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

FBD HOLDINGS PLC

27 August 2013

FBD HOLDINGS PLC

Half Yearly Report

For the Six Months Ended 30 June 2013

OPERATIONAL HIGHLIGHTS

§ Strong performance with half year profit before taxation of €19.1m.

§ As expected, profit in the period is lower than the first half of 2012 primarily due to reduced returns in global investment markets.

§ Key strategic initiatives deliver further growth in gross written premium, customer numbers and market share.

§ Industry leading combined operating ratio of 94.7% (2012: 92.5%).

§ Interim dividend increased 29% to 15.75 cent.

§ FBD Insurance capital base further strengthened with solvency level of 70%, up from 63% at 30 June 2012.

§ Increase in net asset value per share to €7.40.

§ 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. Key strategic initiatives delivered an increase in premium and customer numbers in an insurance market that continued to contract, resulting in further growth in FBD's market share. We have maintained our prudent management of risk, reserving and investments. FBD has followed through on its commitment to increase its dividend, which is up 29% on 2012. The Group is in a strong position to progress its strategic plans and is investing in future growth. The Board is confident that FBD will continue to outperform its peers in delivering superior returns to shareholders".

* Where applicable and unless otherwise stated, all comparative figures have been restated to exclude operations that were sold during 2012 and to reflect changes to IAS 19 "Employee Benefits".

A presentation will be made to analysts at 9.30 am. 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 2013

INTERIM MANAGEMENT REPORT

OVERVIEW

FBD delivered a profit before taxation of €19.1m in the first half of 2013, building on its track record of superior returns in a difficult operating environment.

The strong profit figure was driven by an industry-leading combined operating ratio of 94.7%. This was achieved despite an above-average level of severe personal injury claims early in the period. Due primarily to reduced returns in global investment markets, profit before tax of €19.1m, as expected, was lower than the €21.8m achieved in the prior year. Operating earnings per share for the first half of 2013 were 63 cent compared to 74 cent in the first half of 2012.

While the Irish Insurance market declined further in the period, albeit at a slower pace than heretofore, FBD increased gross written premium to €175.9m (2012: €174.7m), with key strategic initiatives contributing to the outperformance. As a result, the Group's market share increased again in the first half of 2013.

Underwriting

FBD generated underwriting profit of €7.7m in the first half (2012: €11.2m).

Insurable values and risk in the Irish insurance market have reduced every year since 2008 as domestic demand has fallen. In the first half of 2013, the market contracted by circa 3 %. However, FBD's gross written premium is up 0.7%, continuing its track record of market share growth. FBD's policy count grew by 1.7%, while the average customer premium reduced by 1%. FBD lowered rates for car insurance customers in 2012 where risk had reduced as a result of factors such as vehicle usage, safety measures or driver behaviour. As economic activity increases, it is likely that market rates will harden to compensate for the associated increase in risk. Encouragingly, there is some evidence that insurable values are stabilising in the first half of 2013.

FBD has made further progress in delivering on its strategic priorities and in aligning and optimising its business to continue to meet the needs of customers. FBD maintained its focus on the insurance needs of its key farm and direct business customers. This delivered growth in both agri and personal lines policies sold to these customers during the period. FBD's relationships with broker partners are developing well and business written is gaining momentum. The repositioning of No Nonsense has been very successful with growth in the first six months of 2013. No Nonsense also launched its 'smart driver' telematics offering, positioning itself for the inevitable shift in consumer sentiment towards this technology. Growth generated by these initiatives was somewhat offset by home insurance, where FBD has continued to maintain its underwriting discipline rather than compete with uneconomic rates in the market.

Net claims incurred reduced marginally to €100.6m (2012: €100.9m). The loss ratio increased from 67.0% to 68.8%. The Group achieved an excellent attritional loss ratio of 50.4% (full year 2012: 50.8%), driven by continued focus on risk selection, rating and claims management.

As previously advised, severe personal injury claims experience, which can be very volatile especially over a short period, was ahead of historic norms in the early months of 2013. Since then it has begun its reversion towards norm. In contrast, severe weather experience was very benign in the period. Severe weather events and large claims combined cost 18.4% in the first half of 2013 compared to a historic norm of 16.1%.

The level of expenses incurred in the first half of 2013 was flat on 2012. The expense ratio rose marginally from 25.6% to 25.9% as net earned premium declined, reflecting the reduction in premium written in 2012 relative to 2011.

