Final Results
FBD Holdings PLC
09 March 2005
PRELIMINARY ANNOUNCEMENT
RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2004
2004 2003
HIGHLIGHTS €000's €000's
as restated
•Turnover 471,858 500,494
•Operating profit 125,961 115,699
Cent Cent
•Operating earnings per share 258.84 238.10
•Dividend per share 40.00 27.60
•Net assets per share 887.97 675.29
Commenting on the results, Philip Fitzsimons, Chief Executive, stated:
'2004 was another excellent year for FBD shareholders and customers. Operating
profit came in above last year's level. In addition to seeing strong growth in
net asset value, shareholders will receive an increased dividend payout as we
move to bring dividend cover in line with market norms. Policyholders are
benefiting from sizeable premium reductions and a special loyalty discount
introduced last October. Based on ongoing monitoring of underwriting trends, we
will be introducing further premium cuts in a number of business lines in the
near future. Beyond this, additional premium savings will depend significantly
on the implementation of the 2002 MIAB Report recommendations. We are confident
that we will continue to grow our businesses in 2005 and beyond'.
ENDS 9th March 2005
For Reference
Telephone No.
FBD
Philip Fitzsimons,Chief Executive 01 4093200
Andrew Langford,Finance Director 01 4093200
MURRAY CONSULTANTS
Joe Murray 01 4980300
Mobile: 086 253 4950
FBD HOLDINGS PLC
FBD Holdings plc is pleased to announce excellent results for the year ended
31st December 2004.
Operating profit grew to €126m. (2003: €115.7m.), resulting in operating
earnings per share of 258.84 cent, an increase of 8.7% over 2003 (238.10 cent).
Net assets per share amounted to 887.97 cent at year end (2003: 675.29 cent).
(2003 figures have been restated on adoption of FRS 17, Accounting for
Retirement Benefits, resulting in minor adjustments - see Note 3 on page 9).
A final dividend of 27.28 cent is being recommended by the Board, bringing the
total dividend for the year to 40.00 cent, an increase of 45% on the
corresponding 2003 figure (27.60 cent).
The contribution of each of the Group's business divisions is outlined below.
Insurance Underwriting
FBD Insurance operating profit increased by €12.0m. to €107.3m. (2003: €95.3m.).
The following are the key financial figures underpinning that result.
•Gross premiums written fell by 4.6% to €351.5m. This was after
implementing sizeable rate reductions across all major classes of insurance
and after deducting €30m. in respect of a customer loyalty discount. The
fall in premium masks strong growth in policy numbers, where sales in
personal lines business were well above target. Notwithstanding the
aforementioned premium reductions, net earned premiums grew by 2% to
€296.2m., reflecting higher retentions for reinsurance purposes and the earn
out of buoyant 2003 sales.
•Net incurred claims increased by 2.5% to €199.1m. Motor and property
claim costs rose, reflecting increased exposure. The October 2004 floods
also impacted adversely on the property result. These increases in claims
costs were offset somewhat by a reduction in liability claim costs which
benefited from savings on prior year claims estimates.
•Net operating expenses at €32.5m. were down €2.7m. on last year. The
effect of the change in the accounting treatment of deferred acquisition
costs, which occurred in 2003, gave rise to this.
•The underwriting profit resulting from the foregoing revenue and cost
elements amounted to €64.7m., an increase of €3.7m. on 2003.
•Long term investment returns grew by €6.0m. to €39.8m., reflecting growth
in funds invested. Other income increased by €2.6m. to €3.0m. These items,
together with the underwriting result, produced an insurance operating
profit of €107.6m.
Property & Leisure
This division includes the Group's interests in the Tower Hotel Group in
Ireland, La Cala and Sunset Beach Resorts in Spain and other property related
investments. The division contributed €14.5m. (2003: €15.8m.) to overall
operating profit. The economic climate for the leisure industry, globally, was
weak in 2004 and impacted on our businesses. Hotel and golf visitor numbers were
reduced, compared to 2003. Property sales and handovers at La Cala were somewhat
lower than targeted and short of the figure booked in 2003 when the entire Los
Altos apartment development was handed over.
Financial Services
The Group's non-underwriting financial service businesses include FBD Brokers,
FBD Life and Abbey Finance. The division delivered operating profits of €4.2m.
