FBD Holdings plc Annual Report Protection. It s in our nature.

Transcription

1 FBD Holdigs plc Aual Report 2017 Protectio. It s i our ature.

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3 Cotets Fiacial Highlights 2 Chairma's Statemet 4 Review of Operatios 8 Corporate Iformatio 14 Report of the Directors 15 Corporate Goverace 24 Report o Directors Remueratio 38 Directors Resposibilities Statemet 47 Idepedet Auditors Report 48 FBD Holdigs plc Aual Report 2017 Fiacial Statemets Cosolidated Icome Statemet 60 Cosolidated Statemet of Comprehesive Icome 61 Cosolidated Statemet of Fiacial Positio 62 Cosolidated Statemet of Cash Flows 64 Cosolidated Statemet of Chages i Equity 65 Compay Statemet of Fiacial Positio 66 Compay Statemet of Cash Flows 67 Compay Statemet of Chages i Equity 68 Notes to the Fiacial Statemets 69 Other Items (Not Formig Part of the Fiacial Statemets) Alterative Performace Measures 130 Letter from Chairma i relatio to Aual Geeral Meetig 131 Notice of Aual Geeral Meetig 135 1

4 Fiacial Highlights s s Gross premium writte 372, ,799 Net premium eared 325, ,226 Profit for the fiacial year 42,696 10, Cet 2016 Cet Basic earigs per share Diluted earigs per share Net asset value per share Ordiary divided per share Diluted earigs per share reflects the potetial coversio of the covertible debt ad share based paymets Caledar Prelimiary aoucemet 27 February 2018 Divided record date 6 April 2018 Aual Geeral Meetig 4 May 2018 Divided paymet date 11 May

5 FBD Holdigs at a glace 372m GWP is up 3% 86.2% 50m Combied Operatig Ratio Profit before Tax FBD Holdigs plc Aual Report : Progress i Developig our Busiess NEW PRODUCTS SALES & DISTRIBUTION BRAND & MARKETING PRICING & UNDERWRITING New CarProtect product itroduced i Cosumer chael providig greater choice for customer Travel ad Car Hire (exterally uderwritte) Professioal Idemity ad Directors & Officers (exterally uderwritte) New Dubli brach opeed i Drumcodra Brach o Southside plaed Ehacemets to website icludig allowig o lie claims otificatios Chages to Cosumer call cetre to alig to customer buyig patters Advertisig campaig buildig o brad re-lauch Sposorship of Bloom festival, Maria Fiucae Show ad partership with Toyota Face It Dow Campaig Cotiuig support for agricultural associatios ad evets icludig the Natioal Ploughig Champioships More graular ratig facilitated by ew CarProtect product Chages to uderwritig approach to support urba growth plas All chaels ad products cotributig to uderwritig profit 3

6 Chairma s Statemet Performace I am pleased to preset to you our excellet fiacial results for 2017 ad i particular I am very pleased to aouce a proposed divided paymet to our shareholders. We achieved a Group Profit before Tax of 50m ad our Net Asset Value (Book value) per share grew to 784 cets. Our Solvecy Capital Ratio has improved from 126% i 2016 to 164% at the ed of Over the past three years we have successfully executed a sigificat turaroud i our busiess ad we ca ow clearly see the results of the may strog ad sometimes difficult actios take i that time. We look forward with cofidece to future profitability ad growth. We ited to carefully grow our busiess while maitaiig our uderwritig disciplie. It is i this way that FBD iteds to geerate sustaiable growth i book value for our shareholders. From the outset, I would like to ackowledge ad thak our loyal FBD staff for their immese cotributio to these strog fiacial results. Their dedicatio to our customers ad to great customer service cotiues to be a key differetiator ad competitive advatage for FBD ad that dedicatio is a source of pride ad cofidece for the Board. Maagemet Chages With the help of the Board, Ms. Fioa Muldoo our Group Chief Executive added further executive talet to the FBD seior maagemet team durig We welcomed a ew Chief Commercial Officer, Chief Huma Resources Officer ad Chief Uderwritig Officer. The depth ad stregth of our seior maagemet team positio the Group well for the executio of our strategy ad ay future challeges ahead. The Board looks forward with cofidece to the cotiued successful implemetatio of this strategy. Board Chages The ew Board ad streamlied goverace structure was steadily effective durig the year. The group is focussed o its geeral isurace busiess, FBD Isurace plc, ad our life, pesios ad ivestmet itermediary, FBD Fiacial Solutios. Durig the year there were some Board chages that warrat otig ad I would like to record my ow ad the Board s deep appreciatio of Mr. Michael Berkery, our former Chairma, ad Mr. Sea Dorga, our former Seior Idepedet Director, who both stepped dow at our AGM last May. The Board ad I thak them for their valued cotributios to the Group over may years ad we wish them cotiued success i the future. We were also delighted to welcome Joe Healy, Presidet of the Irish Farmers Associatio as a ew o-executive Board member. Joe brigs valuable isight ad excellet relatioships with our core customer base. He has a deep kowledge of Irish farmig ad the Agri-sector ad we look forward to workig with him over the comig years. 4

7 Liam Herlihy CHAIRMAN Chairma s Statemet 5

8 Chairma s Statemet (cotiued) Our Heritage This year, FBD celebrates its 50th year i busiess. We have a rich heritage ad we are uiquely a Irish idigeous isurer, supportig ad protectig our farm, busiess ad cosumer customers. With our atiowide brach etwork, we are based i ad active participats i the commuities we serve. We cotiue to be strog supporters of Irish farmers ad Irish busiesses dow through the years. Our sposorship of key evets such as our o-goig flagship sposorship of The Ploughig Champioship ad may other associatios ad evets across the legth ad breadth of the coutry cotiues to esure our commitmet to rural Irelad s success ad prosperity is well kow ad uderstood. We re-lauched our brad i 2017 with the FBD Tree ad our Protectio. It s i our Nature. strap lie. We believe this speaks to our heritage ad our roots while also beig relevat ad moder to today s customers. It has helped us retai our existig customers, broade the appeal of FBD ad foster relatioships with ew customers. Durig 2017 we formed ew parterships with Toyota ( Face It Dow Drivig Safety Campaig), Chubb (Travel Isurace) ad XL Catli (Professioal Idemity ad Directors & Officers Isurace). I additio, we were proud to become the first commercial sposor of the Bord Bia-led Bloom Festival i the Phoeix Park ad we became the sposors of Irelad s most listeed to radio show: RTÉ s Maria Fiucae Show. More recetly, durig 2017 we also exteded our brach etwork i Dubli with the opeig of our ew office i Drumcodra o Dubli s orth side. This represeted the first brach office opeed i may years ad was a cause of some celebratio for staff ad customers. We hope to soo follow with a further office i South Dubli. This further exteds our presece ito the importat Dubli commercial busiess market ad exteds our brad reach ad recogitio ito the most importat cosumer urba cetre i the coutry; our capital city. Claims Eviromet The claims eviromet cotiues to be ucertai ad, i the absece of reform, our customers will cotiue to pay higher isurace premiums tha those see i other EU coutries. The progress made o the actios recommeded by the Govermet Cost of Isurace Workig Group is welcome. It is importat that these proposals are followed through with legislatio so that we see a reductio i the cost of claims. I October, Storm Ophelia hit the coutry ad caused widespread damage to property. Our claims staff respoded superbly to help our impacted customers. Isurace is for evets such as these ad as always, we ca be proud of our claims payig record. Ufortuately, i additio, 2017 was a very poor year for Farm safety ad ideed there were a record umber of deaths o Irish farms durig the year. FBD will cotiue to work hard with its customers to chage farm workplace practices. FBD supports may sposorships ad iitiatives i this area ad will cotiue to help educate ad support a safety culture that would begi to chage the very high level of death ad ijury i the farm workplace. 6

9 Divided The Board believes that it is i the log-term iterest of all stakeholders to maitai strog solvecy ad liquidity margis ad it is focussed o esurig that the Group s capital positio cotiues to be robust ad its fiacial positio well maaged. Followig the improvemet i the fiacial performace of the busiess the Board proposes to pay a divided of 24c per share for the 2017 fiacial year. This is equivalet to a pay-out ratio of approximately 20% i respect of 2017 profits. The Group will target a 20% to 50% aual pay-out rage of full year profits whe appropriate, recogisig extreme weather evets ad iheret cyclicality are a feature of all isurace busiesses. Coclusio I wat to exted my sicere thaks to the Board for its active leadership ad support durig I also wat to thak Fioa, the maagemet team ad our FBD staff for their commitmet i deliverig this very strog result. Fially we thak our customers for their busiess. Their loyalty, trust ad cofidece i FBD has eabled this success. As we eter our 50th year of tradig, FBD is strogly positioed for the future ad I am cofidet that FBD will cotiue to grow ad prosper over its ext fifty years. Thak you. FBD Holdigs plc Aual Report 2017 This coservative policy is desiged to recogise the importace of full year earigs i determiig divideds while protectig the capital positio of the Group. This divided paymet is a major milestoe for FBD ad reflects our cofidece i the profitability ad future prospects of the busiess. Liam Herlihy Chairma 26 February

