Final Results

FBD Holdings PLC 08 March 2006 Validation No. 180441 FBD HOLDINGS PLC PRELIMINARY ANNOUNCEMENT RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2005 2005 2004 FINANCIAL HIGHLIGHTS €000s €000s % • Gross written premiums 389,472 351,487 +10.8% • Net earned premiums 332,371 296,237 +12.2% • Operating profit* 162,624 124,794 +30.3% Cent Cent • Operating earnings per share* 363.54 256.18 +41.9% • Dividend per share 57.50 40.00 +43.8% • Net assets per share 1,250.62 969.64 +29.0% * Based on longer term investments return. Commenting on the results, Philip Fitzsimons, Chief Executive, said: '2005 was another excellent year for FBD. Operating profit grew strongly and net assets increased significantly. Our insurance results underpinned this performance. New business volumes were strong and more than offset reductions in premiums that were implemented during the year. The claims charge was broadly in line with the previous year and reflected the improvement in overall claims costs that has occurred in recent years. For shareholders this has meant higher returns; for customers it has meant lower premium rates. We anticipate further premium reductions in certain business lines if claims and pricing trends continue.' ENDS 8th March 2006 For Reference Telephone FBD Philip Fitzsimons, Chief Executive 01 4093200 Andrew Langford, Finance Director 01 4093200 Murray Consultants Joe Murray 01 4980300 FBD HOLDINGS PLC PRELIMINARY RESULTS ANNOUNCEMENT FBD Holdings plc ('FBD' or 'the Group') is pleased to announce that the Group's performance in the year ended 31st December 2005 was very satisfactory. Results Group operating profit increased to €162.6m., compared to €124.8m. in 2004. Total income amounted to €404.5m (2004: €355.1m). It included net premium earned of €332.4m (2004: €296.3m.) and investment income (calculated on the basis of longer term returns) of €44.4m. (2004: €40.7m.), arising in the Group's insurance underwriting business. The remaining €27.7m. (2004: €18.1m) represents the net income, i.e. after expenses, arising from the Group's non underwriting activities. Expenses amounting to €241.9m. (2004: €230.3m) related to the Group's underwriting business. They consist of claim costs amounting to €202.5m. (2004: €197.8m.) and operating expenses of €39.4m. (2004: €32.5m). Of the Group's operating profit, €134.9m. (2004: €106.7m.) is attributable to underwriting and €27.7m. (2004: €18.1m) to non-underwriting, as detailed below. Operating earnings per share based on longer term investment returns amounted to 363.54c (2004: 256.18c) in the period. Underwriting Insurance underwriting (FBD Insurance) is the Group's primary business activity. Gross written premiums (i.e. before reinsurance) amounted to €389.5m., compared to €351.5m. in 2004. A €30m. loyalty discount had been provided for in the latter year. Against the background of a reduction in overall market premium income in 2005, we are pleased with our performance. It has been achieved through new business volume growth which has more than offset the impact of reductions in average premiums which occurred in the period. Net earned premiums amounted to €332.4m. (2004: €296.3m) and reflected lower reinsurance cessions. The net claims incurred charge, which is comprised of the movement in net outstanding claims provisions of €38.8m. (2004: €52.1m) plus net claims paid of €163.7m. (2004: €145.7m.), amounted to €202.5m. (2004: €197.8m). The claims charge benefited from ongoing settlement savings on prior year provisions. Net operating expenses amounted to €39.4m. (2004: €32.5m). The foregoing premium/claim/expenses figures resulted in an underwriting profit of €90.5m. (2004: €65.9m.). In achieving this underwriting result, as expected, the second half of the year proved more challenging. Net claims incurred increased at a faster rate in the second half and were 2.4% higher overall for the full year. Net earned premiums decreased in the second half year, compared to the first half, as we had anticipated. The 2005 net operating ratios were: loss ratio - 60.9% (2004: 66.8%); expense ratio - 11.9% (2004: 11.0%); combined ratio - 72.8% (2004: 77.8%). After crediting investment income of €44.4m. (2004: €40.7m), the operating profit of FBD's underwriting business amounted to €134.9m. (2004: €106.7m). Non-underwriting The Group's non-underwriting activities include property development/leisure, financial services and the investment of non-allocated capital ('capital fund'). The contribution to operating profit from these