Half-year Report

RNS Number : 6877U
FBD Holdings PLC
31 July 2020
 

FBD HOLDINGS PLC

31 July 2020 

 

FBD HOLDINGS PLC

Half yearly Report

For the Six Months ended 30 June 2020

 

KEY HIGHLIGHTS

· Tomás O'Midheach will join the Group on 1 February 2021 as Chief Executive Officer

· Gross Written Premium (GWP) of €176m down 7% on 2019 (down 1% excluding €11m of the Covid-19 pandemic related premium rebates included in Half Year)

· Loss Before Tax of €9m compared to profit before tax of €39m in 2019

· On-going uncertainty surrounding the Covid-19 pandemic related business interruption claims, which are subject to legal proceedings, with best estimate costs of €30m included taking into account the most up to date information in assessing the expected costs and probability of occurrence of potential outcomes

· Combined Operating Ratio of 103% impacted by  the business interruption claims costs and benefiting from positive prior year claims development of €8m

· Investment portfolio down 1% at Half Year (annualised equivalent: -2%), equating to negative investment returns of €10.5m

· Our capital position remains strong with a Solvency Capital Ratio of 186% (unaudited) - we continue to deduct the 2019 proposed dividend of €35m, however the timing and amount of distribution of capital is uncertain

· Average premiums down 3.4% across the portfolio, Private Motor down 7.6%, Farm down 3%, Home down 2.3% and Business up 1.5%

· Disciplined underwriting maintained despite competitive and economic challenges

· Increase of 6,500 policy holders since the beginning of 2020

· Broader relationship with Bank of Ireland being finalised to become a panel member for Home and Motor insurance with expected launch in 2021

· Investment in customer first strategy continuing despite the challenging economic environment

New Van product launched in April 2020

Post Insurance partnership continuing to grow

New business Farm offer recently launched in the market  

Web sales up as customers shift to on-line purchases

Brand awareness increased to top 3

 

FINANCIAL SUMMARY


30 Jun 2020

€000s


30 Jun 2019

€000s

 

 

 

Gross written premium

176,216

189,716

Underwriting (loss)/profit

(4,676)

29,214

(Loss)/Profit before taxation

(9,349)

38,661

 

 

 

Loss ratio

74.6%

56.4%

Expense ratio

28.4%

26.1%

Combined operating ratio

103.0%

82.5%

 

 

 

 

Cent

Cent

Basic (loss)/earnings per share

(24)

97

Net asset value per share

1,035

896

 

· GWP of €176m (2019: €190m). New business increased 15%, with continuing strong level of customer retention

· Underwriting loss of €5m (2019: profit of €29m), impacted by the business interruption costs and reduced premium income offset by frequency reductions during the lockdown period and positive prior year reserve development of €8m - this equates to a H1 COR of 103% (2019: 83%)

· Negative investment returns of -€3m through the Income Statement (2019: +€9m) and a further -€7m through Other Comprehensive Income (2019: +€14m) reflecting the impact on investment markets of the Covid-19 pandemic

· Expense ratio of 28.4% (2019: 26.1%), with the impact of the Covid-19 pandemic premium rebates increasing the ratio by two percentage points  

· Net Asset Value per share 1,035 cent (2019: 896 cent) with 100 cent of increase being due to non-payment of dividend in respect of 2019 financial year

 

 

Commenting on these results Paul D'Alton, Interim Group Chief Executive, said:

 

"These are a robust set of results in very difficult circumstances for our customers and employees. Our profitability excluding the business interruption costs and capital position remain strong and we continue to invest in our business for the future.

 

We have introduced a number of measures to assist our customers through the Covid-19 pandemic including premium rebates, suspension of cover reductions and payment flexibility where required. We have also assisted customers with a wide range of supports reflecting the changed environment for individuals and businesses. We are grateful to our loyal customers for their continued support.

 

From an operational perspective our business continuity plans continue to work very well. Service to customers has been maintained and in FBD it has been business as usual. The vast majority of our employees have worked remotely since late March and we are now commencing a slow process of returning to the office. As part of this process our branches reopened to customers on 29th June.

 

We have experienced a lot of publicity in recent months regarding business interruption claims by customers. We acknowledge the disappointment and frustration of affected businesses that their Business Interruption insurance does not respond to cover pandemics. However, we are unable to provide cover for what we believe to be, and are advised is, an uninsured risk not covered by our policies. We have a duty to all of our customers to settle claims consistently with the coverage provided so that we can continue to offer products at affordable pricing levels and pay valid claims. Proceedings will be brought, by way of test case, which is now scheduled for hearing in the Commercial Court in October 2020. We believe that this is the quickest and most efficient way of achieving clarity for our customers .

 

Until clarity emerges in relation to Business Interruption Insurance we expect a period of uncertainty for FBD. However, we remain confident in the underlying profitability, future growth prospects, capital strength of the business and in our ability to continue to provide excellent service to our customers.

 

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

 

 

 Powerscourt

 

Eavan Gannon

+353 87 236 5973

 

About FBD Holdings plc ("FBD")

FBD is one of Ireland's largest property and casualty insurers, looking after the insurance needs of farmers, consumers and business owners.  Established in the 1960s by farmers for farmers, FBD has built on those roots in agriculture to become a leading general insurer serving the needs of its direct agricultural, small business and consumer customers throughout Ireland. It has a network of 34 branches nationwide. 

 

Forward Looking Statements

Some statements in this announcement are forward-looking.  They represent expectations for the Group's business, and involve risks and uncertainties.  These forward-looking statements are based on current expectations and projections about future events.  The Group believes that current expectations and assumptions with respect to these forward-looking statements are reasonable.  However, because they involve known and unknown risks, uncertainties and other factors, which are in some cases beyond the Group's control, actual results or performance may differ materially from those expressed or implied by such forward-looking statements.

 

The following details relate to FBD's ordinary shares of €0.60 each which are publicly traded:

 Listing

Euronext Dublin

UK Listing Authority

 Listing Category

Premium

Premium (Equity)

 Trading Venue

Euronext Dublin

London Stock Exchange

 Market

Main Securities Market

Main Market

 ISIN

IE0003290289

IE0003290289

 Ticker

FBD.I or EG7.IR

FBH.L

 

 

OVERVIEW

The Group reported a loss before tax of €9.3m (2019 profit: €38.7m), reduced by  Covid-19 pandemic related business interruption best estimate costs of €30.0m and premium rebates to customers of €11.1m to date offset by positive prior year reserve releases of €8.0m, claim frequency reductions during Quarter 2 and benign weather. Negative investment returns of €3.3m through the Income Statement are reported reflecting the challenging market conditions as a result of the Covid-19 pandemic albeit mitigated by our conservative investment portfolio.

 

The Group reported an underwriting loss of €4.7m (2019 profit: €29.2m) and a GWP decrease of 7% to €176.2m (2019: €189.7m). GWP reduced by 1% compared to the first half of 2019 when the Covid-19 pandemic related premium rebates are excluded.

 

The Covid-19 pandemic has introduced greater levels of uncertainty to FBD and its customers including the outcome of the test cases on business interruption cover. The Group remains well positioned 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 trends were strong in the first quarter of 2020 while the second quarter was impacted by the pandemic as economic activity reduced. GWP decreased to €176.2m (2019: €189.7m). €11.1m of the €13.5m decrease relates to Motor and Commercial customer rebates included to date. Motor customers with policies in place at 31 March 2020 received a €35 One4All voucher as many cars were off the road in H1 while restrictions were in place with corresponding claims frequency reductions. Commercial customers' rebates reflected the reduced exposure to Employers Liability, Public Liability and Business Interruption while businesses were closed in H1. Commercial rebates paid in H1 amounted to €0.6m and the balance of the rebates will be paid as businesses re-open. Additional commercial rebates will be made in H2 for closure periods beyond the end of June. 

 

Customer policies increased by 6,500 compared to 2019, with new business volumes increasing year on year by 15%. Retention remains high as we provide flexibility, where possible, to our customers in these challenging times.  

 

Average premiums reduced by 3.4% across the book. Average premium for Private Motor reduced by 7.6% due to competitive pressure and discounting, as well as a change in mix. Average Farm premium reduced by 3% while providing an improved product offering and increased covers. Home average premium reduced 2.3% due to rate reductions and discounting.  Average premiums for Business increased 5.7% reflecting mix change rather than rate increases.

 

Reinsurance

The 2020 reinsurance programme remains largely unchanged from 2019. This programme limits our exposure to large claims, weather events and other aggregations of claims. FBD's continued strong underwriting performance resulted in modest reductions in rates.

 

Claims

 

Net claims incurred increased by €22.7m to €117.0m (2019: €94.3m) and includes business interruption claims costs. Positive prior year reserve releases of €8.0m (2019: €8.8m) are coming from frequency being better than expected (in particular for the 2019 accident year) and better than expected settlements of some larger claims.

