REG - FBD Holdings PLC - Final Results
10/03/2023 07:00
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RNS Number : 5068S FBD Holdings PLC 10 March 2023
FBD HOLDINGS PLC
10 March 2023
FBD HOLDINGS PLC
PRELIMINARY ANNOUNCEMENT
For the year ended 31 December 2022
KEY HIGHLIGHTS
· Profit Before Tax of €74m compared to €110m in 2021.
· Combined Operating Ratio (COR) of 75% reflecting a very strong
underwriting performance and positive development of prior year claims.
· Proposed dividend of 100c per share.
· Gross written premium of €383m, an increase of 3.4% excluding the
impact of pandemic premium rebates.
· Policy count growth of 2.8% with retention levels of existing
business increasing 1.5%, reaching a six year high.
· Average premium increased 0.6% across the portfolio with Private
Motor down 7.2%.
· Challenging year for fixed income assets which saw negative
investment returns of -€90m through Other Comprehensive Income. There was
also a negative investment return of -€10m through the Income Statement
primarily due to a negative return on risk assets.
· Our capital position remains strong with a Solvency Capital Ratio
(SCR) of 226% (unaudited). Losses on the investment portfolio have been
largely mitigated by underwriting profits, higher discounting of claims
liabilities and a reduction in the Solvency Capital Requirement.
· In view of capital strength it is our intention to now engage with
stakeholders on steps to return further capital in the short and medium term.
· Return on Equity of 14%.
· The Business Interruption best estimate reduced marginally by €2m
in 2022 to €42m net of reinsurance.
· The Bank of Ireland Home product was launched. We successfully
renewed our An Post Insurance partnership for another 5 years.
· New advertising campaign launched highlighting that FBD stands for
support.
FINANCIAL SUMMARY 2022 2021
€000s €000s
Gross written premium 382,889 366,328
Underwriting profit/ (loss) 85,682 95,197
Profit before taxation 73,723 110,435
Loss ratio 45.9% 43.6%
Expense ratio 28.6% 27.9%
Combined operating ratio 74.5% 71.5%
Cent Cent
Basic earnings per share 181 274
Net assets per share 1,188 1,338
( )
( )
· Gross Written Premium (GWP) of €382.9m (2021: €366.3m) increased
by 4.5% from 2021. This increase is 3.4% excluding the impact of pandemic
related premium rebates.
· Underwriting profit of €85.7m (2021 profit: €95.2m), equating to
a 74.5% COR (2021: 71.5%) with continuing lower frequency of injury claims,
benign weather and positive prior year reserve development being the key
features. Excluding reserve releases the COR for 2022 is 91.9% (2021: 87.5%).
· Expense ratio of 28.6% (2021: 27.9%) with the increase mainly due to
inflationary impacts on employee costs along with utility and IT expense
increases.
· A very challenging year for both equity and fixed income investments
resulting in a loss through the Income Statement of €10.4m (2021:
+€15.7m). Significant increases in risk free rates throughout the year, in
addition to spread widening in the sovereign and corporate bond portfolios,
resulted in a negative mark to market (MTM) return of €90.1m (2021:
-€12.2m) through Other Comprehensive Income (OCI).
· Net Asset Value per share 1,188 cent has decreased from 1,338 cent at
the end of 2021 primarily due to reduced asset values and the payment of the
2021 dividends in May 2022.
Commenting on these results Tomás Ó Midheach, Group Chief Executive, said:
"It is great to be in a position to announce another strong set of results for
FBD despite negative investment returns. We continue to maintain our
underwriting discipline delivering a healthy underwriting profit supported by
positive prior year reserve development.
It is encouraging to see growth in customer and policy numbers. More customers
are staying loyal to us which is testament to the value we offer them and the
continuing customer service our people deliver. We have increased our
relationship customers in Business and Farm this year and intend to build on
this momentum in 2023 by continuing to differentiate ourselves through our
product and service offering.
There is still uncertainty in the external claims environment as we await the
outcome of the challenge to the Personal Injury Guidelines and we see how they
operate in practice. We are now seeing reductions in average settlement costs
feeding through in pre-litigation channels
Underinsurance is being highlighted as a concern for customers as inflation is
impacting rebuild and replacement costs and we are working with our customers
to make sure they are adequately covered in the unfortunate event of a claim.
We expect a reasoned ruling from the Judge in respect of the Business
Interruption Test Case in early 2023. This ruling is anticipated to provide
certainty in respect of outstanding issues and assist in reaching a final
agreement with publicans and enable us to pay the balance of claims this year.
We continue to build strong relationships with intermediary partners and have
launched a Home product in conjunction with Bank of Ireland and successfully
renewed our An Post Insurance partnership.
FBD remains a strongly capitalised business with a Capital Ratio significantly
in excess of our stated risk appetite. It is our intention to now engage with
stakeholders on taking steps to return further capital in the short and medium
term.
Our momentum is a result of focusing on our customer's needs, providing them
with a personalised service and putting them at the heart of what we do,
whether they are contacting us to claim, interacting with our Local Offices,
our Mullingar Service Centre or Head Office. It was great to see so many
customers and employees at the many shows and events around the country. I
would like to thank our people for their continued dedication, as our good
results are a function of their hard work supporting our customers.
Our strategy is delivering and I would like to thank the Board and the
Executive Management Team for their continuing support and invaluable input as
we continue to focus on meeting the needs of all our stakeholders."
