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FBD Holdings plc
2008 Preliminary Results
March 2009
1
2008 Preliminary Results
Forward Looking Statements
This presentation contains certain forward-looking statements.
Actual results may differ materially from those projected or implied
in such forward-looking statements. Such forward-looking
information involves risks and uncertainties that could affect
expected results.
2
2008 Preliminary Results
2008 Highlights
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
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


Operational
Growth in Market Share
Premium rates hardening
Cost improvements and claims
initiatives
Internet developments
Realignment of local offices
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Financial
Solid trading performance
Adjusted operating profit of €65.8m
Operating contributions from all
divisions
Continued de-risking of balance sheet
Loss net of valuation adjustments
FBD will benefit from positive operating leverage as prices rise
3
2008 Preliminary Results
Continuing Growth in Market Share
Premium Income FBD v Irish Market
450
4,400
4,200
4,000
3,800
3,600
3,400
3,200
3,000


350
Irish Market
FBD



Market GWP down 7.5%
FBD Average premium up 0.3%
FBD policy volume down 5.7%
FBD GWP down 5.5%
650,000 policies at 31/12/08
250
2002 2003 2004 2005 2006 2007 2008
Year
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
Market share up from 11.3% to 11.6%
Sustainable growth from core markets
Increasing Dublin penetration
Eighth consecutive year of growth
Third largest non-life insurer in Ireland
Market share growth validates rate
increases
Underwriting discipline maintained
Excellent result in competitive market
Premium by Category - 2008
14%
26%
20%
21%
19%
HOUSES
COMMERCIAL OTHER
OTHER MOTOR
CARS
Growing market share, profitably
FARMS AGRI
4
2008 Preliminary Results
Market Shares
Gross Written Premium – 2008 Provisional
FBD
Eagle Star
13.4%
11.90%
12.4%
8.7%
10.4%
10.2%
AXA
6.4%
5.0%
5.0%
4.5
%
4.8%
5.20%
R.S.A.
9.4%
9.0%
8.7%
8.1%
7.8%
8%
14.9%
14.1%
13.2%
12.5%
11.6%
11.20%
Allianz
13.3%
12.8%
12.3%
10.6%
10.3%
10%
Quinn
11.7%
11.1%
10.7%
10.2%
9.7%
10.40%
Hibernian
8.2%
8.7%
8.8%
10.1%
10.7%
11.30%
11.60%
12.20%
5.7%
7.1%
9.3%11
.0%
12.0%
21.7%
21.8%
21.1%
19.7%
20.7%
19.90%
2008
2007
2006
2005
2004
2003
2002
AIG
Others(14)
Total Market 2008 -€3,333m: 2007 -€3,604m: 2006 - €3,822m: 2005 - €3,841m: 2004 - €3,933m : 2003 - €4,239m: 2002 - €3,955m
FBD Premium 2008- €386m: 2007 - €408m: 2006 - €407m: 2005 - €389m:
2004 - €351m:
2003 - €369m: 2002 - €326m
5
2008 Preliminary Results
Premium Pricing
Graph: Irish Industry Private Motor Insurance Pricing YOY
Source: Dept of Env, Herit age + Local Goc, IIF + INCA Ireland
10
€1,100
5
€1,000
% Change YOY
€900
€800
€700
€600
€500
0
5
5
5
5
6
6
6
6
7
7
7
7
8
8
8
8
9
-5-0 pr-0 ul-0 ct-0 an-0 pr-0 ul-0 ct-0 an-0 pr-0 ul-0 ct-0 an-0 pr-0 ul-0 ct-0 an-0
J
J
J
J
O
J
O
J
O
J
O
J
A
A
A
A
n
Ja
-10
-15
€400
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
-20
Private Motor Vehicle
Gross Written Premium per Vehicle
Graph: Irish Industry House Insurance Pricing YOY
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
Market rates hardening since late
2008
Covers wider / insured values
higher
Claims costs increasing
FBD will benefit from positive
operating leverage as prices rise
20
15
% Change YOY