 

FBD is taking a test case, now scheduled in the Commercial Court for October 2020 to resolve publicans' business interruption claims as a consequence of the Covid-19 pandemic public health measures. FBD remains strongly of the view that our business insurance policies do not provide cover for a pandemic of this nature. However, a probability weighted best estimate of claims costs has been booked on the basis that uncertainty exists surrounding the test case outcome. Further detail surrounding these claims is included in the Risks and Uncertainties section below. 

 

Motor damage and injury claims frequency reduced over the period primarily due to the government lockdown restricting movement. Property claims frequency increased as business interruption claims were notified and there were also more claims for smaller weather events.  No significant weather events occurred in the first half of the year although attritional weather claims experience is higher than 2019, which was an exceptionally benign year.

 

Average cost of all capped injury claims and settlements marginally decreased over the last 12 months. However settlement activity was impacted by court closures and the inability to engage in pre-trial negotiations as a result of the Covid-19 pandemic restrictions. The average cost of property claims has reduced over the last 12 months although the Covid-19 pandemic health and social distancing guidelines are likely to have an inflationary impact on domestic building costs. Motor damage claims increased as parts and paint costs were higher, as well as average labour hours per repair.

 

The Motor Insurers Bureau of Ireland (MIBI) levy and Motor Insurers Insolvency Compensation Fund (MIICF) contribution combined were €6.2m (2019: €6.2m).

 

Claims Environment

There has been limited changes to the claims environment in recent months given the pandemic restrictions which affected the ability of courts to operate. The delay in forming a government after the election also has meant limited legislative changes.

 

Claims reform needs to be progressed by the new government as reducing costs for customers should remain a priority. The underlying issue of personal injury (and in particular, soft tissue) award levels must be tackled to reduce claims pay-outs and ultimately premiums for customers.  

 

FBD welcomes the establishment of The Personal Injuries Guidelines Committee last April with guidelines due in October 2020. The guidelines when agreed by the Committee will replace the Book of Quantum, and judges will be required to provide reasons for any departure from the new guidelines in assessing damages in personal injury cases. This Committee has the chance to reduce personal injuries awards addressing the anomaly where Ireland pay awards at more than four times the UK, and provide more consistency in the assessment of damages for personal injury claims in the future. We are hopeful we will continue to see consistency with the Byrne v Ardenhealth case with responsibility placed on individuals to exercise reasonable care for their own personal safety. This should assist businesses who are being held to unreasonably high standards in personal injury cases.

 

Early indications are positive in respect of the PIAB (Amendment) Act enactment, addressing the non-co-operation of claimants and their legal representatives, although until claims settlements and the courts return to more normal operation the real impact is unknown.

 

No obvious impact is noticeable from The Civil Liability & Courts Act amendment to reduce the timeframe of notification of a claim to a defendant from two months to one month.

 

The new government will in time decide if the second amendment to the Civil Liability & Courts Act will be passed that would allow a claim to be dismissed if a claimant's affidavit is false or misleading. The claimant could also be referred to the DPP at the judge's discretion. 

 

The Court of Appeal has appointed four new judges, increasing the number of sitting judges to sixteen, with three new appointments made to the High Court. Justice Mary Irvine was appointed as President of the High Court in June 2020. The impact of these recent changes will be seen over time.  

 

The change in the Court Taxation System and adjudication of legal bills is resulting in more formal bills being presented by legal cost accountants rather than solicitor firms, and appears to be increasing legal costs and will be kept under close review. 

 

There is a growing possibility the personal injury discount rate in Ireland will decrease, which would augment future claims liabilities. We await the outcome of the June 2020 consultation launched by the Minster for Justice and Equality to address two key issues. Firstly to determine if the judiciary should decide on the appropriate discount rate on a case by case basis, or if the Minister for Justice and Equality should be allowed to determine the discount rate and review at intervals (legislative change required to 2004 Civil Liability and Courts Act). The second issue (as has happened in the UK) is to agree if there is a need to update the investment strategy that a plaintiff is assumed to take in determining the discount rate.  

 

We welcome an update on the Law Reform Commission review of capping of general damages on personal injury claims, to understand which model is being proposed and if the decision on the cap will lie with the Oireachtas or the judiciary.

 

Action is still required on many areas to see meaningful reform such as: 

 

· Speeding up litigation and reducing legal costs;

· Creating pre-action protocol to fast-track rejected Injuries Board awards;

· Making gross exaggeration an offence; and

· Establishing and resourcing a Garda fraud investigation unit.

 

Claims costs may increase further as:

· The Consumer Contracts Bill was passed by the Oireachtas but has not yet been enacted. The proposed changes will make it more difficult for insurers to repudiate exaggerated claims;

· Motor and property damage repair claims may be hit by Brexit supply chain issues; and

· Property costs continue to increase as demand increases and labour supply shortages continue.

 

Weather, Claims Frequency and Large Claims

No significant weather events of note occurred in the period which is consistent with the experience in 2019. January and February brought a return to the more normal level of attritional weather claims and June experienced a number of Lightening claims, with overall attritional weather claims costs almost double 2019.


As a result of the Covid-19 pandemic and the restrictions put in place by the government there has been a significant reduction in Motor and Liability claims in the first half of the year. This was particularly evident in the second half of March and all of April with frequency increasing again in May and further in June. The frequency of claims relating to Farm activities remained relatively stable throughout the period.

 

A much lower than normal number of large claims, defined as a value greater than €250k, have been reported to FBD at 30 June. However, this metric is unreliable given that hospital priorities have been directed toward the Covid-19 pandemic and there has been very little ability in the last few months to get access to medical information in order to place a reliable estimate on injuries being reported. This uncertainty has been allowed for in arriving at our best estimate of claims liabilities.

 

Expenses

The Group's expense ratio was 28.4% (2019: 26.1%). Other underwriting expenses were €44.6m which increased by €0.9m due to increasing regulatory costs and IT costs, some of which were Covid-19 pandemic related to allow for home working by the Group's staff. The ratio is impacted by the decrease in earned premium as a result of the Covid-19 pandemic rebates to customers. Excluding this impact would reduce the expense ratio to 26.5%.

 

GENERAL

 

FBD's Combined Operating Ratio ("COR") was 103.0% (2019: €82.5%) generating an underwriting loss of €4.7m (2019 profit: €29.2m).

 

 

 

 

Investment Return

FBD's total annualised investment return for the first six months of 2020 was -1.9% (2019: 4.3%). This is broken down between annualised investment income of -0.6% (2019: 1.6%) through the Income Statement and annualised mark to market movements of -1.3% (2019: 2.7%) in Other Comprehensive Income (OCI). The negative returns reflect the impact on FBD's portfolio from the downturn in investment markets as a result of the Covid-19 pandemic.  Markets have rallied from the worst days of the pandemic in March and all asset classes posted positive returns in Quarter 2 as a result of unprecedented fiscal and monetary support coming from central banks and governments worldwide, however earlier losses suffered were not fully recovered at the reporting date. Whilst in general markets have been very positive and appear to be pricing in a V-shaped recovery the emerging consensus among economists including the IMF, Federal Reserve and ECB is for a much longer drawn out recovery.  It remains to be seen what type of recovery comes to fruition and in the meantime we can expect elevated volatility in investment markets. 

 

The pension surplus increased during the period due to positive investment returns from sovereign bonds in which over 80% of the scheme's assets are invested and a reduction in the inflation assumption, while the discount rate remained unchanged. 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 profit before tax of €0.7m for the period (2019: €2.1m). Revenue increased by €0.2m, costs increased from €2.7m to €4.2m primarily due to legal and other expenses in FBD Holdings plc.

 

Loss per share

The diluted loss per share was 23 cent per ordinary share, compared to a profit of 95 cent per ordinary share in 2019. 

 

Dividend

The Board rescheduled the Annual General Meeting (AGM) to 31 July 2020 as a result of the Covid-19 pandemic, regulatory and public authority recommendations and in the interest of health and safety. The proposed dividend of 100 cent per share detailed in the 2019 Annual Report will not be brought forward for approval at the AGM as a result of the statement issued in April by the European Insurance and Occupational Pension Authority (EIOPA) urging the suspension of all discretionary dividend distributions, the heightened uncertainty resulting from the Covid-19 pandemic and the importance of maintaining capital in the business. The Board will keep the timing and amount of distributions of capital to shareholders under continuing review. The solvency of the Group remains robust and is currently at 186% (unaudited), including continuing to deduct the 2019 proposed dividend of €35m.

 

The Group dividend policy continues to target an annual pay-out range of 20% to 50% of full year after tax profits when appropriate given the inherent cyclicality of all insurance businesses.