A presentation will be available on our Group website www.fbdgroup.com
(http://www.fbdgroup.com/) from 9am today.
Enquiries Telephone
FBD
Michael Sharpe, Investor Relations +353 87 9152914
Drury Communications
Paddy Hughes +353 87 616 7811
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 €73.7m (2021 profit: €110.4m),
supported by a continuing low injury claims frequency, benign weather and
positive prior year reserve development. The prior year reserve development of
€48.3m is arising from lower large claims experience in recent years and
better than expected settlements of smaller claims. In addition €10m was
released from the Margin for Uncertainty, which is a reserve held in addition
to the best estimate of claims liabilities.
The Group reported an underwriting profit of €85.7m (2021 profit: €95.2m)
and GWP of €382.9m (2021: €366.3m), 3.4% higher than 2021 excluding the
impact of pandemic related premium rebates.
The net best estimate in respect of Business Interruption reduced by €1m to
€42m since June 2022. We have agreed settlements with two of the four
publicans in the Business Interruption Test Case. We hope to receive a
reasoned ruling shortly from the Judge that will assist us in reaching an
agreement with the remaining two publicans and enable us to finally settle all
outstanding claims.
UNDERWRITING
Premium income
Gross written premium increased to €382.9m in 2022 (2021: €366.3m). The
2021 figure includes €3.3m of Covid-19 Commercial rebates. Excluding
rebates, gross written premium is 3.4% higher than prior year.
Customer policy count increased by 2.8%, with retention rates increasing again
by 1.5%, reaching the highest level in the last six years.
Average premium increased by 0.6% across the portfolio. Private Motor average
premium reduced by 7.2% and Commercial Motor reduced by 1.1% reflecting the
reductions seen in claims costs as a result of the new Personal Injury
Guidelines, partially offset by the impact of increases in motor damage costs.
Commercial Business average premium increased by 5.6% and Farm average premium
increased by 2.6% mainly due to increases in property elements as sums insured
were adjusted to reflect inflation in construction costs. Commercial customers
increased their liability cover as trading conditions improved as the economy
reopened, positively impacting average premium. Average Tractor premium
increased by 5.5% due to a higher proportion of newer tractors and the
increasing value of existing tractors. The increase in Home average premium of
4.1% reflects increasing sums insured due to inflation.
Reinsurance
The reinsurance programme for 2023 was successfully renegotiated with a
similar structure to the expiring programme. The negotiation of the 2023
renewal occurred with a backdrop of continuing hardening in the reinsurance
market with rates impacted due to geopolitical and macroeconomic shocks along
with natural disasters. Overall we saw an increase in reinsurance rates for
property of 8% and casualty of 2%, a very positive result in the current
environment.
Claims
Net claims incurred (Net claims and benefits plus movements in Other
provisions) increased by €8.5m to €154.2m (2021: €145.7m). The increase
is largely a result of higher frequency and inflationary impacts in Motor
Damage and Property claims, net of the FSPO consequential payments required in
2021 of €13.2m.
Claims volumes increased by 6% year on year driven by increased motor damage
notifications of 27%. Motor damage notifications increases reflect the
increased traffic volumes and impact of inflation on policyholders hindering
their ability to cover the cost of minor damage claims themselves. More
policyholders have taken out comprehensive cover and inflation continues on
parts and labour increasing the cost of repair. Motor Damage and Property
claim notifications have increased by 30% and 24% on pre-Covid levels.
The average cost of injury claims settlements marginally increased from 2021
while continuing to be lower than that experienced pre-Covid. We are now
seeing reductions in average settlement costs feeding through in
pre-litigation channels. In the litigation channel plaintiff legal costs have
increased in 2022 by 14% and 12% in the High Court and the Circuit Court
respectively.
Claims being settled under the new guidelines are over 40% lower in value when
compared to the previous Book of Quantum. We have reflected the impact of this
in premium reductions. The level of acceptance of Personal Injuries Resolution
Board (PIRB) awards across the market has improved to 48% which is closer to
historic levels. This may reduce the number of cases through the courts system
attracting higher legal costs. It could take a number of years for the full
impact of the new guidelines on claims settled after the PIRB process has been
completed to be known.
Motor damage claims costs continue to experience high inflation with an
increase of 11% year on year as costs of parts, paint and average labour hours
per repair increase. The average cost of property claims increased by 1% year
on year due to a change in mix and inflation, with further inflation expected
on domestic building costs.
Movement in other provisions reduced by €13.7m to €8.4m (2021: €22.1m),
the reduction is because no similar provision to the FSPO consequential
payments of €13.2m made in 2021 was required. The main elements of the Other
Provision is the Motor Insurers Bureau of Ireland (MIBI) levy and the Motor
Insurers Insolvency Compensation Fund (MIICF) contribution.
Industry Environment
The Personal Injuries Resolution Board (PIRB) Bill 2022 was signed into law
changing the title from the Personal Injuries Assessment Board. Voluntary
mediation will be offered as a means of resolving disputes and claimants are
entitled to legal representation. PIRB will have more time to assess claims
but it is as yet unclear whether medical reports and other documentation will
be shared with the parties. We welcome the option of mediation to reduce
litigated claims and await clear guidance on the operation of PIRB to
understand the real impact.
