Interim Results

FBD Holdings PLC 31 August 2005 Press Release INTERIM RESULTS ANNOUNCEMENT For half year ended 30th June 2005 2005 2004 FINANCIAL HIGHLIGHTS €000's €000's • Gross written premium 192,360 187,819 • Net earned premiums 164,515 158,639 •Operating profit 86,849 67,312 Cent Cent •Operating earnings per share 192.07 140.84 •Dividend proposed per share 20.00 12.72 Commenting on the results, Philip Fitzsimons, Chief Executive, said: 'The Group's success in pursuing it's development plans is reflected in the half year results, with new business volumes offsetting the impact of rate reductions on premium income. The results also benefited from a particularly favourable claims outcome. Whilst the latter is unlikely to be repeated and rate reductions will have greater significance for earned premium income in the second half year, we are confident of achieving satisfactory full year results. The good insurance performance delivered rewards to both shareholders and policyholders, alike. Returns to shareholders increased while policyholders enjoyed further reductions in premiums. Maintaining progress on the Claims Reform & Safety Agendas is critical to delivering ongoing benefits to all.' ENDS 31st August 2005 For Reference Telephone FBD Philip Fitzsimons, Chief Executive 353 1 409 3200 Andrew Langford, Finance Director 353 1 409 3200 Murray Consultants Joe Murray 353 1 498 0300 FBD HOLDINGS PLC INTERIM STATEMENT FBD Holdings plc is pleased to report that the Group continued to grow strongly in the half year ended 30th June 2005. Results Operating profits increased to €86.8m compared to 67.3m in the previous half year. The major contributors are detailed below. The underwriting result increased to €52.1m from €42.5m, reflecting good premium growth and a favourable claims outcome in general, which included settlement savings on prior year provisions. The impact of rate reductions on earned premium was not as significant a factor in the six months as it will be in the second half year. The drive for new business brought further growth in market share and supported an increase of 2.4 per cent in gross premiums written. Growth was achieved despite lower like for like revenues arising from premium reductions for customers. After allocating investment income of €16.3m , the insurance technical account shows a surplus of €68.4m, up from €57.9m in the same period last year. Non-underwriting income increased to €12.7m from €5.5m. Property and leisure interests in Spain and Ireland contributed positively but they have been facing challenging times with increased pressure on margins. A small fall in profits from financial services activities reflected reduced broking income. Returns from the investment of non allocated capital and property loans made a satisfactory contribution. Positive short term fluctuations in investment return of €21.7m arising from a buoyant investment performance was a key factor in boosting pre-tax profits. This in turn had a substantial impact on earnings per share (FRS3). Operating earnings per share, which more clearly reflects the underlying trading performance of the Group, increased to 192.07c. The 4.2m share buy-back in March 2005 also contributed to eps growth. The results for the period have been prepared in accordance with the recently introduced International Financial Reporting Standards ('IFRS') for European Union Listed Groups. First half and full year figures for 2004 have been restated on the IFRS basis, for comparative purposes. Arising from the introduction of IFRS, we have prepared a Preliminary Restatement of 2004 Financial Information. This document is attached (Appendix 1). As per the summary on page 13, the impact of IFRS on operating profit and on profit before tax was negligible; the impact on net assets was a positive 9.2%, arising mainly from the requirement to state unquoted securities at fair value and the change in the accounting treatment of dividends payable to shareholders. The results of the Group's two operating divisions are detailed below. Insurance Underwriting. Insurance underwriting is the Group's primary business activity. This activity is undertaken, in the main, by FBD Insurance plc and, to a minor extent, by the Group's captive reinsurance company, Abbey Reinsurance S.A. Gross premiums written increased by 2.4% to €192.4m. (€187.8m.) in the period. Good growth in business volumes more than offset reductions in premium rates to deliver this premium growth. Net earned premiums grew by 3.7% to €164.5m. (€158.6m). This reflected higher retention levels under our reinsurance programme. Claims incurred amounted to €91.7m., compared to €99.6m. in first half 2004. The claims charge benefited from settlement savings on prior year claims provisions. Furthermore, the lower personal injury claims frequency which emerged over the past couple of years has, in most classes of insurance, been maintained. On the property claims front, and similar to last year, weather related claim costs fared better than expected, with no severe storms occurring in the period. Overall, the claims outcome was particularly favourable. After net operating expenses of €20.7m., the resultant underwriting profit was €52.1m. (€42.5m). Adding attributable investment income of €16.3m. to the underwriting figure, the insurance technical result of €68.4m. for the period is arrived at. Non-underwriting The Group's non-underwriting activities include property development/leisure, financial services, and other interests. Property Development and Leisure interests encompass the Group's activities in La Cala Resort and Sunset Beach Resort in Spain and in the Tower Hotel Group in Ireland. Property sales in La Cala were slower than anticipated, reflecting a reduction in the number of non-Spanish purchasers in the Costa del Sol. On the leisure front, in both Spain and Ireland, challenging times are currently being experienced in general, with margins, in particular, under pressure due to present market capacity levels. The Group's financial service businesses include insurance broking (FBD Brokers), life assurance/pension broking/ investment advice (FBD Life) and instalment finance (Abbey Finance). These businesses contributed €2.5m. (€2.8m) to the half year figure. The fall in income reflects the negative impact which lower premium levels in the market had on broker revenues, with insurance rates for large commercial risks being considerably reduced. The Group's other non-underwriting interests include investment of non-allocated capital and property related loans. Returns from these assets in the half year were satisfactory. The combined contribution to Group profit from property development/leisure and other interests amounted to €10.2m. (€2.7m) for the six months. The improvement, compared to the first half of 2004, is largely attributable to the inclusion of returns arising on the investment of non-allocated capital and on property related loans. Interim Dividend In view of the continuing positive results and in line with the Board's previously stated intentions regarding dividend payout levels, an increase in interim dividend to 20 cent (12.72 cent) per share has been decided on by the Directors. The interim dividend will be paid on the 30th September 2005 to shareholders on the Company Register at close of business on the 9th September 2005. The interim dividend is subject to withholding tax (DWT), except for shareholders who are exempt from DWT and have furnished a properly completed