 

 

STATEMENT OF FINANCIAL POSITION

 

Capital position

Ordinary shareholders' funds at 30 June 2020 amounted to €362.8m (December 2019: €372.2m). The decrease in shareholders' funds is driven by the following:

· An increase in the defined benefit pension scheme surplus of €4.0m after tax;

· An increase of €1.1m due to share based payments; and

· Loss after tax for the half year of €8.2m;

· Mark to market losses on Available for Sale investments of €6.3m after tax.

Net assets per ordinary share are 1,035 cent, compared to 1,068 cent per share at 31 December 2019.

 

 

 

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 has been no material changes to investment allocation since year end.  The changes below reflect the impact on valuations of those asset classes impacted by the Covid-19 pandemic.  There has been an increase in the overall cash held by the business. 

 

The allocation of the Group's underwriting investment assets is as follows:

 

 

30  June 2020

31 December 2019

 

€m

%

€m

%

Corporate bonds

495

45%

509

46%

Government bonds

304

27%

302

27%

Deposits and cash

185

17%

168

15%

Other risk assets

64

6%

65

6%

Equities

42

3%

46

4%

Investment property

19

2%

19

2%

 

1,109

100%

1,109

100%

 

Solvency

The half year Solvency Capital Ratio (SCR) was 186% (unaudited) and continues to deduct the 2019 proposed ordinary dividend of €35m. The audited Solvency Capital Ratio (SCR) at 31 December 2019 was 193%. There is more than normal uncertainty surrounding the calculation of the Solvency Capital Ratio pending the outcome of the test cases relating to the Covid-19 pandemic related business interruption claims and movements in investment markets.

 

RISKS AND UNCERTAINTIES

 

The principal risks and uncertainties faced by the Group are outlined on pages 18-24 of the Group's Annual Report for the year ended 31 December 2019. The Covid-19 pandemic and the measures taken to mitigate its impact are having a significant effect on economic activity and give rise to additional specific risks and uncertainties for the Group.

 

We have experienced a reduction in claims volumes as a result of the restrictions put in place to tackle the spread of the virus. However it is feasible that shortages in parts and/or other supplies and a possible increased propensity to claim by financially stressed customers will result in increased claims costs. Court closures and difficulties in obtaining medical reports are impacting our ability to settle claims. We are continuously monitoring claims patterns as the situation unfolds.

 

FBD anticipates an impact on revenue as some customers reconsider their coverage amidst changing needs and financial strain causes some businesses not to re-open or individuals not to renew.

 

Future financial market movements and their impact on balance sheet valuations, pension surplus and investment income are unknown.

 

FBD has modelled a number of possible scenarios on the potential impact of the Covid-19 pandemic to its business plans. The scenario modelling included assumptions on the potential impact of the pandemic on revenue, expenses, claims frequency, claims severity, investment market recovery 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 cannot be accurately predicted and unforeseen difficulties and events could arise.

 

In May and June 2020 FBD issued market updates in respect of business interruption claims received, in particular with regard to those sold to publicans, and our approach to seek a test case to have the issues resolved as quickly as possible to achieve clarity and minimise costs for all parties. We confirmed that litigation between FBD and a number of publican customers claiming cover for business interruption as a consequence of the Covid-19 pandemic public health measures has been scheduled for hearing in the Commercial Court in October 2020. FBD remains strongly of the view, and our legal advice is, that our business insurance policies do not provide cover for a pandemic of this nature. However, a probability weighted best estimate of claims costs has been booked in the half year financial results on the basis that uncertainty exists surrounding the test case outcome.

 

In arriving at the business interruption best estimate of €30m, FBD have assessed all available and up to date information which may impact on ultimate costs. The estimated cost of a number of different scenarios have been modelled including the degree of application of reinsurance cover. Based on legal advice received by the Group, probabilities have been assigned to each scenario and the probability weighted expected cost recognised in respect of business interruption claims received which are subject to the test case judgement. There are scenarios which could result in a significantly more adverse outcome for the Group than this but our assessment is that these have a lower probability of occurrence. It is acknowledged that there is a high degree of uncertainty in arriving at the best estimate of likely costs and in addition the Group holds a margin for uncertainty over the best estimate of claims liabilities.

 

In the meantime the solvency of the Group remains robust and is currently at 186% (unaudited) (31 December 2019: 192%) even while continuing to deduct the proposed 2019 dividend. As noted above, there is more than normal uncertainty surrounding the calculation of the Solvency Capital Ratio pending the outcome of the test cases relating to the Covid-19 pandemic related business interruption claims and movements in investment markets.

 

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 monitored as the situation progresses. 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 working with customers to ensure continuation of cover where possible. As at the reporting date there was no obvious increase in distressed customers but will be subject to on-going monitoring.

 

The Group continues to manage liquidity risk through ongoing monitoring of forecast and actual cashflows ensuring that the maturity profile of its financial assets is shorter than or equal 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 8 with a less than 15% allocation to risk assets.

 

Monitoring of overall business strategy adopted is required to determine continuing relevance considering the potential impacts of the pandemic on customer needs and the way in which we operate.

 

The restrictions put in place to fight the Covid-19 pandemic resulted in the need for current business processes and distribution models to be re-imagined by all. FBD itself has been able to adapt to the changing environment with substantially all employees working from home at the height of the restrictions. The majority of functions were largely able to maintain business as usual. We have not implemented job reduction programmes or received any 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 only able to support emergency repairs for essential workers. 

 

As the country re-opens, FBD has developed its own transition plan. Pre-planned actions aim to ensure operational resilience and the safety of staff and customers through extra health and security measures. Our nationwide network of 34 branches is now open to the public. 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 within which we operate is a priority as we navigate through these difficult times. 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. FBD Insurance is taking several measures to support our customers through these challenging times including rebates to business customers for temporary closures and rebates to motor customers covering periods of restricted travel. From our support of the Irish Olympic Team to our sponsorship of the many other national and local initiatives, FBD Insurance is committed to continue supporting the local communities in which we operate and in which our customers live and work.  We acknowledge the disappointment and frustration of affected businesses that their business interruption insurance does not respond to cover pandemics. However, we are unable to provide cover for what we believe to be, and are advised is, an uninsured risk not covered by our policies.

 

Since 31 December there has been minimal updates to Brexit associated risks and uncertainties as the UK and the EU continue to negotiate and agree details of their future trade relationship. The EU has formally accepted that the UK will not seek an extension to the Brexit transition period, which expires at the end of December 2020.

 

OUTLOOK

 

The half year results for 2020 reflect economic and legal challenges faced by the business as a result of the Covid-19 pandemic resulting business interruption claims costs, negative investment returns and lower premium income. There are also positive impacts in the result as the weather was relatively benign with some positive prior year releases and continued underwriting discipline in a highly competitive environment. New business has grown although overall premium levels are decreasing as discounting and mix changes feed through.  

 

The Group is following a clear strategy that is expected to deliver sustainable growth in book value through a customer centred approach, underwriting discipline and careful risk selection. Continuing underwriting discipline and careful risk selection is critical, particularly in a softening market, to ensure FBD maintains its capital strength and secure its future ability to service customers and pay claims.

 

The determination of the Commercial Court in the test cases relating to the Covid-19 pandemic business interruption claims will bring clarity to FBD and customers and we await the outcome in due course. In addition we will be monitoring the progress of the FCA test case on business interruption policy wordings in the UK and will consider developments here carefully.

 

The Covid-19 pandemic and Brexit are both major challenges that face all businesses for the foreseeable future. The Covid-19 pandemic has changed the way we live and work and as a business we are following all government guidelines and regulations to ensure safe interactions for our employees and customers alike. Despite government support there will be economic casualties as people lose jobs and businesses close and we as a business have to adapt to the changing environment as it evolves. The business is planning for all possible Brexit scenarios to ensure our customers can be fully supported no matter the outcome.   

 

FBD will continue to advocate for moderation of injury awards and personal accountability to reduce claims costs as these changes will have a positive impact on premium levels for all. The Personal Injuries Guidelines Committee has an opportunity to reset the dial for personal injury awards in Ireland, reducing claims payouts and tackling the compensation culture that permeates Irish society.

 

We remain confident in the capital strength and underlying profitability of the business, strategic opportunities that exist for growth and in our ability to continue to provide excellent service to our customers.

