TIDMFBH
RNS Number : 7665H
FBD Holdings PLC
06 August 2021
FBD HOLDINGS PLC
6 August 2021
FBD HOLDINGS PLC
Half yearly Report
For the Six Months ended 30 June 2021
KEY HIGHLIGHTS
-- Profit Before Tax of EUR22m compared to a Loss Before Tax of EUR9m in 2020.
-- Combined Operating Ratio of 92%.
-- The result includes a EUR13m provision for consequential
payments following Financial Services and Pensions Ombudsman (FSPO)
rulings on Business Interruption complaints after consideration of
the Central Bank of Ireland's Business Interruption Insurance
Supervisory Framework.
-- The Business Interruption best estimate of ultimate net costs
for public house claims increased marginally to EUR67m.
-- Investment portfolio annualised return of 0.9% at Half Year,
equating to positive investment returns of EUR5m.
-- Our capital position remains strong with a Solvency Capital Ratio of 198% (unaudited).
-- Average premium down 2.1% across the portfolio with Motor down 5.7%.
-- Increase of 3,500 policy holders since the beginning of 2021.
-- Brand awareness maintained in the top 3 according to the National Brand Health Tracker.
-- Launch of Inclusio software that combines technology,
behavioural science and psychology to support employees as we drive
towards Silver Accreditation from the Irish Centre of
Diversity.
FINANCIAL SUMMARY
30 Jun 30 Jun
2021 2020
EUR000s EUR000s
Gross written premium 181,433 176,216
Underwriting profit/(loss) 13,022 (4,676)
Profit/(Loss) before taxation 21,991 (9,349)
Loss ratio 66.3% 74.6%
Expense ratio 25.7% 28.4%
Combined operating ratio 92.0% 103.0%
Cent Cent
Basic earnings/(loss) per share 55 (24)
Net asset value per share 1,137 1,035
-- Gross Written Premium (GWP) EUR181m (2020: EUR176m), down 1%
excluding EUR5m of pandemic related premium rebates (EUR11m rebates
in H1 2020). Written policy count increased by 1.4%.
-- Underwriting profit of EUR13m (2020: loss of EUR5m), equating
to a H1 COR of 92% (2020: 103%), due to claims frequency
reductions, benign weather and positive prior year reserve
development of EUR7m, offset by a EUR13m provision for
consequential payments following FSPO rulings on Business
Interruption complaints.
-- Positive investment returns of EUR10m through the Income
Statement (2020: -EUR3m) offset by -EUR5m through Other
Comprehensive Income (2020: -EUR7m). These returns reflect a strong
performance from risk assets with increasing yields impacting the
valuation of our bond portfolios.
-- Expense ratio of 25.7% (2020: 28.4%), with reduction in
expenses reflecting the absence of bonus payments in current
year.
-- Net Asset Value per share 1,137 cent has increased from 1,095 cent at the end of 2020.
Commenting on these results Tomás Ó'Midheach, Group Chief
Executive, said:
"I am delighted to report that FBD has delivered a strong set of
interim results with a positive backdrop of reducing restrictions
and an advancing vaccination program. The real impact on the
economy will become clearer when Government income supports are
removed and despite the variant uncertainty there are many reasons
for renewed optimism.
The Business Interruption judgement from the quantum hearing
held in July will rule on a number of issues with the issue of
partial closure being the largest outstanding point of
clarification. This judgement should provide clarity on the gross
liability and the certainty required to finalise discussions with
reinsurers on recoveries due. In the meantime we have continued to
make interim payments to customers who have provided requested
information. We believe our approach has been correct in seeking to
have the complex matters involved resolved by way of a legal
case.
Recent FSPO decisions have a wider beneficial impact for FBD
Public House Insurance policyholders. In line with the Central Bank
of Ireland's Business Interruption Insurance Supervisory Framework,
we will extend payments to all FBD Public House policyholders and
will ensure this benefit is passed on in a timely manner.
We opened our retail offices and contact centre in line with
government guidelines and look forward to welcoming the remainder
of our colleagues back when all workers are permitted to return.
The world of work has changed forever and the senior management
team and I are very thankful to our employees for their continued
support and we recognise the need to develop a more flexible future
working model.
The business continues to evolve and future and current
relationships with partners, our strong presence in local and
farming communities along with our enhanced digital capabilities
will enable us to continue delivering on our customer centric
model.
Our customers are paying less for their insurance in most cases.
The updated Personal Injuries Guidelines are welcome and on the
back of them we implemented reductions to product pricing and we
expect to see the benefit in reduced claim settlements costs in due
course.
It has been an interesting seven months since I started with FBD
and my initial impressions have been borne out as we have a strong
underlying business and capital base to work from. With the
talented team supporting me and with relentless focus, the future
looks promising and the business will be well positioned to deliver
more for all stakeholders."
A presentation will be available on our Group website
www.fbdgroup.com from 9.00 am today.
Enquiries Telephone
FBD
Michael Sharpe, Investor Relations +353 87 9152914
Drury Communications
Billy Murphy +353 87 231 3085
Paul Clifford +353 87 327 2161
About FBD Holdings plc ("FBD")
FBD is one of Ireland's largest property and casualty insurers,
looking after the insurance needs of farmers, consumers and
business owners. Established in the 1960s by farmers for farmers,
FBD has built on those roots in agriculture to become a leading
general insurer serving the needs of its direct agricultural, small
business and consumer customers throughout Ireland. It has a
network of 34 branches nationwide.
Forward Looking Statements
Some statements in this announcement are forward-looking. They
represent expectations for the Group's business, and involve risks
and uncertainties. These forward-looking statements are based on
current expectations and projections about future events. The Group
believes that current expectations and assumptions with respect to
these forward-looking statements are reasonable. However, because
they involve known and unknown risks, uncertainties and other
factors, which are in some cases beyond the Group's control, actual
results or performance may differ materially from those expressed
or implied by such forward-looking statements.
The following details relate to FBD's ordinary shares of EUR0.60
each which are publicly traded:
Listing Euronext Dublin UK Listing Authority
Listing Category Premium Premium (Equity)
Trading Venue Euronext Dublin London Stock Exchange
Market Main Securities Market Main Market
ISIN IE0003290289 IE0003290289
Ticker FBD.I or EG7.IR FBH.L
OVERVIEW
The Group reported a profit before tax of EUR22.0m (2020 loss:
EUR9.3m), supported by a strong underwriting performance including
claims frequency improvements, strong investment returns of
EUR10.3m, positive prior year reserve releases of EUR7.2m and
benign weather partially offset by a EUR13.4m provision for
consequential payments following FSPO decisions on Business
Interruption complaints .
The Group reported an underwriting profit of EUR13.0m (2020
loss: EUR4.7m) and GWP of EUR181.4m (2020: EUR176.2m) which is 1%
lower than prior year when the pandemic related premium rebates are
excluded.
The quantum hearing in respect of the Business Interruption
claims payments was heard in July with an expected judgement in
December. The definition of partial closure is the largest
outstanding point of clarification remaining and whether indemnity
should operate when pubs were allowed to open, but with
restrictions in place to meet Covid-19 social distancing
requirements.
The pandemic continues to affect our customers, our employees
and our business as many continue to work remotely and although
some normality is returning it will take some time to adjust. The
Group continues to support our customers through web sales, our
Mullingar support centre and branch network which are fully
operational and following Government guidelines.
UNDERWRITING
Premium income
Gross written premium (excluding rebates) was 1% lower than 2020
levels with a continuing impact from the pandemic as average
premium reduced along with economic activity . GWP was EUR181.4m
(2020: EUR176.2m). Commercial rebates of EUR4.8m have been deducted
from 2021 premium (2020: EUR11.1m Motor and Commercial customer
rebates). Commercial customers' rebates reflect the reduced
exposure to Employers Liability, Public Liability and Business
Interruption claims while businesses were closed.
Customer policies increased by 3,500 compared to 2020. Retention
of customers remains high in a very competitive market.
Average premium reduced by 2.1% across the book. Average premium
for Motor reduced by 5.7% in a competitive environment reflecting
improved underlying claims experience. Business and Commercial
Motor reduced by 8% and 11% respectively reflecting reduced
exposures and rating reductions. Average Tractor premium increased
by 3.8% due to larger tractors being insured. Farm average premium
reduced by 1.2% with farm activity levels unaffected by the
pandemic. Home average premium increased marginally.
FBD expect to be fully compliant with the Consumer Insurance
Contracts Act 2019 by the September 2021 deadline. This includes
changes to how information about risks being insured is provided by
and presented back to customers, changes to rules around cooling
off periods/cancellations and also changes in the reliance that can
be put on certain information and policy conditions.
Reinsurance
The 2021 reinsurance programme remained largely unchanged from
2020 with modest rate increases. The programme limits our exposure
to large claims, weather events and other aggregations of claims.
The impact of our Business Interruption claim will form part of the
2022 reinsurance renegotiation.
Claims
Net claims incurred (Net claims and benefits plus movements in
Other provisions) reduced by EUR9.5m to EUR107.5m (2020: EUR117.0m)
with the main changes relating to Business Interruption claims
costs incurred in the first half of 2020 of EUR30.0m compared to
EUR2.1m in 2021. This has been offset by a EUR13.4m provision for
consequential payments following FSPO decisions on Business
Interruption complaints, after consideration of the CBI's Business
Interruption Insurance Supervisory Framework . Positive prior year
reserve releases of EUR7.2m (2020: EUR8.0m) are coming primarily
from sustained lower than expected frequency (in particular for the
2020 accident year).
The quantum hearing took place in July in the legal case for
Business Interruption with the judgement expected in December. Once
the judgement is delivered we will make claims settlements as
expediently as possible with interim settlements of EUR20m already
paid. The best estimate gross claims cost increased by EUR33m to
approximately EUR183m primarily due to higher expected legal costs
and a reassessment of the estimated amounts that will be paid to
customers based on the latest available information including
reopening dates of public houses. The quantum hearing judgement
should allow progress to be made towards finalising the reinsurance
recovery position. A margin for uncertainty over the best estimate
is held to address the uncertainty in arriving at the best
estimate.