10
5
0
5
6
7
8
-5-05 r-0 5 l-0 t-05 n-06 r-0 6 l-0 t-06 n-07 r-0 7 l-0 t-07 n-08 r-0 8 l-0 t-08 n-09
Ju Oc
Ju Oc
Ju Oc
Ju Oc
Ja
Ja
Ja
Ja
Ap
Ap
Ap
Ap
-10
n
Ja
-15
Turning Point in Insurance Cycle
Home Policies
6
2008 Preliminary Results
Claims Trends
Loss Ratio
FBD 2002 - 2008
Loss Ratio
100%
90%
80%
70%
60%
50%
2002
2003
2004
2005
2006
2007
2008
Year
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Claims ratio up from 68.2% to 79.1%
Unusual weather events in August
2008
Higher property related claims –
persistent poor weather
Risk of increase in “recessionary”
claims
•
•
•
Claims initiatives
Increased resources to counter fraud
Continuing innovation in technology
and process to improve settlement
costs
We aim to achieve early and cost effective settlements while providing our
customers with a professional claims service that can realise competitive
advantage through reduced premiums
7
2008 Preliminary Results
Distribution Platform Changing
Motor Insurance
100%
80%
•
40%
40%
27%
33%
•
•
0%
Sales Office
Feb-07
Feb-09
Telephone Support
Centre
•
Internet
FBD.ie
NoNonsense.ie
Broker Initiatives
Metro Markets
Distribution Channel
Sales Office Realignment
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In response to changing customer
behaviour sales offices will focus on
Agri & commercial business
Personal lines by phone or internet
Mullingar support centre investment
completed
50
47
40
34
30
20
10
0
Current
Proposed
Enhancing our business platform and operating capacity to extend our
reach by meeting customers needs, cost effectively
8
2008 Preliminary Results
2008 Highlights – Non Underwriting
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La Cala
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Lower property sales
Focus on costs / special offers / new markets
Sunset
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Excellent performance
Another record year
Protecting Competitiveness
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Tower
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Oversupply in the market
We are outperforming competitors
Financial Services
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Cost Savings
Special offers
Developing new markets
Access to FBD database
Contribution from FBD Brokers maintained
FBD Life refocused on pension and protection products
Capital Fund

Converted to cash
Solid result in difficult trading conditions
9
2008 Preliminary Results
Financial Highlights
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Solid trading performance €65.8m
Underwriting Asset Allocation
Lower Long term return
Gilts
16%
4%
Cash
2%
46%
Loans
Property