 

 

 

 

FBD HOLDINGS PLC

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Condensed Consolidated Income Statement

For the half year ended 30 June 2020

 

 

 

 

 

Notes

Half year
ended
30/06/20

(unaudited)

 

Half year

ended

30/06/19

(unaudited)

 

Year ended 31/12/19  (audited)

 

 

€000s

 

€000s

 

€000s

Revenue

3

187,614

 

202,062

 

394,639

Income

 

 

 

 

 

 

Gross premium written

 

176,216

 

189,716

 

370,063

Reinsurance premiums

 

(14,797)

 

(16,104)

 

(31,836)

 

 

 

 

 

 

 

Net premium written

 

161,419

 

173,612

 

338,227

Change in provision for unearned premiums

 

(4,626)

 

(6,405)

 

(674)

 

 

 

 

 

 

 

Net premium earned

 

156,793

 

167,207

 

337,553

Net investment return

 

(3,274)

 

8,627

 

17,892

Financial services income - Revenue from contracts with customers 

 

2,129

 

1,905

 

4,268

  - Other financial services income

 

2,827

 

2,873

 

5,557

 

 

 

 

 

 

 

Total income

 

158,475

 

180,612

 

365,270

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

Net claims and benefits

 

(110,821)

 

(88,139)

 

(148,679)

Other underwriting expenses

  4

(44,451)

 

(43,699)

 

(87,259)

Movement in other provisions

 

(6,197)

 

(6,155)

 

(7,946)

Financial services and other costs

 

(4,241)

 

(2,673)

 

(6,081)

Impairment of property, plant and equipment

 

(842)

 

-

 

(246)

Finance costs

 

(1,272)

 

(1,285)

 

(2,579)

 

 

 

 

 

 

 

(Loss)/Profit before taxation

 

(9,349)

 

38,661

 

112,480

Income taxation credit/(charge)

10

1,135

 

(4,860)

 

(14,255)

 

 

 

 

 

 

 

(Loss)/Profit for the period

 

(8,214)

 

33,801

 

98,225

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

Equity holders of the parent

 

(8,214)

 

33,801

 

98,225

 

 

 

 

 

 

 

 

 

 

FBD HOLDINGS PLC

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Condensed Consolidated Income Statement

For the half year ended 30 June 2020

 

 

 

 

 

 

Notes

Half year
ended
30/06/20

(unaudited)

 

Half year

ended 30/06/19

(unaudited)

 

 

Year ended 31/12/19 (audited)

Earnings per share

 

 

 

Cent

 

Cent

 

Cent

Basic

7

(24)

 

97

 

281

Diluted

7

(23)1

 

951

 

2761

 

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 2020

 

 

Half year

ended 30/06/20

(unaudited)

 

Half year ended 30/06/19

(unaudited)

 

 

Year ended 31/12/19 (audited)

 

€000s

 

€000s

 

€000s

 

 

 

 

 

 

(Loss)/Profit for the period

(8,214)

 

33,801

 

98,225

 

 

 

 

 

 

Items that will or may be reclassified to profit or loss in subsequent periods:

 

 

 

 

 

Net (loss)/gain on available for sale assets

(7,207)

 

14,190

 

11,356

Gains transferred to the Consolidated Income Statement on disposal during the period

 

(32)

 

 

(183)

 

 

(432)

Taxation credit/(charge) relating to items that will or may be reclassified to profit or loss in subsequent periods

 

905

 

 

(1,751)

 

 

(1,366)

 

 

 

 

 

 

Items that will not be reclassified to profit or loss in subsequent periods:

 

 

 

 

 

Actuarial gain/(loss) on retirement benefit obligations

4,577

 

(1,544)

 

(4,236)

Taxation (charge)/credit (relating to items not to be reclassified in subsequent periods)

 

(572)

 

 

193

 

 

530

 

 

 

 

 

 

Other comprehensive (expense)/income after taxation

(2,329)

 

10,905

 

5,852

 

 

 

 

 

 

Total comprehensive (expense)/income for the period

(10,543)

 

44,706

 

104,077

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Equity holders of the parent

(10,543)

 

44,706

 

104,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FBD HOLDINGS PLC

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Condensed Consolidated Statement of Financial Position

At 30 June 2020

 

 

 

 

 

 

 

 

 

ASSETS

 

30/06/20

(unaudited)

 

30/06/19

(unaudited)

 

31/12/19

(audited)

 

Notes

€000s

 

€000s

 

€000s

 

 

 

 

 

 

 

Property, plant and equipment

 

27,148

 

27,845

 

28,114

 

 

 

 

 

 

 

Policy administration system

 

37,704

 

39,452

 

38,603

 

 

 

 

 

 

 

Intangible assets

 

3,356

 

1,159

 

2,155

 

 

 

 

 

 

 

Investment property

 

18,554

 

17,500

 

18,693

 

 

 

 

 

 

 

Right of use asset

 

6,045

 

6,500

 

6,115

 

 

 

 

 

 

 

Loans

 

624

 

598

 

611

 

 

 

 

 

 

 

Deferred taxation asset

 

1,193

 

1,224

 

1,222

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

Available for sale investments

 

799,617

 

811,807

 

811,986

Investments held for trading

 

105,615

 

89,079

 

111,399

Deposits with banks

 

50,000

 

50,000

 

60,000

 

 

 

 

 

 

 

 

 

955,232

 

950,886

 

983,385

 

 

 

 

 

 

 

Reinsurance assets

 

 

 

 

 

 

Provision for unearned premiums

 

172

 

2

 

1

Claims outstanding

 

73,046

 

78,432

 

66,349

 

 

 

 

 

 

 

 

 

73,218

 

78,434

 

66,350

 

 

 

 

 

 

 

Retirement benefit surplus

 

13,300

 

11,400

 

8,723

 

 

 

 

 

 

 

Current taxation asset

10

12,326

 

3,949

 

3,949

 

 

 

 

 

 

 

Deferred acquisition costs

 

33,032

 

32,356

 

33,182

 

 

 

 

 

 

 

Other receivables

 

75,717

 

74,058

 

63,866

 

 

 

 

 

 

 

Cash and cash equivalents

 

127,605

 

106,195

 

94,982

 

 

 

 

 

 

 

Total assets

 

1,385,054

 

1,351,556

 

1,349,950

 

 

 

 

 

 

 

 

 

 

FBD HOLDINGS PLC

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Condensed Consolidated Statement of Financial Position (continued)

At 30 June 2020

 

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

30/06/20

(unaudited)

 

30/06/19

(unaudited)

 

31/12/19 (audited)

 

Notes

€000s

 

€000s

 

€000s

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Called up share capital presented as equity

6

21,409

 

21,409

 

21,409

Capital reserves

 

23,967

 

21,608

 

22,811

Retained earnings

 

317,465

 

268,638

 

328,008

 

 

 

 

 

 

 

Equity attributable to ordinary equity holders of the parent

 

362,841

 

311,655

 

372,228

Preference share capital

 

2,923

 

2,923

 

2,923

 

 

 

 

 

 

 

Total Equity

 

365,764

 

314,578

 

375,151

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Insurance contract liabilities

 

 

 

 

 

 

Provision for unearned premiums

 

188,341

 

189,276

 

183,545

Claims outstanding

 

720,970

 

731,442

 

683,332

 

 

 

 

 

 

 

 

 

909,311

 

920,718

 

866,877

 

 

 

 

 

 

 

Other provisions

11

13,813

 

11,945

 

8,417

 

 

 

 

 

 

 

Subordinated debt

 

49,514

 

49,455

 

49,485

 

 

 

 

 

 

 

Lease liability

 

6,204

 

6,558

 

6,222

 

 

 

 

 

 

 

Deferred taxation liability

 

4,649

 

5,138

 

4,905

 

 

 

 

 

 

 

Current taxation liability

10

30

 

6,895

 

3,128

 

 

 

 

 

 

 

Payables

 

35,769

 

36,269

 

35,765

 

 

 

 

 

 

 

Total liabilities

 

1,019,290

 

1,036,978

 

974,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

1,385,054

 

1,351,556

 

1,349,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FBD HOLDINGS PLC

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Condensed Consolidated Statement of Cash Flows

For the half year ended 30 June 2020

 

 

 

Half year
ended
30/06/20

(unaudited)

 

 

Half year ended 30/06/19

(unaudited)

 

 

Year

ended 31/12/19 (audited)

 

 

€000s

 

€000s

 

€000s

Cash flows from operating activities

 

 

 

 

 

 

(Loss)/Profit before taxation

 

(9,349)

 

38,661

 

112,480

Adjustments for:

 

 

 

 

 

 

Loss/(Profit) on investments held for trading

 

5,785

 

(5,942)

 

(10,741)

Loss on investments available for sale

 

1,860

 

2,153

 

4,025

Interest and dividend income

 

(4,139)

 

(4,165)

 

(11,102)

Depreciation/amortisation

 

5,049

 

4,955

 

10,503

Depreciation of right of use asset

 

410

 

386

 

771

Share-based payment expense

 

1,156

 

1,177

 

2,381

Revaluation of investment property

 

139

 

810

 

(290)

Impairment of property, plant and equipment

 

842

 

-

 

246

Operating cash flows before movement in working capital

 

1,753

 

38,035

 

108,273

Increase/(decrease) in insurance contract liabilities

 

35,568

 

2,309

 

(39,448)

Increase in other provisions

 

5,396

 

4,207

 

679

(Increase) in receivables and deferred acquisition costs

 

(12,837)

 

(13,382)

 

(2,839) 

Decrease in payables

 

1,351

 

4,316

 

5,082

Interest on lease liabilities

 

131

 

143

 

278

Purchase of investments held for trading

 