Capital Composite Resident Form to the Company's Registrar. Balance Sheet Ordinary shareholders' funds have grown to €411.9m. since January 2005, an increase of €5.5m. The contribution of both the strong trading results and the buoyant investment performance was reduced by the Company's purchase of 4.2m of its own shares in March 2005 at a cost of €81.2m This buyback contributed to the growth in net asset value per share, which increased from €9.70 to €10.87 in the period. Outlook Whilst it is unlikely that the particular positive factors experienced in the first half year, which we mentioned above, will be repeated in the second half, we are confident that the outcome for the year will be satisfactory. As regards the Group's core underwriting activity, we expect a satisfactory outcome for the year. On the premium front, notwithstanding rate reductions which have already been put in train, we are targeting an increase on 2004 premium levels for the full year. To achieve this, we are aiming to maintain the volume growth levels which we have achieved in the year to date. The first half year performance benefited from premium growth and a particularly favourable claims outcome. Premium reductions which have been implemented will have a bigger financial impact on our second half year results. Claim costs are the major determinant of underwriting performance. Over the past couple of years, the improvement in the claims environment has benefited FBD, as reflected in better underwriting results. The claims improvement has also benefited FBD policyholders, by way of significantly reduced premiums. The favourable impact of settlement savings on prior year claim estimates in recent times continued in the period under review. Ultimately, the critical ratio for insurers in any year is the combined ratio (i.e. claims plus overhead as a percentage of premium) for that particular underwriting year. It is widely recognised that the premium reductions which insurers have been effecting is driving combined ratios towards European norms. Perceptions exist that premium reductions in the market are tailing off. In our experience, this is not the reality and price competition continues to be intense across all categories of business. In relation to claim cost trends, a major determinant will be the degree of success in delivering fully on the Government/Industry's Claims Reform and Safety Agendas. The MIAB (Motor Insurance Advisory Board) recommended precise measures that needed to be implemented by both insurers and Government Agencies in order to achieve success in these areas. To date, insurers have delivered on the agenda items that were within their remit. Items that remain to be delivered on are within the control of Government Bodies; their follow through will determine whether further claim cost savings emerge. FBD will continue to support Government and Industry actions on Reform measure, whilst pursuing our own claims cost savings plans. Simultaneously, we will remain focused on growing our market share and on maximising the competitive advantages of our direct sales business model. As regards the Group's non-underwriting businesses, as already stated, our property/leisure interests are currently facing particularly challenging times. Management's focus on marketing and sales has intensified and new markets are being pursued. We are confident regarding the intrinsic value of underlying assets. We expect our financial service businesses to perform in line with last year. With clearly defined business development plans and a committed organisation, we are well positioned to continue to successfully pursue the Group's primary objective, namely, to utilise capital to deliver long term sustainable returns at levels that reward shareholders. ENDS FBD - NEWS UPDATE •FBD implemented further reductions in premium rates during the first half of 2005. In the recent IFSRA Survey for Home Insurance, FBD was highlighted as the best value provider in four out of six samples and second and third in the other two. •FBD moved to new, larger offices in Limerick in the first half of 2005 and also entered agreements to relocate to larger offices in Clonmel, Carlow, Letterkenny and Portlaoise. The Company has also acquired new premises in Dundalk (a new location for FBD) and will open for business there later this year. •In Dublin, FBD has continued to expand its Dublin commercial team in response to the very positive reception they are receiving from Dublin businesses. There is currently a major canvass underway in the Dublin market for small to medium size business of all types. •FBD's Dublin based personal lines office, which celebrated its first anniversary recently, continues to deal with large volumes of enquires on the 1850 617617 number and through the internet. Additional staff are currently being recruited to meet demand. •FBD announced recently that it is to continue for another year with its sponsorship of RTE's flagship soap, Fair City. The sponsorship of this programme for the last year has helped lift the profile of FBD, particularly in Dublin and around the country. FBD has also announced that it is to sponsor the 'FBD Dublin Business of the Month' awards in association with City Channel, the new TV Station for Dublin, which will be broadcast through the digital NTL network. This sponsorship is being carried out in association with Crest Ireland Limited. •FBD Brokers continues to consolidate its position as the largest insurance provider to the food and dairy processing sectors. •FBD Life & Pensions continues to grow as an independent adviser to a broad spectrum of individuals and businesses. Additional expertise has been brought into the business over the past half year to assist clients in overall financial planning, pensions and investments. •At the FBD La Cala Resort, in Southern Spain, a third 18 hole championship golf course, ('The Europa') was opened earlier in the year and complements the existing North and South courses and the five star hotel located there. Also at La Cala, work is well underway on the building of 102 luxury townhouses, (Monte Alto) and 108 luxury apartments (Real Alta Vista). In addition, a luxury Spa facility will be available early next year. •Upgrading of all rooms at FBD's Sunset Beach Club on the Costa del Sol is underway and a new promenade and related beach facilities have been completed, further enhancing the Resort. •FBD is now owner of 100% of the Tower Hotel Group which includes the new four star Castleknock Hotel and Country Club, opened earlier this year. The adjoining golf course recently opened for play. FBD HOLDINGS PLC GROUP INCOME STATEMENT For half year ended 30th June 2005 Half Year Half Year Year Ended Ended Ended 30/6/05 30/6/04 31/12/04 (Unaudited) (Unaudited) (Audited) €000's €000's €000's Turnover 263,463 240,465 471,858 ========= ======== ======== Balance on the technical account - Note 1 68,385 57,864 97,072 general business Longer term 21,781 19,204 40,713 investment return Allocated investment return transferred to the (16,341) (15,362) (31,135) technical account - general business Other income 13,024 5,606 18,144 --------- -------- -------- Operating profit Note 2 86,849 67,312 124,794 Other charges (1,818) (1,800) (3,116) Short term fluctuations in 21,738 (8,517) 10,298 investment return --------- -------- -------- Profit before 106,769 56,995 131,976 taxation Taxation (12,849) (6,611) (16,968) --------- -------- -------- Profit after 93,920 50,384 115,008 