10 Review of Operatios Overview FBD has had a excellet year ad I am pleased to see our strog strategic delivery reflected i these results. I particular, I am delighted the Board has proposed a divided of 24c per share for our shareholders. After three years of hard work ad corrective actio my colleagues ad I have delivered a strog uderwritig profit for the year. Storm Ophelia was maaged to a et cost of 5.4m ad our target retur o equity has bee exceeded a full twelve moths ahead of schedule. FBD has displayed exceptioal resiliece ad we are ow well positioed to build o our loyal customer base. As we eter our 50th year of tradig ad as the oly publicly quoted Irish isurer, FBD is here for farmers, busiesses ad cosumers for the log-haul. The Group s profitability ad balace sheet stregtheed sigificatly i FBD delivered a 17% retur o equity due to a exceptioally strog uderwritig result ad some positive prior year reserve developmet. Gross writte premium icreased by 3% to 372m (2016: 362m), profit before tax icreased to 50m (2016: 11m) icludig a uderwritig profit of 45m (2016: 3m). Uderwritig PREMIUM INCOME Gross writte premium icreased by 10.7m to 372.5m (2016: 361.8m), which is largely attributable to our farm, busiess ad private motor products of 11.6m, offset by a 0.9m reductio i broker busiess. Moderate rate icreases were carried across the book ad the uderlyig performace of the busiess cotiues to improve. New busiess volumes grew by 12% largely i commercial, private motor ad farm. We cotiue to see strog retetio rates across our book. REINSURANCE The Group ameded its reisurace arragemets at the outset of 2017 to what it believes is a more effective programme, providig better cover i extreme evets, while acceptig more attritioal property risk. CLAIMS Net claims icurred amouted to 203.1m (2016: 227.9m). We experieced positive prior year reserve developmet of 15.4m drive by the 2016 accidet year which is ow showig sustaied frequecy improvemets. The MIBI levy reserve release of 5.6m is also reflected i these results followig the Supreme Court rulig o the Setata case. This case foud that MIBI was ot liable for third party motor isurer isolvecy. I total the Group icurred a et charge of 1.9m (2016: 7.8m) relatig to its MIBI levy ad related obligatio, which is calculated based o the Group s expected share of the motor market for 2017 ad icludes the MIBI levy reserve release of 5.6m. CLAIMS ENVIRONMENT The claims eviromet has show sigs of moderatio, but overall remais difficult. The average cost of claims cotiues to icrease with higher levels of iflatio observed i ijury settlemets, particularly for more mior ijury levels. The ameded Book of Quatum has icreased the level of damages awarded by the Ijuries Board for most categories of ijury. Despite this developmet, the rejectio rate of Ijuries Board awards remais very high amogst claimats. FBD s rejectio rate has icreased by 30% sice 2013, with sigificatly fewer claimats ow acceptig Ijuries Board awards tha previously. The eactmet by the Govermet of the proposed PIAB (Amedmet) Bill to tackle the o-co-operatio of claimats ad their legal represetatives with the Ijuries Board, is ecessary to reduce the claimat rejectio rate ad lower the cost of claims. 8

11 Fioa Muldoo GROUP CHIEF EXECUTIVE Review of Operatios 9

12 Review of Operatios (cotiued) 10 I Jauary 2017 the Cost of Isurace Workig Group published its report o Motor Isurace, with suggested reforms icludig stregtheig the power of the Ijuries Board, establishmet of a Persoal Ijuries Commissio ad improved data sharig. The report o the cost of Employer ad Public Liability isurace was published recetly with some additioal recommedatios. Progress to date o these recommedatios icludes: The establishmet of the Persoal Ijuries Commissio ad its first report, with a focus o stadardisatio of whiplash ijuries. The publicatio of the First Motor Isurace Key Iformatio Report aimed at greater trasparecy o costs ad treds. Proposed icreased powers for the Ijuries Board as outlied i the PIAB (Amedmet) Bill (eactmet awaited). Work started to establish a itegrated isurace fraud database ad the uisured drivers database which ca be updated to the Garda Automatic Number Plate Recogitio (ANPR) system. While ackowledgig the limited progress made to date, i order for costs to reduce we believe that these projects urgetly eed to reach coclusio ad the required legislatio must be eacted to deliver meaigful reform. WEATHER, CLAIMS FREQUENCY AND LARGE CLAIMS Storm Ophelia, the strogest easter Atlatic hurricae o record, swept through the coutry o 16 October 2017 causig sigificat wid damage. We received almost 2,200 claims with a approximate cost of 10-11m. The et cost to FBD is 5.4m et of reisurace (iclusive of reistatemet premia). Our uderwritig approach has led to a sustaied positive tred i motor ijury frequecy. The gross cost of large claims i 2017 (greater tha 0.5m) is 44m ad is largely i lie with the average of the past five years. O a et of reisurace basis, our large claims cost is 5m lower tha the five-year average as a result of the lower retetios i our 2017 reisurace programme. EXPENSES The Group s expese ratio was 23.3% (2016: 22.6%). Other uderwritig expeses were 75.9m a icrease of 6.5m. 4.5m of the icrease relates to chages i the reisurace arragemets. The balace relates to the icreased full year depreciatio charge from the Group s ew policy admiistratio system. The reclassificatio of claims hadlig expeses has reduced the reported expese ratio by 2.9 percetage poits (2016: 3.4 percetage poits) ad icreased the loss ratio by the same amout. GENERAL FBD s Combied Operatig Ratio ( COR ) was 86.2% geeratig a uderwritig profit of 44.9m (2016: 3.2m). INVESTMENT RETURN FBD s total ivestmet retur for 2017 was 1.2% (2016: 1.9%), with 0.9% (2016: 0.8%) recogised i the Cosolidated Icome Statemet ad 0.3% (2016: 1.1%) recogised i the Cosolidated Statemet of Comprehesive Icome. The modest returs are a reflectio of the Eurozoe low iterest rate eviromet ad the Group s coservative ivestmet portfolio (94% of total assets are ivested i cash ad bods). The Group holds a small portfolio of risk assets icludig equities, ivestmet property ad UCITS fuds. CAPITAL POSITION Ordiary shareholders fuds at 31 December 2017 amouted to 271.6m (2016: 225.5m). The icrease i shareholders fuds is maily attributable to the followig: Profit after tax for the year of 42.7m Mark to market gais o Available for Sale ivestmets of 2.5m after tax recogised i the statemet of other comprehesive icome Share based paymets of 0.7m The decrease i the defied beefit pesio scheme obligatio of 0.2m after tax followig a 5bps icrease i the discout rate to 1.75% Net assets per ordiary share are 784 cet, compared to 651 cet per share at 31 December 2016.

13 INVESTMENT ALLOCATION The allocatio of the Group s uderwritig ivestmet assets is as follows: 31 December December 2016 m % m % Deposits ad cash % % Corporate bods % % Govermet bods % % Equities 22 2% 24 2% Uit trusts 24 2% 24 2% Ivestmet property 18 2% 16 2% 1, % 1, % FBD Holdigs plc Aual Report 2017 The Group has cotiued with its coservative ivestmet policy durig the period. FBD has icreased its exposure to Govermet bods towards a 30% target allocatio. Durig 2018 FBD will move ito the fial phase of its strategic asset allocatio. SOLVENCY The latest (uaudited) Solvecy Capital Ratio (SCR) is 164%, icreasig from 126% at the ed of The improvemet is drive by both the effect of the uderlyig profitability of the busiess o available capital ad the impact of the payig dow of older claims reserves o required capital. Outlook I 2017 FBD delivered a retur o equity of 17% ad a curret year COR of 93%, helped by strog uderwritig actios ad improved rate adequacy. Storm Ophelia represeted a et cost of 5.4m. I additio 2017 icluded positive prior year ad MIBI reserve releases of 15.4m ad 5.6m respectively, both of which further improve the COR to 86%. Strog progress has bee made by the Group over the last three years ad FBD is well positioed to deliver sustaiable profitable growth ad log-term shareholder value through growth i book value. The claims eviromet has moderated although iflatio is still evidet. While the proposals made by the Cost of Isurace Workig Group are sesible, they must be implemeted i practice i order to deliver beefit to our customers. Farm safety remais a cocer ad the Group iteds to cotiue to work hard i this area with its farm customers. Brexit is likely to have a egative impact o our farm customers although Irish farmig has prove resiliet to setbacks i the past ad has overcome all previous sigificat challeges. We remai cofidet i the sector s ability to adapt ad thrive. FBD cotiues to target careful growth, specifically through a measured icrease i its urba busiess while retaiig its large market share i rural Irelad. Fioa Muldoo Group Chief Executive 26 February

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15 FBD Holdigs plc Aual Report 2017 Cotiuig to protect our customers 13

