REG - FBD Holdings PLC - Half-year Report
05/08/2022 07:00
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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 €19m compared to €22m in 2021.
· GWP of €193m 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 €19m.
· Negative investment returns through the Income Statement of -€15m
and through Other Comprehensive Income of -€64m 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 €1m to
€43m 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
(< €1m) for Team Ireland.
FINANCIAL SUMMARY 30 Jun 2022 30 Jun 2021
€000s €000s
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) €193m (2021: €181m) increased by 3.3%
excluding €5m of pandemic related premium rebates in 2021. Written policy
count increased by 3.1%.
· Underwriting profit of €35m (2021: profit of €13m), equating to a
COR of 79% (2021: 92%), due to positive claims frequency and severity trends,
benign weather and reserve releases of €19m.
· A difficult start to the year for both equity and fixed income
investments has resulted in a loss through the Income Statement of -€15m
(2021: €10m). Significant interest rate increases and spread widening has
reduced bond valuations and led to negative mark to market (MTM) returns of
-€64m (2021: -€5m) 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
(http://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 €0.60 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 €18.9m (2021 profit: €22.0m),
supported by a strong underwriting performance due to positive claims
frequency and severity trends, reserve releases of €19.4m and benign
weather, offset by negative investment returns of €15.2m.
The Group reported an underwriting profit of €34.5m (2021 profit: €13.0m)
and GWP of €192.6m (2021: €181.4m) 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 €1m to €43m 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 €192.6m (2021: €181.4m). Commercial customers'
Covid-19 related rebates of €4.8m 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 €21.9m to €85.6m (2021: €107.5m) with
the main changes relating to reserve releases of €19.4m (2021: €7.2m) and
no requirement for a consequential payments provision in 2022 (2021:
€13.4m).
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 €13.3m to €5.2m (2021: €18.5m),
the reduction primarily relates to the additional provision required in 2021
of €13.4m 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 €250k, 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 €44.3m 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 €34.5m (2021: profit of €13.0m).
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. €1m, 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
€0.9m for the period (2021: loss of €0.1m). Revenue increased by €0.8m
reflecting improved direct debit income and an increase in Life and Pensions
commission reported relative to 2021. FBD Holding Company costs reduced by
€0.1m to €3.1m.
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 €401.8m (December
2021: €472.4m). The decrease in shareholders' funds is driven by the
following:
· Profit after tax for the half year of €16.5m;
· An increase of €1.2m due to share based payments;
· An increase in the defined benefit pension scheme surplus of €3.4m
after tax;
· Dividend payments of €35.9m; and
· Mark to market losses on Available for Sale investments of €55.8m
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 €25m 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
€m % €m %
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
30/06/22 ended
(unaudited) 30/06/21
Notes (unaudited)
€000s €000s €000s
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 1,752 1,127 2,930
customers
2,233 2,038 4,375
- Other financial services income
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
30/06/22 ended 30/06/21 Year ended 31/12/21 (audited)
(unaudited) (unaudited)
Notes
Earnings per share Cent Cent Cent
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 30/06/22 (unaudited) Year ended 31/12/21 (audited)
(unaudited)
€000s €000s €000s
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 €000s €000s €000s
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 €000s €000s €000s
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
30/06/22 (unaudited) ended 31/12/21 (audited)
(unaudited)
€000s €000s €000s
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 4,943 5,434 18,012
and policy administration system
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 dividends paid (35,869) - -
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 to Preference Total
share capital presented as equity Reserves Reserve earnings Ordinary shareholders share capital equity
€000s €000s €000s €000s €000s €000s €000s
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 - - - (35,869) (35,869) - (35,869)
preference shares
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 €0.60 each. The adjustment
to ordinary share capital was €174,000. The movement on the capital reserves
of €105,000 relates to the share premium reserve movement of €2,669,000
net of share based payments reserve movement of €2,564,000. The adjustment
to retained earnings was €279,000.
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 (PAA) Eligibility Subject to specified criteria, the PAA can be adopted as a simplified approach FBD is eligible to apply the Premium Allocation Approach based on the fact IFRS 17.53
to the IFRS 17 general model that the insurance contracts issued have a duration of 12 months or less
Insurance acquisition cash flows for insurance contracts issued Where the coverage period of all contracts within a group is no longer than For all groups, insurance acquisition cash flows will be allocated to related IFRS 17.59 (a)
one year, insurance acquisition cash flows can either be expensed as incurred, groups of insurance contracts and amortised over the coverage period of the
IFRS 17.28A,
or allocated, using a systematic and rational method, to groups of insurance related group. This will avoid timing mismatches between revenue earnings
IFRS 17.B35A
contracts (including future groups containing insurance contracts are expected patterns and the recognition of the associated expenses.