taxation Minority interests 84 (210) (1,751) --------- -------- -------- Profit after taxation and 94,004 50,174 113,257 minority interests Dividends paid in (10,298) (7,023) (12,613) period --------- -------- -------- Profit retained for 83,706 43,151 100,644 period ========= ======== ======== Cent Cent Cent Earnings per 60c 237.41 120.81 271.23 ordinary share ========= ======== ======== Dividend paid per 60c ordinary 27.28 17.00 29.72 share ========= ======== ======== Dividend proposed per 60c ordinary 20.00 12.72 27.28 share ========= ======== ======== Net assets per 60c 1,087.21 850.85 969.64 ordinary share ========= ======== ======== FBD HOLDINGS PLC GROUP BALANCE SHEET As at 30th June 2005 As at As at As at 30/6/05 30/6/04 31/12/04 ASSETS (Unaudited) (Unaudited) (Audited) €000's €000's €000's Property and equipment Land and buildings 198,108 165,598 176,517 Fixtures and fittings 9,638 8,423 10,547 ---------- -------- -------- 207,746 174,021 187,064 ---------- -------- -------- Investments Investment property 48,800 23,000 24,200 Financial investments 977,785 930,554 999,080 ---------- -------- -------- 1,026,585 953,554 1,023,280 ---------- -------- -------- Reinsurers' share of technical provisions Provision for unearned 19,927 22,743 21,302 premiums Claims outstanding 50,271 43,529 44,463 ---------- -------- -------- 70,198 66,272 65,765 ---------- -------- -------- Debtors Debtors arising out of direct insurance operations 25,684 30,501 26,703 Other debtors 29,914 28,358 20,023 ---------- -------- -------- 55,598 58,859 46,726 ---------- -------- -------- Other assets Cash and cash equivalents 36,553 37,476 51,362 Inventories 56,977 51,318 70,543 ---------- -------- -------- 93,530 88,794 121,905 ---------- -------- -------- Prepayments and accrued income Accrued interest and rent 5,441 3,916 9,048 Deferred acquisition costs 10,590 9,320 10,591 Other prepayments and accrued 2,839 5,634 2,460 income ---------- -------- -------- 18,870 18,870 22,099 ---------- -------- -------- Total assets 1,472,527 1,360,370 1,466,839 ========== ======== ======== FBD HOLDINGS PLC GROUP BALANCE SHEET As at 30th June 2005 As at As at As at 30/6//05 30/6/04 31/12/04 EQUITY (Unaudited) (Unaudited) (Audited) €000's €000's €000's Share capital 23,557 25,125 25,151 Share premium 5,540 5,367 5,540 Revaluation and other 43,197 39,793 40,603 reserves Translation reserves 1,766 (135) 371 Retained earnings 337,874 284,969 334,788 ---------- -------- -------- Shareholders' funds - equity 411,934 355,119 406,453 interests Preference share capital 2,923 2,923 2,923 ---------- -------- -------- Total shareholders' funds 414,857 358,042 409,376 Minority interests 6,293 15,199 16,333 ---------- -------- -------- Total equity 421,150 373,241 425,709 ---------- -------- -------- LIABILITIES Technical provisions Provision for unearned 188,363 183,619 184,954 premiums Claims outstanding 677,834 637,415 658,431 ---------- -------- -------- 866,197 821,034 843,385 ---------- -------- -------- Provision for other risks and 29,305 19,848 25,787 charges ---------- -------- -------- Creditors Creditors arising out of direct 9,875 17,423 12,606 insurance operations Other creditors including tax and 146,000 128,824 159,352 social security ---------- -------- -------- 155,875 146,247 171,958 ---------- -------- -------- Total liabilities 1,472,527 1,360,370 1,466,839 ========== ======== ======== FBD HOLDINGS PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For half year ended 30th June 2005 Revaluation Attributable Preference Share Share and other Translation Retained to ordinary share Minority capital premium reserves reserve earnings shareholders capital interests Total Balance at at 1 January 2004 25,125 5,367 37,928 - 239,906 308,326 2,923 15,077 326,326 Profit after taxation - - - - 50,174 50,174 - 210 50,384 Exchange translation adjustment - - - (135) - (135) - - (135) Ordinary dividends paid - - - - (7,023) (7,023) - - (7,023) Reissue of ordinary shares - - - - 1,912 1,912 - - 1,912 Recognition of share based payments - - 139 - - 139 - - 139 Gain on available-for- sale investments - - 1,726 - - 1,726 - - 1,726 Purchase of minority interests - - - - - - - (88) (88) ------ ------ -------- ------- ------- -------- ------ ------ ------ Balance at 30 June 2004 25,125 5,367 39,793 (135) 284,969 355,119 2,923 15,199 373,241 ====== ====== ======== ======= ======= ======== ======= ====== ====== Revaluation Attributable Preference Share Share and other Translation Retained to ordinary share Minority Capital Premium Reserves Reserve earnings shareholders capital interests Total Balance at 1 January 2005 25,151 5,540 40,603 371 334,788 406,453 2,923 16,333 425,709 Profit after taxation - - - - 94,004 94,004 - (84) 93,920 Exchange translation adjustment - - - 1,395 - 1,395 - - 1,395 Ordinary dividends paid - - - - (10,298) (10,298) - - (10,298) Buyback of own shares - - - - (81,238) (81,238) - - (81,238) Cancellation of own shares (1,594) - 1,594 - - - - - - Reissue of ordinary shares - - - - 618 618 - - 618 Recognition of share based payments - - 139 - - 139 - - 139 Transfer to income statement on sale of available-for- sale investments - - (5,583) - - (5,583) - - (5,583) Gain on available-for- sale investments - - 6,444 - - 6,444 - - 6,444 Purchase of minority interests - - - - - - - (9,956) (9,956) ------ ------ -------- ------- ------- -------- ------- ------ ------ Balance at 30 June 2005 23,557 5,540 43,197 1,766 337,874 411,934 2,923 6,293 421,150 ====== ====== ======== ======= ======= ======== ======= ====== ====== FBD HOLDINGS PLC GROUP CASH FLOW STATEMENT For half year ended 30th June 2005 Half Year Half Year Year end Ended Ended Ended 30/06/05 30/06/04 31/12/04 (Unaudited) (Unaudited) (Audited) Operating €000s €000s €000s activities Profit for the 106,769 56,995 131,976 period Adjustments for Investment (gains) and losses (22,084) 1,723 (17,231) Depreciation of property, plant and equipment 1,801 1,308 3,075 Share-based payment expense 139 139 278 Increase in fair value of investment property - - (1,200) Increase in technical provisions 18,379 31,496 54,354 Actuarial loss - - (9,031) ------- ------- ------ Operating cash flows before movement in working capital 105,004 91,661 162,221 Increase in receivables (5,644) (17,558) (8,613) (Decrease)/Increase in payables (35,822) 6,387 16,013 ------- ------- ------ Cash generated from operations 63,538 80,490 169,621 Income taxes paid (4,949) (4,404) (12,228) ------- ------- ------ Net cash from operating activities 58,589 76,086 157,393 ------- ------- ------ Investing activities Investments held for trading (87,650) (186,829) (146,227) Investments available for sale (299) (1,151) (139) Purchase of property, equipment & inventory (33,517) (20,484) (55,550) Loans and advances 1,403 5,220 (23,601) Deposits invested with financial institutions 130,909 127,767 68,781 ------- ------- ------ Net cash from (used in) investing activities 10,846 (75,477) (156,736) ------- ------- ------ Financing activities Dividends paid (10,466) (7,192) (12,612) Repurchase of shares (81,238) - - Proceeds of issue of shares 617 1,912 2,716 Increase in bank loans 5,448 17,007 34,955 ------- ------- ------ Net cash (used in) from financing activities (85,639) 11,727 25,059 ------- ------- ------ Net (decrease)/increase in cash and cash equivalents (16,204) 12,336 25,716 Cash and cash equivalents at the beginning of the year 51,362 25,275 25,275 Effect of foreign exchange rate changes 1,395 (135) 371 ------- ------- ------ Cash and cash equivalents at the end of the year 36,553 37,476 51,362 ======= ======= ====== FBD HOLDINGS PLC SUPPLEMENTARY INFORMATION For half year ended 30th June 2005 Half Year Half Year Year Ended Ended Ended 30/6/05 30/6/04 31/12/04 (Unaudited) (Unaudited) (Audited) €000's €000's €000's Note 1 - Technical Result ----------------------------- Gross written premiums 192,360 187,819 351,487 ========== ========= ======== Net earned premiums 164,515 158,639 296,237 Net claims incurred (91,727) (99,644) (197,786) Net operating expenses (20,744) (16,493) (32,514) ---------- --------- -------- Underwriting result 52,044 42,502 65,937 Allocated investment 16,341 15,362 31,135 income ---------- --------- -------- Technical result 68,385 57,864 97,072 ========== ========= ======== Note 2 - Operating Profit by Activity ----------------------------------------- Underwriting 74,148 61,794 107,007 Non underwriting 12,701 5,518 17,787 ---------- --------- -------- 86,849 67,312 124,794 ========== ========= ======== FBD HOLDINGS PLC Interim Statement Appendix 1 Introduction of International Financial Reporting Standards (IFRS) Preliminary Restatement of 2004 Financial Information 31 August 2005 FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Introduction Basis of preparation Reconciliation of impact of IFRS on: - Consolidated Income Statement for the year ended 31 December 2004 - Consolidated Balance Sheet at 31 December 2004 - Consolidated Balance Sheet at 1 January 2004 Explanatory notes on the impact of the IFRS adjustments Accounting policies FBD HOLDINGS PLC Preliminary restatement of 2004 financial information INTRODUCTION From 1 January 2005 FBD Holdings plc ('the Group'), together with all other European Union listed groups, is required to prepare its consolidated financial statements in accordance with International Financial Reporting Standards ('IFRS') as adopted for use in the European Union. This document summarises the key impacts on the Group's previously reported net assets and profits from the adoption of IFRS and details the Group's provisional accounting policies for the year ending 31 December 2005. The principal adjustments arising from adoption relate to changes in: •the accounting treatment of unquoted equity investments; •the accounting treatment of surpluses on the revaluation of owner occupied property; •the accounting treatment of equalisation provisions; and •dividend recognition. The Directors believe that these are the major adjustments which will arise on the transition to IFRS. They have not yet finished quantifying a range of minor adjustments, nor have they finalised their review of the completeness of adjustments. The standards, or guidance on their application, may also be revised, therefore it is possible that other adjustments may come to light which will impact the Group in the preparation of the first full set of IFRS financial statements for the year ended 31 December 2005. The change in accounting standards will not change the underlying operations or cash-flows of the business. The introduction of IFRS has impacted key 2004 figures as follows: As published IFRS Change under Irish GAAP €000's €000's % Operating profit 125,961 124,794 -0.9% Profit before tax 135,009 131,976 -2.2% Total assets 1,460,063 1,466,839 0.5% Total equity 391,474 425,709 8.7% Cent Cent % Operating earnings per 60c ordinary share based on longer term investment return 258.84 256.18 -1.0% Basic earnings per 60c ordinary share 278.37 271.23 -2.6% Net assets per 60c ordinary share 887.97 969.64 9.2% FBD HOLDINGS PLC Preliminary restatement of 2004 financial information BASIS OF PREPARATION The preliminary restated consolidated financial information presented comprises the restated consolidated balance sheet as at 31 December 2004, the restated income statement for the year ended 31 December 2004 and the restated consolidated balance sheet as at 1 January 2004. The information has been prepared in accordance with IFRS including all International Accounting Standards (IAS) and interpretations issued by the International Accounting Standards Board (IASB), the Standing Interpretations Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) as published by 31 August 2005 and currently endorsed by the European Commission effective for 2005 year ends ('the Standards'). The Standards themselves are evolving and are subject to possible amendment by interpretative guidance from the IASB, emerging practice or other external bodies. Accordingly, the interpretation of the Standards to be applied may be subject to change prior to the publication of the Group's first IFRS results in March 2006. The rules for first time adoption of IFRS are set out in IFRS 1 'First-time Adoption of International Financial Reporting Standards'. IFRS 1 requires application of the same accounting policies in the IFRS opening balance sheet at 1 January 2004 and for all periods thereafter. The Group's transition to IFRS has been prepared on the basis of taking the following exemptions available under IFRS 1: a. •Cumulative translation differences on foreign operations are deemed to be nil at 1 January 2004. Any gains and losses recognised in the Consolidated Income Statement on subsequent disposals of foreign operations will therefore exclude translation differences arising prior to the transition date. b. •As permitted under the transitional arrangements, IFRS 2, Share Based Payments has only been applied to options granted after 7 November 2002 which had not vested by 1 January 2005 and which are expected to vest. FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Consolidated Income Statement for the year ended 31st December 2004 As published Effect of IFRS under Irish Transition GAAP to IFRS €000's €000's €000's Balance on the general business technical 96,630 442 97,072 account Longer term investment return 39,820 893 40,713 Allocated investment return transferred to the general business technical (31,976) 841 (31,135) account Other 21,487 (3,343) 18,144 income ------------ ----------- ---------- Operating profit 125,961 (1,167) 124,794 Other (3,116) - (3,116) charges Short term fluctuation in investment 12,164 (1,866) 10,298 return ------------ ----------- ---------- Profit before 135,009 (3,033) 131,976 taxation Taxation (17,025) 57 (16,968) ------------ ----------- ---------- Profit after 117,984 (2,976) 115,008 taxation ============ =========== ========== FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Analysis of adjustments to Consolidated Income Statement for the year ended 31st December 2004 as a result of transition to IFRS Financial Cash and Property Inventories Investments Cash and (Development Insurance Dividend Valuation Equivalents Equipment Land) Contracts Recognition Other Total (Note 1) (Note 2) (Note 3) (Note 4) (Note 5) (Note 6) €000's €000's €000's €000's €000's €000's €000's €000's Balance on the general business technical 442 442 account Longer term investment return 893 893 Allocated investment return transferred to the general business technical 841 841 account Other (294) (2,896) (153) (3,343) income ------- ------- --------- ---------- ------- ------ ------- ------- Operating profit 599 - (2,896) - 1,283 - (153) (1,167) Other charges Short term fluctuation in investment (1,957) 91 (1,866) return ------- ------- ------- --------- ---------- ------- ------- ------ Profit before (1,358) - (2,896) - 1,283 - (62) (3,033) taxation Taxation 171 302 (451) 35 57 ------- ------- ------- --------- ------- ------- ------ ---------- Profit after (1,096) - (2,896) 302 832 - (118) (2,976) taxation ======= ======= ======== ======= ====== ======= ====== ======== FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Consolidated Balance Sheet at 31st December 2004 As published Effect of IFRS under Irish Transition to GAAP IFRS ASSETS €000's €000's €000's Property and equipment Land and buildings 224,985 (48,468) 176,517 Fixtures and fittings 10,547 - 10,547 --------- --------- ---------- 235,532 (48,468) 187,064 --------- --------- ---------- Investments Investment property 24,200 - 24,200 Financial investments 1,027,160 (28,080) 999,080 --------- --------- ---------- 1,051,360 (28,080) 1,023,280 --------- --------- ---------- Reinsurers' share of technical provisions Provision for unearned premiums 21,302 - 21,302 Claims outstanding 44,463 - 44,463 --------- --------- ---------- 65,765 - 65,765 --------- --------- ---------- Debtors Debtors arising out of direct insurance operations 26,703 - 26,703 Other debtors 19,371 652 20,023 --------- --------- ---------- 46,074 652 46,726 --------- --------- ---------- Other assets Cash and cash equivalents 2,795 48,567 51,362 Inventories 36,438 34,105 70,543 --------- --------- ---------- 39,233 82,672 121,905 --------- --------- ---------- Prepayments and accrued income Accrued interest and rent 9,048 - 9,048 Deferred acquisition costs 10,591 - 10,591 Other prepayments and accrued income 2,460 - 2,460 --------- --------- ---------- 22,099 - 22,099 --------- --------- ---------- --------- --------- ---------- Total assets 1,460,063 6,776 1,466,839 --------- --------- ---------- FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Consolidated Balance Sheet at 31st December 2004 (continued) As published Effect of IFRS under Irish Transition to GAAP IFRS EQUITY €'000's €'000's €'000's Share capital 25,151 - 25,151 Share premium 5,540 - 5,540 Revaluation and other reserves 1,627 38,976 40,603 Translation reserves 371 - 371 Retained earnings 339,529 (4,741) 334,788 --------- --------- ---------- Shareholders' funds - equity interests 372,218 34,235 406,453 Preference share capital 2,923 - 2,923 --------- --------- ---------- Total shareholders' funds 375,141 34,235 409,376 Minority interests 16,333 - 16,333 --------- --------- ---------- Total equity 391,474 34,235 425,709 --------- --------- ---------- LIABILITIES Technical provisions Provision for unearned premiums 184,954 - 184,954 Claims outstanding 683,386 (24,955) 658,431 --------- --------- ---------- 868,340 (24,955) 843,385 --------- --------- ---------- Provision for other risks and charges 17,306 8,481 25,787 --------- --------- ---------- Creditors Creditors arising out of direct insurance operations 12,606 - 12,606 Other creditors including tax and social security 170,337 (10,985) 159,352 --------- --------- ---------- 182,943 (10,985) 171,958 --------- --------- ---------- --------- --------- ---------- Total liabilities 1,460,063 6,776 1,466,839 --------- --------- ---------- FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Analysis of adjustments to Consolidated Balance Sheet (Assets) at 31st December 2004 as a result of transition to IFRS Financial Cash and Cash Property and Inventories Insurance Other Total Investments Equivalents Equipment (Development Contracts Dividend Valuation Land) Recognition (Note 1) (Note 2) (Note 3) (Note 4) (Note 5) (Note 6) €000's €000's €000's €000's €000's €000's €000's €000's ASSETS Property and equipment Land and buildings (48,468) (48,468) Fixtures and - fittings Investments Investment - property Financial investments 20,487 (48,567) (28,080) Reinsurers' share of technical provisions Provision for - unearned premiums Claims - outstanding Debtors Debtors - arising out of direct insurance operations Other 652 652 debtors Other assets Cash and cash equivalents 48,567 48,567 Inventories 34,105 34,105 Prepayments and accrued income Accrued - interest and rent Deferred - acquisition costs Other - prepayments and accrued income -------- -------- ------- -------- ------- -------- ------ ------ Total 20,487 - - (14,363) - - 652 6,776 assets -------- -------- ------- -------- ------- -------- ------ ------ FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Analysis of adjustments to Consolidated Balance Sheet (Equity and Liabilities) at 31st December 2004 as a result of transition to IFRS Financial Cash and Cash Property and Inventories Insurance Dividend Other Total Investments Equivalents Equipment (Development Contracts Recognition Valuation Land) (Note 1) (Note 2) (Note 3) (Note 4) (Note 5) (Note 6) €000's €000's €000's €000's €000's €000's €000's €000's EQUITY Share capital - Share premium - Revaluation and other reserves 17,462 21,236 278 38,976 Translation reserves - Retained earnings 464 (22,861) (10,408) 16,219 11,436 409 (4,741) ------- ------- ------- -------- ------- ------- ------ ------ Shareholders' funds - equity interests 17,926 - (1,625) (10,408) 16,219 11,436 687 34,235 Preference share - capital ------- ------- ------- -------- ------- ------- ------ ------ Total shareholders' funds 17,926 - (1,625) (10,408) 16,219 11,436 687 34,235 Minority interests - ------- ------- ------- -------- ------- ------- ------ ------ Total equity 17,926 - (1,625) (10,408) 16,219 11,436 687 34,235 ------- ------- ------- -------- ------- ------- ------ ------ LIABILITIES Technical provisions Provision for unearned premiums - Claims outstanding (24,955) (24,955) Provision for other risks and charges 2,561 1,625 (3,955) 8,285 (35) 8,481 Creditors Creditors arising out of direct insurance operations - Other creditors including tax and social security 451 (11,436) (10,985) ------- ------- ------- -------- ------- ------- ------ ------ 2,561 1,625 (3,955) (16,219) (11,436) (35) (27,459) ------- ------- ------- -------- ------- ------- ------ ------ ------- ------- ------- -------- ------- ------- ------ ------ Total liabilities 20,487 - - (14,363) - - 652 6,776 ------- ------- ------- -------- ------- ------- ------ ------ FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Consolidated Balance Sheet at 1st January 2004 As published Effect of IFRS under Irish Transition to GAAP IFRS ASSETS €000's €000's €000's Property and equipment Land and buildings 199,843 (38,056) 161,787 Fixtures and fittings 8,400 - 8,400 --------- --------- ---------- 208,243 (38,056) 170,187 --------- --------- ---------- Investments Investment property 23,000 - 23,000 Financial investments 881,742 (6,426) 875,316 --------- --------- ---------- 904,742 (6,426) 898,316 --------- --------- ---------- Reinsurers' share of technical provisions Provision for unearned premiums 23,533 - 23,533 Claims outstanding 43,240 - 43,240 --------- --------- ---------- 66,773 - 66,773 --------- --------- ---------- Debtors Debtors arising out of direct insurance operations 30,050 - 30,050 Other debtors 15,684 436 16,120 --------- --------- ---------- 45,734 436 46,170 --------- --------- ---------- Other assets Cash and cash equivalents 2,354 22,921 25,275 Inventories 8,355 27,620 35,975 --------- --------- ---------- 10,709 50,541 61,250 --------- --------- ---------- Prepayments and accrued income Accrued interest and rent 3,542 - 3,542 Deferred acquisition costs 8,155 - 8,155 Other prepayments and accrued income 2,303 - 2,303 --------- --------- ---------- 14,000 - 14,000 --------- --------- ---------- --------- --------- ---------- Total assets 1,250,201 6,495 1,256,696 --------- --------- ---------- FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Consolidated Balance Sheet at 1st January 2004 (continued) As published Effect of IFRS under Irish Transition to GAAP IFRS EQUITY €000's €000's €000's Share capital 25,125 - 25,125 Share premium 5,367 - 5,367 Revaluation and other reserves 1,627 36,301 37,928 Translation reserves - - - Retained earnings 246,836 (6,930) 239,906 -------- --------- ---------- Shareholders' funds - equity interests 278,955 29,371 308,326 Preference share capital 2,923 - 2,923 -------- --------- ---------- Total shareholders' funds 281,878 29,371 311,249 Minority interests 15,077 - 15,077 -------- --------- ---------- Total equity 296,955 29,371 326,326 -------- --------- ---------- LIABILITIES Technical provisions Provision for unearned premiums 181,569 - 181,569 Claims outstanding 632,141 (23,671) 608,470 -------- --------- ---------- 813,710 (23,671) 790,039 -------- --------- ---------- Provision for other risks and charges 13,479 7,817 21,296 -------- --------- ---------- Creditors Creditors arising out of direct insurance operations 23,744 - 23,744 Other creditors including tax and social security 102,313 (7,022) 95,291 -------- --------- ---------- 126,057 (7,022) 119,035 -------- --------- ---------- -------- --------- ---------- Total liabilities 1,250,201 6,495 1,256,696 -------- --------- ---------- FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Analysis of adjustments to Consolidated Balance Sheet (Assets) at 1 January 2004 as a result of transition to IFRS Financial Cash and Property Inventories Investments Cash and (Development Insurance Dividend Valuation Equivalents Equipment Land) Contracts Recognition Other Total (Note 1) (Note 2) (Note 3) (Note 4) (Note 5) (Note 6) €000's €000's €000's €000's €000's €000's €000's €000's ASSETS Property and equipment Land and buildings (38,056) (38,056) Fixtures and fittings - Investments Investment property - Financial investments 16,495 (22,921) (6,426) Reinsurers' share of technical provisions Provision for unearned premiums - Claims outstanding - Debtors Debtors arising out of direct insurance operations - Other 436 436 debtors Other assets Cash and cash equivalents 22,921 22,921 Inventories 27,620 27,620 Prepayments and accrued income Accrued interest and rent - Deferred acquisition costs - Other prepayments and accrued income - ------- ------- -------- -------- -------- -------- ------ ------- Total 16,495 - - (10,436) - - 436 6,495 assets ------- ------- -------- -------- -------- ------- ------- ------- FBD HOLDINGS PLC Preliminary restatement of 2004 financial information Analysis of adjustments to Consolidated Balance sheet (Equity and Liabilities) at 1 January 2004 as a result of transition to IFRS Financial Cash and Cash Property and Inventories Insurance Dividend Other Total Investments Equivalents Equipment (Development Contracts Recognition Valuation Land) (Note 1) (Note 2) (Note 3) (Note 4) (Note 5) (Note 6) €000's €000's €000's €000's €000's €000's €000's €000's Share capital Share premium Revaluation and other reserves 12,660 23,641 36,301 Translation reserves Retained earnings 1,773 (24,764) (6,783) 15,386 7,022 436 (6,930) -------- --------- -------- -------- ------- ------- ------- ------ Shareholders' funds - equity 14,433 - 1,123 (6,783) 15,386 7,022 436 29,371 interests Preference share -------- --------- -------- -------- ------- ------- ------ ------- capital Total shareholders' funds 14,433 - 1,123 (6,783) 15,386 7,022 436 29,371 Minority interests -------- --------- -------- -------- ------- ------- ------ ------- Total 14,433 - 1,123 (6,783) 15,386 7,191 436 29,371 equity -------- --------- -------- -------- ------- ----- ------- ------ LIABILITIES Technical provisions Provision for unearned premiums Claims outstanding (23,671) (23,671) Provision for other risks and charges 2,062 (1,123) (3,653) 8,285 7,817 Creditors Creditors arising out of direct insurance operations Other creditors including tax and social security (7,022) (7,022) -------- --------- -------- -------- ------- ------- ------ ------- 2,062 (1,123) (3,653) (15,386) (7,022) - (22,876) -------- --------- -------- -------- ------- ------ ------ -------- -------- --------- -------- -------- ------- ------- ------ ------- Total liabilities 16,495 - - (10,436) - - 436 6,495 -------- --------- -------- -------- ------- ------- ------- ------- FBD HOLDINGS PLC Preliminary restatement of 2004 financial information EXPLANATORY NOTES ON THE IMPACT OF THE IFRS ADJUSTMENTS 1)FINANCIAL INVESTMENTS In the Group's Irish GAAP financial statements, listed investments were stated at their current market value. Current market value was deemed to be the mid-market price prevailing at the balance sheet date. Unquoted investments were valued at the lower of cost or net realisable value. All realised or unrealised gains or losses on investments were taken to the income statement. For the purposes of measuring financial assets under IAS 39, Financial Instruments: Recognition and Measurement, all financial assets are classified into the following four categories: 1. Available-for-sale investments; 2. Held-to-maturity investments; 3. At fair value through the income statement; and 4. Loans and receivables A full review of the Group's investments has been performed as part of the adoption of IFRS, and all listed equities and debt securities are categorised as financial assets at fair value through the income statement except for certain debt securities that are categorised as held-to-maturity investments. All unquoted equities are categorised as available-for-sale investments. Under IFRS, listed investments are valued at bid price prevailing at the balance sheet date as opposed to mid-market price as was the case under Irish GAAP. For financial assets categorised as at fair value through the income statement, any realised or unrealised gains or losses on revaluation are taken to the income statement. This is similar to the treatment adopted under Irish GAAP. Under IAS 39, available-for-sale investments must be fair valued, with any unrealised gains or losses taken to equity. When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity shall be removed from equity and recognised in the income statement. Where a previously revalued available-for-sale investment is sold, and a gain is realised, any previously unrealised gain included in the revaluation reserve is taken to the income statement. In the Group's Irish GAAP financial statements unquoted equities were valued at the lower of cost and net realisable value. Under IAS 39, held-to-maturity investments are valued at amortised cost. In the Group's Irish GAAP financial statements, held-to-maturity investments were valued at fair value. 