(2003: €4.5m.). This result was achieved in markets which experienced falling
premiums and, consequently, falling commission levels.
Balance Sheet
Total assets at year end amounted to €1.460m, an increase of 16.8% on 2003.
Ordinary shareholders' funds amounted to €372.2m., an increase of 33.4% for the
year. Short term fluctuations in investment returns had a positive impact of
€12.2m. This was largely attributable to a strong equity performance. Government
bond returns, though positive, were weak in what were regarded generally as
difficult market conditions.
Dividend
As already mentioned, a final dividend of 27.28 cent is being recommended by the
Board. This will bring the total dividend for the year to 40.00 cent (2003:
27.60 cent). This represents a special rate of increase, which brings dividend
payout to a considerably higher level. It indicates the Board's intention to
bring dividend cover in line with market norms in due course.
The final dividend will be paid on 3rd May 2005 to shareholders on the company's
Register at close of business on 18th March 2005. The final dividend is subject
to withholding tax (DWT) except for shareholders who are exempt from DWT and
have furnished a properly completed Composite Resident Form to the Company's
Registrar.
Prospects/Outlook
We are confident that we will continue to grow our businesses in 2005 and
beyond.
In our core insurance underwriting activity, and in common with other insurers
in Ireland, we have benefited over the past couple of years from improvements in
the claims environment. The various infrastructural measures that have brought
this about have been well documented. In our experience, the fall in the
incidence of injury claims which has occurred has been one of the most
noteworthy and significant outcomes. Going forward, the need for the Government
to maintain momentum in implementing all of the insurance reforms which have
been identified is of paramount importance to insurers and policyholders alike.
Claims reserving policy and practice are extremely crucial factors in
determining underwriting results. FBD has consistently adopted a conservative
approach in this regard and continues to do so. Our cautious reserving policy
has, historically, seen settlement savings emerge on prior year claim estimates.
We have not amended our claim reserving models or assumptions in anticipation of
potential savings arising from legislative and other measures that have recently
been introduced or are scheduled to be; for example, the Personal Injuries
Assessment Board, provisions in the 2003 Civil Liability & Courts Act etc. The
ultimate impact of these measures will not be known for some time. We will wait
for sufficient factual evidence and settlement experience to emerge before
altering our claims reserving approach in any significant way.
Arising from the relative reduction in claims incurred in recent times, FBD
policyholders have benefited significantly by way of lower premiums. Competition
in the marketplace also dictates that policyholders benefit from the improved
claims/income ratio and that economic levels of return will obtain for risk
capital. FBD recognises these realities and is implementing plans to grow
customer numbers so as to ensure bottom line profit growth in the era of
anticipated lower margins. We currently hold approximately 9% market share and
see considerable scope for further growth. We have been investing significant
expenditure in brand building. This has been undertaken as an integral part of
our strategy to grow organically by extending our cost efficient, direct sell,
business model into the cities and larger towns in Ireland. In the past year, we
engaged an additional 32 sales and customer service personnel in our Dublin
Business Unit in a roll-out of our development plans. Our relatively low cost/
income ratio enhances our competitive position. Underwriting trends continue to
be monitored on an ongoing basis and we anticipate further premium reductions in
a number of business lines where our current analysis is indicating that they
are warranted.
External political and economic circumstances, combined with changing market
dynamics meant that 2004, was a challenging year for our leisure and property
businesses. During the year, to strengthen our position in our target markets,
we undertook business remodelling, introduced new selling channels and
implemented organisational changes. Our biggest leisure/property investment is
the La Cala Resort on Costa del Sol. It has established itself as one of the
premier residential and golf resorts in Southern Spain. Our development of La
Cala is being undertaken in a manner and at a pace that enhances the resort's
intrinsic value, with each completed building project delivering satisfactory
margins.
We are pleased with progress in the year to date and will continue working to
ambitious, realistic targets aimed at delivering long term shareholder value.
ENDS
FBD UPDATE
•In the last 12 months, FBD has implemented significant premium rate
reductions along with a range of lower cost options for drivers.
•In August 2004, FBD announced a special loyalty discount, amounting to
€30m., for policyholders renewing their policies in the 12 months from
October 2004.
•FBD opened a new office in Ballina in May of this year. This followed a
series of other moves to new larger offices in Waterford, Drogheda, Cork and
to a newly renovated larger office in Roscommon. Plans are well advanced for
a move to new offices in Limerick later this year. These moves are in
keeping with FBD's drive to develop its business in larger urban areas and
in the cities.
