F.b.d.hldgs Regulatory News (FBH)

FBD HOLDINGS PLC

28 August 2012

FBD HOLDINGS PLC

Half Yearly Report

For the Six Months Ended 30 June 2012

OPERATIONAL HIGHLIGHTS

§ Very strong performance with half year profit before taxation of €22.2m.

§ Underwriting performance, driven by an improved loss ratio, was the primary contributor.

§ Improvement in combined operating ratio from 92.8% to 92.2%.

§ Operating earnings per share of 75 cent (2011: 74 cent).

§ Interim dividend increased 8.9% to 12.25 cent.

§ Capital base further strengthened with solvency level of 63.3%, up from 60.4% at 30 June 2011.

§ Increase in net asset value per share to €6.66.

§ Full year operating earnings per share guidance re-affirmed at 145 - 155 cent per share.

Commenting on the results, Andrew Langford, Group Chief Executive, said: "These are excellent results in difficult economic conditions. We believe that gross written premium is well ahead of a contracting market and that FBD's market share has again increased. A further fall in domestic demand is expected to limit premium income growth in the second half. The Group's market position continues to be strengthened through our multi-channel distribution strategy. Prudent management of risk and reserving is being maintained. In the current unpredictable investment environment, FBD's investment allocation prioritises capital protection. The Board is confident that FBD will continue to outperform its peers in delivering superior returns to shareholders".

* Comparative figures have been restated to exclude operations that were sold during 2011.

A presentation will be made to analysts at 10am today, a copy of which will be available on our Group website, www.fbdgroup.com from that time.

About FBD Holdings plc ("FBD")

The Group was established in the 1960s and is one of Ireland's largest property and casualty insurers looking after the insurance needs of farmers, private individuals and business owners.

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:

FBD HOLDINGS PLC

Half Yearly Report

For the Six Months Ended 30 June 2012

INTERIM MANAGEMENT REPORT

OVERVIEW

FBD delivered a profit before taxation of €22.2m, repeating the excellent performance delivered in the first half of 2011. In a continuing difficult economic and investment climate, the Group continued to demonstrate its capability to deliver superior returns for shareholders.

Underwriting

The underwriting result, at €11.7m, represents an 8.9% improvement on the same period of last year, a very strong performance given that 2011 benefited from a benign claims environment. After allowing for a lower long-term rate of investment return, underwriting operating profit before taxation amounted to €26.1m, marginally lower than the €26.5m achieved in the first half of 2011.

Gross written premium in the first half of 2012 was €174.7m, 1.6% lower than the corresponding period of the previous year. The Board believes that this performance is well ahead of the market, which contracted further. As a result, the Group's market share is likely to have risen further in the first half of 2012.

The difficult economic environment in Ireland has led to reducing insurable values and risk in the market. Prices in the market for certain insurance products have also moved lower due to competitive pressures and to reflect the lower risk. For example, FBD has reduced prices for its car insurance customers where there has been a genuine reduction in the associated risk. The direction of future claims expense and market rates are likely to be determined by economic factors such as vehicle usage as well as safety measures and driver behaviour.

FBD continued to successfully develop its multi-channel distribution strategy in response to customer needs. The sales office network has made further progress in developing farming insurance, winning over 1,000 additional farm insurance customers in the first six months of the year. FBD.ie and NoNonsense.ie continue to attract a growing number of customers from their respective target markets, particularly urban areas. The initiative to enter into partnerships with insurance brokers to increase our penetration of the business insurance market is progressing positively and accounted for 47% of business insurance new business premium income in the first six months of 2012.

Net earned premium increased 0.7% to €150.9m, as FBD's growth came in areas where more risk is retained and because of the Group's decision in 2011 to increase the proportion of our property insurance book that is retained.

Net claims incurred amounted to €100.9m (2011: €103.2m). The net loss ratio further improved from an excellent 68.9% in the first half of 2011 to 66.9% in the first half of 2012. Continued improvement in risk selection and claims management, together with improvements in the operating environment, further reduced the cost of attritional claims. The very favourable large claims experience in 2011 was not repeated in the period. The increase in large claims was partially offset by the favourable weather experience in the period. Although a flood event in the month of June cost the industry an estimated €50m, the cost to FBD was only €3m gross of reinsurance, €2m net of reinsurance.

An increase in the cost of reinsurance resulted in a fall of €0.9m in reinsurance commission receivable in the first half 2012. This accounted for 60 basis points of the increase in the net expense ratio from 23.9% to 25.3%. The Group increased its ongoing investment in marketing to maintain its "share of voice" in a very competitive market.