-

 

(6,416)

 

(29,689)

Sale of investments held for trading

 

-

 

2,057

 

7,807

Cash generated from operations

 

31,362

 

31,269

 

50,143

Interest and dividend income received

 

5,275

 

5,956

 

11,717

Income taxes paid

 

(10,304)

 

(1,450)

 

(14,129)

Net cash generated from operating activities

 

26,333

 

35,775

 

47,731

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of available for sale investments

 

(91,072)

 

(95,748)

 

(152,656)

Sale of available for sale investments

 

94,341

 

91,512

 

143,289

Purchase of property, plant and equipment

 

(1,615)

 

(1,579)

 

(4,518)

Purchase of intangible assets

 

(1,368)

 

(855)

 

(1,935)

Purchase of policy administration system

 

(2,243)

 

(2,130)

 

(4,414)

(Increase)/decrease in loans and advances

 

(13)

 

17

 

4

Decrease in deposits invested with banks

 

10,000

 

20,998

 

10,998

Net cash generated from/(used in) investing activities

 

8,030

 

12,215

 

(9,232)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Ordinary and preference dividends paid

 

-

 

(17,713)

 

(17,714)

Interest payments on subordinated debt

 

(1,250)

 

(1,250)

 

(2,500)

Principal elements of lease payments

 

(490)

 

(471)

 

(942)

Net cash used in financing activities

 

(1,740)

 

(19,434)

 

(21,156)

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

32,623

 

28,556

 

17,343

Cash and cash equivalents at the beginning of the period

 

94,982

 

77,639

 

77,639

Cash and cash equivalents at the end of the period

 

127,605

 

106,195

 

94,982

 

 

FBD HOLDINGS PLC

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Condensed Consolidated Statement of Changes in Equity (UNAUDITED)

For the half year ended 30 June 2020

 

 

Called up

Capital

Retained

Other

Attributable to

Preference

Total

 

share capital presented as equity

Reserves

 

 

earnings

Reserves

Ordinary shareholders

share capital

equity

 

€000s

€000s

€000s

€000s

€000s

€000s

€000s

 

 

 

 

 

 

 

 

Balance at 1 January 2020

21,409

22,811

  328,008

  -

372,228

2,923

375,151

 

 

 

 

 

 

 

 

Loss after taxation

-

-

(8,214)

-

(8,214)

-

(8,214)

 

 

 

 

 

 

 

 

Other comprehensive expense

-

-

(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

 

 

 

 

 

 

 

 

Balance at 1 January 2019

21,409

20,430

241,645

-

283,484

2,923

286,407

 

 

 

 

 

 

 

 

Profit after taxation

-

-

  33,801

-

33,801

-

33,801

 

 

 

 

 

 

 

 

Other comprehensive income

-

-

10,905

-

10,905

-

10,905

 

 

 

 

 

 

 

 

 

 

21,409

 

20,430

 

286,351

 

-

 

328,190

 

2,923

 

331,113

 

 

 

 

 

 

 

 

Dividends paid and approved on ordinary and

preference shares

-

-

(17,713)

-

(17,713)

-

(17,713)

 

 

 

 

 

 

 

 

Recognition of share based payments

-

1,178

-

-

1,178

-

1,178

 

 

 

 

 

 

 

 

 

Balance at 30 June 2019

 

21,409

 

21,608

 

268,638

 

-

 

311,655

 

2,923

 

314,578

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

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 2020 does not constitute the statutory financial statements of the company;

the statutory financial statements for the financial year ended 31 December 2019 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 2019; 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 are satisfied that the Group has sufficient resources to continue in operation for a period of not less than twelve months from the date of this report. In making this assessment the Directors considered the potential impact of the Covid-19 pandemic on the Group's business over the period of assessment. This included reviewing projections reflecting the Covid-19 pandemic potential impacts across base case, pessimistic and optimistic scenarios. The scenarios included a range of estimates based on the length of time the economy takes to recover as well as the outcome of the business interruption test cases. The economic recovery will impact on premiums including potential reductions in exposures, new business and retention levels. The timing of recovery will also impact on the claims frequency and severity as the economy rebounds as well. Expense assumptions changed depending on the level of premiums as discretionary spend and resources were adjusted. A positive and more adverse view of investment markets were assumed in arriving at assumptions for future investment returns. The scenarios are most sensitive to changes in business interruption claims costs. The pessimistic scenario assumes the loss of the business interruption test cases and indemnity being provided for the closure period under government advice in place at the date of this half yearly report. The Solvency Capital Requirement of the business was calculated for each of the scenarios run and the capital position was well in excess of the Group's preferred risk appetite.

 

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 staff continue to work remotely. No structural changes are required by the business as a result of the Covid-19 pandemic and the capital investment and change projects undertaken by the business have continued.

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 2 - Accounting policies (continued)

 

Going concern (continued)

 The Own Risk and Solvency Assessment (ORSA) process monitors current and future solvency needs. A number of ORSA scenarios were run that included an extreme scenario of losing the business interruption test cases for the full indemnity period with no reinsurance cover. The Solvency Capital Requirement of the business remained within the risk appetite range of the Group and all scenarios included payment of the 2019 proposed dividend.

 

On the basis of the scenarios projected by the Group and the additional ORSA scenarios run, the Directors are satisfied that there is no material uncertainty that the Group will have sufficient capital to meet its Solvency Capital Requirements for the next twelve months and therefore continue to adopt the going concern basis of accounting in preparing the condensed 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 2020 are the same as those used to prepare the Group Annual Report for the year ended 31 December 2019 except as described below. 

 

Premium Rebates

Premium rebates relate to elements of premium written returned to policyholders as a result of agreed reductions in risk exposure. In previous periods the earnings impact of premium rebates was recognised over the remaining term of the policy on a 365th of premium written basis in line with the above policy. To the extent that current period premium rebates relate to reduced exposure for a specific period within the term of impacted policies, the earning impact has been recognised directly in that period.

 

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 2020 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 Contracts1

IFRS 9  Financial instruments2

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. There is a project team in place and training has been provided on the impact of the new standard. The Groups implementation programme is progressing in line with expectations.

 

IFRS 9 Financial Instruments in respect of the Consolidated Financial Statements is being considered as part of the project for the adoption of IFRS 17 Insurance Contracts.

 

 

 

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 2 - Accounting policies (continued)

 

Critical accounting estimates and judgements in applying accounting policies

 

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 2020 are the same as those used to prepare the Group Annual Report for the year ended 31 December 2019 other than as noted above. In the application of these 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 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.  Actual results may differ from these estimates.

 

The following are the key judgements and critical estimates that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

 

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 half year. Allowance is made for any changes or uncertainties that may cause the cost of unsettled claims to increase or reduce. In addition the Group holds a margin for uncertainty over the best estimate of claims liabilities. At each reporting date liability adequacy tests are performed to ensure the adequacy of the liabilities. Any deficiency is recognised in the Income Statement.

 

Litigation between FBD and a number of publican customers claiming cover for business interruption as a consequence of the Covid-19 pandemic public health measures has been scheduled for hearing in the Commercial Court in October 2020. FBD remains strongly of the view that our business policies do not provide cover for a pandemic of this nature, however claims liabilities include a provision to cover costs that may be incurred. The outcome of the litigation is uncertain and the provision made represents a mix of possible scenarios and assumptions around compensation and legal costs. Judgement has been applied in assigning probabilities to possible scenarios. As at the reporting date the claims provisions are most sensitive to the outcome of the business interruption test cases. The ultimate cost to the Group is unknown at 30 June 2020 and it is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are different from the assumptions made could require a material adjustment to the carrying value of the liabilities. The going concern assessment outlined on pages 18 to 19 of this report considered the potential impact of the Covid-19 pandemic on the Group's business including an extreme scenario of losing the business interruption test cases for the full indemnity period with no reinsurance cover.

 

 

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, uncertainties such as Brexit and the Covid-19 pandemic or other factors such as shares being traded less frequently. The current economic conditions as a result of the global pandemic and the market capitalisation being below net assets are considered to be external indicators of impairment and create a necessity to make a formal estimate of recoverable amount to test whether any actual impairment exists. For tangible and intangible assets, the

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 2 - Accounting policies (continued)

 

Critical accounting estimates and judgements in applying accounting policies (continued)

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, 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, therefore the FBD General Insurance business, 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 these estimates are considered a critical accounting estimate as at the reporting date.

 

The Value in Use cash flow projections are based on business plans covering a three-year period. These plans represent management's best estimate of future underwriting profits and fee income for the FBD General Insurance business factoring 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 premiums, number of policies written, claims frequency, claims severity, weather experience, commission rates, fee income charges and expenses. The average growth rate used for the first three years is 1.9% while the later three-year period is extrapolated using a declining growth rate on average of -1.0%. Future cash flows are discounted using an estimated weighted average cost of capital of 9.4% in the discounted cash flow model which is adjusted through sensitivity analysis to approximate a market equivalent discount 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. Projections reflecting Covid-19 pandemic potential impacts across base case, pessimistic and optimistic scenarios were considered. These projections included a range of estimates based on the length of time the economy takes to recover as well as the outcome of the business interruption test cases.