Motor damage and injury claims frequency has been lower than
normal over the period primarily due to the Government restrictions
on movement. It has been noticeable that the frequency for
Commercial policies (Motor and Liability) has not experienced the
same fall as that experienced in early 2020. Excluding Business
Interruption claims, Property claims frequency remained relatively
consistent with the 2020 experience. No significant weather events
occurred in the first half of the year.
The average cost of injury claims settlements continues to be
slightly lower than that experienced pre-Covid. This is due to a
change in the mix of settled cases, affected by court closures and
the inability to engage in pre-trial negotiation with a backlog of
cases building up in the courts system. The average cost of
property claims experienced a significant inflationary increase
with further inflation expected on domestic building costs. Motor
damage claims continue to experience high inflation as costs of
parts, paint and average labour hours per repair increase.
Other provisions includes Premium rebates of EUR4.8m (2020:
EUR11.1m), the Motor Insurers Bureau of Ireland (MIBI) levy and
Motor Insurers Insolvency Compensation Fund (MIICF) contribution
which combined totalled EUR5.1m (2020: EUR6.2m) and a consequential
payments provision of EUR13.4m (2020: EUR0).
Claims Environment
The first half of 2021 continued to be affected by Covid-19 as
court closures and restrictions were still in place impacting
settlement activity. As Government restrictions were lifted in June
the number of court cases listed is still reduced and claims
settlement activity continues to be impacted. Traffic volume has
increased in 2021 as restrictions ease and non-essential retail and
outdoor/indoor dining reopens, although remote working
continues.
FBD welcomes the new Personal Injuries Guidelines that came into
force on 24 April 2021 and apply to any pre litigation cases where
there is no PIAB award at the time of introduction and also
introduced capping of general damages. In litigation cases the
guidelines apply where legal proceedings were issued and/or served
on or after 24 April 2021. The impact of the guidelines will take
12 to 24 months to fully emerge. Although recent trends indicate a
reduction in general and soft tissue damage awards, the early
commentary in respect of drastically reduced awards needs
validation.
Perjury legislation has passed through all stages of the
Oireachtas and is awaiting the Minister's signature. It provides
for considerable penalties against those who commit the offence of
perjury and related offences with a maximum penalty on indictment
of up to ten years imprisonment and/or a fine of EUR100,000. This
should act as a deterrent against false claims or untruthful
statements by claimants.
All changes required for claims handling in respect of system
and process changes are in place to ensure FBD is compliant with
the Consumer Insurance Contracts Act 2019. Funds retained pending
completion of property repair have been reduced and explanations on
third party claim settlements are provided with engagement of
policyholders on liability claims/decisions.
FBD responded to the Department of Enterprise, Trade and
Employment's public consultation seeking measures to enhance and
reform PIAB, through our representative body. The reforms would
increase the number of personal injury cases assessed by PIAB and
would expect to see cases settled quicker and at a lower cost. The
consultation process is seeking views on a new mediation process
and reform of the PIAB Acts which could include claims that
currently fall outside the remit of PIAB because of the type of
injury (e.g. dominant injury is psychological) or the complexity of
an injury involved (e.g. claimant has a pre-existing injury).
The Dáil passed The Civil Law (Miscellaneous Provisions) Bill
2021 on 30 June 2021 to enable the appointment of five additional
High Court judges increasing the number from 37 to 42. The
additional judges will assist in clearing the pandemic created
backlog of cases.
There is still a possible challenge coming to the current
discount rate used for personal injury claims which would increase
future claims liabilities. No clarity has been received yet in
respect of the public consultation launched by the Minister for
Justice and Equality on the manner in which the discount rate
should be set in future. The discount rate could be set in future
by the judiciary or the Minister along with potential proposals to
amend the current assumed investment strategy in determining the
appropriate rate.
FBD continue to monitor the trend in respect of legal costs
particularly in the Circuit Court and High Court. The inflation
experienced in allowances granted by the Office of the Legal Costs
Adjudicator and the County Registrars reduced in recent months.
Motor damage claims and average repairs costs are continuing to
increase well ahead of general inflation with supply chains still
adjusting to Brexit and Covid disruption. New technology in cars
can result in claims costing multiples of the past with replacement
sensors, headlights and driver assisted supports. Property claims
are seeing double-digit inflation over a rolling 12 month period.
All of these trends are being closely monitored.
Weather, Claims Frequency and Large Claims
No significant weather events of note occurred during 2021 to
date, which is consistent with the experience in 2020.
As a result of the Covid-19 pandemic and the restrictions put in
place by the Government there has been a significant reduction in
the frequency of Motor and Liability claims during the year to date
when compared to pre-Covid levels. The reduction was particularly
evident in January and February, with frequency increasing as the
economy opened up and following the schools reopening in March.
Employer Liability claims have returned to more normal levels with
Motor and Public Liability claims remaining lower than normal. The
frequency of claims relating to Farm activities remained relatively
stable throughout the year to date, however the month of June
experienced the highest number of tractor injury claims in a single
month than any other over the past ten years.
Less than 50% of the normal number of large claims, defined as a
value greater than EUR250k, have been reported to 30 June with
Covid-19 affecting frequency and possibly impacting the normal flow
of information on large claims.
Expenses
The Group's expense ratio was 25.7% (2020: 28.4%). Other
underwriting expenses were EUR41.7m which is lower than the
previous year primarily due to the absence of bonus payments. The
ratio is impacted by the decrease in earned premium as a result of
the Covid-19 pandemic rebates to customers without which the ratio
would be 25.0%. Also an additional EUR1.3m has been allocated to
claims handling expenses following an updated cost allocation
review.
GENERAL
FBD's Combined Operating Ratio ("COR") was 92.0% (2020: 103.0%)
generating an underwriting profit of EUR13.0m (2020: loss of
EUR4.7m).
Investment Return
FBD's total annualised investment return for the first six
months of 2021 was 0.9% (2020: -1.9%). This is made up of
annualised investment income of 1.8% (2020: -0.6%) through the
Income Statement and annualised mark to market movements of -0.9%
(2020: -1.3%) in Other Comprehensive Income (OCI).
The positive investment return reflects the strong economic
growth as economies reopen following lockdowns and with central
banks remaining accommodative. Risk assets performed strongly, led
by equities. FBD's Global equity investments increased by 13.8% and
the Emerging Markets equities increased by10.9% in the first six
months. Increased interest rates have reduced the valuation of
bonds leading to negative mark to market returns through OCI.
The pension surplus decreased during the period as the
investment return reduced by more than the decrease in scheme
liabilities. The scheme liabilities decreased as a result of an
increase in the discount rate offset to some extent by an increase
in the inflation assumption . The assets and liabilities are
reasonably well matched as a result of the structural changes made
to the pension scheme in 2015 and 2016.
Financial Services
The Group's financial services operations returned a loss before
tax of EUR0.1m for the period (2020: profit EUR0.7m). Revenue
reduced by EUR1.8m reflecting the impact of customer forebearance
measures and lower commission in the Life & Pension business.
Costs reduced by EUR1m to EUR3.2m primarily due to reduced legal
and other expenses in the Holding company.
Profit per share
The diluted profit per share was 53 cent per ordinary share,
compared to a loss of 23 cent per ordinary share in 2020.
STATEMENT OF FINANCIAL POSITION
Capital position
Ordinary shareholders' funds at 30 June 2021 amounted to
EUR398.6m (December 2020: EUR384.0m). The increase in shareholders'
funds is driven by the following:
-- Profit after tax for the half year of EUR19.3m;
-- An increase of EUR1.0m due to share based payments;
-- A decrease in the revaluation reserve of EUR0.2m;
-- A decrease in the defined benefit pension scheme surplus of EUR0.8m after tax; and
-- Mark to market losses on Available for Sale investments of EUR4.7m after tax.
Net asset value per ordinary share is 1,137 cent, compared to
1,095 cent per share at 31 December 2020.
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. There have been no
material changes to investment allocation since year end 2020. The
Group continues to maintain a high cash allocation to provide
sufficient liquidity for Business Interruption claims payments.
The allocation of the Group's underwriting investment assets is
as follows:
30 June 2021 31 December 2020
EURm % EURm %
Corporate bonds 551 46% 552 47%
Government bonds 307 26% 311 26%
Deposits and cash 185 16% 180 15%
Other risk assets 83 7% 68 6%
Equities 51 4% 49 4%
Investment property 17 1% 17 2%
1,194 100% 1,177 100%
-------- ------ ---------- --------
Solvency
The half year Solvency Capital Ratio (SCR) was 198% (unaudited).
The audited Solvency Capital Ratio (SCR) at 31 December 2020 was
197%. There is still a high degree of uncertainty in the
calculation of the Solvency Capital Ratio due to the on-going
Business Interruption claims issue and associated reinsurance
recoveries.
RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group are
outlined on pages 17-28 of the Group's Annual Report for the year
ended 31 December 2020 and remain consistent at 30 June 2021 and
for the foreseeable future. The Covid-19 pandemic and the measures
taken to mitigate its impact continue to have a significant effect
on economic activity and give rise to additional specific risks and
uncertainties for the Group.
Claims volumes continue to be lower than pre-Covid levels in the
first half of 2021 as economic activity and traffic volumes are
below normal levels expected. The risk still remains around
possible increased propensity to claim by financially stressed
customers when Government supports are removed. Courts opened in
June although the lists are still restricted impacting the ability
to settle claims and settlement times have increased during the
period.
The risk of reduced exposures and consequently reduced premiums
on the Commercial account continues until commercial activity
returns to pre-Covid levels. Commercial premium rebates have been
provided to many businesses who have recently been allowed to
reopen. Commercial rebates will cease following the reopening of
most businesses and the risk of contraction of the Commercial
insurance book due to businesses not reopening will become clearer
over the coming months.
Future financial market movements and their impact on balance
sheet valuations, pension surplus and investment income are
unknown.
FBD has modelled future results that reflect changes of which we
are now aware and other uncertainties that may impact future
business plans including the new Judicial Council Guidelines for
personal injury claim awards. The scenario modelling 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.
