Interim Results
FBD Holdings PLC
25 August 2004
Press Release
INTERIM RESULTS ANNOUNCEMENT
For half year ended 30th June 2004
2004 2003
FINANCIAL HIGHLIGHTS €000's €000's
•Gross written premium 187,819 177,795 + 5.6%
•Operating profit 65,886 61,767 +6.7%
Cent Cent
•Operating earnings per 138.03 126.18 +9.4%
share
•Dividend per share 12.72 10.60 +20.0%
Commenting on the results, Philip Fitzsimons, Chief Executive, said:
'The improved performance of the Group is attributable to a continuing
favourable underwriting result. Strong flows in new personal lines business were
achieved. Personal injury accident frequencies declined and we also benefited
from the absence of severe weather related storms in the period. Customers
received sizeable premium reductions arising from the positive underwriting
performance. Significant additional benefits will accrue to existing
policyholders over the coming year. We will shortly be implementing a €30
million special loyalty discount which will be extended to all existing core
product policyholders when they renew their insurances. If current trends
continue and the claims environment reforms underway are effected, we anticipate
further premium reductions. We are confident that the steps we have taken
enhance the competitive position of FBD and will drive continued strong growth
in business. The competitiveness of our products has already been highlighted by
recent IFSRA surveys and by the large increase in policy numbers in the year to
date'.
ENDS 25th August 2004
For Reference
Telephone
FBD
Philip Fitzsimons, Chief Executive 01 4093200
Murray Consultants
Joe Murray 01 4980300
FBD HOLDINGS PLC
INTERIM STATEMENT
FBD Holdings plc is pleased to report continued strong growth for the six months
ended 30th June 2004.
Operating profit for the period amounted to €65.9m., compared to €61.8m. for the
first half of 2003. The resultant earnings per share figure is 138.03 cent
(126.18 cent, June 2003). Profit before taxation, which includes negative short
term fluctuations in investment return of €7.0m., (€6.4m) was €58.9m. (€55.4m.)
The contribution of each of the Group's business divisions - insurance
underwriting, financial services and property/leisure - is outlined below.
Insurance Underwriting
----------------------
Gross premiums written in the period grew to €187.8m. (€177.8m). We achieved
strong growth in personal lines business, whilst, at the same time, implementing
sizeable premium reductions for customers.
The increase in net earned premium to €158.6m. (€141.2m), is attributable to the
aforementioned business growth, higher levels of retention for reinsurance
purposes and the earn out of buoyant 2003 sales, in the period. Net claims
incurred amounted to €99.7m (€93.7m) overall. The resultant claims/premium
ratio, combined with our efficient cost/income ratio, delivered a €42.5m.
(€32.2m) underwriting result. Loss ratios improved in most categories. Personal
injury accident frequencies in our casualty portfolio trended downwards.
Property insurance benefited from the absence of severe weather storms in the
period under review.
The insurance technical result of €58.3m. (€46.8m) was achieved after crediting
investment income of €15.8m. (€14.6m).
Financial Services
------------------
This division of the Group embraces our non-underwriting financial services
businesses - including our general and life assurance brokerages. The
contribution to operating profit from the division increased to €3.1m. (€2.9m).
Property & Leisure
------------------
The Group's interests in La Cala Resort and Sunset Beach on the Costa del Sol,
Spain, and its 75% shareholding in the Tower Hotel Group in Ireland, contributed
€2.1m. to profit. In the corresponding period last year, the contribution from
this division included the profit realised on completed sales of the Los Altos
Apartment Complex at La Cala. The follow-on building project, Los Colinas (32
villas/townhouses) is scheduled for completion in late 2004/early 2005. Profit
in this division varies from period to period due to the timing nature of
building projects and also because of the seasonality of tourism revenues in our
target markets, in both Spain and Ireland. The downturn in tourism in the wake
of adverse international political and economic events impacted negatively on
the division's first half year performance.
Balance Sheet
--------------
Ordinary shareholders' funds increased to €338.2m. from €290.0m. in the period,
reflecting the strong trading performance. Net asset value per share at 30th
June was €8.10 compared to €7.02 at the beginning of the year.
Interim Dividend
----------------
The Directors have decided to increase the interim dividend to 12.72 cent from
10.60 cent in 2003, an increase of 20%.