interests amounted to €27.7m. (2004: €18.1m.) Property and leisure interests, which include the La Cala and Sunset Beach resorts in Spain and the Tower Hotel Group in Ireland, contributed €13.6m (2004: €10.6m.) to operating profits. Property sales at La Cala were below budget, with 40 handovers in the year. This reflected the general slowdown in second-home sales in Costa del Sol in 2005. On the leisure side, trading in Spain and in Ireland was challenging, with an oversupply of product exerting downward pressure on margins. The Group's financial service businesses, which include insurance broking (FBD Brokers), life assurance/pension broking/investment advice (FBD Life) and instalment finance (Abbey Finance) contributed €3.3m. (2004: €3.9m.) to operating profits. Insurance broking income was negatively affected by lower revenues, which resulted from the reduction in premium levels in the market, particularly for large commercial risks. Investment returns on the capital fund amounted to €10.8m. (2004: €3.7m.) This fund was invested in equities. Balance Sheet Total assets at year end amounted to €1,564.4m. (2004: 1,466.8m.), an increase of 6.7% on 2004. Ordinary shareholders' funds amounted to €476.1m. (2004: €406.5m), an increase of 17.1% for the year. The growth in shareholders' funds arising from the contribution of the strong operating performance and the positive short term fluctuations of €26.0m. (€2004: €10.3m.) was reduced by the Company's purchase of its own shares in March 2005 at a cost of €81m. Final Dividend In the light of the Group's continuing favourable results and the Board's stated intention to increase the proportion of earnings distributed to shareholders, a final dividend of 37.50c (2004: 27.28c) per share is being recommended by the Directors. This will bring the total dividend for the year to 57.50c (2004: 40.00c), a significant increase of 43.8%. The final dividend will be paid on 3rd May 2006 to shareholders on the Company's Register at close of business on 17th March 2006. The final dividend is subject to withholding tax ('DWT') except for shareholders who are exempt from DWT and who have furnished a properly completed Composite Resident Form to the Company's Registrar. Outlook The progress made by the Group in 2005 has been maintained in the year to date. In our core activity, we are focused on implementing strategies and plans that are designed to grow our underwriting business efficiently and profitably. We are targeting to achieve challenging new business volumes. In an environment where price competition continues to be intense and premiums are trending lower, this volume growth is essential in order to maintain overall premium income at current levels. The impact on 2006 earned income of premium reductions which were implemented in recent months, and further premium reductions which are likely to be undertaken this year, must also be borne in mind. In the light of this challenging background, our insurance operations are being strengthened and resourced in order to increase our customer base and to grow our market share. Against the background of increasing risk exposure and falling average premiums, the critical drivers of the margin that will be achieved are claim trends and claims experience. It is widely acknowledged that changes in the public mindset and the various measures undertaken over the past couple of years have improved the claims environment in Ireland to the benefit of insured and insurer alike. It is also widely recognised that competition is reducing the current underwriting margins and driving them towards European norms. The improved loss ratios reported by Irish insurers in recent years have been favoured by savings in prior year claim provisions that arise at time of settlement. The critical factors that will ultimately determine the timescales for combined ratios in the Irish market to fall into line with European norms are (a) the speed of implementation and (b) the degree of success surrounding the remaining reforms which the Government has pledged to undertake, allied to the impact of competition on premium levels. While we await these reforms, in addition to those implemented to date, and pending sufficient evidence emerging that reductions in claims frequency and claim costs will be permanent, FBD will continue to provide for its outstanding claims on the basis of its historical reserving policy. It is a matter which we will keep under regular review. FBD will remain supportive of the Government's efforts to deliver