 

 

The scenarios run resulted in headroom ranging from 1.1 to 2.3 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.

 

Accounting for the Defined Benefit Pension Obligations

The valuation of the pension scheme is provided by the Group's consultant actuaries. The critical accounting estimates in recognising the defined benefit pension surplus is the measurement of the defined pension obligations.

 

The valuation of the defined benefit obligation is sensitive to actuarial assumptions. These include demographic assumptions covering mortality and longevity, and economic assumptions covering price inflation and the discount rate used. Sensitivities regarding the principal assumptions used to measure the scheme liabilities are detailed in note 31 of the Group Annual Report for the year ended 31 December 2019. 

 

 

 

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

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 30/06/2020

 

Underwriting

Financial
Services

 

Total

 

€000s

€000s

€000s

 

 

 

 

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

 

 

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 3 - Segmental information (continued)

 

(a)  Operating segments (continued)

 

 

Half year ended 30/06/2019


 

Underwriting

 

Financial
Services

 

 

Total

 

€000s

€000s

€000s

 

 

 

 

Revenue

197,284

4,778

202,062

Investment Return

8,627

-

8,627

Finance costs

(1,285)

-

(1,285)

 

 

 

 

Profit before taxation

36,556

2,105

38,661

Income taxation charge

(4,570)

(290)

(4,860)

 

 

 

 

Profit  after taxation

31,986

1,815

33,801

 

 

 

 

Other information

 

 

 

Capital additions

3,967

-

3,967

Depreciation/amortisation

(4,955)

-

(4,955)

 

 

 

 

Statement of Financial Position

 

 

 

Segment Assets

1,334,754

16,802

1,351,556

Segment Liabilities

1,030,088

6,890

1,036,978

 

 

 

 

 

Year ended 31/12/2019


 

Underwriting

 

Financial
Services


 

Total

 

€000s

€000s

€000s

 

 

 

 

Revenue 

384,814

9,825

394,639

Investment return

17,892

-

17,892

Finance costs

(2,579)

-

(2,579)

 

 

 

 

Profit before taxation

108,736

3,744

112,480

Income taxation charge

(13,592)

(663)

(14,255)

 

 

 

 

Profit after taxation

95,144

3,081

98,225

 

 

 

 

Other information

 

 

 

Capital additions

9,385

-

9,385

(Impairment)/Revaluation of other assets

(1,908)

1,952

44

Depreciation/amortisation

(10,503)

-

(10,503)

 

 

 

 

Statement of Financial Position

 

 

 

Segment Assets

1,335,431

14,519

1,349,950

Segment Liabilities

967,810

6,989

974,799

 

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 3 - Segmental information (continued)

(b)  Geographical segments

The Group's operations are located in Ireland.

 

 

Note 4 - Underwriting result

 

 

Half year ended 30/06/20 (unaudited)

 

 

Half year

ended 30/06/19

(unaudited)

 

 

Year

ended 31/12/19

(audited)

 

€000s

 

€000s

 

€000s

 

 

 

 

 

 

Gross premium written

176,216

 

189,716

 

370,063

 

 

 

 

 

 

 

 

 

 

 

 

Net premium earned

156,793

 

167,207

 

337,553

Net claims incurred

(110,821)

 

(88,139)

 

(148,679)

Motor Insurers Bureau of Ireland Levy and related payments

(6,197)

 

(6,155)

 

(7,946)

 

 

 

 

 

 

 

39,775

 

72,913

 

180,928

 

 

 

 

 

 

Gross management expenses

(42,735)

 

(43,129)

 

(86,499)

Deferred acquisition costs

(150)

 

400

 

1,226

Reinsurers' share of expense

1,197

 

1,227

 

2,479

Broker commissions payable

(2,763)

 

(2,197)

 

(4,465)

 

 

 

 

 

 

Net operating expenses

(44,451)

 

(43,699)

 

(87,259)

 

 

 

 

 

 

Underwriting result

(4,676)

 

29,214

 

93,669

 

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 2020

 

Note 5 - Dividends

 

 

Half Year ended 30/06/20

(unaudited)

 

Half Year ended 30/06/19

(unaudited)

 

Year

ended 31/12/19

(audited)

Paid:

€000s

 

€000s

 

  €000s

 

 

 

 

 

 

2019 dividend of 0 cent (2018: 8.4 cent) per share on 14% non-cumulative preference shares of €0.60 each

 

-

 

 

113

 

 

113

2019 dividend of 0 cent (2018: 4.8 cent) per share on 8% non-cumulative preference shares of €0.60 each

 

-

 

 

169

 

 

169

2019 final dividend of 0 cent (2018: 50.0 cent) per share on ordinary shares of €0.60 each

 

-

 

 

17,432

 

17,432

 

 

 

 

 

 

Total dividends paid

-

 

17,714

 

17,714

 

The FBD Board has decided not to proceed at this time with the proposed dividend payment for the 2019 Financial Year detailed in the 2019 Annual Report, taking into account the statement issued in April by the European Insurance and Occupational Pensions Authority (EIOPA) urging the suspension of all discretionary dividend distributions due to the heightened uncertainty resulting from the Covid-19 pandemic and the importance of maintaining capital in the business. The Board will keep the timing and amount of distributions of capital to shareholders under continuing review.

 

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 6 - Ordinary share capital

 

Half year ended 30/06/20 (unaudited)

 

Half year ended 30/06/19 (unaudited)

 

Year

ended 31/12/19

(audited)

 

Number

 

€000s

 

€000s

 

€000s

(i)  Ordinary shares of €0.60 each

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Authorised:

 

 

 

 

 

 

 

At beginning and end of period

51,326,000

 

30,796

 

30,796

 

30,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued and fully paid:

 

 

 

 

 

 

 

At beginning and end of period

35,461,206

 

21,277

 

21,277

 

21,277

 

 

 

 

 

 

 

 

(ii)  'A' Ordinary shares of €0.01 each

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Authorised:

 

 

 

 

 

 

 

At beginning and end of period

120,000,000

 

1,200

 

1,200

 

1,200

 

 

 

 

 

 

 

 

Issued and fully paid:

 

 

 

 

 

 

 

At beginning and end of period

13,169,428

 

132

 

132

 

132

 

 

 

 

 

 

 

 

Total Ordinary Share Capital

 

 

21,409

 

21,409

 

21,409

 

The number of ordinary shares of €0.60 each held as treasury shares at 30 June 2020 was 408,744. At 31 December 2019 the number held was 598,742.

 

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 7 - Earnings per €0.60 ordinary share

 

The calculation of the basic and diluted earnings per share attributable to the ordinary shareholders is based on the following data:

 

Half year

ended
30/06/20  (unaudited)

 

Half year

ended 30/06/19

(unaudited)

 

Year

ended 31/12/19 (audited)

 

€000s

 

€000s

 

€000s

Earnings

 

 

 

 

 

Profit for the period for the purpose of basic earnings

 

 

 

 

 

per share

(8,214)

 

33,801

 

97,943

 

 

 

 

 

 

Profit for the period for the purpose of diluted earnings

 

 

 

 

 

per share

(8,214)

 

33,801

 

97,943

 

 

 

 

 

 

Number of shares

No.

 

No.

 

No.

Weighted average number of ordinary shares for

 

 

 

 

 

the purpose of basic earnings per share (excludes treasury shares)

 

34,932,408

 

 

34,770,837

 

 

34,817,297

 

 

 

 

 

 

Weighted average number of ordinary shares for

 

 

 

 

 

the purpose of diluted earnings per share (excludes treasury shares)

 

35,634,096

 

 

35,436,482

 

 

35,472,380

 

 

 

 

 

 

 

Cent

 

Cent

 

Cent

Basic earnings per share

(24)

 

97

 

281

Diluted earnings per share

(23)1

 

951

 

2761

1 Diluted earnings per share reflects the potential vesting of share based payments.

 

The 'A' ordinary shares of €0.01 each that are in issue have no impact on the earnings per share calculation. The 'A' ordinary shares of €0.01 each are non-voting. They are non-transferable except only to the Company. Other than a right to a return of paid up capital of €0.01 per 'A' ordinary share in the event of a winding up, the 'A' ordinary shares have no right to participate in the capital or the profits of the Company.

