FBD Holding Plc

National Storage Mechanism | Additional information RNS Number : 0070J FBD Holdings PLC 11 August 2023 FBD HOLDINGS PLC Half yearly Report For the Six Months ended 30 June 2023 KEY HIGHLIGHTS �� Profit before tax of ��39m under IFRS 17 compared to ��3m in 2022. �� Combined Operating Ratio (COR) of 81% reflecting continued underwriting discipline and benefitting from positive prior year reserve development including that related to Business Interruption. �� Special dividend approved of 100 cent per ordinary share. �� Insurance revenue increased by 4.5% to ��195m. �� Written policy count increased by 2.6%. �� The Covid-19 related Business Interruption best estimate reduced by ��15m to ��27m net of reinsurance since year-end 2022 following conclusion of the test case. �� Retention levels of existing business increased by 0.2% year on year. �� Average premium increased by 4.6% across the portfolio. Private Motor average premium increased by 1.7%. �� Income statement investment return of 0.7%, reflecting positive investment returns of ��8m. �� Our capital position remains strong with a Solvency capital ratio (SCR) of 217% (unaudited) after allowing for the special dividend, compared to 226% at 31 December 2022. �� Return on equity of 15%. �� IFRS 17 is effective for insurance contract reporting since 1 January 2023 and all comparatives are Half Year 2022 restated, unless otherwise specified. IFRS 9 has also been adopted. FINANCIAL SUMMARY Half Year ended 30 Jun 2023 ��000s Half Year ended 30 Jun 2022 (restated) ��000s Gross written premium 206,432 192,432 Insurance revenue 194,540 186,142 Insurance service result 65,403 44,052 Profit before taxation 39,477 2,509 Loss ratio 54.0% 60.9% Expense ratio 27.1% 25.7% Combined operating ratio 81.1% 86.6% Cent Cent Basic earnings per share 91 6 Net asset value per share 1,274 1,179 A reconciliation between IFRS and non-IFRS measures is given in the Alternative Performance Measures (APMs) on page 62 and 63. �� The largest element of Insurance revenue is Gross written premium (GWP) which increased by 7.3% to ��206m (2022: ��193m). Written policy count increased by 2.6% with over 70% of the increase coming through our local offices. �� The Insurance service result increased by ��21m to ��65m (2022: ��44m). This is made up of increased Insurance revenue of ��8m, a reduction in the Insurance service expense (ISE) of ��35m, largely due to a positive past service benefit including that related to Business Interruption reserve releases, net of additional reinsurance contract expenses of ��22m as expected reinsurance recoveries on Business Interruption reduced. �� A positive start to the year for both equity and fixed income investments has resulted in a profit through the Income Statement of ��8m (2022: -��15m) and a profit through Other Comprehensive Income (OCI) of ��9m (2022: -��64m). �� The expense ratio increased to 27.1% (2022: 25.7%), with the increase primarily reflecting inflationary increases on staff costs, IT and utility costs. The expense ratio includes Insurance acquisition expenses and Non-attributable expenses. �� Net Asset Value per share of 1,274 cent has reduced from 1,276 cent (restated) at the end of 2022 as the dividend payments in May were offset by Half Year profit. Commenting on these results Tom��s �� Midheach, Group Chief Executive, said: "I am pleased to announce a strong profit for the first half of 2023 where the business continued to grow and deliver for all stakeholders. Supported by a disciplined underwriting approach, our financial and strategic foundations remain solid as we continue to drive sustainable profitable growth. Our ongoing focus and commitment to meeting the needs of our customers and the provision of a personalised service continue to play a significant role in the performance of the business. As a consequence, it is most encouraging to see strong retention of existing customers and continued growth in both customer and policy count numbers. Economic conditions remain challenging for businesses and customers alike. Inflation continues to be experienced in Property and Motor Damage claims. Injury claims experience has been benign and there were no significant weather events. We welcome the final Judgement on the Business Interruption test case. This ruling allows us to finalise all valid Covid-19 related claims and State subsidies. We are supportive of the steps the Government has taken on insurance reform to reduce claims costs and consequently insurance premiums. The increased acceptance rates of awards from the Personal Injuries Resolution Board could indicate the Personal Injury Guidelines are being adopted, although their ultimate impact will not be known until the challenges make their way through the courts. The business remains strongly capitalised with a capital ratio above our stated risk appetite. As signalled earlier this year and following engagement with our stakeholders, a special dividend of 100c per ordinary share was approved by the Board. I am thankful for the support of the Board and the commitment and hard work by all the team at FBD. We have demonstrated that our relationship focus strategy is delivering and our evolving strategy to firmly position FBD for the future to become a digitally enabled, data enriched organisation delivering an excellent customer and employee experience, is firmly on track." A presentation will be available on our Group website www.fbdgroup.com from 9.00 am today. Enquiries Telephone FBD Michael Sharpe, Investor Relations +353 87 9152914 Drury Communications Paddy Hughes +353 87 6167811 About FBD Holdings plc ("FBD") FBD is one of Ireland's largest property and casualty insurers, looking after the insurance needs of farmers, consumers and business owners. Established in the 1960s by farmers for farmers, FBD has built on those roots in agriculture to become a leading general insurer serving the needs of its direct agricultural, small business and consumer customers throughout Ireland. It has a network of 34 branches nationwide. Forward Looking Statements Some statements in this announcement are forward-looking. They represent expectations for the Group's business, and involve risks and uncertainties. These forward-looking statements are based on current expectations and projections about future events. The Group believes that current expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which are in some cases beyond the Group's control, actual results or performance may differ materially from those expressed or implied by such forward-looking statements. The following details relate to FBD's ordinary shares of ��0.60 each which are publicly traded: Listing Euronext Dublin Financial Conduct Authority Listing Category Premium Premium (Equity) Trading Venue Euronext Dublin London Stock Exchange Market Main Securities Market Main Market ISIN IE0003290289 IE0003290289 Ticker FBD.I or EG7.IR FBH.L OVERVIEW The Group reported a profit before tax of ��39.5m (2022: ��2.5m), supported by growth in Insurance revenue of ��8.4m primarily in local offices, a reduction in Insurance service expenses of ��35.3m mainly related to positive past service movement including in respect of Covid-19 Business Interruption (BI) claims, and positive investment returns of ��8.4m (2022: -��15.3m). This was offset by a ��7.5m provision for our current estimate of the cost of a constructive obligation arising from the deduction of State subsidies under Business Interruption. The net best estimate in respect of BI reduced by ��14.9m to ��26.6m since December 2022. The reduction reflects the final Judgement in respect of the BI test case. INSURANCE SERVICE RESULT Insurance Revenue Insurance revenue is 4.5% higher at ��194.5m (2022: 186.1m). Gross written premium is the largest part of Insurance revenue and is 7.3% higher than 2022 at ��206.4m (2022: ��192.4m) with strong increases in Home, Agri and Commercial Business. Written policy count increased by 2.6% with average premiums increasing by 4.6% across the portfolio. The retention rate on the portfolio is higher than the first half of 2022, continuing the trend of multi-year highs. Average premium increased by 4.6% across the portfolio reflecting the inflationary impacts from the economic environment. Private Motor average premium increased by 1.7% and Commercial Motor increased by 0.7% reflecting the increasing cost of Motor Damage claims, driven by increases in labour, parts and paint costs with newer, more technologically advanced vehicles costing more to repair. Home average premium increased by 9.5% reflecting increases in property sums insured as inflation continues in construction costs. Commercial Business average premium increased 5.9% driven by a combination of sums insured increasing due to inflation in construction costs and customers increasing liability cover, increasing the exposure and as a result average premium. Farm average premium increased by 5.0% as a result of increases in property elements as sums insured increased due to inflation in construction costs. Average Tractor premium increased by 8.8% due to a higher proportion of newer tractors, increasing value of existing tractors and inflation in the cost of Motor Damage claims. Insurance Service Expenses Insurance service expenses (ISE) reduced by ��35.3m to ��92.0m (2022: ��127.3m). The table below splits the ISE into Gross incurred claims, Changes that relate to past service and Insurance acquisition expenses. The Gross incurred claims increase of ��4.5m reflects increasing costs due to inflation and increased frequency in Property and Motor Damage. Changes that relate to past service of ��59.4m include prior year reserve movements, gross of reinsurance, including that related to Business Interruption, as well as other IFRS 17 specific movements in the Risk Adjustment and Discounting. Insurance acquisition expenses of ��36.6m form part of the ISE and are referenced below under Expenses. Insurance Service Expenses Half Year ended 30 June 2023 Half Year ended 30 June 2022 ��000 ��000 Gross incurred claims (114,744) (110,263) Changes that relate to past service 59,375 17,005 Insurance acquisition expenses (36,588) (34,064) Total Insurance service expenses (91,957) (127,322) Injury notifications increased 4% year on year largely reflecting increased policy count with a slight increase in frequency. The average cost of injury claims settlements are down 5% in the last 12 months and continue to be lower than that experienced pre-Covid. Court backlogs are easing with trial dates now secured within pre-Covid timeframes. FBD continue to stand over the Personal Injuries Resolution Board (PIRB) awards made under the Personal Injury Guidelines. Claims being settled under the new guidelines continue to be over 40% lower in value when compared to the previous Book of Quantum. The level of acceptance of PIRB awards across the market has improved to 48% which is closer to historic levels. This should reduce the number of cases through the courts system attracting higher legal costs. It could take a number of years for the full impact to be known of the new guidelines on claims settled through the litigation process. Motor damage notifications increased by 17% as traffic volumes have returned to pre-Covid levels and settlement costs also increased over 11%. The mix is changing within the Motor book as more policyholders have taken out comprehensive cover and inflation on parts and labour is increasing the cost of repairs. The increasing repair costs appear to be encouraging more people to claim rather than pay outside of their insurance. The average cost of property claims increased by 7% due to a change in mix and inflation, with double digit increases in Escape of Water and Fire costs. Movement in other provisions increased by ��7.2m to ��12.4m (2022: ��5.2m), with the increase relating to the provision for our current estimate of the cost of a constructive obligation arising from the deduction of State subsidies paid to claimants under Business Interruption of ��7.5m. The other elements of the Movement in other provisions are the Motor Insurers Bureau of Ireland (MIBI) levy and the Motor Insurers Insolvency Compensation Fund (MIICF) contribution. Reinsurance The reinsurance programme for 2023 was successfully renegotiated with a similar structure to the expiring programme. The programme saw an increase in reinsurance rates for property of 8% and casualty of 2% which was a very positive result in the current environment of hardening rates in the reinsurance market reflecting geopolitical and macroeconomic shocks. The net expense from reinsurance contracts held increased by ��22.4m as recoverables from reinsurers reduced by ��20.1m, primarily due to expected recoveries on Business Interruption claims reducing, as well as reinsurance premium increases year on year of ��2.3m. Weather, Claims Frequency and Large Claims No significant weather events of note occurred in the first six months of 2023. We observed an increase in the frequency of injury claims in the first half of 2023 although the frequency of these claims continues to remain significantly below pre-Covid levels. Large injury claims, defined as a value greater than ��250k, notified to date in 2023 are lower than the average of previous pre-Covid years. Expenses The Group's expense ratio is 27.1% (2022: 25.7%). Insurance acquisition expenses and Non-attributable expenses are combined to calculate the total expense cost of ��52.8m (2022: ��47.8m). The increase is made up of inflationary impacts on salary costs, IT spend and other utility costs with an increase in depreciation costs as FBD increase capital investment in the business. Commission also increased as our partnerships with intermediaries continue to grow. INDUSTRY ENVIRONMENT An appeal to the Supreme Court in respect of the Personal Injury Guidelines was heard at the end of February 2023. We are awaiting the Judgement, but have no indication as to the timeline for delivery. There are still a number of challenges over the constitutionality of the laws underpinning the Guidelines. Court backlogs have eased, with trial dates secured within pre-Covid timelines, however, we note Claimants' Solicitors still have a greater say around the timing of cases being called for trial. We still await the outcome of the review to determine if the Judiciary or the Minister of Justice and Equality should be allowed to determine the discount rate and review it at intervals. The delay in this decision may raise the potential of a challenge to the discount rate. The Court & Civil Law (Miscellaneous Provisions) Bill 2022 was signed into law in July 2023. Part 3 of the Act sets out that the indexation of periodic payment orders will no longer be fixed solely on the Consumer Price Index. Instead, the indexation rate will be set by ministerial regulations based on a broad range of more flexible factors. We note these ministerial regulations are yet to be published with no timeline for introduction indicated. Amendments to Occupiers Liability Act 1995 were signed into law in July as part of the Courts and Civil Law (Miscellaneous Provisions) Bill 2022. An important part of the amendment is the introduction of the concept of "Voluntary Assumption of Risk", which seeks to broaden the circumstances in which an occupier may be relieved of liability. For trespassers and recreational users the amendment seeks to ensure that for an occupier to be held liable the appropriate test is one of recklessness and not of reasonable grounds. The amendment also provides that, apart from exceptional circumstances, where a person enters onto a premises for the purpose of committing an offence or while on the premises commits an offence, the occupier will not be liable. The following legislative changes impacting insurance have been enacted in the year to date: �� Irish Motor Insurance Database (IMID) - The next phase of the previously named Motor Third Party Liability project (MTPL) requires sharing of additional data on insured vehicles and drivers with Regulatory Authorities. FBD is committed to adhering to industry timelines. �� The Road Traffic Act (RTA) legislation has been extended to better regulate the use of scramblers/quads and e-bike/e-scooters. �� Assisted Decision Making Act - The Act came into effect on the 26 April 2023. We are working on a number of changes including updating our Vulnerable Customer Policy, scenario testing, reviewing the customer journey and training. �� Amendments to Occupiers Liability Act - Changes to amend the "common duty of care" provisions in the Occupiers' Liability Act 1995. A number of additional changes impacting insurance are progressing through the legislative process: �� The Motor Insurance Directive (MID) primarily deals with the scope of compulsory insurance broadening the potential scenarios where RTA cover will apply. European council have reached a provisional agreement on the revision of the MID. �� Flood Insurance Bill - This is a private member bill at early stage of debate, the purpose of the bill is to provide for fairness in the market for property insurance, which will force insurers to offer flood cover to homes and businesses in flood affected areas. �� Protection of the Collective Interests of Consumers Bill 2023 - Proposed legislation transposes an EU directive and gives designated "Qualified Entities" the power to take enforcement action on behalf of a group of consumers whose rights have been breached in Ireland or in another EU country. This Bill is currently before the Seanad at the 3rd stage of debate. �� Consumer Insurance Contracts (Amendment) Bill 2023 - This Bill is currently at the second stage of debate in the Seanad and proposes to ban the use of "clauses of average" in non-life insurance contracts. FBD has provided its response to Insurance Ireland on the proposed Bill, with the immediate concerns being this legislation at present does not state the ban is only applicable to new policies, and should not apply in entirety to commercial policies. Introduction of a change in legislation in the middle of a policy term as proposed would have an immediate impact on Insurer reserving and pricing. A timed amendment has been passed and the Bill will have to be reintroduced in June 2024 for discussion. We recently passed the anniversary of the Differential Pricing regulations, meaning all policies have been through a cycle under the new regulations. We continue to support the Central Bank of Ireland with their data requests in this area, and we continue to actively monitor the impact of the changes on our portfolio. GENERAL FBD's Combined Operating Ratio (COR) was 81.1% (2022: 86.6%). The calculation of COR has changed under IFRS 17 (see APMs). Investment Return FBD's actual investment return for the first six months of 2023 was 1.5% (2022: -6.6%). 