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FBD Holding Plc — Interim / Quarterly Report 2016
Aug 12, 2016
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Interim / Quarterly Report
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RNS Number : 9903G
FBD Holdings PLC
12 August 2016
FBD HOLDINGS PLC
12 August 2016
FBD HOLDINGS PLC
Half Yearly Report
For the six months ended 30 June 2016
KEY HIGHLIGHTS
· Gross Written Premium of €181m down 2%, largely driven by a reduction in broker business
· Improved risk selection and price adequacy is driving a lower current year loss ratio
· No further prior year loss development
· Combined Operating Ratio ("COR") of 101%
· €3.7m loss before tax in first half of 2016
· Strong further progress with our turnaround setting FBD firmly on track for full year profitability in 2017:
o Senior management appointments, including new Chief Financial Officer and Chief Commercial Officer
o Insurance and Holdings Boards streamlined for greater oversight and control
o A number of new Board appointments
o Strong focus on Irish farm and small business sectors with a complementary single brand consumer strategy
o Further pricing and underwriting actions taken
o Launch of new IT policy administration system in June and further roll-out well underway
| FINANCIAL SUMMARY | 2016 €000s |
2015 €000s |
| Gross written premium | 180,845 | 184,778 |
| Underwriting loss | (1,595) | (103,466) |
| Loss before taxation | (3,652) | (96,416) |
| Cent | Cent | |
| Basic loss per share | (9) | (244) |
| Net assets per share | 607 | 512 |
· Gross written premium down €4m with a €10m reduction in business written through brokers
· Average premium rate increases of 11%, offset by an 7% decline in policy volume from direct operations
· COR of 101% compared to a reported 167% for the same period last year
· Net loss before tax of €3.7m from continued and discontinued operations
· Annualised total investment return of 1.9%
· Capital levels within target range of 110%-130% of Solvency Capital Requirement ("SCR")
Fiona Muldoon, Group Chief Executive, said:
"These results demonstrate that we are returning the business to profitability. There is increasing stability in our reserves with no further prior year development recorded since the strengthening that occurred one year ago. As expected, there was a net loss of €3.7m in the first half of 2016. We are firmly on track to deliver full year profitability in 2017. We remain focussed on our customer base in the Irish farm and small business sectors, backed up by a single brand consumer strategy. We will continue to serve that market in difficult trading circumstances.
We believe that structural reforms are necessary to tackle injury claims inflation and address the impact claims costs are having on the affordability of insurance for farmers, businesses and other consumers. The re-pricing of certain risk classes will need to continue for a further period to allow FBD to fully restore profitability for its shareholders. While FBD notes the various government and industry initiatives underway to identify the cause of claims and cost inflation, we believe there must be substantial reform to tackle these issues. In the absence of such reform we believe Irish insurance customers will bear the cost of much higher premiums than those seen in other countries."
A presentation will be made to analysts at 9am today, a copy of which will be available on our Group website www.fbdgroup.com.
| Enquiries | Telephone |
| FBD | |
| Fiona Muldoon, Group Chief Executive | +353 1 409 3208 |
| John O'Grady, Group Chief Financial Officer | |
| Peter Jackson, Head of Investor Relations Kathryn Speedie, Corporate Communications Officer |
|
| Powerscourt | |
| Rory Godson/Jack Hickey | +353 83 448 8339 |
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 33 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 | Irish Stock Exchange | UK Listing Authority |
| Listing Category | Premium | Premium (Equity) |
| Trading Venue | Irish Stock Exchange | London Stock Exchange |
| Market | Main Securities Market | Main Market |
| ISIN | IE0003290289 | IE0003290289 |
| Ticker | FBD.I or EG7.IR | FBH.L |
OVERVIEW
Strong progress has been made in the first half of 2016, The turnaround strategy puts the Group on track to restore profitability in 2017. The claims environment continues to be difficult and the re-pricing of certain risk classes will need to continue for a further period. The uncertainty in the claims environment requires a robust response from all stakeholders in the insurance market. FBD notes the various government and industry initiatives that are being undertaken to get to the root cause of claims and cost inflation. FBD continues to implement all necessary steps under its control to return the business to profitability.
The Group recorded a loss before tax from continuing and discontinued operations of €3.7m to June 2016 (2015: €96.4m).
UNDERWRITING
Premium income
The Group continues to focus on its core farm and small business customers, along with a single brand consumer strategy. It continues to reduce its exposure to business written through brokers.
Overall, gross written premium has declined by €4.0m to €180.8m (2015: €184.8m), with increased premium from direct operations of €6.3m (+3.9%) offset by a €10.3m (-47.4%) reduction in business written through brokers. Excluding broker business, average rates across the book are up 10.6%, while policy volume has declined by 6.7%. However, certain classes of insurance have seen more substantial increases year on year (Motor +18.7%). The Group began to raise rates in 2014 and the cumulative effect of increases across all classes of business since that date is 27%.
Claims
Net claims incurred amounted to €114.8m (2015: €215.8m). This includes €5.0m (2015: €4.6m) relating to the Group's MIBI levy obligation. In 2016 the movement on prior year reserves was negligible.
The comparable claims incurred figure for 2015 includes a charge of €88m for strengthening prior year claims reserves and increasing the margin for uncertainty.
Claims Environment
The claims environment continues to be challenging, with significant uncertainty still evident. There is significant volatility in relation to award levels and continued inflationary pressure on the cost of claims.
However, a number of unexpectedly large High Court awards were reduced by the Court of Appeal in the period. While these were not FBD cases, it is hoped they will contribute to the stabilisation of the claims settlement environment. The Court of Appeal has set out principles and guidelines to assess damages to ensure they are proportionate to the injuries, and the existing cap on general damages of €450,000. Recent High Court judgments have referenced these guidelines, indicating a more moderate view on award levels is being adopted by some judges.
There still remain a number of factors that are increasing the cost of claims. These include the following:
Increase in Court Awards
The change in Circuit Court jurisdiction from €38k to €60k has heightened claimants' expectations and had a negative retrospective impact on existing claims.
Legal Costs
Despite the enactment of the Legal Services Regulation Act the Office of the Legal Cost Adjudicator is not yet established and there is still no publication of the adjudication of assessment of legal costs. As a result, the process of agreeing plantiffs' legal costs following settlements is very protracted and contentious, leading to higher costs for both sides.