The interim dividend will be paid on the 1st October 2004 to shareholders on the
Company Register at close of business on the 3rd September 2004. The interim
dividend is subject to withholding tax (DWT), except for shareholders who are
exempt from DWT and have furnished a properly completed Capital Composite
Resident Form to the Company's Registrar.
Outlook
--------
The prospects for the Group for the remainder of the year, and beyond, are
positive.
In relation to insurance, recent favourable underwriting performances should be
further consolidated through implementation of the Insurance Reform Agenda which
insurers, government and customers have set and which all parties are committed
to pursuing.
The Oireachtas Joint Committee on Enterprise and Small Businesses, in its most
recent interim report on this subject, is specific in recommending the areas
that need further attention and the measures to be adopted in order to deliver
an insurance market that satisfies customers and shareholders alike. The
Committee identified, in particular, the need for an enquiry into claim award
levels in Ireland compared to other countries and stated that the Book of
Quantum, published by the PIAB, should be used for this exercise. This is an
essential comparison if Ireland is to aspire to the lower premium levels that
obtain elsewhere. Other areas to which the Committee drew attention were:
reducing accidents at work and on the road; reducing the costs of processing
claims and eliminating unnecessary costs from the system. The role of the PIAB,
the impact of the Civil Liability & Courts Act, stringent enforcement of road
and workplace safety laws, and tackling the uninsured motorist scourge, were
highlighted as being critical to achieving the required improvements. Of
particular concern is the increased number of fatalities and serious accidents
on our roads this year. The trend is worrying, especially after the very
positive impact of penalty points in the first six months after their
introduction.
Progress over the past two years in reforming the Irish insurance environment
has worked for the benefit of both insurers and customers. Insurers, including
FBD, have experienced an improvement in profitability, whilst customers have
benefited from reductions in premiums. In the case of FBD, these reductions have
been significant and have been implemented across our range of products (see FBD
Developments). These reductions are evidenced by our competitiveness in the
marketplace, as revealed in IFSRA surveys. Significant and continuing growth in
new business volumes also confirms our competitive offerings.
Claims trends, including frequency, settlement levels and associated costs, are
being studiously monitored by us on an ongoing basis. They are the key
determinants of the premium rates that must be applied. If current trends
continue, and the reforms outlined above are effected, we anticipate further
premium reductions in specific classes of insurance.
We are also pleased to state that our current favourable underwriting result
will enable us to provide a special loyalty discount off their renewal premiums
to all of our core product policyholders. It will apply to specified policies in
force in October 2004, which are subsequently renewed for the succeeding year.
The discount, where applicable, will be based primarily on the time period
policies have been in force, the level of premium paid and underwriting
experience. The total value of this discount to policyholders will be €30m. We
believe it will be well received over the twelve month period as customers renew
their insurance and that it will be recognised as our reward for their loyalty.
The special discount reinforces, in a tangible way, the commitment in our
mission statement to deliver long term sustainable value to our customers, and
in a way that is unique to FBD.
In relation to the Group's other financial service activities, we are optimistic
that year to date progress will be maintained.
We alluded earlier to the challenging market conditions for the hotel and
leisure sector globally. Notwithstanding these conditions, we are confident that
the second half year will deliver a considerably increased contribution due to
high-season hotel revenues and a substantial number of property handovers in La
Cala before year end. The third golf course, which will further enhance La Cala
as a premier holiday and residential resort, is targeted to be up and running in
early 2005. In Ireland, the Tower Hotel Group's plans for the new 4 Star
Castleknock Hotel and Country Club are on schedule, with the hotel due to be
completed by year end.
We are confident that the progress which the Group has achieved in the first
half year will be maintained into the future.
FBD Developments
----------------
•In the last 12 months, FBD has implemented significant premium reductions
along with a range of lower cost options for drivers.
•Motor rates have reduced by in excess of 20% on average.
•Home insurance rates have reduced by 25% on average.
•Business insurance, including farms, shops, pubs and other small to
medium sized businesses, has seen property rates fall, from 15% up to 38% in
some cases. Liability rates have fallen from 10% up to 25% in some cases.
•Our range of new options for drivers brings further savings when they opt
for insured only or insured only plus one, as against an open drive policy.