0.7% (2022: -1.3%) is recognised in the Consolidated Income Statement and 0.8% (2022: -5.3%) in the Consolidated Statement of Other Comprehensive Income (OCI). Interest rates stabilised in the first half of 2023 after extraordinary rate increases in 2022. Although the ECB continued to raise its benchmark deposit rate during the first 6 months of 2023, these rises were largely priced into FBD's 5 year benchmark interest rate which remained largely unchanged over the half year. The pull-to-par effect on the bond portfolios was the main contributor to OCI returns, also aided with some spread narrowing for corporate bonds. Bond maturities continue to be reinvested at higher interest rates, which is gradually increasing the income earned on these portfolios through the Income Statement. Risk assets in general posted positive returns for the first six months of the year. This was despite rising interest rates threatening to cause a recession in many developed countries. The bankruptcy of Silicon Valley Bank in the US and the forced takeover of Credit Suisse in Europe threatened to cause a wider banking crisis, however the situation was very much confined to US regional banks. Rising interest rates did result in one of the Company's corporate bonds being downgraded below investment grade. The Company decided to sell the bond resulting in a realised loss of ��0.9m. The Company also wrote down the value of its investment property by 5% (��0.75m), on advice from its valuation agent. Financial Services and Other Group activities The Group's financial services operations returned a loss before tax of ��0.1m for the period (2022 profit: ��0.2m). Other Group activities includes Holding Company costs which increased by ��0.3m to ��1.8m due to inflation as well as additional costs incurred for new reporting requirements. Profit per share The diluted profit per share is 89 cent per ordinary share, compared to a profit of 6 cent per ordinary share in 2022. Dividend The Board has approved a special dividend of 100 cent per ordinary share returning a portion of the excess capital to shareholders. We will continue to monitor our capital position with the intention of moving closer to our target capital based on risk appetite. The special dividend approved by the Board on 10 August 2023 will be paid on 20 October 2023 to the holders of shares on the register on 15 September 2023. The dividend is subject to withholding tax ("DWT") except for shareholders who are exempt from DWT and who have furnished a properly completed declaration of exemption to the Company's Registrar from whom further details may be obtained. STATEMENT OF FINANCIAL POSITION Capital position Ordinary shareholders' funds at 30 June 2023 amounted to ��456.9m (31 December 2022: ��454.0m restated). The increase in shareholders' funds is driven by the following: �� Profit after tax for the half year of ��33.3m; �� An increase of ��1.4m due to share based payments; �� Mark to market gains on investments in debt securities measured at FVOCI of ��7.6m after tax; �� Net of a decrease in the defined benefit pension scheme surplus of ��0.9m after tax; �� Insurance finance expense for insurance and reinsurance contracts of ��2.3m after tax; and �� Dividend payments of ��36.2m in respect of 2022 financial year. Net asset value per ordinary share is 1,274 cent, compared to 1,276 cent per share at 31 December 2022. 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. The Company's deposits and cash reduced as the 2022 dividend was paid and ��10m was invested in risk assets in the first six months of the year. The average credit quality of the corporate bond portfolio has remained at A- and has seen a reduction in allocation to BBB rated bonds (40% vs 42% at 31 December 2022). The allocation of the Group's investment assets is as follows: 30 June 2023 31 December 2022 (restated) ��m % ��m % Corporate bonds 575 51% 563 49% Government bonds 276 24% 271 24% Deposits and cash 124 11% 175 15% Other risk assets 92 8% 83 7% Equities 56 5% 50 4% Investment property 14 1% 15 1% 1,137 100% 1,157 100% Solvency The Half Year Solvency Capital Ratio (SCR) is 217% (unaudited). The audited SCR at 31 December 2022 was 226%. The Group is committed to maintaining a strong solvency position. RISKS AND UNCERTAINTIES The principal risks and uncertainties faced by the Group are outlined on pages 21 to 28 of the Group's Annual Report for the year ended 31 December 2022 and continue to apply to the six month period ended 30 June 2023. Inflation is expected to moderate due to falling energy prices although price levels are still higher since the Russian invasion of Ukraine, which is difficult for businesses to afford and poses cost of living challenges for consumers. The Personal Injury Guidelines are positively impacting the claims environment although continuing challenges have resulted in delayed settlements that may result in increased legal costs. A higher degree of uncertainty still exists in the environment as the claims payment patterns and average settlement costs of more recent years are a less reliable future indicator and must be carefully considered by the Actuarial function when arriving at claims projections. The delays in claim settlements are likely to increase legal costs further as well as additional inflation. Substantial inflation in materials and labour continue to impact the Motor and the Construction industries which has a knock on effect on claims costs. There is a risk of continually increasing settlement costs in future years and potentially higher injury claims costs in the near future as pressure mounts on salary inflation. FBD model forward looking projections of key financial metrics on a periodic basis based on an assessment of the likely operating environment over the next number of years. The projections reflect changes of which we are aware and other uncertainties that may impact future business plans and includes assumptions on the potential impact on revenue, expenses, claims frequency, claims severity, investment market movements and in turn solvency. The output of the modelling demonstrates that the Group is projected to be profitable and remain in a strong capital position. However, the situation can change and unforeseen challenges and events could occur. The solvency of the Group remains solid and is currently at 217% (31 December 2022: 226%). Central banks have continued to raise interest rates in an effort to reduce stubbornly high inflation. Developed economies have remained surprisingly resilient to higher interest rates, however, there are real fears that continued higher rates will push economies into recession and will increase default rates. Whether monetary policy is sufficient to bring inflation under control remains a risk. Also, whether the policy response will push economies into a recession with consequent impact on asset valuations continues to be a risk. Future financial market movements and their impact on balance sheet valuations, pension surplus and investment income are unknown and market risk is expected to remain high for the foreseeable future. The Group's Investment Policy, which defines investment limits and rules and ensures there is an optimum allocation of investments, is being continuously monitored. Regular review of the Group's reinsurers' credit ratings, term deposits and outstanding debtor balances is in place. All of the Group's reinsurers have a credit rating of A- or better. All of the Group's fixed term deposits are with financial institutions which have a minimum A- rating. Customer defaults are at pre-pandemic levels and support is provided to customers when required. The Group continues to manage liquidity risk through ongoing monitoring of forecast and actual cash flows. The Group's cash flow projections from its financial assets are well matched to the cash flow projections of its liabilities and it maintains a minimum amount available on term deposit at all times. The Group's asset allocation is outlined on page 8. Businesses are refocusing on costs due to the ongoing energy and cost of living crisis impacted by the war in Ukraine. There is a risk that delaying the transition to a green economy due to affordability may accelerate the already evident effects of climate change, with more immediate impacts on insurers globally such as reinsurance becoming increasingly more expensive and a reassessment may be required of insurable risks. The labour market is constantly evolving and changing with certain skills in high demand making attracting and retaining employees challenging. FBD continue to embed pandemic-based learnings in the workplace culture including hybrid working, flexibility, well-being initiatives and are committed to investing in our employees' on-going skills development to meet future needs. OUTLOOK The economic outlook for 2023 is projected to continue on a solid growth path. Inflation is expected to reduce although high prices and rising interest rates are still expected to impact growth. Unemployment is expected to remain low while labour shortages may hold back growth expectations. The increased acceptance rates of awards from the PIRB could indicate the Personal Injury Guidelines are gaining more acceptance, although their ultimate impact will not be known until the challenges make their way through the courts and experience develops of how the guidelines are implemented. The Differential Pricing requirements have been in place for over a year and all policies have gone through a renewal cycle. It will take time to see the full effects of the changes on pricing in the market as the insurance industry adapts, creating potential opportunities and challenges. Income projections on our bond portfolios have increased in the years ahead due to the impact of higher reinvestment rates as existing bonds mature. Our sustainability journey continues as we focus our ESG approach on where we can have a meaningful impact as we embed and engage the broader company through the integration of ESG across the business. We are currently assessing the gaps to delivering the multiple reporting and disclosure requirements and putting plans and processes in place to address. We are investigating Science Based Targets in order to provide a benchmark for future decarbonisation improvements and we have submitted an application to sign up to the UN Principles for Sustainable Insurance. FBD offers a valuable proposition to all our customers and they continue to stay with us in ever increasing numbers which is testament to our committed employees keeping the customer at the heart of what we do. We will continue to strengthen our relationship focus and extend our digital enablement as our strategy evolves. Despite the headwinds of inflation and increasing interest rates affecting all businesses, customers and employees, FBD is profitable and growing and continuing to deliver for all our stakeholders. FBD HOLDINGS PLC CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED) For the half year ended 30 June 2023 Notes Half year ended 30/06/23 Half year ended 30/06/22 (restated)1 Year ended 31/12/22 (restated)1 ��000s ��000s ��000s Insurance revenue 6(a) 194,540 186,142 379,697 Insurance service expenses 6(c) (91,957) (127,322) (201,838) Reinsurance expense (19,540) (17,232) (34,814) Change in amounts recoverable from reinsurers for incurred claims (17,640) 2,464 (11,941) Net expense from reinsurance contracts held 6(a) (37,180) (14,768) (46,755) Insurance service result 6(a) 65,403 44,052 131,104 Total investment return 7 8,389 (15,281) (10,753) Finance expense from insurance contracts issued 5 (1,823) (6,213) (8,731) Finance (expense)/income from reinsurance contracts held 5 (281) 1,431 1,389 Net insurance finance expenses (2,104) (4,782) (7,342) Net insurance and investment result 71,688 23,989 113,009 Other finance costs (1,272) (1,272) (2,559) Non-attributable expenses 6(c) (16,165) (13,780) (33,048) Movement in other provisions 16 (12,439) (5,241) (8,403) Revenue from contracts with customers 6(a) 1,592 1,753 3,173 Financial services income and expenses (3,381) (2,940) (6,045) Revaluation of property, plant and equipment 6(a) (546) - (287) Profit before taxation 39,477 2,509 65,840 Income taxation charge 8 (6,170) (327) (8,284) Profit for the period 33,307 2,182 57,556 Attributable to: Equity holders of the parent 33,307 2,182 57,556 Notes Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) Earnings per share Cent Cent Cent Basic 9 91 6 161 Diluted2 9 89 6 157 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contacts'. The Group elected, as it met the criteria for a temporary exemption, to defer the application of IFRS 9 'Financial Instruments' (replacing IAS 39) until 1 January 2023. See note 3 for updated accounting policies and note 4 for transitional impact. 2 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 (UNAUDITED) For the half year ended 30 June 2023 Notes Half year ended 30/06/23 Half year ended 30/06/22 (restated)1 Year ended 31/12/22 (restated)1 ��000s ��000s ��000s Profit for the period 33,307 2,182 57,556 Items that will or may be reclassified to profit or loss in subsequent periods: Movement on investments in debt securities measured at FVOCI 7 7,720 (63,842) (89,761) Movement transferred to the Consolidated Income Statement on disposal during the period 7 965 (11) (41) Finance (expense)/income from insurance contracts issued 5 (5,096) 35,670 42,388 Finance income/(expense) from reinsurance contracts held 5 2,400 (7,832) (8,202) Income tax relating to these items (749) 4,500 6,951 Items that will not be reclassified to profit or loss: Re-measurements of post-employment benefit obligations, before tax (999) 3,899 (2,272) Revaluation of owner occupied property - - 5 Income tax relating to these items 125 (485) 282 Other comprehensive income/(expense) after taxation 4,366 (28,101) (50,650) Total comprehensive income/(expense) for the period 37,673 (25,919) 6,906 Attributable to: Equity holders of the parent 37,673 (25,919) 6,906 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contacts'. The Group elected, as it met the criteria for a temporary exemption, to defer the application of IFRS 9 'Financial Instruments' (replacing IAS 39) until 1 January 2023. See note 3 for updated accounting policies and note 4 for transitional impact. FBD HOLDINGS PLC CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Condensed Consolidated Statement of Financial Position (UNAUDITED) At 30 June 2023 Assets Notes Half year ended 30/06/23 Half year ended 30/06/22 (restated)1 Year ended 31/12/22 (restated)1 ��000s ��000s ��000s Cash and cash equivalents 12 113,833 148,771 165,240 Equity and debt instruments at fair value through profit or loss 10 149,147 131,583 134,094 Debt instruments at fair value through other comprehensive income 10 851,124 851,805 833,865 Deposits 10 10,000 20,000 10,000 Investment assets 1,010,271 1,003,388 977,959 Other receivables 11 23,689 20,161 15,148 Loans 10 506 520 568 Reinsurance contract assets 15 120,234 158,069 136,657 Retirement benefit surplus 20 7,500 14,800 8,499 Intangible assets 19,083 10,074 14,082 Policy administration system 21,530 27,081 23,683 Investment property 14,304 16,053 15,052 Right of use assets 3,896 4,683 4,290 Property, plant and equipment 22,442 23,439 22,745 Deferred taxation asset 17 2,924 2,174 3,629 Total assets 1,360,212 1,429,213 1,387,552 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contacts'. The Group elected, as it met the criteria for a temporary exemption, to defer the application of IFRS 9 'Financial Instruments' (replacing IAS 39) until 1 January 2023. See note 3 for updated accounting policies and note 4 for transitional impact. FBD HOLDINGS PLC CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Condensed Consolidated Statement of Financial Position (UNAUDITED) (continued) At 30 June 2023 Liabilities and equity Half year ended 30/06/23 Half year ended 30/06/22 (restated)1 Year ended 31/12/22 (restated)1 Notes ��000s ��000s ��000s Liabilities Current taxation liabilities 1,650 13,520 2,399 Other payables 18 39,875 30,805 35,628 Other provisions 16 16,750 10,062 11,103 Reinsurance contract liabilities 15 656 458 610 Insurance contract liabilities 15 787,522 897,112 826,621 Lease liabilities 4,214 4,974 4,600 Subordinated debt 49,690 49,632 49,662 Total liabilities 900,357 1,006,563 930,623 Equity Called up share capital presented as equity 13 21,745 21,583 21,583 Capital reserves 33,257 28,738 30,192 Retained earnings 444,777 400,346 450,318 Other reserves 14 (42,847) (30,940) (48,087) Shareholders' funds equity interests 456,932 419,727 454,006 Preference share capital 2,923 2,923 2,923 Total equity 459,855 422,650 456,929 Total liabilities and equity 1,360,212 1,429,213 1,387,552 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contacts'. The Group elected, as it met the criteria for a temporary exemption, to defer the application of IFRS 9 'Financial Instruments' (replacing IAS 39) until 1 January 2023. See note 3 for updated accounting policies and note 4 for transitional impact. FBD HOLDINGS PLC CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Condensed Consolidated Statement of Cash Flows (UNAUDITED) For the half year ended 30 June 2023 Half year ended 30/06/23 Half year ended 30/06/22 (restated)1 Year ended 31/12/22 (restated)1 ��000s ��000s ��000s Cash flows from operating activities Profit before taxation 39,477 2,509 65,840 Adjustments for: Movement on investments classified as fair value (3,096) 20,663 19,616 Interest and dividend income (8,809) (5,895) (11,510) Depreciation/amortisation of property, plant and equipment, intangible assets and policy administration system 5,648 4,943 13,239 Depreciation on right of use assets 394 395 788 Share based payment expense 1,419 1,227 2,681 Fair value movement on investment property 748 1 1,003 Revaluation of property, plant and equipment 546 - 287 Operating cash flows before movement in working capital 36,327 23,843 91,944 Movement on insurance and reinsurance contract liabilities/assets (25,326) 45,459 2,879 Movement on other provisions 5,397 (2,209) (1,168) Movement on other receivables (6,429) (4,266) 1,274 Movement on other payables 5,773 2,797 9,023 Interest on lease liabilities 92 106 216 Cash generated from operations 15,834 65,730 104,168 Interest and dividend income received 6,694 5,909 10,998 Income taxes (paid)/refunded (6,836) 4,706 (12,603) Net cash generated from operating activities 15,692 76,345 102,563 Cash flows from investing activities Purchase of investments classified as fair value through other comprehensive income (92,658) (166,911) (238,126) Sale of investments classified as fair value through other comprehensive income 82,127 142,007 203,750 Purchase of investments classified as fair value through profit or loss (24,503) (16,154) (25,312) Sale of investments classified as fair value through profit or loss 14,503 4,415 13,573 Purchase of property, plant and equipment (1,383) (453) (1,288) Additions to policy administration system (1,297) (2,021) (4,566) Purchase of intangible assets (6,056) (1,873) (6,987) Movement on loans 62 40 (8) Additional deposits invested with banks - (20,000) (10,000) Net cash used in investing activities (29,205) (60,950) (68,964) Cash flows from financing activities Ordinary and preference dividends paid (36,166) (35,870) (35,870) Interest payment on subordinated debt (1,250) (1,250) (2,500) Principal elements of lease payments (478) (480) (965) Net cash used in financing activities (37,894) (37,600) (39,335) Net decrease in cash and cash equivalents (51,407) (22,205) (5,736) Cash and cash equivalents at the beginning of the period 165,240 170,976 170,976 Cash and cash equivalents at the end of the period 113,833 148,771 165,240 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contacts'. The Group elected, as it met the criteria for a temporary exemption, to defer the application of IFRS 9 'Financial Instruments' (replacing IAS 39) until 1 January 2023. See note 3 for updated accounting policies and note 4 for transitional impact. FBD HOLDINGS PLC CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Condensed Consolidated Statement of Changes in Equity (UNAUDITED) For the half year ended 30 June 2023 Call up share capital presented as equity Capital reserve Retained earnings Other reserves Attributable to ordinary shareholders Preference share capital Total equity ��000s ��000s ��000s ��000s ��000s ��000s ��000s As at 31 December 2022, as previously reported 21,583 30,192 370,258 755 422,788 2,923 425,711 Impact of application of IFRS 17 (Note 4) - - 10,518 20,984 31,502 - 31,502 Impact of application IFRS 9 (Note 4) - - 69,542 (69,826) (284) - (284) Restated balance at 1 January 2023 21,583 30,192 450,318 (48,087) 454,006 2,923 456,929 Profit after taxation - - 33,307 - 33,307 - 33,307 Other comprehensive (expense)/income for the period - - (874) 5,240 4,366 - 4,366 Total comprehensive income for the period - - 32,433 5,240 37,673 - 37,673 Dividends paid and approved on ordinary and preference shares - - (36,166) - (36,166) - (36,166) Issue of ordinary shares 162 1,646 (1,808) - - - - Recognition of share based payments - 1,419 - - 1,419 - 1,419 Balance at 30 June 2023 21,745 33,257 444,777 (42,847) 456,932 2,923 459,855 As at 31 December 2021, as previously reported 21,409 27,406 422,815 752 472,382 2,923 475,305 Impact of initial application of IFRS 17 (Note 4) - - 17,190 (8,928) 8,262 - 8,262 Impact of initial application IFRS 9 (Note 4) - - (9,106) 8,751 (355) - (355) Restated balance at 1 January 2022 21,409 27,406 430,899 575 480,289 2,923 483,212 Profit after taxation - - 2,182 - 2,182 - 2,182 Other comprehensive income/(expense) for the period - - 3,414 (31,515) (28,101) - (28,101) Total comprehensive income/(expense) for the period - - 5,596 (31,515) (25,919) - (25,919) Dividends paid and approved on ordinary and preference shares - - (35,870) - (35,870) - (35,870) Issue of ordinary shares 174 105 (279) - - - - Recognition of share based payments - 1,227 - - 1,227 - 1,227 Balance at 30 June 2022 21,583 28,738 400,346 (30,940) 419,727 2,923 422,650 * In 2022 and 2023 new ordinary shares were allotted to employees of FBD Holdings plc as part of the performance share awards scheme. FBD HOLDINGS PLC CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Condensed Consolidated Statement of Changes in Equity (UNAUDITED) (continued) For the half year ended 30 June 2023 Call up share capital presented as equity Capital reserve Retained earnings Other reserves Attributable to ordinary shareholders Preference share capital Total equity ��000s ��000s ��000s ��000s ��000s ��000s ��000s As at 31 December 2021, as previously reported 21,409 27,406 422,815 752 472,382 2,923 475,305 Impact of initial application of IFRS 17 (Note 4) - - 17,190 (8,928) 8,262 - 8,262 Impact of initial application IFRS 9 (Note 4) - - (9,106) 8,751 (355) - (355) Restated balance at 1 January 2022 21,409 27,406 430,899 575 480,289 2,923 483,212 Profit after taxation - - 57,556 - 57,556 - 57,556 Other comprehensive expense for the year - - (1,988) (48,662) (50,650) - (50,650) Total comprehensive income/(expense) for the year - - 55,568 (48,662) 6,906 - 6,906 Dividends paid and approved on ordinary and preference shares - - (35,870) - (35,870) - (35,870) Issue of ordinary shares* 174 105 (279) - - - - Recognition of share based payments - 2,681 - - 2,681 - 2,681 Balance at 31 December 2022 21,583 30,192 450,318 (48,087) 454,006 2,923 456,929 * In 2022 new ordinary shares were allotted to employees of FBD Holdings plc as part of the performance share awards scheme. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 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 2023 does not constitute the statutory financial statements of the Company; �� the statutory financial statements for the financial year ended 31 December 2022 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 2022; 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. PricewaterhouseCoopers, Chartered Accountants and Statutory Audit Firm, have performed an interim review in accordance with International Standard on Review Engagements (Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' ("ISRE (Ireland) 2410") issued for use in Ireland' on the interim financial information for the period ended 30 June 2023. As part of this review they also reviewed the IFRS 17 and IFRS 9 transition impacts on the comparative information. Note 2 Going concern The Directors have, at the time of approving the interim financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future being a period of not less than 12 months from the date of this report. In making this assessment the Directors considered up to date solvency, liquidity and profitability projections for the Group. The basis of this assessment was the latest quarterly forecast for 2023 and projections for 2024 which reflect the latest assumptions used by the business. The economic environment may impact on premiums including exposures, new business and retention levels. Expense assumptions can change depending on the level of premiums as discretionary spend and resources are adjusted and inflationary pressures are taken into account. A number of scenario projections were also run as part of the Own Risk Solvency Assessment (ORSA) process, including a number of more extreme stress events, and in all scenarios the Group's capital ratio remained in excess of the Solvency Capital Requirement and in compliance with liquidity policies. The Directors considered the liquidity requirements of the business to ensure it is projected to have cash resources available to pay claims and other expenditures as they fall due. The business is expected to have adequate cash resources available to support business requirements. In addition the Group has a highly liquid investment portfolio with over 50% of the portfolio invested in corporate and sovereign bonds with a minimum A- rating. In the worst case scenario run the Group's Capital Ratio remained in excess of the Solvency Capital Requirement and in compliance with liquidity policies. Note 3 Summary of significant 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. On the basis of the projections for the Group, the Directors are satisfied that there are no material uncertainties which cast significant doubt on the ability of the Group or Company to continue as a going concern over the period of assessment being not less than 12 months from the date of this report. Therefore the Directors continue to adopt the going concern basis of accounting in preparing the financial statements. Consistency of accounting policies The below accounting policies have been updated for the application of IFRS 17 and IFRS 9 (see note 4). Apart from the updated accounting policies included hereafter to address IFRS 17 and IFRS 9, the methods of computation used by the Group to prepare the interim financial statements for the six month period ended 30 June 2023 are the same as those used to prepare the Group Annual Report for the year ended 31 December 2022 (reference Note 3 of FBD Holdings plc Annual Report 2022). Other than the adoption of IFRS 17 and IFRS 9 there are no other impacts from the adoption of other standards and amendments. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) E) Insurance contracts I. Definition and classification The Group issues insurance contracts in the normal course of business, under which it accepts significant insurance risk from its policyholders. As a general guideline, the Group determines whether it has significant insurance risk by comparing benefits payable after an insured event with benefits payable if the insured event did not occur. Insurance contracts can also transfer financial risk. The Group issues non-life insurance to individuals and businesses. Non-life insurance products offered include Motor, Property, Liability and Personal Accident which are segmented into Motor and Non-Motor for reporting. These products offer protection of policyholder's assets and indemnification of other parties that have suffered damage as a result of an insured event occurring. In the normal course of business, the Group uses reinsurance to mitigate its risk exposures. A reinsurance contract transfers significant risk if it transfers substantially all the insurance risk resulting from the insured portion of the underlying insurance contracts, even if it does not expose the reinsurer to the possibility of a significant loss. II. Insurance and reinsurance contracts accounting treatment Separating components from insurance and reinsurance contract Before the Group accounts for an insurance contract based on the guidance of IFRS 17, it assesses whether the contract contains distinct components which must be accounted for under another IFRS instead of under IFRS 17. After separating any distinct components, the Group applies IFRS 17 to all remaining components of the insurance contract. Currently, engineering inspection risk, which is not material, is the only non-insurance component which forms part of any insurance contracts that requires unbundling. Level of aggregation/Unit of account The Group manages insurance contracts issued by product lines within an operating segment, where each product line includes contracts that are subject to similar risks. All insurance contracts within a product line represent a portfolio of contracts. Each portfolio is further disaggregated into groups of contracts that are issued within a calendar year (annual cohorts) and are (i) contracts that are onerous at initial recognition; (ii) contracts that at initial recognition have no significant possibility of becoming onerous subsequently; or (iii) a group of remaining contracts. These groups represent the level of aggregation at which insurance contracts are initially recognised and measured. The profitability of groups of contracts is assessed by actuarial valuation models that take into consideration existing and new business. FBD assumes that no contracts in the portfolio are onerous at initial recognition unless facts and circumstances indicate otherwise. By the nature of the insurance risks covered by the Group, all of the contracts issued have a maximum claim pay-out potential that is greater than the premium received. On this basis there are currently no contracts grouped into 'no significant possibility of becoming onerous'. Recognition, modification and de-recognition The Group recognises groups of insurance contracts it issues from the earliest of the following: �� the beginning of the coverage period of the group of contracts; �� the date when the first payment from a policyholder in the group is due or when the first payment is received if there is no due date; and �� when the Group determines that a group of contracts becomes onerous. Only contracts that meet the recognition criteria by the end of the reporting period are included in the groups. When contracts meet the recognition criteria in the groups after the reporting date, they are added to the groups in the reporting period in which they meet the recognition criteria, subject to the annual cohorts' restriction. Composition of the groups is not reassessed in subsequent periods. The Group derecognises insurance contracts when: �� the rights and obligations relating to the contract are extinguished (i.e. discharged, cancelled or expired) or �� the contract is modified such that the modification results in a change in the measurement model or the applicable standard for measuring a component of the contract, substantially changes the contract boundary, or requires the FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) E) Insurance contracts (continued) II. Insurance and reinsurance contracts accounting treatment (continued) Recognition, modification and de-recognition (continued) modified contract to be included in a different group. In such cases, the Group derecognises the initial contract and recognises the modified contract as a new contract. When a modification is not treated as a derecognition, the Group recognises amounts paid or received for the modification with the contract as an adjustment to the relevant liability for remaining coverage (LRC). Contract boundary The Group includes in the measurement of a group of insurance contracts all the future cash flows within the boundary of each contract in the group. Cash flows are within the boundary of an insurance contract if they arise from substantive rights and obligations that exist during the reporting period in which the Group can compel the policyholder to pay the premiums, or in which the Group has a substantive obligation to provide the policyholder with insurance contract services. A substantive obligation to provide insurance contract services ends when the Group has the practical ability to reassess the risks of the particular policyholder and, as a result, can set a price or level of benefits that fully reflects those risks. Cash flows outside the insurance contracts boundary relate to future insurance contracts and are recognised when those contracts meet the recognition criteria. Initial and subsequent measurement - groups of contracts measured under the PAA The Group applies the premium allocation approach (PAA) to all the insurance contracts that it issues and reinsurance contracts that it holds. The PAA is an optional simplified measurement model in IFRS 17 that is available for insurance and reinsurance contracts that meet the eligibility criteria. The Group is eligible to apply the PAA because the following criteria are met at initial recognition: �� insurance contracts and losses-occurring reinsurance contracts: The coverage period of each contract in the group is one year or less. �� risk-attaching reinsurance contracts: The Group reasonably expects that the resulting measurement of the asset for remaining coverage would not differ materially from the measurement that would be produced applying the general measurement model (GMM). The estimates of future cash flows: �� are based on a probability weighted mean of the full range of possible outcomes; �� are determined from the perspective of the Group, provided the estimates are consistent with observable market prices for market variables; and �� reflect conditions existing at the measurement date. The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques, such as, but not limited to, Chain Ladder, Bornheutter-Ferguson, Initial Expected Loss Ratio and frequency-severity methods. The main assumption underlying these techniques is that a group's past claims development experience can be used to project future claims development and hence ultimate claims costs. These methods extrapolate the development of paid and incurred losses, average costs per claim (including claims handling costs), and claim numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident years, but can also be further analysed by significant business lines and claim types. Large claims are separately addressed, separately projected in order to reflect their future development. Explicit assumptions are made regarding future rates of claims inflation or loss ratios. Additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (e.g., to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, levels of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the probability weighted expected value outcome from the range of possible outcomes, taking account of all the uncertainties involved. In its claims incurred assessments, the Group uses internal and market data. Internal data is derived mostly from the Group's claims reports. This information is used to develop scenarios related to the latency of claims that are used for the projections of the ultimate number of claims. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) E) Insurance contracts (continued) II. Insurance and reinsurance contracts accounting treatment (continued) Initial and subsequent measurement - groups of contracts measured under the PAA (continued) Some of the insurance contracts that have been written in the property line of business permit the Group to sell property acquired in settling a claim. The Group also has the right to pursue third parties for payment of some or all costs. Estimates of salvage recoveries and subrogation reimbursements are considered as an allowance in the measurement of ultimate claims costs. Other key circumstances affecting the reliability of assumptions include delays in settlement and inflation rates. An explicit risk adjustment for non-financial risk is estimated separately from the other estimates. For contracts measured under the PAA, unless the contracts are onerous, the explicit risk adjustment for non-financial risk is only estimated for the measurement of the liability for incurred claims (LIC). The risk adjustment for non-financial risk is applied to the present value of the estimated future cash flows and reflects the compensation the Group requires for bearing the uncertainty about the amount and timing of the cash flows from non-financial risk as the Group fulfils insurance contracts. The Group does not disaggregate the change in risk adjustment for non-financial risk between a financial and non-financial portion and includes the entire change as part of the insurance service result. Methods and assumptions used to determine the risk adjustment for non-financial risk are discussed in accounting policy U. The Group does not adjust the LRC for insurance contracts issued and the remaining coverage for reinsurance contracts held for the effect of the time value of money as insurance premiums are due within the coverage period of contracts, which is one year or less. The estimates of future cash flows related to incurred claims are adjusted using the current discount rates to reflect the time value of money and the financial risks related to those cash flows, to the extent not included in the estimates of cash flows. The discount rates reflect the characteristics of the cash flows arising from the groups of insurance contracts, including timing, currency and liquidity characteristics of the insurance contracts. The determination of the discount rate that reflects the characteristics of the cash flows and liquidity characteristics of the insurance contracts requires significant judgement and estimation. The Group estimates certain fulfilment cash flows (FCF) at the portfolio level or higher and then allocates such estimates to groups of contracts. Insurance acquisition cash flows The Group includes the following acquisition cash flows within the insurance contract boundary that arise from selling, underwriting and starting a group of insurance contracts and that are: �� costs directly attributable to individual contracts and groups of contracts; and �� costs directly attributable to the portfolio of insurance contracts to which the group belongs, which are allocated on a reasonable and consistent basis to measure the group of insurance contracts. For all groups, insurance acquisition cash flows will be allocated to related groups of insurance contracts and amortised over the coverage period of the related group. Cash flows that are not directly attributable to a portfolio of insurance contracts, such as some product development and training costs, are recognised in non-attributable expenses as incurred. Initial measurement The carrying amount of a group of insurance contracts issued at the end of each reporting period is the sum of: �� the LRC; and �� the LIC, comprising the FCF related to past service allocated to the group at the reporting date. For insurance contracts issued, on initial recognition, the Group measures the LRC at the amount of premiums received, less any acquisition cash flows paid and any amounts arising from the derecognition of the prepaid acquisition cash flows asset. The Group estimates the LIC as the FCF related to incurred claims. Where facts and circumstances indicate that contracts are onerous at initial recognition, the Group performs additional analysis to determine if a net outflow is expected from the contract. Such onerous contracts are separately grouped from other contracts FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) E) Insurance contracts (continued) II. Insurance and reinsurance contracts accounting treatment (continued) Initial and subsequent measurement - groups of contracts measured under the PAA (continued) and the Group recognises a loss in the income statement for the net outflow, resulting in the carrying amount of the liability for the group being equal to the FCF. A loss component is established by the Group for the LRC for such onerous groups depicting the losses recognised and included in the LRC. Subsequent measurement For insurance contracts issued, at each of the subsequent reporting dates, the LRC is: �� increased for premiums received in the period; �� decreased for insurance acquisition cash flows paid in the period; �� decreased for the amounts recognised as insurance revenue for the services provided in the period; and �� increased for the amortisation of insurance acquisition cash flows in the period recognised as insurance service expenses. The FCF relating to incurred claims, therefore the LIC, is updated by the Group for current assumptions at the end of every reporting period, using the current estimates of the amount, timing and uncertainty of future cash flows and of discount rates. If a group of contracts becomes onerous, the Group increases the carrying amount of the LRC to the amounts of the FCF determined under the GMM with the amount of such an increase recognised in insurance service expenses. Subsequently, the Group amortises the amount of the