Collapse of Setanta Insurance
The Supreme Court has recently granted leave to appeal the MIBI/Setanta decision of the Court of Appeal regarding responsibility for the settlement of claims arising out of the failed insurer, and this is likely to be heard towards the end of the year. FBD notes the Departments of Finance and Transport's initiatives to tackle the cost of claims and provide clarity around who pays when an insurer collapses. FBD believes that the Insurance Compensation Fund is the correct vehicle for the payment of claims as a result of the insolvency of an insurer. Transferring any liability onto the MIBI will only serve to increase the cost of premiums for all policyholders and to increase the solvency requirements of insurers, (which is also ultimately passed on to insurance customers). The recent failure of Enterprise, which was regulated in Gibraltar, underpins the urgent need to address this issue.
Uncertainties in the Claims Environment
There are still a number of uncertainties prevalent in the claims environment, most notably the updating of the book of quantum by the Injuries Board and the expected introduction of periodic payment orders (PPOs). We believe structural reform in the claims environment is required to tackle injury claims inflation and address the impact claims costs are having on the affordability of insurance. In the absence of reform , all insurance customers will continue to pay higher premiums.
Potential Reforms to Reduce the Cost of Claims
A less confrontational approach to personal injury litigation is required, for example court-appointed experts (rather than competing experts appointed by both sides) would lower costs. Equally mediation and pre-action protocols could be used to speed up cases with lower costs and an earlier resolution for both parties.
Measures need to be taken to introduce a more effective and objective method of assessing claims, particularly whiplash, and benchmarking their value against other countries.
The Injuries Board legislation needs to be reformed to strengthen the Boards powers to compel co-operation and ensure that claimants receive their compensation faster and without unnecessary litigation and cost.
A strong internal vigilance is continuously required to identify and deal with claims fraud and exaggeration. FBD is committed to improving its processes in this regard.
Claims Settlement
The pace of claims settlement, which had slowed significantly from 2014 into 2015, has increased somewhat in the past nine months, though it remains below historic norms. In contrast to the first half of 2015, settlement activity for medium size claims has increased, following the removal of the uncertainty around the discount rate applying to catastrophic injury awards.
Weather, Claims Frequency and Large Claims
Weather in the first half of 2016 was relatively benign and there were no events of note.
Motor injury frequency continued to decline as the underwriting and risk selection actions taken by the Group come into effect.
Large claims (greater than €1.0m) were higher than historic averages in the first half of 2016. The net cost of such claims for 2016 was €6.4m (2015: €4.0m).
Expenses
The Group's expense ratio was 25.5% (2015: 27.3%). Net expenses reduced by €3.3m to €38.8m (2015: €42.1m) as the benefit of the voluntary redundancy programme launched in the second half of 2015 starts to emerge.
The rollout of the Group's new policy administration system commenced at the end of June 2016. Depreciation of the system will commence in the second half of 2016, and will be approximately €3.0m in the second half of 2016 (€6.0m in a full year).
General
FBD's combined operating ratio was 101.0%, leading to an underwriting loss of €1.6m (2015: €103.5m).
Investment Return
FBD's total investment return for the first six months of 2016 was an annualised 1.92% (2015: 1.1%), with 0.06% (2015: 1.2%) recognised in the income statement and 1.86% (2015: -0.1%) recognised in the statement of other comprehensive income. The decision by the citizens of the UK to leave the EU led to a sharp increase in volatility in June. FBD's low risk allocation protected its investment assets from this volatility. In the first half the portfolio saw strong returns as it benefited from the decision in 2015 to increase the allocation to corporate bonds.
FINANCIAL SERVICES
The Group's financial services operations include premium instalment services and life, pension and investment broking (FBD Financial Solutions), less holding company costs. These generated a solid performance in a tough environment, delivering a profit of €0.5m (before restructuring charges) (2015: €1.1m).
In 2015 the Group carried out a review of FBD Financial Solutions and concluded that there was further opportunity for FBD in the life and pensions area. However, the Group identified a need to transform the operating model to generate greater long term value. Earlier this year FBD Financial Solutions entered into a preferred provider arrangement with New Ireland, one of Ireland's largest life companies. This arrangement enables FBD to provide a customer focussed life and pensions advisory service to customers, reduce expenses and make the business more profitable. The life and pensions transformation project is on target and is expected to generate a profit from 2017 onwards.
On 23 May 2016 FBD divested its 70% shareholding in Passage East Ferry Company for a total consideration of €2.7m, realising a profit on disposal of €1.9m. The Passage East Ferry Company was a non-core asset, and the proceeds realised will be used for general corporate purposes.
Loss per share
The diluted loss per share was 9 cent per ordinary share, compared to a loss of 243 cent per ordinary share in 2015.
STATEMENT OF FINANCIAL POSITION
Capital position
Ordinary shareholders' funds at 30 June 2016 amounted to €210.5m (December 2015: €215.9m) The reduction in shareholders' funds is mainly attributable to the following:
· Losses in the period of €3.1m
· The increase in the defined benefit pension scheme obligation of €10.8m after tax driven mainly by a 1% reduction in the discount rate, recognised in the statement of other comprehensive income. The action taken by the Group in 2015 to restructure and de-risk its defined benefit scheme limited the impact of the decrease in the discount rate. Prior to the restructuring of the scheme, the impact of a 1% reduction in the discount rate would have been significantly more material
· Mark to market gains on the Group's Available for Sale investments of €8.0m after tax recognised in the statement of other comprehensive income
· Share based payments of €0.4m.
Net assets per ordinary share are 607 cent, compared to 623 cent per share at December 2015.
Solvency
Solvency II became effective from 1 January 2016. The Group's economic capital is within its target range of 110-130% of SCR.
Investment Allocation
This table shows the assets of the Group.
| 30 June 2016 | 31 December 2015 | |||
| Underwriting investment assets | €m | % | €m | % |
| Deposits and cash | 336 | 34% | 398 | 40% |
| Corporate bonds | 491 | 50% | 432 | 43% |
| Government bonds | 100 | 10% | 101 | 10% |
| Equities | 21 | 2% | 24 | 2% |
| Unit trusts | 24 | 2% | 25 | 3% |
| Investment property | 15 | 2% | 15 | 2% |
| Underwriting investment assets | 987 | 100% | 995 | 100% |
| Own land & buildings | 16 | 16 | ||
| Working capital & other assets | 110 | 117 | ||
| Reinsurers' share of provisions | 77 | 80 | ||
| Plant and equipment | 58 | 56 | ||
| Total assets | 1,248 | 1,264 |
Investment Background
ECB led quantitative easing continues to drive yields and investment returns lower. The uncertainty created by "Brexit" and rising political risk globally exacerbates the low rate dynamics prevalent in investment markets. The continuing low interest rates in the Eurozone present challenging conditions to generating positive returns over the medium term. These structural issues, in tandem with high valuations for risk assets underpins our low allocation to such assets. Uncertainty about the outlook for global growth and elevated political risks, justifies our cautious strategy.