An appeal to the Supreme Court in respect of the Personal Injury Guidelines
was heard at the end of February 2023. There are still a number of challenges
over the constitutionality of the laws underpinning the Guidelines that are
due before the courts. We continue to experience a build-up of older, higher
value injury claims as a result of the reluctance of legal profession to
engage before the challenges are heard. A recent report indicated the number
of new personal injury claims initiated in the High Court and the Circuit
Court reduced as potential damages awarded would be lower and there are a
reducing number of claims being made as a result.
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.
A number of legislative changes impacting insurance are expected to be enacted
shortly:
· Irish Motor Insurance Database (IMID) - The next phase of the
previously named Motor Third Party Liability project (MTPL) will require
sharing of additional data on insured vehicles and drivers with Regulatory
Authorities.
· The Road Traffic Act (RTA) legislation is to be extended to better
regulate the use of scramblers/quads and e-bike/e-scooters.
· The Motor Insurance Directive (MID) primarily deals with the scope of
compulsory insurance broadening the potential scenarios where RTA cover will
apply. The text is currently under review after which it will be formally
adopted by the three European Institutions, the amendments must be transposed
into national law within 24 months of being accepted.
· General Scheme of Insurance (Miscellaneous Provisions) Bill - The
Bill is currently before the Seanad for debate and intends to address a number
of insurance-related issues that have arisen since the Government's 'Action
Plan for Insurance Reform' in December 2020.
All development work required in respect of Differential Pricing guidelines
issued in March 2022 including the auto-renewals elements were completed. The
pricing practice review will finish in early 2023. We continue to actively
monitor the impact of the changes on our portfolio.
FBD has updated additional wording changes needed as part of the Contract of
Insurance review programme ensuring all wording enhancements and clarity of
coverage expected following the enactment of the Consumer Insurance Contracts
Act 2019 are reflected.
Weather, Claims Frequency and Large Claims
No significant weather events of note occurred in 2022.
2020 and 2021 saw a significant reduction in frequency of injury claims due to
lockdowns arising from Covid-19 and 2022 sees continued lower frequency.
Injury claims frequency continues to remain below pre Covid-19 levels.
Large injury claims, defined as a value greater than €250k, notified in 2022
are higher than the last two years, the volumes are still lower than the
average of previous pre-Covid years.
Expenses
The Group's expense ratio is 28.6% (2021: 27.9%). Other underwriting expenses
are €96.0m, an increase of €2.6m on 2021. The increase in expenses is due
to inflationary increases in employee costs along with inflation in utility
and IT costs. Commission also increased as we continue to broaden and deepen
our partnerships with intermediaries adding additional routes to market.
Accelerated amortisation was charged on the policy administration system in
2022 of €2.5m compared to €5.9m in 2021.
The expense ratio increased by 0.7 of a percentage point as a result of the
higher cost base being offset by marginally higher earned premium.
General
FBD generated an underwriting profit of €85.7m (2021: €95.2m) which
translates to a COR of 74.5% (2021: 71.5%).
Investment Return
FBD's total investment return for 2022 is -8.6% (2021: +0.3%). The investment
return recognised in the Consolidated Income Statement is -0.9% (2021: +1.3%)
and in the Consolidated Statement of Other Comprehensive Income (OCI) is -7.7%
(2021: -1.0%). 2022 was a challenging year for investments. Inflation levels
have been higher than seen for decades which was largely driven by the energy
crisis in Europe, as a result of the Russian invasion of Ukraine. Central
banks around the world responded by increasing interest rates in an attempt to
control inflation. This led to steep interest rate increases with a resultant
significant reduction in the valuation of fixed income assets. Credit spreads
were volatile and increased over the year on fears of recession. This spread
widening has also contributed to the negative OCI on our bond portfolio.
The policy response by central banks risked sending many developed market
economies into recession as central bankers were more willing to risk a
recession rather than uncontrolled inflation. This resulted in a lot of
volatility in equity markets with US markets down roughly 20% over the year.
European markets were down 12%, however, overall risk assets had a difficult
year and this resulted in the negative return through the Income Statement.
FBD had very minor exposure, c. €1m, to Russian securities through its
Emerging Market funds prior to the invasion of Ukraine.
Financial Services Income and Other Costs
The Group's financial services operations returned a profit before tax of
€1.3m for the period (2021: profit €1.2m). Revenue increased by €0.7m
primarily from improved return on direct debit income. Costs increased by
€0.5m to €6.7m primarily due to inflationary increases in employee costs
in the Life & Pensions business and ESG consultancy costs incurred in the
Holding company.
Profit per share
The diluted profit per share was 176 cent per ordinary share, compared to 268
cent per ordinary share in 2021.
Dividend
The Group's Dividend Policy intends to reward shareholders through regular
annual dividends while retaining sufficient capital in order to maintain a
healthy capital adequacy to support future capital requirements. The Group has
a robust capital position and liquidity margins. Given the Group's strong
financial performance in 2022 the Board proposes to pay a dividend of 100 cent
per share for the 2022 financial year (2021: 100c).
Subject to the approval of shareholders at the Annual General Meeting to be
held on 11 May 2023, the final dividend for 2022 will be paid on 16 May 2023
to the holders of shares on the register on 21 April 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 31 December 2022 amounted to €422.8m (2021:
€472.4m). The decrease in shareholders' funds is mainly attributable to the
following:
· Profit after tax for the year of €64.5m;
· An increase of €2.7m due to share based payments;
· Offset by dividend payments of €35.9m;
· Mark to Market losses on our Bond portfolio of €78.9m after tax;
and
· A reduction in the Retirement benefit surplus of €2.0m;
Net assets per ordinary share are 1,188 cent, compared to 1,338 cent per share
at 31 December 2021.