•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 at 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 the larger urban areas
and in the cities.
•In Dublin, FBD has relocated an expanded Dublin commercial lines 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 office on the Naas Road to deal
with enquiries on the 1850 617 617 Number and all internet business.
•FBD also announced a major sponsorship deal in recent weeks with RTE to
sponsor its flagship soap 'Fair City' for the next 12 months. This is a key
strategic move to lift the profile of FBD, both in Dublin and around the
country.
•FBD Brokers, which is the largest insurance provider to the food and
dairy processing sectors, continues to grow its base of corporate customers
in medium to large manufacturing, wholesale and distribution businesses.
•FBD Life & Pensions continues its growth as an independent advisor to a
broad spectrum of individuals and businesses, with a network of financial
advisers strategically located around the country, assisting customers in
making key decisions in relation to investments, pensions, protection and
mortgages.
•At La Cala, in Spain, the third 18 hole championship golf course is
nearing completion and will be ready for play in early 2005. Work is coming
to completion on the 32 Los Colinas villas/townhouses and is well underway
on the 128 apartments in the Real Altavista development. Work is also about
to commence on a new spa facility at the exclusive hotel at La Cala.
•Following a major investment programme in recent years, Sunset Beach Club
in Benalmadena, on the Costa del Sol, continues to attract large numbers of
Irish, European and US visitors during the peak seasons. A major marketing/
sales programme is underway to deal with the challenging market conditions
for the hotel and leisure sector globally and, in particular, in the off
peak season.
•In the Tower Hotel Group, which is 75% owned by FBD, work on the new 4
Star Castleknock Hotel & Country Club is on schedule, and the hotel will be
completed by year end.
FBD HOLDINGS PLC
GROUP PROFIT AND LOSS ACCOUNT
For half year ended 30th June 2004
Half Year Half Year Year
Ended Ended Ended
30/6/04 30/6/03 31/12/03
(Unaudited) (Unaudited) (Audited)
€000's €000's €000's
Turnover 240,465 251,251 500,494
========= ======== ========
Balance on the
technical account - Note 1 58,262 46,771 88,815
general business
Longer term 19,090 16,366 33,797
investment return
Allocated
investment return
transferred to the (15,773) (14,597) (29,488)
technical
account - general
business
Other income 5,346 14,183 18,970
Other charges (1,039) (956) (1,638)
--------- -------- --------
Operating profit Note 2 65,886 61,767 110,456
Short term
fluctuations in (7,003) (6,407) (5,905)
investment return --------- -------- --------
Profit before 58,883 55,360 104,551
taxation
Taxation (6,900) (6,297) (12,374)
--------- -------- --------
Profit after 51,983 49,063 92,177
taxation
Minority interests (210) (127) (846)
--------- -------- --------
Profit after
taxation and 51,773 48,936 91,331
minority
interests
Dividends (5,309) (4,379) (11,683)
--------- -------- --------
Retained profit 46,464 44,557 79,648
========= ======== ========
Cent Cent Cent
Operating earnings
per 60c ordinary
share based on 138.03 126.18 227.38
longer term ========= ======== ========
investment return
Earnings per 60c 124.67 119.39 221.17
ordinary share ========= ======== ========
Dividend per 60c 12.72 10.60 27.60
ordinary share ========= ======== ========
Net assets per 60c 810.32 615.87 701.94
ordinary share ========= ======== ========
FBD HOLDINGS PLC
GROUP BALANCE SHEET
As at 30th June 2004
As at As at As at
ASSETS 30/6/04 30/6/03 31/12/03
(Unaudited) (Unaudited) (Audited)
€000's €000's €000's
Investments 1,176,308 1,007,078 1,104,585
Reinsurers' share of
technical 66,271 65,104 66,773
provisions
Debtors 57,971 55,333 45,734
Other assets 34,246 17,942 19,109
Prepayments and accrued 18,870 26,043 14,000
income --------- -------- --------
TOTAL ASSETS 1,353,666 1,171,500 1,250,201