FBD's Investment Allocation
During the first half FBD further increased its allocation to corporate bonds and reduced exposure to term deposits.
OUTLOOK
From an economic perspective, the recent "Brexit" decision introduces business and trading uncertainty for all indigenous Irish businesses, including FBD and our core customers in farming and other small businesses. While the ultimate outcome of this historic vote is difficult to quantify at this stage, it may have negative effects for business and business confidence in Ireland, particularly in the medium term. FBD is Irish and conducts all its business in Ireland, with Irish consumers and Irish businesses. FBD will not therefore be directly materially affected in the near term by currency exposures or trade flows.
Despite rate hardening, industry profitability continues to be challenging, and the Group believes that the industry may continue to be loss making for 2016.
The Group will continue to simplify its strategy. FBD will dedicate its resources primarily to its direct farm, small business and consumer customers, and will concentrate on those markets where it has developed a significant competitive advantage.
The Group is committed to taking whatever action is required to return the business to profitability. The Group intends to maintain underwriting discipline and to deliver sustainable shareholder value through growth in book value.
The Group believes substantial reform is necessary to tackle claims inflation and the cost of claims for the benefit of all insurance users. In the absence of reform these costs are passed onto insurance customers through higher premiums.
The Group continues to target a sub-100% combined operating ratio by Q4 2016 (excluding catastrophic weather events), and a full year's underwriting profitability in 2017.
FBD HOLDINGS PLC
Condensed Consolidated Income Statement
For the half year ended 30 June 2016
| Notes | Half year ended 30/06/16 (unaudited) |
Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) | |||
| €000s | €000s | €000s | ||||
| Revenue | 3 | 198,179 | 203,864 | 401,889 | ||
| Income | ||||||
| Gross premium written | 180,845 | 184,778 | 363,263 | |||
| Reinsurance premiums | (25,415) | (25,954) | (50,497) | |||
| Net premium written | 155,430 | 158,824 | 312,766 | |||
| Change in provision for unearned premiums | (3,410) | (4,402) | 388 | |||
| Net premium earned | 152,020 | 154,422 | 313,154 | |||
| Net investment return | 271 | 5,405 | 20,260 | |||
| Financial services income | 3,888 | 6,800 | 12,634 | |||
| Total income | 156,179 | 166,627 | 346,048 | |||
| Expenses | ||||||
| Net claims and benefits | (109,827) | (211,245) | (341,260) | |||
| Underwriting expenses | 4 | (38,790) | (42,062) | (85,725) | ||
| Movement in other provisions | (4,998) | (4,581) | (11,581) | |||
| Financial services expenses | (3,346) | (5,729) | (9,130) | |||
| Restructuring and other costs | (1,266) | - | (11,415) | |||
| Finance costs | (3,255) | - | (1,357) | |||
| Revaluation of property, plant and equipment | - | - | 175 | |||
| Pension curtailment | - | - | 28,340 | |||
| Result before taxation | (5,303) | (96,990) | (85,905) | |||
| Income taxation credit | 542 | 12,052 | 11,277 | |||
| Result for the period from continuing operations | (4,761) | (84,938) | (74,628) | |||
| Discontinued operations | ||||||
| Result for period from discontinued operations including profit/(loss) from sale | 1,651 | 574 | 1,061 | |||
| Result for the period | (3,110) | (84,364) | (73,567) | |||
| Attributable to: | ||||||
| Equity holders of the parent | (3,031) | (84,392) | (73,685) | |||
| Non-controlling interests | (79) | 28 | 118 | |||
| (3,110) | (84,364) | (73,567) |
| Notes | Half year ended 30/06/16 (unaudited) |
Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) | |||
| Loss per share | Cent | Cent | Cent | |||
| Basic | 8(a) | (9) | (244) | (213) | ||
| Diluted | 8(a) | (9) | (244) | (213) |
FBD HOLDINGS PLC
Condensed Consolidated Statement of Comprehensive Income
For the half year ended 30 June 2016
| Half year ended 30/06/16 (unaudited) |
Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) | |||
| €000s | €000s | €000s | |||
| Result for the period | (3,110) | (84,364) | (73,567) | ||
| Items that will or may be reclassified to profit or loss in subsequent periods: | |||||
| Net (loss)/gain on available for sale assets | 9,161 | (671) | (1,762) | ||
| Taxation credit/(charge) relating to items that will or may be reclassified to profit or loss in subsequent periods | (1,145) | 168 | 698 | ||
| Items that will not be reclassified to profit or loss in subsequent periods: | |||||
| Actuarial gain/(loss) on retirement benefit obligations | (12,320) | 3,354 | 15,914 | ||
| Taxation (charge)/credit relating to items not to be reclassified in subsequent periods | 1,540 | (419) | (1,989) | ||
| Other comprehensive income/(expense) after taxation | (2,764) | 2,432 | 12,861 | ||
| Total comprehensive expense for the period | (5,874) | (81,932) | (60,706) | ||
| Attributable to: | |||||
| Equity holders of the parent | (5,795) | (81,960) | (60,824) | ||
| Non-controlling interests | (79) | 28 | 118 | ||
| (5,874) | (81,932) | (60,706) | |||
FBD HOLDINGS PLC
Condensed Consolidated Statement of Financial Position
At 30 June 2016
| ASSETS | 30/06/16 (unaudited) |
30/06/15 (unaudited) |
31/12/15 (audited) |
||
| €000s | €000s | €000s | |||
| Property, plant and equipment | 74,351 | 67,392 | 72,617 | ||
| Investment property | 14,550 | 20,799 | 14,550 | ||
| Investment in joint venture | - | 47,647 | - | ||
| Loans | 752 | 1,001 | 832 | ||
| Deferred taxation asset | 12,938 | 17,170 | 13,139 | ||
| Financial assets | |||||
| Available for sale investments | 548,010 | 239,587 | 489,837 | ||
| Investments held for trading | 88,571 | 146,705 | 94,375 | ||
| Deposits with banks | 305,676 | 451,472 | 371,333 | ||
| 942,257 | 837,764 | 955,545 | |||
| Reinsurance assets | |||||
| Provision for unearned premiums | 14,821 | 16,208 | 15,332 | ||
| Claims outstanding | 62,484 | 48,144 | 64,751 | ||
| 77,305 | 64,352 | 80,083 | |||