16 Corporate Iformatio Registered Office ad Head Office FBD House Bluebell Dubli 12 D12 Y0HE Irelad Idepedet Auditors for 2017 PricewaterhouseCoopers Chartered Accoutats ad Statutory Audit Firm Oe Specer Dock North Wall Quay Dubli 1 Irelad Solicitors Dillo Eustace 33 Sir Joh Rogerso s Quay Dubli 2 Irelad Registrar Computershare Ivestor Services (Irelad) Limited Hero House Corrig Road Sadyford Idustrial Estate Dubli 18 Irelad Bakers Allied Irish Baks plc Bak of Irelad Barclays Bak plc BNP Paribas Close Brothers Iteratioal Credit Suisse (UK) Limited Daske Bak Deutsche Bak AG Goldma Sachs Stockbrokers Goodbody Stockbrokers Ballsbridge Park Ballsbridge Dubli 4 Irelad Shore Capital The Cor Exchage Fewick Street Liverpool L2 7RB Uited Kigdom 14

17 Report of the Directors The Directors preset their report ad the audited Fiacial Statemets for the fiacial year Pricipal Activities FBD is oe of Irelad s largest property ad casualty isurers lookig after the isurace eeds of farmers, private idividuals ad busiess owers through its pricipal subsidiary, FBD Isurace plc. The Group also has fiacial services operatios icludig a successful life ad pesios brokerage, FBD Fiacial Solutios. The Compay is a holdig compay icorporated i Irelad. Busiess Review The review of the performace of the Group, icludig a aalysis of fiacial iformatio ad the outlook for its future developmet, is cotaied i the Chairma s Statemet o pages 4 to 7 ad i the Group Chief Executive s Review of Operatios o pages 8 to 11. Iformatio i respect of evets sice the fiacial year ed ad a review of the key performace idicators are also icluded i these sectios. The key performace idicators iclude gross premium writte, earigs per share, loss ratio, expese ratio, combied operatig ratio, profit for the year ad et asset value per share. Results The results for the year are show i the Cosolidated Icome Statemet o page 60. Divideds O 23 February 2018 the Board of FBD Holdigs plc proposed a preferece divided of 113,000 o the 14% preferece shares, 169,000 o the 8% preferece shares ad 8,320,000 o the ordiary shares. The proposed divideds are subject to approval by shareholders at the Aual Geeral Meetig o 4 May Please refer to ote 35 for further details. Subsequet Evets There have bee o subsequet evets that would have a material impact o the Fiacial Statemets. Risk ad Ucertaities Risk Maagemet is embedded across the Group through its Risk Maagemet Framework. The Directors cosider that the pricipal risk factors that could materially ad adversely affect the Group s future operatig profits or fiacial positio are as follows: GENERAL INSURANCE RISK The risk attached to ay geeral isurace policy writte is the possibility that a isured evet occurs ad the ucertaity of the amout of the resultig claim. The frequecy ad severity of claims ca be affected by several factors, most otably weather evets, the ature of the evet, the level of awards ad iflatio o settlig claims. Whe estimatig the cost of claims outstadig at fiacial year ed, the pricipal assumptio uderlyig the estimates is the Group s past developmet patter. This icludes assumptios i respect of certai historic average claims costs, claims hadlig costs ad claims iflatio factors. Profitability of geeral isurace is, by its ature, cyclical ad ca vary because of the actios or omissios of market participats, particularly iappropriate pricig decisios. The extet of the Group s exposure to geeral isurace risk is cotrolled withi defied parameters by meas of strict uderwritig criteria, aalysis of historical uderwritig experiece, formalised pricig structures ad appropriate reisurace treaties. The claims settlemet eviromet cotiues to show emergig sigs of greater stability, but remais difficult. Average cost of claims cotiues to icrease with higher levels of iflatio observed i ijury settlemets. FBD Holdigs plc Aual Report

18 Report of the Directors (cotiued) The ameded Book of Quatum has icreased the level of damages awarded by the Ijuries Board for most categories of ijury. Despite this developmet, the rejectio rate of Ijuries Board awards remais high amogst claimats with legal represetatio. The rejectio rate has i fact icreased by 30% over the last umber of years, with sigificatly fewer claimats ow acceptig Ijuries Board awards tha previously. These claims proceed to litigatio where they icur sigificat legal costs. The eactmet by the Govermet ad eforcemet by the judiciary of proposed PIAB (Amedmet) Bill to tackle the o-co-operatio with the Ijuries Board by claimats ad their legal represetatives, is critical to reducig the claimat rejectio rate ad lowerig the cost of claims. There are a umber of other factors drivig higher uderlyig iflatio i ijury claims: Upward pressure o the average cost of soft tissue ijury claims of 18 moths to 24 moths duratio, as a result of the ameded Book of Quatum Psychological ijury accompayig soft tissue ijury, to a much greater extet tha previously experieced. We believe awards for this type of post-traumatic stress are excessive ad extraordiary i the iteratioal cotext Icreasig frequecy of assistive care claims. Such claims were previously a feature of catastrophic ijury claims but are becomig more prevalet i less serious claims Wage iflatio ad higher levels of employmet impactig past ad future loss of earigs claims CAPITAL MANAGEMENT RISK The Group is committed to maagig its capital to esure it is adequately capitalised at all times ad to maximise returs to shareholders. The capital of the Group comprises of issued capital, reserves ad retaied earigs as detailed i otes 24 to 27. The Board of Directors reviews the capital structure frequetly to determie the appropriate level of capital required to pursue the Group s growth plas. The Group s pricipal subsidiary, FBD Isurace, must maitai a adequate regulatory solvecy positio ad must satisfy the Cetral Bak of Irelad that it has doe so. The capital positio of FBD Isurace is reviewed frequetly by its Board of Directors. To provide protectio agaist material evets or shocks, the Group esures that its isurace subsidiary holds sufficiet capital to maitai appropriate regulatory surpluses. FBD Isurace maitaied its required capital positio ad complied with all regulatory solvecy margi requiremets throughout both the year uder review ad the prior year. The Solvecy II directive itroduced a requiremet for udertakigs to coduct a Ow Risk ad Solvecy Assessmet ORSA. The ORSA is a very importat process as it provides a comprehesive view ad uderstadig of the risks to which the Group is exposed or could face i the future ad how they traslate ito capital eeds or alteratively require mitigatig actios. FBD Isurace plc has a Ivestmet Committee, a Pricig & Uderwritig Committee, a Capital Maagemet Forum, a Audit Committee, a Reservig Committee ad Executive ad Board Risk Committees, all of which assist the Board i the idetificatio ad maagemet of exposures ad capital. The Group uses a umber of sesitivity based riskaalysis tools as part of its decisio makig ad plaig processes to uderstad ad maage the volatility of earigs ad capital requiremets more efficietly. The Group measures key performace idicators, icludig compliace with solvecy requiremets, uder a umber of ecoomic ad operatig scearios so as to idetify ad quatify the risks to which the busiess ad its capital are exposed. I preparatio for the Board s aual review of the iteral cotrol system, seior maagemet carry out a self-assessmet, i compliace with the Irish Stock Exchage Listig Rules as well as the U.K. Corporate Goverace Code, of the sigificat risks, icludig capital risks, facig the orgaisatio ad the cotrols i place to mitigate or maage such exposures. 16

19 OPERATIONAL RISK Operatioal risk could arise as a result of iadequately cotrolled iteral processes or systems, huma error or from exteral evets. Operatioal risks are regularly assessed agaist fiacial, operatioal, regulatory ad reputatioal criteria. LIQUIDITY RISK The Group is exposed to daily calls o its cash resources, maily for claims paymets. The Group maages liquidity risk by cotiuously moitorig forecast ad actual cash flows ad esurig that the maturity profile of its fiacial assets is shorter tha or equal to the maturity profile of its liabilities ad maitaiig a miimum amout available o term deposit at all times. MARKET RISK The Group has ivested i term deposits, listed debt securities, ivestmet property ad quoted ad uquoted shares. These ivestmets are subject to market risk, whereby the value of the ivestmets may fluctuate as a result of chages i market prices, chages i market iterest rates or chages i the foreig exchage rates of the currecy i which the ivestmets are deomiated. The extet of the exposure to market risk is maaged by the formulatio of, ad adherece to, a Ivestmet Policy icorporatig clearly defied ivestmet limits ad rules, as approved aually by the Board of Directors ad employmet of appropriately qualified ad experieced persoel ad exteral ivestmet maagemet specialists to maage the Group s ivestmet portfolio. The overridig philosophy of the ivestmet policy is to protect ad safeguard the Group s assets ad to esure its capacity to uderwrite is ot put at risk. CREDIT RISK Credit risk is the risk of loss i the value of fiacial assets due to couterparties failig to meet all or part of their obligatios. All of the Group s curret reisurers have a credit ratig of A- or better. The Group has assessed these credit ratigs as beig satisfactory i dimiishig the Group s exposure to the credit risk of its reisurace receivables. CONCENTRATION RISK Cocetratio risk is the risk of loss due to overdepedece o a sigular etity or category of busiess. While all of the Group s uderwritig busiess is coducted i Irelad, with a sigificat focus o the agri sector, it is spread over a wide geographical area with o cocetratio i ay oe couty or regio. The Group adheres to a strict Ivestmet Policy ad actively maages its ivestmet portfolio to esure that there is a optimum spread ad duratio of ivestmets. MACRO-ECONOMIC RISK These are the risks faced by the Group as a result of macro-ecoomic chages icludig ecoomic dowtur, icreasig competitio, chagig market treds ad the risk associated with chages i the taxatio laws i the jurisdictio i which the Group operates. The success of the Group depeds o its ability to react appropriately to these chages. The icreasig likelihood of a hard Brexit itroduces busiess ad tradig ucertaity for all idigeous Irish busiesses, icludig FBD ad the Group s core customers i farmig ad other small busiesses. It appears likely that Britai departig the EU will have egative effects for busiess ad busiess cofidece i Irelad, particularly i the medium term ad the Group believes this will cotiue to be a sigificat headwid to otherwise strog Irish ecoomic prospects. OTHER RISKS The risk that the strategy adopted by the Board is icorrect or ot implemeted appropriately resultig i sub-optimal performace. The risk that deterioratio i ecoomic coditios globally ad particularly i Irelad may lead to a reductio i reveue ad profits. The risk that the loss of key executive officers or other key employees, the adoptio of iappropriate HR policies or regulatory chages affectig the work force or the limited availability of qualified persoel may disrupt operatios or icrease cost structures. FBD Holdigs plc Aual Report