A quantum hearing was held in July in the Business Interruption
legal case and the judgement is due in December 2021. This
judgement should provide clarity on the calculation of the quantum
of losses in respect of B usiness Interruption insurance claims
resulting from Covid-19 pandemic public health measures. The issues
to be agreed include the definition of imposed closure, the level
of wages to be allowed and any compensation in respect of late
payments . The judgement should set a clear legal position on
liability and quantum under our public house policies and will
facilitate completing discussions with reinsurers and therefore the
level of reinsurance recoveries.
The Business Interruption best estimate is EUR67m (including
reinsurance reinstatement premium). FBD has assessed all available
and up to date information which may impact on ultimate costs. The
current estimate of gross claims costs has increased to
approximately EUR183m. The Group has also modelled a number of
different scenarios in the calculation of gross and net losses. In
arriving at the best estimate, probabilities have been assigned to
gross and reinsurance scenarios based on discussions with
reinsurers, our reinsurance broker and specialist legal advice .
While more adverse outcomes for the Group are possible relative to
the booked best estimate, our assessment is that these have a lower
probability of occurrence. Business Interruption as with all
uncertainties, is assessed when the Group is considering the margin
for uncertainty, being a provision held as an amount over the best
estimate of claims liabilities net of expected reinsurance
recoveries.
The solvency of the Group remains robust and is currently at
198% (unaudited) (31 December 2020: 197%). As noted above, t here
is more than normal uncertainty surrounding the calculation of the
Solvency Capital Ratio pending final determination of the net cost
of Covid-19 pandemic related Business Interruption claims.
An economic downturn threatens increased credit exposure and
concentration risk. The Group's Investment Policy, which defines
investment limits and rules and ensures there is an optimum spread
and duration 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 current 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. An increase in
customer defaults is possible and we are actively monitoring the
movements and working with customers to ensure continuation of
cover where possible. As at the reporting date there was no obvious
increase in distressed customers and this will be continuously
monitored.
The Group continues to manage liquidity risk through ongoing
monitoring of forecast and actual cash flows, including expected
Business Interruption claims payments, ensuring that the maturity
profile of its financial assets is well matched to the maturity
profile of its liabilities and maintaining a minimum amount
available on term deposit at all times. The Group's asset
allocation is outlined on page 7 with a 12% allocation to risk
assets.
Our overall business strategy is continually monitored to ensure
it remains relevant in the current environment and is well placed
to meet the needs of our customers.
The current business processes and distribution models changed
to address Covid-19 pandemic challenges and have operated
effectively throughout the period. FBD itself has been able to
adapt to the changing environment with many of FBD's employees
still working from home as restrictions ease in line with
Government guidelines. All functions were largely able to maintain
business as usual. We have not implemented job reduction programmes
and we have not received Government support.
From a third party risk management perspective, alternative
processes were put in place with many providers to ensure
continuity of service while under restricted movement.
Unfortunately, due to Government guidelines, our vehicle repairers
and windscreen providers were at times only able to support
emergency repairs for essential workers. However with the loosening
of restrictions the risk has reduced.
FBD has developed its own action plan to ensure operational
resilience and the safety of staff and customers through extra
health and security measures as offices reopened. We are following
all Government and HSE public health guidelines and ensuring that
the appropriate social distancing measures are in place.
There is an inherent increased risk of regulatory action and
reputational damage associated with how well a business is
perceived to respond to the crisis. At FBD the safety of our staff,
customers and the community continues to be a priority as
restrictions ease and we emerge from the Covid pandemic. We
understand the extraordinary and unprecedented challenges our
customers are experiencing as a result of the actions taken to
reduce the spread of Covid-19. As the vaccination program gathers
pace and more of the population are protected the risk is reducing,
although different variants can emerge causing on-going concerns.
FBD have provided forebearance measures to support our customers
through these challenging times. We continue to support the Irish
Olympic Team who are now in Tokyo and many other national and local
initiatives, FBD is committed to continue supporting the local
communities in which we operate and in which our customers live and
work.
OUTLOOK
The first half of 2021 started with a continuing lockdown and
ended with the reopening of non-essential services and businesses
including public houses outdoors and the continuation of a
successful adult vaccination roll out. The economy is expected to
see growth in the second half of the year with the release of pent
up consumer demand and the expected return of employees to offices
in due course.
Business Interruption resolution took another step forward as
the quantum hearing finished on 16 July and the judgement is due in
December. The judgement is required to enable Business Interruption
claim payments to be agreed as the most important decision around
liability for "partial closure" will be provided and it will
facilitate the finalisation of reinsurance recoveries with our
reinsurers. EUR20m of interim payments have been made to Business
Interruption claimants and we continue to issue settlement offers
to those who have provided the requested information.
We have reacted quickly to the new Personal Injury Guidelines
and expect they will bring about consistency in awards and a real
reduction in claims settlements in personal injury cases. This will
positively result in lower premiums for customers.
As we start to emerge from the pandemic and look forward to
returning to social events, offices and hobbies we continue to be
mindful of the threat of variants and the need to continue to mind
each other. FBD operate in full compliance with all Government
guidelines and restrictions to ensure our employees and customers
are protected and feel safe in their interactions with us. The
Government supports will continue in the short term with a phasing
out expected near the end of the year and the full economic reality
from the pandemic will become evident.
Farm accidents unfortunately have increased again with a 10 year
high in Tractor claims notified in June this year. This emphasises
the need for continuing vigilance around farm safety.
Brexit has happened and despite the disruption experienced by
some industries, most have innovated and adapted to the changes.
The resilience of the Irish farmers, businesses and consumers was
evident as they responded to the challenges posed.
Phase two of the Consumer Insurance Contract Act 2019 (CICA)
comes into effect on 1 September 2021. Customers will have a
statutory obligation to answer "honestly and with reasonable care"
all questions asked by their insurer, replacing "utmost good
faith". FBD as an insurer have many new obligations including
providing all premiums and claims paid for the preceding 5 years as
well as limited ability to cancel policies for non-disclosure
including ensuring questions are specific, in plain English and
avoiding assumptions. In addition the act will impact on the
reliance that can be put on certain information and policy
conditions in order to defend a claim, and an expansion of the
circumstances in which a claim may be payable. The changes require
system, process and procedure changes which have been completed in
time for the September 2021 deadline and provide more transparency
of policy wordings and procedures and also strengthen consumer
rights.
We note the recent report published by the Central Bank of
Ireland in respect of differential pricing and are undertaking a
review of the issues raised and look forward to contributing to the
public consultation process.
The underlying insurance business is delivering strong returns,
is well-capitalised and is growing policy numbers. We are putting
our customer at the heart of what we do and delivering unrivalled
customer service. Our strategic intent is to deliver profitable
growth while maintaining underwriting discipline underpinned by a
strong capital position. This will ensure the business delivers for
all our stakeholder groups.
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Income Statement
For the half year ended 30 June 2021
Half year Half year Year ended 31/12/20 (audited)
ended ended
30/06/21 30/06/20
Notes (unaudited) (unaudited)
EUR000s EUR000s EUR000s
Revenue 3 191,545 187,614 380,999
------------------- ------------- ------------------------------
Income
Gross written premium 181,433 176,216 358,230
Reinsurance premium (16,319) (14,797) (43,034)
------------------- ------------- ------------------------------
Net written premium 165,114 161,419 315,196
Change in net provision for unearned premiums (2,868) (4,626) 36
------------------- ------------- ------------------------------
Net premium earned 162,246 156,793 315,232
Net investment return 10,324 (3,274) 10,388
Financial services income - Revenue from contracts with
customers 1,127 2,129 4,211
- Other
financial
services
income 2,038 2,827 5,172
------------------- ------------- ------------------------------
Total income 175,735 158,475 335,003
Expenses
4
Net claims and benefits (iii) (88,980) (110,821) (221,403)
Other underwriting expenses 4 (41,728) (44,451) (88,527)
Movement in other provisions 5 (18,516) (6,197) (9,681)
Financial services and other costs (3,248) (4,241) (7,276)
Impairment of property, plant and equipment - (842) (734)
Finance costs (1,272) (1,272) (2,580)
Profit/(Loss) before taxation 21,991 (9,349) 4,802
Income taxation (charge)/ credit 12 (2,738) 1,135 (412)
------------------- ------------- ------------------------------
Profit/(Loss) for the period 19,253 (8,214) 4,390
------------------- ------------- ------------------------------
Attributable to:
Equity holders of the parent 19,253 (8,214) 4,390
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Income Statement
For the half year ended 30 June 2021
Half year Half year
ended ended 30/06/20 Year ended 31/12/20 (audited)
30/06/21 (unaudited)
(unaudited)
Notes
Earnings per Cent Cent Cent
share
Basic 9 55 (24) 13
---------------- ------------------- -------------------------------
Diluted 9 53(1) (23)(1) 12(1)
---------------- ------------------- -------------------------------
(1) Diluted earnings per share reflects the potential vesting of
share based payments.