| Retirement benefit asset | - | - | 9,110 | ||
| Current taxation asset | 4,557 | 8,793 | 8,813 | ||
| Deferred acquisition costs | 25,695 | 29,128 | 27,545 | ||
| Other receivables | 63,891 | 67,091 | 59,506 | ||
| Cash and cash equivalents | 31,606 | 25,196 | 22,244 | ||
| Total assets | 1,247,902 | 1,186,333 | 1,263,984 | ||
FBD HOLDINGS PLC
Condensed Consolidated Statement of Financial Position (continued)
At 30 June 2016
| EQUITY AND LIABILITIES | Notes | 30/06/16 (unaudited) |
30/06/15 (unaudited) |
31/12/15 (audited) | ||
| €000s | €000s | €000s | ||||
| Equity | ||||||
| Ordinary share capital | 7 | 21,409 | 21,409 | 21,409 | ||
| Capital reserves | 18,964 | 19,371 | 18,553 | |||
| Other reserves | 18,232 | - | 18,232 | |||
| Retained earnings | 151,875 | 136,704 | 157,670 | |||
| Shareholders' funds - ordinary equity interests | 210,480 | 177,484 | 215,864 | |||
| Preference share capital | 2,923 | 2,923 | 2,923 | |||
| Equity attributable to equity holders of the parent | 213,403 | 180,407 | 218,787 | |||
| Non-controlling interests | - | 361 | 451 | |||
| Total equity | 213,403 | 180,768 | 219,238 | |||
| Liabilities | ||||||
| Insurance contract liabilities | ||||||
| Provision for unearned premiums | 181,483 | 184,250 | 178,584 | |||
| Claims outstanding | 739,033 | 715,297 | 748,144 | |||
| 920,516 | 899,547 | 926,728 | ||||
| Other provisions | 12,361 | 7,920 | 10,938 | |||
| Convertible debt | 50,647 | - | 50,036 | |||
| Retirement benefit obligation | 3,202 | 50,900 | - | |||
| Deferred taxation liability | 1,851 | 5,266 | 2,990 | |||
| Payables | 45,922 | 41,932 | 54,054 | |||
| Total liabilities | 1,034,499 | 1,005,565 | 1,044,746 | |||
| Total equity and liabilities | 1,247,902 | 1,186,333 | 1,263,984 | |||
FBD HOLDINGS PLC
Condensed Consolidated Statement of Cash Flows
For the half year ended 30 June 2016
| Half year ended 30/06/16 (unaudited) |
Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) |
||||
| €000s | €000s | €000s | ||||
| Cash flows from operating activities | ||||||
| Result before taxation for continued and discontinued operations | (3,652) | (96,416) | (84,789) | |||
| Adjustments for: | ||||||
| Loss/(profit) on disposal of investments held for trading | 4,999 | (1,130) | (535) | |||
| Loss on investments available for sale | 1,428 | 2,870 | 5,493 | |||
| Interest and dividend income | (3,806) | (6,144) | (13,123) | |||
| Depreciation of property, plant and equipment | 4,232 | 4,323 | 8,392 | |||
| Share-based payment expense/(credit) | 411 | 615 | (203) | |||
| Revaluation of investment property | - | - | (3,450) | |||
| Revaluation of property, plant and equipment | - | - | (175) | |||
| Profit on the sale of investment property | - | - | (8,915) | |||
| (Decrease)/increase in insurance contract liabilities | (3,433) | 118,873 | 130,320 | |||
| Increase in other provisions | 1,423 | - | 3,018 | |||
| Effect of foreign exchange rate changes | - | (840) | (485) | |||
| Joint venture trading result | - | (480) | (1,461) | |||
| Profit on disposal of discontinued operation | (1,915) | - | - | |||
| Operating cash flows before movement in working capital | (313) | 21,671 | 34,087 | |||
| (Increase)/decrease in receivables and deferred acquisition costs | (4,647) | (6,918) | 1,004 | |||
| (Decrease)/increase in payables | (7,156) | 4,791 | (30,408) | |||
| Cash (used in)/ generated from operations | (12,116) | 19,544 | 4,683 | |||
| Interest and dividend income received | 5,923 | 4,222 | 12,339 | |||
| Income taxes refunded | 4,257 | 152 | 126 | |||
| Net cash (used in)/generated from operating activities | (1,936) | 23,918 | 17,148 | |||
| Cash flows from investing activities | ||||||
| Purchase of investments held for trading | (6,506) | (69,256) | (32,561) | |||
| Sale of investments held for trading | 7,312 | 40,109 | 55,149 | |||
| Realisation of investments held to maturity | - | - | - | |||
| Purchase of available for sale investments | (211,231) | (95,938) | (408,318) | |||
| Sale of available for sale investments | 160,792 | 77,786 | 136,202 | |||
| Purchase of property, plant and equipment | (6,502) | (9,090) | (18,209) | |||
| Sale of property, plant and equipment | - | - | - | |||
| Sale of investment property | - | 18,259 | ||||
| Decrease/(increase) in loans and advances | 80 | (30) | 139 | |||
| Decrease in deposits invested with banks | 65,656 | 43,437 | 123,577 | |||
| Cash inflow from sale of discontinued operation (net) | 1,930 | - | 48,500 | |||
| Net cash provided by/(used in) investing activities | 11,531 | (12,982) | (77,262) | |||
| Cash flows from financing activities | ||||||
| Ordinary and preference dividends paid | (113) | (11,780) | (11,950) | |||
| Dividends paid to non-controlling interests | (120) | (150) | (150) | |||
| Proceeds from issue of convertible bond | - | - | 68,268 | |||
| Net cash (used in)/generated from financing activities | (233) | (11,930) | 56,168 | |||
| Net increase/(decrease) in cash and cash equivalents | 9,362 | (994) | (3,946) | |||
| Cash and cash equivalents at the beginning of the period | 22,244 | 26,190 | 26,190 | |||
| Cash and cash equivalents at the end of the period | 31,606 | 25,196 | 22,244 |
FBD HOLDINGS PLC
Condensed Consolidated Statement of Changes in Equity (UNAUDITED)
For the half year ended 30 June 2016
| Ordinary | Capital | Other | Retained | Attributable to | Preference | Non-controlling | Total | |
| share capital | reserves | reserves | earnings | Ordinary shareholders | share capital | interests | equity | |
| €000s | €000s | €'000 | €000s | €000s | €000s | €'000 | €000s | |
| Balance at 1 January 2016 | 21,409 | 18,553 | 18,232 | 157,670 | 215,864 | 2,923 | 451 | 219,238 |
| Result after taxation | - | - | - | (3,031) | (3,031) | - | (79) | (3,110) |
| Other comprehensive income | - | - | - | (2,764) | (2,764) | - | - | (2,764) |
| Total comprehensive income for the period | 21,409 | 18,553 | 18,232 | 151,875 | 210,069 | 2,923 | 372 | 213,364 |
| Recognition of share based payments | - | 411 | - | - | 411 | - | - | 411 |
| Dividend paid to non-controlling interests | - | - | - | - | - | - | (120) | (120) |