Loss net of valuation
adjustments
Land & Buildings
5%
Equities
7%
Other
20%

Continued de-risking of
balance sheet

Strong capital base
•
•
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Final dividend of 10c per
share
•
Total assets of €1,278m
Three times minimum statutory
solvency
Prudent reserving policy
Positive claims run-off
Well placed financially for growth
10
2008 Preliminary Results
Income Statement
2008
€000s
2007
€000s
Gross Written Premium
€420,000
Net earned premiums
Net claims incurred
385,638
€400,000
407,953
343,075
350,321
(271,205)
(239,054)
(58,470)
(51,928)
€000s
Gross written premiums
€380,000
€360,000
€340,000
€320,000
€300,000
Net operating expenses
2002
2003
2004
2005
2006
2007
2008
Year
Adjusted Underwriting Result
13,400
59,339
Loss Ratio
79.1%
68.2%
Net Expense Ratio
17.0%
14.8%
Combined Ratio
96.1%
83.1%
Net Expense Ratio
29.0%
25.0%
21.0%
Underwriting Net Expense Ratio
FBD
17.0%
18.00%
16.00%
13.0%
14.00%
9.0%
12.00%
Market
5.0%
10.00%
2002
8.00%
2003
2004
2005
2006
2007
2008
6.00%
Year
4.00%
2.00%
0.00%
2007
2008
Positive operating leverage as prices rise
11
2008 Preliminary Results
Income Statement (contd)
2008
€000s
2007
€000s
Underwriting Result
13,400
59,339
Longer term investment return
43,930
53,369
Operating Profit by Activity
8%
5%
Insurance Underwriting
Property / Leisure
Financial Services/Other
Non underwriting operating income
8,453
15,175
87%
Adjusted operating profit
65,783
127,883
Adjusted operating profit
by activity:
Adjusted Operating Profit
Insurance underwriting
57,330
€200,000
112,708
€150,000
- Property/leisure
5,991
16,101
- Financial services/other
3,329
5,882
- Capital fund
(867)
€000s
Non-underwriting
€100,000
€50,000
8,453
65,783
(6,808)
€0
15,175
2002
127,883
Profitable at all points in the cycle
2003
2004
2005
2006
2007
2008
Year
12
2008 Preliminary Results
Income Statement (contd)
Fluctuation in Investment Return
2007
80,000
€000s
€000s
60,000
40,000
65,783
127,883
2008
Fluctuation in
Investment
Return
20,000
Adjusted operating profit
Fluctuation in investment return
Restructuring costs
Change of reserving policy
(92,307)
(69,253)
(7,609)
-
-
107,627
(4,474)
(4,089)
(38,607)
162,168
0
-20,000
2001
2002
2003
2004
2005
2006
2007
2008
-40,000
-60,000
-80,000
-100,000
Profit/ loss before tax
Finance costs
(Loss) profit before tax
€350,000
Income tax credit/(expense)
(Loss) profit for the year
5,607
(22,093)
(33,000)
140,075
€000s
€250,000
€150,000
€50,000
-€50,000
2002
2003
2004
2005
2006
2007
2008
Year
Valuation adjustments of €126.5m
13
2008 Preliminary Results
Underwriting Business – Asset Allocation
2008
2007
€m
%
€m
%
German government gilts
466
45%
482
42%
Deposits and cash
207
20%
94
8%
Loans and accrued interest
71
7%
85
7%
Investment properties
53
5%
83
7%
Own land and buildings
24
2%
33
3%
Quoted equities and corporate bonds
38
4%
163
15%
169
16%
210
18%
1,028
100%
1,150
100%
Other
Three times minimum statutory solvency requirements
14
2008 Preliminary Results
Group Assets – Valuation Adjustments
At start
of year
€m
At end
of year
€m
German government gilts
482.2
466.3
-
-
Hotel and golf resorts
192.4
167.0
(25.1)
(13%)
Quoted equities and corporate bonds
181.6
38.0
(46.1)
(25%)
Deposits and cash
108.6
218.8
-
-
Loans and accrued interest
85.2
70.5
(15.7)
(18%)
Investment properties
83.0
52.5
(30.5)
(37%)
Inventories
65.7
62.4
-
-
Insurance own land and buildings
32.8
24.3
(9.1)
(28%)
155.5
178.0
-
-
1,387.0
1,277.8
(126.5)
(9%)
Other
Total
Total Adjustments
€m
%
Adjustments made in income statement
(92.3)
Adjustments made directly to reserves
(34.2)
Total valuation adjustments
(126.5)
Properties independently valued by professional external valuers
15
2008 Preliminary Results
Gross Claims Run-off
Prior
Years
2001
2002
2003
2004
2005
2006
2007
2008
Total
€ms
€ms
€ms
€ms
€ms
€ms
€ms
€ms
€ms
€ms
At end of underwriting year
-
205
290
262
329
330
394
340
384
One year later
-
201
222
225
277
278
306
316
Two years later
-
198
209
206
256
243
299
-
Three years later
-
182
199
185
224
230
-
-
Four years later
-
168
174
166
215
-
-
-
Five years later
-
163
166
157
-
-
-
-
Six Years Later
158
158
-
-
-
-
-
Seven Years Later
156
Estimate of cumulative
claims:
Estimate of cumulative claims
Cumulative payments
Claims outstanding
2008 Run-off
1,135
156
158
157
215
230
299
316
384
3,050
(1,114)
(140)
(146)
(135)
(173)
(162)
(208)
(188)
(159)
(2,424)
21
15
13
21
43
68
92
128
225
626
8
3
7
9
8
13
7
24
-
80
Validates Reserve Release in 2007
16
2008 Preliminary Results
Dividend Policy
Dividend Payout Ratio
30%