FBD's combined operating ratio for the first half of 2012 was 92.2%, an improvement on the 92.8% achieved in the first half of 2011. Long-term investment return at €14.4m was lower than the €15.7m booked in the first half of 2011 as the average asset mix in the period was more conservative than the previous year, due to the continuing uncertain market outlook.

Financial Services

The Group's financial services operations, which includes premium instalment services and life, pension and investment broking (FBD Financial Solutions) less holding company costs, generated an operating profit of €2.6m (2011: €1.6m). This is a strong performance in difficult market conditions.

Joint Venture

The Group's share of the loss of the property and leisure joint venture was €0.7m. This is a seasonal business with most of the profits generated in the summer months, which predominately fall in the second half of the year. Trading performance of the joint venture has improved compared to 2011, with growth in occupancy, rate and revenue per room, particularly in the Irish market. Sales of units in La Cala continue to be strong and the joint venture was cash generative in the period. The joint venture finalised refinancing of its debt facility, a significant achievement in the current credit market.

Profit before taxation

The excellent operating result was somewhat offset by adverse investment return fluctuations of €2.4m (2011: €5.6m), which arise primarily because current rates of return on bank deposits are lower than longer term expectations. After writing off €2.6m, being the Group's investment as a limited partner in Bloxham Stockbrokers and charging restructuring costs of €0.7m, the Group recorded a profit before tax of €22.2m (2011: €21.8m).

Dividends

The Board is committed to ensuring that the Group's capital position continues to be robust and its balance sheet well managed. This reflects the Board's view that it is in the long-term interests of all shareholders to maintain strong solvency and liquidity margins. The Board is also committed to a progressive dividend policy and efficient capital management.

The Board has approved a 2012 interim dividend of 12.25 cent per ordinary share (2011: 11.25 cent). This will be paid on 2 October 2012 to the holders of shares on the register on 7 September 2012. The interim dividend is subject to dividend withholding tax ("DWT") except for shareholders who are exempt from DWT and who have furnished a properly completed declaration of exemption to the Company's Registrar, from whom further details may be obtained.

Earnings per share

Operating earnings per share based on long-term investment return amounted to 75 cent per ordinary share, compared to 74 cent in the first half of 2011. The fully diluted earnings per share was 58 cent (2011: 58 cent) per ordinary share.

STATEMENT OF FINANCIAL POSITION

The Group's financial position has further strengthened during the period. Ordinary shareholders' funds have grown to €221.8m (December 2011: €209.9m). Net assets per ordinary share have increased to 666 cent up from 630 cent at December 2011.

The investment and other assets at the beginning and end of the six month period are set out in the following table:

Asset allocation

International financial market volatility continued throughout the first half of 2012. In such an unpredictable environment, FBD's investment philosophy, like its peers globally, remains focussed on capital preservation. As a result, the Group has maintained a short-term, low-risk investment allocation and will continue to do so until the sovereign debt crisis abates and investment volatility normalises.

At 30 June 2012, 90% of the underwriting investment assets were invested in bank deposits, government bonds and corporate bonds. The average term of these assets is far shorter than the corresponding liabilities thereby reducing the risk of investment volatility.

During the first half of 2012, nearly half of the sovereign bonds held by FBD for the last five years reached their maturity dates. Reflecting the Group's low-risk investment policy, the proceeds from these maturities were invested in a portfolio of short-dated investment-grade corporate bonds and a diversified mix of bank deposits.

FBD Group has a strong capital base and its balance sheet has further strengthened in the period. The Group has no debt. FBD Insurance has a solvency level of 63.3% of net earned premium at the end of June 2012, compared with 60.4% at June 2011. FBD has a prudent reserving policy that has delivered positive runoffs in each year since 2003. Reserving at 30 June 2012 was maintained at the same robust level as at the previous year end. The reserving ratio (net technical provisions divided by net earned premium) remains strong at 232%.

OUTLOOK

In the second half of 2012, Irish domestic demand is likely to decline further, albeit at a slower pace than in recent years. As a result, the opportunity for FBD's business to grow premium income in the remainder of 2012 is expected to be limited. Nonetheless, FBD is committed to achieving profitable growth by constantly evolving its business to reflect customers' needs. The Group will continue to implement its plan to increase penetration of key urban markets, in particular Dublin, and the business insurance market. The Board believes that the opportunities provided by NoNonsense.ie and the expansion of the broker channel will provide the Group with the ability to outperform the market again in 2012. At the same time, the Group continues to devote considerable resources to developing its core farming base, a key strategic priority.

The Group will continue to deliver improvements in those aspects of claims costs that it can control and, barring exceptional claims, expects the loss ratio in the second half of the year to be similar to that of the first half.