Investment Allocation
The Group adopts a conservative investment strategy to ensure that its
technical reserves are matched by cash and fixed interest securities of low
risk and similar duration. Maintaining a well matched position has allowed FBD
to mitigate the impact of interest rate rises on its solvency position as
lower liabilities (due to discounting at a higher interest rate) offset
reduced bond valuations. The Company invested an additional €35m cash in
corporate bonds and other risk assets in 2022. The average credit quality of
the corporate bond portfolio has remained at A- and has seen a lower
allocation to BBB rated bonds (42% vs 47% at 31 December 2021).
The allocation of the Group's investment assets is as follows:
31 December 2022 31 December 2021
€m % €m %
Corporate bonds 563 49% 589 49%
Government bonds 271 24% 303 25%
Deposits and cash 172 15% 164 14%
Other risk assets 83 7% 84 7%
Equities 50 4% 54 4%
Investment property 15 1% 16 1%
1,154 100% 1,210 100%
Solvency
The latest (unaudited) Solvency Capital Ratio (SCR) is 226% compared to the
2021 SCR of 214%.
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. The
effects of the Russian invasion of Ukraine continue to impact on the global
economy through continuing higher inflation impacting operational costs, the
cost of Motor Damage and Property claims and potentially may increase the cost
of injury claims over time. Market risk continues to be elevated as the
investment markets remain volatile.
The claims environment is positively impacted by the Personal Injury
Guidelines although continuing challenges have resulted in delayed settlements
that could result in increased legal costs, reducing the benefit. 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.
Supply chain issues in respect of materials and labour shortages particularly
in respect of Construction and the Motor industry may impact claims costs in
future years. Despite more stabilised energy costs of late there is a risk
they may drive increased general inflation in future. Supply chain issues in
respect of materials and labour shortages particularly in respect of
Construction and the Motor industry are impacting claims costs and will
increase settlements costs in future years and may have a knock on impact to
injury claims in the near future as pressure mounts on salary inflation.
Legal costs will continue to be monitored as High Court and Circuit Court
costs have seen double digit increases in the last twelve months. The delays
in claim settlements are likely to increase legal costs further.
FBD model forward looking projections of key financial metrics on a periodic
basis based on an assessment of the likely operating environment over the next
number of years. The projections reflect changes of which we are aware and
other uncertainties that may impact future business plans and includes
assumptions on the potential impact on revenue, expenses, claims frequency,
claims severity, investment market movements and in turn solvency. The output
of the modelling demonstrates that the Group is likely to be profitable and
remain in a strong capital position. However, the situation can change and
unforeseen challenges and events could occur. The solvency of the Group
remains solid and is currently at 226%, unaudited (31 December 2021: 214%).
A reasoned ruling is expected by the Judge on the Business Interruption Test
case in early 2023 which we are hopeful will provide the certainty that will
enable us to pay the balance of the claims due to publicans this year.
Potential future adverse events are assessed when the Group is considering the
Margin for Uncertainty which is a provision held as an amount over the best
estimate of claims liabilities net of expected reinsurance recoveries.
The highest inflation in developed markets in decades has led to increasing
risk free interest rates. While there are signs that inflation is beginning to
reduce the risk remains as to how aggressive central banks' policy responses
will be which could lead to recession. Equity valuations which have fallen
significantly during 2022 risk falling further if recessionary fears become a
reality. Similarly, continued high inflation becoming engrained in the
economy is a serious risk with stagflation (high inflation, low growth) being
a possibility. Future financial market movements and their impact on balance
sheet valuations, pension surplus and investment income are unknown and market
risk remains 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. The Group holds cash resources significantly higher than its
minimum liquidity requirement in order to mitigate any liquidity stress
events. The Group's asset allocation is outlined on page 8.
The employment market has rebounded to above pre-pandemic levels and is very
tight with shortages of skills in some areas. We continue to enhance our
employee proposition to ensure we attract and retain a talented workforce. We
support our employees through the provision of professional development and
career opportunities, alongside a supportive working environment which focuses
on well-being and flexible working which act as key retention tools.
IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments
IFRS 17 came into effect on 1 January 2023. IFRS 17 provides consistent
principles for all aspects of accounting for insurance contracts. It aims to
enable investors, analysts and others to meaningfully compare companies,
insurance contracts and industries while increasing transparency. IFRS 17 will
significantly impact the measurement and presentation of insurance financial
statements. The impact to shareholder's equity will mainly be driven by the
introduction of discounting claims reserves as well as 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. The risk adjustment under IFRS17 replaces the margin
for uncertainty currently in existence under IFRS4.
Based on assessments to date, the total adjustment after tax to the Group's
total equity on the application of IFRS17 and IFRS9 is currently estimated to
be an increase of approximately €7.9m at 1 January 2022 with the discounting
impact becoming significantly more prevalent throughout the 2022 transitional
period in line with the rising interest rate environment. Any future reserve
releases will reflect the impacts of discounting and risk adjustment.
Estimated increase (reduction) in the Group's total equity: 1 January 2022
€m
Adjustments due to the adoption of IFRS 17:
Re-measurement of non-life insurance contracts under IFRS 17 9.4
Adjustments due to adoption of IFRS 9:
Impairment of financial assets (0.4)
Deferred tax impact (1.1)
Estimated impact of adoption of IFRS 17 and IFRS 9 after tax 7.9
OUTLOOK
The economic outlook suggests continued high inflation resulting in high
interest rates and reduced growth, with Irish growth expected to be marginally
ahead of Europe. Despite the backdrop income projections on our bond portfolio
in the higher interest rate environment have increased due to the impact of
higher reinvestment rates as bonds mature.