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 (LFRC) adjusted for financial risk and Where there is no significant financing component in relation to the LFRC, or No allowance for interest accretion will be made as the premiums are received IFRS 17.56
time value of money where the time between providing each part of the services and the related within one year 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 (LFIC) adjusted for the time value of money Where claims are expected to be paid within a year of the date that the claim FBD will discount cash flows when calculating the Liability for Incurred IFRS 17.59 (b)
is incurred, it is not required to adjust these amounts for the time value of Claims as the claims are typically open for longer than a 12 month duration.
money.
Insurance finance income and expense There is an option to disaggregate part of the movement in the LFIC resulting The impact of LFIC from changes in discount rates will be captured within the IFRS 17.88
from changes in discount rates and present this in Other comprehensive income OCI, in line with the accounting for assets backing the relevant product
(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
Services
Underwriting Total
€000s €000s €000s
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)
Underwriting
Half year ended 30/06/2021 Financial
Services
Total
€000s €000s €000s
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
Underwriting Total
Year ended 31/12/2021 Financial
Services
€000s €000s €000s
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 ended 30/06/22 (unaudited) Half year Year
ended 30/06/21 ended 31/12/21
(unaudited) (audited)
€000s €000s €000s
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 year Half year
ended 30/06/22 ended 30/06/21
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
€000s €000s €000s €000s €000s €000s
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 year Half year
ended 30/06/22 ended 30/06/21
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
€000s €000s €000s €000s €000s €000s
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 including claims handling expenses Half year Half year
ended 30/06/22 ended 30/06/21
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
€000s €000s €000s €000s €000s €000s
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 expenses Half year Half year
ended 30/06/22 ended 30/06/21
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
€000s €000s €000s €000s €000s €000s
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 ended 30/06/22 Half Year ended 30/06/21 Year
(unaudited) (unaudited) ended 31/12/21
(audited)
Paid: €000s €000s €000s
2021 dividend of 8.4 cent (2020: 0.0 cent) per share on 14% non-cumulative
preference shares of €0.60 each
113 - -
2021 dividend of 4.8 cent (2020: 0.0 cent) per share on 8% non-cumulative
preference shares of €0.60 each
169 - -
2021 final dividend of 100.0 cent (2020: 0.0 cent) per share on ordinary
shares of €0.60 each
35,587 - -
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 ended 30/06/22 (unaudited) Half year ended 30/06/21 (unaudited) Year
ended 31/12/21
(audited)
Number €000s €000s €000s
(i) Ordinary shares of €0.60 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 €0.01 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 €0.60 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 €0.60 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)
€000s €000s €000s
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 €0.01 each that are in issue have no impact on
the earnings per share calculation. The 'A' ordinary shares of €0.01 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 €0.01 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 €0.60 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)
€000s €000s €000s
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)
€000s €000s €000s
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 value Fair Carrying value Fair Carrying value
value
value
value
€000s €000s €000s €000s €000s €000s
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 1 Fair value measurements derived from quoted prices (unadjusted) 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 2 Fair value measurements derived from inputs other than quoted 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 3 Fair value measurements derived from valuation techniques 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 1 Level 2 Level 3 Total
€000s €000s €000s €000s
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 €1,031,262,000 at 31
December 2021 to €983,388,000 at 30 June 2022. This is a result of
negative investment returns in the period partially offset by an additional
€25,000,000 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 €63,907,000 through the
Other Comprehensive Income. The investment returns through the Income
Statement were negative €15,227,000 primarily due to the reduction in the
valuation of the Company's risk asset portfolio.
30 June 2021 (unaudited) Level 1 Level 2 Level 3 Total
€000s €000s €000s €000s
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 1 Level 2 Level 3 Total
€000s €000s €000s €000s
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 - 137,547
13,886
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)
€000s €000s €000s
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 €7,500,000 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 €7,006,000, offset by amounts due to the Revenue
Commissioners of €2,379,000. The current period movement of €7,083,000 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
€000s €000s €000s €000s €000s
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 €469,000 (2021: provision of €4,809,000). The
remaining €556,000 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 €1,489,000 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
APPENDIX
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 (audited)
30/06/22 (unaudited)
30/06/21 (unaudited)
€000s €000s €000s
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 1,194,183 1,171,620 1,185,036
assets
Actual investment return (Total investment return/Average investment assets)
-6.6% 0.4% 0.3%
FBD HOLDINGS PLC
APPENDIX
ALTERNATIVE PERFORMANCE MEASURES (APM's)
Half year Half year Year
ended ended ended 31/12/21 (audited)
30/06/22 (unaudited)
30/06/21 (unaudited)
€000s €000s €000s
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 €000s €000s €000s
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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