loss component within the LRC by decreasing insurance service expenses. The loss component amortisation is based on the passage of time over the remaining coverage period of contracts within an onerous group. If facts and circumstances indicate that the expected profitability of the onerous group during the remaining coverage has changed, then the Group remeasures the FCF by applying the GMM and reflects changes in the FCF by adjusting the loss component as required until the loss component is reduced to zero. Reinsurance contracts held Reinsurance contracts held are measured on the same basis as insurance contracts, except: �� They are adapted to reflect the features of reinsurance contracts that differ from insurance contracts; �� That references to onerous contracts refer to contracts on which there is a net gain on initial recognition. For some groups of reinsurance contracts held, a group can comprise a single contract. By the nature of the Group's reinsurance treaties currently in effect, there are no reinsurance contracts held that are a net gain on initial recognition nor that are deemed as having no significant risk of being a gain. �� The Group recognises a group of reinsurance contracts held it has entered into from the earlier of the following: o the beginning of the coverage period of the group of reinsurance contracts held. (However, the Group delays the recognition of a group of reinsurance contracts held that provide proportionate coverage until the date any underlying insurance contract is initially recognised, if that date is later than the beginning of the coverage period of the group of reinsurance contracts held); and o the date the Group recognises an onerous group of underlying insurance contracts if the Group entered into the related reinsurance contract held in the group of reinsurance contracts held at or before that date. �� The risk adjustment represents the amount of risk being transferred by the Group to the reinsurer. �� That cash flows are within the contract boundary if they arise from substantive rights and obligations of the Group that exist during the reporting period in which the Group is compelled to pay amounts to the reinsurer or in which the Group has a substantive right to receive services from the reinsurer. �� The excess of loss reinsurance contracts held provides coverage for claims incurred during an accident year. �� All cash flows arising from claims incurred and expected to be incurred in the accident year are included in the measurement of the reinsurance contracts held. Some of these contracts may include reinstatement reinsurance premiums, which are guaranteed per the contractual arrangements and are thus within the respective reinsurance contracts' boundaries. �� In the measurement of reinsurance contracts held, the probability weighted estimates of the present value of future cash flows include the potential credit losses and other disputes of the reinsurer to reflect the non-performance risk of the reinsurer. �� On initial recognition, the Group measures the remaining coverage at the amount of ceding premiums paid. The carrying amount of a group of reinsurance contracts held at the end of each reporting period is the sum of: o the remaining coverage; and o the incurred claims, comprising the FCF related to past service allocated to the group at the reporting date. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) E) Insurance contracts (continued) II. Insurance and reinsurance contracts accounting treatment (continued) Reinsurance contracts held (continued) �� Instead of at initial recognition, where the Group recognises a loss on initial recognition of an onerous group of underlying insurance contracts or when further onerous underlying insurance contracts are added to a group, the Group establishes a loss-recovery component of the asset for remaining coverage for a group of reinsurance contracts held depicting the recovery of losses. The loss-recovery component adjusts the carrying amount of the asset for remaining coverage. �� At each of the subsequent reporting dates, the remaining coverage is: o increased for ceding premiums paid in the period; and o decreased for the amounts of ceding premiums recognised as reinsurance expenses for the services received in the period. �� Instead of a loss component, the loss-recovery component adjusts the carrying amount of the asset for remaining coverage. Where a loss-recovery component has been established, the Group subsequently reduces the loss recovery component to zero in line with reductions in the onerous group of underlying insurance contracts in order to reflect that the loss-recovery component shall not exceed the portion of the carrying amount of the loss component of the onerous group of underlying insurance contracts that the entity expects to recover from the group of reinsurance contracts held. Methods used and judgements applied in determining the IFRS 17 transition amounts The Group has been able to apply the fully retrospective approach with the exception of using the modified retrospective approach for the choice of initial recognition yield curves for underwriting years 2015 and prior. To the extent that the Group did not have reasonable and supportable information to determine discount rates applicable on the date of initial recognition of the group of contracts, the Group estimated the discount rates using an observable yield curve. III. Amounts recognised in comprehensive income Insurance revenue The insurance revenue for the period is the amount of expected premium receipts allocated to the period. The Group allocates the expected premium receipts to each period of insurance contract services on the basis of the passage of time. But if the expected pattern of release of risk during the coverage period differs significantly from the passage of time, then the allocation is made on the basis of the expected timing of incurred insurance service expenses. The Group changes the basis of allocation between the two methods above as necessary, if facts and circumstances change. The change is accounted for prospectively as a change in accounting estimate. For the periods presented, all revenue has been recognised on the basis of the passage of time. Insurance service expenses Insurance service expenses include the following: �� incurred claims and benefits excluding investment components; �� other incurred insurance acquisition expenses; �� amortisation of insurance acquisition cash flows; �� changes that relate to past service (i.e. changes in the FCF relating to the LIC); and �� changes that relate to future service (i.e. losses/reversals of onerous groups of contracts from changes in the loss components). For the contracts measured under the PAA, amortisation of insurance acquisition cash flows is based on the passage of time. Net income /(expense) from reinsurance contracts held The Group presents separately on the face of the income statement, the amounts expected to be recovered from reinsurers and the reinsurance expense. Re-instatement premiums contingent on claims on the underlying contracts are treated as part of the claims that are expected to be reimbursed under the reinsurance contracts held. Ceding commissions that are not contingent on claims of the underlying contracts issued reduce ceding premiums and are accounted for as part of reinsurance expenses. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) E) Insurance contracts (continued) II. Insurance and reinsurance contracts accounting treatment (continued) Finance income/ (expense) from insurance contracts issued Insurance finance income or expense comprise the change in the carrying amount of the group of insurance contracts arising from: �� interest accreted on the LIC; and �� the effect of changes in interest rates and other financial assumptions. The Group disaggregates insurance finance income or expenses on insurance contracts issued between the income statement and the statement of comprehensive income. The impact of changes in market interest rates on the value of the insurance contract liabilities are reflected in the OCI in order to minimise accounting mismatches between the accounting for financial assets and insurance assets and liabilities. The Group's financial assets backing the insurance portfolios are predominantly measured at fair value through other comprehensive income (FVOCI). K) Financial instruments a) Recognition, classification and measurement Financial assets and financial liabilities are recognised in the Statement of Financial Position when, and only when, the Group becomes party to the contractual provisions of the instrument. The Group classifies its financial assets, subsequent to initial recognition, at either: �� amortised cost; �� fair value through other comprehensive income (FVOCI); or �� fair value through profit and loss (FVTPL). The Group determines the appropriate classification based on: (i) the business model for managing the financial assets: how the Group manages its financial assets in order to generate cash flows-either by collecting contractual cash flows, selling the asset or both; and (ii) the contractual cash flow characteristics of the financial asset: the Solely Payments of Principal and Interest (SPPI) test - whether the contractual terms of the financial asset give rise to, on specified dates, cash flows that are solely payments of principal and interest. A financial asset is measured at amortised cost if both the following conditions are met: (i) the financial asset is held within a business model whose objective is to hold the financial asset in order to collect contractual cash flows; and (ii) the contractual terms of the financial asset gives rise on specific dates to cash flows that are SPPI on the principal amount outstanding. A financial asset is measured at FVOCI if both the following conditions are met: (i) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and (ii) the contractual terms of the financial asset gives rise on specific dates to cash flows that are SPPI on the principal amount outstanding. A financial asset is measured at fair value though profit and loss (FVTPL), unless it is measured using either of the above two methods - amortised cost or FVOCI. Investments at FVOCI FVOCI investments relate to quoted debt securities. These investments pass the SPPI test and are classified as FVOCI as they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. They are recognised on a trade date basis at fair value, and are subsequently revalued at each reporting date to fair value, with gains and losses being included directly in the Statement of Comprehensive Income until the investment is disposed of or determined to be impaired, at which time the cumulative gain or loss previously recognised in the Statement of Comprehensive Income, is included in the Income Statement for the year. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) K) Financial instruments (continued) a) Recognition, classification and measurement (continued) Interest revenue using the effective interest method and foreign exchange gains and losses on the financial asset are recognised in the Income Statement. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount at initial recognition. The Expected Credit Loss (ECL) on debt instruments measured at FVOCI does not reduce the carrying amount of the asset in the statement of financial position, which remains at fair value. Instead an amount equal to the allowance that would arise if the assets were measured at amortised cost is recognised in OCI with a corresponding charge to provision for credit losses in the income statement. Investments at FVTPL Investments at FVTPL are stated at fair value and include quoted shares, collective investment schemes and unquoted investments. These investments are classified as FVTPL as they do not pass the SPPI test. They are recognised on a trade date basis at fair value and are revalued at subsequent reporting dates at fair value, with gains and losses being included in the Income Statement in the period in which they arise. Any dividend or interest earned on FVTPL investments is also recognised in the Income Statement. Loans Loans are recognised on a trade date basis at fair value plus transaction costs and are subsequently measured at amortised cost 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 projected cash flows over the full term of the loan are used to determine fair value. Other receivables Amounts arising out of direct insurance operations and other debtors are measured at initial recognition at fair value and are subsequently measured at amortised cost, after recognising a loss allowance for ECLs (note K (c)). Deposits with banks Term deposits with banks comprise cash held for the purpose of investment. Demand deposits with banks are held for operating purposes and included in cash and cash equivalents. Deposits with banks and cash and cash equivalents are valued at amortised cost. Subordinated debt Subordinated debt issued by the Group comprise callable dated deferrable subordinated notes. The subordinated debt is measured at amortised cost using the effective interest rate method. Interest and amortisation relating to the financial liability is recognised in the Income Statement. b) Derecognition The Group derecognises a financial asset only when the contractual rights to the cash flows of the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of the ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risk and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability to the extent of its continuing involvement in the financial asset. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset. The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) K) Financial instruments (continued) c) Impairment of financial instruments The Group recognises loss allowances for ECLs at each balance sheet date for the following financial instruments that are not measured at FVTPL; �� financial assets at FVOCI �� financial assets at amortised cost Financial assets at FVOCI The Group categorises financial instruments classified as FVOCI into the following categories at each reporting date. Stage 1: 12-month expected credit losses (not credit-impaired) These are financial instruments where there has not been a significant increase in credit risk since initial recognition. An impairment loss allowance equal to the 12-month ECL is recognised, which is the portion of the lifetime ECL resulting from default events that are possible within the next 12 months. Stage 2: Lifetime expected credit losses (not credit-impaired) These are financial instruments where there has been a significant increase in credit risk since initial recognition but which are not credit-impaired. The Group assesses whether the risk of default over the remaining expected life of the financial instrument is significantly higher than had been anticipated at initial recognition, the credit risk is always considered as significantly increased if any contractual payments are more than 30 days past due. An impairment loss allowance equal to the lifetime ECL is recognised, being the ECL resulting from all possible default events over the expected life of the financial instrument. Stage 3: Lifetime expected credit losses (credit-impaired) These are financial instruments which are credit-impaired at the reporting date but were not credit-impaired at initial recognition. If the financial instrument is more than 90 days past due or if there is other evidence of financial distress (for example, a legal bankruptcy or default), the instrument is classified as credit-impaired (stage 3) which means the impairment loss has to reflect the lifetime ECL as in stage 2. The interest, for Stage 3 assets, is calculated by applying the effective interest rate (EIR) to their carrying value, if the asset is no longer credit-impaired, the calculation of interest income reverts to the gross basis. Financial assets at amortised cost The Group calculates a loss allowance for financial assets at amortised cost. The Group considers the best reasonable and supportable information when considering ECLs for 'Loans' and 'Other receivables'. The Group calculates ECL on loans at initial recognition by considering the consequences and probabilities of possible defaults only for the next 12 months (stage 1). It continues to apply this method until a significant increase in credit risk has occurred, at which point the loss allowance is measured based on lifetime ECLs (stage 2) or where significant increase in credit risk has occurred and the asset is credit-impaired (stage 3). For 'Other receivables' the Group uses the simplified approach, and therefore does not track the changes in credit risk, but instead recognise a loss allowance based on lifetime ECLs at each reporting date. Impairment loss allowances for ECL on financial assets at amortised cost are presented as a reduction in the gross carrying amount in the Statement of Financial Position. The measurement of impairment losses under IFRS 9 across relevant financial assets requires judgement, in particular, for the estimation of the amount and timing of future cash flows when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by the outcome of modelled ECL scenarios and the relevant inputs used. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) N) Taxation Income tax expense or credit represents the sum of income tax currently payable and deferred income tax. Income tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Consolidated Income Statement because it excludes items of income or expense that are taxable or deductible in other years and further excludes items that are not taxable or deductible. The Group's liability for income tax is calculated using rates that have been enacted or substantively enacted at the reporting date. Income tax is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity. Deferred income tax is provided, using the liability method, on all differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is expected to be realised or the liability to be settled. Accounting adjustments to opening reserves as a result of the adoption of IFRS 9 and IFRS 17 (i.e. the retrospective effect of adopting the accounting standard recognised in opening reserves) will be brought into account as a transitional adjustment and spread over 5 years for tax purposes. Deferred tax assets are recognised for all deductible differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit would be available to allow all or part of the deferred income tax asset to be utilised. T) Other financial services income Other financial services income previously comprised interest on instalment premiums which is now included with Insurance revenue and no longer presented separately on the face of the Consolidated Income Statement. U) Critical accounting estimates and judgements in applying accounting policies In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The key judgements and the key sources of estimation uncertainty that have the most significant effect on the amounts recognised in the interim financial statements are detailed below. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. The estimates and underlying assumptions are reviewed on an ongoing basis and actual results may differ from these estimates. Estimates of future cash flows to fulfil insurance/reinsurance contracts The Group estimates insurance liabilities in relation to claims incurred. In estimating future cash flows, the Group incorporate, in an unbiased way, all reasonable and supporting information that is available without undue cost or effort at the reporting date. This information includes both internal information and external historical data about claims and other experience, updated to reflect current expectations of future events. Uncertainty in the estimation of future claims and benefit payments arises primarily from the severity and frequency of claims and uncertainties regarding future inflation rates leading to claims and claims-handling expenses growth. As a result of the uncertainties noted, the Group sets provisions at a margin above the best estimate known as the risk adjustment. Assumptions used to develop estimates about future cash flows are reassessed at each reporting date and adjusted where required. Methods used to measure the LIC The Group estimates insurance liabilities and reinsurance assets in relation to claims incurred on a risk basis. Estimates are performed on an accident year basis with further allocation to annual cohorts of portfolios based on available data. Judgement is involved in assessing the most appropriate technique to estimate insurance liabilities for the claims incurred. In certain instances, different techniques or a combination of techniques have been selected for individual accident years or groups of accident years within the same type of contracts. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) U) Critical accounting estimates and judgements in applying accounting policies (continued) Methods used to measure the LIC (continued) The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques, such as, but not limited to, Chain Ladder, Bornheutter-Ferguson, Initial Expected Loss Ratio and frequency-severity methods. The liabilities for incurred claims represent the cost of claims outstanding. Actuarial techniques, based on statistical analysis of past experience, are used to calculate the estimated cost of claims outstanding at the period end. The estimation of outstanding claim also includes factors such as the potential for inflation and the potential impact of the Personal Injuries Guidelines. Provisions for more recent claims make use of techniques that incorporate expected loss ratios and average claims costs (adjusted for inflation) and frequency methods. The average claims cost and frequency methods are particularly relevant when calculating the ultimate cost of the current accident year. FBD have now received the final judgement in relation to the Covid-19 Business Interruption test case. This has provided more certainty on the measurement of losses and FBD have issued communications to all affected policyholders in order make the final settlement of their claims. FBD has received information from more than 700 policyholders in order to assess the claims and has been making interim payments based on these assessments. This data has provided reasonable certainty in respect to a number of assumptions underlying the best estimate of Covid-19 Business Interruption losses and will continue to improve as FBD proceed to final settlements. The calculations are particularly sensitive to the estimation of the ultimate cost of claims for the particular classes of business and the estimation of future claims handling costs. Actual claims experience may differ from the assumptions on which the actuarial best estimate is based and the cost of settling individual claims may exceed that assumed. The actual amount recovered from reinsurers is sensitive to the same uncertainties as the underlying claims. To the extent that the underlying claim settles at a lower or higher amount than that assumed this will have a direct influence on the associated reinsurance asset. To minimise default exposure, the group's policy is that all reinsurers should have a credit rating of A- or better or have provided alternative satisfactory security. Discount rates The Group is required to discount future cash flows related to incurred claims as the weighted time to settlement is greater than one year from the date claim occurred. The Group determines the risk-free discount rate using a bottom-up approach. Under this approach, the discount rate is determined as the risk-free yield curve adjusted for differences in liquidity characteristics between the financial assets used to derive the risk free yield and the relevant liability cash flows (known as an illiquidity premium). The Group uses the Euro denominated EIOPA prescribed rates under Solvency II as the risk-free yield. The EIOPA EUR spot rates are derived from market observable EUR swap rates for durations one to twenty years. The illiquidity premium is determined by reference to observable market rates. The yield curves used to discount the estimates of future cash flows are as follows: Currency 1 year 3 years 5 years 10 years 15 years 20 years 30 June 2022 EUR 1.5% 2.2% 2.4% 2.8% 3.0% 2.9% 31 Dec 2022 EUR 3.3% 3.3% 3.2% 3.2% 3.1% 2.9% 30 June 2023 EUR 4.1% 3.6% 3.3% 3.0% 2.9% 2.8% FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 3 Summary of significant accounting policies (continued) U) Critical accounting estimates and judgements in applying accounting policies (continued) Methods used to measure the risk adjustment for non-financial risk The risk adjustment for non-financial risk is the compensation that is required for bearing the uncertainty about the amount and timing of cash flows that arises from non-financial risk as the insurance contract is fulfilled. As the risk adjustment represents compensation for uncertainty, estimates are made on the degree of diversification benefits and expected favourable and unfavourable outcomes in a way that reflects the Group's degree of risk aversion. The Group estimates an adjustment for non-financial risk separately from all other estimates. The risk adjustment is calculated at the entity level and then allocated down to each group of contracts in accordance with their risk profiles. A confidence level approach is used to derive the overall risk adjustment for non-financial risk. The Group aim to target a risk adjustment within a range between the 75th and 80th percentiles. At year-end 2022, the risk adjustment was at the 80th percentile, and remained at the 80th percentile to date. As the Group is using the PAA method, a risk adjustment is only required for the LIC and not the LRC (unless there is an onerous group). To determine the risk adjustment for non-financial risk for reinsurance contracts, the Group will apply these techniques both gross and net of reinsurance and derive the amount of risk transferred to the reinsurer as the difference between the two results. The methods and assumptions used to determine the risk adjustment for non-financial risk were not changed in 2023. Uncertainties in impairment testing The Group has carried out impairment testing on tangible and intangible assets. The recoverable amount of an asset is the higher of its value in use or its fair value less costs to sell. In the case of the Property, Plant and Equipment (excluding Owner Occupied Property which is held at revalued amount), policy administration system, Intangible Assets and Right of Use Assets there is no reliable estimate of the price at which an orderly transaction to sell the assets would take place and there are no direct cash-flows expected from the individual assets. These assets are an integral part of the FBD General Insurance business, therefore, the smallest group of assets that can be classified as a cash generating unit is the FBD General Insurance business. The Value in Use cash flow projections are based on the quarterly forecast for 2023 approved by the Board in May 2023 and the five year strategic projections approved by the Board in quarter four 2022. The 2028 and 2029 figures are extrapolated assuming the performance in 2028 and 2029 are in line with 2027. The time period of six years used in the cash flow projections is less than the weighted average remaining useful life of the assets in the FBD General Insurance business being assessed. This projection and plan refresh represent management's best estimate of future underwriting profits and fee income for FBD. General Insurance business projections factors in both past experience as well as expected future outcomes relative to market data and the strategy adopted by the Board. The underlying assumptions of these forecasts include average premium, number of policies written, claims frequency, claims severity, weather experience, commission rates, fee income charges and expenses. The average growth rate used for 2023 is 6%, for 2024 is 7%, followed by a 3% growth rate for 2025-2027. The growth rate is assumed to be flat for later years. Future cash flows are discounted using an estimated weighted average cost of capital (WACC) of 10.3% which is considered a reasonable estimate following the recent increase in risk free rates. 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. The sensitivities include climate change scenarios, delayed benefits from the Judicial Council Guidelines, additional inflation in claims settlements, reduced growth rates and positive impacts of new initiatives. The level of headroom has remained in line with year-end 2022, and in all scenarios run, the value in use of the cash generating unit exceeded the carrying value of the assets, demonstrating that no reasonably possible change in key assumptions would result in an impairment of the assets. The largest reduction in the level of headroom was from a climate change scenario. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 4 First time adoption of new accounting standards The following new standards have been adopted by the Group during the period ended 30 June 2023: �� IFRS 9 'Financial Instruments'; and �� IFRS 17 'Insurance Contracts'. The Group's accounting policies have been updated for the application of IFRS 9 and IFRS 17 from 1 January 2023 and are detailed within note 3. The impact on transition can be summarised, as follows: IFRS 9 'Financial Instruments' IFRS 9 'Financial Instruments' has been issued to replace IAS 39 'Financial Instruments: Recognition and Measurement'. IFRS 9 replaced IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018. However, the Group elected, under the amendments to IFRS 4, to apply the temporary exemption from IFRS 9, thereby deferring the initial application date of IFRS 9 to align with the initial application of IFRS 17. Financial assets within the scope of IFRS 9 are required to be classified as being measured, subsequent to initial recognition, at amortised cost (AC), fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). The assessment of how an asset should be classified is dependent on both the overall objective of the business model within which the asset is held and whether the contractual terms of the financial asset give rise to, on specified dates, cash flows that are solely payments of principal and interest (SPPI). IFRS 9 introduces a new forward-looking impairment model based on expected credit losses (ECL) rather than incurred losses. The accounting for financial liabilities will remain largely consistent with that applied under IAS 39, except for recognition of changes in own credit risk in other comprehensive income for certain liabilities designated at fair value through profit or loss. The consolidated statements for the comparative periods presented have been updated using the classification overlay approach with the amendment to the transition requirements in IFRS 17 issued by the IASB at the end of 2021. Differences arising from the adoption of IFRS 9 were recognised in retained earnings as of 1 January 2022. To reflect the differences between IFRS 9 and IAS 39, IFRS 7 Financial Instruments: Disclosures was also amended. The Group has applied the amended disclosure requirements of IFRS 7, together with IFRS 9, for the year beginning 1 January 2023. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 4 First time adoption of new accounting standards (continued) The table below shows the impact of classification and measurement in accordance with IFRS 9 as at the opening balance sheet of the comparative period (i.e. 1 January 2022) Financial assets Original measurement (IAS 39) Revised measurement (IFRS 9) Carrying amount under IAS 39 Reclassification Re-measurement Carrying amount under IFRS 9 ��000s ��000s ��000s ��000s Quoted debt securities1 Available for sale (AFS) FVOCI 892,495 - - 892,495 Cash and cash equivalents Amortised cost (AC) AC 164,479 6,4972 - 170,976 Collective investment schemes Held for trade (HFT) FVTPL 137,547 - - 137,547 Receivables AC AC 58,047 (41,749)2 (388)3 15,910 Unquoted investments AFS FVTPL 1,220 - - 1,220 Loans AC AC 577 - (17)3 560 Deposits with banks AC AC - - - - Financial liabilities Original measurement (IAS 39) Revised measurement (IFRS 9) Carrying amount under IAS 39 Reclassification Re-measurement Carrying amount under IFRS 9 ��000s ��000s ��000s ��000s Subordinated debt AC AC 49,603 - - 49,603 Payables AC AC 41,657 - - 41,657 1In accordance with the requirements of IFRS 9 the recognition and measurement of a loss allowance for financial assets that are measured at FVOCI does not reduce the carrying amount of the asset in the statement of financial position, which remains at fair value. Instead an amount equal to the allowance that would arise if the assets were measured at amortised cost is recognised in OCI with a corresponding charge to provision for credit losses in the income statement. As at the opening balance sheet of the comparative period (i.e. 1 January 2022) an expected credit loss of ��754,000 was recognised and reflected directly in the FVOCI reserve. 2Insurance and reinsurance contract receivables and payables (outstanding cheques) are included within Insurance/Reinsurance contract asset/liabilities under IFRS 17. 3 Re-measurement relates to expected credit losses recognised on 'Loans' and 'Other receivables' under IFRS 9. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 4 First time adoption of new accounting standards (continued) IFRS 17 'Insurance contracts' IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 Insurance Contracts. The core of IFRS 17 is the general model, supplemented by a specific adaption for contracts with direct participation features (the variable fee approach) and a simplified approach (the premium allocation approach) mainly for short-duration contracts. The Group are eligible to apply the PAA to all insurance contracts issued and reinsurance contracts held and have elected to apply the PAA in all cases. The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of the LRC, comprising the fulfilment cash flows related to future service allocated to the group at that date, and the LIC, comprising the FCF and risk adjustment related to past service allocated to the group at that date. IFRS 17 requires a company to determine the level of aggregation for applying its requirements. Portfolios comprise groups of contracts with similar risks which are managed together. Portfolios are required to be further divided based on expected profitability at inception into three categories: onerous contracts, contracts with no significant risk of becoming onerous, and the remainder. A group of contracts that is onerous on initial recognition results in a loss being recognised immediately in the statement of financial performance for the entire net cash outflow, therefore the carrying amount of the insurance liability for the group is equal to the fulfilment cash flows and the contractual service margin is nil. Under the Premium Allocation Approach (PAA) it is assumed no contracts in the portfolio are onerous at initial recognition unless facts and circumstances indicate otherwise. IFRS 17 also requires that no group for level of aggregation purposes, may contain contracts issued more than one year apart. The impact to shareholder's equity on transition to IFRS 17 is mainly driven by the below: Discounting claims reserves In accordance with the requirements of IFRS 17, the Group is required to discount future cash flows related to incurred claims as the weighted time to settlement is greater than one year from the date the claim occurred. This requirement to allow for the time value of money is a change from the previous practice under IFRS 4, where no allowance for the time value of money was made in the calculation of the claims liabilities. The impact of discounting in a positive interest rate environment results in a reduction in the liabilities previously recognised under IFRS 4, however, this will unwind in future periods. Discounting cash flows when calculating the LIC alters the timing of profit emergence but not the overall level of profit. The impact of discounting cash flows related to incurred claims became significantly more prevalent throughout 2022 in line with the rising interest rate environment. Re-measurement of claims reserves under IFRS 17 Under IFRS 17 the measurement of the LIC, (previously claims outstanding and incurred but not reported claims) is determined on a discounted probability-weighted expected value basis and includes an explicit risk adjustment for non-financial risk. The introduction of the risk adjustment calculation as an allowance for uncertainty about the amount and timing of cash flows that arises from non-financial risk as the insurance contract is fulfilled replaces the margin for uncertainty previously in existence under IFRS 4 and resulted in a reduction of the liabilities on transition. Re-measurement of asset for insurance acquisition cashflows In applying the Premium Allocation Approach, the Group continues to defer acquisition costs which are directly attributable to a portfolio and chose not to expense all acquisition costs as they are incurred. However, IFRS 17 incorporates a more prescribed approach in determining the asset for insurance acquisition cashflows compared to IFRS 4, resulting in a reduction in total equity on transition. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 4 First time adoption of new accounting standards (continued) The below table illustrates the impact on the relevant components of equity on applying IFRS 9 and IFRS 17: Year ended Year ended 31/12/21 31/12/22 ��000s ��000s Retained earnings Closing balances as previously reported under IAS 39 and IFRS 4 422,815 370,258 Reclassification to FVOCI reserve (9,247) 80,804 IFRS 9 recognition of expected credit losses - debt securities at FVOCI (754) (1,003) IFRS 9 recognition of expected credit losses - other receivables and loans (405) (324) IFRS 17 re-measurement of claims reserves under IFRS 17 12,300 2,531 IFRS 17 impact of discounting the liability for incurred claims recognised through profit/loss 9,571 12,396 IFRS 17 re-measurement of asset for insurance acquisition cashflows (2,225) (2,905) Tax on the above adjustments (1,156) (11,439) Total adjustment net of tax 8,084 80,060 Opening balance at 1 January under IFRS 9 and IFRS 17 430,899 450,318 31/12/21 31/12/22 ��000s ��000s FVOCI reserve Closing balances as previously reported under IAS 39 and IFRS 4 - - Reclassification from retained earnings 9,247 (80,804) IFRS 9 recognition of expected credit losses - debt securities at FVOCI 754 1,003 Tax on the above adjustments (1,250) 9,975 Total adjustment net of tax 8,751 (69,826) Opening balance at 1 January under IFRS 9 and IFRS 17 8,751 (69,826) 31/12/21 31/12/22 ��000s ��000s Insurance/RI finance reserve Closing balance as previously reported under IAS 39 and IFRS 4 - - IFRS 17 impact of discounting liability for incurred claims through OCI (10,204) 23,982 Tax on the above adjustment 1,276 (2,998) Total adjustment net of tax (8,928) 20,984 Opening balance at 1 January under IFRS 9 and IFRS 17 (8,928) 20,984 IFRS 9 and IFRS 17 transition adjustment to total equity 7,907 31,218 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 4 First time adoption of new accounting standards (continued) The below tables detail the adjustments required to restate the previously presented financial statements under IFRS 4 and IAS 39 to those reported under IFRS 17 and IFRS 9 as at 31 December 2022: Statement of Financial Position Financial statement line item IFRS 4 & IAS 39 Previously Reported Classification adjustment Measurement adjustment Restated Financial statement line item IFRS 17 & IFRS 9 ��000s ��000s ��000s ��000s Loans 580 - (12) 1 568 Loans Available for sale investments 834,994 (1,129) 2 - 833,865 Debt instruments at FVOCI Investments held for trading 132,965 1,1292 - 134,094 Equity and debt instruments at FVTPL Deposits with banks 10,000 - - 10,000 Deposits Reinsurance assets 138,785 (4,830)3 2,7024 136,657 Reinsurance contract assets Deferred taxation asset 8,091 - (4,462) 5 3,629 Deferred taxation asset Deferred acquisition costs 38,520 (38,520)6 - - - Other receivables 58,307 (42,847)6 (312) 1 15,148 Other receivables Cash and cash equivalents 162,398 2,842 7 - 165,240 Cash and cash equivalents All other assets (unaffected) 88,351 - - 88,351 All other assets (unaffected) Total assets 1,472,991 (83,355) (2,084) 1,387,552 Total assets Called up share capital presented as equity 21,583 - - 21,583 Called up share capital presented as equity Capital reserves 30,192 - - 30,192 Capital reserves Revaluation reserve 755 (69,826)8 20,9844,9,5 (48,087) Other reserves Retained earnings 370,258 69,8268 10,2341,4,5,9 450,318 Retained earnings Preference share capital 2,923 - - 2,923 Preference share capital Total equity 425,711 - 31,218 456,929 Total equity Insurance contract liabilities 932,677 (72,754) 6,7,10 (33,302) 4,9 826,621 Insurance contract liabilities - - 6106 - 610 Reinsurance contract liabilities Other provisions 11,615 (512)10 - 11,103 Other provisions Payables 46,327 (10,699) 3,6,7,10 - 35,628 Other payables All other liabilities (unaffected) 56,661 - - 56,661 All other liabilities (unaffected) Total liabilities 1,047,280 (83,355) (33,302) 930,623 Total liabilities Total equity and liabilities 1,472,991 (83,355) (2,084) 1,387,552 Total equity and liabilities Notes 1 Re-measurement relates to the recognition of ECL recognised on 'Loans' and 'Other receivables' under IFRS 9. 