REG - FBD Holdings PLC - Half-year Report
11/08/2023 07:00
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RNS Number : 0070J FBD Holdings PLC 11 August 2023
FBD HOLDINGS PLC
Half yearly Report
For the Six Months ended 30 June 2023
KEY HIGHLIGHTS
· Profit before tax of €39m under IFRS 17 compared to €3m in
2022.
· Combined Operating Ratio (COR) of 81% reflecting continued
underwriting discipline and benefitting from positive prior year reserve
development including that related to Business Interruption.
· Special dividend approved of 100 cent per ordinary share.
· Insurance revenue increased by 4.5% to €195m.
· Written policy count increased by 2.6%.
· The Covid-19 related Business Interruption best estimate reduced
by €15m to €27m net of reinsurance since year-end 2022 following
conclusion of the test case.
· Retention levels of existing business increased by 0.2% year on
year.
· Average premium increased by 4.6% across the portfolio. Private
Motor average premium increased by 1.7%.
· Income statement investment return of 0.7%, reflecting positive
investment returns of €8m.
· Our capital position remains strong with a Solvency capital ratio
(SCR) of 217% (unaudited) after allowing for the special dividend, compared to
226% at 31 December 2022.
· Return on equity of 15%.
· IFRS 17 is effective for insurance contract reporting since 1
January 2023 and all comparatives are Half Year 2022 restated, unless
otherwise specified. IFRS 9 has also been adopted.
Half Year ended Half Year ended
30 Jun 2023
30 Jun 2022
FINANCIAL SUMMARY
(restated)
€000s €000s
Gross written premium 206,432 192,432
Insurance revenue 194,540 186,142
Insurance service result 65,403 44,052
Profit before taxation 39,477 2,509
Loss ratio 54.0% 60.9%
Expense ratio 27.1% 25.7%
Combined operating ratio 81.1% 86.6%
Cent Cent
Basic earnings per share 91 6
Net asset value per share 1,274 1,179
A reconciliation between IFRS and non-IFRS
measures is given in the Alternative Performance Measures (APMs) on page 62
and 63.
· The largest element of Insurance revenue is Gross written premium
(GWP) which increased by 7.3% to €206m (2022: €193m). Written policy count
increased by 2.6% with over 70% of the increase coming through our local
offices.
· The Insurance service result increased by €21m to €65m (2022:
€44m). This is made up of increased Insurance revenue of €8m, a reduction
in the Insurance service expense (ISE) of €35m, largely due to a positive
past service benefit including that related to Business Interruption reserve
releases, net of additional reinsurance contract expenses of €22m as
expected reinsurance recoveries on Business Interruption reduced.
· A positive start to the year for both equity and fixed income
investments has resulted in a profit through the Income Statement of €8m
(2022: -€15m) and a profit through Other Comprehensive Income (OCI) of €9m
(2022: -€64m).
· The expense ratio increased to 27.1% (2022: 25.7%), with the
increase primarily reflecting inflationary increases on staff costs, IT and
utility costs. The expense ratio includes Insurance acquisition expenses and
Non-attributable expenses.
· Net Asset Value per share of 1,274 cent has reduced from 1,276
cent (restated) at the end of 2022 as the dividend payments in May were offset
by Half Year profit.
Commenting on these results Tomás Ó Midheach, Group Chief Executive,
said:
"I am pleased to announce a strong profit for the first half of 2023 where the
business continued to grow and deliver for all stakeholders. Supported by a
disciplined underwriting approach, our financial and strategic foundations
remain solid as we continue to drive sustainable profitable growth.
Our ongoing focus and commitment to meeting the needs of our customers and the
provision of a personalised service continue to play a significant role in the
performance of the business. As a consequence, it is most encouraging to see
strong retention of existing customers and continued growth in both customer
and policy count numbers.
Economic conditions remain challenging for businesses and customers alike.
Inflation continues to be experienced in Property and Motor Damage claims.
Injury claims experience has been benign and there were no significant weather
events.
We welcome the final Judgement on the Business Interruption test case. This
ruling allows us to finalise all valid Covid-19 related claims and State
subsidies.
We are supportive of the steps the Government has taken on insurance reform to
reduce claims costs and consequently insurance premiums. The increased
acceptance rates of awards from the Personal Injuries Resolution Board could
indicate the Personal Injury Guidelines are being adopted, although their
ultimate impact will not be known until the challenges make their way through
the courts.
The business remains strongly capitalised with a capital ratio above our
stated risk appetite. As signalled earlier this year and following engagement
with our stakeholders, a special dividend of 100c per ordinary share was
approved by the Board.
I am thankful for the support of the Board and the commitment and hard work by
all the team at FBD. We have demonstrated that our relationship focus strategy
is delivering and our evolving strategy to firmly position FBD for the future
to become a digitally enabled, data enriched organisation delivering an
excellent customer and employee experience, is firmly on track."
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 6167811
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 Financial Conduct 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 €39.5m (2022: €2.5m), supported
by growth in Insurance revenue of €8.4m primarily in local offices, a
reduction in Insurance service expenses of €35.3m mainly related to positive
past service movement including in respect of Covid-19 Business Interruption
(BI) claims, and positive investment returns of €8.4m (2022: -€15.3m).
This was offset by a €7.5m provision for our current estimate of the cost of
a constructive obligation arising from the deduction of State subsidies under
Business Interruption.
The net best estimate in respect of BI reduced by €14.9m to €26.6m since
December 2022. The reduction reflects the final Judgement in respect of the BI
test case.
INSURANCE SERVICE RESULT
Insurance Revenue
Insurance revenue is 4.5% higher at €194.5m (2022: 186.1m). Gross written
premium is the largest part of Insurance revenue and is 7.3% higher than 2022
at €206.4m (2022: €192.4m) with strong increases in Home, Agri and
Commercial Business. Written policy count increased by 2.6% with average
premiums increasing by 4.6% across the portfolio. The retention rate on the
portfolio is higher than the first half of 2022, continuing the trend of
multi-year highs.
Average premium increased by 4.6% across the portfolio reflecting the
inflationary impacts from the economic environment. Private Motor average
premium increased by 1.7% and Commercial Motor increased by 0.7% reflecting
the increasing cost of Motor Damage claims, driven by increases in labour,
parts and paint costs with newer, more technologically advanced vehicles
costing more to repair. Home average premium increased by 9.5% reflecting
increases in property sums insured as inflation continues in construction
costs. Commercial Business average premium increased 5.9% driven by a
combination of sums insured increasing due to inflation in construction costs
and customers increasing liability cover, increasing the exposure and as a
result average premium. Farm average premium increased by 5.0% as a result of
increases in property elements as sums insured increased due to inflation in
construction costs. Average Tractor premium increased by 8.8% due to a higher
proportion of newer tractors, increasing value of existing tractors and
inflation in the cost of Motor Damage claims.
Insurance Service Expenses
Insurance service expenses (ISE) reduced by €35.3m to €92.0m (2022:
€127.3m). The table below splits the ISE into Gross incurred claims, Changes
that relate to past service and Insurance acquisition expenses. The Gross
incurred claims increase of €4.5m reflects increasing costs due to inflation
and increased frequency in Property and Motor Damage. Changes that relate to
past service of €59.4m include prior year reserve movements, gross of
reinsurance, including that related to Business Interruption, as well as other
IFRS 17 specific movements in the Risk Adjustment and Discounting. Insurance
acquisition expenses of €36.6m form part of the ISE and are referenced below
under Expenses.
Insurance Service Expenses Half Year ended 30 June 2023 Half Year ended 30 June 2022
€000 €000
Gross incurred claims (114,744) (110,263)
Changes that relate to past service 59,375 17,005
Insurance acquisition expenses (36,588) (34,064)
Total Insurance service expenses (91,957) (127,322)
Injury notifications increased 4% year on year largely reflecting increased
policy count with a slight increase in frequency. The average cost of injury
claims settlements are down 5% in the last 12 months and continue to be lower
than that experienced pre-Covid. Court backlogs are easing with trial dates
now secured within pre-Covid timeframes. FBD continue to stand over the
Personal Injuries Resolution Board (PIRB) awards made under the Personal
Injury Guidelines.
Claims being settled under the new guidelines continue to be over 40% lower in
value when compared to the previous Book of Quantum. The level of acceptance
of PIRB awards across the market has improved to 48% which is closer to
historic levels. This should reduce the number of cases through the courts
system attracting higher legal costs. It could take a number of years for the
full impact to be known of the new guidelines on claims settled through the
litigation process.
Motor damage notifications increased by 17% as traffic volumes have returned
to pre-Covid levels and settlement costs also increased over 11%. The mix is
changing within the Motor book as more policyholders have taken out
comprehensive cover and inflation on parts and labour is increasing the cost
of repairs. The increasing repair costs appear to be encouraging more people
to claim rather than pay outside of their insurance.
The average cost of property claims increased by 7% due to a change in mix and
inflation, with double digit increases in Escape of Water and Fire costs.
Movement in other provisions increased by €7.2m to €12.4m (2022: €5.2m),
with the increase relating to the provision for our current estimate of the
cost of a constructive obligation arising from the deduction of State
subsidies paid to claimants under Business Interruption of €7.5m. The other
elements of the Movement in other provisions are the Motor Insurers Bureau of
Ireland (MIBI) levy and the Motor Insurers Insolvency Compensation Fund
(MIICF) contribution.
Reinsurance
The reinsurance programme for 2023 was successfully renegotiated with a
similar structure to the expiring programme. The programme saw an increase in
reinsurance rates for property of 8% and casualty of 2% which was a very
positive result in the current environment of hardening rates in the
reinsurance market reflecting geopolitical and macroeconomic shocks. The net
expense from reinsurance contracts held increased by €22.4m as recoverables
from reinsurers reduced by €20.1m, primarily due to expected recoveries on
Business Interruption claims reducing, as well as reinsurance premium
increases year on year of €2.3m.
Weather, Claims Frequency and Large Claims
No significant weather events of note occurred in the first six months of
2023.
We observed an increase in the frequency of injury claims in the first half of
2023 although the frequency of these claims continues to remain significantly
below pre-Covid levels.
Large injury claims, defined as a value greater than €250k, notified to date
in 2023 are lower than the average of previous pre-Covid years.
Expenses
The Group's expense ratio is 27.1% (2022: 25.7%). Insurance acquisition
expenses and Non-attributable expenses are combined to calculate the total
expense cost of €52.8m (2022: €47.8m). The increase is made up of
inflationary impacts on salary costs, IT spend and other utility costs with an
increase in depreciation costs as FBD increase capital investment in the
business. Commission also increased as our partnerships with intermediaries
continue to grow.
INDUSTRY ENVIRONMENT
An appeal to the Supreme Court in respect of the Personal Injury Guidelines
was heard at the end of February 2023. We are awaiting the Judgement, but have
no indication as to the timeline for delivery. There are still a number of
challenges over the constitutionality of the laws underpinning the Guidelines.
Court backlogs have eased, with trial dates secured within pre-Covid
timelines, however, we note Claimants' Solicitors still have a greater say
around the timing of cases being called for trial.
We still await the outcome of the review to determine if the Judiciary or the
Minister of Justice and Equality should be allowed to determine the discount
rate and review it at intervals. The delay in this decision may raise the
potential of a challenge to the discount rate. The Court & Civil Law
(Miscellaneous Provisions) Bill 2022 was signed into law in July 2023. Part 3
of the Act sets out that the indexation of periodic payment orders will no
longer be fixed solely on the Consumer Price Index. Instead, the indexation
rate will be set by ministerial regulations based on a broad range of more
flexible factors. We note these ministerial regulations are yet to be
published with no timeline for introduction indicated.
Amendments to Occupiers Liability Act 1995 were signed into law in July as
part of the Courts and Civil Law (Miscellaneous Provisions) Bill 2022. An
important part of the amendment is the introduction of the concept of
"Voluntary Assumption of Risk", which seeks to broaden the circumstances in
which an occupier may be relieved of liability. For trespassers and
recreational users the amendment seeks to ensure that for an occupier to be
held liable the appropriate test is one of recklessness and not of reasonable
grounds. The amendment also provides that, apart from exceptional
circumstances, where a person enters onto a premises for the purpose of
committing an offence or while on the premises commits an offence, the
occupier will not be liable.
The following legislative changes impacting insurance have been enacted in the
year to date:
· Irish Motor Insurance Database (IMID) - The next phase of the
previously named Motor Third Party Liability project (MTPL) requires sharing
of additional data on insured vehicles and drivers with Regulatory
Authorities. FBD is committed to adhering to industry timelines.
· The Road Traffic Act (RTA) legislation has been extended to
better regulate the use of scramblers/quads and e-bike/e-scooters.
· Assisted Decision Making Act - The Act came into effect on the 26
April 2023. We are working on a number of changes including updating our
Vulnerable Customer Policy, scenario testing, reviewing the customer journey
and training.
· Amendments to Occupiers Liability Act - Changes to amend the
"common duty of care" provisions in the Occupiers' Liability Act 1995.
A number of additional changes impacting insurance are progressing through the
legislative process:
· The Motor Insurance Directive (MID) primarily deals with the
scope of compulsory insurance broadening the potential scenarios where RTA
cover will apply. European council have reached a provisional agreement on the
revision of the MID.
· Flood Insurance Bill - This is a private member bill at early
stage of debate, the purpose of the bill is to provide for fairness in the
market for property insurance, which will force insurers to offer flood cover
to homes and businesses in flood affected areas.
· Protection of the Collective Interests of Consumers Bill 2023 -
Proposed legislation transposes an EU directive and gives designated
"Qualified Entities" the power to take enforcement action on behalf of a group
of consumers whose rights have been breached in Ireland or in another EU
country. This Bill is currently before the Seanad at the 3(rd) stage of
debate.
· Consumer Insurance Contracts (Amendment) Bill 2023 - This Bill is
currently at the second stage of debate in the Seanad and proposes to ban the
use of "clauses of average" in non-life insurance contracts. FBD has provided
its response to Insurance Ireland on the proposed Bill, with the immediate
concerns being this legislation at present does not state the ban is only
applicable to new policies, and should not apply in entirety to commercial
policies. Introduction of a change in legislation in the middle of a policy
term as proposed would have an immediate impact on Insurer reserving and
pricing. A timed amendment has been passed and the Bill will have to be
reintroduced in June 2024 for discussion.
We recently passed the anniversary of the Differential Pricing regulations,
meaning all policies have been through a cycle under the new regulations. We
continue to support the Central Bank of Ireland with their data requests in
this area, and we continue to actively monitor the impact of the changes on
our portfolio.
GENERAL
FBD's Combined Operating Ratio (COR) was 81.1% (2022: 86.6%). The calculation
of COR has changed under IFRS 17 (see APMs).
Investment Return
FBD's actual investment return for the first six months of 2023 was 1.5%
(2022: -6.6%). 0.7% (2022: -1.3%) is recognised in the Consolidated Income
Statement and 0.8% (2022: -5.3%) in the Consolidated Statement of Other
Comprehensive Income (OCI). Interest rates stabilised in the first half of
2023 after extraordinary rate increases in 2022. Although the ECB continued
to raise its benchmark deposit rate during the first 6 months of 2023, these
rises were largely priced into FBD's 5 year benchmark interest rate which
remained largely unchanged over the half year. The pull-to-par effect on the
bond portfolios was the main contributor to OCI returns, also aided with some
spread narrowing for corporate bonds. Bond maturities continue to be
reinvested at higher interest rates, which is gradually increasing the income
earned on these portfolios through the Income Statement.
Risk assets in general posted positive returns for the first six months of the
year. This was despite rising interest rates threatening to cause a
recession in many developed countries. The bankruptcy of Silicon Valley Bank
in the US and the forced takeover of Credit Suisse in Europe threatened to
cause a wider banking crisis, however the situation was very much confined to
US regional banks. Rising interest rates did result in one of the Company's
corporate bonds being downgraded below investment grade. The Company decided
to sell the bond resulting in a realised loss of €0.9m. The Company also
wrote down the value of its investment property by 5% (€0.75m), on advice
from its valuation agent.
Financial Services and Other Group activities
The Group's financial services operations returned a loss before tax of
€0.1m for the period (2022 profit: €0.2m). Other Group activities includes
Holding Company costs which increased by €0.3m to €1.8m due to inflation
as well as additional costs incurred for new reporting requirements.
Profit per share
The diluted profit per share is 89 cent per ordinary share, compared to a
profit of 6 cent per ordinary share in 2022.
Dividend
The Board has approved a special dividend of 100 cent per ordinary share
returning a portion of the excess capital to shareholders. We will continue to
monitor our capital position with the intention of moving closer to our target
capital based on risk appetite.
The special dividend approved by the Board on 10 August 2023 will be paid on
20 October 2023 to the holders of shares on the register on 15 September 2023.
The dividend is subject to withholding tax ("DWT") except for shareholders who
are exempt from DWT and who have furnished a properly completed declaration of
exemption to the Company's Registrar from whom further details may be
obtained.