20 Report of the Directors (cotiued) The risk that a iterruptio or failure of iformatio systems, whether caused by security breaches, cyber-attacks or other failures or malfuctios, may result i a sigificat loss of busiess, assets, or competitive positio. The impact of climate chage may result i icreasigly volatile weather patters ad more frequet severe weather evets. place to idetify, assess, maage ad moitor risk ad risk is actively reported ad reviewed at Executive Risk Committee meetigs ad quarterly Board Risk Committee meetigs. Subsidiaries The Compay s pricipal subsidiaries, as at 31 December 2017, are listed i ote 36. The risk that processes ad techiques to protect computer systems ad iformatio assets from uiteded or uauthorised access, chages or destructio are iadequate. A detailed descriptio of the Group s Risk Maagemet Process is provided i ote 41. The Group has cotrols embedded withi its systems to limit each of these potetial exposures. The Board cofirms that it has carried out a robust assessmet of the pricipal risks facig the Group, icludig those that would threate its busiess model, future performace, solvecy or liquidity. FBD uses the 3 lies of defece model i the maagemet of risk. Uder the three lies of defece model: Primary resposibility for risk maagemet lies with lie maagemet. Lie maagemet is supported by the Risk Fuctio, Compliace Fuctio ad Actuarial Fuctio. The third ad fial lie of defece is the Iteral Audit fuctio, which provides idepedet assurace to the Audit Committee ad the Board o risk-takig activities. FBD has developed a suite of risk policies to assist i the maagemet of risk which iclude roles ad resposibilities, risk maagemet processes, risk limits ad idicators ad escalatio processes. The risk policies icludig the Risk Maagemet Framework ad Risk Appetite are reviewed at least aually by the FBD Isurace Executive ad Board Risk Committees ad the Board or more frequetly if a system, or area cocered udergoes sigificat chage. FBD has a framework i Directors The preset Directors of the Compay, together with a biography o each, are set out o pages 25 to 26. The Board has decided that all Directors cotiuig i office will submit themselves for re-electio at each Aual Geeral Meetig. The Directors who served at ay time durig 2017 were as follows: Liam Herlihy (Chairma/Appoited as Chairma 5 May 2017) Michael Berkery (Chairma/Retired 5 May 2017) Walter Bogaerts Mary Brea Dermot Browe (Seior Idepedet No-Executive Director/Appoited Seior Idepedet No-Executive Director 5 May 2017) Sea Dorga (Seior Idepedet No-Executive Director/Retired 5 May 2017) Joe Healy (Appoited 9 August 2017) Orlagh Hut Fioa Muldoo David O Coor Joh O Grady Padraig Walshe Aual Geeral Meetig The otice of the Aual Geeral Meetig of the Compay which will be held at 11 a.m. o 4 May 2018 i the Irish Farm Cetre, Old Naas Road, Bluebell, Dubli 12, is set out o pages 135 to 137. A letter from the Chairma detailig the busiess to come before the Aual Geeral Meetig is icluded at pages 131 to

21 Directors ad Compay Secretary s Iterests The iterests of the Directors ad Compay Secretary (together with their respective family iterests) i the share capital of the Compay, at 31 December 2017 ad 1 Jauary 2017 (or date of appoitmet if later) were as follows: Beeficial Number of ordiary shares of 0.60 each 31 December Jauary 2017* Liam Herlihy 8,000 3,000 Walter Bogaerts 0 0 Mary Brea 0 0 Dermot Browe 0 0 Joe Healy 0 0 Orlagh Hut 0 0 Fioa Muldoo 4,000 0 David O Coor 1,500 1,500 Joh O Grady 0 0 Padraig Walshe 1,100 1,100 Compay Secretary Derek Hall 1,755 1,755 *or at date of appoitmet if later There has bee o chage i the iterests of the Directors ad Compay Secretary (together with their respective family iterests) i the share capital of the Compay up to the date of this report. The iterests of the Directors ad the Compay Secretary i coditioal awards over the share capital of the Compay uder the shareholder approved Performace Share Pla are detailed i the Report o Directors Remueratio o pages 38 to 46. Europea Commuities (Takeover Bids (Directive 2004/25/EC)) Regulatios 2006 For the purposes of Regulatio 21 of the Europea Commuities (Takeover Bids (Directive 2004/25/EC)) Regulatios 2006, the iformatio o the Board of Directors o pages 18 ad 19, the Performace Share Pla i ote 39 ad the Report o Directors Remueratio o pages 38 to 46 are deemed to be icorporated i this part of the Report of the Directors. Substatial Shareholdigs As at 26 February 2018 the Compay has bee otified of the followig iterests of 3% or more i its share capital: Ordiary shares of 0.60 each No. % of Class Farmer Busiess Developmets plc 8,531,948 25% FBD Trust Compay Limited 2,984,737 9% Prudetial plc 2,770,253 8% Black Creek Iteratioal 1,776,831 5% Fidelity Maagemet ad Research LLC 1,730,064 5% Fidelity Iteratioal Limited 1,652,642 5% Preferece Share Capital 14% No-cumulative preferece shares of 0.60 each Farmer Busiess Developmets plc 1,340, % 8% No-cumulative preferece shares of 0.60 each FBD Trust Compay Limited 2,062, % Farmer Busiess Developmets plc 1,470, % FBD Holdigs plc Aual Report

22 Report of the Directors (cotiued) Share Capital The Compay had four classes of shares i issue at the ed of the year. These classes ad the percetage of the total issued share capital represeted by each are as follows: Votig shares Number i issue % of Total Ordiary shares of 0.60 each 34,666,201 * % No-cumulative preferece shares of 0.60 each 1,340, % No-cumulative preferece shares of 0.60 each 3,532, * excludig 795,005 shares held i treasury 39,538, The Compay s ordiary shares of 0.60 each are listed o the Mai Securities Market of the Irish Stock Exchage ad have a premium listig o the UK Listig Authority. They are traded o both the Irish Stock Exchage ad the Lodo Stock Exchage. Neither class of preferece share is traded o a regulated market. Each of the above classes of share ejoys the same rights to receive otice of, atted ad vote at meetigs of the Compay. No-votig shares Number i issue A ordiary shares of 0.01 each 13,169,428 The rights attachig to the A ordiary shares are clearly set out i the Articles of Associatio of the Compay. They are ot trasferable except oly to the Compay. Other tha a right to a retur of paid up capital of 0.01 per A ordiary share i the evet of a widig up, the A ordiary shares have o right to participate i the capital or the profits of the Compay. Idepedet Auditors PricewaterhouseCoopers, Chartered Accoutats ad Statutory Audit Firm, were appoited by the Directors i 2016 to audit the Fiacial Statemets for the fiacial year eded 31 December 2016 ad subsequet fiacial periods. The period of total uiterrupted egagemet is 2 years, coverig the fiacial years eded 31 December 2016 to 31 December PricewaterhouseCoopers have sigified their willigess to cotiue i office i accordace with the provisios of Sectio 383(2) of the Compaies Act Regardig disclosure of iformatio to the Auditors, the Directors cofirm that: As far as they are aware, there is o relevat audit iformatio of which the compay s statutory auditors are uaware; ad they have take all the steps that they ought to have take as a Director i order to make themselves aware of ay relevat audit iformatio ad to establish that the compay s statutory auditors are aware of that iformatio. Accoutig Records The Directors have take appropriate measures to esure compliace with Sectios 281 to 285 of the Compaies Act, 2014 the requiremet to keep proper accoutig records through the employmet of suitably qualified accoutig persoel ad the maiteace of appropriate accoutig systems. The accoutig records are located at FBD House, Bluebell, Dubli 12, Irelad. Directors Compliace Statemet The Directors of the Compay ackowledge that they are resposible for securig the Compay s compliace with its relevat obligatios (as defied i the Compaies Act 2014 (the 2014 Act )) ad, as required by sectio 225 of the 2014 Act, the Directors cofirm that: (i) a compliace policy statemet settig out the Compay s policies with regard to complyig with the relevat obligatios uder the 2014 Act has bee prepared; (ii) arragemets ad structures have bee put i place that they cosider sufficiet to secure material compliace with the Compay s relevat obligatios; ad (iii) a review of arragemets ad structures has bee coducted durig the fiacial year to which the Directors report relates. 20