As financial markets continue to be volatile, insurance companies should remain conservative in their investment mix and become more reliant on positive underwriting results to achieve an adequate return on investment. FBD will continue to prioritise capital protection over investment return. Low returns on deposits and bonds will lead to negative investment fluctuations in the short term.

FBD has a strong capital base and balance sheet, a low-risk investment allocation and a prudent reserving strategy. The Group is in a very strong position to progress its strategic plans and the Board is confident that FBD will continue to outperform its peers in delivering superior returns to shareholders. FBD has demonstrated its capacity to deliver returns in difficult market conditions and is well positioned to deliver long-term profitable growth.

The Group re-affirms its previous guidance, subject to exceptional events arising, for full year 2012 operating earnings per share of between 145 and 155 cent.

PRINCIPAL RISKS AND UNCERTAINTIES

Under the Transparency (Directive 2004/109/EC) Regulations 2007 the Group is required to give a description of the principal risks and uncertainties it faces.

The Group has a risk management policy which provides a systematic, effective and efficient way for managing risk in the organisation and ensures it is consistent with the overall business strategy and the risk appetite of the Group.

Risk appetite is a measure of the amount and type of risks the Group is willing to accept or not accept over a defined period of time in the pursuit of its objectives. The Group's risk appetite seeks to encourage measured and appropriate risk taking to ensure that risks are aligned to business strategy and objectives.

The risk appetite in the Group's underwriting subsidiary is driven by an overarching desire to protect the solvency of the Company at all times. Through the proactive management of risk the Company ensures that it does not have or will not take on an individual risk or combination of risks that could threaten the solvency of the Company. This ensures that the Company has and will have in the future sufficient capital to pay its policyholders and all other creditors in full as liabilities fall due.

The Board considers that the risks and uncertainties disclosed in the Annual Report for the year ended 31 December 2011 continue to reflect the principal risks and uncertainties of the Group over the remainder of the financial year. In the Annual Report 2011 risk is categorised as general insurance risk, capital management risk, operational risk, liquidity risk, market risk, credit risk, concentration risk and macro-economic risk.

Further information on these risks is included in pages 116 to 125 of the Annual Report 2011, which quantifies the sensitivity of parameters such as loss ratio, equity and property values and exchange and interest rates. The risks and uncertainties have not altered and further movement in the parameters described above may be experienced in future periods.

RELATED PARTY TRANSACTIONS

There were no related party transactions in the half year that have materially affected the financial position or performance of the Group.

AUDIT REVIEW

This half yearly financial report has not been audited or reviewed by the auditors of the Group.

FBD HOLDINGS PLC

Condensed Consolidated Income Statement

For the half year ended 30 June 2012

FBD HOLDINGS PLC

Condensed Consolidated Income Statement

For the half year ended 30 June 2012

FBD HOLDINGS PLC

Condensed Consolidated Statement of Comprehensive Income

For the half year ended 30 June 2012

FBD HOLDINGS PLC

Pro Forma Reconciliation of Consolidated Operating Profit to PROFIT after Tax

For the half year ended 30 June 2012

FBD HOLDINGS PLC

Condensed Consolidated Statement of Financial Position

At 30 June 2012

FBD HOLDINGS PLC

Condensed Consolidated Statement of Financial Position (continued)

At 30 June 2012

FBD HOLDINGS PLC

Condensed Consolidated Statement of Cash Flows

For the half year ended 30 June 2012

FBD HOLDINGS PLC

Condensed Consolidated Statement of Changes in Equity (UNAUDITED)

For the half year ended 30 June 2012

FBD HOLDINGS PLC

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the half year ended 30 June 2012

Note 1 - General information

The information for the year ended 31 December 2011 does not constitute statutory accounts as defined in Section 19 of the Companies (Amendment) Act 1986. A copy of the statutory accounts for that year has been delivered to the Register of Companies. The auditors' report on those accounts was not qualified and did not contain any matters to which attention was drawn by way of emphasis.

This half yearly financial report has not been audited or reviewed by the auditors of the Group.

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.

Comparative figures for the half year ended 30 June 2011 in the Condensed Consolidated Income Statement and relevant notes as indicated have been restated to exclude operations that were sold during 2011.

Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than twelve months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the 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 2012 are the same as those used to prepare the Group Annual Report for the year ended 31 December 2011 except as described below.

The following new and revised Standards and Interpretations have been adopted in these financial statements in the current period:

Amendments to IFRS 7: Disclosures - Transfers of Financial Assets

Amendments to IAS 12: Deferred Tax: Recovery of Underlying Assets

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 Report for the year ended 31 December 2011. While there have been some changes in estimates of amounts in the current financial period, these changes do not have a significant impact in the results for the period.

FBD HOLDINGS PLC

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the half year ended 30 June 2012

Note 3 - Longer term investment return