•In Dublin, FBD has relocated and expanded its Dublin commercial lines
sales office to the Naas Road, while at the same time doubling the number of
staff in this unit to continue to develop its presence in the Dublin market.
•FBD also established a new personal lines unit on the Naas Road to deal
with enquiries on our 1850 617617 number and all internet business.
•FBD also announced a major sponsorship deal with RTE to sponsor its
flagship soap, Fair City. This is a key strategic move to lift the profile
of FBD, both in Dublin and around the country. In addition, FBD also
announced that they were taking over the sole sponsorship of the FBD
Insurance Ras from 2005 onwards.
•FBD Brokers continue as major providers of risk management and insurance
broking services to the food and allied sectors and continue to grow its
base of corporate customers. Their unique risk management safety system and
alternative risk financing concepts offer customers flexible solutions
tailor made to meet their specific requirements.
•FBD Life and Pensions continued its growth as an independent advisor to a
broad spectrum of individuals and businesses. 2004 also saw the successful
introduction of the 'business solutions' concept. Through this, FBD now
offers business clients a process which includes a full review and plan, not
just of their company pension schemes, but many other important areas of
financial planning. These include advice on partnership and 'key-men'
insurance, commercial lending, investment alternatives, tax planning etc.
•At La Cala in Spain, the third 18 hole championship golf course is
complete and will to open in mid March 2005. The 32 Los Colinas villas/
townhouses are complete and they are virtually all sold at this stage. Work
is well underway on the 108 apartments in the Real Altavista development.
Work has also commenced on a new spa facility at the exclusive in La Cala
Hotel.
•Sunset Beach Club, 600 bedroom apart hotel in Benalmadena, Spain,
continues to attract large numbers of Irish and European visitors annually
and a growing number of North Americans. Significant organisational changes
and a new management team position Sunset for continued growth in 2005 and
beyond. In the Tower Hotel Group, which is 75% owned by FBD, work on the new
4 Star Castleknock Hotel & County Club was completed during the year and the
hotel is now open. It will provide employment for 140 staff.
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31ST DECEMBER 2004
2004 2003
€000's €000's
as restated
Turnover 471,858 500,494
======== ========
Balance on the technical account
- general business Note 1 96,630 90,455
Longer term investment return 39,820 33,797
Allocated investment return transferred to the
general business technical account (31,976) (29,488)
Other income 21,487 20,935
-------- --------
Operating profit
Note 2 125,961 115,699
Other charges (3,116) (3,256)
Short term fluctuations in investment return 12,164 (5,905)
-------- --------
Profit before taxation 135,009 106,538
Taxation (17,025) (12,216)
-------- --------
Profit after taxation 117,984 94,322
Minority interests (1,751) (846)
-------- --------
Profit after taxation and minority interests 116,233 93,476
Dividends (17,026) (11,683)
-------- --------
Retained profit 99,207 81,793
======== ========
Cent Cent
Operating earnings per 60c ordinary share
based on longer term investment return 258.84 238.10
======== ========
Earnings per 60c ordinary share 278.37 226.38
======== ========
Dividend per 60c ordinary share 40.00 27.60
======== ========
Net assets per 60c ordinary share 887.97 675.29
======== ========
GROUP BALANCE SHEET
AS AT 31ST DECEMBER 2004
2004 2003
€000's €000's
as restated
ASSETS
Investments 1,276,345 1,104,585
Reinsurers' share of technical provisions 65,765 66,773
Debtors 46,074 45,734
Other assets 49,780 19,109
Prepayments and accrued income 22,099 14,000
--------- ---------
TOTAL ASSETS 1,460,063 1,250,201
LIABILITIES
Technical provisions (868,340) (813,710)
Provision for other risks and charges (17,306) (13,479)
Creditors (182,943) (126,057)
--------- ---------
NET ASSETS 391,474 296,955
========= =========
CAPITAL AND RESERVES
Ordinary share capital 25,151 25,125
Share premium 5,540 5,367
Reserves 341,527 248,463
--------- ---------