LIABILITIES
Technical provisions (844,718) (776,452) (813,710)
Provision for other risks and (13,651) (10,732) (13,479)
charges
Creditors (138,969) (112,489) (115,047)
--------- -------- --------
NET ASSETS 356,328 271,827 307,965
========= ======== ========
CAPITAL AND RESERVES
Ordinary share capital 25,125 25,125 25,125
Share premium 5,367 5,367 5,367
Reserves 307,714 223,917 259,473
--------- -------- --------
ORDINARY SHAREHOLDERS' FUNDS 338,206 254,409 289,965
Preference share capital 2,923 2,923 2,923
Minority interests 15,199 14,495 15,077
--------- -------- --------
356,328 271,827 307,965
========= ======== ========
FBD HOLDINGS PLC
GROUP CASH FLOW STATEMENT
For half year ended 30th June 2004
Half Year Half Year Year
Ended Ended Ended
30/6/04 30/6/03 31/12/03
(Unaudited) (Unaudited) (Audited)
€000's €000's €000's
Net cash inflow from
operating 80,353 81,055 160,355
activities
Dividends paid (7,191) (5,453) (9,944)
Corporation taxation paid (4,404) (4,063) (9,377)
Capital expenditure (1,330) (1,595) (2,536)
Financing 18,919 2,658 11,666
---------- --------- --------
86,347 72,602 150,164
========== ========= ========
Cash flows were invested as follows
Increase in cash holdings 1,496 4,599 1,329
---------- --------- --------
Net portfolio investment
Quoted shares 61,468 16,578 48,169
Quoted debt securities 125,361 193,383 (30,835)
Unquoted shares 1,150 (939) (516)
Deposits with banks (117,062) (137,793) 139,022
Loans and advances (5,220) (1,116) (14,206)
Land and property 19,154 (2,110) 7,201
---------- --------- --------
84,851 68,003 148,835
---------- --------- --------
Net investment of cash flows 86,347 72,602 150,164
========== ========= ========
FBD HOLDINGS PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For half year ended 30th June 2004
Half Year Half Year Year
Ended Ended Ended
30/6/04 30/6/03 31/12/03
(Unaudited) (Unaudited) (Audited)
€000's €000's €000's
Profit after taxation and
minority 51,773 48,936 91,331
interests
Exchange translation (135) (469) (4)
adjustment ---------- --------- --------
Total gains recognised in 51,638 48,467 91,327
period
========== ========= ========
RECONCILIATION OF MOVEMENT IN ORDINARY SHAREHOLDERS' FUNDS
For half year ended 30th June 2004
Half Year Half Year Year
Ended Ended Ended
30/6/04 30/6/03 31/12/03
(Unaudited) (Unaudited) (Audited)
€000's €000's €000's
Profit after taxation and
minority 51,773 48,936 91,331
interests
Less: preference dividends - - (282)
---------- --------- --------
Profit attributable to
ordinary 51,773 48,936 91,049
shareholders
Dividends (5,309) (4,379) (11,401)
Other recognised losses (135) (469) (4)
Reissue of ordinary shares 1,912 1,393 1,393
---------- --------- --------
48,241 45,481 81,037
Ordinary shareholders' funds
at 289,965 208,928 208,928
beginning of period
---------- --------- --------
Ordinary shareholders' funds
at end of 338,206 254,409 289,965
period ========== ========= ========
FBD HOLDINGS PLC
SUPPLEMENTARY INFORMATION
For half year ended 30th June 2004
Half Year Half Year Year
Ended Ended Ended
30/6/04 30/6/03 31/12/03
(Unaudited) (Unaudited) (Audited)
€000's €000's €000's
Note 1 - Technical Result
-----------------------------
Gross written premiums 187,819 177,795 368,619
========== ========= ========
Net earned premiums 158,639 141,194 290,320
Net claims incurred (99,657) (93,749) (194,127)
Net operating expenses (16,493) (15,271) (36,866)
---------- --------- --------
Underwriting result 42,489 32,174 59,327
Allocated investment 15,773 14,597 29,488
income
---------- --------- --------
Technical result 58,262 46,771 88,815
========== ========= ========
Note 2 - Operating Profit by Activity
-----------------------------------------
Insurance Underwriting 61,806 48,704 93,698
Financial Services 3,051 2,855 4,186
Property and Leisure 2,068 11,164 14,484
Interest Payable (1,039) (956) (1,912)
---------- --------- --------
65,886 61,767 110,456
========== ========= ========
This information is provided by RNS
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