23 Corporate Goverace The Corporate Goverace Report o pages 24 to 37 forms part of this report ad i this the Board has set out how it has applied the priciples set out i the UK Corporate Goverace Code, which was adopted by both the Irish Stock Exchage ad the UK Listig Authority, the Irish Corporate Goverace Aex, ad the Cetral Bak of Irelad Corporate Goverace Code for Credit Istitutios ad Isurace Udertakigs. Viability Statemet The Directors have assessed the prospects of the Group ad its ability to meet its liabilities as they fall due i the medium term. The Directors selected a three year timeframe as this correspods with the Board s strategic plaig process. The objectives of the strategic plaig process are to cosider the key strategic choices facig the Group ad to icorporate these ito a fiacial model with various scearios. This assessmet has bee made with referece to the Group s curret positio ad prospects, the Group s strategy, the Board s risk appetite ad the pricipal risks ad ucertaities facig the Group, as outlied o pages 15 to 18. The Directors review ad reew the Group s three year pla at least aually. Progress agaist the strategic pla is reviewed regularly by the Board ad seior maagemet. Associated risks are cosidered withi the Board s risk maagemet framework. The strategic pla has bee tested for a umber of scearios which assess the potetial impact of some of the strategic ad commercial risks facig the Group. The Group performs a ORSA at least aually which subjects FBD s solvecy capital levels to a umber of extreme stress scearios. This was last performed i December Based o the results of these tests the Directors cofirm that they have performed a robust assessmet of the pricipal risks facig the Group, icludig those that would threate its busiess model, its future performace ad solvecy ad that they ca have a reasoable expectatio that the Group will be able to cotiue i operatio ad meet its liabilities as they fall due over the period of the assessmet. Goig Cocer The Group s busiess activities, together with the factors likely to affect its future developmet, performace ad fiacial positio are set out i the Chairma s Statemet ad the Review of Operatios, as is the fiacial positio of the Group. I additio, ote 41 of the Fiacial Statemets icludes the Group s policies ad processes for risk maagemet. The Directors have a reasoable expectatio that the Compay ad the Group have adequate resources to cotiue i operatioal existece for the foreseeable future beig a period of at least twelve moths from the date of this report. As a result they cotiue to adopt the goig cocer basis of accoutig i preparig the Fiacial Statemets. I formig this view, the Directors have reviewed the Group s budget for 2018 ad forecast for 2019 ad 2020, which take accout of reasoably foreseeable chages i tradig performace, the key risks facig the busiess ad the medium-term plas approved by the Board i its review of the Group s corporate strategy alog with the Group s capital projectios ad requiremets uder the Solvecy II regime. The Directors have cocluded that there are o material ucertaities that cast sigificat doubt over the Group s ability to cotiue as a goig cocer. Approval of Fiacial Statemets The Fiacial Statemets were approved by the Board o 26 February Siged o behalf of the Board Liam Herlihy Chairma Fioa Muldoo Group Chief Executive 26 February 2018 FBD Holdigs plc Aual Report

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25 FBD Holdigs plc Aual Report 2017 Cotiuig to help busiesses grow 23

26 Corporate Goverace Your Board of Directors is committed to the highest stadards of corporate goverace. Good goverace stems from a positive culture ad well embedded values. FBD s core values of itegrity, etrepreeurship, customer focus ad ambitio are cetral to how the Board coducts its busiess ad discharges its resposibilities. Equally, however, these values are as relevat to every employee workig throughout the Group i their iteractios with each other, ad with our customers, shareholders ad other stakeholders. UK Corporate Goverace Code ad the Irish Corporate Goverace Aex The UK Corporate Goverace Code ( the Code ) ad the Irish Corporate Goverace Aex ( the Aex ) codify the goverace arragemets which apply to listed compaies such as FBD. Combied, these represet corporate goverace stadards of the highest iteratioal level. Throughout 2017 ad to the date of this report, we applied the priciples of the Code ad except where otherwise expressly stated complied with the provisios of both the Code ad the Aex. This sectio of the Aual Report sets out the goverace arragemets i place i FBD Holdigs plc. LOCATION OF INFORMATION REQUIRED PURSUANT TO ISE LISTING RULE C Listig Rule Iformatio to be icluded: (4) Refer to Report o Director s Remueratio o pages 38 to 46 No iformatio is required to be disclosed i respect of Listig Rules (1), (2), (3), (5), (6), (7), (8), (9), (10), (11), (12), (13), (14). The Board of Directors ad its Role The Group is maaged by the Board of Directors. The primary role of the Board is to provide leadership ad strategic directio while maitaiig effective cotrol over the activities of the Group. The Board has approved a Corporate Goverace Framework settig out its role ad resposibilities. This is reviewed aually as part of the Board s evaluatio of its performace ad goverace arragemets. The Framework icludes a formal schedule of matters reserved to the Board for its cosideratio ad decisio, which icludes: the approval of the Group s objectives ad strategy; approval of the aual budget icludig capital expediture ad the review of the Group s systems of iteral cotrol; maiteace of the appropriate level of capital, the allocatio thereof ad decisios as to the recommedatio or paymet of divideds; approval of Fiacial Statemets; ad the appoitmet of Directors ad the Compay Secretary. This schedule esures that the skills, expertise ad experiece of the Directors are haressed to best effect ad esures that ay major opportuities or challeges for the Group come before the Board for cosideratio ad decisio. The schedule was last reviewed i February Other specific resposibilities of the Board are delegated to Board appoited Committees, details of which are give later i this report. Board Compositio ad Idepedece At 31 December 2017 the Board comprised two executive Directors ad eight o-executive Directors, icludig the Chairma. This structure was deemed appropriate by the Board. The Board deemed it appropriate that it should have betwee 8 ad 12 members ad that this size is appropriate, beig of sufficiet breadth ad diversity to esure that there is healthy debate ad iput o the mai busiess to be dealt with by it. Two Directors retired ad oe was appoited durig Seve of the o-executive Directors i office at the ed of 2017 were cosidered to meet all of the criteria idicatig idepedece set out i the Code. 24

27 Date first elected by shareholders Years from Cosidered first electio to be to 2018 AGM idepedet Mary Brea 31 Aug Yes Dermot Browe 31 Aug Yes Liam Herlihy 29 Apr Yes Orlagh Hut 31 Aug Yes David O Coor 31 Aug Yes Walter Bogaerts 29 Apr Yes Joe Healy 0.75 Yes Mr. Walshe, who is chairma of the Group s largest shareholder, Farmer Busiess Developmets plc, is ot cosidered to be idepedet. The skills ad experiece idetified by the Board as critical to its compositio ad that of its Committees at this time iclude expertise i isurace or other fiacial services, actuarial, geeral ad farmig/agri idustry experiece, corporate fiace, corporate goverace, compliace, fiacial accoutig ad executive reward. Directors Biographies Biographical details of the Directors i office o the date of this Report are as follows: WALTER BOGAERTS, INDEPENDENT NON-EXECUTIVE DIRECTOR Mr. Walter Bogaerts (aged 60) was Geeral Maager of the Corporate Isuraces Divisio of KBC Isurace based i Belgium prior to his retiremet i He joied KBC Group (previously ABB Isuraces) i 1979 ad has gaied extesive experiece throughout his career with KBC i uderwritig, reisurace, audit, risk maagemet ad sales. He was geeral maager i charge of KBC Group s Cetral-Europea isurace busiesses util appoited to his most recet role i I that role he was member of the Supervisory Boards, Audit ad Risk Committees of KBC s isurace subsidiaries i Czech Republic, Slovakia, Hugary, Polad ad Bulgaria. He holds a Commercial Egieerig degree from the Ecoomic Uiversity of Brussels. MARY BRENNAN, INDEPENDENT NON-EXECUTIVE DIRECTOR Ms. Mary Brea (aged 52) is a Chartered Director ad a Fellow of Chartered Accoutats Irelad. I a career spaig over 30 years, Ms. Brea has worked iteratioally i audit i KPMG ad i a umber of publicly listed compaies, icludig Ela plc ad Occidetal Petroleum Corp. She is a highly experieced o-executive director with a portfolio of compaies, previously servig as Director ad Audit Committee Chair of BNP Paribas Irelad. FBD Holdigs plc Aual Report 2017 LIAM HERLIHY, CHAIRMAN Mr. Liam Herlihy (aged 66) is a farmer ad was, util May of 2015, Group Chairma of Glabia plc, a leadig Irish based performace utritio ad igrediets group, havig served i that role for 7 years durig which he presided over a period of sigificat structural chage ad uprecedeted growth for Glabia. Mr. Herlihy joied the Board i September Mr. Herlihy completed the Istitute of Directors Developmet Programme ad holds a certificate of merit i Corporate Goverace from Uiversity College Dubli. He brigs to the Board a wealth of commercial experiece ad some deep isights ito the farmig ad geeral agricultural idustries i Irelad which, together, comprise the Group s core customer base. DERMOT BROWNE, SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR Mr. Dermot Browe (aged 55) is a Fellow of Chartered Accoutats Irelad. Betwee 2007 ad 2011, Mr. Browe held a umber of seior executive roles i Aviva Irelad, icludig the positio of CEO with resposibility for all Aviva busiesses i Irelad across geeral isurace, health isurace ad life assurace. Prior to this he was a seior executive with Zurich Life over a sixtee year period with resposibility for fiace, sales, marketig ad iformatio techology. Betwee 2012 ad 2016 he rejoied Zurich Group i a Global Strategy role based i Switzerlad. He is curretly a No-Executive Director i two other fiacial services compaies i Irelad. 25