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 of how the guidelines are implemented develops.
2023 sees the requirements on ESG reporting broaden with the introduction of
the EU's Sustainable Finance Taxonomy Regulation requiring alignment on the EU
Taxonomy. FBD will focus our ESG approach on where we can have a meaningful
impact and the UN Principles for Sustainable Insurance will guide our ESG
strategy. We have set out the pillars of the strategy which is the framework
we will use to embed ESG across the business and will ensure we have clear
responsibility around delivery, ensuring we meet the increased demands for
targets and disclosures from all stakeholders. FBD naturally has very strong
engagement with local communities and customers through our branch network and
contact centre as we service their needs and endeavour to deepen this
connection as we embed ESG across our business.
FBD's strategy puts our customers at the heart of what we do and is
delivering, as we see growth across all portfolios particularly our
relationship customers in Business and Farm. We will continue to strengthen
our relationship focus and extend our digital enablement as our strategy
evolves. A key differentiator is our claims proposition as we strive to
deliver best in class service when our customers need us most.
FBD expects to continue to be profitable in 2023 and believes an IFRS 17
Combined Operating Ratio* of low 90s to be achievable (similar for current
accounting basis).
*Please see the Annual Report page 136 for definition of IFRS17 Combined
Operating Ratio
FBD Holdings plc
Consolidated Income Statement
For the financial year ended 31 December 2022
2022 2021
€000s €000s
Revenue 406,395 386,661
Income
Gross premium written 382,889 366,328
Reinsurance premiums (40,016) (32,652)
Net premium written 342,873 333,676
Change in net provision for unearned premiums (7,019) 571
Net premium earned 335,854 334,247
Net investment return (10,413) 15,679
Financial services income - Revenue from contracts with customers 3,173 2,930
- 4,812 4,375
Other financial services income
Total income 333,426 357,231
Expenses
Net claims and benefits (145,807) (123,538)
Other underwriting expenses (95,962) (93,369)
Movement in other provisions (8,403) (22,143)
Financial services and other costs (6,685) (6,138)
(Impairment)/revaluation of property, plant and equipment (287) 937
Finance costs (2,559) (2,545)
Profit before taxation 73,723 110,435
Income taxation charge (9,269) (14,026)
Profit for the financial year 64,454 96,409
Attributable to:
Equity holders of the parent 64,454 96,409
FBD Holdings plc
Consolidated Income Statement
For the financial year ended 31 December 2022
Earnings per share 2022 2021
Cent Cent
Basic 181 274
Diluted 176(1) 268(1)
( )
(1) Diluted earnings per share reflects the potential vesting of share based
payments.
The Financial Statements were approved by the Board and authorised for issue
on 10 March 2023.
FBD Holdings plc
Consolidated Statement of Comprehensive Income
For the financial year ended 31 December 2022
2022 2021
€000s €000s
Profit for the financial year 64,454 96,409
Items that will or may be reclassified to profit or loss in subsequent
periods:
Movement on available for sale financial assets during the year
(90,271) (11,169)
Movement transferred to the Consolidated Income Statement on disposal during
the year
129 (1,033)
Taxation credit relating to items that will or may be reclassified to profit
or loss in subsequent periods
11,268 1,525
Items that will not be reclassified to profit or loss in subsequent periods:
Actuarial movement on retirement benefit obligations (2,272) 280
Property held for own use revaluation movement 5 4
Taxation credit / (charge) relating to items not to be reclassified in
subsequent periods
282 (265)
Other comprehensive expense after taxation (80,859) (10,658)
Total comprehensive (expense)/income for the financial year (16,405) 85,751
Attributable to:
Equity holders of the parent (16,405) 85,751
FBD Holdings plc
Consolidated Statement of Financial Position
At 31 December 2022
ASSETS
2022 2021
€000s €000s
Property, plant and equipment 22,745 24,178
Policy administration system 23,683 27,982
Intangible assets 14,082 9,031
Investment property 15,052 16,055
Right of use assets 4,290 5,078
Loans 580 577
Financial assets
Available for sale investments 834,994 893,715
Investments held for trading 132,965 137,547
Deposits with banks 10,000 -
977,959 1,031,262
Reinsurance assets
Provision for unearned premiums 1,937 1,711
Claims outstanding 136,848 195,249
138,785 196,960
Retirement benefit surplus 8,499 10,901
Deferred taxation asset 8,091 -
Deferred acquisition costs 38,520 35,458
Other receivables 58,307 58,047
Cash and cash equivalents 162,398 164,479
Total assets 1,472,991 1,580,008
FBD Holdings plc
Consolidated Statement of Financial Position (continued)
At 31 December 2022
EQUITY AND LIABILITIES
2022 2021
€000s €000s
Equity
Called up share capital presented as equity 21,583 21,409
Capital reserves 30,192 27,406
Revaluation reserve 755 752
Retained earnings 370,258 422,815
Equity attributable to ordinary equity holders of the parent
422,788 472,382
Preference share capital 2,923 2,923
Total equity 425,711 475,305
Liabilities