 

The below table reconciles the profit or loss attributable to the parent entity for the period to the amounts used as the numerators in calculating basic and diluted earnings per share for the period and the comparative period including the individual effect of each class of instruments that affects earnings per share:

 

Half year

ended
30/06/20  (unaudited)

 

Half year

ended 30/06/19

(unaudited)

 

Year

ended 31/12/19 (audited)

 

€000s

 

€000s

 

€000s

Profit or loss attributable to the parent entity for the period

(8,214)

 

33,801

 

98,225

2019 dividend of 0 cent (2018: 8.4 cent) per share on 14% non-cumulative preference shares of €0.60 each

 

-

 

 

-

 

 

(113)

2019 dividend of 0 cent (2018: 4.8 cent) per share on 8% non-cumulative preference shares of €0.60 each

-

 

-

 

 

(169)

Profit for the period for the purpose of calculating basic and diluted earnings

 

(8,214)

 

 

33,801

 

 

97,943

 

 

 

 

 

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 7 - Earnings per €0.60 ordinary share (continued)

 

The below table reconciles the weighted average number of ordinary shares used as the denominator in calculating basic earnings per share to the weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share including the individual effect of each class of instruments that affects earnings per share:

 

 

Half year

ended
30/06/20  (unaudited)

 

Half year

ended 30/06/19

(unaudited)

 

Year

ended 31/12/19 (audited)

 

No.

 

No.

 

No.

Weighted average number of ordinary shares for the purpose of calculating basic earnings per share

 

34,932,408

 

 

34,770,837

 

 

34,817,297

Potential vesting of share based payments

 

701,688

 

 

665,645

 

 

655,083

Weighted average number of ordinary shares for the purpose of calculating diluted earnings per share

 

35,634,096

 

 

35,436,482

 

 

35,472,380

 

 

 

 

 

 

 

 

 

Note 8 - Retirement Benefit Surplus

The Group operates a funded defined benefit retirement scheme for qualifying employees that is closed to future accrual and new entrants. The retirement benefit surplus increased by €4,577,000 in the period mainly due to positive investment returns and a decrease in the inflation assumption from 1.3% to 1.0%, while the discount rate remained unchanged at 0.9%. 

 

The amounts recognised in the Statement of Financial Position are as follows:

 

 

30/06/20

 

30/06/19

 

31/12/19

 

(unaudited)

 

(unaudited)

 

(audited)

 

€000s

 

€000s

 

€000s

 

 

 

 

 

 

Fair value of plan assets

103,500

 

103,400

 

102,681

Present value of defined benefit obligation

(90,200)

 

(92,000)

 

(93,958)

 

 

 

 

 

 

Net retirement benefit surplus

13,300

 

11,400

 

8,723

 

 

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 9 - Financial Instruments and Fair Value Measurement

(a)  Financial Instruments

 

30/06/20

 

30/06/19

 

31/12/19

 

(unaudited)

 

(unaudited)

 

(audited)

 

€000s

 

€000s

 

€000s

Financial Assets

 

 

 

 

 

At amortised cost:

 

 

 

 

 

Deposits with banks

50,000

 

50,000

 

60,000

Cash and cash equivalents

127,605

 

106,195

 

94,982

Other receivables

75,717

 

74,058

 

63,866

Loans

624

 

598

 

611

 

 

 

 

 

 

 

 

 

 

 

 

At fair value:

 

 

 

 

 

Available for sale investments

799,617

 

811,807

 

811,986

Investments held for trading

105,615

 

89,079

 

111,399

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

At amortised cost:

 

 

 

 

 

Payables

35,769

 

36,269

 

35,765

Subordinated debt

49,514

 

49,455

 

49,485

Lease liability

6,204

 

6,558

 

6,222

 

 

 

 

 

 

 

 

(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:

 

 

30/06/20

30/06/20

30/06/19

30/06/19

31/12/19

31/12/19

 

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(audited)

(audited)

 

Fair
value

Carrying value

Fair
value

Carrying value

Fair
value

Carrying value

 

€000s

€000s

€000s

€000s

€000s

€000s

Assets

 

 

 

 

 

 

Loans

749

624

717

598

733

611

Financial liabilities

 

 

 

 

 

 

Subordinated debt

52,095

49,514

52,105

49,455

53,148

49,485

 

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 2020

 

Note 9 - Financial Instruments and Fair Value Measurement (continued)

(b)  Fair value measurement (continued)

Certain assets and liabilities are measured in the Condensed Consolidated Statement of Financial Position at fair value using a fair value hierarchy of valuation inputs.  The following table provides an analysis of assets and liabilities that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

 

Level 1

Fair value measurements derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities.

Available for sale investments - quoted debt securities are fair valued using latest available closing bid price. 

Collective investment schemes, held for trading (Level 1) are valued using the latest available closing NAV of the fund. 

 

Level 2

Fair value measurements derived from inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices). There are no assets/liabilities deemed to be held at this level at 30 June 2020.

 

Level 3

Fair value measurements derived from valuation techniques that include inputs for the
asset or liability that are not based on observable market data (unobservable inputs).  Among the valuation techniques used are cost, net asset or net book value or the net present value of future cash flows based on operating projections which are considered an approximation of fair value.

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 mainly valued at cost

Investment property and property held for own use were fair valued by independent external professional valuers at year end and a review of the continued appropriateness of those valuations is considered at interim period end (refer to note 13 and note 16 in the Group Annual Report for year ended 31 December 2019). Given the uncertainty in the market and the low number of observable transactions taking place during the period, the valuations have been reclassified to Level 3 from Level 2 at 31 December 2019.

 

 

 

 

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 9 - Financial Instruments and Fair Value Measurement (continued)

(b)  Fair value measurement (continued)

 

30 June 2020 (unaudited)

Level 1

Level 2

Level 3

Total

 

€000s

€000s

€000s

€000s

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

AFS1 investments - quoted debt securities

798,805

-

-

798,805

AFS1 investments - unquoted investments

-

-

812

812

 

 

 

 

 

Total assets

899,141

-

40,648

939,789

 

 

 

 

 

Total liabilities

-

-

-

-

1Available for sale

 

30 June 2019 (unaudited)

Level 1

Level 2

Level 3

Total

 

€000s

€000s

€000s

€000s

Assets

 

 

 

 

Investment property

-

17,500

-

17,500

Property held for own use

-

17,184

-

17,184

 

 

 

 

 

Financial assets

 

 

 

 

Investments held for trading - quoted shares

52

-

-

52

Investments held for trading - collective investment schemes

89,027

-

-

89,027

AFS1 investments - quoted debt securities

811,184

-

-

811,184

AFS1 investments - unquoted investments

-

-

623

623

 

 

 

 

 

Total assets

900,263

34,684

623

935,570

 

 

 

 

 

Total liabilities

-

-

-

-

1Available for sale

 

 

 

 

 

 

 

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 9 - Financial Instruments and Fair Value Measurement (continued)

(b)  Fair value measurement (continued)

 

 

 

 

 

 

31 December 2019 (audited)

Level 1

Level 2

Level 3

Total

 

€000s

€000s

€000s

€000s

Assets

 

 

 

 

Investment property

-

18,693

-

18,693

Property held for own use

-

16,846

-

16,846

 

 

 

 

 

Financial assets

 

 

 

 

Investments held for trading - collective investment schemes

108,266

-

3,133

111,399

AFS1 investments - quoted debt securities

811,174

-

-

811,174

AFS1 investments - unquoted investments

-

-

812

812

 

 

 

 

 

Total assets

919,440

35,539

3,945

958,924

 

 

 

 

 

Total liabilities

-

-

-

-

1Available for sale

 

A reconciliation of Level 3 fair value measurement of financial assets is shown in the table below:

 

30/06/20

30/06/19

31/12/19

 

(unaudited)

(unaudited)

(audited)

 

€000s

€000s

€000s

 

 

 

 

Opening balance Level 3 financial assets

3,945

623

623

Transfers-in

35,539

-

-

Additions

2,411

-

3,436

Disposals

-

-

-

Impairment

(842)

-

-

Unrealised losses recognised in Consolidated Income Statement

(405)

-

  (114)

 

 

 

 

Closing balance Level 3 financial assets

40,648

623

3,945

 

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 which transferred from the level 2 hierarchy during the period. It is the Groups policy to recognise transfers between levels of the fair value hierarchy in line with the date of the event or change in circumstances that caused the transfer.

 

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 2019 (refer to note 13 and note 16 in the Group Annual Report for year ended 31 December 2019). The valuations at 31 December 2019 were reviewed for impairment at the period end including informal discussions with external professional valuers and it was decided that the valuations for

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

Note 9 - Financial Instruments and Fair Value Measurement (continued)

 

(b)  Fair value measurement (continued)

 

owner occupied property be written down by 5%. The valuations for owner occupied property are written down by 5% (€842,000) based on higher yield figures used in valuations for similar type properties.

 

No change to the investment property valuations was deemed necessary as the rent negotiations underway and completed are supportive of the fair value recognised. The sale of the land in the United Kingdom is still under price negotiation under the terms of an option agreement and the progress of these negotiations is supportive of the fair value recognised. It is likely the negotiations for the sale of the land in the United Kingdom will conclude before the end of 2020.