| Disposal of subsidiary undertaking (note 5) | - | - | - | - | - | - | (252) | (252) |
| Balance at 30 June 2016 | 21,409 | 18,964 | 18,232 | 151,875 | 210,480 | 2,923 | - | 213,403 |
| Balance at 1 January 2015 | 21,409 | 18,756 | - | 230,444 | 270,609 | 2,923 | 483 | 274,015 |
| Result after taxation | - | - | - | (84,392) | (84,392) | - | 28 | (84,364) |
| Other comprehensive income | - | - | - | 2,432 | 2,432 | - | - | 2,432 |
| Total comprehensive income for the period | 21,409 | 18,756 | - | 148,484 | 188,649 | 2,923 | 511 | 192,083 |
| Recognition of share based payments | - | 615 | - | - | 615 | - | - | 615 |
| Dividend paid on ordinary shares | - | - | - | (11,780) | (11,780) | - | - | (11,780) |
| Dividend paid to non-controlling interests | - | - | - | - | - | - | (150) | (150) |
| Balance at 30 June 2015 | 21,409 | 19,371 | - | 136,704 | 177,484 | 2,923 | 361 | 180,768 |
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
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 2016 has been prepared to meet our obligation to do so under the listing rules of the main securities market of the Irish Stock Exchange and S.I. No. 277 of 2007;
• the financial information for the half year to 30 June 2016 does not constitute the statutory financial statements of the company;
• the statutory financial statements for the financial year ended 31 December 2015 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; and
• the matters referred to in the statutory auditors' report were unqualified, and did not include a reference to any matters to which the statutory auditors drew attention by way of emphasis without qualifying the report.
This half yearly financial report has not been audited but has been reviewed by the auditors of the Company.
Note 2 - Accounting policies
Basis of preparation
The annual financial statements of FBD Holdings plc are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union.
Going concern
The Directors are satisfied that the Group has sufficient resources to continue in operation for a period of not less than twelve months from the date of this report. Accordingly, they continue to adopt the going concern basis of accounting in preparing the condensed financial statements.
Consistency of accounting policy
The accounting policies and methods of computation used by the Group to prepare the interim financial statements for the six month period ended 30 June 2016 are the same as those used to prepare the Group Annual Report for the year ended 31 December 2015 except as described below.
The following new and revised Standards and Interpretations have been adopted in these financial statements in the current period:
· Annual Improvements 2012-2014 Cycle
· Clarification of Acceptable Methods of Depreciation & Amortisation (Amendments to IAS 16 and IAS 41)
· Disclosure Initiative (Amendments to IAS 1)
The adoption of these standards has not had any significant impact on the amounts reported in this interim report.
Critical accounting estimates and judgements in applying accounting policies.
The critical accounting estimates and judgements used by the Group in applying accounting policies are the same as those used to prepare the Group Annual Financial Statements for the year ended 31 December 2015. While there have been some changes in estimates of amounts in the current financial period these changes do not have a significant impact on the results for the period.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
Risks and uncertainties
The principa risks and uncertainties faced by the Group are outlined on pages 21-23 of the Group's Annual Financial Statements for the year ended 31 December 2015 and remain unchanged.
Reclassification
The comparative information for discontinued operations has been reclassified to result for the period from discontinued operations within the condensed consolidated income statement.
Note 3 - Segmental information
(a) Operating segments
The principal activities of the Group are underwriting of general insurance business and financial services. For management purposes, the Group is organised in two operating segments - underwriting and financial services. These two segments are the basis upon which information is reported to the chief operating decision maker, the Group Chief Executive, for the purpose of resource allocation and assessment of segmental performance. Discrete financial information is prepared and reviewed on a regular basis for these two segments.
The following is an analysis of the Group's revenue and results from continuing operations by reportable segments:
| Half year ended 30/06/2016 | Underwriting | Financial Services |
Total |
| €000s | €000s | €000s | |
| Revenue | 193,740 | 4,439 | 198,179 |
| Result before taxation | (4,579) | (724) | (5,303) |
| Income taxation credit | 572 | (30) | 542 |
| Result after taxation | (4,007) | (754) | (4,761) |
| Half year ended 30/06/2015 | Underwriting | Financial Services |
Total |
| €000s | €000s | €000s | |
| Revenue | 197,163 | 6,701 | 203,864 |
| Result before taxation | (98,061) | 1,071 | (96,990) |
| Income taxation credit/(charge) | 12,257 | (205) | 12,052 |
| Result after taxation | (85,804) | 866 | (84,938) |
| Year ended 31/12/2015 | Underwriting | Financial Services |
Total |
| €000s | €000s | €000s | |
| Revenue | 389,255 | 12,634 | 401,889 |
| Result before taxation | (90,265) | 4,361 | (85,904) |
| Income taxation credit/(charge) | 10,924 | 352 | 11,276 |
| Result after taxation | (79,341) | 4,713 | (74,628) |
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
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. Restructuring costs and income taxation are direct costs of each segment. Segment profit is the measure reported to the chief operating decision maker, the Group Chief Executive, for the purposes of resource allocation and assessment of segmental reporting. There has been no material change to the assets by reportable segment from the disclosure in the 2015 Annual Report.
(b) Geographical segments
The Group's operations are located in Ireland.