28 Corporate Goverace (cotiued) JOE HEALY, INDEPENDENT NON-EXECUTIVE DIRECTOR Mr. Joe Healy (aged 50) rus a dairy ad cattle farm i Athery, Co Galway with his family. He was elected the 15th Presidet of the Irish Farmers Associatio i April Prior to that, he represeted Galway IFA o the IFA Natioal Farm Busiess Committee. Previously, he was actively ivolved i the youg farmers orgaisatio Macra a Feirme ad was elected Presidet of that orgaisatio from Mr Healy represets Irish farmers at EU level o COPA, which is the official umbrella represetative body for Europea farmers. He chairs the COPA Food Chai Workig Group, which is seekig a stroger positio for farmers i the food supply chai. He is a o-executive director of Bord Bia the Irish Food Board which is resposible for the marketig of Irish food ad drik abroad. ORLAGH HUNT, INDEPENDENT NON-EXECUTIVE DIRECTOR Ms. Orlagh Hut (aged 45) is a Fellow of the Chartered Istitute of Persoel Developmet ad is a huma resources executive with extesive fiacial services experiece i firms such as Allied Irish Baks plc, RSA Group ad Axa Life Isurace, as well as with a umber of FMCG ad retail compaies. FIONA MULDOON, GROUP CHIEF EXECUTIVE Ms. Fioa Muldoo (aged 50) joied the Group i Jauary 2015 as Group Fiace Director Desigate ad was appoited as a executive Director ad member of its Board. I October 2015, Ms. Muldoo was appoited as Group Chief Executive. A Chartered Accoutat, Ms. Muldoo was Director of Credit Istitutios ad Isurace Supervisio at the Cetral Bak of Irelad from August 2011 util May Prior to this she was with XL Group for sevetee years ad held a umber of seior roles with this NYSE listed Property & Casualty Isurace firm i Irelad, Lodo ad Bermuda, icludig two years as Group Treasurer util July O 12 Jue 2015 Ms. Muldoo, was appoited as a o-executive Director of the Goveror ad Compay of the Bak of Irelad. DAVID O CONNOR, INDEPENDENT NON-EXECUTIVE DIRECTOR Mr. David O Coor (aged 60) is a Fellow of the Society of Actuaries i Irelad. He commeced his career i New Irelad Assurace before joiig Alliaz Irelad i 1988 to set up its o-life actuarial fuctio. He was a member of Alliaz Executive Maagemet Board ad held a umber of seior maagemet positios there prior to joiig Willis Towers Watso i 2003 to set up its Property ad Casualty cosultacy uit i Dubli, where he worked util Jue JOHN O GRADY, GROUP FINANCE DIRECTOR Mr. Joh O Grady (aged 56) is a Chartered Accoutat ad a experieced isurace executive. He joied FBD from Liberty Isurace Limited where he held the role of Fiace Director. Prior to his role i Liberty, Mr. O Grady worked for Aviva ad its predecessor compaies i Irelad i various roles betwee 1989 ad 2012, icludig Fiace Director, Claims Director ad Operatios Director. PADRAIG WALSHE, NON-EXECUTIVE DIRECTOR Mr. Padraig Walshe (aged 60) is Chairma of Farmer Busiess Developmets plc, the Compay s largest shareholder, ad a dairy farmer. He is a past Presidet of COPA, the Europea Farmers Orgaisatio ad of the Irish Farmers Associatio. Mr. Walshe previously served o the Board of FBD betwee 2006 ad 2010, ad rejoied the Board i December Mr. Walshe s extesive leadership experiece at atioal ad iteratioal level ad his deep uderstadig of Irelad s farmig commuity ad the Irish food sector are of immese beefit to the Board. Board Diversity The Board values the major cotributio which a mix of backgrouds, skills ad experiece brigs to the Group ad sees merit i icreasig diversity at Board level i achievig the Group s strategic objectives. Differeces i backgroud, skills, experiece ad other qualities, icludig geder, will cotiue to be cosidered i determiig the optimal compositio of the Board, the pricipal aim beig to achieve a appropriate balace betwee them. 26

29 While all appoitmets to the Board will have due regard to diversity, they will be made o merit, esurig that the skills, experiece ad traits oted by the Board as beig of particular relevace at ay time are preset o the Board ad icluded i ay plaed refreshmet. As at the date of this report, the Board was comprised as follows: TENURE OF DIRECTOR 0 2 years 80% 3 6 years 10% 7 9 years 10% Over 9 years 0% GENDER Male 70% Female 30% EXECUTIVE/NON-EXECUTIVE No-executive 80% Executive 20% EXPERIENCE AND SKILLS The percetage of the Board havig the requisite skills ad experiece were as follows: Key Roles ad Resposibilities CHAIRMAN The role of the Chairma is set out i writig i the Corporate Goverace Framework. He is resposible, iter alia, for: the effective ruig of the Board, settig its ageda ad esurig that it receives accurate, timely ad clear iformatio; esurig that the Board as a whole plays a full ad costructive part i the developmet ad determiatio of the Group s strategy ad overall commercial objectives; ad esurig that the views of shareholders are commuicated to the Board. GROUP CHIEF EXECUTIVE The role of the Group Chief Executive is set out i writig i the Corporate Goverace Framework. She is resposible, iter alia, for: ruig the Group s busiess; proposig ad developig the Group s strategy ad overall objectives i close cosultatio with the Chairma ad the Board; ad implemetig the decisios of the Board ad its Committees. FBD Holdigs plc Aual Report 2017 Isurace or fiacial services 70% Actuarial 10% Geeral idustry 100% Agri/farmig 30% Corporate fiace 30% Accoutig ad Auditig 40% Corporate Goverace 80% Compliace 60% Executive reward 50% SENIOR INDEPENDENT DIRECTOR The Seior Idepedet Director is resposible for: beig available to shareholders if they have cocers which they have ot bee able to resolve through the ormal chaels of the Chairma, the Group Chief Executive or the Fiace Director, or for which such cotact is iappropriate; coductig a aual review of the performace of the Chairma; actig as a soudig board for the Chairma; ad servig as a itermediary for the other oexecutive Directors as required. 27

30 Corporate Goverace (cotiued) COMPANY SECRETARY The Compay Secretary acts as Secretary to the Board ad to its Committees. I so doig, he: assists the Chairma i esurig that the Directors have access, i a timely fashio, to the papers ad iformatio ecessary to eable them to discharge their duties; assists the Chairma by orgaisig ad deliverig iductio ad traiig programmes as required; ad is resposible for esurig that Board procedures are followed ad that the Board ad that the Directors are fully briefed o corporate goverace matters. Board Effectiveess ad Performace Evaluatio Board effectiveess is reviewed aually as part of the Board s performace evaluatio process. The Chairma is resposible for esurig that each Director receives a iductio o joiig the Board ad that he or she receives ay additioal traiig he or she requires. The iductio itself is orgaised ad delivered by the Compay Secretary ad other members of the maagemet team. BOARD EVALUATION Every year the Board evaluates its performace ad that of its Committees. Directors are expected to take resposibility for idetifyig their ow traiig eeds ad to take steps to esure that they are adequately iformed about the Group ad about their resposibilities as a Director. Oe Director joied the Board durig 2017 ad received comprehesive iductio traiig. The Board is cofidet that all of its members have the requisite kowledge ad experiece ad support from withi the Compay to perform their role as a Director of the Group. Towards the ed of 2015, the Board had its evaluatio process exterally facilitated by Praesta Irelad, a idepedet cosultacy which has o other coectios with the Group. The mai coclusio from the evaluatio process was that the Board, its Committees, the Chairma ad idividual Directors are performig very effectively. The Board iteds to have its evaluatio exterally facilitated agai at the ed of The evaluatio process for 2017 took place i Jauary The purpose of the process was to idetify areas where the Board ca beefit from improvemet ad to affirm positively those areas where it is playig a effective role i leadig the Group. This was achieved through a combiatio of direct discussio betwee the Chairma ad idividual Directors ad cofidetial writte evaluatio submissios which were collated by the Compay Secretary ad the Chairma ad reported back to the Board i a o-attributable maer. The Board is satisfied that the cofidetiality of the evaluatio process esured that objectivity was safeguarded. The output from the evaluatio process for 2017 reaffirmed that the Board is operatig effectively ad is fulfillig its role. RE-ELECTION OF DIRECTORS The Board has, sice 2011, adopted the practice that all Directors will submit themselves for re-electio at each Aual Geeral Meetig regardless of legth of service or the provisios of the Compay s Articles of Associatio. ACCESS TO ADVICE All members of the Board have access to the advice ad the services of the Compay Secretary who is resposible for esurig that Board procedures are followed ad that applicable rules, regulatios ad other obligatios are complied with. I additio members of the Board may take idepedet professioal advice at the Compay s expese if deemed ecessary i the furtherace of their duties. 28