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Comprehensive Income
For the half year ended 30 June 2021
Half year Half year
ended 30/06/20
ended 30/06/21 (unaudited) Year ended
31/12/20
(audited)
(unaudited)
EUR000s EUR000s EUR000s
Profit/ (Loss) for the period 19,253 (8,214) 4,390
---------------- ---------------- -------------------
Items that will or may be reclassified
to profit or loss in subsequent
periods :
Net (loss)/gain on available for
sale assets (4,682) (7,207) 4,491
(Gain)/ loss transferred to the
Consolidated Income Statement on
disposal during the period (718) (32) 14
Taxation credit/(charge) relating
to items that will or may be reclassified
to profit or loss in subsequent
periods 675 905 (563)
Items that will not be reclassified
to profit or loss in subsequent
periods:
Actuarial (loss)/gain on retirement
benefit obligations (849) 4,577 2,326
Property held for own use revaluation
loss - - (419)
Taxation charge (relating to items
not to be reclassified in subsequent
periods) (124) (572) (431)
---------------- ---------------- -------------------
Other comprehensive (expense)/income
after taxation (5,698) (2,329) 5,418
---------------- ---------------- -------------------
Total comprehensive income/(expense)
for the period 13,555 (10,543) 9,808
---------------- ---------------- -------------------
Attributable to:
Equity holders of the parent 13,555 (10,543) 9,808
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Financial Position
At 30 June 2021
ASSETS 30/06/21 30/06/20 31/12/20
(unaudited) (unaudited) (audited)
Notes EUR000s EUR000s EUR000s
Property, plant and equipment 23,899 27,148 25,085
Policy administration system 35,287 37,704 36,721
Intangible assets 7,340 3,356 5,100
Investment property 17,054 18,554 17,051
Right of use asset 5,245 6,045 5,635
Loans 650 624 601
Deferred taxation asset - 1,193 1,294
Financial assets
Available for sale investments 859,091 799,617 863,880
Investments held for trading 134,223 105,615 116,930
Deposits with banks 10,000 50,000 40,000
------------- ------------- -----------
1,003,314 955,232 1,020,810
------------- ------------- -----------
Reinsurance assets
Provision for unearned premiums 1,741 172 1,033
Claims outstanding 8 162,469 73,046 122,760
------------- ------------- -----------
164,210 73,218 123,793
------------- ------------- -----------
Retirement benefit surplus 10 10,000 13,300 10,849
Current taxation asset 12 4,602 12,326 7,510
Deferred acquisition costs 33,638 33,032 34,079
Other receivables 68,781 75,717 65,402
Cash and cash equivalents 166,832 127,605 129,535
------------- ------------- -----------
Total assets 1,540,852 1,385,054 1,483,465
------------- ------------- -----------
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Financial Position (
continued)
At 30 June 2021
EQUITY AND LIABILITIES 30/06/21 30/06/20 31/12/20 (audited)
(unaudited) (unaudited)
Notes EUR000s EUR000s EUR000s
Equity
Called up share capital presented as equity 7 21,409 21,409 21,409
Capital reserves 25,786 23,967 24,756
Revaluation reserve 749 - 978
Retained earnings 350,622 317,465 336,838
Equity attributable to ordinary equity holders of
the parent 398,566 362,841 383,981
Preference share capital 2,923 2,923 2,923
------------- ------------- -------------------
Total Equity 401,489 365,764 386,904
Liabilities
Insurance contract liabilities
Provision for unearned premiums 188,115 188,341 184,541
Claims outstanding 8 819,118 720,970 794,416
------------- ------------- -------------------
1,007,233 909,311 978,957
Other provisions 13 26,073 13,813 12,067
Subordinated debt 49,573 49,514 49,544
Lease liability 5,489 6,204 5,843
Deferred taxation liability 3,583 4,649 5,421
Current taxation liability 12 - 30 -
Payables 47,412 35,769 44,729
-------------
Total liabilities 1,139,363 1,019,290 1,096,561
------------- ------------- -------------------
Total equity and liabilities 1,540,852 1,385,054 1,483,465
------------- ------------- -------------------
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Cash Flows
For the half year ended 30 June 2021
Half year Half year ended 30/06/20 Year
ended (unaudited) ended 31/12/20 (audited)
30/06/21
(unaudited)
EUR000s EUR000s EUR000s
Cash flows from operating
activities
Profit/(Loss) before taxation 21,991 (9,349) 4,802
Adjustments for:
(Profit)/Loss on investments held for
trading (6,970) 5,785 (5,356)
Loss on investments available for
sale 971 1,860 3,531
Interest and dividend income (3,925) (4,139) (9,481)
Depreciation/amortisation of
property, plant and equipment,
intangible assets and policy
administration
system 5,434 5,049 11,041
Depreciation of right of use asset 390 410 821
Share-based payment expense 1,030 1,156 1,945
Fair value (gain)/ loss on investment
property (3) 139 1,569
Impairment of property, plant and
equipment - 842 734
(Decrease)/increase in insurance
contract liabilities (12,141) 35,568 54,638
Increase in other provisions 14,006 5,396 3,650
Operating cash flows before movement
in working capital 20,783 42,717 67,894
(Increase) in receivables and
deferred acquisition costs (3,817) (12,837) (3,154)
Decrease in payables 3,963 1,351 10,680
Interest on lease liabilities 117 131 263
Purchase of investments held for
trading (36,628) (24.964) (54,008)
Sale of investments held for trading 26,306 24,964 53,835
------------- ------------------------- --------------------------
Cash generated from operations 10,724 31,362 75,510
Interest and dividend income received 4,802 5,275 10,204
Income taxes received/(paid) 178 (10,304) (6,611)
------------- ------------------------- --------------------------
Net cash generated from operating
activities 15,704 26,333 79,103
------------- ------------------------- --------------------------
Cash flows from investing
activities
Purchase of available for sale
investments (93,452) (91,072) (217,013)
Sale of available for sale
investments 91,868 94,341 166,093
Purchase of property, plant and
equipment (194) (1,615) (1,839)
Addition to policy administration
system (2,103) (2,243) (4,796)
Additions of intangible assets (2,756) (1,368) (3,593)
Refurbishment of investment property - - (1,922)
Sale of investment property - - 1,994
(Increase)/decrease in loans and
advances (49) (13) 10
Maturities of deposits invested with
banks 30,000 10,000 40,000
Additional deposits invested with
banks - - (20,000)
Net cash generated from/(used in)
investing activities 23,314 8,030 (41,066)
------------- ------------------------- --------------------------
Cash flows from financing
activities
Ordinary and preference - - -
dividends paid
Interest payments on subordinated
debt (1,250) (1,250) (2,500)
Principal elements of lease payments (471) (490) (984)
Net cash used in financing activities (1,721) (1,740) (3,484)
------------- ------------------------- --------------------------
Net increase in cash and cash
equivalents 37,297 32,623 34,553
Cash and cash equivalents at the
beginning of the period 129,535 94,982 94,982
Cash and cash equivalents at the end
of the period 166,832 127,605 129,535
------------- ------------------------- --------------------------
FBD HOLDINGS PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statement of Changes in Equity
(UNAUDITED)
For the half year ended 30 June 2021
Called up Capital Revaluation Retained Attributable Preference Total
to
share Reserves Reserve earnings Ordinary share capital equity
capital shareholders
presented as
equity
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
------------- --------- ------------ ------------------ ------------- -------------- ----------
Balance at 1
January 2021 21,409 24,756 978 336,838 383,981 2,923 386,904
Profit after
taxation - - - 19,253 19,253 - 19,253
Other
comprehensive
expense - - (229) (5,469) (5,698) - (5,698)
21,409 24,756 749 350,622 397,536 2,923 400,459
Recognition of
share based
payments - 1,030 - - 1,030 - 1,030
Balance at
30 June 2021 21,409 25,786 749 350,622 398,566 2,923 401,489
------------- --------- ------------ ------------------ ------------- -------------- ----------
Balance at 1
January 2020 21,409 22,811 - 328,008 372,228 2,923 375,151
Profit after
taxation - - - (8,214) (8,214) - (8,214)
Other
comprehensive
income - - - (2,329) (2,329) - (2,329)
21,409 22,811 - 317,465 361,685 2,923 364,608
Recognition of
share based
payments - 1,156 - - 1,156 - 1,156
Balance at
30 June 2020 21,409 23,967 - 317,465 362,841 2,923 365,764
------------- --------- ------------ ------------------ ------------- -------------- ----------
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
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 2021
does not constitute the statutory financial statements of the
company;
-- the statutory financial statements for the financial year
ended 31 December 2020 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 2020; and
-- the matters referred to in the statutory auditors' report
were unqualified, and did not include a reference to any matters to
which the statutory auditors drew attention by way of emphasis
without qualifying the report.
This half yearly financial report has not been audited but has
been reviewed by the auditors of the Company.
Note 2 - Accounting policies
Basis of preparation
The annual financial statements of FBD Holdings plc are prepared
in accordance with International Financial Reporting Standards
("IFRSs") as adopted by the European Union. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with IAS 34 'Interim Financial
Reporting', as adopted by the European Union.
Going concern
The Directors have, at the time of approving the interim
financial statements, a reasonable expectation that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future being a period of not less
than 12 months from the date of this report.
In making this assessment the Directors considered up to date
solvency, liquidity and profitability projections for the Group,
including base and potential downside scenarios. The key areas of
judgement in this assessment are the net cost of the public house
Covid-19 Business Interruption claims, the potential impact of
Covid-19 factors on the Group's business and the potential impact
of The Judicial Council Personal Injuries Guidelines on the Group's
business.
The economic environment may impact on premiums including
potential reductions in exposures, new business and retention
levels. The pace of recovery in the economy as we emerge from
lockdown will also impact on the claims frequency and severity.
Expense assumptions can change depending on the level of premiums
as discretionary spend and resources are adjusted. The level of
projected capital and liquidity is most sensitive to the ultimate
net cost of Covid-19 related public house Business Interruption
claims. In the worst case scenario the Group's Capital Ratio
remained in excess of the Solvency Capital Requirement and in
compliance with liquidity policies.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 2 - Accounting policies (continued)
Going concern (continued)
The Directors considered the liquidity requirements of the
business to ensure it is projected to have cash resources available
to pay claims and other expenditure as they fall due, including
under potential net cost outcomes in relation to public house
Covid-19 Business Interruption claims. The business is expected to
have adequate cash resources available to support business
requirements as well as potential net costs in relation to public
house Covid-19 Business Interruption claims as they fall due. In
addition the Group has a highly liquid investment portfolio with
over 50% of the portfolio invested in corporate and sovereign bonds
with a minimum A rating.
We have implemented required health and safety changes to our
branch offices, contact centre and head office to ensure the safe
working conditions for all customers and employees. Many of our
employees continue to work remotely while our offices are open and
available for business, as everyone operates in line with
Government guidelines. No structural changes are required by the
business as a result of the Covid-19 pandemic and planned capital
investment projects are in train, as we continue to deliver
improvements in IT infrastructure and the customer journey ensuring
our customers can do business with us the way they choose.
On the basis of the scenarios projected by 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 interim financial statements.
Consistency of accounting policy
The accounting policies and methods of computation used by the
Group to prepare the interim financial statements for the six month
period ended 30 June 2021 are the same as those used to prepare the
Group Annual Report for the year ended 31 December 2020.
Standards adopted in the period
The impact of new standards, amendments to existing standards
and interpretations issued and effective for annual periods
beginning on or after 1 January 2021 has been assessed by the
Directors and none have had or are expected to have a material
effect for the Group.