Note 4 - Underwriting result
| Half year ended 30/06/16 (unaudited) | Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) | |||
| €000s | €000s | €000s | |||
| Gross premium written | 180,845 | 184,778 | 363,263 | ||
| Net premium earned | 152,020 | 154,422 | 313,154 | ||
| Net claims incurred | (114,825) | (215,826) | (352,841) | ||
| 37,195 | (61,404) | (39,687) | |||
| Gross management expenses | (40,830) | (45,552) | (92,307) | ||
| Deferred acquisition costs | (1,850) | 700 | (882) | ||
| Reinsurers' share of expenses | 5,643 | 5,964 | 12,799 | ||
| Broker commissions payable | (1,753) | (3,174) | (5,335) | ||
| Underwriting expenses | (38,790) | (42,062) | (85,725) | ||
| Underwriting result | (1,595) | (103,466) | (125,412) | ||
The Group's half yearly results are not subject to any significant impact arising from the seasonality of operations.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
Note 5 - Discontinued operations
| Half year ended 30/06/16 (unaudited) | Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) | |||
| €000s | €000s | €000s | |||
| Passage East Ferry Company Ltd result for the period including profit on sale | 1,651 | 94 | 393 | ||
| Joint venture result for the period including loss on sale | - | 480 | 668 | ||
| 1,651 | 574 | 1,061 | |||
On 23 May 2016 the Group disposed of its 70% interest in the Passage East Ferry Company Limited. Total consideration received for the disposal of the 70% interest was €2,662,800. A profit on disposal of €1,914,000 has been recorded during the half year ended 30 June 2016. In addition a loss of €263,000 for the period up to the date of disposal, including €79,000 attributable to non-controlling interests, has been recorded in the half year ended 30 June 2016.
On 24 August 2015, the Group announced it had entered a conditional agreement for the divestment of its stake in its joint venture, FBD Property Leisure Ltd, through a sale of the Group's entire shareholding to Farm Business Developments plc, the other shareholder in FBD Property & Leisure Ltd, and the redemption of all of its loan notes in FBD Property & Leisure Ltd. The sale was approved by shareholders on 23 October 2015. Total consideration received for the sale of the joint venture was €48,500,000. Full details of the loss on disposal and the Group's share of the joint ventures profit up to date of disposal are available in Note 7 (d) of the Group Annual Report for the year ended 31 December 2015.
Note 6 - Dividends
| Half year ended 30/06/16 (unaudited) |
Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) |
|||
| €000s | €000s | €000s | |||
| Paid in Period: | |||||
| 2014 final dividend of 34.0 cent (2013: 33.25 cent) per share on ordinary shares of €0.60 each | - | 11,780 | 11,780 | ||
| Dividend of 8.4 cent per share on 14% non-cumulative Preference shares of €0.60 each |
113 | - | |||
| Dividend of 4.8 cent per share on 8% non-cumulative preference shares of €0.60 each | - | - | 169 | ||
| 113 | 11,780 | 11,949 |
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
Note 7 - Ordinary share capital
| Half year ended 30/06/16 (unaudited) | Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) |
|||||
| Number | €000s | €000s | €000s | ||||
| (i) Ordinary shares of €0.60 each | |||||||
| Authorised: | |||||||
| At beginning and end of period | 51,326,000 | 30,796 | 30,796 | 30,796 | |||
| Issued and fully paid: | |||||||
| At beginning and end of period | 35,461,206 | 21,277 | 21,277 | 21,277 | |||
| (ii) 'A' Ordinary shares of €0.01 each | |||||||
| Authorised: | |||||||
| At beginning and end of period | 120,000,000 | 1,200 | 1,200 | 1,200 | |||
| Issued and fully paid: | |||||||
| At beginning and end of period | 13,169,428 | 132 | 132 | 132 | |||
| Total Ordinary Share Capital | 21,409 | 21,409 | 21,409 |
The number of ordinary shares of €0.60 each held as treasury shares at 30 June 2016 was 813,084.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
Note 8 - Loss 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 30/06/16 (unaudited) |
Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) |
|||||
| €000s | €000s | €000s | |||||
| Earnings/(loss) | |||||||
| Result for the period | (3,110) | (84,364) | (73,567) | ||||
| Non-controlling interests | 79 | (28) | (118) | ||||
| Preference dividends | - | - | (169) | ||||
| Result for the period - attributable to equity shareholders | (3,031) | (84,392) | (73,854) | ||||
| Adjustments to exclude profit from discontinued operations | (1,651) | (574) | (1,061) | ||||
| Result for the purpose of basic and diluted | |||||||
| earnings per share (excluding discontinued operations) | (4,682) | (84,966) | (74,915) | ||||
| Number of shares | 30/06/16 | 3 | 30/06/15 | 31/12/2015 | |||
| Weighted average number of ordinary shares for | |||||||
| the purpose of basic earnings per share | 34,648,122 | 34,648,122 | 34,648,122 | ||||
| Effect of dilutive potential of share options | |||||||
| outstanding | - | - | - | ||||
| Weighted average number of ordinary shares for | |||||||
| the purpose of diluted earnings per share | 34,648,122 | 34,648,122 | 34,648,122 | ||||
| Earnings/(loss) per share | Restated | Restated | |||||
| From continuing and discontinued operations | Cent | Cent | Cent | ||||
| Basic earnings/(loss) per share | (9) | (244) | (213) | ||||
| Diluted earnings/(loss) per share | (9) | (244) | (213) | ||||
| Restated | Restated | ||||
| From discontinued operations | Cent | Cent | Cent | ||
| Basic earnings/(loss) per share | 5 | 1 | 3 | ||
| Diluted earnings/(loss) per share | 5 | 1 | 3 |
| Restated | Restated | ||||
| From continuing operations | Cent | Cent | Cent | ||
| Basic earnings/(loss) per share | (14) | (245) | (216) | ||
| Diluted earnings/(loss) per share | (14) | (245) | (216) |
The 'A' ordinary shares of €0.01 each that are in issue have no impact on the earnings per share calculation.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
Note 9 - Capital Commitments
| Half year ended 30/06/16 (unaudited) |
Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) |
|||
| €000s | €000s | €000s | |||
| Capital commitments at period end authorised by | |||||
| the Directors but not provided for in the Financial | |||||
| Statements: | |||||
| Contracted for | 3,704 | 1,400 | 8,083 | ||
| Not contracted for | - | 1,900 | - |
The above capital commitments relate to an investment in the underwriting policy administration system that commenced in 2013. Rollout of the new system commenced in late June 2016.
Note 10 - Retirement Benefit Plan Assets/(Obligation)
The Group operates a funded defined benefit retirement scheme for qualifying employees. During the year ended 31 December 2015 the Group completed a review of the defined benefit pension scheme with the primary goals to reduce the IAS19 deficit and the inherent volatility of the scheme. The outcome of the review was as follows:
· The defined benefit scheme ceased for future accrual of benefits.
· The link to future salary increases was replaced with deferred pension increases.
