in other provisions 5,241 18,516 22,143
------------- -------------
Total claims incurred 85,611 107,496 145,681
Net premium earned 164,466 162,246 334,247
Loss ratio (Total claims incurred/Net
premium earned) 52.1% 66.3% 43.6%
-------------
Expense ratio
Other underwriting expenses 44,311 41,728 93,369
Net premium earned 164,466 162,246 334,247
Expense ratio (Underwriting expenses/Net
premium earned) 26.9% 25.7% 27.9%
------------- ------------- ----------------
Combined operating ratio % %
Loss ratio 52.1% 66.3% 43.6%
Expense ratio 26.9% 25.7% 27.9%
------------- ------------- ----------------
Combined operating ratio (Loss
ratio + Expense ratio) 79.0% 92.0% 71.5%
------------- ------------- ----------------
Investment return recognised in
consolidated income statement (15,227) 10,324 15,679
Investment return recognised in
statement of comprehensive income (63,907) (5,400) (12,202)
------------- ------------- ----------------
Total investment return (79,134) 4,924 3,477
Average investment assets 1,194,183 1,171,620 1,185,036
Actual investment return (Total
investment return/Average investment
assets) -6.6% 0.4% 0.3%
------------- ------------- ----------------
FBD HOLDINGS PLC
APPIX
ALTERNATIVE PERFORMANCE MEASURES (APM's)
Half year Half year Year
ended ended ended 31/12/21
30/06/22 30/06/21 (audited)
(unaudited) (unaudited)
EUR000s EUR000s EUR000s
Net asset value per share (NAV
per share)
Shareholders' funds - equity interests 401,781 398,566 472,382
------------- ------------- ----------------
Number of shares
Closing number of ordinary shares 35,587,279 35,052,462 35,297,201
------------- ------------- ----------------
Cent Cent Cent
Net asset value per share (Shareholders
funds /Closing number of ordinary
shares) 1,129 1,137 1,338
------------- ------------- ----------------
Return on equity EUR000s EUR000s EUR000s
Result for the period 16,548 19,253 96,409
------------- ------------- ----------------
Weighted average equity attributable
to ordinary equity holders of
the parent 437,082 391,274 428,182
Return on equity (Result for the
period/Weighted average equity
attributable to ordinary equity
holders of the parent) 8%(1) 10%(1) 23%
------------- ------------- ----------------
Gross premium written: The total premium on insurance underwritten
by an insurer or reinsurer
during a specified period, before deduction of reinsurance premium.
Underwriting result: Net premium earned less net claims and benefits,
other underwriting expenses and movement in other provisions.
Expense ratio: Underwriting and administrative expenses as a
percentage of net earned premium.
Loss ratio: Net claims incurred as a percentage of net earned
premium .
Combined Operating Ratio: The sum of the loss ratio and expense
ratio. A combined operating ratio below 100% indicates profitable
underwriting results. A combined operating ratio over 100% indicates
unprofitable results.
(1) Annualised
Independent review report to FBD Holdings plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed FBD Holdings plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the half-yearly report of FBD Holdings plc for the six month
period ended 30 June 2022 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Transparency
(Directive 2004/109/EC) Regulations 2007 and the Central Bank
(Investment Market Conduct) Rules 2019.
The interim financial statements, comprise:
-- the condensed consolidated statement of financial position as at 30 June 2022;
-- the condensed consolidated income statement and condensed
consolidated statement of comprehensive income for the period then
ended;
-- the condensed consolidated statement of cash flows for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the condensed consolidated interim financial statements.
The interim financial statements included in the half-yearly
report have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Transparency (Directive 2004/109/EC)
Regulations 2007 and the Central Bank (Investment Market Conduct)
Rules 2019.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (Ireland) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' ("ISRE (Ireland) 2410") issued for use in Ireland. A review
of interim financial information consists of making enquiries,
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 (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.
We have read the other information contained in the half-yearly
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (Ireland) 2410. However future events or
conditions may cause the group to cease to continue as a going
concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half-yearly report, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the
half-yearly report in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007 and the Central Bank (Investment
Market Conduct) Rules 2019. In preparing the half-yearly report
including the interim financial statements, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly report based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Transparency (Directive 2004/109/EC) Regulations 2007 and
the Central Bank (Investment Market Conduct) Rules 2019 and for no
other purpose. We do not, in giving this conclusion, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers
Chartered Accountants
4 August 2022
Dublin
Notes:
(a) The maintenance and integrity of the FBD Holdings plc
website is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since
they were initially presented on the website.
(b) Legislation in the Republic of Ireland governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
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IR BKQBNDBKBFFK
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