STATEMENT OF FINANCIAL POSITION
Capital position
Ordinary shareholders' funds at 30 June 2023 amounted to €456.9m (31
December 2022: €454.0m restated). The increase in shareholders' funds is
driven by the following:
· Profit after tax for the half year of €33.3m;
· An increase of €1.4m due to share based payments;
· Mark to market gains on investments in debt securities measured
at FVOCI of €7.6m after tax;
· Net of a decrease in the defined benefit pension scheme surplus
of €0.9m after tax;
· Insurance finance expense for insurance and reinsurance contracts
of €2.3m after tax; and
· Dividend payments of €36.2m in respect of 2022 financial year.
Net asset value per ordinary share is 1,274 cent, compared to 1,276 cent per
share at 31 December 2022.
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. The Company's deposits and cash reduced as the
2022 dividend was paid and €10m was invested in 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 (40% vs 42% at 31 December 2022).
The allocation of the Group's investment assets is as follows:
30 June 2023 31 December 2022
(restated)
€m % €m %
Corporate bonds 575 51% 563 49%
Government bonds 276 24% 271 24%
Deposits and cash 124 11% 175 15%
Other risk assets 92 8% 83 7%
Equities 56 5% 50 4%
Investment property 14 1% 15 1%
1,137 100% 1,157 100%
Solvency
The Half Year Solvency Capital Ratio (SCR) is 217% (unaudited). The audited
SCR at 31 December 2022 was 226%. 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
21 to 28 of the Group's Annual Report for the year ended 31 December 2022 and
continue to apply to the six month period ended 30 June 2023. Inflation is
expected to moderate due to falling energy prices although price levels are
still higher since the Russian invasion of Ukraine, which is difficult for
businesses to afford and poses cost of living challenges for consumers.
The Personal Injury Guidelines are positively impacting the claims environment
although continuing challenges have resulted in delayed settlements that may
result in increased legal costs. A higher degree of uncertainty still exists
in the environment as the claims payment patterns and average settlement costs
of more recent years are a less reliable future indicator and must be
carefully considered by the Actuarial function when arriving at claims
projections. The delays in claim settlements are likely to increase legal
costs further as well as additional inflation.
Substantial inflation in materials and labour continue to impact the Motor and
the Construction industries which has a knock on effect on claims costs. There
is a risk of continually increasing settlement costs in future years and
potentially higher injury claims costs in the near future as pressure mounts
on salary inflation.
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 projected 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 217% (31 December 2022: 226%).
Central banks have continued to raise interest rates in an effort to reduce
stubbornly high inflation. Developed economies have remained surprisingly
resilient to higher interest rates, however, there are real fears that
continued higher rates will push economies into recession and will increase
default rates. Whether monetary policy is sufficient to bring inflation
under control remains a risk. Also, whether the policy response will push
economies into a recession with consequent impact on asset valuations
continues to be a risk. 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. 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 8.
Businesses are refocusing on costs due to the ongoing energy and cost of
living crisis impacted by the war in Ukraine. There is a risk that delaying
the transition to a green economy due to affordability may accelerate the
already evident effects of climate change, with more immediate impacts on
insurers globally such as reinsurance becoming increasingly more expensive and
a reassessment may be required of insurable risks.
The labour market is constantly evolving and changing with certain skills in
high demand making attracting and retaining employees challenging. FBD
continue to embed pandemic-based learnings in the workplace culture including
hybrid working, flexibility, well-being initiatives and are committed to
investing in our employees' on-going skills development to meet future needs.
OUTLOOK
The economic outlook for 2023 is projected to continue on a solid growth path.
Inflation is expected to reduce although high prices and rising interest rates
are still expected to impact growth. Unemployment is expected to remain low
while labour shortages may hold back growth expectations.
The increased acceptance rates of awards from the PIRB could indicate the
Personal Injury Guidelines are gaining more acceptance, although their
ultimate impact will not be known until the challenges make their way through
the courts and experience develops of how the guidelines are implemented.
The Differential Pricing requirements have been in place for over a year and
all policies have gone through a renewal cycle. 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.
Income projections on our bond portfolios have increased in the years ahead
due to the impact of higher reinvestment rates as existing bonds mature.
Our sustainability journey continues as we focus our ESG approach on where we
can have a meaningful impact as we embed and engage the broader company
through the integration of ESG across the business. We are currently assessing
the gaps to delivering the multiple reporting and disclosure requirements and
putting plans and processes in place to address. We are investigating Science
Based Targets in order to provide a benchmark for future decarbonisation
improvements and we have submitted an application to sign up to the UN
Principles for Sustainable Insurance.
FBD offers a valuable proposition to all our customers and they continue to
stay with us in ever increasing numbers which is testament to our committed
employees keeping the customer at the heart of what we do. We will continue to
strengthen our relationship focus and extend our digital enablement as our
strategy evolves. Despite the headwinds of inflation and increasing interest
rates affecting all businesses, customers and employees, FBD is profitable and
growing and continuing to deliver for all our stakeholders.
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the half year ended 30 June 2023
( ) Half year Half year Year
ended
30/06/23 ended ended
( ) 30/06/22 31/12/22
Notes (restated)(1) (restated)(1)
( ) ( ) €000s €000s €000s
( ) ( ) ( ) ( ) ( )
Insurance revenue 6(a) 194,540 186,142 379,697
Insurance service expenses 6(c) (91,957) (127,322) (201,838)
( )
Reinsurance expense (19,540) (17,232) (34,814)
Change in amounts recoverable from reinsurers for incurred claims (17,640) 2,464 (11,941)
Net expense from reinsurance contracts held 6(a) (37,180) (14,768) (46,755)
( )
Insurance service result 6(a) 65,403 44,052 131,104
( )
Total investment return 7 8,389 (15,281) (10,753)
Finance expense from insurance contracts issued 5 (1,823) (6,213) (8,731)
Finance (expense)/income from reinsurance contracts held 5 (281) 1,431 1,389
Net insurance finance expenses (2,104) (4,782) (7,342)
Net insurance and investment result 71,688 23,989 113,009
Other finance costs (1,272) (1,272) (2,559)
Non-attributable expenses 6(c) (16,165) (13,780) (33,048)
Movement in other provisions 16 (12,439) (5,241) (8,403)
Revenue from contracts with customers 6(a) 1,592 1,753 3,173
Financial services income and expenses (3,381) (2,940) (6,045)
Revaluation of property, plant and equipment 6(a) (546) - (287)
Profit before taxation 39,477 2,509 65,840
Income taxation charge 8 (6,170) (327) (8,284)
Profit for the period 33,307 2,182 57,556
Attributable to:
Equity holders of the parent 33,307 2,182 57,556
( )
( ) Half year Half year Year
ended
30/06/23 ended ended
( ) 30/06/22 31/12/22
Notes (restated) (restated)
Earnings per share ( ) Cent Cent Cent
( )
Basic 9 91 6 161
Diluted(2) 9 89 6 157
(1) On 1 January 2023, IFRS 17 'Insurance Contracts' became effective,
replacing IFRS 4 'Insurance Contacts'. The Group elected, as it met the
criteria for a temporary exemption, to defer the application of IFRS 9
'Financial Instruments' (replacing IAS 39) until 1 January 2023. See note 3
for updated accounting policies and note 4 for transitional impact.
(2) 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 (UNAUDITED)
For the half year ended 30 June 2023
Half year Half year Year
ended
30/06/23 ended ended
30/06/22 31/12/22
Notes (restated)(1) (restated)(1)
€000s €000s €000s
Profit for the period 33,307 2,182 57,556
Items that will or may be reclassified to profit or loss in subsequent
periods:
Movement on investments in debt securities measured at FVOCI 7 7,720 (63,842) (89,761)
Movement transferred to the Consolidated Income Statement on disposal during
the period
7 965 (11) (41)
Finance (expense)/income from insurance contracts issued 5 (5,096) 35,670 42,388
Finance income/(expense) from reinsurance contracts held 5 2,400 (7,832) (8,202)
Income tax relating to these items (749) 4,500 6,951
Items that will not be reclassified to profit or loss:
Re-measurements of post-employment benefit obligations, before tax (999) 3,899 (2,272)
Revaluation of owner occupied property - - 5
Income tax relating to these items 125 (485) 282
Other comprehensive income/(expense) after taxation 4,366 (28,101) (50,650)
Total comprehensive income/(expense) for the period 37,673 (25,919) 6,906
Attributable to:
Equity holders of the parent 37,673 (25,919) 6,906
(1) On 1 January 2023, IFRS 17 'Insurance Contracts' became effective,
replacing IFRS 4 'Insurance Contacts'. The Group elected, as it met the
criteria for a temporary exemption, to defer the application of IFRS 9
'Financial Instruments' (replacing IAS 39) until 1 January 2023. See note 3
for updated accounting policies and note 4 for transitional impact.
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Financial Position (UNAUDITED)
At 30 June 2023
Assets Half year Half year Year
ended
Notes
30/06/23 ended ended
30/06/22 31/12/22
(restated)(1) (restated)(1)
€000s €000s €000s
Cash and cash equivalents 12 113,833 148,771 165,240
Equity and debt instruments at fair value through profit or loss 10 149,147 131,583 134,094
Debt instruments at fair value through other comprehensive income
10 851,124 851,805 833,865
Deposits 10 10,000 20,000 10,000
Investment assets 1,010,271 1,003,388 977,959
Other receivables 11 23,689 20,161 15,148
Loans 10 506 520 568
Reinsurance contract assets 15 120,234 158,069 136,657
Retirement benefit surplus 20 7,500 14,800 8,499
Intangible assets 19,083 10,074 14,082
Policy administration system 21,530 27,081 23,683
Investment property 14,304 16,053 15,052
Right of use assets 3,896 4,683 4,290
Property, plant and equipment 22,442 23,439 22,745
Deferred taxation asset 17 2,924 2,174 3,629
Total assets 1,360,212 1,429,213 1,387,552
(1) On 1 January 2023, IFRS 17 'Insurance Contracts' became effective,
replacing IFRS 4 'Insurance Contacts'. The Group elected, as it met the
criteria for a temporary exemption, to defer the application of IFRS 9
'Financial Instruments' (replacing IAS 39) until 1 January 2023. See note 3
for updated accounting policies and note 4 for transitional impact.
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Financial Position (UNAUDITED) (continued)
At 30 June 2023
Liabilities and equity Half year Half year Year
ended
30/06/23 ended ended
30/06/22 31/12/22
(restated)(1) (restated)(1)
Notes €000s €000s €000s
Liabilities
Current taxation liabilities 1,650 13,520 2,399
Other payables 18 39,875 30,805 35,628
Other provisions 16 16,750 10,062 11,103
Reinsurance contract liabilities 15 656 458 610
Insurance contract liabilities 15 787,522 897,112 826,621
Lease liabilities 4,214 4,974 4,600
Subordinated debt 49,690 49,632 49,662
Total liabilities 900,357 1,006,563 930,623
Equity
Called up share capital presented as equity 13 21,745 21,583 21,583
Capital reserves 33,257 28,738 30,192
Retained earnings 444,777 400,346 450,318
Other reserves 14 (42,847) (30,940) (48,087)
Shareholders' funds equity interests 456,932 419,727 454,006
Preference share capital 2,923 2,923 2,923
Total equity 459,855 422,650 456,929
Total liabilities and equity 1,360,212 1,429,213 1,387,552
(1) On 1 January 2023, IFRS 17 'Insurance Contracts' became effective,
replacing IFRS 4 'Insurance Contacts'. The Group elected, as it met the
criteria for a temporary exemption, to defer the application of IFRS 9
'Financial Instruments' (replacing IAS 39) until 1 January 2023. See note 3
for updated accounting policies and note 4 for transitional
impact.
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Cash Flows (UNAUDITED)
For the half year ended 30 June 2023
Half year Half year ended 30/06/22 Year
ended
30/06/23 (restated)(1) ended 31/12/22 (restated)(1)
€000s €000s €000s
Cash flows from operating activities
Profit before taxation 39,477 2,509 65,840
Adjustments for:
Movement on investments classified as fair value (3,096) 20,663 19,616
Interest and dividend income (8,809) (5,895) (11,510)
Depreciation/amortisation of property, plant and equipment, intangible assets
and policy administration system
5,648 4,943 13,239
Depreciation on right of use assets 394 395 788
Share based payment expense 1,419 1,227 2,681
Fair value movement on investment property 748 1 1,003
Revaluation of property, plant and equipment 546 - 287
Operating cash flows before movement in working capital 36,327 23,843 91,944
Movement on insurance and reinsurance contract liabilities/assets (25,326) 45,459 2,879
Movement on other provisions 5,397 (2,209) (1,168)
Movement on other receivables (6,429) (4,266) 1,274
Movement on other payables 5,773 2,797 9,023
Interest on lease liabilities 92 106 216
Cash generated from operations 15,834 65,730 104,168
Interest and dividend income received 6,694 5,909 10,998
Income taxes (paid)/refunded (6,836) 4,706 (12,603)
Net cash generated from operating activities 15,692 76,345 102,563
Cash flows from investing activities
Purchase of investments classified as fair value through other comprehensive (92,658) (166,911) (238,126)
income
Sale of investments classified as fair value through other comprehensive 82,127 142,007 203,750
income
Purchase of investments classified as fair value through profit or loss (24,503) (16,154) (25,312)
Sale of investments classified as fair value through profit or loss 14,503 4,415 13,573
Purchase of property, plant and equipment (1,383) (453) (1,288)
Additions to policy administration system (1,297) (2,021) (4,566)
Purchase of intangible assets (6,056) (1,873) (6,987)
Movement on loans 62 40 (8)
Additional deposits invested with banks - (20,000) (10,000)
Net cash used in investing activities (29,205) (60,950) (68,964)
Cash flows from financing activities
Ordinary and preference dividends paid (36,166) (35,870) (35,870)
Interest payment on subordinated debt (1,250) (1,250) (2,500)
Principal elements of lease payments (478) (480) (965)
Net cash used in financing activities (37,894) (37,600) (39,335)
Net decrease in cash and cash equivalents (51,407) (22,205) (5,736)
Cash and cash equivalents at the beginning of the period 165,240 170,976 170,976
Cash and cash equivalents at the end of the period 113,833 148,771 165,240
(1) On 1 January 2023, IFRS 17 'Insurance Contracts' became effective,
replacing IFRS 4 'Insurance Contacts'. The Group elected, as it met the
criteria for a temporary exemption, to defer the application of IFRS 9
'Financial Instruments' (replacing IAS 39) until 1 January 2023. See note 3
for updated accounting policies and note 4 for transitional
impact.
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Changes in Equity (UNAUDITED)
For the half year ended 30 June 2023
Call up share capital presented as equity Capital reserve Retained earnings Other reserves Attributable to ordinary shareholders Preference share capital Total equity
€000s €000s €000s €000s €000s €000s €000s
As at 31 December 2022, as previously reported 21,583 30,192 370,258 755 422,788 2,923 425,711
Impact of application of IFRS 17 (Note 4) - - 10,518 20,984 31,502 - 31,502
Impact of application IFRS 9 (Note 4) - - 69,542 (69,826) (284) - (284)
Restated balance at 1 January 2023 21,583 30,192 450,318 (48,087) 454,006 2,923 456,929
Profit after taxation - - 33,307 - 33,307 - 33,307
Other comprehensive (expense)/income for the period - - (874) 5,240 4,366 - 4,366
Total comprehensive income for the period - - 32,433 5,240 37,673 - 37,673
Dividends paid and approved on ordinary and preference shares - - (36,166) - (36,166) - (36,166)
Issue of ordinary shares* 162 1,646 (1,808) - - - -
Recognition of share based payments - 1,419 - - 1,419 - 1,419
Balance at 30 June 2023 21,745 33,257 444,777 (42,847) 456,932 2,923 459,855
As at 31 December 2021, as previously reported 21,409 27,406 422,815 752 472,382 2,923 475,305
Impact of initial application of IFRS 17 (Note 4) - - 17,190 (8,928) 8,262 - 8,262
Impact of initial application IFRS 9 (Note 4) - - (9,106) 8,751 (355) - (355)
Restated balance at 1 January 2022 21,409 27,406 430,899 575 480,289 2,923 483,212
Profit after taxation - - 2,182 - 2,182 - 2,182
Other comprehensive income/(expense) for the period - - 3,414 (31,515) (28,101) - (28,101)
Total comprehensive income/(expense) for the period - - 5,596 (31,515) (25,919) - (25,919)
Dividends paid and approved on ordinary and preference shares - - (35,870) - (35,870) - (35,870)
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 28,738 400,346 (30,940) 419,727 2,923 422,650
* In 2022 and 2023 new ordinary shares were
allotted to employees of FBD Holdings plc as part of the performance share
awards scheme.