Standards and interpretations not yet effective
IFRS 17 Insurance Contracts(1)
IFRS 9 Financial instruments(2)
(1) Effective for annual periods on or after 1 January 2023,
with earlier application permitted.
(2) Effective for annual periods on or after 1 January 2023,
with earlier application permitted.
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts is effective for annual periods
beginning on or after 1 January 2023.
IFRS 17 is expected to have a material impact on the
consolidated financial statements of the Group. IFRS 17 is a
comprehensive new accounting standard for all insurance contracts
covering recognition and measurement, presentation and disclosure.
The core of IFRS 17 is the general model, supplemented by an
optional simplified premium allocation approach which is permitted
for the liability for the remaining coverage for short duration
contracts. The general model measures insurance contracts using the
building blocks of: discounted probability weighted cash flows; an
explicit risk adjustment; and a contractual service margin
representing the unearned profit of the contract which is
recognised as revenue over the coverage period.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 2 - Accounting policies (continued)
An IFRS 17 cross functional project team is in place to deliver
the required reporting in line with required application timelines.
The impact on adoption cannot be reasonably estimated at this
time.
An initial assessment of the impact of IFRS 17 on the Group's
financial statements is on-going and work has now started on the
design and build of the systems that will provide the foundation
for reporting under IFRS 17 from 1 January 2023. The Group expects
to be able to apply the simplified premium allocation approach to
all material insurance and reinsurance contract groups.
IFRS 9 has been issued to replace IAS 39 'Financial Instruments:
Recognition and Measurement' (IAS 39). IFRS 4 permits an insurance
company that meets the criteria a temporary exemption from applying
IFRS 9 and continue to apply IAS 39. The Group meets the criteria
and has elected to defer the application of IFRS 9 to the reporting
period beginning on 1 January 2023, alongside IFRS 17.
Implementation plans are on track.
Critical accounting estimates and judgements in applying
accounting policies
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities
that are not readily apparent from other sources. The key
judgements and the key sources of estimation uncertainty that have
the most significant effect on the amounts recognised in the
interim financial statements are detailed below. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. The estimates and
underlying assumptions are reviewed on an ongoing basis and actual
results may differ from these estimates.
Claims provisions
Claims provisions represent the estimation of the cost of claims
outstanding under insurance contracts written. Actuarial
techniques, based on statistical analysis of past experience, are
used to calculate the estimated cost of claims outstanding at the
period end.
Also included in the estimation of outstanding claims are
factors such as the potential for inflation. Provisions for more
recent claims make use of techniques that incorporate expected loss
ratios and average claims cost (adjusted for inflation) and
frequency methods. The average claims cost and frequency methods
are particularly relevant when calculating the ultimate cost of
claims for the 2020 accident year and the first half of 2021 as
historic patterns have been distorted by Covid-19.
A Commercial Court judgement issued on 5 February 2021 confirmed
the Group is liable to cover Business Interruption claims as a
consequence of the Covid-19 pandemic for publican customers. The
Commercial Court judgement provided more clarity on likely gross
claims costs however the outcome of the quantum module of the Court
proceedings will bring more certainty to this element of the
estimated provisions. On 23 April 2021, the Judge ruled on three
more areas of the legal case: Partial closures, Territorial Extent
of Covid and Legal Costs. In this Judgement the Judge ruled that
the pub is still subject to an imposed closure when customers were
not allowed to eat and/or drink indoors, the Territorial extent of
Covid was worldwide and legal costs to be awarded on a Party to
Party basis.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 2 - Accounting policies (continued)
Critical accounting estimates and judgements in applying
accounting policies (continued)
The 23 April 2021 Judgement also provided the plaintiffs an
opportunity to argue that they were subject to a partial closure
during the periods when they were open to the public. The
plaintiff's primary argument is that the Bar Counter area continued
to be subject to an imposed closure while the pub was open because
the customer was not allowed to sit and consume their alcohol at
the bar counter. This issue, together with other macro issues,
including accrual of salaries and late payment were argued at the
recent quantum hearing and the Judgement in December could
potentially change the estimated gross claims provisions. The
foregoing demonstrates the continuing estimation uncertainty that
exists.
The full imposed closure of public houses ceased on 26 July when
vaccinated customers and their children were allowed to eat and
drink indoors and FBD consider that from then on there is no
exposure to any potential future complete closures of public
houses. There continues to be a risk of exposure if the Judge rules
that the pub continues to be partially closed and this exposure
will continue until the partial closure ceases or the end of the
indemnity period of the policy, whichever is sooner.
FBD has now received information from approximately 300 pub
policyholders in order to assess the claims and has been making
interim payments based on these assessments. Further payments will
be made, where appropriate, to these policyholders once the quantum
Judgement is set down, which is expected to be in December. The
recent data has provided more certainty in respect to a number of
assumptions underlying the best estimate of the Business
Interruption losses and more certainty will be achieved as further
judgements and particulars of more claims are received.
There also continues to be uncertainty relating to the legal
costs associated with the legal case. FBD has estimated the legal
costs based on FBD's own legal advisor costs with some prudent
adjustments.
The calculations are particularly sensitive to the estimation of
the ultimate cost of claims for the particular
Classes of business and the estimation of future claims handling
costs. Actual claims experience may differ from the assumptions on
which the actuarial best estimate is based and the cost of settling
individual claims may exceed that assumed.
As a result of the uncertainties noted, the Group sets
provisions at a margin above the actuarial best estimate, inclusive
of an amount specifically allocated to the Business Interruption
estimate.
Reinsurance assets
The Group spends substantial sums to purchase reinsurance
protection from third parties and substantial claims recoveries
from these reinsurers are included in the Statement of Financial
Position at the reporting date. A reinsurance asset (reinsurers'
share of claims outstanding and provision for unearned premium) is
recognised to reflect the amount estimated to be recoverable under
the reinsurance contracts in respect of the outstanding claims
reported under insurance liabilities. The amount recoverable from
reinsurers is initially valued on the same basis as the underlying
claims provision. The amount recoverable is reduced when there is
an event arising after the initial recognition that provides
objective evidence that the Group may not receive all amounts due
under the contract and the event has a reliably measurable impact
on the expected amount that will be recoverable from the
reinsurer.
To minimise default exposure, the Group's policy is that all
reinsurers should have a credit rating of A- or better or have
provided alternative satisfactory security.
The actual amount recovered from reinsurers is sensitive to the
same uncertainties as the underlying claims. To the extent that the
underlying claim settles at a lower or higher amount than that
assumed this will have a direct influence on the associated
reinsurance asset.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 2 - Accounting policies (continued)
Critical accounting estimates and judgements in applying
accounting policies (continued)
In relation to Business Interruption claims, given Covid-19 is a
novel event with no real precedent in reinsurance the Group has
modelled a number of different reinsurance recovery scenarios and
applied judgement in relation to the application of reinsurance
cover. In arriving at the best estimate, probabilities have been
assigned to reinsurance scenarios based on discussions with
reinsurers and our reinsurance broker and specialist legal advice.
While more adverse outcomes for the Group are possible relative to
the booked best estimate, our assessment is that these have a lower
probability of occurrence. This process has resulted in a
reinsurance asset of approximately EUR115m after reinstatements. It
is acknowledged that there is currently a high degree of
uncertainty in arriving at the best estimate of likely costs and
the actual effect of reinsurance recoveries with the potential of
the ultimate reinsurance asset being higher or lower than the best
estimate. Business Interruption as with all uncertainties, is
assessed when the Group is considering the margin for uncertainty,
being a provision held as an amount over the best estimate of
claims liabilities net of expected reinsurance recoveries.
Other Provisions - Consequential Payments
The FSPO decisions relating to complaints made by public house
customers on the Group's initial refusal to accept liability for
public house Business Interruption claims arising as a result of
Covid-19, resulted in a consequential award being made to the
policyholders. Under the Central Bank of Ireland (CBI) Business
Interruption Insurance Supervisory Framework, a consequential
payment should be provided to similarly affected Business
Interruption customers. The Group has arrived at a basis for making
these payments, which it believes is in line with the CBI's
Business Interruption Insurance Supervisory Framework. It estimates
this will result in a cost of EUR13.4m. The Group is therefore
required to provide for a present obligation that is likely to
result in an outflow from the business and can be reliably
estimated. The provision is included in the same manner as other
provisions in the interim results.
Uncertainties in impairment testing
As at the reporting date it is noted that the market
capitalisation, that is the quoted share price multiplied by the
number of ordinary shares in issue, is lower than the Shareholders'
Funds as per the Statement of Financial Position. There are a large
number of factors driven by market conditions that can influence
the market capitalisation of a company which includes but are not
limited to, the Covid-19 pandemic or other factors such as shares
being traded less frequently. The market capitalisation being below
net assets is considered to be an external indicator of impairment
and creates a necessity to make a formal estimate of recoverable
amount to test whether any actual impairment exists. For tangible
and intangible assets, the recoverable amount of an asset is the
higher of its value in use or its fair value less costs to
sell.
In the case of the Property, Plant and Equipment (excluding
Owner Occupied Property which is held at revalued amount), Policy
Administration System, Intangible Assets and Right of Use Assets
there is no reliable estimate of the price at which an orderly
transaction to sell the assets would take place and there are no
direct cash-flows expected from the individual assets. These assets
are an integral part of the FBD General Insurance business,
therefore, the smallest group of assets that can be classified as a
cash generating unit is the FBD General Insurance business.
The Value in Use of the cash generating unit has been determined
by estimating the future cash inflows and outflows to be derived
from continuing use of the group of assets, and applying a discount
rate to those future cash flows. As with all projections there are
assumptions made that will be different to actual experience,
however given the increased uncertainty surrounding the economic
recovery from the pandemic and the impact of Judicial Council
changes to Personal Injuries Guidelines, these estimates are
considered a critical accounting estimate as at the reporting
date.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 2 - Accounting policies (continued)
Critical accounting estimates and judgements in applying
accounting policies (continued)
The Value in Use cash flow projections are based on the latest
quarterly forecast for 2021 and an updated view of the three-year
business plan for 2021-2023. A projection for 2024 up to half year
2027 is included using the updated business plan assumptions. The
total time period used in the cash flow projections is less than
the weighted average remaining useful life of the assets in the FBD
General Insurance business being assessed. This projection and plan
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 from 2021-2024 is 2.0% followed by a 0%
growth rate for later years. Future cash flows are discounted using
an estimated weighted average cost of capital (WACC) of 8.7% that
is considered a reasonable estimate for market rate.