· FBD will no longer fund for future discretionary pension increases.
· Current employees within the scheme were offered membership in a new defined contribution arrangement for future service.
· Current employees within the scheme were provided with the option to take an enhanced transfer value of their past benefits into the new defined contribution scheme. A significant majority took up this option.
· The investments in the scheme were significantly de-risked to reduce the volatility of the IAS19 balance sheet position.
The Group recognised a pension curtailment gain of €28.3m for the year ended 31 December 2015.
Full details of this scheme are available in Note 31 of the Group Annual Report for the year ended 31 December 2015.
The amounts recognised in the Statement of Financial Position are as follows:
| 30/06/16 | 30/06/15 | 31/12/15 | |
| (unaudited) | (unaudited) | (audited*) | |
| €000s | €000s | €000s | |
| Fair value of plan assets | 122,000 | 146,600 | 115,600 |
| Present value of defined benefit obligation | (125,210) | (197,500) | (106,490) |
| Net retirement plan asset/(obligation) | (3,210) | (50,900) | 9,110 |
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
Note 11 - Financial Instruments
| (a) Financial assets | |||
| 30/06/16 | 30/06/15 | 31/12/15 | |
| (unaudited) | (unaudited) | (audited) | |
| €000s | €000s | €000s | |
| (i) At amortised cost | |||
| Investments held to maturity | - | - | |
| Deposits with banks | 305,676 | 451,472 | 371,333 |
| 305,676 | 451,472 | 371,333 | |
| (ii) At fair value | |||
| Available for sale investments - unquoted investments | 844 | 843 | 844 |
| Available for sale investments - quoted debt securities | 547,166 | 238,744 | 488,993 |
| Available for sale investments | 548,010 | 239,587 | 489,837 |
| Investments held for trading - quoted shares | 21,643 | 19,310 | 25,671 |
| Investments held for trading - quoted debt securities | 43,038 | 102,373 | 44,082 |
| Investments held for trading - UCITs | 23,890 | 25,022 | 24,622 |
| Investments held for trading - unquoted debt securities | - | - | - |
| Investments held for trading | 88,571 | 146,705 | 94,375 |
| (iii) At cost | |||
| Cash and cash equivalents | 31,606 | 25,196 | 22,244 |
Fair value measurement
The following table compares the fair value of financial assets with their carrying values:
| 30/06/16 | 30/06/16 | 30/06/15 | 30/06/15 | 31/12/15 | 31/12/15 | |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (audited) | (audited) | |
| Fair value |
Carrying value | Fair value |
Carrying value | Fair value |
Carrying value | |
| €000s | €000s | €000s | €000s | €000s | €000s | |
| Financial assets | ||||||
| Loans | 752 | 752 | 1,161 | 1,001 | 998 | 832 |
| Financial investments | 942,257 | 942,257 | 837,764 | 837,764 | 955,545 | 955,545 |
The carrying amount of the following financial assets and liabilities is considered a reasonable approximation of their fair value:
· Other receivables
· Cash and cash equivalents
· Payables
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
The following tables provide an analysis of financial instruments 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 are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 fair value measurements are those 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).
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Among the valuation techniques used are net asset or net book value or the net present value of future cash flows based on conservative operating projections.
| 30 June 2016 (unaudited) | Level 1 | Level 2 | Level 3 | Total |
| €000s | €000s | €000s | €000s | |
| Assets | ||||
| Investment property | - | 14,550 | - | 14,550 |
| Loans | - | 752 | - | 752 |
| Other receivables | - | 63,891 | - | 63,891 |
| Financial assets | ||||
| Investments held for trading - quoted shares | 21,643 | - | - | 21,643 |
| Investments held for trading - quoted debt securities | 43,038 | - | - | 43,038 |
| Investments held for trading - UCIT Funds | 23,890 | - | - | 23,890 |
| AFS*investments - quoted debt securities | 547,166 | - | - | 547,166 |
| AFS* investments - unquoted investments | - | - | 844 | 844 |
| Deposits with banks | 305,676 | - | - | 305,676 |
| Cash and cash equivalents | 31,606 | - | - | 31,606 |
| Total assets | 973,019 | 79,193 | 844 | 1,053,056 |
| Liabilities | ||||
| Payables | - | 45,922 | - | 45,922 |
| Convertible debt | - | 50,647 | - | 50,647 |
| Total liabilities | - | 96,569 | - | 96,569 |
* Available for sale
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
| 30 June 2015 (unaudited) | Level 1 | Level 2 | Level 3 | Total |
| €000s | €000s | €000s | €000s | |
| Assets | ||||
| Investment property | - | 20,799 | - | 20,799 |
| Loans | - | 1,161 | - | 1,161 |
| Other receivables | - | 67,091 | - | 67,091 |
| Financial assets | ||||
| Investments held for trading - quoted shares | 19,310 | - | - | 19,310 |
| Investments held for trading - quoted debt securities | 102,373 | - | - | 102,373 |
| Investments held for trading - UCIT Funds | 25,022 | - | - | 25,022 |
| AFS* investments - quoted debt securities | 238,744 | - | - | 238,744 |
| AFS* investments - unquoted investments | - | - | 843 | 843 |
| Deposits with banks | 451,472 | - | - | 451,472 |
| Cash and cash equivalents | 25,196 | - | - | 25,196 |
| Total assets | 862,117 | 89,051 | 843 | 952,011 |
| Liabilities | ||||
| Payables | - | 41,932 | - | 41,932 |
| Total liabilities | - | 41,932 | - | 41,932 |
* Available for sale
| 30 December 2015 (audited) | Level 1 | Level 2 | Level 3 | Total |
| €000s | €000s | €000s | €000s | |
| Assets | ||||
| Investment property | - | 14,550 | - | 14,550 |
| Loans | - | 998 | - | 998 |
| Other receivables | - | 59,506 | - | 59,506 |
| Financial assets | ||||
| Investments held for trading - quoted shares | 25,671 | - | - | 25,671 |
| Investments held for trading - quoted debt securities | 44,082 | - | - | 44,082 |
| Investments held for trading - UCITs | 24,622 | - | - | 24,622 |
| AFS* investments - quoted debt securities | 488,993 | - | - | 488,993 |
| AFS* investments - unquoted investments | - | - | 844 | 844 |
| Deposits with banks | 371,333 | - | - | 371,333 |
| Cash and cash equivalents | 22,244 | - | - | 22,244 |
| Total assets | 976,945 | 75,054 | 844 | 1,052,843 |
| Liabilities | ||||
| Payables | - | 54,054 | - | 54,054 |
| Convertible debt | - | 50,036 | - | 50,036 |
| Total liabilities | - | 104,090 | - | 104,090 |
* Available for sale
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
A reconciliation of Level 3 fair value measurement of financial assets is shown in the table below
| 30/06/16 | 30/06/15 | 31/12/15 | |
| (unaudited) | (unaudited) | (audited) | |
| €000s | €000s | €000s | |
| Opening balance Level 3 financial assets | 844 | 948 | 948 |
| Additions | - | - | - |
| Disposals | - | (103) | (103) |
| Unrealised gains/(losses) recognised in Consolidated Income Statement | - | - | - |
| Realised (losses)/gains recognised in Consolidated Income Statement | - | (2) | (1) |
| Closing balance Level 3 financial assets | 844 | 843 | 844 |
Available for sale investments grouped into Level 3 consist of a number of small unquoted investments. The values attributable to these investments are derived from a number of valuation techniques including net asset or net book value or the net present value of future cash flows based on conservative operating projections. A change in one or more of these inputs could have an impact on valuations. The maximum exposure the Group has in relation to Level 3 valued financial assets at 30 June 2016 is €844,000 (30 June 2015: €843,000; 31 December 2015: €844,000).