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Changes in Equity (UNAUDITED) (continued)
For the half year ended 30 June 2023
Call up share capital presented as equity Capital reserve Retained earnings Other reserves Attributable to ordinary shareholders Preference share capital Total equity
€000s €000s €000s €000s €000s €000s €000s
As at 31 December 2021, as previously reported 21,409 27,406 422,815 752 472,382 2,923 475,305
Impact of initial application of IFRS 17 (Note 4) - - 17,190 (8,928) 8,262 - 8,262
Impact of initial application IFRS 9 (Note 4) - - (9,106) 8,751 (355) - (355)
Restated balance at 1 January 2022 21,409 27,406 430,899 575 480,289 2,923 483,212
Profit after taxation - - 57,556 - 57,556 - 57,556
Other comprehensive expense for the year - - (1,988) (48,662) (50,650) - (50,650)
Total comprehensive income/(expense) for the year - - 55,568 (48,662) 6,906 - 6,906
Dividends paid and approved on ordinary and preference shares - - (35,870) - (35,870) - (35,870)
Issue of ordinary shares* 174 105 (279) - - - -
Recognition of share based payments - 2,681 - - 2,681 - 2,681
Balance at 31 December 2022 21,583 30,192 450,318 (48,087) 454,006 2,923 456,929
* In 2022 new ordinary shares were allotted to
employees of FBD Holdings plc as part of the performance share awards
scheme.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
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 2023 does
not constitute the statutory financial statements of the Company;
· the statutory financial statements for the financial year ended
31 December 2022 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 2022; 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.
PricewaterhouseCoopers, Chartered Accountants and Statutory Audit Firm, have
performed an interim 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' on the interim financial information for the period
ended 30 June 2023. As part of this review they also reviewed the IFRS 17 and
IFRS 9 transition impacts on the comparative information.
Note 2 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 2023 and projections for 2024
which reflect the latest assumptions used by the business. The economic
environment may impact on premiums including exposures, new business and
retention levels. 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 Own Risk
Solvency Assessment (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. 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.
Note 3 Summary of significant 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.
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 policies
The below accounting policies have been updated for the application of IFRS 17
and IFRS 9 (see note 4). Apart from the updated accounting policies included
hereafter to address IFRS 17 and IFRS 9, the methods of computation used by
the Group to prepare the interim financial statements for the six month period
ended 30 June 2023 are the same as those used to prepare the Group Annual
Report for the year ended 31 December 2022 (reference Note 3 of FBD Holdings
plc Annual Report 2022). Other than the adoption of IFRS 17 and IFRS 9 there
are no other impacts from the adoption of other standards and amendments.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
E) Insurance contracts
I. Definition and classification
The Group issues insurance contracts in the normal course of business, under
which it accepts significant insurance risk from its policyholders. As a
general guideline, the Group determines whether it has significant insurance
risk by comparing benefits payable after an insured event with benefits
payable if the insured event did not occur. Insurance contracts can also
transfer financial risk. The Group issues non-life insurance to individuals
and businesses. Non-life insurance products offered include Motor, Property,
Liability and Personal Accident which are segmented into Motor and Non-Motor
for reporting. These products offer protection of policyholder's assets and
indemnification of other parties that have suffered damage as a result of an
insured event occurring.
In the normal course of business, the Group uses reinsurance to mitigate its
risk exposures. A reinsurance contract transfers significant risk if it
transfers substantially all the insurance risk resulting from the insured
portion of the underlying insurance contracts, even if it does not expose the
reinsurer to the possibility of a significant loss.
II. Insurance and reinsurance contracts accounting treatment
Separating components from insurance and reinsurance contract
Before the Group accounts for an insurance contract based on the guidance of
IFRS 17, it assesses whether the contract contains distinct components which
must be accounted for under another IFRS instead of under IFRS 17. After
separating any distinct components, the Group applies IFRS 17 to all remaining
components of the insurance contract. Currently, engineering inspection risk,
which is not material, is the only non-insurance component which forms part of
any insurance contracts that requires unbundling.
Level of aggregation/Unit of account
The Group manages insurance contracts issued by product lines within an
operating segment, 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. These groups represent
the level of aggregation at which insurance contracts are initially recognised
and measured.
The profitability of groups of contracts is assessed by actuarial valuation
models that take into consideration existing and new business. FBD assumes
that no contracts in the portfolio are onerous at initial recognition unless
facts and circumstances indicate otherwise. By the nature of the insurance
risks covered by the Group, all of the contracts issued have a maximum claim
pay-out potential that is greater than the premium received. On this basis
there are currently no contracts grouped into 'no significant possibility of
becoming onerous'.
Recognition, modification and de-recognition
The Group recognises groups of insurance contracts it issues from the earliest
of the following:
· the beginning of the coverage period of the group of contracts;
· the date when the first payment from a policyholder in the group
is due or when the first payment is received if there is no due date; and
· when the Group determines that a group of contracts becomes
onerous.
Only contracts that meet the recognition criteria by the end of the reporting
period are included in the groups. When contracts meet the recognition
criteria in the groups after the reporting date, they are added to the groups
in the reporting period in which they meet the recognition criteria, subject
to the annual cohorts' restriction. Composition of the groups is not
reassessed in subsequent periods.
The Group derecognises insurance contracts when:
· the rights and obligations relating to the contract are
extinguished (i.e. discharged, cancelled or expired)
or
· the contract is modified such that the modification results in a
change in the measurement model or the applicable standard for measuring a
component of the contract, substantially changes the contract boundary, or
requires the
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
E) Insurance contracts (continued)
II. Insurance and reinsurance contracts accounting treatment
(continued)
Recognition, modification and de-recognition (continued)
modified contract to be included in a different group. In such cases, the
Group derecognises the initial contract and recognises the modified contract
as a new contract.
When a modification is not treated as a derecognition, the Group recognises
amounts paid or received for the modification with the contract as an
adjustment to the relevant liability for remaining coverage (LRC).
Contract boundary
The Group includes in the measurement of a group of insurance contracts all
the future cash flows within the boundary of each contract in the group. Cash
flows are within the boundary of an insurance contract if they arise from
substantive rights and obligations that exist during the reporting period in
which the Group can compel the policyholder to pay the premiums, or in which
the Group has a substantive obligation to provide the policyholder with
insurance contract services. A substantive obligation to provide insurance
contract services ends when the Group has the practical ability to reassess
the risks of the particular policyholder and, as a result, can set a price or
level of benefits that fully reflects those risks.
Cash flows outside the insurance contracts boundary relate to future insurance
contracts and are recognised when those contracts meet the recognition
criteria.
Initial and subsequent measurement - groups of contracts measured under the
PAA
The Group applies the premium allocation approach (PAA) to all the insurance
contracts that it issues and reinsurance contracts that it holds. The PAA is
an optional simplified measurement model in IFRS 17 that is available for
insurance and reinsurance contracts that meet the eligibility criteria.
The Group is eligible to apply the PAA because the following criteria are met
at initial recognition:
· insurance contracts and losses-occurring reinsurance contracts:
The coverage period of each contract in the group is one year or less.
· risk-attaching reinsurance contracts: The Group reasonably
expects that the resulting measurement of the asset for remaining coverage
would not differ materially from the measurement that would be produced
applying the general measurement model (GMM).
The estimates of future cash flows:
· are based on a probability weighted mean of the full range of
possible outcomes;
· are determined from the perspective of the Group, provided the
estimates are consistent with observable market prices for market variables;
and
· reflect conditions existing at the measurement date.
The ultimate cost of outstanding claims is estimated by using a range of
standard actuarial claims projection techniques, such as, but not limited to,
Chain Ladder, Bornheutter-Ferguson, Initial Expected Loss Ratio and
frequency-severity methods.
The main assumption underlying these techniques is that a group's past claims
development experience can be used to project future claims development and
hence ultimate claims costs. These methods extrapolate the development of paid
and incurred losses, average costs per claim (including claims handling
costs), and claim numbers based on the observed development of earlier years
and expected loss ratios. Historical claims development is mainly analysed by
accident years, but can also be further analysed by significant business lines
and claim types. Large claims are separately addressed, separately projected
in order to reflect their future development. Explicit assumptions are made
regarding future rates of claims inflation or loss ratios. Additional
qualitative judgement is used to assess the extent to which past trends may
not apply in future, (e.g., to reflect one-off occurrences, changes in
external or market factors such as public attitudes to claiming, economic
conditions, levels of claims inflation, judicial decisions and legislation, as
well as internal factors such as portfolio mix, policy features and claims
handling procedures) in order to arrive at the estimated ultimate cost of
claims that present the probability weighted expected value outcome from the
range of possible outcomes, taking account of all the uncertainties involved.
In its claims incurred assessments, the Group uses internal and market data.
Internal data is derived mostly from the Group's claims reports. This
information is used to develop scenarios related to the latency of claims that
are used for the projections of the ultimate number of claims.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
E) Insurance contracts (continued)
II. Insurance and reinsurance contracts accounting treatment
(continued)
Initial and subsequent measurement - groups of contracts measured under the
PAA (continued)
Some of the insurance contracts that have been written in the property line of
business permit the Group to sell property acquired in settling a claim. The
Group also has the right to pursue third parties for payment of some or all
costs. Estimates of salvage recoveries and subrogation reimbursements are
considered as an allowance in the measurement of ultimate claims costs.
Other key circumstances affecting the reliability of assumptions include
delays in settlement and inflation rates.
An explicit risk adjustment for non-financial risk is estimated separately
from the other estimates. For contracts measured under the PAA, unless the
contracts are onerous, the explicit risk adjustment for non-financial risk is
only estimated for the measurement of the liability for incurred claims (LIC).
The risk adjustment for non-financial risk is applied to the present value of
the estimated future cash flows and reflects the compensation the Group
requires for bearing the uncertainty about the amount and timing of the cash
flows from non-financial risk as the Group fulfils insurance contracts. The
Group does not disaggregate the change in risk adjustment for non-financial
risk between a financial and non-financial portion and includes the entire
change as part of the insurance service result. Methods and assumptions used
to determine the risk adjustment for non-financial risk are discussed in
accounting policy U.
The Group does not adjust the LRC for insurance contracts issued and the
remaining coverage for reinsurance contracts held for the effect of the time
value of money as insurance premiums are due within the coverage period of
contracts, which is one year or less. The estimates of future cash flows
related to incurred claims are adjusted using the current discount rates to
reflect the time value of money and the financial risks related to those cash
flows, to the extent not included in the estimates of cash flows. The discount
rates reflect the characteristics of the cash flows arising from the groups of
insurance contracts, including timing, currency and liquidity characteristics
of the insurance contracts. The determination of the discount rate that
reflects the characteristics of the cash flows and liquidity characteristics
of the insurance contracts requires significant judgement and estimation.
The Group estimates certain fulfilment cash flows (FCF) at the portfolio level
or higher and then allocates such estimates to groups of contracts.
Insurance acquisition cash flows
The Group includes the following acquisition cash flows within the insurance
contract boundary that arise from selling, underwriting and starting a group
of insurance contracts and that are:
· costs directly attributable to individual contracts and groups of
contracts; and
· costs directly attributable to the portfolio of insurance
contracts to which the group belongs, which are allocated on a reasonable and
consistent basis to measure the group of insurance contracts.
For all groups, insurance acquisition cash flows will be allocated to related
groups of insurance contracts and amortised over the coverage period of the
related group.
Cash flows that are not directly attributable to a portfolio of insurance
contracts, such as some product development and training costs, are recognised
in non-attributable expenses as incurred.
Initial measurement
The carrying amount of a group of insurance contracts issued at the end of
each reporting period is the sum of:
· the LRC; and
· the LIC, comprising the FCF related to past service allocated to
the group at the reporting date.
For insurance contracts issued, on initial recognition, the Group measures the
LRC at the amount of premiums received, less any acquisition cash flows paid
and any amounts arising from the derecognition of the prepaid acquisition cash
flows asset.
The Group estimates the LIC as the FCF related to incurred claims.
Where facts and circumstances indicate that contracts are onerous at initial
recognition, the Group performs additional analysis to determine if a net
outflow is expected from the contract. Such onerous contracts are separately
grouped from other contracts
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
E) Insurance contracts (continued)
II. Insurance and reinsurance contracts accounting treatment
(continued)
Initial and subsequent measurement - groups of contracts measured under the
PAA (continued)
and the Group recognises a loss in the income statement for the net outflow,
resulting in the carrying amount of the liability for the group being equal to
the FCF. A loss component is established by the Group for the LRC for such
onerous groups depicting the losses recognised and included in the LRC.
Subsequent measurement
For insurance contracts issued, at each of the subsequent reporting dates, the
LRC is:
· increased for premiums received in the period;
· decreased for insurance acquisition cash flows paid in the
period;
· decreased for the amounts recognised as insurance revenue for the
services provided in the period; and
· increased for the amortisation of insurance acquisition cash
flows in the period recognised as insurance service expenses.
The FCF relating to incurred claims, therefore the LIC, is updated by the
Group for current assumptions at the end of every reporting period, using the
current estimates of the amount, timing and uncertainty of future cash flows
and of discount rates.
If a group of contracts becomes onerous, the Group increases the carrying
amount of the LRC to the amounts of the FCF determined under the GMM with the
amount of such an increase recognised in insurance service expenses.
Subsequently, the Group amortises the amount of the loss component within the
LRC by decreasing insurance service expenses. The loss component amortisation
is based on the passage of time over the remaining coverage period of
contracts within an onerous group. If facts and circumstances indicate that
the expected profitability of the onerous group during the remaining coverage
has changed, then the Group remeasures the FCF by applying the GMM and
reflects changes in the FCF by adjusting the loss component as required until
the loss component is reduced to zero.
Reinsurance contracts held
Reinsurance contracts held are measured on the same basis as insurance
contracts, except:
· They are adapted to reflect the features of reinsurance contracts
that differ from insurance contracts;
· That references to onerous contracts refer to contracts on which
there is a net gain on initial recognition. For some groups of reinsurance
contracts held, a group can comprise a single contract. By the nature of the
Group's reinsurance treaties currently in effect, there are no reinsurance
contracts held that are a net gain on initial recognition nor that are deemed
as having no significant risk of being a gain.
· The Group recognises a group of reinsurance contracts held it has
entered into from the earlier of the following:
o the beginning of the coverage period of the group of reinsurance contracts
held. (However, the Group delays the recognition of a group of reinsurance
contracts held that provide proportionate coverage until the date any
underlying insurance contract is initially recognised, if that date is later
than the beginning of the coverage period of the group of reinsurance
contracts held); and
o the date the Group recognises an onerous group of underlying insurance
contracts if the Group entered into the related reinsurance contract held in
the group of reinsurance contracts held at or before that date.
· The risk adjustment represents the amount of risk being
transferred by the Group to the reinsurer.
· That cash flows are within the contract boundary if they arise
from substantive rights and obligations of the Group that exist during the
reporting period in which the Group is compelled to pay amounts to the
reinsurer or in which the Group has a substantive right to receive services
from the reinsurer.
· The excess of loss reinsurance contracts held provides coverage
for claims incurred during an accident year.
· All cash flows arising from claims incurred and expected to be
incurred in the accident year are included in the measurement of the
reinsurance contracts held. Some of these contracts may include reinstatement
reinsurance premiums, which are guaranteed per the contractual arrangements
and are thus within the respective reinsurance contracts' boundaries.
· In the measurement of reinsurance contracts held, the probability
weighted estimates of the present value of future cash flows include the
potential credit losses and other disputes of the reinsurer to reflect the
non-performance risk of the reinsurer.
· On initial recognition, the Group measures the remaining coverage
at the amount of ceding premiums paid. The carrying amount of a group of
reinsurance contracts held at the end of each reporting period is the sum of:
o the remaining coverage; and
o the incurred claims, comprising the FCF related to past service allocated
to the group at the reporting date.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
E) Insurance contracts (continued)
II. Insurance and reinsurance contracts accounting treatment
(continued)
Reinsurance contracts held (continued)
· Instead of at initial recognition, where the Group recognises a
loss on initial recognition of an onerous group of underlying insurance
contracts or when further onerous underlying insurance contracts are added to
a group, the Group establishes a loss-recovery component of the asset for
remaining coverage for a group of reinsurance contracts held depicting the
recovery of losses. The loss-recovery component adjusts the carrying amount of
the asset for remaining coverage.
· At each of the subsequent reporting dates, the remaining coverage
is:
o increased for ceding premiums paid in the period; and
o decreased for the amounts of ceding premiums recognised as reinsurance
expenses for the services received in the period.
· Instead of a loss component, the loss-recovery component adjusts
the carrying amount of the asset for remaining coverage. Where a loss-recovery
component has been established, the Group subsequently reduces the loss
recovery component to zero in line with reductions in the onerous group of
underlying insurance contracts in order to reflect that the loss-recovery
component shall not exceed the portion of the carrying amount of the loss
component of the onerous group of underlying insurance contracts that the
entity expects to recover from the group of reinsurance contracts held.