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 used to assess the impact on the
headroom. The sensitivities include additional Business
Interruption costs, other negative claims impacts along with
changes to the discount rate.
The scenarios run resulted in headroom ranging from 1.3 to 1.6
times when comparing the Value in Use of the cash generating unit
to the carrying value of the assets, indicating that there is no
impairment of the assets.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 3 - Segmental information
(a) Operating segments
The principal activities of the Group are underwriting of
general insurance business and financial services. For management
purposes, the Group is organised in two operating segments -
underwriting and financial services. The profit earned by each
segment is reported to the chief operating decision maker, the
Group Chief Executive, for the purpose of resource allocation and
assessment of segmental performance. Central administration costs
and Directors' salaries are allocated based on actual activity.
Income taxation is a direct cost to each segment. Discrete
financial information is prepared and reviewed on a regular basis
for these two segments. The accounting policies of the reportable
segments are the same as the Group accounting policies.
The following is an analysis of the Group's revenue and results
from continuing operations by reportable segments:
Half year ended 30/06/2021 Financial
Underwriting Services Total
EUR000s EUR000s EUR000s
Revenue 188,380 3,165 191,545
--------------- ---------- ----------
Investment return 10,324 - 10,324
--------------- ---------- ----------
Finance costs (1,272) - (1,272)
--------------- ---------- ----------
Profit/(Loss) before taxation 22,074 (83) 21,991
Income taxation (charge)/credit (2,759) 21 (2,738)
--------------- ---------- ----------
Profit/(Loss) after taxation 19,315 (62) 19,253
--------------- ---------- ----------
Other information
Capital additions 5,053 - 5,053
--------------- ---------- ----------
Impairment of other assets - - -
--------------- ---------- ----------
Depreciation/amortisation (5,434) - (5,434)
--------------- ---------- ----------
Statement of Financial Position
Segment assets 1,519,572 21,280 1,540,852
--------------- ---------- ----------
Segment liabilities 1,133,411 5,952 1,139,363
--------------- ---------- ----------
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 3 - Segmental information (continued)
(a) Operating segments (continued)
Half year ended 30/06/2020 Financial
Underwriting Services Total
EUR000s EUR000s EUR000s
Revenue 182,659 4,955 187,614
--------------- ------------ ----------
Investment return (3,274) - (3,274)
--------------- ------------ ----------
Finance costs (1,272) - (1,272)
--------------- ------------ ----------
(Loss)/ Profit before taxation (10,064) 715 (9,349)
Income taxation credit/(charge) 1,258 (123) 1,135
--------------- ------------ ----------
(Loss)/Profit after taxation (8,806) 592 (8,214)
--------------- ------------ ----------
Other information
Capital additions 4,454 - 4,454
--------------- ------------ ----------
Impairment of other assets (842) - (842)
--------------- ------------ ----------
Depreciation/amortisation (5,049) - (5,049)
--------------- ------------ ----------
Statement of Financial Position
Segment assets 1,366,153 18,901 1,385,054
--------------- ------------ ----------
Segment liabilities 1,012,148 7,142 1,019,290
--------------- ------------ ----------
Year ended 31/12/2020 Financial
Underwriting Services Total
EUR000s EUR000s EUR000s
Revenue 371,616 9,383 380,999
--------------- ------------ ----------
Investment return 10,388 - 10,388
--------------- ------------ ----------
Finance costs (2,580) - (2,580)
--------------- ------------ ----------
Profit before taxation 2,695 2,107 4,802
Income taxation credit/(charge) 91 (503) (412)
--------------- ------------ ----------
Profit after taxation 2,786 1,604 4,390
--------------- ------------ ----------
Other information
Capital additions 8,357 - 8,357
--------------- ------------ ----------
Impairment of other assets (2,303) - (2,303)
--------------- ------------ ----------
(11,041
Depreciation/amortisation (11,041) - )
--------------- ------------ ----------
Statement of Financial Position
Segment assets 1,461,755 21,710 1,483,465
--------------- ------------ ----------
Segment liabilities 1,088,963 7,598 1,096,561
--------------- ------------ ----------
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 3 - Segmental information (continued)
(b) Geographical segments
The Group's operations are located in Ireland.
Note 4 - Underwriting result
Half year Half year Year
ended 30/06/21
(unaudited)
ended ended
30/06/20 31/12/20
(unaudited) (audited)
EUR000s EUR000s EUR000s
Gross written premium 181,433 176,216 358,230
----------------- -------------- --------------
Net earned premium 162,246 156,793 315,232
Net claims incurred (88,980) (110,821) (225,399)
Consequential payments (13,400) - -
Motor Insurers Bureau of Ireland Levy
and related payments (5,116) (6,197) (9,681)
----------------- -------------- --------------
Underwriting result before net operating
expenses 54,750 39,775 80,152
----------------- -------------- --------------
Gross management expenses (40,191) (42,735) (82,862)
Deferred acquisition costs (441) (150) 897
Reinsurers' share of expense 1,873 1,197 2,872
Broker commissions payable (2,969) (2,763) (5,438)
----------------- -------------- --------------
Net operating expenses (41,728) (44,451) (88,527)
----------------- -------------- --------------
Underwriting result 13,022 (4,676) (4,379)
----------------- -------------- --------------
The Group's half yearly results are not subject to any
significant impact arising from seasonality of operations.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 4 - Underwriting result (continued)
See below written premium, earned premium, incurred clams
including claims handling expense and other underwriting expenses
split by product lines within the underwriting segment.
(i) Gross premium written Half year Half year
ended ended
30/06/21 30/06/20
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
Motor 94,845 (8,370) 86,475 90,674 (6,941) 83,733
Fire and other damage
to property 51,729 (5,111) 46,618 50,683 (5,313) 45,370
Liability 32,264 (2,422) 29,842 32,328 (2,361) 29,967
Miscellaneous 2,595 (416) 2,179 2,531 (182) 2,349
-------- ------------- -------- --- -------- ------------- --------
181,433 (16,319) 165,114 176,216 (14,797) 161,419
-------- ------------- -------- --- -------- ------------- --------
Included in the gross premium written balance of EUR181,433,000
are premium rebates of EUR4,809,000 (June 2020: EUR11,100,000)
relating to reduced insurance exposure as a result of Covid-19
restrictions.
(ii) Net premium earned Half year Half year
ended ended
30/06/21 30/06/20
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
Motor 91,718 (7,732) 83,986 84,386 (6,940) 77,446
Fire and other damage
to property 52,457 (5,041) 47,416 52,208 (5,142) 47,066
Liability 31,278 (2,422) 28,856 32,384 (2,361) 30,023
Miscellaneous 2,404 (416) 1,988 2,440 (182) 2,258
-------- ------------- -------- --- ---------- ------------- --------
177,857 (15,611) 162,246 171,418 (14,625) 156,793
-------- ------------- -------- --- ---------- ------------- --------
(iii) Incurred claims Half year Half year
including claims handling
expenses
ended ended
30/06/21 30/06/20
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
Motor 41,281 (6,976) 34,305 36,447 (970) 35,477
Fire and other damage
to property 69,532 (31,877) 37,655 64,109 (7,835) 56,274
Liability 17,168 (2,670) 14,498 17,726 (407) 17,319
Miscellaneous 2,564 (42) 2,522 1,782 (31) 1,751
---------- ------------- -------- --- -------- ------------- -----------
130,545 (41,565) 88,980 120,064 (9,243) 110,821
---------- ------------- -------- --- -------- ------------- -----------
Net claims and benefits of EUR88,980,000 includes additional net
costs for Business Interruption claims as a result of Covid-19 of
EUR3,830,000 (June 2020: EUR30,000,000). The gross incurred claims
costs for Business Interruption increased by EUR33,500,000 in 2021
and is offset by the benefit of reinsurance for Covid-19 Business
Interruption claims included in Ceded claims above which increased
by EUR29,670,000 in 2021. The increase in the gross claims cost and
reinsurance asset is primarily due to higher expected legal costs
and a reassessment of the estimated compensation that will be paid
to customers based on the latest available information including
reopening dates of public houses.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 4 - Underwriting result (continued)
(iv) Other underwriting Half year Half year
expenses
ended ended
30/06/21 30/06/20
(unaudited) (unaudited)
Gross Ceded Net Gross Ceded Net
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
Motor 22,792 (1,081) 21,711 22,540 (632) 21,908
Fire and other damage
to property 12,431 (522) 11,909 12,598 (322) 12,276
Liability 7,754 (227) 7,527 8,036 (224) 7,812
Miscellaneous 624 (43) 581 629 (19) 610
----------- ------------- ---------- --- -------- ------------- ------------
43,601 (1,873) 41,728 43,803 (1,197) 42,606
----------- ------------- ---------- --- -------- ------------- ------------
Note 5 - Movement in Other Provisions
Movement in Other Provisions in the Consolidated Income
Statement includes a provision of EUR13,400,000 for consequential
payments to public house Business Interruption customers. The Board
approved a consequential payment provision in line with the Central
Bank of Ireland Business Interruption Insurance Supervisory
Framework following decisions from the Financial Services and
Pensions Ombudsman in respect of a Business Interruption customer
complaints. Refer to note 2 Critical accounting estimates and
judgements in applying policies.