FBD's combined operating ratio for the first half of 2013 was a market leading 94.7%, compared to the 92.6% achieved in the first half of 2012. Longer-term investment return at €14.2m was lower than the €14.3m booked in the first half of 2012. The underwriting operating profit before taxation amounted to €21.9m (2012: €25.5m).

Financial Services

The Group's financial services operations, which include premium instalment services and life, pension and investment broking (FBD Financial Solutions) less holding company costs, generated a solid performance in a tough operating environment, delivering an operating profit of €2.2m (2012: €2.6m). An increasing proportion of insurance customers are availing of premium instalment services.

Profit before taxation

Group operating profit before taxation was €24.1m (2012: €28.1m). The strong operating result was somewhat offset by impairment of property, plant and equipment of €0.3m (2012: Nil) and adverse investment return fluctuations of €4.3m (2012: €2.2m), which arose primarily because rates of return on bank deposits and bonds were at historic lows.

The Group's share of the loss of the property and leisure joint venture was €0.4m, an improvement on the €0.7m loss in the same period in 2012. The joint venture's trading has improved compared to 2012, 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 last of the remaining units were sold in July. The joint venture continued to be cash generative in the period.

The Group achieved a profit before tax of €19.1m (2012: €21.8m).

Dividends

It is in the long-term interest of all stakeholders to maintain strong solvency and liquidity margins and the Board is determined that the Group's capital position continues to be robust and allows for growth. The Group is committed to a progressive dividend policy and efficient management of capital.

The Board is satisfied that the significant increase in the level of dividend committed to at the publication of our 2012 results remains appropriate given the very strong profit performance, the robust financial position and the Board's desire to move towards its target of a 40% to 50% operating pay-out ratio. The Board approved an interim dividend payment of 15.75c cent per share (2012: 12.25 cent), an increase of 29%. This increase in dividend moves the Group towards its desired pay-out ratio while maintaining a high dividend cover and providing the potential for a sustainable and progressive dividend in future years.

The interim dividend will be paid on 1 October 2013 to the holders of shares on the register on 6 September 2013. It 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 longer-term investment return amounted to 63 cent per ordinary share, compared to 74 cent in the first half of 2012. The fully diluted earnings per share was 49 cent (2012: 57 cent) per ordinary share.

STATEMENT OF FINANCIAL POSITION

The Group's financial position further strengthened during the period. Ordinary shareholders' funds grew to €249.1m (December 2012: €241.3m). Net assets per ordinary share increased to 740 cent, up from 721 cent at December 2012.

Table 1 shows how the assets of the Group were invested at the beginning and end of the period.

Table 1 - Asset Allocation

International financial market volatility continues as evidenced by events in June. The reward provided by the market is insufficient to justify holding longer-dated assets. In such an environment, FBD's investment philosophy, like most of its peers globally, remains focussed on capital preservation, ensuring that customers and shareholders are protected. As a result, the Group has maintained a short-term, low-risk investment allocation.

The Group continues to be encouraged by policymakers' actions to address the euro crisis and the improvement in confidence in the global economy. As a result the Group has reduced the proportion of assets invested in cash and bonds at 30 June 2013 from 90% to 87%. The average term of these assets is far shorter than the corresponding liabilities, thereby reducing the risk of investment volatility.

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 70% of net earned premium at the end of June 2013, compared with 63% at June 2012. FBD has a prudent reserving policy that has delivered positive runoffs in each year since 2003. Reserving at 30 June 2013 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 235%, up from 232% at 30 June 2012.

OUTLOOK

Irish domestic demand is likely to stabilise in the second half of 2013, but is unlikely to return to growth in the short term.

However, FBD is committed to achieving profitable growth by constantly evolving its business to better serve the needs of customers. The Group will continue delivering products and services that matter to its farming and business customers. FBD expects to further increase penetration of key urban markets, in particular Dublin, and of the business insurance market, in partnership with brokers. These opportunities provide the Group with the ability to continue outperforming the market.

FBD's policy to only write profitable business at sustainable rates will continue. The Group has the ambition, capability and capital strength to take advantage of appropriate market opportunities that provide profitable growth.