Methods used and judgements applied in determining the IFRS 17 transition
amounts
The Group has been able to apply the fully retrospective approach with the
exception of using the modified retrospective approach for the choice of
initial recognition yield curves for underwriting years 2015 and prior.
To the extent that the Group did not have reasonable and supportable
information to determine discount rates applicable on the date of initial
recognition of the group of contracts, the Group estimated the discount rates
using an observable yield curve.
III. Amounts recognised in comprehensive income
Insurance revenue
The insurance revenue for the period is the amount of expected premium
receipts allocated to the period. The Group allocates the expected premium
receipts to each period of insurance contract services on the basis of the
passage of time. But if the expected pattern of release of risk during the
coverage period differs significantly from the passage of time, then the
allocation is made on the basis of the expected timing of incurred insurance
service expenses.
The Group changes the basis of allocation between the two methods above as
necessary, if facts and circumstances change. The change is accounted for
prospectively as a change in accounting estimate.
For the periods presented, all revenue has been recognised on the basis of the
passage of time.
Insurance service expenses
Insurance service expenses include the following:
· incurred claims and benefits excluding investment components;
· other incurred insurance acquisition expenses;
· amortisation of insurance acquisition cash flows;
· changes that relate to past service (i.e. changes in the FCF
relating to the LIC); and
· changes that relate to future service (i.e. losses/reversals of
onerous groups of contracts from changes in the loss components).
For the contracts measured under the PAA, amortisation of insurance
acquisition cash flows is based on the passage of time.
Net income /(expense) from reinsurance contracts held
The Group presents separately on the face of the income statement, the amounts
expected to be recovered from reinsurers and the reinsurance expense.
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. Ceding commissions that are not contingent on
claims of the underlying contracts issued reduce ceding premiums and are
accounted for as part of reinsurance expenses.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
E) Insurance contracts (continued)
II. Insurance and reinsurance contracts accounting treatment
(continued)
Finance income/ (expense) from insurance contracts issued
Insurance finance income or expense comprise the change in the carrying amount
of the group of insurance contracts arising from:
· interest accreted on the LIC; and
· the effect of changes in interest rates and other financial
assumptions.
The Group disaggregates insurance finance income or expenses on insurance
contracts issued between the income statement and the statement of
comprehensive income. The impact of changes in market interest rates on the
value of the insurance contract liabilities are reflected in the OCI in order
to minimise accounting mismatches between the accounting for financial assets
and insurance assets and liabilities. The Group's financial assets backing the
insurance portfolios are predominantly measured at fair value through other
comprehensive income (FVOCI).
K) Financial instruments
a) Recognition, classification and measurement
Financial assets and financial liabilities are recognised in the Statement of
Financial Position when, and only when, the Group becomes party to the
contractual provisions of the instrument.
The Group classifies its financial assets, subsequent to initial recognition,
at either:
· amortised cost;
· fair value through other comprehensive income (FVOCI); or
· fair value through profit and loss (FVTPL).
The Group determines the appropriate classification based on:
(i) the business model for managing the financial assets: how the Group
manages its financial assets in order to generate cash flows-either by
collecting contractual cash flows, selling the asset or both; and
(ii) the contractual cash flow characteristics of the financial asset: the
Solely Payments of Principal and Interest (SPPI) test - whether the
contractual terms of the financial asset give rise to, on specified dates,
cash flows that are solely payments of principal and interest.
A financial asset is measured at amortised cost if both the following
conditions are met:
(i) the financial asset is held within a business model whose objective
is to hold the financial asset in order to collect contractual cash flows; and
(ii) the contractual terms of the financial asset gives rise on specific
dates to cash flows that are SPPI on the principal amount outstanding.
A financial asset is measured at FVOCI if both the following conditions are
met:
(i) the financial asset is held within a business model whose objective
is achieved by both collecting contractual cash flows and selling financial
assets; and
(ii) the contractual terms of the financial asset gives rise on specific
dates to cash flows that are SPPI on the principal amount outstanding.
A financial asset is measured at fair value though profit and loss (FVTPL),
unless it is measured using either of the above two methods - amortised cost
or FVOCI.
Investments at FVOCI
FVOCI investments relate to quoted debt securities. These investments pass the
SPPI test and are classified as FVOCI as they are held within a business model
whose objective is achieved by both collecting contractual cash flows and
selling financial assets. They are recognised on a trade date basis at fair
value, and are subsequently revalued at each reporting date to fair value,
with gains and losses being included directly in the Statement of
Comprehensive Income until the investment is disposed of or determined to be
impaired, at which time the cumulative gain or loss previously recognised in
the Statement of Comprehensive Income, is included in the Income Statement for
the year.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
K) Financial instruments (continued)
a) Recognition, classification and measurement (continued)
Interest revenue using the effective interest method and foreign exchange
gains and losses on the financial asset are recognised in the Income
Statement.
The effective interest method is a method of calculating the amortised cost of
a debt instrument and of allocating interest income over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash receipts through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the net carrying
amount at initial recognition.
The Expected Credit Loss (ECL) on debt instruments measured at FVOCI does not
reduce the carrying amount of the asset in the statement of financial
position, which remains at fair value. Instead an amount equal to the
allowance that would arise if the assets were measured at amortised cost is
recognised in OCI with a corresponding charge to provision for credit losses
in the income statement.
Investments at FVTPL
Investments at FVTPL are stated at fair value and include quoted shares,
collective investment schemes and unquoted investments. These investments are
classified as FVTPL as they do not pass the SPPI test. They are recognised on
a trade date basis at fair value and are revalued at subsequent reporting
dates at fair value, with gains and losses being included in the
Income Statement in the period in which they arise. Any dividend or interest
earned on FVTPL investments is also recognised in the Income Statement.
Loans
Loans are recognised on a trade date basis at fair value plus transaction
costs and are subsequently measured at amortised cost using the effective
interest rate method. When it is not possible to estimate reliably the cash
flows or the expected life of a loan, the projected cash flows over the full
term of the loan are used to determine fair value.
Other receivables
Amounts arising out of direct insurance operations and other debtors are
measured at initial recognition at fair value and are subsequently measured at
amortised cost, after recognising a loss allowance for ECLs (note K (c)).
Deposits with banks
Term deposits with banks comprise cash held for the purpose of investment.
Demand deposits with banks are held for operating purposes and included in
cash and cash equivalents. Deposits with banks and cash and cash equivalents
are valued at amortised cost.
Subordinated debt
Subordinated debt issued by the Group comprise callable dated deferrable
subordinated notes. The subordinated debt is measured at amortised cost using
the effective interest rate method. Interest and amortisation relating to the
financial liability is recognised in the Income Statement.
b) Derecognition
The Group derecognises a financial asset only when the contractual rights to
the cash flows of the asset expire, or when it transfers the financial asset
and substantially all the risks and rewards of the ownership of the asset to
another entity. If the Group neither transfers nor retains substantially all
the risk and rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and an
associated liability to the extent of its continuing involvement in the
financial asset. If the Group retains substantially all the risks and rewards
of ownership of a transferred financial asset, the Group continues to
recognise the financial asset.
The Group derecognises financial liabilities when, and only when, the Group's
obligations are discharged, cancelled or they expire.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
K) Financial instruments (continued)
c) Impairment of financial instruments
The Group recognises loss allowances for ECLs at each balance sheet date for
the following financial instruments that are not measured at FVTPL;
· financial assets at FVOCI
· financial assets at amortised cost
Financial assets at FVOCI
The Group categorises financial instruments classified as FVOCI into the
following categories at each reporting date.
Stage 1: 12-month expected credit losses (not credit-impaired)
These are financial instruments where there has not been a significant
increase in credit risk since initial recognition. An impairment loss
allowance equal to the 12-month ECL is recognised, which is the portion of the
lifetime ECL resulting from default events that are possible within the next
12 months.
Stage 2: Lifetime expected credit losses (not credit-impaired)
These are financial instruments where there has been a significant increase in
credit risk since initial recognition but which are not credit-impaired. The
Group assesses whether the risk of default over the remaining expected life of
the financial instrument is significantly higher than had been anticipated at
initial recognition, the credit risk is always considered as significantly
increased if any contractual payments are more than 30 days past due. An
impairment loss allowance equal to the lifetime ECL is recognised, being the
ECL resulting from all possible default events over the expected life of the
financial instrument.
Stage 3: Lifetime expected credit losses (credit-impaired)
These are financial instruments which are credit-impaired at the reporting
date but were not credit-impaired at initial recognition. If the financial
instrument is more than 90 days past due or if there is other evidence of
financial distress (for example, a legal bankruptcy or default), the
instrument is classified as credit-impaired (stage 3) which means the
impairment loss has to reflect the lifetime ECL as in stage 2. The interest,
for Stage 3 assets, is calculated by applying the effective interest rate
(EIR) to their carrying value, if the asset is no longer credit-impaired, the
calculation of interest income reverts to the gross basis.
Financial assets at amortised cost
The Group calculates a loss allowance for financial assets at amortised cost.
The Group considers the best reasonable and supportable information when
considering ECLs for 'Loans' and 'Other receivables'. The Group calculates ECL
on loans at initial recognition by considering the consequences and
probabilities of possible defaults only for the next 12 months (stage 1). It
continues to apply this method until a significant increase in credit risk has
occurred, at which point the loss allowance is measured based on lifetime ECLs
(stage 2) or where significant increase in credit risk has occurred and the
asset is credit-impaired (stage 3). For 'Other receivables' the Group uses the
simplified approach, and therefore does not track the changes in credit risk,
but instead recognise a loss allowance based on lifetime ECLs at each
reporting date. Impairment loss allowances for ECL on financial assets at
amortised cost are presented as a reduction in the gross carrying amount in
the Statement of Financial Position.
The measurement of impairment losses under IFRS 9 across relevant financial
assets requires judgement, in particular, for the estimation of the amount and
timing of future cash flows when determining impairment losses and the
assessment of a significant increase in credit risk. These estimates are
driven by the outcome of modelled ECL scenarios and the relevant inputs used.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
N) Taxation
Income tax expense or credit represents the sum of income tax currently
payable and deferred income tax. Income tax currently payable is based on
taxable profit for the year. Taxable profit differs from profit before tax as
reported in the Consolidated Income Statement because it excludes items of
income or expense that are taxable or deductible in other years and further
excludes items that are not taxable or deductible. The Group's liability for
income tax is calculated using rates that have been enacted or substantively
enacted at the reporting date. Income tax is recognised in the Income
Statement except to the extent that it relates to items recognised directly in
equity.
Deferred income tax is provided, using the liability method, on all
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply in the year when the asset is expected to be realised or
the liability to be settled.
Accounting adjustments to opening reserves as a result of the adoption of IFRS
9 and IFRS 17 (i.e. the retrospective effect of adopting the accounting
standard recognised in opening reserves) will be brought into account as a
transitional adjustment and spread over 5 years for tax purposes.
Deferred tax assets are recognised for all deductible differences, carry
forward of unused tax credits and unused tax losses, to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences and the carry forward of unused tax credits and unused
tax losses can be utilised. The carrying amount of deferred income tax assets
is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit would be available to allow all
or part of the deferred income tax asset to be utilised.
T) Other financial services income
Other financial services income previously comprised interest on instalment
premiums which is now included with Insurance revenue and no longer presented
separately on the face of the Consolidated Income Statement.
U) 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.
Estimates of future cash flows to fulfil insurance/reinsurance contracts
The Group estimates insurance liabilities in relation to claims incurred. In
estimating future cash flows, the Group incorporate, in an unbiased way, all
reasonable and supporting information that is available without undue cost or
effort at the reporting date. This information includes both internal
information and external historical data about claims and other experience,
updated to reflect current expectations of future events.
Uncertainty in the estimation of future claims and benefit payments arises
primarily from the severity and frequency of claims and uncertainties
regarding future inflation rates leading to claims and claims-handling
expenses growth. As a result of the uncertainties noted, the Group sets
provisions at a margin above the best estimate known as the risk adjustment.
Assumptions used to develop estimates about future cash flows are reassessed
at each reporting date and adjusted where required.
Methods used to measure the LIC
The Group estimates insurance liabilities and reinsurance assets in relation
to claims incurred on a risk basis. Estimates are performed on an accident
year basis with further allocation to annual cohorts of portfolios based on
available data. Judgement is involved in assessing the most appropriate
technique to estimate insurance liabilities for the claims incurred. In
certain instances, different techniques or a combination of techniques have
been selected for individual accident years or groups of accident years within
the same type of contracts.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
U) Critical accounting estimates and judgements in applying accounting
policies (continued)
Methods used to measure the LIC (continued)
The ultimate cost of outstanding claims is estimated by using a range of
standard actuarial claims projection techniques, such as, but not limited to,
Chain Ladder, Bornheutter-Ferguson, Initial Expected Loss Ratio and
frequency-severity methods.
The liabilities for incurred claims represent the cost of claims outstanding.
Actuarial techniques, based on statistical analysis of past experience, are
used to calculate the estimated cost of claims outstanding at the period end.
The estimation of outstanding claim also includes factors such as the
potential for inflation and the potential impact of the Personal Injuries
Guidelines. Provisions for more recent claims make use of techniques that
incorporate expected loss ratios and average claims costs (adjusted for
inflation) and frequency methods. The average claims cost and frequency
methods are particularly relevant when calculating the ultimate cost of the
current accident year.
FBD have now received the final judgement in relation to the Covid-19 Business
Interruption test case. This has provided more certainty on the measurement of
losses and FBD have issued communications to all affected policyholders in
order make the final settlement of their claims.
FBD has received information from more than 700 policyholders in order to
assess the claims and has been making interim payments based on these
assessments. This data has provided reasonable certainty in respect to a
number of assumptions underlying the best estimate of Covid-19 Business
Interruption losses and will continue to improve as FBD proceed to final
settlements.
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.
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.
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.
Discount rates
The Group is required to discount future cash flows related to incurred claims
as the weighted time to settlement is greater than one year from the date
claim occurred.
The Group determines the risk-free discount rate using a bottom-up approach.
Under this approach, the discount rate is determined as the risk-free yield
curve adjusted for differences in liquidity characteristics between the
financial assets used to derive the risk free yield and the relevant liability
cash flows (known as an illiquidity premium).
The Group uses the Euro denominated EIOPA prescribed rates under Solvency II
as the risk-free yield. The EIOPA EUR spot rates are derived from market
observable EUR swap rates for durations one to twenty years.
The illiquidity premium is determined by reference to observable market rates.
The yield curves used to discount the estimates of future cash flows are as
follows:
Currency 1 year 3 years 5 years 10 years 15 years 20 years
30 June 2022 EUR 1.5% 2.2% 2.4% 2.8% 3.0% 2.9%
31 Dec 2022 EUR 3.3% 3.3% 3.2% 3.2% 3.1% 2.9%
30 June 2023 EUR 4.1% 3.6% 3.3% 3.0% 2.9% 2.8%
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 3 Summary of significant accounting policies (continued)
U) Critical accounting estimates and judgements in applying accounting
policies (continued)
Methods used to measure the risk adjustment for non-financial risk
The risk adjustment for non-financial risk is the compensation that is
required for bearing the uncertainty about the amount and timing of cash flows
that arises from non-financial risk as the insurance contract is fulfilled. As
the risk adjustment represents compensation for uncertainty, estimates are
made on the degree of diversification benefits and expected favourable and
unfavourable outcomes in a way that reflects the Group's degree of risk
aversion. The Group estimates an adjustment for non-financial risk separately
from all other estimates.
The risk adjustment is calculated at the entity level and then allocated down
to each group of contracts in accordance with their risk profiles. A
confidence level approach is used to derive the overall risk adjustment for
non-financial risk. The Group aim to target a risk adjustment within a range
between the 75(th) and 80(th) percentiles. At year-end 2022, the risk
adjustment was at the 80(th) percentile, and remained at the 80(th) percentile
to date.
As the Group is using the PAA method, a risk adjustment is only required for
the LIC and not the LRC (unless there is an onerous group).
To determine the risk adjustment for non-financial risk for reinsurance
contracts, the Group will apply these techniques both gross and net of
reinsurance and derive the amount of risk transferred to the reinsurer as the
difference between the two results.
The methods and assumptions used to determine the risk adjustment for
non-financial risk were not changed in 2023.
Uncertainties in impairment testing
The Group has carried out impairment testing on 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 cash flow projections are based on the quarterly forecast for
2023 approved by the Board in May 2023 and the five year strategic projections
approved by the Board in quarter four 2022. The 2028 and 2029 figures are
extrapolated assuming the performance in 2028 and 2029 are in line with
2027. The time period of six years 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 refresh
represent management's best estimate of future underwriting profits and fee
income for FBD.
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 6%, for 2024 is 7%, followed by a 3%
growth rate for 2025-2027. 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 10.3% which is considered a reasonable estimate
following the recent increase in risk free rates.