31 ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS DURING 2017 Board Audit Nomiatio Remueratio Risk M Berkery 4/4-3/3-1/2 W Bogaerts 9/9 6/6-6/6 5/5 M Brea 9/9 6/ D Browe 9/9 6/6 1/1 - S Dorga 4/4 3/3 3/3 3/3 - Joe Healy 3/ L Herlihy 9/9-4/4-3/3 O Hut 9/ /6 2/3 F Muldoo 9/ D O Coor 9/9-1/1 2/3 4/5 J O Grady 9/ /2 P Walshe 9/ FBD Holdigs plc Aual Report 2017 If a Director is uable for ay reaso to atted a Board or Committee meetig, he or she will receive Board/ Committee papers i advace of the meetig ad is give a opportuity to commuicate ay views o or iput ito the busiess to come before the Board/Committee to the Board/Committee Chairma. The Compay Secretary acts as secretary to the Committees. Miutes of all of the Committees meetigs are available to the Board. Each of these Committees has provided a report i the sectios followig. Board Committees The Board has established four Committees to assist it i the executio of its resposibilities. These are: the Audit Committee; the Risk Committee; the Nomiatio Committee; ad the Remueratio Committee. Each of the Committees has writte terms of referece which were approved by the Board ad set out the Committees powers, resposibilities ad obligatios. These are available o the Group s website 29

32 Corporate Goverace (cotiued) Report of the Audit Committee MEMBERSHIP DURING THE YEAR Curret D Browe W Bogaerts M Brea Previous S Dorga Committee Chairma, Seior Idepedet o-executive Director Idepedet o-executive Director Idepedet o-executive Director Committee Chairma, Seior Idepedet o-executive Director, resiged 5 May 2017 Legth of time served o committee 1.50 years 1.83 years 1.33 years The Committee members have bee selected to esure that the Committee has available to it the rage of skills ad experiece ecessary to discharge its resposibilities. The Board has resolved that all Members are cosidered to have recet ad relevat fiacial experiece. OBJECTIVE OF COMMITTEE To assist the Board of the Group i fulfillig its oversight resposibilities for such matters as fiacial reportig, the system of iteral cotrol ad maagemet of fiacial risks, the audit process ad the Group s process for moitorig compliace with laws ad regulatios. KEY RESPONSIBILITIES DELEGATED TO THE COMMITTEE reviewig the Group s fiacial results aoucemets ad Fiacial Statemets; reviewig the scope, resources, results ad effectiveess of the Group s iteral audit fuctio; ad performig detailed reviews of specific areas of fiacial reportig as required by the Board or the Committee. MEETINGS The Committee met o six occasios durig Meetigs are atteded by Committee members. The Chief Fiacial Officer, the Statutory Auditor ad the Head of Group Iteral Audit are ivited to atted all scheduled meetigs of the Committee. The Committee regularly meets separately with the Statutory Auditor ad with the Head of Group Iteral Audit, without members of maagemet preset. The miutes of Committee meetigs are circulated routiely to the Board. The Committee chairma also provides a verbal report to the Board after each Committee meetig. The Committee reports formally to the Board aually o the overall work udertake ad the degree to which it discharged the resposibilities delegated to it. ACTIVITIES OF THE COMMITTEE DURING 2017 The pricipal activities udertake by the Committee durig 2017 iclude: assessmet of fiacial ad other risks facig the Group ad of the operatio of iteral cotrols; review of all aspects of the relatioship with the exteral auditors, icludig the statutory audit pla, audit fidigs ad recommedatios ad cosideratio of the idepedece of the exteral auditors ad the arragemet i place to safeguard this, icludig parter rotatio, prohibitio o share owership ad levels of fees payable to the statutory auditor for o-audit assigmets; overseeig the relatioship with the exteral auditors icludig reviewig their terms of egagemet, idepedece ad fees; cosideratio of issues of fiacial reportig, particularly those ivolvig substatial judgmet ad the risk of material misstatemet icludig claims estimates ad provisios; 30

33 review of drafts of the Aual Report ad the Half Yearly Report prior to their cosideratio by the Board; appraisal of the Iteral Audit fuctio, pla, work, reports ad issues arisig ad moitorig the scope ad effectiveess of the fuctio; assessmet of compliace with laws, regulatios, codes ad fiacial reportig requiremets; ad reportig to the Board o its activities ad cofirmig the degree to which the Committee s delegated resposibilities had bee discharged through verbal reports to the Board after each meetig ad a formal writte report preseted aually. The critical judgemets ad estimates used i the formulatio of the fiacial statemets are set out i ote 3. All are cosidered by the Committee, with particular focus o the followig i 2017: Isurace cotract liabilities ad related reisurace assets. The Group had et claims outstadig of 674.5m ad Net UPR of 186.0m at 31 December I order to satisfy itself that the balaces were appropriately stated, the Committee reviewed the Actuarial Reserve aalysis prepared by Maagemet, which is also subject to the approval of the Reservig Committee of FBD Isurace plc, ad subject to both iteral ad exteral actuarial peer review. The Committee also reviewed the Margi for Ucertaity proposal. The Audit Committee cocluded that the carryig value of claims outstadig ad UPR icluded i the fiacial statemets are appropriate. PricewaterhouseCoopers were reappoited as Auditors of the Compay i respect of the fiacial year eded 31 December FAIR, BALANCED AND UNDERSTANDABLE The Committee formally advises the Board o whether the Aual Report ad Fiacial Statemets, take as a whole, are fair, balaced ad uderstadable, i accordace with sectio C.1.1 of the UK Corporate Goverace Code. The committee must esure that the Aual Report ad Fiacial Statemets also provide the iformatio ecessary for Shareholders to assess the performace of the Group, alog with its busiess model ad strategy ad the Committee is satisfied that the above requiremets have bee met. EVALUATION The Committee s activities formed part of the Board s evaluatio process which foud the Committee to be operatig effectively. Dermot Browe O behalf of the Audit Committee 26 February 2018 FBD Holdigs plc Aual Report 2017 Accoutig for the defied beefit pesio scheme. The Group had a defied beefit pesio scheme asset of 9.8m at 31 December 2017, which is closed to future accrual ad closed to ew members. The valuatio of the pesio scheme is provided by the Group s cosultat actuaries. The valuatio was reviewed by the Audit Committee ad it was cocluded that the carryig value of the defied beefit pesio scheme icluded i the fiacial statemets is appropriate. 31

34 Corporate Goverace (cotiued) Report of the Risk Committee MEMBERSHIP DURING THE YEAR Curret W Bogaerts L Herlihy D O Coor O Hut Previous S Dorga M Berkery J O Grady Committee Chairma, Idepedet o-executive Director Idepedet o-executive Director ad Board Chairma Idepedet o-executive Director Idepedet o-executive Director Seior Idepedet o-executive Director resiged 5 May 2017 No-executive Director ad Board Chairma, resiged 5 May 2017 Executive Director, resiged 5 May 2017 Legth of time served o committee 1 year 1 year 1 year 0.66 year The Committee members have bee selected to esure that the Committee has available to it the rage of skills ad experiece ecessary to discharge its resposibilities. OBJECTIVE OF COMMITTEE The Board Risk Committee is the forum for risk goverace withi FBD. It is resposible for providig oversight ad advice to the Board i relatio to curret ad potetial future risk exposures of the Group ad future risk strategy. This advice icludes recommedig a risk maagemet framework icorporatig strategies, policies, risk appetites ad risk idicators to the Board for approval. The Risk Committee oversees the risk maagemet fuctio, which is maaged o a daily basis by the CRO. KEY RESPONSIBILITIES DELEGATED TO THE COMMITTEE Promote a risk awareess culture withi the Group; Esure that the material risks facig the Group have bee idetified ad that appropriate arragemets are i place to maage ad mitigate those risks effectively; Advise the Board o the effectiveess of strategies ad policies with respect to maitaiig, o a ogoig basis, the amouts, types ad distributio of capital adequate to cover the risks of the Group; Review ad challege risk iformatio received by the Chief Risk Officer from the busiess departmets to esure that the Group is ot exceedig the risk limits set by the Board; Preset a profile of the Group s key risks, risk maagemet framework, risk appetite ad tolerace ad risk policies at least aually together with a summary of the Committee s busiess to the Board. MEETINGS The Committee met o five occasios durig Meetigs are atteded by Committee members. The Chief Risk Officer, the Chief Fiacial Officer, the Head of Actuarial Fuctio ad the Head of Iteral Audit are ivited to atted all scheduled meetigs of the Committee. The miutes of Committee meetigs are circulated routiely to the Board. The Committee chairma also provides a verbal report to the Board after each Committee meetig. The Committee reports formally to the Board aually o the overall work udertake ad the degree to which it discharged the resposibilities delegated to it. 32