the outstanding structural reform measures. Meanwhile, the Group will continue to pursue its own claims cost savings plans and will work to achieve cost efficiencies across its insurance operations in general. In relation to our non-underwriting businesses, our property/leisure interests face the particular challenges that currently pertain to the industry, as mentioned earlier. Revised strategies and plans are being implemented for each individual business unit. Options to maximise shareholders' interests are kept under ongoing review. This is evidenced by our public announcement on 23rd February last that we had entered into a conditional agreement to sell the major portion of La Cala's development land bank in Spain for a total consideration of €201m. in cash, to be received in phased payments. The Board has informed shareholders of its intention to distribute the net proceeds of this sale, amounting to up to €120m, by way of two special dividends. Our financial services businesses continue to adapt to the environment that they face and are focused on availing of opportunities for growth. How best to maximise non-allocated capital for the benefit of shareholders is a matter which the Board regularly reviews. At this particular juncture, the Board has decided to retain the capital. The Group will investigate all possible opportunities to invest some or all of this capital fund in the Group's primary business of insurance underwriting or in related financial service activities. Whilst it is investigating such possibilities, the Board does not rule out other options for use of capital if it deems them to be in the best interests of shareholders. 2005 was a year in which FBD's platform for growth in the years ahead was further strengthened and the successes of previous years were built on. The Group looks forward to the future with confidence. ENDS Note Management will present these results to analysts at 10.30 am. to-day. A copy of the presentation will be posted on the Group's website, www.fbd.ie, at that time. FBD Update • FBD introduced two new major benefits for customers who have a car insurance policy with FBD. Car Breakdown Assist and Car Accident Assist are 24 hours services, automatically included for all customers with comprehensive insurance and can be added to third party policies for a charge of €30. • FBD implemented further reductions in premium rates during 2005. In the July 2005 Survey of house insurance, FBD came out on top once again, being No. 1 in four out of 6 samples and second and third in the other two. Since the Financial Regulator's Surveys began in August 2004, FBD has consistently been rated No. 1 for house insurance. • FBD moved to new larger offices in Limerick in the first half of 2005 and entered agreements to relocate to larger offices in Clonmel, Carlow, Letterkenny and Portlaoise. The Company also acquired a new premises in Dundalk (a new location for FBD) which will open for business in March of this year (2006). • FBD's Dublin based Personal Lines office celebrated its first anniversary in August of 2005. Due to its success and the continued larger volumes of calls to the 1850 617617 line, staff numbers are currently being increased from over 30 to in excess of 50. • FBD has continued to expand its Dublin commercial business base and now has 10 teams in place, targeting a broad spectrum of small to medium sized businesses. • FBD announced a continuance of its sponsorship of RTE's Flagship Soap, Fair City, for 2005/2006 season. This sponsorship continues to lift the profile of FBD in Dublin and around the country. FBD also commenced its sponsorship of the 'FBD Dublin Business of the Month', Awards in association with City Channel, the new TV Station for Dublin, which is broadcast through the digital NTL network. This sponsorship is being carried out in association with Crest Ireland Limited. FBD has sponsored the FBD Crest Retail Excellence Awards for the past 5 years. • In 2005, for the second successive year, FBD, in conjunction with Advance Pitstop, carried out the Annual Survey of Motorists' Behaviour & Attitudes. The findings, once again, added greatly to the data available for those involved in setting the safety agenda. The Report highlighted the worsening habits of Irish drivers and in addition to receiving substantial media attention when it was launched, it was also presented to all interested parties, including Government Departments, the Road Safety Authority and the Gardai. • At the FBD La Cala Resort in Southern Spain, a