Note 6 - Dividends
No dividends have been paid in 2020 or in 2021 to date due to
uncertainty in respect of Business Interruption and following
regulatory guidance issued to insurance companies as a result of
the Covid-19 pandemic. Given the continuing uncertainty prevailing,
the Board continues to believe that capital preservation is
paramount. The Board will however keep the matter of capital return
to shareholders under continuous review.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 7 - Ordinary share capital
Half year Half year Year
ended 30/06/21 ended 30/06/20
(unaudited) (unaudited)
ended
31/12/20
(audited)
Number EUR000s EUR000s EUR000s
(i) Ordinary shares
of EUR0.60 each
Authorised:
At beginning and end
of period 51,326,000 30,796 30,796 30,796
------------ ---------------- ---------------- -----------
Issued and fully paid:
At beginning and end
of period 35,461,206 21,277 21,277 21,277
------------ ---------------- ---------------- -----------
(ii) 'A' Ordinary shares
of EUR0.01 each
Authorised:
At beginning and end
of period 120,000,000 1,200 1,200 1,200
------------ ---------------- ---------------- -----------
Issued and fully paid:
At beginning and end
of period 13,169,428 132 132 132
------------ ---------------- ---------------- -----------
Total Ordinary Share
Capital 21,409 21,409 21,409
---------------- ---------------- -----------
The number of ordinary shares of EUR0.60 each held as treasury
shares at 30 June 2021 was 408,744. At 31 December 2020 the number
held was 408,744.
Note 8 - Claims outstanding
The net ultimate gross cost of Covid-19 Business Interruption
claims is estimated at EUR182,500,000 at 30 June 2021. Included in
the gross claims outstanding balance at 30 June 2021 is
EUR152,300,000 (December 2020: EUR149,000,000) for Covid-19
Business Interruption claims (including legal and other expenses,
net of payments made to date of EUR30,200,000). The best estimate
net claims outstanding for Covid-19 Business Interruption claims at
30 June 2021 is EUR27,630,000 (December 2020: EUR54,000,000).
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 9 - Earnings per EUR0.60 ordinary share
The calculation of the basic and diluted earnings per share
attributable to the ordinary shareholders is based on the following
data:
Half year Half year Year
ended ended 30/06/20 ended 31/12/20
(audited)
30/06/21 (unaudited)
(unaudited)
EUR000s EUR000s EUR000s
Earnings
Profit/(Loss) for the period for
the purpose of basic earnings per
share 19,253 (8,214) 4,390
-------------- ---------------- ----------------
Profit/(Loss) for the period for
the purpose of diluted earnings
per share 19,253 (8,214) 4,390
-------------- ---------------- ----------------
Number of shares No. No. No.
Weighted average number of ordinary
shares for
the purpose of basic earnings per
share (excludes treasury shares) 35,052,462 34,932,408 34,992,763
Weighted average number of ordinary
shares for
the purpose of diluted earnings
per share (excludes treasury shares) 35,987,399 35,634,096 35,719,059
-------------- ---------------- ----------------
Cent Cent Cent
Basic earnings per share 55 (24) 13
-------------- ---------------- ----------------
Diluted earnings per share 53 (1) (23) (1) 12 (1)
-------------- ---------------- ----------------
(1) Diluted earnings per share reflects the potential vesting of
share based payments.
The 'A' ordinary shares of EUR0.01 each that are in issue have
no impact on the earnings per share calculation. The 'A' ordinary
shares of EUR0.01 each are non-voting. They are non-transferable
except only to the Company. Other than a right to a return of paid
up capital of EUR0.01 per 'A' ordinary share in the event of a
winding up, the 'A' ordinary shares have no right to participate in
the capital or the profits of the Company.
There was no difference between the profit or loss attributable
to the parent entity for the amounts used as the numerators in
calculating basic and diluted earnings per share in each of the
periods.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 9 - Earnings per EUR0.60 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 Half year Year
ended ended 30/06/20 ended 31/12/19
(audited)
30/06/21 (unaudited)
(unaudited)
No. No. No.
Weighted average number of ordinary
shares for the purpose of calculating
basic earnings per share 35,052,462 34,932,408 34,992,763
-------------- ---------------- ----------------
Potential vesting of share based
payments 934,937 701,688 726,296
Weighted average number of ordinary
shares for the purpose of calculating
diluted earnings per share 35,987,399 35,634,096 35,719,059
Note 10 - Retirement Benefit Surplus
The Group operates a funded defined benefit retirement scheme
for qualifying employees that is closed to future accrual and new
entrants. The return on assets during the period reduced by more
than the decrease in scheme liabilities. The retirement benefit
liabilities decreased during the period as a result of the discount
rate increasing from 0.5% to 0.9% and offset to some extent by the
inflation assumption increasing from 1.2% to 1.5%.
The amounts recognised in the Condensed Consolidated Statement
of Financial Position are as follows:
30/06/21 30/06/20 31/12/20
(unaudited) (unaudited) (audited)
EUR000s EUR000s EUR000s
Fair value of plan assets 98,900 103,500 105,776
Present value of defined benefit
obligation (88,900) (90,200) (94,927)
------------ ------------ ----------
Net retirement benefit surplus 10,000 13,300 10,849
------------ ------------ ----------
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 11 - Financial Instruments and Fair Value Measurement
(a) Financial Instruments
30/06/21 30/06/20 31/12/20
(unaudited) (unaudited) (audited)
EUR000s EUR000s EUR000s
Financial Assets
At amortised cost:
Deposits with banks 10,000 50,000 40,000
Cash and cash equivalents 166,832 127,605 129,535
Other receivables 68,781 75,717 65,402
Loans 650 624 601
At fair value:
Available for sale investments 859,091 799,617 863,880
Investments held for trading 134,223 105,615 116,930
Financial Liabilities
At amortised cost:
Payables 47,412 35,769 44,729
Subordinated debt 49,573 49,514 49,544
Lease liability 5,489 6,204 5,843
------------ ------------ ----------
(b) Fair value measurement
The following table compares the fair value of financial
instruments not held at fair value with the fair value of those
assets and liabilities:
30/06/21 30/06/21 30/06/20 30/06/20 31/12/20 31/12/20
(unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited)
Fair Carrying Fair Carrying Fair Carrying
value value value value value value
EUR000s EUR000s EUR000s EUR000s EUR000s EUR000s
Assets
Loans 780 650 749 624 721 601
Financial liabilities
Subordinated
debt 54,414 49,573 52,095 49,514 53,924 49,544
The carrying amount of the following assets and liabilities is
considered a reasonable approximation of their fair value:
-- Deposits with banks
-- Cash and cash equivalents
-- Other Receivables
-- Payables
-- Lease liability
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 11 - Financial Instruments and Fair Value Measurement
(continued)
(b) Fair value measurement (continued)
Certain assets and liabilities are measured in the Condensed
Consolidated Statement of Financial Position at fair value using a
fair value hierarchy of valuation inputs. The following table
provides an analysis of assets and liabilities that are measured
subsequent to initial recognition at fair value, grouped into
Levels 1 to 3 based on the degree to which the fair value is
observable.
Level Fair value measurements derived from quoted prices (unadjusted)
1 in active markets for
identical assets or liabilities.
* Available for sale investments - quoted debt
securities are fair valued using latest available
closing bid price.
* Collective investment schemes, held for trading
(Level 1) are valued using the latest available
closing NAV of the fund.
Level Fair value measurements derived from inputs other than quoted
2 prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e.
derived from prices). There are no assets/liabilities deemed
to be held at this level at 30 June 2021.
Level Fair value measurements derived from valuation techniques
3 that include inputs for the
asset or liability that are not based on observable market
data (unobservable inputs). Valuation techniques used are
outlined below;
* Collective investment schemes held for trading
(Infrastructure and Senior Private Debt funds) are
valued using the most up-to-date valuations
calculated by the fund administrator allowing for any
additional investments made up until period end.
* AFS unquoted investments securities are classified as
Level 3 as they are not traded in an active market.
* Investment property and property held for own use
were fair valued by independent external professional
valuers at year end 2020 and a review of the
continued appropriateness of those valuations is
considered at the interim period end. Group occupied
properties have been valued on a vacant possession
basis applying hypothetical 10-year leases and
assumptions of void and rent free periods, market
rents, capital yields and purchase costs which are
derived from comparable transactions and adjusted for
property specific factors as determined by the
valuer. Group investment properties have been valued
using the investment method based on the long
leasehold interest in the subject property, the
contracted values of existing tenancies, assumptions
of void and rent free periods and market rents for
vacant lots, and capital yields and purchase costs
which are derived from comparable transactions and
adjusted for property specific factors as determined
by the valuer.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 11 - Financial Instruments and Fair Value Measurement
(continued)
(b) Fair value measurement (continued)
30 June 2021 (unaudited) Level Level Level 3 Total
1 2
EUR000s EUR000s EUR000s EUR000s
Assets
Investment property - - 17,054 17,054
Property held for own use - - 15,507 15,507
Financial assets
Investments held for trading
- collective investment schemes 124,209 - 10,014 134,223
AFS(1) investments - quoted debt
securities 858,279 - - 858,279
AFS(1) investments - unquoted
investments - - 812 812
Total assets 982,488 - 43,387 1,025,875
-------- -------- -------- ----------
Total liabilities - - - -
-------- -------- -------- ----------
(1) Available for sale
30 June 2020 (unaudited) Level Level Level 3 Total
1 2
EUR000s EUR000s EUR000s EUR000s
Assets
Investment property - - 18,554 18,554
Property held for own use - - 16,003 16,003
Financial assets
Investments held for trading
- collective investment schemes 100,336 - 5,279 105,615
AFS(1) investments - quoted debt
securities 798,805 - - 798,805
AFS(1) investments - unquoted
investments - - 812 812
Total assets 899,141 - 40,648 939,789
-------- -------- -------- --------
Total liabilities - - - -
-------- -------- -------- --------
(1) Available for sale
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 11 - Financial Instruments and Fair Value Measurement
(continued)
(b) Fair value measurement (continued)
31 December 2020 (audited) Level 1 Level Level 3 Total
2
EUR000s EUR000s EUR000s EUR000s
Assets
Investment property - - 17,051 17,051
Property held for own use - - 15,565 15,565
Financial assets
Investments held for trading
- collective investment schemes 108,199 - 8,731 108,199
AFS(1) investments - quoted debt
securities 863,068 - - 863,068
AFS(1) investments - unquoted
investments - - 812 812
Total assets 971,267 - 42,159 1,013,426
-------- -------- -------- ----------
Total liabilities - - - -
-------- -------- -------- ----------
(1) Available for sale
A reconciliation of Level 3 fair value measurement of financial
assets is shown in the table below:
30/06/21 30/06/20 31/12/20
(unaudited) (unaudited) (audited)
EUR000s EUR000s EUR000s
Opening balance Level 3 financial assets 42,159 3,945 3,945
Transfers-in - 35,539 35,539
Additions 930 2,411 7,754
Disposals - - (1,995)
Impairment - (842) (2,722)
Unrealised gains/(losses) recognised in Consolidated Income Statement 298 (405) (362)
Closing balance Level 3 financial assets 43,387 40,648 42,159
------------ ------------ ----------
Available for sale investments grouped into Level 3 comprise
unquoted securities consisting of a number of small investments as
well as Investment property and property held for own use .