2. CASH AND CASH EQUIVALENTS In the Group's Irish GAAP financial statements deposits with credit institutions were included within investments. These deposits were predominantly comprised of short dated certificates of deposit. Under IFRS, cash equivalents are included with cash at bank and in hand as cash and cash equivalents. IAS 7, Cash Flow Statements defines cash equivalents as held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Therefore, the Group has categorised certain deposits as cash and cash equivalents as they are held for the purpose of meeting short terms cash commitments. This adjustment has no impact on shareholders' funds or profit after tax. FBD HOLDINGS PLC Preliminary restatement of 2004 financial information 3)PROPERTY & EQUIPMENT - OWNER OCCUPIED PROPERTY The Group's owner occupied property includes group headquarters, FBD Insurance plc's branch offices and FBD Property & Leisure Ltd's hotels and golf courses. In the Group's Irish GAAP financial statements, owner occupied property was carried at current market value, with any resulting unrealised revaluation surplus or deficit being taken to the income statement. Under IFRS, the owner occupied property is accounted for under IAS 16, Property, Plant & Equipment. Under IAS 16, owner occupied property continues to be carried at current market value but any unrealised surplus, arising on revaluation, is taken to equity. Any unrealised revaluation deficit will be taken to the income statement, to the extent that there is no previous revaluation surplus to offset the deficit. 4) INVENTORIES In the Group's Irish GAAP financial statements, development land was treated as investment property and was carried at current market value, with any unrealised revaluation surplus or deficit taken to the income statement. IAS 40, Investment Property, does not permit classification of property intended for sale in the ordinary course of business or in the process of construction or development for such sale as investment property but states that it is to be accounted for under IAS 2, Inventories. Under IAS 2, development land is valued at the lower of cost or net realisable value. Accordingly, in our IFRS financial statements, development land is classified as inventory and valued at the lower of cost and net realisable value. 5)INSURANCE CONTRACTS In the Group's Irish GAAP financial statements, an equalisation provision was recorded in the balance sheet to eliminate, or reduce, the volatility in incurred claims arising from exceptional levels of claims in certain classes of business. Under IFRS 4 Insurance Contracts, provisions for possible future claims arising from insurance contracts that are not in existence at the reporting date (such as catastrophe and equalisation provisions) are not recognised as liabilities. 6)DIVIDEND RECOGNITION In the Group's Irish GAAP financial statements, dividends payable to shareholders were recognised in the income statement in the period to which they relate irrespective of when they were declared and approved. IAS 10, Events after the Balance Sheet Date does not allow the recognition of dividends to holders of equity instruments declared after the balance sheet date because they do not meet the criteria of a present obligation in IAS 37, Provisions, Contingent Liabilities and Contingent Assets. Accordingly only dividends declared (i.e. appropriately approved by shareholders and no longer at the discretion of the Group) are recognised in the income statement. FBD HOLDINGS PLC Preliminary restatement of 2004 financial information ACCOUNTING POLICIES The principal accounting policies adopted by the Group in the preparation of the preliminary restatement of 2004 financial information are listed below. These are also the Group's provisional accounting policies for the year ended 31 December 2005 in accordance with IFRS including all International Accounting Standards (IAS) and interpretations issued by the International Accounting Standards Board (IASB), the Standing Interpretations Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) as published by 31 August 2005 and currently endorsed by the European Commission effective for 2005 year ends ('the Standards'). A)ACCOUNTING CONVENTION The group financial statements are prepared under the historical cost convention as modified by the revaluation of shares, debt securities and land and buildings. B) BASIS OF CONSOLIDATION The consolidated financial statements include the financial statements of the company and its subsidiary undertakings, made up to 31 December 2004. All intra group transactions, balances, income and expenses are eliminated on consolidation. C) REVENUE RECOGNITION Turnover represents gross premiums written, broking commissions, fees, other commissions, interest and dividends receivable, rents receivable, sales of goods and services and sales by the property, hotel and leisure operations. Interest income is recognised on an accruals basis. Dividend income from investments is recognised when the shareholders' rights to receive payment have been established. Rental income is recognised on an accruals basis. D) TECHNICAL RESULT The technical result is determined on an annual basis whereby the incurred cost of claims, commission and related expenses are charged against the earned proportion of premiums, net of reinsurance as follows: (i)Premiums written Premiums written relate to business incepted during the year, together with any difference between booked premiums for prior years and those previously accrued, and include estimates of premiums due. (ii)Unearned premiums Unearned premiums are those portions of premium income written in the year that relate to insurance cover after 31 December 2004. Unearned premiums are computed on a 365ths basis of premium written. (iii)Deferred acquisition costs Deferred acquisition costs represent the proportion of net acquisition costs which are attributable to the unearned premiums. (iv)Unexpired risks Provision for unexpired risks is made where the expected claims, related expenses and deferred acquisition costs are expected to exceed unearned premiums, after taking account of future investment income. FBD HOLDINGS PLC Preliminary restatement of 2004 financial information (v)Claims incurred Claims incurred comprise the cost of all claims occurring during the year, whether reported or not, and any adjustments to claims outstanding from previous years. Full provision, net of reinsurance recoveries, is made at the balance sheet date for the estimated cost of claims incurred but not settled, including claims incurred but not yet reported and expenses to be incurred after the balance sheet date in settling those claims. The group takes all reasonable steps to ensure that it has appropriate information regarding notified claims and uses this information when estimating the cost of those claims. The group uses estimation techniques, based on statistical analysis of past experience, to calculate the estimated cost of claims outstanding at the year-end. It is assumed that the development pattern of the current claims will be consistent with previous experience. Allowance is made, however, for any changes or uncertainties that may cause the cost of unsettled claims to increase or reduce. These changes or uncertainties may arise from issues such as the effects of inflation, changes in the mix of business or the legal environment. Provision is also made in respect of the group's share of the estimated liability for outstanding claims of the Motor Insurers' Bureau of Ireland. (vi)Transfer of investment return to technical account A transfer of longer term investment return is made from the non-technical account to the technical account - general business to reflect the return made on those assets directly attributable to the insurance business. E)INVESTMENT RETURN Operating profits are reported on the basis of a longer term investment return. The short term fluctuation between the longer term investment return and the actual investment return, which includes realised and unrealised gains and losses, is incorporated as an adjustment figure in arriving at profit before taxation. As a result, the operating profit is not subject to distortion from short term fluctuations in investment returns. F) PROPERTY AND EQUIPMENT (i)Land and buildings Land and buildings held for own use in the supply of services or for administrative purposes are stated at their revalued amounts, being the fair value at the date of revaluation determined by professional valuers. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. Any revaluation increase arising on the revaluation of such land and buildings is credited to the revaluation reserve. A decrease on revaluation is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to previous revaluation of that asset. Land and buildings held under financing arrangements which transfer substantially all of the risks and rewards of ownership to the group are treated as if they had been purchased outright and are included in the balance sheet at valuation. The corresponding commitments are shown as liabilities. It is the group's policy and practice to maintain all group properties in a continual state of sound repair. As a result, the directors consider that the residual values of these properties are such that any depreciation is immaterial and is therefore not provided. ii. •Tangible fixed assets Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation is provided in respect of all tangible fixed assets, and is calculated in order to write off the cost or valuation of the assets over their expected useful lives as follows:- Fixtures and fittings: 5 to 10 years FBD HOLDINGS PLC Preliminary restatement of 2004 financial information G)INVESTMENTS (i) Shares and debt securities Quoted shares and debt securities are classified as at fair value through the income statement or held to maturity. Those at fair value through the income statement are marked to market and gains and losses arising from changes in value are recognised in the income statement in the period in which they arise. Financial instruments held to maturity are stated at amortised cost. Unquoted investments are classified as available for sale and stated at fair value where fair value can be measured reliably. Gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the income statement for the period. (ii)Associated Undertakings The group's financial statements include the group's share of associated undertakings' results and net assets. (iii)Investment property Investment property is stated at fair value. Gains or losses arising from changes in the fair value are included in the income statement for the period in which they arise. It is the group's policy and practice to maintain all group properties, including investment properties, in a continual state of sound repair. As a result, the directors consider that the residual values of these properties are such that any depreciation is immaterial and is therefore not provided. (iv)Loans Loans are carried at fair value using the effective interest rate method. When it is not possible to estimate reliably the cash flows or the expected life of a loan the actual cash flows over the full term of the loan are used to determine fair value. Loans are stated in the balance sheet after deduction of provisions for bad and doubtful debts. Specific provisions are made on a case-by-case basis after taking into account factors such as the financial condition of the borrower, security held and costs of realisation. H) INVENTORIES Inventories comprise work in progress and land held for development and are stated at the lower of cost and net realisable value. Cost includes all expenditure incurred in bringing the inventory to its present condition. Net realisable value is the estimated selling price less all further costs to completion and the estimated costs necessary to make the sale. I)DEFERRED TAXATION Deferred tax is recognised in respect of all timing differences, including unrealised investment gains, that have originated but not reversed at the balance sheet date where transactions or events have occurred at the balance sheet date that result in an obligation to pay more tax or a right to pay less tax in the future. Timing differences are differences between profit as computed for taxation purposes and profit as stated in the financial statements which arise because certain items of income and expenditure in the financial statements are dealt with in different periods for taxation purposes. A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is measured at the tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws enacted or substantially enacted at the balance sheet date. Deferred tax is measured on a non-discounted basis. FBD HOLDINGS PLC Preliminary restatement of 2004 financial information J)PENSIONS The group operates defined benefit pension schemes for the majority of its Irish based employees. A full actuarial valuation of the schemes is undertaken every three years and is updated to reflect current conditions in the intervening periods. Scheme assets are valued at market value. Scheme liabilities are measured on an actuarial basis and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The surplus or deficit on the schemes is shown on the balance sheet as an asset or liability net of the deferred tax impact. Actuarial gains and losses are recognised immediately in equity through the statement of total recognised income and expense. The current service cost and past service cost of the schemes and the expected return on assets net of the change in the present value of the scheme liabilities arising from the passage of time, are charged to operating profit. K)CURRENCY All amounts are stated in Euro. Transactions in currencies other than euro are recorded at the rates of exchange prevailing on the dates of the transactions. Balances in foreign currencies have been translated into Euro at contract rates where the amounts are covered by forward contracts. On consolidation, the assets and liabilities of the Group's overseas operation are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences are classified as equity and transferred to the translation reserve. At the 1st January 2004 this reserve has been deemed to be zero in accordance with IFRS1. L) SHARE-BASED PAYMENT The Group operates a share option scheme based on non-market vesting criteria. The group has availed of the transitional arrangements under IFRS 1 and IFRS 2 and no charge is included for share options granted before 7 November 2002 which had not vested by 1 January 2005. For all other options, the fair value of the options is determined at the date of grant and expensed in the income statement over the period during which the employees become unconditionally entitled to the options. The expense is credited to a separate reserve in the balance sheet. At each period end the group revises its estimate of the number of options that it expects to vest and any adjustment relating to current and past vesting period is charged to the income statement. Share options are all equity settled. M) TREASURY SHARES Where any Group Company purchases the Company's equity share capital, the consideration paid is shown as a deduction from ordinary shareholders' equity. No gain or loss is recognised on the sale issue or cancellation of treasury shares. Consideration received on the subsequent sale or issue of treasury shares is credited to ordinary shareholders equity. Treasury shares are excluded when calculating earnings per share. ENDS This information is provided by RNS The company news service from the London Stock Exchange UR

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