Insurance contract liabilities
Provision for unearned premiums 191,893 184,648
Claims outstanding 740,784 800,756
932,677 985,404
Other provisions 11,615 13,492
Subordinated debt 49,662 49,603
Lease liabilities 4,600 5,349
Deferred taxation liability - 2,761
Current taxation liability 2,399 6,437
Payables 46,327 41,657
Total liabilities 1,047,280 1,104,703
Total equity and liabilities 1,472,991 1,580,008
FBD Holdings plc
Consolidated Statement of Cash Flows
For the financial year ended 31 December 2022
2022 2021
€000s €000s
Cash flows from operating activities
Profit before taxation 73,723 110,435
Adjustments for:
Movement on investments held for trading 16,321 (10,839)
Movement on investments available for sale 2,955 2,429
Interest and dividend income (11,510) (8,106)
Depreciation / amortisation of property, plant and equipment, intangible
assets and policy administration system
13,239 18,012
Depreciation of right of use asset 788 790
Share-based payment expense 2,681 2,650
Fair value movement on investment property 1,003 996
Fair value movement of property, plant and equipment 287 (937)
Operating cash flows before movement in working capital 99,487 115,430
Movement in insurance contract liabilities 5,448 (66,720)
Movement in other provisions (1,877) 1,425
Movement in receivables and deferred acquisition costs (2,809) 5,460
Movement in payables 7,353 (394)
Interest on lease liabilities 216 236
Purchase of investments held for trading (25,312) (58,432)
Sale of investments held for trading 13,573 48,653
Cash generated from operations 96,079 45,658
Interest and dividend income received 10,998 8,620
Income taxes paid (12,603) (75)
Net cash generated from operating activities 94,474 54,203
Cash flows from investing activities
Purchase of available for sale investments (238,126) (210,499)
Sale of available for sale investments 203,750 166,034
Purchase of property, plant and equipment (1,288) (1,273)
Additions to policy administration system (4,566) (4,685)
Purchase of intangible assets (6,987) (5,398)
Movement in loans and advances (3) 24
Maturities of deposits invested with banks - 40,000
Additional deposits invested with banks (10,000) -
Net cash used in investing activities (57,220) (15,797)
Cash flows from financing activities
Ordinary and preference dividends paid (35,870) -
Interest payments on subordinated debt (2,500) (2,500)
Principal elements of lease payments (965) (962)
Net cash used in financing activities (39,335) (3,462)
Net (decrease)/increase in cash and cash equivalents (2,081) 34,944
Cash and cash equivalents at the beginning of the year 164,479 129,535
Cash and cash equivalents at the end of the financial year 162,398 164,479
FBD Holdings plc
Consolidated Statement of Changes in Equity
For the financial year ended 31 December 2022
Called up share capital presented as equity Capital reserves Retained earnings Attributable to Preference share Total equity
Revaluation reserves ordinary shareholders capital
€000s €000s €000s €000s €000s €000s €000s
Balance at 1 January 2021
21,409 24,756 978 336,838 383,981 2,923 386,904
Profit after taxation
- - - 96,409 96,409 - 96,409
Other comprehensive expense after taxation
- - (226) (10,432) (10,658) - (10,658)
Total comprehensive (expense)/income for the year
- - (226) 85,977 85,751 - 85,751
Recognition of share based payments
- 2,650 - - 2,650 - 2,650
Balance at 31 December 2021
21,409 27,406 752 422,815 472,382 2,923 475,305
Profit after taxation - - - 64,454 64,454 - 64,454
Other comprehensive income / (expense) after taxation
- - 3 (80,862) (80,859) - (80,859)
Total comprehensive income / (expense) for the year
- - 3 (16,408) (16,405) - (16,405)
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 30,192 755 370,258 422,788 2,923 425,711
*In April 2022 new ordinary shares were allotted to employees of FBD Holdings
plc as part of the performance share awards scheme in 2019. A total of 290,078
ordinary shares were issued at a nominal value of €0.60 each. The adjustment
to ordinary share capital was €174,000. The movement on the capital reserves
of €105,000 relates to the share premium reserve movement of €2,669,000
net of share based payments reserve movement of €2,564,000. The adjustment
to retained earnings was €279,000.
FBD Holdings plc
Supplementary Information
For the year ended 31 December 2022
Note 1 Underwriting PROFIT
2022 2021
€000s €000s
Gross premium written 382,889 366,328
Net premium earned 335,854 334,247
Net claims incurred (145,807) (123,538)
Other provisions (8,403) (22,143)
Net underwriting expenses (95,962) (93,369)
Underwriting profit 85,682 95,197
2022 2021
Net underwriting expenses €000s €000s
Management expenses 96,021 92,308
Deferred acquisition costs (3,061) (1,380)
Gross underwriting expenses 92,960 90,928
Reinsurance commission receivable (4,329) (3,864)
Broker commission payable 7,331 6,305
Net underwriting expenses 95,962 93,369
FBD Holdings plc
Supplementary Information (continued)
For the year ended 31 December 2022
Note 2 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:
2022 2021
Earnings €000s €000s
Profit for the year for the purpose of basic earnings per share 64,172 96,127
Profit for the year for the purpose of diluted earnings per share 64,172 96,127
Number of shares 2022 2021
No. No.