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 climate change scenarios, 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 remained in line with year-end 2022, 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. The largest
reduction in the level of headroom was from a climate change scenario.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 4 First time adoption of new accounting standards
The following new standards have been adopted by the Group during the period
ended 30 June 2023:
• IFRS 9 'Financial Instruments'; and
• IFRS 17 'Insurance Contracts'.
The Group's accounting policies have been updated for the application of
IFRS 9 and IFRS 17 from 1 January 2023 and are detailed within note 3. The
impact on transition can be summarised, as follows:
IFRS 9 'Financial Instruments'
IFRS 9 'Financial Instruments' has been issued to replace IAS 39 'Financial
Instruments: Recognition and Measurement'.
IFRS 9 replaced IAS 39 Financial Instruments: Recognition and Measurement for
annual periods beginning on or after 1 January 2018. However, the Group
elected, under the amendments to IFRS 4, to apply the temporary exemption from
IFRS 9, thereby deferring the initial application date of IFRS 9 to align with
the initial application of IFRS 17.
Financial assets within the scope of IFRS 9 are required to be classified as
being measured, subsequent to initial recognition, at amortised cost (AC),
fair value through other comprehensive income (FVOCI) or fair value through
profit or loss (FVTPL). The assessment of how an asset should be classified is
dependent on both the overall objective of the business model within which the
asset is held and whether the contractual terms of the financial asset give
rise to, on specified dates, cash flows that are solely payments of principal
and interest (SPPI). IFRS 9 introduces a new forward-looking impairment model
based on expected credit losses (ECL) rather than incurred losses. The
accounting for financial liabilities will remain largely consistent with that
applied under IAS 39, except for recognition of changes in own credit risk in
other comprehensive income for certain liabilities designated at fair value
through profit or loss.
The consolidated statements for the comparative periods presented have been
updated using the classification overlay approach with the amendment to the
transition requirements in IFRS 17 issued by the IASB at the end of 2021.
Differences arising from the adoption of IFRS 9 were recognised in retained
earnings as of 1 January 2022.
To reflect the differences between IFRS 9 and IAS 39, IFRS 7 Financial
Instruments: Disclosures was also amended. The Group has applied the amended
disclosure requirements of IFRS 7, together with IFRS 9, for the year
beginning 1 January 2023.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 4 First time adoption of new accounting standards (continued)
The table below shows the impact of classification and measurement in
accordance with IFRS 9 as at the opening balance sheet of the comparative
period (i.e. 1 January 2022)
Financial assets Original measurement (IAS 39) Revised measurement (IFRS 9) Carrying amount under IAS 39 Reclassification Re-measurement Carrying amount under IFRS 9
€000s €000s €000s €000s
Quoted debt securities(1) Available for sale (AFS) FVOCI 892,495 - - 892,495
Cash and cash equivalents Amortised cost (AC) AC 164,479 6,497(2) - 170,976
Collective investment schemes Held for trade (HFT) FVTPL 137,547 - - 137,547
Receivables AC AC 58,047 (41,749)(2) (388)(3) 15,910
Unquoted investments AFS FVTPL 1,220 - - 1,220
Loans AC AC 577 - (17)(3) 560
Deposits with banks AC AC - - - -
Financial liabilities Original measurement (IAS 39) Revised measurement (IFRS 9) Carrying amount under IAS 39 Reclassification Re-measurement Carrying amount under IFRS 9
€000s €000s €000s €000s
Subordinated debt AC AC 49,603 - - 49,603
Payables AC AC 41,657 - - 41,657
(1)In accordance with the requirements of IFRS 9 the recognition and
measurement of a loss allowance for financial assets that are measured at
FVOCI does not reduce the carrying amount of the asset in the statement of
financial position, which remains at fair value. Instead an amount equal to
the allowance that would arise if the assets were measured at amortised cost
is recognised in OCI with a corresponding charge to provision for credit
losses in the income statement. As at the opening balance sheet of the
comparative period (i.e. 1 January 2022) an expected credit loss of €754,000
was recognised and reflected directly in the FVOCI reserve.
(2)Insurance and reinsurance contract receivables and payables (outstanding
cheques) are included within Insurance/Reinsurance contract asset/liabilities
under IFRS 17.
(3) Re-measurement relates to expected credit losses recognised on 'Loans' and
'Other receivables' under IFRS 9.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 4 First time adoption of new accounting standards (continued)
IFRS 17 'Insurance contracts'
IFRS 17 establishes the principles for the recognition, measurement,
presentation and disclosure of insurance contracts and supersedes IFRS 4
Insurance Contracts.
The core of IFRS 17 is the general model, supplemented by a specific adaption
for contracts with direct participation features (the variable fee approach)
and a simplified approach (the premium allocation approach) mainly for
short-duration contracts. The Group are eligible to apply the PAA to all
insurance contracts issued and reinsurance contracts held and have elected to
apply the PAA in all cases. The carrying amount of a group of insurance
contracts at the end of each reporting period shall be the sum of the LRC,
comprising the fulfilment cash flows related to future service allocated to
the group at that date, and the LIC, comprising the FCF and risk adjustment
related to past service allocated to the group at that date.
IFRS 17 requires a company to determine the level of aggregation for applying
its requirements. Portfolios comprise groups of contracts with similar risks
which are managed together. Portfolios are required to be further divided
based on expected profitability at inception into three categories: onerous
contracts, contracts with no significant risk of becoming onerous, and the
remainder. A group of contracts that is onerous on initial recognition results
in a loss being recognised immediately in the statement of financial
performance for the entire net cash outflow, therefore the carrying amount of
the insurance liability for the group is equal to the fulfilment cash flows
and the contractual service margin is nil. Under the Premium Allocation
Approach (PAA) it is assumed no contracts in the portfolio are onerous at
initial recognition unless facts and circumstances indicate otherwise. IFRS 17
also requires that no group for level of aggregation purposes, may contain
contracts issued more than one year apart.
The impact to shareholder's equity on transition to IFRS 17 is mainly driven
by the below:
Discounting claims reserves
In accordance with the requirements of IFRS 17, the Group is required to
discount future cash flows related to incurred claims as the weighted time to
settlement is greater than one year from the date the claim occurred. This
requirement to allow for the time value of money is a change from the previous
practice under IFRS 4, where no allowance for the time value of money was made
in the calculation of the claims liabilities. The impact of discounting in a
positive interest rate environment results in a reduction in the liabilities
previously recognised under IFRS 4, however, this will unwind in future
periods. Discounting cash flows when calculating the LIC alters the timing of
profit emergence but not the overall level of profit.
The impact of discounting cash flows related to incurred claims became
significantly more prevalent throughout 2022 in line with the rising interest
rate environment.
Re-measurement of claims reserves under IFRS 17
Under IFRS 17 the measurement of the LIC, (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 introduction of the risk adjustment
calculation as an allowance for uncertainty about the amount and timing of
cash flows that arises from non-financial risk as the insurance contract is
fulfilled replaces the margin for uncertainty previously in existence under
IFRS 4 and resulted in a reduction of the liabilities on transition.
Re-measurement of asset for insurance acquisition cashflows
In applying the Premium Allocation Approach, the Group continues to defer
acquisition costs which are directly attributable to a portfolio and chose not
to expense all acquisition costs as they are incurred. However, IFRS 17
incorporates a more prescribed approach in determining the asset for insurance
acquisition cashflows compared to IFRS 4, resulting in a reduction in total
equity on transition.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 4 First time adoption of new accounting standards (continued)
The below table illustrates the impact on the relevant components of equity on
applying IFRS 9 and IFRS 17:
Year ended Year ended
31/12/21 31/12/22
€000s €000s
Retained earnings
Closing balances as previously reported under IAS 39 and IFRS 4 422,815 370,258
Reclassification to FVOCI reserve (9,247) 80,804
IFRS 9 recognition of expected credit losses - debt securities at FVOCI (754) (1,003)
IFRS 9 recognition of expected credit losses - other receivables and loans (405) (324)
IFRS 17 re-measurement of claims reserves under IFRS 17 12,300 2,531
IFRS 17 impact of discounting the liability for incurred claims recognised 9,571 12,396
through profit/loss
IFRS 17 re-measurement of asset for insurance acquisition cashflows (2,225) (2,905)
Tax on the above adjustments (1,156) (11,439)
Total adjustment net of tax 8,084 80,060
Opening balance at 1 January under IFRS 9 and IFRS 17 430,899 450,318
31/12/21 31/12/22
€000s €000s
FVOCI reserve
Closing balances as previously reported under IAS 39 and IFRS 4 - -
Reclassification from retained earnings 9,247 (80,804)
IFRS 9 recognition of expected credit losses - debt securities at FVOCI 754 1,003
Tax on the above adjustments (1,250) 9,975
Total adjustment net of tax 8,751 (69,826)
Opening balance at 1 January under IFRS 9 and IFRS 17 8,751 (69,826)
31/12/21 31/12/22
€000s €000s
Insurance/RI finance reserve
Closing balance as previously reported under IAS 39 and IFRS 4 - -
IFRS 17 impact of discounting liability for incurred claims through OCI (10,204) 23,982
Tax on the above adjustment 1,276 (2,998)
Total adjustment net of tax (8,928) 20,984
Opening balance at 1 January under IFRS 9 and IFRS 17 (8,928) 20,984
IFRS 9 and IFRS 17 transition adjustment to total equity 7,907 31,218
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 4 First time adoption of new accounting standards (continued)
The below tables detail the adjustments required to restate the previously
presented financial statements under IFRS 4 and IAS 39 to those reported under
IFRS 17 and IFRS 9 as at 31 December 2022:
Statement of Financial Position
Financial statement line item Previously Reported Classification Measurement Restated Financial statement line item
IFRS 4 & IAS 39 adjustment adjustment IFRS 17 & IFRS 9
€000s €000s €000s €000s
Loans 580 - (12) (1) 568 Loans
Available for sale investments 834,994 (1,129) (2) - 833,865 Debt instruments at FVOCI
Equity and debt instruments at FVTPL
Investments held for trading 132,965 1,129(2) - 134,094
Deposits with banks 10,000 - - 10,000 Deposits
Reinsurance assets 138,785 (4,830)(3) 2,702(4) 136,657 Reinsurance contract assets
Deferred taxation asset 8,091 - (4,462) (5) 3,629 Deferred taxation asset
Deferred acquisition costs 38,520 (38,520)(6) - - -
Other receivables 58,307 (42,847)(6) (312) (1) 15,148 Other receivables
Cash and cash equivalents 162,398 2,842 (7) - 165,240 Cash and cash equivalents
All other assets (unaffected) 88,351 - - 88,351 All other assets (unaffected)
Total assets 1,472,991 (83,355) (2,084) 1,387,552 Total assets
Called up share capital presented as equity Called up share capital presented as equity
21,583 - - 21,583
Capital reserves 30,192 - - 30,192 Capital reserves
Revaluation reserve 755 (69,826)(8) 20,984(4,9,5) (48,087) Other reserves
Retained earnings 370,258 69,826(8) 10,234(1,)(4,5,9) 450,318 Retained earnings
Preference share capital 2,923 - - 2,923 Preference share capital
Total equity 425,711 - 31,218 456,929 Total equity
Insurance contract liabilities 932,677 (72,754) (6,7,10) (33,302) (4,9) 826,621 Insurance contract liabilities
- - 610(6) - 610 Reinsurance contract liabilities
Other provisions 11,615 (512)(10) - 11,103 Other provisions
Payables 46,327 (10,699) (3,6,7,10) - 35,628 Other payables
All other liabilities (unaffected) 56,661 - - 56,661 All other liabilities (unaffected)
Total liabilities 1,047,280 (83,355) (33,302) 930,623 Total liabilities
Total equity and liabilities 1,472,991 (83,355) (2,084) 1,387,552 Total equity and liabilities
Notes
1 Re-measurement relates to the recognition of ECL recognised on 'Loans' and
'Other receivables' under IFRS 9.
2 Unquoted investments previously classified as 'Available for sale' under IAS
39 are classified as FVTPL under IFRS 9 as they do not pass the SPPI test.
3 Reinsurance debtors and creditors are included within the fulfilment cash
flows under IFRS 17, previously included within 'Other receivables' and
'Payables' under IFRS 4.
4 Impact of re-measurement of claims reserves under IFRS 17 including the impact
of discounting LIC and the application of a risk adjustment.
5 Tax on transitional adjustments.
6 No separate asset recognised for deferred acquisition costs or premium
receivables under IFRS 17. Instead, qualifying insurance acquisition cash
flows and premium receivables are subsumed into the insurance liability for
remaining coverage. Similarly transactional tax levies on insurance premium
written and liabilities owing to reinsurers are subsumed into the fulfilment
cash flows.
7 Outstanding premium and claims cheques are included within LRC and LIC
respectively previously included within 'Cash and cash equivalents' or
'Payables'.
8 IFRS 9 mark to market gains/losses on FVOCI assets reclassified from retained
earnings net of ECL.
9 IFRS 17 re-measurement of asset for insurance acquisition cashflows.
10 Pre-recognised premium excluded from 'Insurance contract liabilities' under
IFRS 17 as this does not form part of the cash flows within the contract
boundaries, a deferred income liability set up for same. Provisions for
premium rebates are subsumed into the fulfilment cash flows.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 4 First time adoption of new accounting standards (continued)
Total Comprehensive Income
Financial statement line item Previously Reported Classification Measurement Restated Financial statement line item
IFRS 4 & IAS 39 adjustment adjustment IFRS 17 & IFRS 9
Year ended 31/12/2022 Year ended 31/12/2022 Year ended 31/12/2022 Year ended 31/12/2022
€000s €000s €000s €000s
Income
Gross written premium 382,889 (3,192)(1,5,6) - 379,697 Insurance revenue
Reinsurance premiums (40,016) 5,202 (1,2,6) - (34,814) Reinsurance expense
Change in net provision for unearned premiums
(7,019) 7,019(6) - -
Net investment return (10,413) (340)(3,4) - (10,753) Total investment return
Revenue from contracts with customers Revenue from contracts with customers
3,173 - - 3,173
Other financial services income 4,812 (4,812)(1,5) - -
Expenses ( )
Net claims and benefits (145,807) 3,125(6) 11,441(7,8) (131,241) Insurance service expenses
Change in amounts recoverable from reinsurers for incurred claims
- - (2,971) (2,6) (8,970) (7) (11,941)
Other underwriting expenses (95,962) 28,118 (1,2,9) (2,753)(8,10) (70,597) Insurance service expenses
- - (33,048)(9) - (33,048) Non-attributable expenses
Financial services income and expenses
Financial services and other costs (6,685) 559 (1) 81(11) (6,045)
Finance income/(expense) from insurance contracts issued
- - - (8,731)(7) (8,731)
Finance income/(expense) from reinsurance contracts held
- - - 1,389(7) 1,389
All other expenses (unaffected) (11,249) - - (11,249) All other expenses (unaffected)
Profit before taxation 73,723 (340) (7,543) 65,840 Profit before taxation
Income taxation charge (9,269) 43(13) 942(13) (8,284) Income taxation charge
Profit for the financial year 64,454 (297) (6,601) 57,556 Profit for the financial year
Net gains/(losses) on investments in debt securities measured at FVOCI
Movement on available for sale financial assets during the year
(90,271) 510(3,4) - (89,761)
Net gains on investments in debt securities measured at FVOCI reclassified to
profit or loss on disposal
Movement transferred to the Consolidated Income Statement on disposal during
the year
129 (170)(3,4) - (41)
- 42,388(12) 42,388 Finance income/(expense) from insurance contracts issued
- (8,202)(12) (8,202) Finance income/(expense) from reinsurance contracts held
Income tax relating to these items 11,268 (43)(13) (4,274)(13) 6,951 Income tax relating to these items
All other OCI (unaffected) (1,985) - - (1,985) All other OCI (unaffected)
Other comprehensive expense after taxation Other comprehensive expense after taxation
(80,859) 297 29,912 (50,650)
Total comprehensive (expense)/income for the period
Total comprehensive (expense)/income for the year
(16,405) - 23,311 6,906
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 4 First time adoption of new accounting standards (continued)
Notes
1 Unbundling of engineering inspection premium under IFRS 17. Other income
re-classified to 'Financial services income and expenses'.
2 Reinstatement 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 'Reinsurance
premiums' under IFRS 4. Reinsurance commission offset against reinsurance
expense under IFRS 17, included in 'Other underwriting expenses' under IFRS 4.
3 Movement on ECL on FVOCI assets under IFRS 9 recognised in profit or loss.
4 Unquoted investments previously classified as 'Available for sale' under IAS
39 are classified as FVTPL under IFRS 9 as they do not pass the SPPI test. All
income and other gains and/or losses on FVTPL assets are recognised in profit
or loss. Mark to market gains and/or losses on 'Available for sale' assets
under IAS 39 were recognised in Other Comprehensive Income.