FBD is committed to a robust capital
position and well-managed balance
sheet
25%
20%
15%
10%
5%


Given market uncertainty it is
appropriate to be prudent at this time
0%
2003
2005
2006
2007
2008
Repatriations since 2005 of €546m
Special distribution of €1.50 in October 2008
•
Recommended final 2008 dividend of
10c
2004
•
Dividend

Total 2008 dividend of 40.25c
100
79.5

25% payout ratio, same as 2007
Cents
80
60
40.25
40
20
0
2007
2008
Year
Committed to progressive dividend policy
17
2008 Preliminary Results
Outlook : Underwriting




A period of unprecedented economic volatility
FBD’s underwriting business, by it’s defensive nature, will be
cushioned
Premium rates hardening
Further premium increases in market necessitated because:




Premiums have reduced too far
Increase in claims costs - weather and property
Severe weather in January 2009
Lower investment returns
FBD well positioned to benefit from hardening market
18
2008 Preliminary Results
Outlook : Non Underwriting
 Leisure/Leisure Property Development
 Market conditions will continue to be challenging
 Marketing/sales initiatives to counter market conditions
 Management focused on operational efficiencies
 La Cala Land Sale
 Parallel planning procedure initiated
 If successful, substantial proportion will be delivered
 Dependent on local authorities
 Financial Services
 FBD Brokers will benefit from hardening market
 Focus on pension and protection products in FBD Life
 Consolidate customer relationships
Difficult environment, but focus on maintaining profitability
19
2008 Preliminary Results
Proposition





Robust underwriting business
Positive operating leverage as prices rise
Appropriate plans, people and infrastructure
Growing market share, profitably
Quality portfolio of property & leisure
businesses




Strong capital base and balance sheet
Prudent reserving policy
Continued de-risking of balance sheet
Well positioned



To benefit from hardening market
To deliver long-term profitable growth
To produce superior returns for shareholders
20
FBD Holdings plc
2008 Preliminary Results
QUESTIONS?
March 2009
A.
21
2008 Preliminary Results
Balance Sheet - Assets
Property & Equipment
Hotels/golf
31/12/08
31/12/07
€000s
€000s
167,088
192,352
Property – own use
24,335
32,806
Fixtures & Fittings
17,236
208,659
18,186
243,344
Investments
Property
52,538
83,019
Financial
768,420
823,151
Reinsurers’ share of technical provisions
58,994
50,483
Other receivables/DAC’s
91,092
85,705
Other Assets
Development land
30,806
30,781
Work-in-Progress
31,578
34,964
Cash
35,713
Total Assets
98,097
1,277,800
35,618
101,363
1,387,065
22
2008 Preliminary Results
Balance Sheet - Liabilities
31/12/08
€000s
31/12/07
€000s
21,409
21,277
214,031
362,312
235,410
383,589
Preference Shareholders
2,923
2,923
Minority Interests
4,151
5,689
242,484
392,201
Equity
Share Capital
Reserves
Shareholders’ funds – equity interests
Total equity
Liabilities
Technical provisions
- Unearned premiums
188,017
- Claims
626,188
Deferred tax
199,074
814,205
612,852
15,062
811,926
27,738
Creditors
- Loans
- Other
Total Liabilities
110,968
95,081
60,406
206,049
1,277,800
94,794
155,200
1,387,065
23
2008 Preliminary Results
Cash Flow Statement
2008
€000s
2007
€000s
26,315
121,263
1,949
179,790
(27,099)
(303,085)
1,165
(2,032)
Cash and cash equivalents at the beginning of the period
35,618
37,423
Effect of foreign exchange rate changes
(1,070)
227
Cash and cash equivalents at the end of the period
35,713
35,618
Net cash from operating activities
From investing activities
Used in financing activities
Net increase (decrease) in cash and cash equivalents
24