Weighted average number of ordinary shares for the purpose of basic earnings
per share (excludes treasury shares)
35,507,806 35,138,959
Weighted average number of ordinary shares for the purpose of diluted earnings
per share (excludes treasury shares)
36,424,983 35,930,762
Cent Cent
Basic earnings per share 181 274
Diluted earnings per share 176 268
The 'A' ordinary shares of €0.01 each that are in issue have no impact on
the earnings per share calculation.
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:
FBD Holdings plc
Supplementary Information (continued)
For the year ended 31 December 2022
Note 2 EARNINGS PER €0.60 ORDINARY SHARE (continued)
2022 2021
€000s €000s
Profit attributable to the parent entity for the year 64,454 96,409
2022 dividend of 8.4 cent (2021: 8.4 cent) per share on 14% noncumulative
preference shares of €0.60 each
(113) (113)
2022 dividend of 4.8 cent (2021: 4.8 cent) per share on 8% non-cumulative
preference shares of €0.60 each
(169) (169)
Profit for the year for the purpose of calculating basic and diluted earnings
64,172 96,127
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:
2022 2021
No. No.
Weighted average number of ordinary shares for the purpose of calculating
basic earnings per share
35,507,806 35,138,959
Potential vesting of share based payments 917,177 791,803
Weighted average number of ordinary shares for the purpose of calculating
diluted earnings per share
36,424,983 35,930,762
FBD Holdings plc
Supplementary Information (continued)
For the year ended 31 December 2022
Note 3 DIVIDENDS
2022 2021
€000s €000s
Paid during year:
2021 dividend of 8.4 cent (2020: 0.0 cent) per share on 14% non-cumulative
preference shares of €0.60 each
113 0
2021 dividend of 4.8 cent (2020: 0.0 cent) per share on 8% non-cumulative
preference shares of €0.60 each
169 0
2021 final dividend of 100.0 cent (2020: 0.0 cent) per share on ordinary
shares of €0.60 each
35,588 0
Total dividends paid 35,870 0
2022 2021
€000s €000s
Proposed:
2022 dividend of 8.4 cent (2021: 8.4 cent) per share on 14% non-cumulative
preference shares of €0.60 each
113 113
2022 dividend of 4.8 cent (2021: 4.8 cent) per share on 8% non-cumulative
preference shares of €0.60 each
169 169
2022 final dividend of 100.0 cent (2021: 100.0 cent) per share on ordinary
shares of €0.60 each
35,588 35,297
Total dividends proposed 35,870 35,579
The proposed dividend excludes any amounts due on outstanding share awards as
at 31 December 2022 that are due to vest in April 2023 and is subject to
approval by shareholders at the AGM on 11 May 2022. The proposed dividends
have not been included as a liability in the Consolidated Statement of
Financial Position as at 31 December 2022.
FBD Holdings plc
Supplementary Information (continued)
For the year ended 31 December 2022
Note 4 CALLED UP SHARE CAPITAL PRESENTED AS EQUITY
Number 2022 2021
€000s €000s
(i) Ordinary shares of €0.60 each
Authorised:
At the beginning and the end of the year 51,326,000 30,796 30,796
Issued and fully paid:
At the beginning of the year 35,461,206 21,277 21,277
Issued during the year 290,078 174 -
At the end of the year 35,751,284 21,451 21,277
(ii) 'A' Ordinary shares of €0.01 each
Authorised:
At the beginning and the end of the year 120,000,000 1,200 1,200
Issued and fully paid:
At the beginning and the end of the year 13,169,428 132 132
Total - issued and fully paid 21,583 21,409
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 holders of the two classes of non-cumulative preference shares rank ahead
of the two classes of ordinary shares in the event of a winding up. Before
any dividend can be declared on the ordinary shares of €0.60 each, the
dividend on the non-cumulative preference shares must firstly be declared or
paid.
The number of ordinary shares of €0.60 each held as treasury shares at the
beginning (and the maximum number held during the year) was 164,005 (2021:
408,744). No ordinary shares were reissued from treasury during the year under
the FBD Performance Plan. The number of ordinary shares of €0.60 each held
as treasury shares at the end of the year was 164,005 (2021: 164,005). This
represented 0.5% (2021: 0.5%) of the shares of this class in issue and had a
nominal value of €98,403 (2021: €98,403). There were no ordinary shares of
€0.60 each purchased by the Company during the year.
The weighted average number of ordinary shares of €0.60 each in the earnings
per share calculation has been reduced by the number of such shares held in
treasury.
All issued shares have been fully paid.
FBD Holdings plc
Supplementary Information (continued)
For the year ended 31 December 2022
Note 5 TRANSACTIONS WITH RELATED PARTIES
Farmer Business Developments plc and FBD Trust Company Ltd have a substantial
shareholding in the Group at 31 December 2022. Details of their
shareholdings and related party transactions are set out in the Annual Report.
Both companies have subordinated debt investment in the Group. Farmer Business
Developments holds a €21.0m investment and FBD Trust Ltd holds a €12.0m
investment. During 2022 interest payments of €1.1m and €0.6m were made to
Farmer Business Developments plc and FBD Trust Company Ltd respectively.
Please refer to note 26 for further details.
At 31 December 2022 the intercompany balances with other subsidiaries was
€5,867,000 (2021: €3,739,000).
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
Group's primary subsidiary, FBD Insurance plc and the members of the Executive
Management Team.
The remuneration of key management personnel ("KMP") during the year was as
follows:
2022 2021
€000s €000s
Short term employee benefits(1) 4,730 4,131
Post-employment benefits 275 262
Share based payments 1,386 1,346
Charge to the Consolidated Income Statement 6,391 5,739
(1)Short term benefits include fees to Non-Executive Directors, salaries and
other short-term benefits to all key management personnel.