5 Instalment premiums included within 'Insurance Revenue' under IFRS 17,
included within 'Other financial services income' under IFRS 4.
6 Reinsurance result presented separately on face of profit or loss under IFRS
17.
7 Impact of re-measurement of claims reserves under IFRS 17 including the impact
of discounting liability for incurred claims and the application of a risk
adjustment.
8 IFRS 17 re-measurement of claims handling expenses.
9 Non-attributable expenses presented separately under IFRS 17.
10 IFRS 17 re-measurement of asset for insurance acquisition cashflows.
11 Movement in ECL on 'Other receivables' and 'Loans'.
12 IFRS 17 impact of discounting LIC recognised through OCI.
13 Tax on transitional adjustments.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 4 First time adoption of new accounting standards (continued)
The below tables detail the adjustments required to restate the previously
presented financial statements under IFRS 4 and IAS 39 to those reported under
IFRS 17 and IFRS 9 as at 1 January 2022:
Statement of Financial Position
Financial statement line item Previously Reported Classification Measurement Restated Financial statement line item
IFRS 4 & IAS 39 adjustment adjustment IFRS 17 & IFRS 9
€000s €000s €000s €000s
Loans 577 - (17) (1) 560 Loans
Available for sale investments 893,715 (1,220) (2) - 892,495 Debt instruments at FVOCI
Equity and debt instruments at FVTPL
Investments held for trading 137,547 1,220(2) - 138,767
Reinsurance assets 196,960 (6,557)(3) 18,485(4) 208,888 Reinsurance contract assets
Deferred acquisition costs 35,458 (35,458)(6) - - -
Other receivables 58,047 (41,749)(6) (388) (1) 15,910 Other receivables
Cash and cash equivalents 164,479 6,497 (7) - 170,976 Cash and cash equivalents
All other assets (unaffected) 93,225 - - 93,225 All other assets (unaffected)
Total assets 1,580,008 (77,267) 18,080 1,520,821 Total assets
Called up share capital presented as equity Called up share capital presented as equity
21,409 - - 21,409
Capital reserves 27,406 - - 27,406 Capital reserves
Revaluation reserve 752 8,751(8) (8,928)(4,5,9) 575 Other reserves
Retained earnings 422,815 (8,751)(8) 16,835(1,)(4,5,9) 430,899 Retained earnings
Preference share capital 2,923 - - 2,923 Preference share capital
Total equity 475,305 - 7,907 483,212 Total equity
Insurance contract liabilities 985,404 (64,466) (3,6,7,10) 9,043 (4,9) 929,981 Insurance contract liabilities
- - 788(6) - 788 Reinsurance contract liabilities
Other provisions 13,492 (1,221)(10) - 12,271 Other provisions
Deferred taxation liability 2,761 - 1,130(5) 3,891 Deferred taxation liability
Payables 41,657 (12,368) (3,6,7,10) - 29,289 Other payables
All other liabilities (unaffected) 61,389 - - 61,389 All other liabilities (unaffected)
Total liabilities 1,104,703 (77,267) 10,173 1,037,609 Total liabilities
Total equity and liabilities 1,580,008 (77,267) 18,080 1,520,821 Total equity and liabilities
Notes
1 Re-measurement relates to the recognition of expected credit losses recognised
on 'Loans' and 'Other receivables' under IFRS 9.
2 Unquoted investments previously classified as 'Available for sale' under IAS
39 are classified as FVTPL under IFRS 9 as they do not pass the SPPI test.
3 Reinsurance debtors and creditors are included within the fulfilment cash
flows under IFRS 17, previously included within 'Other receivables' and
'Payables' under IFRS 4.
4 Impact of re-measurement of claims reserves under IFRS 17 including the impact
of discounting the LIC and the application of a risk adjustment.
5 Tax on transitional adjustments.
6 No separate asset recognised for deferred acquisition costs or premium
receivables under IFRS 17. Instead, qualifying insurance acquisition cash
flows and premium receivables are subsumed into the LRC. Similarly
transactional tax levies on insurance premium written and liabilities owing to
reinsurers are subsumed into the fulfilment cash flows.
7 Outstanding premium and claims cheques are included within LRC and LIC
respectively previously included within 'Cash and cash equivalents' or
'Payables'.
8 IFRS 9 mark to market gains/losses on FVOCI assets reclassified from retained
earnings net of expected credit losses.
9 IFRS 17 re-measurement of asset for insurance acquisition cashflows.
10 Pre-recognised premium excluded from 'Insurance contract liabilities' under
IFRS 17 as this does not form part of the cash flows within the contract
boundaries, a deferred income liability set up for same. Provisions for
premium rebates are subsumed into the fulfilment cash flows.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 5 Finance income/ (expense) recognised in comprehensive income
The Group disaggregates finance income or expense on insurance contracts
issued and reinsurance contracts held between income statement and OCI. The
impact of changes in market interest rates on the value of the insurance
liabilities are reflected in OCI in order to minimise accounting mismatches
between the accounting for financial assets and insurance assets and
liabilities.
The Group adopts a conservative investment strategy to ensure that its
technical provisions are matched by cash and fixed interest securities of low
risk and similar duration. All of the Group's fixed interest securities are
classified as FVOCI whereby accumulated mark to market gains or losses are
reclassified to the profit and loss account on liquidation.
The tables below detail:
· the element of interest accretion on the LIC from the prior
reporting period; and
· the effect of changes in interest rates and other financial
assumptions during the period on the finance income/(expense) recognised in
comprehensive income.
Total investment return during the period is detailed in note 7 including the
corresponding mark to market gains or losses on FVOCI recognised.
Half year ended 30/06/23 Half year ended 30/06/22 Year ended 31/12/22
(restated)
(restated)
€000s €000s €000s
Finance income /(expense) from insurance contracts issued recognised in
comprehensive income:
Interest accreted (4,965) 836 2,517
Effect of changes in interest rates and other financial assumptions during the
period
(1,954) 28,621 31,140
Total (6,919) 29,457 33,657
Represented by:
Amounts recognised in profit or loss (1,823) (6,213) (8,731)
Amounts recognised in OCI (5,096) 35,670 42,388
Half year ended 30/06/23 Half year ended 30/06/22 Year ended 31/12/22
(restated)
(restated)
€000s €000s €000s
Finance income /(expense) from reinsurance contracts held recognised in
comprehensive income:
Interest accreted 1,168 (221) (595)
Effect of changes in interest rates and other financial assumptions during the
period
951 (6,180) (6,218)
Total 2,119 (6,401) (6,813)
Represented by:
Amounts recognised in profit or loss (281) 1,431 1,389
Amounts recognised in OCI 2,400 (7,832) (8,202)
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 6 Segmental information
(a) Operating segments
The principal activities of the Group are underwriting of general insurance
business, financial services and other group activities. For management
purposes, the Group is organised in three operating segments - general
insurance, financial services and other group activities. These three segments
are the basis upon which information is reported to the chief operating
decision makers, the Group Chief Executive/Executive Management Team, for the
purpose of resource allocation and assessment of segmental performance.
Discrete financial information is prepared and reviewed on a regular basis for
these three segments.
The following is an analysis of the Group's revenue and results from
continuing operations by reportable segments:
Half year ended 30/06/2023 General insurance Financial services Other group activities
Total
€000s €000s €000s €000s
Insurance revenue 194,540 - - 194,540
Insurance service expenses (91,957) - - (91,957)
Net expense from reinsurance contracts held (37,180) - - (37,180)
Insurance service result 65,403 - - 65,403
Total investment return 8,307 - 82 8,389
Net insurance finance expenses (2,104) - - (2,104)
Net insurance and investment result 71,606 - 82 71,688
Other finance costs (1,272) - - (1,272)
Non-attributable expenses (16,165) - - (16,165)
Movement in other provisions (12,439) - - (12,439)
Revenue from contracts with customers - 1,592 - 1,592
Financial services income and expenses 85 (1,655) (1,811) (3,381)
Revaluation of property, plant and equipment (546) - - (546)
Profit/(loss) before taxation 41,269 (63) (1,729) 39,477
Income taxation (charge)/credit (6,409) 13 226 (6,170)
Profit/(loss) for the period 34,860 (50) (1,503) 33,307
Other information
Insurance acquisition expenses (36,588) - - (36,588)
Depreciation/amortisation (5,648) - - (5,648)
Impairment of other assets (1,294) - - (1,294)
Capital additions 8,736 - - 8,736
Statement of financial position
Segment assets 1,329,118 8,333 22,761 1,360,212
Segment liabilities (893,699) (872) (5,786) (900,357)
Included above in the current period is a net non-cash impairment charge
relating to property held for own use of €546,000 and to investment property
of €748,000 (31 December 2022: €287,000 and €1,003,000, 30 June 2022:
Nil).
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 6 Segmental information (continued)
(a) Operating segments (continued)
Half year ended 30/06/2022 (restated) General insurance Financial services Other group activities
Total
€000s €000s €000s €000s
Insurance revenue 186,142 - - 186,142
Insurance service expenses (127,322) - - (127,322)
Net expense from reinsurance contracts held (14,768) - - (14,768)
Insurance service result 44,052 - - 44,052
Total investment return (15,281) - - (15,281)
Net insurance finance expenses (4,782) - - (4,782)
Net insurance and investment result 23,989 - - 23,989
Other finance costs (1,272) - - (1,272)
Non-attributable expenses (13,780) - - (13,780)
Movement in other provisions (5,241) - - (5,241)
Revenue from contracts with customers - 1,753 - 1,753
Financial services income and expenses 163 (1,594) (1,509) (2,940)
Revaluation of property, plant and equipment - - - -
Profit/(loss) before taxation 3,859 159 (1,509) 2,509
Income taxation (charge)/credit (485) (19) 177 (327)
Profit/(loss) for the period 3,374 140 (1,332) 2,182
Other information
Insurance acquisition expenses (34,064) - - (34,064)
Depreciation/amortisation (4,943) - - (4,943)
Impairment of other assets - - - -
Capital additions 4,347 - - 4,347
Statement of financial position
Segment assets 1,400,379 9,796 19,038 1,429,213
Segment liabilities (1,001,200) (919) (4,444) (1,006,563)
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 6 Segmental information (continued)
(a) Operating segments (continued)
Year ended 31/12/2022 (restated) General insurance Financial services Other group activities
Total
€000s €000s €000s €000s
Insurance revenue 379,697 - - 379,697
Insurance service expenses (201,838) - - (201,838)
Net expense from reinsurance contracts held (46,755) - - (46,755)
Insurance service result 131,104 - - 131,104
Total investment return (10,753) - - (10,753)
Net insurance finance expenses (7,342) - - (7,342)
Net insurance and investment result 113,009 - - 113,009
Other finance costs (2,559) - - (2,559)
Non-attributable expenses (33,048) - - (33,048)
Movement in other provisions (8,403) - - (8,403)
Revenue from contracts with customers - 3,173 - 3,173
Financial services income and expenses 560 (3,198) (3,407) (6,045)
Revaluation of property, plant and equipment (287) - - (287)
Profit/(loss) before taxation 69,272 (25) (3,407) 65,840
Income taxation (charge)/credit (8,758) (7) 481 (8,284)
Profit/(loss) for the period 60,514 (32) (2,926) 57,556
Other information
Insurance acquisition expenses (70,595) - - (70,595)
Depreciation/amortisation (13,239) - - (13,239)
Impairment of other assets (1,290) - - (1,290)
Capital additions 7,026 7,026
Statement of financial position
Segment assets 1,361,232 8,988 17,332 1,387,552
Segment liabilities (924,367) (826) (5,430) (930,623)
The accounting policies of the reportable segments are the same as the Group
accounting policies. Segment profit represents the profit earned by each
segment. Central administration costs and Directors' salaries are allocated
based on actual activity.
Income taxation is a direct cost of each segment.
In monitoring segment performance and allocating resources between segments:
· All assets are allocated to reportable segments. Assets used
jointly by reportable segments are allocated on the basis of activity by each
reportable segment; and
· All liabilities are allocated to reportable segments. Liabilities
for which reportable segments are jointly liable are allocated in proportion
to segment assets.
The Group's customer base is diverse and it has no reliance on any major
customer Insurance risk is not concentrated on any area or on any one line of
business.
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 (UNAUDITED)
For the half year ended 30 June 2023
Note 6 Segmental information (continued)
(a) Operating segments (continued)
See below Insurance revenue generated from major product lines Motor and
Non-motor:
Insurance revenue
Motor Non-motor Total
€000s €000s €000s
Half year ended 30/06/2023 92,116 102,424 194,540
Half year ended 30/06/2022 (restated) 90,722 95,420 186,142
Year ended 31/12/2022 (restated) 183,255 196,442 379,697
(b) Geographical segments
The Group's operations are located in Ireland.
(c) Insurance service expenses
Insurance service expenses, in the General Insurance segment, comprise the
following:
Half year ended 30/06/23 Half year ended 30/06/22 Year ended 31/12/22 (restated)
(restated)
€000s €000s €000s
Incurred claims and other expenses (114,744) (110,263) (223,807)
Changes that relate to past service - changes in FCF relating to the LIC
59,375 17,005 92,564
Amortisation of insurance acquisition cash flows (36,588) (34,064) (70,595)
Total (91,957) (127,322) (201,838)
Total expenses, in the General Insurance segment, comprise the following:
Half year ended 30/06/23 Half year Year
ended 30/06/22 ended 31/12/22
(restated) (restated)
€000s €000s €000s
Amortisation of insurance acquisition cash flows (36,588) (34,064) (70,595)
Acquisition cash flows recognised when incurred - - -
Non-attributable expenses (16,165) (13,780) (33,048)
Total expenses (52,753) (47,844) (103,643)
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 6 Segmental information (continued)
(c) Insurance service expenses (continued)
The below tables provide further details of the total expenses of the Group by
reportable segments.
Half year ended 30/06/2023 General insurance Financial services Other group activities Total
€000s €000s €000s €000s
Employee benefit expense (26,712) (1,041) (866) (28,619)
Depreciation (1,142) - - (1,142)
Amortisation (4,506) - - (4,506)
Other (20,393) (614) (945) (21,952)
Total (52,753) (1,655) (1,811) (56,219)
Half year ended 30/06/2022 (restated) General insurance Financial services Other group activities Total
€000s €000s €000s €000s
Employee benefit expense (24,715) (1,113) (899) (26,727)
Depreciation (1,193) - - (1,193)
Amortisation (3,751) - - (3,751)
Other (18,185) (481) (610) (19,276)
Total (47,844) (1,594) (1,509) (50,947)
Year ended 31/12/2022 (restated) General insurance Financial services Other group activities Total
€000s €000s €000s €000s
Employee benefit expense (53,392) (2,221) (1,595) (57,208)
Depreciation (2,348) - - (2,348)
Amortisation (10,891) - - (10,891)
Other (37,012) (977) (1,812) (39,801)
Total (103,643) (3,198) (3,407) (110,248)
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 7 Total investment return
The net gain or loss for each class of financial instrument by measurement
category is as follows:
Amortised Cost FVOCI FVTPL FVTPL Total
Half year ended 30/06/2023 Designated Designated Mandatory
€000s €000s €000s €000s €000s
Interest revenue from financial assets not measured at FVTPL
Cash and cash equivalents 1,320 - - - 1,320
Government bonds - 896 - - 896
Other debt securities - 2,943 - - 2,943
1,320 3,839 - - 5,159
Net gain on FVTPL investments
Collective investment scheme - - - 5,085 5,085
Unquoted investments - - - - -
- - - 5,085 5,085
Other
Income, net of expenses, from investment properties - - - (86) (86)
Unrealised loss on investment properties - - - (748) (748)
Net credit impairment loss - (56) - - (56)
Net gain on FVOCI debt securities - 7,720 - - 7,720
- 7,664 - (834) 6,830
Recognised in income statement 1,320 2,818 - 4,251 8,389
Recognised in OCI - 8,685 - - 8,685
Recognised in total comprehensive income 1,320 11,503 - 4,251 17,074
During the period to 30 June 2023 a loss of €965,000 on FVOCI investments
was reclassified from Other Comprehensive Income to the Consolidated Income
Statement.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 7 Total investment return (continued)
Amortised Cost FVOCI FVTPL FVTPL Total
Half year ended 30/06/2022 (restated) Designated Designated Mandatory
€000s €000s €000s €000s €000s
Interest revenue/ (expense) from financial assets not measured at FVTPL
Cash and cash equivalents (291) - - - (291)
Government bonds - 548 - - 548
Other debt securities 1,637 - - 1,637
(291) 2,185 - - 1,894
Net loss on FVTPL investments
Collective investment scheme - - - (17,272) (17,272)
Unquoted investments - - - - -
- - - (17,272) (17,272)
Other
Income, net of expenses, from investment properties - - - 227 227
Unrealised gain/ (loss) on investment properties - - - - -
Net credit impairment loss - (141) - - (141)
Net loss on FVOCI debt securities - (63,842) - - (63,842)
- (63,983) - 227 (63,756)
Recognised in income statement (291) 2,055 - (17,045) (15,281)
Recognised in OCI - (63,853) - - (63,853)
Recognised in total comprehensive income (291) (61,798) - (17,045) (79,134)
During the period to 30 June 2022 a gain of €11,000 on FVOCI investments was
reclassified from Other Comprehensive Income to the Consolidated Income
Statement.