The values attributable to the unquoted investments are derived
from a number of valuation techniques including the net present
value of future cash flows based on operating projections. A change
in one or more of these inputs could have an impact on
valuations.
Investment property and property held for own use were fair
valued by independent external professional valuers at 31 December
2020 (refer to note 13 and note 16 in the Group Annual Report for
year ended 31 December 2020). The valuations at 31 December 2020
were reviewed at the period end 30 June 2021 including informal
discussions with external professional valuers and it was decided
that the valuations for owner occupied property and investment
property would remain unchanged from the 31 December 2020
valuation.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 12 - Taxation
The current taxation asset has decreased by EUR2.9m compared to
31 December 2020. This is as a result of the additional taxation
liability in the first six months of EUR2.7m and a refund of
EUR0.2m received in the period.
The effective tax rate for the period was 12.5% (2020: 12.1%)
which is the best estimate of the weighted average annual income
tax rate expected for the full year.
Note 13 - Other Provisions
Premium rebates MIICF Contribution MIBI Levy Consequential Payments Total
EUR000s EUR000s EUR000s EUR000s EUR000s
Balance at 1 January 2021 2,027 3,609 6,431 - 12,067
Provided in the six months 4,809 1,901 3,215 13,400 23,325
Net amounts paid (2,495) (3,609) (3,215) - (9,319)
---------------- ------------------- ---------- ----------------------- ---------
Closing balance 30 June 2021 4,341 1,901 6,431 13,400 26,073
Balance at 1 January 2020 - 3,652 4,765 - 8,417
Provided in the six months 11,122 1,944 4,253 - 17,319
Net amounts paid (6,629) (3,652) (1,642) - (11,923)
---------------- ------------------- ---------- ----------------------- ---------
Closing balance 30 June 2020 4,493 1,944 7,376 - 13,813
Premium Rebates
FBD committed to rebating certain elements of Commercial policy
premiums to reflect the changing claims environment and enforced
restrictions as a result of the Covid-19 pandemic. The total amount
of Commercial premium rebates provided for in the period was
EUR4,809,000 (2020: EUR5,082,000). The remaining EUR4,341,000
provision represents an estimate of the remaining Commercial
rebates due, this is expected to settle in advance of 31 December
2021. In 2020 Motor rebates of EUR6,040,000 were provided for and
paid by 30 June 2020.
MIICF Contribution
The Group's contribution to the Motor Insurers' Insolvency
Compensation Fund "MIICF" for 2021 is based on 2% of its Motor
Gross Written Premium. Payment is expected to be made in the first
half of 2022.
MIBI Levy
The Group's share of the Motor Insurers' Bureau of Ireland
"MIBI" levy for 2021 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 paid in equal instalments
throughout the year.
Consequential Payments
This is the best estimate of the Consequential Payments
provision in respect of the FSPO decisions as at 30 June 2021 and
we expect to make the payments in the short term - refer to note
5.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
Note 14 - 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 2020 Annual Report. An analysis of share-based
payments to key management personnel is also included in Note 35 of
the 2020 Annual Report. The level and nature of related party
transactions in the first half of 2021 are consistent with the
transactions disclosed in the 2020 Annual Report.
Note 15 - Contingent liabilities and contingent assets
There were no contingent liabilities or contingent assets at 30
June 2021, 30 June 2020 or 31 December 2020.
Note 16 - Subsequent events
The quantum hearing on Business Interruption claims was held in
July with the Judgement expected in December 2021. The Indoor
services for public houses reopened with restrictions from 26 July
2021. Both of these developments have been considered in arriving
at the provision for Business Interruption claims in the half year
results.
Note 17 - Information
This half yearly report and the Annual Report for the year ended
31 December 2020 are available on the Company's website at
www.fbdgroup.com.
Note 18 - Approval of Half Yearly Report
The half yearly report was approved by the Board of Directors of
FBD Holdings plc on 5 August 2021.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 June 2021
RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Half Yearly
Financial Report in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007, as amended and Part 2 (Transparency
Requirements) of the Central Bank of Ireland (Investment Market
Conduct) Rules 2019, as issued under the 2014 Act (the "IMC Rules")
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
5 August 2021
FBD HOLDINGS PLC
APPIX
ALTERNATIVE PERFORMANCE MEASURES (APM's)
The Group uses the following alternative performance measures:
Loss ratio, expense ratio, combined operating ratio, annualised
investment return, net asset value per share, return on equity and
gross written premium.
Loss ratio (LR), expense ratio (ER) and combined operating ratio
(COR) are widely used as a performance measure by insurers, and
give users of the financial statements an understanding of the
underwriting performance of the entity. Investment return is used
widely as a performance measure to give users of financial
statements an understanding of the performance of an entities
investment portfolio. Net asset value per share (NAV) is a widely
used performance measure which provides the users of the financial
statements the book value per share. Return on equity (ROE) is also
a widely used profitability ratio that measures an entity's ability
to generate profits from its shareholder investments. Gross written
premium refers to the revenue of an insurance company and is widely
used across the general insurance industry.
The calculation of the APM's is based on the following data:
Half year Half year Year
ended ended ended 31/12/20
30/06/21 30/06/20 (audited)
(unaudited) (unaudited)
EUR000s EUR000s EUR000s
Loss ratio
Net claims and benefits 88,980 110,821 221,403
Movement in other provisions 18,516 6,197 9,681
------------- --------------
Total claims incurred 107,496 117,018 231,084
Net premium earned 162,246 156,793 315,232
Loss ratio (Total claims incurred/Net
premium earned) 66.3% 74.6% 73.3%
-------------
Expense ratio
Other underwriting expenses 41,728 44,451 88,527
Net premium earned 162,246 156,793 315,232
Expense ratio (Underwriting expenses/Net
premium earned) 25.7% 28.4% 28.1%
------------- -------------- -----------------
Combined operating ratio % % %
Loss ratio 66.3% 74.6% 73.3%
Expense ratio 25.7% 28.4% 28.1%
------------- -------------- -----------------
Combined operating ratio (Loss
ratio + Expense ratio) 92.0% 103.0% 101.4%
------------- -------------- -----------------
Investment return recognised in
consolidated income statement 10,324 (3,274) 10,388
Investment return recognised in
statement of comprehensive income (5,400) (7,239) 4,505
------------- -------------- -----------------
Total investment return 4,924 (10,513) 14,893
Average investment assets 1,171,620 1,095,839 1,117,036
Investment return (Total investment
return/Average underwriting investment
assets) 0.9%(1) (1.9%)(1) 1.3%
------------- -------------- -----------------
(1) Annualised
FBD HOLDINGS PLC
APPIX
ALTERNATIVE PERFORMANCE MEASURES (APM's)
Half year Half year Year
ended ended ended 31/12/20
30/06/21 30/06/20 (audited)
(unaudited) (unaudited)
EUR000s EUR000s EUR000s
Net asset value per share (NAV
per share)
Shareholders' funds - equity interests 398,566 362,841 383,981
------------- -------------- -----------------
Number of shares
Closing number of ordinary shares 35,052,462 35,052,462 35,052,462
------------- -------------- -----------------
Cent Cent Cent
Net asset value per share (Shareholders
funds /Closing number of ordinary
shares) 1,137 1,035 1,095
------------- -------------- -----------------
Return on Equity EUR000s EUR000s EUR000s
Weighted average equity attributable
to ordinary equity holders of
the parent 391,274 367,535 378,105
Result for the period 19,253 (8,214) 4,390
------------- -------------- -----------------
Return on equity (Result for the
period/Weighted average equity
attributable to ordinary equity
holders of the parent) 10%(1) (4%)(1) 1%
------------- -------------- -----------------
Gross premium written: The total premium on insurance underwritten
by an insurer or reinsurer
during a specified period, before deduction of reinsurance premium.
Underwriting result: Net premium earned less net claims and benefits,
other underwriting expenses and movement in other provisions.
Expense ratio: Underwriting and administrative expenses as a
percentage of net earned premium.
Loss ratio: Net claims incurred as a percentage of net earned
premium .
Combined Operating Ratio: The sum of the loss ratio and expense
ratio. A combined operating ratio below 100% indicates profitable
underwriting results. A combined operating ratio over 100% indicates
unprofitable results.
(1) Annualised
Independent review report to FBD Holdings plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed FBD Holdings plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the half-yearly report of FBD Holdings plc for the six month
period ended 30 June 2021. 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, as amended
and Part 2 (Transparency Requirements) of the Central Bank
(Investment Market Conduct) Rules 2019, as issued under the 2014
Act (the "IMC Rules").
What we have reviewed
The interim financial statements, comprise:
-- the condensed consolidated statement of financial position as at 30 June 2021;
-- the condensed consolidated income statement and c0ndensed
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 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, as amended and Part 2 (Transparency Requirements)
of the Central Bank (Investment Market Conduct) Rules 2019, as
issued under the 2014 Act (the "IMC Rules").
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
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, as amended and Part 2 (Transparency
Requirements) of the Central Bank (Investment Market Conduct) Rules
2019, as issued under the 2014 Act (the "IMC Rules").
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly report based on our review.
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, as amended
and Part 2 (Transparency Requirements) of the Central Bank
(Investment Market Conduct) Rules 2019, as issued under the 2014
Act (the "IMC Rules") 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.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity', issued by the Auditing Practices Board for use in
the United Kingdom and 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.
PricewaterhouseCoopers
Chartered Accountants
Dublin
5 August 2021
Notes:
(a) The maintenance and integrity of the FBD Holdings plc
website is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since
they were initially presented on the website.
(b) Legislation in the Republic of Ireland governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
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END
IR DKPBDABKDFFK
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