third 18 hole championship golf course (the Europa) was opened in 2005. This new course complements the existing North and South courses and the 5 Star hotel located there. The Real Altavista apartment development (108 units) has been completed, with a substantial number of sales and handovers achieved to date. Work on building the Monte Alto townhouses (108 units) is well advanced and marketing of these properties has commenced. In addition, the luxury CaraCala Spa at the hotel is due to open in April of this year. • Upgrading of all rooms at FBD Sunset Beach Club on the Costa del Sol is well advanced and a new promenade and related beach facilities have been developed, further enhancing the Resort. • Since March 2005, FBD is 100% owner of the Tower Hotel Group which includes the new 4 Star Castleknock Hotel & Country Club, opened during the year. The adjoining golf course also recently opened for play. FBD HOLDINGS PLC GROUP INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2005 2005 2004 €000s €000s as restated Turnover 531,747 471,858 ======= ======= Income Net premium earned 332,371 296,237 Non-underwriting operating income 27,739 18,142 Investment income - longer term rate of return 44,435 40,713 ------- ------- 404,545 355,092 Expenses Change in insurance liabilities net of reinsurance (38,809) (52,142) Claims paid, net of recoveries from reinsurers (163,666) (145,642) Operating expenses (39,446) (32,514) ------- ------- Operating profit 162,624 124,794 Investment income - short term fluctuation 25,956 10,298 Finance costs (3,425) (3,116) ------- ------- Profit before tax 185,155 131,976 Income tax expense (23,701) (16,968) ------- ------- Profit for the year 161,454 115,008 ======= ======= Attributable to: Equity holders of the parent 161,500 113,257 Minority interest (46) 1,751 ------- ------- 161,454 115,008 ======= ======= 2005 2004 Cent Cent Earnings per 60c ordinary share 416.09 271.23 ======= ======= Diluted earnings per 60c ordinary share 411.45 266.94 ======= ======= FBD HOLDINGS PLC GROUP BALANCE SHEET - ASSETS AT 31ST DECEMBER 2005 2005 2004 €000s €000s as restated Property and equipment Land and buildings 196,923 176,517 Fixtures and fittings 13,302 10,547 --------- --------- 210,225 187,064 --------- --------- Intangible assets Deferred acquisition costs 11,849 10,591 --------- --------- Investments Investment property 48,856 24,200 Investments held for trading 477,310 339,825 Available for sale investments 47,290 30,476 Investments held to maturity 13,740 13,684 Deposits with banks 443,042 538,420 --------- --------- 1,030,238 946,605 --------- --------- Inventories 62,496 70,543 --------- --------- Loans and receivables 141,673 134,909 --------- --------- Reinsurers' share of technical provisions Provision for unearned premiums 19,412 21,302 Claims outstanding 46,622 44,463 --------- --------- 66,034 65,765 --------- --------- Cash and cash equivalents 41,897 51,362 --------- --------- Total assets 1,564,412 1,466,839 ========= ========= FBD HOLDINGS PLC GROUP BALANCE SHEET - LIABILITIES AT 31ST DECEMBER 2005 2005 2004 €000s €000s as restated Equity Share capital 23,557 25,151 Capital reserves 9,813 7,445 Revaluation reserves 47,706 38,581 Translation reserves 435 371 Retained earnings 394,616 334,905 --------- --------- Shareholders' funds - equity interests 476,127 406,453 Preference share capital 2,923 2,923 --------- --------- Total shareholders' funds 479,050 409,376 Minority interests 6,423 16,333 --------- --------- Total equity 485,473 425,709 --------- --------- Liabilities Technical provisions Provision for unearned premiums 188,953 184,954 Claims outstanding 699,397 658,431 --------- --------- 888,350 843,385 --------- --------- Bank and other loans 99,831 80,476 --------- --------- Creditors 54,829 91,482 --------- --------- Deferred tax 33,873 25,787 --------- --------- Retirement benefit obligation 2,056 - --------- --------- Total liabilities 1,564,412 1,466,839 ========== ========= FBD HOLDINGS PLC GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST DECEMBER 2005 Revaluation Attributable Preference 2004 Share Capital and other Translation Retained to ordinary share Minority capital reserves reserves reserve earnings shareholders capital interests Total €000s €000s €000s €000s €000s €000s €000s €000s €000s Balance at 1 January 2004 25,125 6,994 35,801 - 240,776 308,696 2,923 15,077 326,696 Profit after taxation - - - - 113,257 113,257 - 1,751 115,008 Exchange translation adjustment - - - 371 - 371 - - 371 Dividends paid - - - - (12,614) (12,614) - - (12,614) Reissue of ordinary shares 26 173 - - 2,517 2,716 - - 2,716 Recognition of share based payments - 278 - - - 278 - - 278 Transfer to income statement on sale of available for sale investments - - (3,854) - - (3,854) - - (3,854) Gain on available-for-sale investments - - 8,535 - - 8,535 - - 8,535 Purchase of minority interest - - - - - - - (495) (495) Actuarial loss on pension fund valuation - - - - (9,031) (9,031) - - (9,031) Revaluation of owner occupied property - - (1,901) - - (1,901) - - (1,901) ------- ------- ------- ------- ------- ------- ------- ------- ------- Balance at 31 December 2004 25,151 7,445 38,581 371 334,905 406,453 2,923 16,333 425,709 2005 Profit after taxation - - - - 161,500 161,500 - (46) 161,454 Exchange translation adjustment - - - 64 64 - 64 Dividends paid - - - - (18,158) (18,158) - - (18,158) Buyback of own shares - - - - (81,238) (81,238) - - (81,238) Cancellation of own shares (1,594) 1,594 - - - - - - - Reissue of ordinary shares - - - - 1,409 1,409 - - 1,409 Recognition of share based payments - 774 - - - 774 - - 774 Transfer to income statement on sale of available for sale investments - - (5,583) - - (5,583) - - (5,583) Gain on available for sale investments - - 15,779 - - 15,779 - - 15,779 Purchase of minority interest - - - - - - - (9,864) (9,864) Actuarial loss on pension fund valuation - - - - (3,802) (3,802) - - (3,802) Sale of land and buildings - - (1,071) - - (1,071) - - (1,071) ------- ------- ------- ------- ------- ------- ------- ------- ------- Balance at 31 December 2005 23,557 9,813 47,706 435 394,616 476,127 2,923 6,423 485,473 ====== ====== ====== ====== ======= ======= ====== ====== ======= FBD HOLDINGS PLC GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2005 2005 2004 €000s €000s as restated Operating activities Profit before tax for the year 185,155 131,976 Adjustments for: Gains on investments held for trading and held to maturity (41,031) (17,231) Depreciation of property and equipment 3,487 3,075 Share-based payment expense 774 278 Increase in fair value of investment property - (1,200) Increase in technical provisions 44,696 54,354 Retirement benefit charges (3,802) (9,031) --------- --------- Operating cash flows before movement in working capital 189,279 162,221 Increase in receivables (4,274) (8,612) (Decrease) increase in payables (22,863) 16,013 --------- --------- Cash generated from operations 162,142 169,622 Income taxes paid (20,516) (12,228) --------- --------- Net cash from operating activities 141,626 157,394 --------- --------- Investing activities Investments held for trading (96,510) (146,225) Investments available for sale (5,162) (138) Purchase of land, buildings and inventory (13,430) (50,328) Purchase of fixtures and fittings (6,242) (5,222) Purchase of investment property (24,656) - Loans and advances (3,789) (23,601) Deposits invested with financial institutions 95,378 68,779 --------- --------- Net cash used in investing activities (54,411) (156,735) --------- --------- Financing activities Dividends paid (18,158) (12,614) Repurchase of ordinary shares (81,238) - Proceeds of issue of ordinary shares - 199 Proceeds of re-issue of ordinary shares 1,409 2,517 Increase in bank loans 1,243 34,955 --------- --------- Net cash (used in) from financing activities (96,744) 25,057 --------- --------- Net (decrease) increase in cash and cash equivalents (9,529) 25,716 Cash and cash equivalents at the beginning of the year 51,362 25,275 Effect of foreign exchange rate changes 64 371 --------- --------- Cash and cash equivalents at the end of the year 41,897 51,362 ========= ========= FBD HOLDINGS PLC SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED 31ST DECEMBER 2005 2005 2004 €000s €000s as restated Note 1 - Operating profit by activity Underwriting 134,885 106,652 Non underwriting 27,739 18,142 --------- --------- 162,624 124,794 ========= ========= Note 2 - Underwriting Gross written premiums 389,472 357,487 ========= ========= Net earned premiums 332,371 296,237 Net claims incurred (202,475) (197,784) Net operating expenses (39,446) (32,514) --------- --------- Underwriting result 90,450 65,939 ========= ========= Ratios % % Net loss ratio 60.9 66.8 Net expense ratio 11.9 11.0 Combined ratio 72.8 77.8 ENDS This announcement has been issued through the Companies Announcement Service of the Irish Stock Exchange This information is provided by RNS The company news service from the London Stock Exchange

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