The Group will continue to deliver improvements in those aspects of claims costs that it can control, and expects to maintain the attritional loss ratio achieved in the first half of 2013 throughout the remainder of 2013. It is expected that the severe personal injury claims experience, which can be volatile in any short period, will revert towards historic norms.

As global investment returns will remain low, insurance companies are likely to become more reliant on underwriting profit 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. In a rising interest rate environment, our current asset allocation positions FBD to benefit from higher investment returns as they materialise.

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 by investing in future growth. 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 2013 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 Board considers that the risks and uncertainties disclosed in the Annual Report for the year ended 31 December 2012 continue to reflect the principal risks and uncertainties of the Group over the remainder of the financial year. In the 2012 Annual Report, risk was 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 110 to 120 of the 2012 Annual Report, 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 movement in the parameters described above may be experienced in future periods.

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 its solvency at all times. Through the proactive management of risk, it ensures that it does not have or will not take on an individual risk or combination of risks that could threaten its solvency. This ensures that it has, and will have at all times, sufficient capital to pay its policyholders and all other creditors in full as liabilities fall due.

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 2013

FBD HOLDINGS PLC

Condensed Consolidated Income Statement

For the half year ended 30 June 2013

FBD HOLDINGS PLC

Condensed Consolidated Statement of Comprehensive Income

For the half year ended 30 June 2013

FBD HOLDINGS PLC

Pro Forma Reconciliation of Consolidated Operating Profit to PROFIT after TaxATION

For the half year ended 30 June 2013

FBD HOLDINGS PLC

Condensed Consolidated Statement of Financial Position

At 30 June 2013

FBD HOLDINGS PLC

Condensed Consolidated Statement of Financial Position (continued)

At 30 June 2013

FBD HOLDINGS PLC

Condensed Consolidated Statement of Cash Flows

For the half year ended 30 June 2013

FBD HOLDINGS PLC

Condensed Consolidated Statement of Cash Flows (continued)

For the half year ended 30 June 2013

FBD HOLDINGS PLC

Condensed Consolidated Statement of Changes in Equity (UNAUDITED)

For the half year ended 30 June 2013

FBD HOLDINGS PLC

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the half year ended 30 June 2013

Note 1 - General information

The information for the year ended 31 December 2012 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 2012 and the full year ended 31 December 2012 in the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Cash Flows and relevant notes as indicated have been restated to reflect changes to IAS 19 "Employee Benefits". Comparative figures for the half year ended 30 June 2012 in the Condensed Consolidated Income Statement and relevant notes as indicated have been restated to reflect comparatives for the discontinued operation in 2012.

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.

Changes in accounting policy

In the current year, the Group has adopted the amendments to IAS 1 "Presentation of Items of Other Comprehensive Income", IAS 19 (revised 2011) "Employee Benefits" and IFRS 13 "Fair Value Measurement". Otherwise, the same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements for the six month period ended 30 June 2013 as those applied to prepare the Group Annual Report for the year ended 31 December 2012.

The amendments to IAS 1 require items of other comprehensive income to be grouped by those items that will or may be reclassified subsequently to profit or loss and those that will never be reclassified, together with their associated income taxation.

IAS 19 (revised 2011) and the related consequential amendments have impacted the accounting for the Group's defined benefit scheme, by replacing the interest cost and expected return on plan assets with a net interest charge on the net defined benefit liability. This has resulted in the restatement of the comparative figures in the Condensed Consolidated Income Statement and corresponding opposite entries in the Condensed Consolidated Statement of Comprehensive Income. The impact of these restatements is to reduce profit after taxation by €285,000 for the six months ended 30 June 2012 and by €570,000 for the 12 months to 31 December 2012. There is no change to the Condensed Consolidated Statement of Financial Position. As the Group has always recognised actuarial gains and losses immediately there has been no effect on the prior year defined benefit obligation.

IFRS 13 establishes a framework for measuring fair value and introduces new disclosures. The Group has adopted the disclosure requirements in respect of financial instruments in note 11. Financial instruments measured at fair value continue to be valued using the techniques set out in the accounting policies used in the 2012 Annual Report.

FBD HOLDINGS PLC

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the half year ended 30 June 2013

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 2012. 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.

Note 3 - Longer term investment return

The rates of investment return underlying the calculation of the longer term investment return are set out below. These rates are reviewed annually and reflect both historical experience and the Directors' current expectations for longer term investment returns.