2 Unquoted investments previously classified as 'Available for sale' under IAS 39 are classified as FVTPL under IFRS 9 as they do not pass the SPPI test. 3 Reinsurance debtors and creditors are included within the fulfilment cash flows under IFRS 17, previously included within 'Other receivables' and 'Payables' under IFRS 4. 4 Impact of re-measurement of claims reserves under IFRS 17 including the impact of discounting LIC and the application of a risk adjustment. 5 Tax on transitional adjustments. 6 No separate asset recognised for deferred acquisition costs or premium receivables under IFRS 17. Instead, qualifying insurance acquisition cash flows and premium receivables are subsumed into the insurance liability for remaining coverage. Similarly transactional tax levies on insurance premium written and liabilities owing to reinsurers are subsumed into the fulfilment cash flows. 7 Outstanding premium and claims cheques are included within LRC and LIC respectively previously included within 'Cash and cash equivalents' or 'Payables'. 8 IFRS 9 mark to market gains/losses on FVOCI assets reclassified from retained earnings net of ECL. 9 IFRS 17 re-measurement of asset for insurance acquisition cashflows. 10 Pre-recognised premium excluded from 'Insurance contract liabilities' under IFRS 17 as this does not form part of the cash flows within the contract boundaries, a deferred income liability set up for same. Provisions for premium rebates are subsumed into the fulfilment cash flows. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 4 First time adoption of new accounting standards (continued) Total Comprehensive Income Financial statement line item IFRS 4 & IAS 39 Previously Reported Classification adjustment Measurement adjustment Restated Financial statement line item IFRS 17 & IFRS 9 Year ended 31/12/2022 Year ended 31/12/2022 Year ended 31/12/2022 Year ended 31/12/2022 ��000s ��000s ��000s ��000s Income Gross written premium 382,889 (3,192)1,5,6 - 379,697 Insurance revenue Reinsurance premiums (40,016) 5,202 1,2,6 - (34,814) Reinsurance expense Change in net provision for unearned premiums (7,019) 7,0196 - - Net investment return (10,413) (340)3,4 - (10,753) Total investment return Revenue from contracts with customers 3,173 - - 3,173 Revenue from contracts with customers Other financial services income 4,812 (4,812)1,5 - - Expenses Net claims and benefits (145,807) 3,1256 11,4417,8 (131,241) Insurance service expenses - - (2,971) 2,6 (8,970) 7 (11,941) Change in amounts recoverable from reinsurers for incurred claims Other underwriting expenses (95,962) 28,118 1,2,9 (2,753)8,10 (70,597) Insurance service expenses - - (33,048)9 - (33,048) Non-attributable expenses Financial services and other costs (6,685) 559 1 8111 (6,045) Financial services income and expenses - - - (8,731)7 (8,731) Finance income/(expense) from insurance contracts issued - - - 1,3897 1,389 Finance income/(expense) from reinsurance contracts held All other expenses (unaffected) (11,249) - - (11,249) All other expenses (unaffected) Profit before taxation 73,723 (340) (7,543) 65,840 Profit before taxation Income taxation charge (9,269) 4313 94213 (8,284) Income taxation charge Profit for the financial year 64,454 (297) (6,601) 57,556 Profit for the financial year Movement on available for sale financial assets during the year (90,271) 5103,4 - (89,761) Net gains/(losses) on investments in debt securities measured at FVOCI Movement transferred to the Consolidated Income Statement on disposal during the year 129 (170)3,4 - (41) Net gains on investments in debt securities measured at FVOCI reclassified to profit or loss on disposal - 42,38812 42,388 Finance income/(expense) from insurance contracts issued - (8,202)12 (8,202) Finance income/(expense) from reinsurance contracts held Income tax relating to these items 11,268 (43)13 (4,274)13 6,951 Income tax relating to these items All other OCI (unaffected) (1,985) - - (1,985) All other OCI (unaffected) Other comprehensive expense after taxation (80,859) 297 29,912 (50,650) Other comprehensive expense after taxation Total comprehensive (expense)/income for the year (16,405) - 23,311 6,906 Total comprehensive (expense)/income for the period FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 4 First time adoption of new accounting standards (continued) Notes 1 Unbundling of engineering inspection premium under IFRS 17. Other income re-classified to 'Financial services income and expenses'. 2 Reinstatement premiums contingent on claims on the underlying contracts are treated as part of the claims that are expected to be reimbursed under the reinsurance contracts held and were previously included within 'Reinsurance premiums' under IFRS 4. Reinsurance commission offset against reinsurance expense under IFRS 17, included in 'Other underwriting expenses' under IFRS 4. 3 Movement on ECL on FVOCI assets under IFRS 9 recognised in profit or loss. 4 Unquoted investments previously classified as 'Available for sale' under IAS 39 are classified as FVTPL under IFRS 9 as they do not pass the SPPI test. All income and other gains and/or losses on FVTPL assets are recognised in profit or loss. Mark to market gains and/or losses on 'Available for sale' assets under IAS 39 were recognised in Other Comprehensive Income. 5 Instalment premiums included within 'Insurance Revenue' under IFRS 17, included within 'Other financial services income' under IFRS 4. 6 Reinsurance result presented separately on face of profit or loss under IFRS 17. 7 Impact of re-measurement of claims reserves under IFRS 17 including the impact of discounting liability for incurred claims and the application of a risk adjustment. 8 IFRS 17 re-measurement of claims handling expenses. 9 Non-attributable expenses presented separately under IFRS 17. 10 IFRS 17 re-measurement of asset for insurance acquisition cashflows. 11 Movement in ECL on 'Other receivables' and 'Loans'. 12 IFRS 17 impact of discounting LIC recognised through OCI. 13 Tax on transitional adjustments. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 4 First time adoption of new accounting standards (continued) The below tables detail the adjustments required to restate the previously presented financial statements under IFRS 4 and IAS 39 to those reported under IFRS 17 and IFRS 9 as at 1 January 2022: Statement of Financial Position Financial statement line item IFRS 4 & IAS 39 Previously Reported Classification adjustment Measurement adjustment Restated Financial statement line item IFRS 17 & IFRS 9 ��000s ��000s ��000s ��000s Loans 577 - (17) 1 560 Loans Available for sale investments 893,715 (1,220) 2 - 892,495 Debt instruments at FVOCI Investments held for trading 137,547 1,2202 - 138,767 Equity and debt instruments at FVTPL Reinsurance assets 196,960 (6,557)3 18,4854 208,888 Reinsurance contract assets Deferred acquisition costs 35,458 (35,458)6 - - - Other receivables 58,047 (41,749)6 (388) 1 15,910 Other receivables Cash and cash equivalents 164,479 6,497 7 - 170,976 Cash and cash equivalents All other assets (unaffected) 93,225 - - 93,225 All other assets (unaffected) Total assets 1,580,008 (77,267) 18,080 1,520,821 Total assets Called up share capital presented as equity 21,409 - - 21,409 Called up share capital presented as equity Capital reserves 27,406 - - 27,406 Capital reserves Revaluation reserve 752 8,7518 (8,928)4,5,9 575 Other reserves Retained earnings 422,815 (8,751)8 16,8351,4,5,9 430,899 Retained earnings Preference share capital 2,923 - - 2,923 Preference share capital Total equity 475,305 - 7,907 483,212 Total equity Insurance contract liabilities 985,404 (64,466) 3,6,7,10 9,043 4,9 929,981 Insurance contract liabilities - - 7886 - 788 Reinsurance contract liabilities Other provisions 13,492 (1,221)10 - 12,271 Other provisions Deferred taxation liability 2,761 - 1,1305 3,891 Deferred taxation liability Payables 41,657 (12,368) 3,6,7,10 - 29,289 Other payables All other liabilities (unaffected) 61,389 - - 61,389 All other liabilities (unaffected) Total liabilities 1,104,703 (77,267) 10,173 1,037,609 Total liabilities Total equity and liabilities 1,580,008 (77,267) 18,080 1,520,821 Total equity and liabilities Notes 1 Re-measurement relates to the recognition of expected credit losses recognised on 'Loans' and 'Other receivables' under IFRS 9. 2 Unquoted investments previously classified as 'Available for sale' under IAS 39 are classified as FVTPL under IFRS 9 as they do not pass the SPPI test. 3 Reinsurance debtors and creditors are included within the fulfilment cash flows under IFRS 17, previously included within 'Other receivables' and 'Payables' under IFRS 4. 4 Impact of re-measurement of claims reserves under IFRS 17 including the impact of discounting the LIC and the application of a risk adjustment. 5 Tax on transitional adjustments. 6 No separate asset recognised for deferred acquisition costs or premium receivables under IFRS 17. Instead, qualifying insurance acquisition cash flows and premium receivables are subsumed into the LRC. Similarly transactional tax levies on insurance premium written and liabilities owing to reinsurers are subsumed into the fulfilment cash flows. 7 Outstanding premium and claims cheques are included within LRC and LIC respectively previously included within 'Cash and cash equivalents' or 'Payables'. 8 IFRS 9 mark to market gains/losses on FVOCI assets reclassified from retained earnings net of expected credit losses. 9 IFRS 17 re-measurement of asset for insurance acquisition cashflows. 10 Pre-recognised premium excluded from 'Insurance contract liabilities' under IFRS 17 as this does not form part of the cash flows within the contract boundaries, a deferred income liability set up for same. Provisions for premium rebates are subsumed into the fulfilment cash flows. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 5 Finance income/ (expense) recognised in comprehensive income The Group disaggregates finance income or expense on insurance contracts issued and reinsurance contracts held between income statement and OCI. The impact of changes in market interest rates on the value of the insurance liabilities are reflected in OCI in order to minimise accounting mismatches between the accounting for financial assets and insurance assets and liabilities. The Group adopts a conservative investment strategy to ensure that its technical provisions are matched by cash and fixed interest securities of low risk and similar duration. All of the Group's fixed interest securities are classified as FVOCI whereby accumulated mark to market gains or losses are reclassified to the profit and loss account on liquidation. The tables below detail: �� the element of interest accretion on the LIC from the prior reporting period; and �� the effect of changes in interest rates and other financial assumptions during the period on the finance income/(expense) recognised in comprehensive income. Total investment return during the period is detailed in note 7 including the corresponding mark to market gains or losses on FVOCI recognised. Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Finance income /(expense) from insurance contracts issued recognised in comprehensive income: Interest accreted (4,965) 836 2,517 Effect of changes in interest rates and other financial assumptions during the period (1,954) 28,621 31,140 Total (6,919) 29,457 33,657 Represented by: Amounts recognised in profit or loss (1,823) (6,213) (8,731) Amounts recognised in OCI (5,096) 35,670 42,388 Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Finance income /(expense) from reinsurance contracts held recognised in comprehensive income: Interest accreted 1,168 (221) (595) Effect of changes in interest rates and other financial assumptions during the period 951 (6,180) (6,218) Total 2,119 (6,401) (6,813) Represented by: Amounts recognised in profit or loss (281) 1,431 1,389 Amounts recognised in OCI 2,400 (7,832) (8,202) FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 6 Segmental information (a) Operating segments The principal activities of the Group are underwriting of general insurance business, financial services and other group activities. For management purposes, the Group is organised in three operating segments - general insurance, financial services and other group activities. These three segments are the basis upon which information is reported to the chief operating decision makers, the Group Chief Executive/Executive Management Team, for the purpose of resource allocation and assessment of segmental performance. Discrete financial information is prepared and reviewed on a regular basis for these three segments. The following is an analysis of the Group's revenue and results from continuing operations by reportable segments: Half year ended 30/06/2023 General insurance Financial services Other group activities Total ��000s ��000s ��000s ��000s Insurance revenue 194,540 - - 194,540 Insurance service expenses (91,957) - - (91,957) Net expense from reinsurance contracts held (37,180) - - (37,180) Insurance service result 65,403 - - 65,403 Total investment return 8,307 - 82 8,389 Net insurance finance expenses (2,104) - - (2,104) Net insurance and investment result 71,606 - 82 71,688 Other finance costs (1,272) - - (1,272) Non-attributable expenses (16,165) - - (16,165) Movement in other provisions (12,439) - - (12,439) Revenue from contracts with customers - 1,592 - 1,592 Financial services income and expenses 85 (1,655) (1,811) (3,381) Revaluation of property, plant and equipment (546) - - (546) Profit/(loss) before taxation 41,269 (63) (1,729) 39,477 Income taxation (charge)/credit (6,409) 13 226 (6,170) Profit/(loss) for the period 34,860 (50) (1,503) 33,307 Other information Insurance acquisition expenses (36,588) - - (36,588) Depreciation/amortisation (5,648) - - (5,648) Impairment of other assets (1,294) - - (1,294) Capital additions 8,736 - - 8,736 Statement of financial position Segment assets 1,329,118 8,333 22,761 1,360,212 Segment liabilities (893,699) (872) (5,786) (900,357) Included above in the current period is a net non-cash impairment charge relating to property held for own use of ��546,000 and to investment property of ��748,000 (31 December 2022: ��287,000 and ��1,003,000, 30 June 2022: Nil). FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 6 Segmental information (continued) (a) Operating segments (continued) Half year ended 30/06/2022 (restated) General insurance Financial services Other group activities Total ��000s ��000s ��000s ��000s Insurance revenue 186,142 - - 186,142 Insurance service expenses (127,322) - - (127,322) Net expense from reinsurance contracts held (14,768) - - (14,768) Insurance service result 44,052 - - 44,052 Total investment return (15,281) - - (15,281) Net insurance finance expenses (4,782) - - (4,782) Net insurance and investment result 23,989 - - 23,989 Other finance costs (1,272) - - (1,272) Non-attributable expenses (13,780) - - (13,780) Movement in other provisions (5,241) - - (5,241) Revenue from contracts with customers - 1,753 - 1,753 Financial services income and expenses 163 (1,594) (1,509) (2,940) Revaluation of property, plant and equipment - - - - Profit/(loss) before taxation 3,859 159 (1,509) 2,509 Income taxation (charge)/credit (485) (19) 177 (327) Profit/(loss) for the period 3,374 140 (1,332) 2,182 Other information Insurance acquisition expenses (34,064) - - (34,064) Depreciation/amortisation (4,943) - - (4,943) Impairment of other assets - - - - Capital additions 4,347 - - 4,347 Statement of financial position Segment assets 1,400,379 9,796 19,038 1,429,213 Segment liabilities (1,001,200) (919) (4,444) (1,006,563) FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 6 Segmental information (continued) (a) Operating segments (continued) Year ended 31/12/2022 (restated) General insurance Financial services Other group activities Total ��000s ��000s ��000s ��000s Insurance revenue 379,697 - - 379,697 Insurance service expenses (201,838) - - (201,838) Net expense from reinsurance contracts held (46,755) - - (46,755) Insurance service result 131,104 - - 131,104 Total investment return (10,753) - - (10,753) Net insurance finance expenses (7,342) - - (7,342) Net insurance and investment result 113,009 - - 113,009 Other finance costs (2,559) - - (2,559) Non-attributable expenses (33,048) - - (33,048) Movement in other provisions (8,403) - - (8,403) Revenue from contracts with customers - 3,173 - 3,173 Financial services income and expenses 560 (3,198) (3,407) (6,045) Revaluation of property, plant and equipment (287) - - (287) Profit/(loss) before taxation 69,272 (25) (3,407) 65,840 Income taxation (charge)/credit (8,758) (7) 481 (8,284) Profit/(loss) for the period 60,514 (32) (2,926) 57,556 Other information Insurance acquisition expenses (70,595) - - (70,595) Depreciation/amortisation (13,239) - - (13,239) Impairment of other assets (1,290) - - (1,290) Capital additions 7,026 7,026 Statement of financial position Segment assets 1,361,232 8,988 17,332 1,387,552 Segment liabilities (924,367) (826) (5,430) (930,623) The accounting policies of the reportable segments are the same as the Group accounting policies. Segment profit represents the profit earned by each segment. Central administration costs and Directors' salaries are allocated based on actual activity. Income taxation is a direct cost of each segment. In monitoring segment performance and allocating resources between segments: �� All assets are allocated to reportable segments. Assets used jointly by reportable segments are allocated on the basis of activity by each reportable segment; and �� All liabilities are allocated to reportable segments. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets. The Group's customer base is diverse and it has no reliance on any major customer Insurance risk is not concentrated on any area or on any one line of business. 