ORDINARY SHAREHOLDERS' FUNDS 372,218 278,955
Preference share capital 2,923 2,923
Minority interests 16,333 15,077
--------- ---------
391,474 296,955
========= =========
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31ST DECEMBER 2004
2004 2003
€000's €000's
as restated
Net cash inflow from operating activities 169,990 160,355
Dividends paid (12,613) (9,944)
Corporation tax paid (12,228) (9,377)
Capital expenditure (5,222) (2,536)
Financing 37,671 11,666
--------- --------
177,598 150,164
========= ========
Cash flows were invested as follows
Increase in cash holdings 441 1,329
--------- --------
Net portfolio investment
Quoted shares 73,371 48,169
Quoted debt securities 72,854 (30,835)
Unquoted shares 138 (516)
Deposits with banks (43,135) 139,022
Loans and advances 23,601 (14,206)
Land and property 50,328 7,201
--------- --------
177,157 148,835
--------- --------
Net investment of cash flows 177,598 150,164
========= ========
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31ST DECEMBER 2004
2004 2003
€000's €000's
as restated
Profit after taxation and minority interests 116,233 93,476
Exchange translation adjustment 371 (4)
Actual loss on pension fund valuation (9,031) (3,091)
--------- --------
Total recognised gains relating to the year 107,573 90,381
========= ========
RECONCILIATION OF MOVEMENT IN
ORDINARY SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31ST DECEMBER 2004
2004 2003
€000's €000's
as restated
Profit after taxation and minority interests 116,233 93,476
Less: preference dividends (282) (282)
-------- ----------
115,951 93,194
Dividends (16,744) (11,401)
New share capital issued 199 -
Other recognised losses (8,660) (3,095)
Re-issue of ordinary shares 2,517 1,393
-------- ----------
Net addition to shareholders' funds 93,263 80,091
Ordinary shareholders' funds at beginning of
year as 278,955 208,928
originally reported
Prior year adjustment - (10,064)
-------- ----------
Ordinary shareholders' funds at end of year 372,218 278,955
======== ==========
Note 1- Technical result by class of business
YEAR ENDED 31ST DECEMBER 2004
Gross Written Net Earned Net Claims Net Op Underwriting Allocated Technical
Premiums Premiums Incurred Expenses Result Inv Income Result
€000's €000's €000's €000's €000's €000's €000's
Direct
insurance
Motor 175,249 169,573 (126,991) (22,745) 19,837 19,578 39,415
Liability 74,081 74,408 (39,463) (10,701) 24,244 9,817 34,061
Fire &
Property 98,130 48,934 (30,871) 1,293 19,356 2,389 21,745
Other 4,027 3,322 (1,744) (361) 1,217 192 1,409
-------- -------- -------- ------- -------- -------- -------
351,487 296,237 (199,069) (32,514) 64,654 31,976 96,630
======== ======== ======== ======= ======== ======== =======
All gross premiums are written in the Republic of Ireland.
Premiums in 2004 are stated after deducting €30.4m. in respect
of a customer loyalty discount.
YEAR ENDED 31ST DECEMBER 2003
Gross Written Net Earned Net Claims Net Op Underwriting Allocated Technical
Premiums Premiums Incurred Expenses Result Inv Income Result
€000's €000's €000's €000's €000's €000's €000's
Direct As restated
insurance
Motor 180,074 166,024 (119,547) (23,641) 22,836 18,074 40,910
Liability 80,842 71,147 (48,937) (11,434) 10,776 9,094 19,870
Fire &
Property 103,349 49,534 (23,347) 246 26,433 2,123 28,556
Other 4,354 3,615 (2,296) (397) 922 197 1,119
-------- -------- -------- ------- -------- -------- -------
368,619 290,320 (194,127) (35,226) 60,967 29,488 90,455
======== ======== ======== ======= ======== ======== =======
2004 2003
Note 2 - Operating profit by activity €000's €000's
As restated
Insurance underwriting 107,319 95,338
Financial services 4,183 4,533
Property and leisure 14,459 15,828
-------- -------
125,961 115,699
======== =======
Note 3- Change in accounting policy
The group has adopted Financial Reporting Standard 17 -
'Retirement Benefits' (FRS 17) for the first time in 2004. The
change in accounting policy has resulted in a prior year
adjustment and the 2003 figures have been restated accordingly.
The change resulted in a net reduction in shareholders' funds of
€10.1m. at 1st January 2003. Profit before taxation increased by
€2m. for the year ended 31st December 2003.
This information is provided by RNS
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