(b) Financial liabilities
The Group had no financial liabilities at 30 June 2016, 30 June 2015 or 31 December 2015 except for those disclosed in Note 11 (a).
Note 12 - Transactions with related parties
For the purposes of the disclosure requirements of IAS 24, the term "key management personnel" (i.e. those persons having authority and responsibility for planning, directing and controlling the activities of the Group) comprises the Board of Directors and Company Secretary of FBD Holdings plc and the members of the Executive Management Team. Full disclosure in relation to the compensation of the Board of Directors and details of Directors' share options are provided in the Report on Directors' Remuneration in the 2015 Annual Report. An analysis of share-based payment to key management personnel is also included in Note 38 of the 2015 Annual Report.
Note 13 - Contingent liabilities and contingent assets
There were no contingent liabilities or contingent assets at 30 June 2016, 30 June 2015 or 31 December 2015.
Note 14 - Information
This half yearly report and the Annual Report for the year ended 31 December 2015 are available on the Company's website at www.fbdgroup.com.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
Note 15 - Alternative performance measures (APM's)
The Group uses the following alternative performance measures: Loss ratio, expense ratio, combined operating ratio, annualised investment return and net asset value per share.
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.
Annualised 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.
The calculation of the APM's is based on the following data:
| Half year ended 30/06/16 (unaudited) |
Half year ended 30/06/15 (unaudited) |
Year ended 31/12/15 (audited) |
|||
| €000s | €000s | €000s | |||
| Loss ratio | |||||
| Net claims and benefits | 109,827 | 211,245 | 341,260 | ||
| Movement in other provisions | 4,998 | 4,581 | 11,581 | ||
| Total claims incurred | 114,825 | 215,826 | 352,841 | ||
| Net premium earned | 152,020 | 154,422 | 313,154 | ||
| Loss ratio (total claims/Net premium earned) | 75.5% | 139.8% | 112.7% | ||
| Expense ratio | |||||
| Other underwriting expenses | 38,790 | 42,062 | 85,725 | ||
| Net premium earned | 152,020 | 154,422 | 313,154 | ||
| Expense ratio (underwriting expenses/Net premium earned) | 25.5% | 27.2% | 27.4% | ||
| Combined operating ratio | % | % | % | ||
| Loss ratio | 75.5% | 139.8% | 112.7% | ||
| Expense ratio | 25.5% | 27.2% | 27.4% | ||
| Combined operating ratio | 101.0% | 167.0% | 140.1% |
| Annualised investment return | €000s | €000s | €000s | ||
| Investment return recognised in consolidated income statement | 271 | 5,405 | 20,260 | ||
| Investment return recognised in statement of comprehensive income | 9,161 | (671) | (1,762) | ||
| Total investment return | 9,432 | 4,734 | 18,498 |
| Average underwriting investment assets | 984,244 | 871,598 | 905,577 | ||
| 1.9%* | 1.1%* | 2.0% | |||
| *Annualised |
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
| Net asset value per share (NAV per share) | €000s | €000s | €000s | ||
| Shareholders' funds - equity interests | 210,480 | 177,484 | 215,864 | ||
| Number of shares | |||||
| Weighted average number of ordinary shares | 34,648,122 | 34,648,122 | 34,648,122 | ||
| Cent | Cent | Cent | |||
| Net asset value per share | 607 | 512 | 623 | ||
Note 16 - Approval of Half Yearly Report
The half yearly report was approved by the Board of Directors of FBD Holdings plc on 11 August 2016.
FBD HOLDINGS PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the half year ended 30 June 2016
RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Central Bank of Ireland and with IAS 34, Interim Financial Reporting as adopted by the European Union.
We confirm that to the best of our knowledge:
a) the Group condensed set of interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union;
b) the interim management report includes a fair review of the important events that have occurred during the first six months of the financial year, and their impact on the condensed set of interim financial statements and the principal risks and uncertainties for the remaining six months of the financial year;
c) the interim management report includes a fair review of related party transactions that have occurred during the first six months of the current financial year and that have materially affected the financial position or the performance of the Group during that period, and any changes in the related parties' transactions described in the last Annual Report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.
On behalf of the Board
Michael Berkery Fiona Muldoon
Chairman Group Chief Executive
11 August 2016
Independent review report to FBD Holdings plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed the condensed consolidated interim financial statements, defined below, in the half-yearly report of FBD Holdings plc for the six months ended 30 June 2016. Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the Central Bank of Ireland.
This conclusion is to be read in the context of what we say in the remainder of this report.
What we have reviewed
The condensed consolidated interim financial statements, which are prepared by FBD Holdings plc, comprise:
· the condensed consolidated statement of financial position as at 30 June 2016;
· 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.
As disclosed in note 2, 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.
The condensed consolidated interim financial statements included in the half-yearly report have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the Central Bank of Ireland.
What a review of condensed consolidated interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board for use in the United Kingdom and Ireland. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and 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 condensed consolidated interim financial statements.
Our responsibilities and those of the directors
The half-yearly report, including the condensed consolidated interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the Central Bank of Ireland.
Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial statements in the half-yearly report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the Central Bank of Ireland and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers
Chartered Accountants
Dublin
11 August 2016
Notes:
1. 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.
2. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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