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 (UNAUDITED) For the half year ended 30 June 2023 Note 6 Segmental information (continued) (a) Operating segments (continued) See below Insurance revenue generated from major product lines Motor and Non-motor: Insurance revenue Motor Non-motor Total ��000s ��000s ��000s Half year ended 30/06/2023 92,116 102,424 194,540 Half year ended 30/06/2022 (restated) 90,722 95,420 186,142 Year ended 31/12/2022 (restated) 183,255 196,442 379,697 (b) Geographical segments The Group's operations are located in Ireland. (c) Insurance service expenses Insurance service expenses, in the General Insurance segment, comprise the following: Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Incurred claims and other expenses (114,744) (110,263) (223,807) Changes that relate to past service - changes in FCF relating to the LIC 59,375 17,005 92,564 Amortisation of insurance acquisition cash flows (36,588) (34,064) (70,595) Total (91,957) (127,322) (201,838) Total expenses, in the General Insurance segment, comprise the following: Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Amortisation of insurance acquisition cash flows (36,588) (34,064) (70,595) Acquisition cash flows recognised when incurred - - - Non-attributable expenses (16,165) (13,780) (33,048) Total expenses (52,753) (47,844) (103,643) FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 6 Segmental information (continued) (c) Insurance service expenses (continued) The below tables provide further details of the total expenses of the Group by reportable segments. Half year ended 30/06/2023 General insurance Financial services Other group activities Total ��000s ��000s ��000s ��000s Employee benefit expense (26,712) (1,041) (866) (28,619) Depreciation (1,142) - - (1,142) Amortisation (4,506) - - (4,506) Other (20,393) (614) (945) (21,952) Total (52,753) (1,655) (1,811) (56,219) Half year ended 30/06/2022 (restated) General insurance Financial services Other group activities Total ��000s ��000s ��000s ��000s Employee benefit expense (24,715) (1,113) (899) (26,727) Depreciation (1,193) - - (1,193) Amortisation (3,751) - - (3,751) Other (18,185) (481) (610) (19,276) Total (47,844) (1,594) (1,509) (50,947) Year ended 31/12/2022 (restated) General insurance Financial services Other group activities Total ��000s ��000s ��000s ��000s Employee benefit expense (53,392) (2,221) (1,595) (57,208) Depreciation (2,348) - - (2,348) Amortisation (10,891) - - (10,891) Other (37,012) (977) (1,812) (39,801) Total (103,643) (3,198) (3,407) (110,248) FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 7 Total investment return The net gain or loss for each class of financial instrument by measurement category is as follows: Amortised Cost FVOCI FVTPL FVTPL Total Half year ended 30/06/2023 Designated Designated Mandatory ��000s ��000s ��000s ��000s ��000s Interest revenue from financial assets not measured at FVTPL Cash and cash equivalents 1,320 - - - 1,320 Government bonds - 896 - - 896 Other debt securities - 2,943 - - 2,943 1,320 3,839 - - 5,159 Net gain on FVTPL investments Collective investment scheme - - - 5,085 5,085 Unquoted investments - - - - - - - - 5,085 5,085 Other Income, net of expenses, from investment properties - - - (86) (86) Unrealised loss on investment properties - - - (748) (748) Net credit impairment loss - (56) - - (56) Net gain on FVOCI debt securities - 7,720 - - 7,720 - 7,664 - (834) 6,830 Recognised in income statement 1,320 2,818 - 4,251 8,389 Recognised in OCI - 8,685 - - 8,685 Recognised in total comprehensive income 1,320 11,503 - 4,251 17,074 During the period to 30 June 2023 a loss of ��965,000 on FVOCI investments was reclassified from Other Comprehensive Income to the Consolidated Income Statement. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 7 Total investment return (continued) Amortised Cost FVOCI FVTPL FVTPL Total Half year ended 30/06/2022 (restated) Designated Designated Mandatory ��000s ��000s ��000s ��000s ��000s Interest revenue/ (expense) from financial assets not measured at FVTPL Cash and cash equivalents (291) - - - (291) Government bonds - 548 - - 548 Other debt securities 1,637 - - 1,637 (291) 2,185 - - 1,894 Net loss on FVTPL investments Collective investment scheme - - - (17,272) (17,272) Unquoted investments - - - - - - - - (17,272) (17,272) Other Income, net of expenses, from investment properties - - - 227 227 Unrealised gain/ (loss) on investment properties - - - - - Net credit impairment loss - (141) - - (141) Net loss on FVOCI debt securities - (63,842) - - (63,842) - (63,983) - 227 (63,756) Recognised in income statement (291) 2,055 - (17,045) (15,281) Recognised in OCI - (63,853) - - (63,853) Recognised in total comprehensive income (291) (61,798) - (17,045) (79,134) During the period to 30 June 2022 a gain of ��11,000 on FVOCI investments was reclassified from Other Comprehensive Income to the Consolidated Income Statement. Amortised Cost FVOCI FVTPL FVTPL Total Year ended 31/12/2022 (restated) Designated Designated Mandatory ��000s ��000s ��000s ��000s ��000s Interest revenue/ (expense) from financial assets not measured at FVTPL Cash and cash equivalents (37) - - - (37) Government bonds - 1,330 - - 1,330 Other debt securities 3,885 - - 3,885 (37) 5,215 - - 5,178 Net loss on FVTPL investments Collective investment scheme - - - (14,655) (14,655) Unquoted investments - - (92) - (92) - - (92) (14,655) (14,747) Other Income, net of expenses, from investment properties - - - 196 196 Unrealised loss on investment properties - - - (1,003) (1,003) Net credit impairment loss - (418) - - (418) Net loss on FVOCI debt securities - (89,761) - - (89,761) - (90,179) - (807) (90,986) Recognised in income statement (37) 4,838 (92) (15,462) (10,753) Recognised in OCI - (89,802) - - (89,802) Recognised in total comprehensive income (37) (84,964) (92) (15,462) (100,555) During the year to 31 December 2022 a gain of ��41,000 on FVOCI investments was reclassified from Other Comprehensive Income to the Consolidated Income Statement. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 8 Income taxation charge The effective tax rate for the period was 15.6% (2022: 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 higher than the standard Irish corporation tax rate of 12.5% primarily due to assumed higher disallowable expenses in the period. Note 9 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 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Earnings Profit for the period for the purpose of basic earnings per share 33,307 2,182 57,274 Profit for the period for the purpose of diluted earnings per share 33,307 2,182 57,274 Number of shares No. No. No. Weighted average number of ordinary shares for the purpose of basic earnings per share (excludes treasury shares) 36,583,005 35,427,015 35,507,806 Weighted average number of ordinary shares for the purpose of diluted earnings per share (excludes treasury shares) 37,458,042 36,346,524 36,424,983 Cent Cent Cent Basic earnings per share 91 6 161 Diluted earnings per share1 89 6 157 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 attributable to the parent entity for the year to the amounts used as the numerators in calculating basic and diluted earnings per share for the year and the comparative year including the individual effect of each class of instruments that affects earnings per share: Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Profit attributable to the parent entity for the period 33,307 2,182 57,556 2023 dividend of 0.0 cent (2022:8.4 cent) per share on 14% non-cumulative preference shares of ��0.60 each - - (113) 2023 dividend of 0.0 cent (2022:8.4 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 33,307 2,182 57,274 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 9 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 30/06/23 (unaudited) Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Weighted average number of ordinary shares for the purpose of calculating basic earnings per share 36,583,005 35,427,015 35,507,806 Weighted average of potential vesting of share based payments 875,037 919,509 917,177 Weighted average number of ordinary shares for the purpose of calculating diluted earnings per share 37,458,042 36,346,524 36,424,983 Note 10 Financial instrument and fair value measurement (a) Financial Instruments Half year ended 30/06/23 (unaudited) Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Financial Assets At amortised cost: Cash and cash equivalents 89,685 148,771 108,635 Deposits 10,000 20,000 10,000 Other receivables 23,689 20,161 15,148 Loans 506 520 568 At fair value: Cash and cash equivalents 24,148 - 56,605 Equity and debt instruments at FVTPL -mandatory 148,018 130,454 132,965 Equity and debt instruments at FVTPL -designated 1,129 1,129 1,129 Debt instruments at FVOCI - designated 851,124 851,805 833,865 Financial Liabilities At amortised cost: Other payables 39,875 30,805 35,628 Lease liabilities 4,214 4,974 4,600 Subordinated debt 49,690 49,632 49,662 An ECL for 'Debt instruments at FVOCI' of ��928,000 (30 June 2022: ��808,000, 31 December 2022: ��1,003,000) does not reduce the carrying amount of the asset in the statement of financial position, which remains at fair value. Instead an amount equal to the allowance that would arise if the assets were measured at amortised cost is recognised in OCI with a corresponding charge to provision for credit losses in the income statement. An ECL of ��312,000 (30 June 2022: ��388,000, 31 December 2022: ��312,000) has reduced the carrying value of 'Other receivables' and an ECL of ��12,000 (30 June 2022: ��17,000, 31 December 2022: ��12,000), has reduced the carrying value of 'Loans'. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 10 Financial instrument and fair value measurement (continued) (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: Half year ended 30/06/23 Half year ended 30/06/23 Half year ended 30/06/22 Half year ended 30/06/22 Year ended 31/12/22 Year ended 31/12/22 (restated) (restated) (restated) (restated) Fair value Carrying value Fair value Carrying value Fair value Carrying value ��000s ��000s ��000s ��000s ��000s ��000s Assets Loans (restated) 607 506 624 520 682 568 Financial liabilities Subordinated debt 45,484 49,690 49,119 49,632 46,129 49,662 The carrying amount of the following assets and liabilities is considered a reasonable approximation of their fair value: �� Cash and cash equivalents �� Deposits �� Other receivables �� Other payables �� Lease liabilities Certain assets and liabilities are measured in the 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. �� Debt instruments at fair value through other comprehensive income - quoted debt securities are fair valued using latest available closing bid price. �� Collective investment schemes, fair value through profit or loss (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 end of the periods disclosed. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 10 Financial instrument and fair value measurement (continued) (b) Fair value measurement (continued) 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). Valuation techniques used are outlined below; �� Collective investment schemes, fair value through profit or loss (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. �� Unquoted investments, fair value through profit or loss, are classified as Level 3 as they are not traded in an active market. �� Investment property and property held for own use were fair valued by independent external professional valuers at year end 2022. The properties were revalued at 30 June 2023. Group occupied properties have been valued on a vacant possession basis applying hypothetical 10-year leases and assumptions of void and rent free periods, market rents, capital yields and purchase costs which are derived from comparable transactions and adjusted for property specific factors as determined by the valuer. Group investment properties have been valued using the investment method based on the long leasehold interest in the subject property, the contracted values of existing tenancies, assumptions of void and rent free periods and market rents for vacant lots, and capital yields and purchase costs which are derived from comparable transactions and adjusted for property specific factors as determined by the valuer. Half year ended 30/06/23 Half year ended 30/06/22 (restated) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total ��000s ��000s ��000s ��000s ��000s ��000s ��000s ��000s Assets Investment property - - 14,304 14,304 - - 16,053 16,053 Property held for own use - - 15,377 15,377 - - 16,327 16,327 Financial assets Cash and cash equivalents 24,148 - - 24,148 - - - - Investments at fair value through profit or loss - collective investment schemes 107,008 - 41,010 148,018 112,720 - 17,643 130,363 Investments at fair value through profit or loss -unquoted investments - - 1,129 1,129 - - 1,220 1,220 Investments at fair value through other comprehensive income - quoted debt securities 851,124 - - 851,124 851,805 - - 851,805 Total assets 982,280 - 71,820 1,054,100 964,525 - 51,243 1,015,768 Total liabilities - - - - - - - - FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 10 Financial instrument and fair value measurement (continued) (b) Fair value measurement (continued) Year ended 31/12/22 (restated) Level 1 Level 2 Level 3 Total ��000s ��000s ��000s ��000s Assets Investment property - - 15,052 15,052 Property held for own use - - 15,984 15,984 Financial assets Cash and cash equivalents 56,605 - - 56,605 Investments at fair value through profit or loss - collective investment schemes 105,419 - 27,546 132,965 Investments at fair value through profit or loss -unquoted investments - - 1,129 1,129 Investments at fair value through other comprehensive income - quoted debt securities 833,865 - - 833,865 Total assets 995,889 - 59,711 1,055,600 Total liabilities - - - - A reconciliation of Level 3 fair value measurement of financial assets is shown in the table below. Half year ended 30/06/23 Half year ended 30/06/22 Year ended 31/12/22 (restated) (restated) ��000s ��000s ��000s Opening balance Level 3 financial assets 59,711 47,551 47,551 Transfers-in - - - Additions 14,503 4,415 12,349 Disposals - (1,739) - Unrealised movements recognised in consolidated income statement (2,394) 1,016 (189) Closing balance Level 3 financial assets 71,820 51,243 59,711 Investment property and property held for own use were fair valued by independent external professional valuers at 31 December 2022 (refer to note 13 and note 16 in the Group Annual Report for year ended 31 December 2022). At the period ending 30 June 2023 the valuations for owner occupied property and investment property were reduced by ��546,000 and ��748,000 respectively. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 11 Other receivables Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Prepayments and accrued income 10,881 7,810 6,084 Other debtors 12,127 12,351 8,882 Accrued interest and rent 681 - 182 Total other receivables 23,689 20,161 15,148 Note 12 Cash and cash equivalents Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Short term deposits 45,437 126,041 80,661 Money market fund 24,148 - 56,605 Cash in hand 44,248 22,730 27,974 Total cash and cash equivalents 113,833 148,771 165,240 Note 13 Called up share capital presented as equity Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) 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 1 January 2022 35,461,206 - 21,277 21,277 Issued during the period 290,078 - 174 174 At the end of the period 35,751,284 - 21,451 21,451 At 1 January 2023 35,751,284 21,451 Issued during the period 269,688 162 At the end of the period 36,020,972 21,613 (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 21,745 21,583 21,583 The number of ordinary shares of ��0.60 each held as treasury shares at 30 June 2023 was 164,005. At 31 December 2022 the number held was 164,005. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 14 Other reserves Revaluation reserve FVOCI reserve Insurance/RI finance reserve Total ��000s ��000s ��000s ��000s Balance at 1 January 2023 755 (69,826) 20,984 (48,087) Other comprehensive income - 7,599 (2,359) 5,240 Balance at 30 June 2023 755 (62,227) 18,625 (42,847) Balance at 1 January 2022 752 8,751 (8,928) 575 Other comprehensive income - (55,873) 24,358 (31,515) Balance at 30 June 2022 752 (47,122) 15,430 (30,940) Balance at 1 January 2022 752 8,751 (8,928) 575 Other comprehensive income 3 (78,577) 29,912 (48,662) Balance at 31 December 2022 755 (69,826) 20,984 (48,087) The reconciliation of cumulative amounts of the fair value reserve within OCI, for investment assets measured at FVOCI relating to the claims that the Group has applied the retrospective approach at the IFRS 17 transition date, is provided in the tables below. 30/06/2023 30/06/2022 At transition Post transition Total At transition Post transition Total ��000s ��000s ��000s ��000s ��000s ��000s Opening FVOCI reserve (55,736) (14,090) (69,826) 8,751 - 8,751 Net movement during period 7,037 684 7,721 (55,539) (8,303) (63,842) Net movement reclassified to profit or loss on disposal 964 - 964 (11) - (11) Income tax relating to these items (1,000) (86) (1,086) 6,942 1,038 7,980 Closing FVOCI reserve (48,735) (13,492) (62,227) (39,857) (7,265) (47,122) 31/12/22 At transition Post transition Total ��000s ��000s ��000s Opening FVOCI reserve 8,751 - 8,751 Net movement during period (73,659) (16,102) (89,761) Net movement reclassified to profit or loss on disposal (41) - (41) Income tax relating to these items 9,213 2,012 11,225 Closing FVOCI reserve (55,736) (14,090) (69,826) Note 15 Insurance and reinsurance contracts The breakdown of groups of insurance contracts issued, and reinsurance contracts held, that are in an asset position and those in a liability position is set out in the table below: Half year ended 30/06/23 Half year ended 30/06/22 (restated) Assets Liabilities Net Assets Liabilities Net ��000s ��000s ��000s ��000s ��000s ��000s Total insurance contracts issued - (787,522) (787,522) - (897,112) (897,112) Total reinsurance contracts held 120,234 (656) 119,578 158,069 (458) 157,611 Year ended 31/12/22 (restated) Assets Liabilities Net ��000s ��000s ��000s Total insurance contracts issued - (826,621) (826,621) Total reinsurance contracts held 136,657 (610) 136,047 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 15 Insurance and reinsurance contracts (continued) The roll-forward of the net asset or liability for insurance contracts issued, showing the liability for remaining coverage and the liability for incurred claims for major product lines are disclosed in the tables below: Half year ended 30/06/23 Total insurance contracts issued Liability for remaining coverage Liability for incurred claims Total Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment ��000s ��000s ��000s ��000s ��000s Insurance contract liabilities as at 01/01 117,798 - 641,074 67,749 826,621 Insurance contract assets as at 01/01 - - - - - Net insurance contract (assets)/liabilities as at 01/01 117,798 - 641,074 67,749 826,621 Insurance revenue (194,540) - - - (194,540) Incurred claims and other expenses - - 106,384 8,360 114,744 Amortisation of insurance acquisition cash flows 36,588 - - - 36,588 Losses on onerous contracts and reversals of those losses - - - - - Changes that relate to past service-Changes in FCF relating to the LIC - - (50,774) (8,601) (59,375) Impairment of assets for insurance acquisition cash flow - - - - - Reversal of impairment of assets for insurance acquisition cash flows - - - - - Investment components - - - - - Insurance service expenses 36,588 - 55,610 (241) 91,957 Insurance service result (157,952) - 55,610 (241) (102,583) Insurance finance expenses - - 6,919 - 6,919 Total amounts recognised in comprehensive income (157,952) - 62,529 (241) (95,664) Premium received 200,203 - - - 200,203 Claims and other directly attributable expenses paid - - (105,098) - (105,098) Insurance acquisition cash flows (38,540) - - - (38,540) Total cash flows 161,663 - (105,098) - 56,565 Net insurance contract (assets)/liabilities as at 30/06: Insurance contract liabilities as at 30/06 121,509 - 598,505 67,508 787,522 Insurance contract assets as at 30/06 - - - - - Net insurance contract (assets)/liabilities as at 30/06 121,509 - 598,505 67,508 787,522 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 15 Insurance and reinsurance contracts (continued) Half year ended 30/06/22 (restated) Total insurance contracts issued Liability for remaining coverage Liability for incurred claims Total Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment ��000s ��000s ��000s ��000s ��000s Insurance contract liabilities as at 01/01 114,940 - 750,038 65,003 929,981 Insurance contract assets as at 01/01 - - - - - Net insurance contract (assets)/liabilities as at 01/01 114,940 - 750,038 65,003 929,981 Insurance revenue (186,142) - - - (186,142) Incurred claims and other expenses - - 102,883 7,380 110,263 Amortisation of insurance acquisition cash flows 34,064 - - - 34,064 Losses on onerous contracts and reversals of those losses - - - - - Changes that relate to past service-Changes in FCF relating to the LIC - - (13,079) (3,926) (17,005) Impairment of assets for insurance acquisition cash flow - - - - - Reversal of impairment of assets for insurance acquisition cash flows - - - - - Investment components - - - - - Insurance service expenses 34,064 - 89,804 3,454 127,322 Insurance service result (152,078) - 89,804 3,454 (58,820) Insurance finance expenses - - (29,457) - (29,457) Total amounts recognised in comprehensive income (152,078) - 60,347 3,454 (88,277) Premium received 188,249 - - - 188,249 Claims and other directly attributable expenses paid - - (97,589) - (97,589) Insurance acquisition cash flows (35,252) - - - (35,252) Total cash flows 152,997 - (97,589) - 55,408 Net insurance contract (assets)/liabilities as at 30/06: Insurance contract liabilities as at 30/06 115,859 - 712,796 68,457 897,112 Insurance contract assets as at 30/06 - - - - - Net insurance contract (assets)/liabilities as at 30/06 115,859 - 712,796 68,457 897,112 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 15 Insurance and reinsurance contracts (continued) Year ended 31/12/22 (restated) Total insurance contracts issued Liability for remaining coverage Liability for incurred claims Total Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment ��000s ��000s ��000s ��000s ��000s Insurance contract liabilities as at 01/01 114,940 - 750,038 65,003 929,981 Insurance contract assets as at 01/01 - - - - - Net insurance contract (assets)/liabilities as at 01/01 114,940 - 750,038 65,003 929,981 Insurance revenue (379,697) - - - (379,697) Incurred claims and other expenses - - 209,625 14,182 223,807 Amortisation of insurance acquisition cash flows 70,595 - - - 70,595 Losses on onerous contracts and reversals of those losses - - - - - Changes that relate to past service-Changes in FCF relating to the LIC - - (81,128) (11,436) (92,564) Impairment of assets for insurance acquisition cash flow - - - - - Reversal of impairment of assets for insurance acquisition cash flows - - - - - Investment components - - - - - Insurance service expenses 70,595 - 128,497 2,746 201,838 Insurance service result (309,102) - 128,497 2,746 (177,859) Insurance finance expenses - - (33,657) - (33,657) Total amounts recognised in comprehensive income (309,102) - 94,840 2,746 (211,516) Premium received 384,935 - - - 384,935 Claims and other directly attributable expenses paid - - (203,804) - (203,804) Insurance acquisition cash flows (72,975) - - - (72,975) Total cash flows 311,960 - (203,804) - 108,156 Net insurance contract (assets)/liabilities as at 31/12: Insurance contract liabilities as at 31/12 117,798 - 641,074 67,749 826,621 Insurance contract assets as at 31/12 - - - - - Net insurance contract (assets)/liabilities as at 31/12 117,798 - 641,074 67,749 826,621 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 15 Insurance and reinsurance contracts (continued) The roll-forward of the net asset or liability for reinsurance contracts held showing assets for remaining coverage and amounts recoverable on incurred claims arising on property and liability insurance ceded to reinsurers is disclosed in the tables below: Half year ended 30/06/23 Assets for remaining coverage Amounts recoverable on incurred claims Total Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment ��000s ��000s ��000s ��000s ��000s Reinsurance contracts held that are liabilities as at 01/01 (631) - 20 1 (610) Reinsurance contracts held that are assets as at 01/01 (2,530) - 131,797 7,390 136,657 Net reinsurance contracts held as at 01/01 (3,161) - 131,817 7,391 136,047 Reinsurance expense (19,540) - - - (19,540) Change in amounts recoverable for incurred claims and other expenses - - 5,060 355 5,415 Changes that relate to past service-changes in the FCF relating to incurred claims recovery - - (22,954) (104) (23,058) Loss-recovery on onerous underlying contracts and adjustments - - - - - Effect of changes in risk of reinsurers' non-performance - - 3 - 3 Net income/expense from reinsurance contracts held (19,540) - (17,891) 251 (37,180) Finance income / expense from reinsurance contracts held - - 2,119 - 2,119 Total amounts recognised in comprehensive income (19,540) - (15,772) 251 (35,061) Premiums paid, net of commission ceded 19,329 - - - 19,329 Recoveries from reinsurance - - (737) - (737) Total cash flows 19,329 - (737) - 18,592 Net reinsurance contract assets/(liabilities) held as at 30/06: Reinsurance contracts held that are liabilities as at 30/06 (678) - 21 1 (656) Reinsurance contracts held that are assets as at 30/06 (2,694) - 115,287 7,641 120,234 Net reinsurance contracts held as at 30/06 (3,372) - 115,308 7,642 119,578 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 15 Insurance and reinsurance contracts (continued) Half year ended 30/06/22 (restated) Assets for remaining coverage Amounts recoverable on incurred claims Total Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment ��000s ��000s ��000s ��000s ��000s Reinsurance contracts held that are liabilities as at 01/01 (809) - 20 1 (788) Reinsurance contracts held that are assets as at 01/01 (1,297) - 201,827 8,358 208,888 Net Reinsurance contracts held as at 01/01 (2,106) - 201,847 8,359 208,100 Reinsurance expense (17,232) - - - (17,232) Change in amounts recoverable for incurred claims and other expenses - - 6,375 577 6,952 Changes that relate to past service-changes in the FCF relating to incurred claims recovery - - (4,455) (33) (4,488) Loss-recovery on onerous underlying contracts and adjustments - - - - - Effect of changes in risk of reinsurers' non-performance - - - - - Net income/(expense) from reinsurance contracts held (17,232) - 1,920 544 (14,768) Finance income / (expense) from reinsurance contracts held - - (6,401) - (6,401) Total amounts recognised in comprehensive income (17,232) - (4,481) 544 (21,169) Premiums paid, net of commission ceded 17,619 - - - 17,619 Recoveries from reinsurance - - (46,939) - (46,939) Total cash flows 17,619 - (46,939) - (29,320) Net reinsurance contract assets/(liabilities) held as at 30/06: Reinsurance contracts held that are liabilities as at 30/06 (479) - 20 1 (458) Reinsurance contracts held that are assets as at 30/06 (1,240) - 150,407 8,902 158,069 Net reinsurance contracts held as at 30/06 (1,719) - 150,427 8,903 157,611 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 15 Insurance and reinsurance contracts (continued) Year ended 31/12/22 (restated) Assets for remaining coverage Amounts recoverable on incurred claims Total Excluding loss component Loss component Estimates of the present value of future cash flows Risk Adjustment ��000s ��000s ��000s ��000s ��000s Reinsurance contracts held that are liabilities as at 01/01 (809) - 20 1 (788) Reinsurance contracts held that are assets as at 01/01 (1,297) - 201,827 8,358 208,888 Net Reinsurance contracts held as at 01/01 (2,106) - 201,847 8,359 208,100 Reinsurance expense (34,814) - - - (34,814) Change in amounts recoverable for incurred claims and other expenses - - 14,508 1,048 15,556 Changes that relate to past service-changes in the FCF relating to incurred claims recovery - - (25,488) (2,016) (27,504) Loss-recovery on onerous underlying contracts and adjustments - - - - - Effect of changes in risk of reinsurers' non-performance - - 7 - 7 Net income/(expense) from reinsurance contracts held (34,814) - (10,973) (968) (46,755) Finance income / (expense) from reinsurance contracts held - - (6,813) - (6,813) Total amounts recognised in comprehensive income (34,814) - (17,786) (968) (53,568) Premiums paid, net of commission ceded 33,759 - - - 33,759 Recoveries from reinsurance - - (52,244) - (52,244) Total cash flows 33,759 - (52,244) - (18,485) Net reinsurance contract assets/(liabilities) held as at 31/12: Reinsurance contracts held that are liabilities as at 31/12 (631) - 20 1 (610) Reinsurance contracts held that are assets as at 31/12 (2,530) - 131,797 7,390 136,657 Net reinsurance contracts held as at 31/12 (3,161) - 131,817 7,391 136,047 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 MIBI Levy MIICF contribution Consequential payments State subsidies Total ��000s ��000s ��000s ��000s ��000s Balance at 1 January 2023 6,195 3,642 1,266 - 11,103 Provided in the period 2,952 1,960 27 7,500 12,439 Net amounts paid (2,952) (3,642) (198) - (6,792) Balance at 30 June 2023 6,195 1,960 1,095 7,500 16,750 Balance at 1 January 2022 6,681 3,645 1,945 - 12,271 Provided in the period 3,347 1,894 - - 5,241 Net amounts paid (3,347) (3,649) (454) - (7,450) Balance at 30 June 2022 (restated) 6,681 1,890 1,491 - 10,062 Balance at 1 January 2022 6,681 3,645 1,945 - 12,271 Provided in the period 4,751 3,642 10 - 8,403 Net amounts paid (5,237) (3,645) (689) - (9,571) Balance at 31 December 2022 (restated) 6,195 3,642 1,266 - 11,103 Note 16 Other provisions MIBI Levy The Group's share of the Motor Insurers' Bureau of Ireland 'MIBI' levy for 2023 is based on its estimated market share in the current year at the Statement of Financial Position date. Payments of the total amount provided is made in equal instalments throughout the year. MIICF Contribution The Group's contribution to the Motor Insurers' Insolvency Compensation Fund 'MIICF' for 2023 is based on 2% of its Motor Gross Written Premium. Payment is expected to be made in the first half of 2024. Consequential payments The balance of the provision of ��1,095,000 is based on the best estimate of the Consequential Payments provision in respect of the FSPO decisions and payments are expected to be made before the end of the year. State subsidies The Group has included a provision of ��7,500,000 in the financial statements in respect of our current estimate of the cost of a constructive obligation arising from the deduction of State subsidies from Business Interruption claims payments following Covid-19 closures. Payment to the State is expected to be made in the coming year. FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 17 Deferred taxation asset/ (liability) Retirement benefit surplus Unrealised gains on investment & loans Insurance/ Reinsurance finance reserve Revaluation surplus on investment properties Losses carried forward Other timing differences Total ��000s ��000s ��000s ��000s ��000s ��000s ��000s Balance at 1 January 2023 (1,061) 9,974 (2,998) (1,387) 329 (1,228) 3,629 Credited/ (debited) to the Consolidated Statement of Comprehensive Income 125 (1,086) 337 - - - (624) Debited to the Consolidated Income Statement - - - - (81) - (81) Balance at 30 June 2023 (936) 8,888 (2,661) (1,387) 248 (1,228) 2,924 Balance at 1 January 2022 (1,363) (1,251) 1,276 (1,387) 410 (1,576) (3,891) (Debited)/ credited to the Consolidated Statement of Comprehensive Income (485) 7,981 (3,481) - - - 4,015 Credited to the Consolidated Income Statement - - - - - 2,050 2,050 Balance at 30 June 2022 (restated) (1,848) 6,730 (2,205) (1,387) 410 474 2,174 Balance at 1 January 2022 (1,363) (1,251) 1,276 (1,387) 410 (1,576) (3,891) Credited/ (debited) to the Consolidated Statement of Comprehensive Income 284 11,225 (4,274) - - (2) 7,233 Credited/ (debited) to the Consolidated Income Statement 18 - - - (81) 350 287 Balance at 31 December 2022 (restated) (1,061) 9,974 (2,998) (1,387) 329 (1,228) 3,629 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 18 Other payables Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Amounts falling due within one year: Payables and accruals 38,007 29,173 33,947 PAYE/PRSI 1,868 1,632 1,681 Total payables 39,875 30,805 35,628 Note 19 Dividends Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Paid in period: 2022 dividend of 8.4 cent (2021: 8.4 cent) per share on 14% non-cumulative preference share of ��0.60 each 113 113 113 2022 dividend of 4.8 cent (2021: 4.8 cent) per share on 8% non-cumulative preference share of ��0.60 each 169 169 169 2022 final dividend of 100.0 cent (2021:100.0 cent) per share on ordinary shares of ��0.60 each 35,884 35,588 35,588 Total dividends paid 36,166 35,870 35,870 2022 dividend payments were approved by the shareholders at the Annual General Meeting on 11 May 2023 and paid on 16 May 2023. A special dividend of 100 cent per ordinary share (��35,857,000) has been approved by the Board of FBD Holdings plc on 10 August 2023. The approved dividend has not been included as a liability in the Consolidated Statement of Financial Position at 30 June 2023. Note 20 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 Scheme liabilities increased slightly during the period while the value of Scheme assets fell marginally, reducing the Scheme surplus at 30 June 2023. The amounts recognised in the Consolidated Statement of Financial Position are as follows: Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Fair value of plan assets 70,400 79,600 71,170 Present value of defined benefit obligation (62,900) (64,800) (62,671) Net retirement benefit surplus 7,500 14,800 8,499 FBD HOLDINGS PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the half year ended 30 June 2023 Note 21 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 2022 Annual Report. An analysis of share-based payments to key management personnel is also included in Note 35 of the 2022 Annual Report. The level and nature of related party transactions in the first half of 2023 are consistent with the transactions disclosed in the 2022 Annual Report. Note 22 Contingent liabilities and contingent assets There were no contingent liabilities or contingent assets at 30 June 2023, 30 June 2022 (restated) or 31 December 2022 (restated). Note 23 Subsequent events There have been no subsequent events that would have a material impact on the interim financial statements. Note 24 Information This half yearly report and the Annual Report for the year ended 31 December 2022 are available on the Company's website at www.fbdgroup.com. Note 25 Approval of Half Yearly Report The half yearly report was approved by the Board of Directors of FBD Holdings plc on 10 August 2023. RESPONSIBILITY STATEMENT The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 and the Central Bank of Ireland (Investment Market Conduct) Rules 2019 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 Tom��s �� Midheach Chairman Group Chief Executive 10 August 2023 FBD HOLDINGS PLC APPENDIX ALTERNATIVE PERFORMANCE MEASURES (APMs) (UNAUDITED) 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 is a component of insurance revenue and is widely used across the general insurance industry. The calculation of the APMs is based on the following data: Note Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Loss ratio Incurred claims and other expenses 6(c) 114,744 110,263 223,807 Changes that relate to past service - changes in FCF relating to the LIC 6(c) (59,375) (17,005) (92,564) Net expense from reinsurance contracts held 37,180 14,768 46,755 Movement in other provisions 12,439 5,241 8,403 Total claims incurred and movement in other provisions 104,988 113,267 186,401 Insurance revenue 194,540 186,142 379,697 Loss ratio (Total claims incurred and movement in other provisions/Insurance revenue) 54.0% 60.9% 49.1% Expense ratio Amortisation of insurance acquisition cash flow 6(c) 36,588 34,064 70,595 Acquisition cash flows recognised when incurred 6(c) - - - Non-attributable expenses 6(c) 16,165 13,780 33,048 Total insurance acquisition and non-attributable expenses 6(c) 52,753 47,844 103,643 Insurance revenue 194,540 186,142 379,697 Expense ratio (Total insurance acquisition and non-attributable expenses /Insurance revenue) 27.1% 25.7% 27.3% % % % Combined operating ratio Loss ratio 54.0 60.9 49.1 Expense ratio 27.1 25.7 27.3 Combined operating ratio (Loss ratio + Expense ratio) 81.1 86.6 76.4 FBD HOLDINGS PLC APPENDIX ALTERNATIVE PERFORMANCE MEASURES (APMs) (UNAUDITED) (continued) Half year ended 30/06/23 Half year ended 30/06/22 (restated) Year ended 31/12/22 (restated) ��000s ��000s ��000s Actual investment return Investment return recognised in consolidated income statement 8,389 (15,281) (10,753) Investment return recognised in statement of comprehensive income 8,685 (63,853) (89,802) Actual investment return 17,074 (79,134) (100,555) Average investment assets 1,143,242 1,194,183 1,169,411 Investment return (Actual investment return/ Average investment assets) 1.5% (6.6%) (8.6%) Net asset value per share (NAV per share) Shareholders' funds - equity interests 456,932 419,727 454,006 Number of shares No. No. No. Closing number of ordinary shares (excluding Treasury) 35,856,967 35,587,279 35,587,279 Cent Cent Cent Net asset value per share (Shareholders' funds/Closing number of ordinary shares) 1,274 1,179 1,276 Return on Equity ��000s ��000s ��000s Weighted Average (WA) equity attributable to ordinary shareholders 455,469 450,008 467,148 Result for the period 33,307 2,182 57,556 ROE (Result for the period/WA equity attributable to ordinary shareholders) % 15 1 % 11 % 12 Underwriting result ��000s ��000s ��000s Insurance service result 65,403 44,052 131,104 Non-attributable expenses (16,165) (13,780) (33,048) Other provisions (12,439) (5,241) (8,403) Underwriting result 36,799 25,031 89,653 Gross written premium ��000s ��000s ��000s Insurance revenue 194,540 186,142 379,697 Less: Instalment premium2 (2,070) (2,088) (4,291) Add: Movement in unearned premium2 13,962 8,378 7,245 Gross written premium 206,432 192,432 382,651 1Annualised 2These items cannot be reconciled to the Financial Statements Gross written premium: the total premium on insurance underwritten by an insurer or reinsurer during a specific period, before deduction of reinsurance premium. Underwriting result: Insurance service result less non-attributable expenses and movement in other provisions. Expense ratio: Insurance acquisition expenses and non-attributable expenses as a percentage of insurance revenue. Loss ratio: Claims incurred net of reinsurance result as a percentage of insurance revenue. Combined operating ratio: the sum of the loss ratio and expense ratio. A combined operating ratio below 100% indicates profitable insurance results. A combined operating ratio over 100% indicates unprofitable results. 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 2023 (the "period"). 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 Central Bank (Investment Market Conduct) Rules 2019. The interim financial statements, comprise: �� the condensed consolidated statement of financial position as at 30 June 2023; �� the condensed consolidated income statement and condensed 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 condensed consolidated 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 Central Bank (Investment Market Conduct) Rules 2019. As disclosed in note 3 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. Basis for conclusion We conducted our review in accordance with International Standard on Review Engagements (Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' ("ISRE (Ireland) 2410") issued for use in 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. Conclusions relating to going concern Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (Ireland) 2410. However future events or conditions may cause the group to cease to continue as a going concern. 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 Central Bank (Investment Market Conduct) Rules 2019. In preparing the half yearly report including the interim financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so. Our responsibility is to express a conclusion on the interim financial statements in the half yearly report based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. 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 Central Bank (Investment Market Conduct) Rules 2019 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. PricewaterhouseCoopers Chartered Accountants 10 August 2023 Dublin Notes: (a) The maintenance and integrity of the FBD Holdings plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. (b) Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 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 [email protected] or visit www.rns.com. RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy. END IR NKKBDBBKBKFD

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