Full disclosure in relation to the 2022 and 2021 compensation entitlements and
share awards of the Board of Directors is provided in the Annual Report.
At 31 December 2022 KMP had loans to the value of €19,085 with the Group
(December 2021: €18,000). KMP loans with the Group did not exceed these
values at any stage during the year.
In common with all shareholders, Directors received payments/distributions
related to their holdings of shares in the Company during the year, amounting
in total to €49,939 (2021: €0).
FBD Holdings plc
Supplementary Information (continued)
For the year ended 31 December 2022
Note 6 Subsequent Events
There have been no subsequent events which would have a material impact on the
Financial Statements.
Note 7 General Information and Accounting Policies
The financial information set out in this document does not constitute full
statutory Financial Statements for the years ended 31 December 2022 or 2021
but is derived from same. The Group Financial Statements have been prepared
in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union, applicable Irish law and the listing Rules of
Euronext Dublin, the Financial Conduct Authority and comply with Article 4 of
the EU IAS Regulation.
The 2022 and 2021 Financial Statements have been audited and received
unqualified audit reports.
The 2022 Financial Statements were approved by the Board of Directors on 9
March 2023.
The Consolidated Financial Statements are prepared under the historical cost
convention as modified by the revaluation of property, investments held for
trading, available for sale investments and investment property which are
measured at fair value.
FBD Holdings plc
Supplementary Information (continued)
For the year ended 31 December 2022
ALTERNATIVE PERFORMANCE MEASURES (unaudited) (APM's)
The Group uses the following alternative performance measures: Loss ratio,
expense ratio, combined operating ratio, annualised investment return, net
asset value per share, return on equity and gross written premium.
Loss ratio (LR), expense ratio (ER) and combined operating ratio (COR) are
widely used as a performance measure by insurers, and give users of the
financial statements an understanding of the underwriting performance of the
entity. Investment return is used widely as a performance measure to give
users of financial statements an understanding of the performance of an
entities investment portfolio. Net asset value per share (NAV) is a widely
used performance measure which provides the users of the financial statements
the book value per share. Return on equity (ROE) is also a widely used
profitability ratio that measures an entity's ability to generate profits from
its shareholder investments. Gross written premium refers to the premium on
insurance contracts entered into during the year and is widely used across the
general insurance industry.
The calculation of the APM's is based on the following data:
2022 2021
€000s €000s
Loss ratio
Net claims and benefits 145,807 123,538
Movement in other provisions 8,403 22,143
Total claims incurred 154,210 145,681
Net premium earned 335,854 334,247
Loss ratio (Total claims incurred/Net premium earned) 45.9% 43.6%
Expense ratio
Other underwriting expenses 95,962 93,369
Net premium earned 335,854 334,247
Expense ratio (Underwriting expenses/Net premium earned) 28.6%* 27.9%*
* excluding the accelerated amortisation of the policy administration system
of €2,460,000, the Expense Ratio would be 27.8% (2021: €5,884,000, 26.1%)
Combined operating ratio % %
Loss ratio 45.9% 43.6%
Expense ratio 28.6% 27.9%
Combined operating ratio (Loss ratio + Expense ratio) 74.5% 71.5%
FBD Holdings plc
Supplementary Information (continued)
For the year ended 31 December 2022
ALTERNATIVE PERFORMANCE MEASURES (unaudited) (APM's) (continued)
2022 2021
Investment return €000s €000s
Investment return recognised in Consolidated Income Statement (10,413) 15,679
Investment return recognised in Consolidated Statement of Comprehensive Income
(90,142) (12,202)
Total investment return (100,555) 3,477
Average investment assets 1,169,411 1,185,036
Investment return % (Total investment return/Average investment assets)
-8.6% 0.3%
2022 2021
Net asset value per share €000s €000s
Shareholders' funds - equity interests 422,788 472,382
Number of shares
Number of ordinary shares in issue (excluding treasury) 35,587,279 35,297,201
Cent Cent
Net asset value per share (NAV) (Shareholders funds / Closing number of 1,188 1,338
ordinary shares)
Return on equity
Weighted average equity attributable to ordinary equity holders of the parent
447,585 428,182
Result for the year 64,454 96,409
Return on equity (Result for the year/Weighted average equity attributable to
ordinary equity holders of the parent)
14% 23%
Underwriting result
Net premium earned 335,854 334,247
Net claims and benefits (145,807) (123,538)
Other underwriting expenses (95,962) (93,369)
Movement in other provisions (8,403) (22,143)
Underwriting result 85,682 95,197
Gross premium written: The total premium on insurance underwritten by an
insurer or reinsurer during a specified period, before deduction of
reinsurance premium.
Expense ratio: Underwriting and administrative expenses as a percentage of net
earned premium.
FBD Holdings plc
Supplementary Information (continued)
For the year ended 31 December 2022
ALTERNATIVE PERFORMANCE MEASURES (unaudited) (APM's) (continued)
Loss ratio: Net claims incurred as a percentage of net earned premium.
Combined Operating Ratio: The sum of the loss ratio and expense ratio. A
combined operating ratio below 100% indicates profitable
underwriting results. A combined operating ratio over 100% indicates
unprofitable results.
Underwriting result: Net premium earned less net claims and benefits, other
underwriting expenses and movement in other provisions.
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