Amortised Cost FVOCI FVTPL FVTPL Total
Year ended 31/12/2022 (restated) Designated Designated Mandatory
€000s €000s €000s €000s €000s
Interest revenue/ (expense) from financial assets not measured at FVTPL
Cash and cash equivalents (37) - - - (37)
Government bonds - 1,330 - - 1,330
Other debt securities 3,885 - - 3,885
(37) 5,215 - - 5,178
Net loss on FVTPL investments
Collective investment scheme - - - (14,655) (14,655)
Unquoted investments - - (92) - (92)
- - (92) (14,655) (14,747)
Other
Income, net of expenses, from investment properties - - - 196 196
Unrealised loss on investment properties - - - (1,003) (1,003)
Net credit impairment loss - (418) - - (418)
Net loss on FVOCI debt securities - (89,761) - - (89,761)
- (90,179) - (807) (90,986)
Recognised in income statement (37) 4,838 (92) (15,462) (10,753)
Recognised in OCI - (89,802) - - (89,802)
Recognised in total comprehensive income (37) (84,964) (92) (15,462) (100,555)
During the year to 31 December 2022 a gain of €41,000 on FVOCI investments
was reclassified from Other Comprehensive Income to the Consolidated Income
Statement.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 8 Income taxation charge
The effective tax rate for the period was 15.6% (2022: 12.6%) which is the
best estimate of the weighted average annual income tax rate expected for the
full year. The effective tax rate for the period was higher than the standard
Irish corporation tax rate of 12.5% primarily due to assumed higher
disallowable expenses in the period.
Note 9 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 ended Half year ended 30/06/22 (restated) Year
30/06/23 ended 31/12/22 (restated)
€000s €000s €000s
Earnings
Profit for the period for the purpose of basic earnings per share 33,307 2,182 57,274
Profit for the period for the purpose of diluted earnings per share 33,307 2,182 57,274
Number of shares No. No. No.
Weighted average number of ordinary shares for the purpose of basic earnings
per share (excludes treasury shares)
36,583,005 35,427,015 35,507,806
Weighted average number of ordinary shares for the purpose of diluted earnings
per share (excludes treasury shares)
37,458,042 36,346,524 36,424,983
Cent Cent Cent
Basic earnings per share 91 6 161
Diluted earnings per share(1) 89 6 157
(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.
The below table reconciles the profit attributable to the parent entity for
the year to the amounts used as the numerators in calculating basic and
diluted earnings per share for the year and the comparative year including the
individual effect of each class of instruments that affects earnings per
share:
Half year ended 30/06/23 Half year Year
ended ended 31/12/22 (restated)
30/06/22
(restated)
€000s €000s €000s
Profit attributable to the parent entity for the period 33,307 2,182 57,556
2023 dividend of 0.0 cent (2022:8.4 cent) per share on 14% non-cumulative
preference shares of €0.60 each
- - (113)
2023 dividend of 0.0 cent (2022:8.4 cent) per share on 8% non-cumulative
preference shares of €0.60 each
- - (169)
Profit for the period for the purpose of calculating basic and diluted
earnings
33,307 2,182 57,274
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 9 Earnings per €0.60 ordinary share (continued)
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:
Half year ended 30/06/23 (unaudited) Half year ended 30/06/22 (restated) Year
ended 31/12/22 (restated)
€000s €000s €000s
Weighted average number of ordinary shares for the purpose of calculating
basic earnings per share
36,583,005 35,427,015 35,507,806
Weighted average of potential vesting of share based payments
875,037 919,509 917,177
Weighted average number of ordinary shares for the purpose of calculating
diluted earnings per share
37,458,042 36,346,524 36,424,983
Note 10 Financial instrument and fair value measurement
(a) Financial Instruments
Half year ended 30/06/23 (unaudited) Half year ended 30/06/22 (restated) Year
ended 31/12/22 (restated)
€000s €000s €000s
Financial Assets
At amortised cost:
Cash and cash equivalents 89,685 148,771 108,635
Deposits 10,000 20,000 10,000
Other receivables 23,689 20,161 15,148
Loans 506 520 568
At fair value:
Cash and cash equivalents 24,148 - 56,605
Equity and debt instruments at FVTPL -mandatory 148,018 130,454 132,965
Equity and debt instruments at FVTPL -designated 1,129 1,129 1,129
Debt instruments at FVOCI - designated 851,124 851,805 833,865
Financial Liabilities
At amortised cost:
Other payables 39,875 30,805 35,628
Lease liabilities 4,214 4,974 4,600
Subordinated debt 49,690 49,632 49,662
An ECL for 'Debt instruments at FVOCI' of €928,000 (30 June 2022:
€808,000, 31 December 2022: €1,003,000) does not reduce the carrying
amount of the asset in the statement of financial position, which remains at
fair value. Instead an amount equal to the allowance that would arise if the
assets were measured at amortised cost is recognised in OCI with a
corresponding charge to provision for credit losses in the income statement.
An ECL of €312,000 (30 June 2022: €388,000, 31 December 2022: €312,000)
has reduced the carrying value of 'Other receivables' and an ECL of €12,000
(30 June 2022: €17,000, 31 December 2022: €12,000), has reduced the
carrying value of 'Loans'.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 10 Financial instrument and fair value measurement (continued)
(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:
Half year ended 30/06/23 Half year ended 30/06/23 Half year ended 30/06/22 Half year ended 30/06/22 Year ended 31/12/22 Year ended 31/12/22
(restated) (restated) (restated) (restated)
Fair Carrying value Fair Carrying value Fair Carrying value
value
value
value
€000s €000s €000s €000s €000s €000s
Assets
Loans (restated) 607 506 624 520 682 568
Financial liabilities
Subordinated debt 45,484 49,690 49,119 49,632 46,129 49,662
The carrying amount of the following assets and liabilities is considered a
reasonable approximation of their fair value:
· Cash and cash equivalents
· Deposits
· Other receivables
· Other payables
· Lease liabilities
Certain assets and liabilities are measured in the 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.
• Debt instruments at fair value through other comprehensive
income - quoted debt securities are fair valued using latest available closing
bid price.
• Collective investment schemes, fair value through profit or
loss (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 end of the periods
disclosed.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 10 Financial instrument and fair value measurement (continued)
(b) Fair value measurement (continued)
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, fair value through profit or
loss (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.
• Unquoted investments, fair value through profit or loss, 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 2022. The
properties were revalued at 30 June 2023. 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.
Half year ended 30/06/23 Half year ended 30/06/22 (restated)
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
€000s €000s €000s €000s €000s €000s €000s €000s
Assets
Investment property - - 14,304 14,304 - - 16,053 16,053
Property held for own use - - 15,377 15,377 - - 16,327 16,327
Financial assets
Cash and cash equivalents 24,148 - - 24,148 - - - -
Investments at fair value through profit or loss - collective investment
schemes
107,008 - 41,010 148,018 112,720 - 17,643 130,363
Investments at fair value through profit or loss -unquoted investments
- - 1,129 1,129 - - 1,220 1,220
Investments at fair value through other comprehensive income - quoted debt
securities
851,124 - - 851,124 851,805 - - 851,805
Total assets 982,280 - 71,820 1,054,100 964,525 - 51,243 1,015,768
Total liabilities - - - - - - - -
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 10 Financial instrument and fair value measurement (continued)
(b) Fair value measurement (continued)
Year ended 31/12/22 (restated)
Level 1 Level 2 Level 3 Total
€000s €000s €000s €000s
Assets
Investment property - - 15,052 15,052
Property held for own use - - 15,984 15,984
Financial assets
Cash and cash equivalents 56,605 - - 56,605
Investments at fair value through profit or loss - collective investment
schemes
105,419 - 27,546 132,965
Investments at fair value through profit or loss -unquoted investments
- - 1,129 1,129
Investments at fair value through other comprehensive income - quoted debt
securities
833,865 - - 833,865
Total assets 995,889 - 59,711 1,055,600
Total liabilities - - - -
A reconciliation of Level 3 fair value measurement of financial assets is
shown in the table below.
Half year ended Half year ended 30/06/22 Year ended 31/12/22
30/06/23
(restated) (restated)
€000s €000s €000s
Opening balance Level 3 financial assets 59,711 47,551 47,551
Transfers-in - - -
Additions 14,503 4,415 12,349
Disposals - (1,739) -
Unrealised movements recognised in consolidated income statement (2,394) 1,016 (189)
Closing balance Level 3 financial assets 71,820 51,243 59,711
Investment property and property held for own use were fair valued by
independent external professional valuers at 31 December 2022 (refer to note
13 and note 16 in the Group Annual Report for year ended 31 December 2022).
At the period ending 30 June 2023 the valuations for owner occupied property
and investment property were reduced by €546,000 and €748,000
respectively.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 11 Other receivables
Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year
ended 31/12/22 (restated)
€000s €000s €000s
Prepayments and accrued income 10,881 7,810 6,084
Other debtors 12,127 12,351 8,882
Accrued interest and rent 681 - 182
Total other receivables 23,689 20,161 15,148
Note 12 Cash and cash equivalents
Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year
ended 31/12/22 (restated)
€000s €000s €000s
Short term deposits 45,437 126,041 80,661
Money market fund 24,148 - 56,605
Cash in hand 44,248 22,730 27,974
Total cash and cash equivalents 113,833 148,771 165,240
Note 13 Called up share capital presented as equity
Half year ended Half year ended 30/06/22 (restated) Year
30/06/23 ended 31/12/22 (restated)
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 1 January 2022 35,461,206 - 21,277 21,277
Issued during the period 290,078 - 174 174
At the end of the period 35,751,284 - 21,451 21,451
At 1 January 2023 35,751,284 21,451
Issued during the period 269,688 162
At the end of the period 36,020,972 21,613
(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 21,745 21,583 21,583
The number of ordinary shares of €0.60 each held as treasury shares at 30
June 2023 was 164,005. At 31 December 2022 the number held was 164,005.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 14 Other reserves
Revaluation reserve FVOCI reserve Insurance/RI finance reserve Total
€000s €000s €000s €000s
Balance at 1 January 2023 755 (69,826) 20,984 (48,087)
Other comprehensive income - 7,599 (2,359) 5,240
Balance at 30 June 2023 755 (62,227) 18,625 (42,847)
Balance at 1 January 2022 752 8,751 (8,928) 575
Other comprehensive income - (55,873) 24,358 (31,515)
Balance at 30 June 2022 752 (47,122) 15,430 (30,940)
Balance at 1 January 2022 752 8,751 (8,928) 575
Other comprehensive income 3 (78,577) 29,912 (48,662)
Balance at 31 December 2022 755 (69,826) 20,984 (48,087)
The reconciliation of cumulative amounts of the fair value reserve within OCI,
for investment assets measured at FVOCI relating to the claims that the Group
has applied the retrospective approach at the IFRS 17 transition date, is
provided in the tables below.
30/06/2023 30/06/2022
At transition Post transition Total At transition Post transition Total
€000s €000s €000s €000s €000s €000s
Opening FVOCI reserve (55,736) (14,090) (69,826) 8,751 - 8,751
Net movement during period 7,037 684 7,721 (55,539) (8,303) (63,842)
Net movement reclassified to profit or loss on disposal
964 - 964 (11) - (11)
Income tax relating to these items (1,000) (86) (1,086) 6,942 1,038 7,980
Closing FVOCI reserve (48,735) (13,492) (62,227) (39,857) (7,265) (47,122)
31/12/22
At transition Post transition Total
€000s €000s €000s
Opening FVOCI reserve 8,751 - 8,751
Net movement during period (73,659) (16,102) (89,761)
Net movement reclassified to profit or loss on disposal (41) - (41)
Income tax relating to these items 9,213 2,012 11,225
Closing FVOCI reserve (55,736) (14,090) (69,826)
Note 15 Insurance and reinsurance contracts
The breakdown of groups of insurance contracts issued, and reinsurance
contracts held, that are in an asset position and those in a liability
position is set out in the table below:
Half year ended Half year ended
30/06/23 30/06/22 (restated)
Assets Liabilities Net Assets Liabilities Net
€000s €000s €000s €000s €000s €000s
Total insurance contracts issued - (787,522) (787,522) - (897,112) (897,112)
Total reinsurance contracts held 120,234 (656) 119,578 158,069 (458) 157,611
Year ended
31/12/22 (restated)
Assets Liabilities Net
€000s €000s €000s
Total insurance contracts issued - (826,621) (826,621)
Total reinsurance contracts held 136,657 (610) 136,047
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 15 Insurance and reinsurance contracts (continued)
The roll-forward of the net asset or liability for insurance contracts issued,
showing the liability for remaining coverage and the liability for incurred
claims for major product lines are disclosed in the tables below:
Half year ended 30/06/23
Total insurance contracts issued
Liability for remaining coverage Liability for incurred claims Total
Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment
€000s €000s €000s €000s €000s
Insurance contract liabilities as at 01/01 117,798 - 641,074 67,749 826,621
Insurance contract assets as at 01/01 - - - - -
Net insurance contract (assets)/liabilities as at 01/01
117,798 - 641,074 67,749 826,621
Insurance revenue (194,540) - - - (194,540)
Incurred claims and other expenses - - 106,384 8,360 114,744
Amortisation of insurance acquisition cash flows
36,588 - - - 36,588
Losses on onerous contracts and reversals of those losses
- - - - -
Changes that relate to past service-Changes in FCF relating to the LIC
- - (50,774) (8,601) (59,375)
Impairment of assets for insurance acquisition cash flow
- - - - -
Reversal of impairment of assets for insurance acquisition cash flows
- - - - -
Investment components - - - - -
Insurance service expenses 36,588 - 55,610 (241) 91,957
Insurance service result (157,952) - 55,610 (241) (102,583)
Insurance finance expenses - - 6,919 - 6,919
Total amounts recognised in comprehensive income
(157,952) - 62,529 (241) (95,664)
Premium received 200,203 - - - 200,203
Claims and other directly attributable expenses paid
- - (105,098) - (105,098)
Insurance acquisition cash flows (38,540) - - - (38,540)
Total cash flows 161,663 - (105,098) - 56,565
Net insurance contract (assets)/liabilities as at 30/06:
Insurance contract liabilities as at 30/06 121,509 - 598,505 67,508 787,522
Insurance contract assets as at 30/06 - - - - -
Net insurance contract (assets)/liabilities as at 30/06
121,509 - 598,505 67,508 787,522
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 15 Insurance and reinsurance contracts (continued)
Half year ended 30/06/22 (restated)
Total insurance contracts issued
Liability for remaining coverage Liability for incurred claims Total
Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment
€000s €000s €000s €000s €000s
Insurance contract liabilities as at 01/01 114,940 - 750,038 65,003 929,981
Insurance contract assets as at 01/01 - - - - -
Net insurance contract (assets)/liabilities as at 01/01 -
114,940 750,038 65,003 929,981
Insurance revenue (186,142) - - - (186,142)
Incurred claims and other expenses - - 102,883 7,380 110,263
Amortisation of insurance acquisition cash flows
34,064 - - - 34,064
Losses on onerous contracts and reversals of those losses
- - - - -
Changes that relate to past service-Changes in FCF relating to the LIC
- - (13,079) (3,926) (17,005)
Impairment of assets for insurance acquisition cash flow
- - - - -
Reversal of impairment of assets for insurance acquisition cash flows
- - - - -
Investment components - - - - -
Insurance service expenses 34,064 - 89,804 3,454 127,322
Insurance service result (152,078) - 89,804 3,454 (58,820)
Insurance finance expenses - - (29,457) - (29,457)
Total amounts recognised in comprehensive income
(152,078) - 60,347 3,454 (88,277)
Premium received 188,249 - - - 188,249
Claims and other directly attributable expenses paid
- - (97,589) - (97,589)
Insurance acquisition cash flows (35,252) - - - (35,252)
Total cash flows 152,997 - (97,589) - 55,408
Net insurance contract (assets)/liabilities as at 30/06:
Insurance contract liabilities as at 30/06 115,859 - 712,796 68,457 897,112
Insurance contract assets as at 30/06 - - - - -
Net insurance contract (assets)/liabilities as at 30/06
115,859 - 712,796 68,457 897,112
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 15 Insurance and reinsurance contracts (continued)
Year ended 31/12/22 (restated)
Total insurance contracts issued