 

The maximum exposure the Group has in relation to Level 3 valued financial assets at 30 June 2020 is €40,648,000 (30 June 2019: €623,000; 31 December 2019: €3,945,000).

 

Note 10 - Taxation

 

The current taxation asset has increased by €8.4m compared to 31 December 2019 mainly as a result of preliminary tax paid for 2020, which was based on the 2019 corporation tax liability and the amount is considered recoverable on the basis that the Group has made a loss in the interim period to 30 June 2020. In addition, loss relief for actual losses suffered in the interim period is currently available for offset against 2019 profits.

 

The current taxation liability has reduced by €3.1m as a result of payments made in the period.

 

The effective tax rate for the period was 12.1% (2019: 12.6%) which is the best estimate of the weighted average annual income tax rate expected for the full year.The effective tax rate for the period was lower than the standard Irish corporation tax rate of 12.5% primarily due to disallowable expenses.

 

 

Note 11 - Other Provisions

 

 

30/06/20

30/06/19

31/12/19

 

(unaudited)

(unaudited)

(audited)

 

€000s

€000s

€000s

 

 

 

 

Balance at 1 January

8,417

7,738

7,738

Provision for MIBI levy and MIICF contribution

6,197

6,155

7,946

Provision for Commercial premium rebates

4,493

-

-

MIBI levy and MIICF contribution paid

(5,294)

(1,948)

  (7,267)

 

 

 

 

Closing balance

13,813

11,945

8,417

 

 

MIBI Levy

The Group's share of the Motor Insurers' Bureau of Ireland "MIBI" levy for 2020 is based on its estimated market share in the current year at the reporting date.

 

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

 

Note 11 - Other Provisions (continued)

 

MIICF Levy

The Group's contribution to the Motor Insurers' Insolvency Compensation Fund "MIICF" for 2020 is based on 2% of its Motor Gross Written Premium.

 

Commercial Premium Rebates

FBD committed to rebating Commercial customers to reflect the changing claims environment and enforced restrictions as a result of the Covid-19 pandemic. The total amount of commercial rebates provided for in the period was €5.1m of which €0.6m was paid out to 30 June 2020. The remaining €4.5m provision represents a best estimate of the remaining rebates due in respect of this period. The amount is considered an estimate on the basis that exposure reductions in line with Covid-19 pandemic related restrictions will differ on a policy by policy basis and the administrative task of calculating the rebate amount is ongoing at the date of approval of the half yearly report.

 

 

Note 12 - Transactions with related parties

 

For the purposes of the disclosure requirements of IAS 24, the term "key management personnel" (i.e. those persons having authority and responsibility for planning, directing and controlling the activities of the Group) comprises the Board of Directors and Company Secretary of FBD Holdings plc and the members of the Executive Management Team. Full disclosure in relation to the compensation of the Board of Directors and details of Directors' share options are provided in the Report on Directors' Remuneration in the 2019 Annual Report. An analysis of share-based payments to key management personnel is also included in Note 39 of the 2019 Annual Report.

 

 

Note 13 - Contingent liabilities and contingent assets

 

There were no contingent liabilities or contingent assets at 30 June 2020, 30 June 2019 or 31 December 2019.

 

 

Note 14 - Subsequent events

 

FBD has settled over €1.5m of Commercial premium rebates between the reporting date and the date of approval of the half yearly report. The Group expects to provide an additional €0.6m of Commercial rebates in the second half of the year on the basis of current government advised business re-opening dates. The final total of Commercial premium rebates remains uncertain at the date of approval of the half yearly report as uncertainty remains surrounding business re-opening dates and a return to normal business.

 

 

Note 15 - Information

 

This half yearly report and the Annual Report for the year ended 31 December 2019 are available on the Company's website at www.fbdgroup.com.

 

 

Note 16 - Approval of Half Yearly Report

 

The half yearly report was approved by the Board of Directors of FBD Holdings plc on 30 July 2020.

 

FBD HOLDINGS PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the half year ended 30 June 2020

 

RESPONSIBILITY STATEMENT

 

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Central Bank of Ireland 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    Paul D'Alton 

Chairman  Interim Group Chief Executive

 

30 July 2020

 

 

 

FBD HOLDINGS PLC

APPENDIX

ALTERNATIVE PERFORMANCE MEASURES (APM's)

 

The Group uses the following alternative performance measures: Loss ratio, expense ratio, combined operating ratio, annualised investment return, net asset value per share, return on equity and gross written premium.

 

Loss ratio (LR), expense ratio (ER) and combined operating ratio (COR) are widely used as a performance measure by insurers, and give users of the financial statements an understanding of the underwriting performance of the entity. Investment return is used widely as a performance measure to give users of financial statements an understanding of the performance of an entities investment portfolio. Net asset value per share (NAV) is a widely used performance measure which provides the users of the financial statements the book value per share. Return on equity (ROE) is also a widely used profitability ratio that measures an entity's ability to generate profits from its shareholder investments. Gross written premium refers to the revenue of an insurance company and is widely used across the general insurance industry.  

 

The calculation of the APM's is based on the following data: 

 

Half year

ended
30/06/20 (unaudited)

 

Half year

ended
30/06/19 (unaudited)

 

Year

ended 31/12/19 (audited)

 

€000s

 

€000s

 

€000s

Loss ratio

 

 

 

 

 

Net claims and benefits

110,821

 

88,139

 

148,679

Movement in other provisions

6,197

 

6,155

 

7,946

Total claims incurred

117,018

 

94,294

 

156,625

 

 

 

 

 

 

Net premium earned

156,793

 

167,207

 

337,553

 

 

 

 

 

 

Loss ratio (Total claims incurred/Net premium earned)

74.6%

 

56.4%

 

46.4%

 

 

 

 

 

 

Expense ratio

 

 

 

 

 

Other underwriting expenses

44,451

 

43,699

 

87,259

 

 

 

 

 

 

Net premium earned

156,793

 

167,207

 

337,553

 

 

 

 

 

 

Expense ratio (Underwriting expenses/Net premium earned)

28.4%

 

26.1%

 

25.9%

 

 

 

 

 

 

Combined operating ratio

%

 

%

 

%

Loss ratio

74.6%

 

56.4%

 

46.4%

Expense ratio

28.4%

 

26.1%

 

25.9%

Combined operating ratio (Loss ratio + Expense ratio)

103.0%

 

82.5%

 

72.3%

 

 

 

 

 

 

Annualised investment return

€000s

 

€000s

 

€000s

Investment return recognised in consolidated income statement

 

(3,274)

 

 

8,627

 

 

17,892

Investment return recognised in statement of comprehensive income

 

(7,239)

 

 

14,007

 

 

10,924

Total investment return

(10,513)

 

22,634

 

28,816

 

 

 

 

 

 

Average investment assets 

1,095,839

 

1,061,025

 

1,073,429

Investment return (Total investment return/Average underwriting investment assets)

 

(1.9%)1

 

 

4.3%1

 

 

2.7%

1Annualised

 

 

 

 

 

 

Half year

ended
30/06/20 (unaudited)

 

Half year

ended
30/06/19 (unaudited)

 

Year

ended 31/12/19 (audited)

Net asset value per share (NAV per share)

€000s

 

€000s

 

€000s

Shareholders' funds - equity interests

362,841

 

311,655

 

372,228

 

 

 

 

 

 

Number of shares

 

 

 

 

 

Closing number of ordinary shares

35,052,462

 

34,770,837

 

34,862,464

 

 

 

 

 

 

 

Cent

 

Cent

 

Cent

Net asset value per share (Shareholders funds /Closing number of ordinary shares)

 

1,035

 

 

896

 

 

1,068

 

 

 

 

 

 

Return on Equity

€000s

 

€000s

 

€000s

Weighted average equity attributable to ordinary equity holders of the parent

 

367,535

 

 

297,570

 

 

327,856

 

Result for the period

(8,214)

 

33,801

 

98,225

 

Return on equity (Result for the period/Weighted average equity attributable to ordinary equity holders of the parent)

 

 

(4%)1

 

 

 

23%1

 

 

 

30%

 

Gross premium written:The total premium on insurance underwritten by an insurer or reinsurer
during a specified period, before deduction of reinsurance premium.

 

Expense ratio: Underwriting and administrative expenses as a percentage of net earned premium.

 

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.

 

1Annualised

 

 

 

 

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 2020.  Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the Central Bank of Ireland.

What we have reviewed

The interim financial statements, comprise:

· the condensed consolidated statement of financial position as at 30 June 2020;

· the condensed consolidated income statement for the period then ended;

· the 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 and the Transparency Rules of the Central Bank of Ireland.

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 and the Transparency Rules of the Central Bank of Ireland.

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 and the Transparency Rules of the Central Bank of Ireland 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

 

30 July 2020

 

 

(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.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
IR KKKBKDBKBOON
UK 100

Latest directors dealings