Liability for remaining coverage Liability for incurred claims Total
Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment
€000s €000s €000s €000s €000s
Insurance contract liabilities as at 01/01 114,940 - 750,038 65,003 929,981
Insurance contract assets as at 01/01 - - - - -
Net insurance contract (assets)/liabilities as at 01/01
114,940 - 750,038 65,003 929,981
Insurance revenue (379,697) - - - (379,697)
Incurred claims and other expenses - - 209,625 14,182 223,807
Amortisation of insurance acquisition cash flows
70,595 - - - 70,595
Losses on onerous contracts and reversals of those losses
- - - - -
Changes that relate to past service-Changes in FCF relating to the LIC
- - (81,128) (11,436) (92,564)
Impairment of assets for insurance acquisition cash flow
- - - - -
Reversal of impairment of assets for insurance acquisition cash flows
- - - - -
Investment components - - - - -
Insurance service expenses 70,595 - 128,497 2,746 201,838
Insurance service result (309,102) - 128,497 2,746 (177,859)
Insurance finance expenses - - (33,657) - (33,657)
Total amounts recognised in comprehensive income
(309,102) - 94,840 2,746 (211,516)
Premium received 384,935 - - - 384,935
Claims and other directly attributable expenses paid
- - (203,804) - (203,804)
Insurance acquisition cash flows (72,975) - - - (72,975)
Total cash flows 311,960 - (203,804) - 108,156
Net insurance contract (assets)/liabilities as at 31/12:
Insurance contract liabilities as at 31/12 117,798 - 641,074 67,749 826,621
Insurance contract assets as at 31/12 - - - - -
Net insurance contract (assets)/liabilities as at 31/12
117,798 - 641,074 67,749 826,621
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 15 Insurance and reinsurance contracts (continued)
The roll-forward of the net asset or liability for reinsurance contracts held
showing assets for remaining coverage and amounts recoverable on incurred
claims arising on property and liability insurance ceded to reinsurers is
disclosed in the tables below:
Half year ended 30/06/23
Assets for remaining coverage Amounts recoverable on incurred claims Total
Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment
€000s €000s €000s €000s €000s
Reinsurance contracts held that are liabilities as at 01/01
(631) - 20 1 (610)
Reinsurance contracts held that are assets as at 01/01
(2,530) - 131,797 7,390 136,657
Net reinsurance contracts held as at 01/01
(3,161) - 131,817 7,391 136,047
Reinsurance expense (19,540) - - - (19,540)
Change in amounts recoverable for incurred claims and other expenses
- - 5,060 355 5,415
Changes that relate to past service-changes in the FCF relating to incurred
claims recovery
- - (22,954) (104) (23,058)
Loss-recovery on onerous underlying contracts and adjustments
- - - - -
Effect of changes in risk of reinsurers' non-performance
- - 3 - 3
Net income/expense from reinsurance contracts held
(19,540) - (17,891) 251 (37,180)
Finance income / expense from reinsurance contracts held
- - 2,119 - 2,119
Total amounts recognised in comprehensive income
(19,540) - (15,772) 251 (35,061)
Premiums paid, net of commission ceded 19,329 - - - 19,329
Recoveries from reinsurance - - (737) - (737)
Total cash flows 19,329 - (737) - 18,592
Net reinsurance contract assets/(liabilities) held as at 30/06:
Reinsurance contracts held that are liabilities as at 30/06
(678) - 21 1 (656)
Reinsurance contracts held that are assets as at 30/06
(2,694) - 115,287 7,641 120,234
Net reinsurance contracts held as at 30/06
(3,372) - 115,308 7,642 119,578
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 15 Insurance and reinsurance contracts (continued)
Half year ended 30/06/22 (restated)
Assets for remaining coverage Amounts recoverable on incurred claims Total
Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment
€000s €000s €000s €000s €000s
Reinsurance contracts held that are liabilities as at 01/01
(809) - 20 1 (788)
Reinsurance contracts held that are assets as at 01/01
(1,297) - 201,827 8,358 208,888
Net Reinsurance contracts held as at 01/01
(2,106) - 201,847 8,359 208,100
Reinsurance expense (17,232) - - - (17,232)
Change in amounts recoverable for incurred claims and other expenses
- - 6,375 577 6,952
Changes that relate to past service-changes in the FCF relating to incurred
claims recovery
- - (4,455) (33) (4,488)
Loss-recovery on onerous underlying contracts and adjustments
- - - - -
Effect of changes in risk of reinsurers' non-performance
- - - - -
Net income/(expense) from reinsurance contracts held
(17,232) - 1,920 544 (14,768)
Finance income / (expense) from reinsurance contracts held
- - (6,401) - (6,401)
Total amounts recognised in comprehensive income
(17,232) - (4,481) 544 (21,169)
Premiums paid, net of commission ceded 17,619 - - - 17,619
Recoveries from reinsurance - - (46,939) - (46,939)
Total cash flows 17,619 - (46,939) - (29,320)
Net reinsurance contract assets/(liabilities) held as at 30/06:
Reinsurance contracts held that are liabilities as at 30/06
(479) - 20 1 (458)
Reinsurance contracts held that are assets as at 30/06
(1,240) - 150,407 8,902 158,069
Net reinsurance contracts held as at 30/06
(1,719) - 150,427 8,903 157,611
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 15 Insurance and reinsurance contracts (continued)
Year ended 31/12/22 (restated)
Assets for remaining coverage Amounts recoverable on incurred claims Total
Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment
€000s €000s €000s €000s €000s
Reinsurance contracts held that are liabilities as at 01/01
(809) - 20 1 (788)
Reinsurance contracts held that are assets as at 01/01
(1,297) - 201,827 8,358 208,888
Net Reinsurance contracts held as at 01/01
(2,106) - 201,847 8,359 208,100
Reinsurance expense (34,814) - - - (34,814)
Change in amounts recoverable for incurred claims and other expenses
- - 14,508 1,048 15,556
Changes that relate to past service-changes in the FCF relating to incurred
claims recovery
- - (25,488) (2,016) (27,504)
Loss-recovery on onerous underlying contracts and adjustments
- - - - -
Effect of changes in risk of reinsurers' non-performance
- - 7 - 7
Net income/(expense) from reinsurance contracts held
(34,814) - (10,973) (968) (46,755)
Finance income / (expense) from reinsurance contracts held
- - (6,813) - (6,813)
Total amounts recognised in comprehensive income
(34,814) - (17,786) (968) (53,568)
Premiums paid, net of commission ceded 33,759 - - - 33,759
Recoveries from reinsurance - - (52,244) - (52,244)
Total cash flows 33,759 - (52,244) - (18,485)
Net reinsurance contract assets/(liabilities) held as at 31/12:
Reinsurance contracts held that are liabilities as at 31/12
(631) - 20 1 (610)
Reinsurance contracts held that are assets as at 31/12
(2,530) - 131,797 7,390 136,657
Net reinsurance contracts held as at 31/12
(3,161) - 131,817 7,391 136,047
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
MIBI Levy MIICF contribution Consequential payments State Total
subsidies
€000s €000s €000s €000s €000s
Balance at 1 January 2023 6,195 3,642 1,266 - 11,103
Provided in the period 2,952 1,960 27 7,500 12,439
Net amounts paid (2,952) (3,642) (198) - (6,792)
Balance at 30 June 2023 6,195 1,960 1,095 7,500 16,750
Balance at 1 January 2022 6,681 3,645 1,945 - 12,271
Provided in the period 3,347 1,894 - - 5,241
Net amounts paid (3,347) (3,649) (454) - (7,450)
Balance at 30 June 2022 (restated)
6,681 1,890 1,491 - 10,062
Balance at 1 January 2022 6,681 3,645 1,945 - 12,271
Provided in the period 4,751 3,642 10 - 8,403
Net amounts paid (5,237) (3,645) (689) - (9,571)
Balance at 31 December 2022 (restated)
6,195 3,642 1,266 - 11,103
Note 16 Other provisions
MIBI Levy
The Group's share of the Motor Insurers' Bureau of Ireland 'MIBI' levy for
2023 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.
MIICF Contribution
The Group's contribution to the Motor Insurers' Insolvency Compensation Fund
'MIICF' for 2023 is based on 2% of its Motor Gross Written Premium. Payment is
expected to be made in the first half of 2024.
Consequential payments
The balance of the provision of €1,095,000 is based on the best estimate of
the Consequential Payments provision in respect of the FSPO decisions and
payments are expected to be made before the end of the year.
State subsidies
The Group has included a provision of €7,500,000 in the financial statements
in respect of our current estimate of the cost of a constructive obligation
arising from the deduction of State subsidies from Business Interruption
claims payments following Covid-19 closures. Payment to the State is expected
to be made in the coming year.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 17 Deferred taxation asset/ (liability)
Retirement benefit surplus Unrealised gains on investment & loans Insurance/ Reinsurance finance reserve Revaluation surplus on investment properties Losses carried forward Other Total
timing differences
€000s €000s €000s €000s €000s €000s €000s
Balance at 1 January 2023 (1,061) 9,974 (2,998) (1,387) 329 (1,228) 3,629
Credited/ (debited) to the Consolidated Statement of Comprehensive Income
125 (1,086) 337 - - - (624)
Debited to the Consolidated Income Statement - - - - (81) - (81)
Balance at 30 June 2023 (936) 8,888 (2,661) (1,387) 248 (1,228) 2,924
Balance at 1 January 2022 (1,363) (1,251) 1,276 (1,387) 410 (1,576) (3,891)
(Debited)/ credited to the Consolidated Statement of Comprehensive Income
(485) 7,981 (3,481) - - - 4,015
Credited to the Consolidated Income Statement - - - - - 2,050 2,050
Balance at 30 June 2022 (restated) (1,848) 6,730 (2,205) (1,387) 410 474 2,174
Balance at 1 January 2022 (1,363) (1,251) 1,276 (1,387) 410 (1,576) (3,891)
Credited/ (debited) to the Consolidated Statement of Comprehensive Income
284 11,225 (4,274) - - (2) 7,233
Credited/ (debited) to the Consolidated Income Statement 18 - - - (81) 350 287
Balance at 31 December 2022 (restated) (1,061) 9,974 (2,998) (1,387) 329 (1,228) 3,629
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 18 Other payables
Half year ended Half year ended Year
30/06/23 30/06/22 (restated) ended 31/12/22 (restated)
€000s €000s €000s
Amounts falling due within one year:
Payables and accruals 38,007 29,173 33,947
PAYE/PRSI 1,868 1,632 1,681
Total payables 39,875 30,805 35,628
Note 19 Dividends
Half year ended 30/06/23 Half year ended 30/06/22 Year
(restated) ended 31/12/22 (restated)
€000s €000s €000s
Paid in period:
2022 dividend of 8.4 cent (2021: 8.4 cent) per share on 14% non-cumulative
preference share of €0.60 each
113 113 113
2022 dividend of 4.8 cent (2021: 4.8 cent) per share on 8% non-cumulative
preference share of €0.60 each
169 169 169
2022 final dividend of 100.0 cent (2021:100.0 cent) per share on ordinary
shares of €0.60 each
35,884 35,588 35,588
Total dividends paid 36,166 35,870 35,870
2022 dividend payments were approved by the shareholders at the Annual General
Meeting on 11 May 2023 and paid on 16 May 2023.
A special dividend of 100 cent per ordinary share (€35,857,000) has been
approved by the Board of FBD Holdings plc on 10 August 2023. The approved
dividend has not been included as a liability in the Consolidated Statement of
Financial Position at 30 June 2023.
Note 20 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 Scheme
liabilities increased slightly during the period while the value of Scheme
assets fell marginally, reducing the Scheme surplus at 30 June 2023.
The amounts recognised in the Consolidated Statement of Financial Position are
as follows:
Half year Half year Year
ended ended ended 31/12/22 (restated)
30/06/23 30/06/22 (restated)
€000s €000s €000s
Fair value of plan assets 70,400 79,600 71,170
Present value of defined benefit obligation (62,900) (64,800) (62,671)
Net retirement benefit surplus 7,500 14,800 8,499
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the half year ended 30 June 2023
Note 21 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 2022 Annual
Report. An analysis of share-based payments to key management personnel is
also included in Note 35 of the 2022 Annual Report. The level and nature of
related party transactions in the first half of 2023 are consistent with the
transactions disclosed in the 2022 Annual Report.
Note 22 Contingent liabilities and contingent assets
There were no contingent liabilities or contingent assets at 30 June 2023, 30
June 2022 (restated) or 31 December 2022 (restated).
Note 23 Subsequent events
There have been no subsequent events that would have a material impact on the
interim financial statements.
Note 24 Information
This half yearly report and the Annual Report for the year ended 31 December
2022 are available on the Company's website at www.fbdgroup.com.
Note 25 Approval of Half Yearly Report
The half yearly report was approved by the Board of Directors of FBD Holdings
plc on 10 August 2023.
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
10 August 2023
FBD HOLDINGS PLC
APPENDIX
ALTERNATIVE PERFORMANCE MEASURES (APMs) (UNAUDITED)
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 is a component of insurance
revenue and is widely used across the general insurance industry.
The calculation of the APMs is based on the following
data:
Note Half year ended 30/06/23 Half year ended 30/06/22 Year ended 31/12/22 (restated)
(restated)
€000s €000s €000s
Loss ratio
Incurred claims and other expenses 6(c) 114,744 110,263 223,807
Changes that relate to past service - changes in FCF relating to the LIC
6(c) (59,375) (17,005) (92,564)
Net expense from reinsurance contracts held 37,180 14,768 46,755
Movement in other provisions 12,439 5,241 8,403
Total claims incurred and movement in other provisions
104,988 113,267 186,401
Insurance revenue 194,540 186,142 379,697
Loss ratio (Total claims incurred and movement in other provisions/Insurance
revenue)
54.0% 60.9% 49.1%
Expense ratio
Amortisation of insurance acquisition cash flow 6(c) 36,588 34,064 70,595
Acquisition cash flows recognised when incurred 6(c) - - -
Non-attributable expenses 6(c) 16,165 13,780 33,048
Total insurance acquisition and non-attributable expenses
6(c) 52,753 47,844 103,643
Insurance revenue 194,540 186,142 379,697
Expense ratio (Total insurance acquisition and non-attributable expenses
/Insurance revenue)
27.1% 25.7% 27.3%
% % %
Combined operating ratio
Loss ratio 54.0 60.9 49.1
Expense ratio 27.1 25.7 27.3
Combined operating ratio (Loss ratio + Expense ratio) 81.1 86.6 76.4
FBD HOLDINGS PLC
APPENDIX
ALTERNATIVE PERFORMANCE MEASURES (APMs) (UNAUDITED) (continued)
Half year ended 30/06/23 Half year ended 30/06/22 Year ended 31/12/22 (restated)
(restated)
€000s €000s €000s
Actual investment return
Investment return recognised in consolidated income statement 8,389 (15,281) (10,753)
Investment return recognised in statement of comprehensive income
8,685 (63,853) (89,802)
Actual investment return 17,074 (79,134) (100,555)
Average investment assets 1,143,242 1,194,183 1,169,411
Investment return (Actual investment return/ Average investment assets)
1.5% (6.6%) (8.6%)
Net asset value per share (NAV per share)
Shareholders' funds - equity interests 456,932 419,727 454,006
Number of shares No. No. No.
Closing number of ordinary shares (excluding Treasury) 35,856,967 35,587,279 35,587,279
Cent Cent Cent
Net asset value per share (Shareholders' funds/Closing number of ordinary
shares)
1,274 1,179 1,276
Return on Equity €000s €000s €000s
Weighted Average (WA) equity attributable to ordinary shareholders 455,469 450,008 467,148
Result for the period 33,307 2,182 57,556
ROE (Result for the period/WA equity attributable to ordinary shareholders) % % %
15 (1) 1(1) 12
Underwriting result €000s €000s €000s
Insurance service result 65,403 44,052 131,104
Non-attributable expenses (16,165) (13,780) (33,048)
Other provisions (12,439) (5,241) (8,403)
Underwriting result 36,799 25,031 89,653
Gross written premium €000s €000s €000s
Insurance revenue 194,540 186,142 379,697
Less: Instalment premium(2) (2,070) (2,088) (4,291)
Add: Movement in unearned premium(2) 13,962 8,378 7,245
Gross written premium 206,432 192,432 382,651
(1)Annualised
(2)These items cannot be reconciled to the Financial Statements
Gross written premium: the total premium on insurance underwritten by an
insurer or reinsurer during a specific period, before deduction of reinsurance
premium.
Underwriting result: Insurance service result less non-attributable expenses
and movement in other provisions.
Expense ratio: Insurance acquisition expenses and non-attributable expenses as
a percentage of insurance revenue.
Loss ratio: Claims incurred net of reinsurance result as a percentage of
insurance revenue.
Combined operating ratio: the sum of the loss ratio and expense ratio. A
combined operating ratio below 100% indicates profitable insurance results. A
combined operating ratio over 100% indicates unprofitable results.
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 2023 (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 2023;
· 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 3 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
10 August 2023
Dublin
Notes:
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