35 ACTIVITIES OF THE COMMITTEE DURING 2017 The pricipal activities udertake by the Committee durig 2017 iclude: assisted the Board i the review ad update of its risk policies, risk appetite, risk idicators ad risk tolerace; appraised the Risk Fuctio pla to esure that the pla is sufficiet ad appropriate to effectively idetify, moitor, maage ad report, o a cotiuous basis, the risks to which the Group could be exposed; esured that the material risks facig the Group have bee idetified ad appropriately maaged ad mitigated; reviewed ad challeged risk iformatio reported to the Committee to esure that the Group is operatig withi the risk limits set by the Board; reviewed the quarterly Solvecy Capital Ratio; cosidered the results of risk policy stress tests ad peer reviews of the Actuarial Best Estimate that were performed by the Risk Fuctio; assessed the results of Cotrol Desig ad Operatioal Effectiveess Reviews udertake by the Risk Fuctio; ad reviewed the 2017 ORSA report prior to its cosideratio by the Board. EVALUATION The Committee s activities formed part of the Board s evaluatio process which foud the Committee to be operatig effectively. Report of the Nomiatio Committee MEMBERSHIP DURING THE YEAR Curret L Herlihy D Browe D O Coor Previous M Berkery S Dorga Committee Chairma, o-executive Director, Board Chairma Seior Idepedet o-executive Director Idepedet o-executive Director Committee Chairma, o-executive Director, Board chairma, resiged 5 May 2017 Seior Idepedet o-executive Director, resiged 5 May 2017 Legth of time served o committee 1.58 years 0.66 years 0.66 years OBJECTIVE OF COMMITTEE To esure that the Board ad its Committees are made up of idividuals with the ecessary skills, kowledge ad experiece to esure that the Board is effective i dischargig its resposibilities. KEY RESPONSIBILITIES DELEGATED TO THE COMMITTEE reviewig the structure, size ad compositio of the Board ad makig recommedatios to the Board for ay appoitmets or other chages; FBD Holdigs plc Aual Report 2017 Walter Bogaerts O behalf of the Risk Committee 26 February 2018 recommedig chages to the Board s committees; ad advisig the Board i relatio to successio plaig both for the Board ad the seior executives i the Group. 33

36 Corporate Goverace (cotiued) MEETINGS The Committee met four times durig 2017 to cosider potetial cadidates for appoitmet as Chairma of the Board, to fill vacacies which arose durig the year ad to oversee the detailed successio plaig process udertake i the Group s pricipal subsidiary, FBD Isurace plc. At its meetig i December, the Committee reviewed ad approved the Board ad Seior Maagemet successio pla. The Committee reviewed ad approved the compositio of the Board Committees i EVALUATION The Committee s activities formed part of the Board s evaluatio process which foud the Committee to be operatig effectively. The compositio of the Committee at the ed of 2017 fully met the requiremets of the Code as a majority of Committee members were Directors cosidered to be idepedet. Liam Herlihy O behalf of the Nomiatio Committee 26 February 2018 Report of the Remueratio Committee MEMBERSHIP DURING YEAR Curret O Hut W Bogaerts D O Coor Previous S Dorga Committee Chairma, Idepedet o-executive director Idepedet o-executive Director Idepedet o-executive Director Committee Chairma, Seior idepedet o-executive Director, resiged 5 May 2017 Legth of time served o committee 1.33 years 1.66 years 0.66 years OBJECTIVE OF COMMITTEE To assist the Board of the Group i esurig that the level of remueratio i the Group ad the split betwee fixed ad variable remueratio are sufficiet to attract, retai ad motivate executive Directors ad seior maagemet of the quality required to ru the Group i a maer which is fair ad i lie with market orms, while ot exposig the Group to uecessary levels of risk. KEY RESPONSIBILITIES DELEGATED TO THE COMMITTEE determiig the broad policy for the remueratio of the Group s executive Directors, Compay Secretary ad other seior executives; determiig the total remueratio packages for the foregoig idividuals, icludig salaries, variable remueratio, pesio ad other beefit provisio ad ay compesatio o termiatio of office; esurig that the Group operates to recogised good goverace stadards i relatio to remueratio; 34

37 makig awards of shares uder the Group s approved share scheme; ad preparatio of the detailed Report o Directors Remueratio. MEETINGS The Group Chief Executive may atted meetigs of the Committee but oly by ivitatio ad ot at a time whe his or her idividual remueratio arragemets are discussed. The Committee met six times durig ACTIVITIES OF THE COMMITTEE DURING 2017 The pricipal activities udertake by the Committee durig 2017 iclude: aual review of remueratio arragemets for executive Directors ad other seior executives; review ad approval of the Report o Directors Remueratio for 2017; makig of a coditioal award of shares uder the FBD Performace Share Pla ad settig the coditios attached; ad Cosider the ew FBD Performace Share Pla which is to be preseted to the Shareholders at the Aual Geeral Meetig to be held i 2018 Full details of Directors Remueratio are set i the Report o Directors Remueratio o pages 38 to 46. EVALUATION The Committee s activities formed part of the Board s evaluatio process which foud the Committee to be operatig effectively. Orlagh Hut O behalf of the Remueratio Committee Shareholder Egagemet The Board is committed to esurig that excellet lies of commuicatio exist ad are fostered betwee the Group ad its shareholders. A plaed programme of ivestor relatios activities is udertake throughout the year which icludes: briefig meetigs with all major shareholders after the full year ad half yearly results aoucemets; regular meetigs betwee istitutioal ivestors ad aalysts with the Group Chief Executive, Chief Fiacial Officer ad/or Head of Ivestor Relatios to discuss busiess performace ad strategy ad to address ay issues of cocer; ad respodig to letters ad queries received directly from shareholders ad from proxy adviser firms. Should a sigificat proportio of votes be cast agaist a resolutio at ay geeral meetig, the Board will edeavour to idetify the shareholders cocered ad will iitiate a cotact with them with the view to uderstadig the reasos for the adverse vote. The Board receives reports from the Head of Ivestor Relatios which icludes details of all meetigs held, feedback received ad issues either of iterest or of cocer raised. Aual Geeral Meetig The Compay s Aual Geeral Meetig is held each year i Dubli. The 2018 meetig will be held o 4 May WHO ATTENDS? Directors; Seior Group executives; FBD Holdigs plc Aual Report February 2018 Shareholders; Compay Advisers; ad Members of the media are also ivited ad permitted to atted. 35

38 Corporate Goverace (cotiued) WHAT BUSINESS TAKES PLACE AT THE MEETING? the Group Chief Executive makes a presetatio o the results ad performace to the meetig prior to the Chairma dealig with the formal busiess of the meetig itself; all shareholders preset, either i perso or by proxy ca questio the Chairma, the Committee Chairme ad the rest of the Board durig the meetig ad afterwards; ad All formal resolutios are dealt with o a show of hads. Oce the vote is declared by the Chairma, the votes lodged with the Compay i advace of the meetig are displayed promietly i the veue for those preset to see. Immediately after the meetig is cocluded the results are published o the Group s website ad also via the Irish ad Lodo Stock Exchages. The otice of the Aual Geeral Meetig is issued to shareholders at least 20 workig days i advace of the meetig. Iteral Cotrol The Board has overall resposibility for the Group s system of iteral cotrol ad for reviewig its effectiveess. Such a system is desiged to maage rather tha elimiate the risk of failure to achieve busiess objectives ad ca provide oly reasoable ad ot absolute assurace agaist material misstatemet or loss. I accordace with the revised Fiacial Reportig Coucil (FRC) guidace for directors o iteral cotrol published i September 2014, Guidace o Risk Maagemet, Iteral Cotrol ad Related Fiacial ad Busiess Reportig, the Board cofirms that there is a ogoig process for idetifyig, evaluatig ad maagig ay sigificat risks faced by the Group, that it has bee i place for the year uder review ad up to the date of approval of the Fiacial Statemets ad that this process is regularly reviewed by the Board. The key risk maagemet ad iteral cotrol procedures which cover all material cotrols iclude: skilled ad experieced maagemet ad staff i lie with fit ad proper requiremets: roles ad resposibilities icludig reportig lies clearly defied with performace liked to compay objectives: a orgaisatio structure with clearly defied lies of resposibility ad authority; a comprehesive system of fiacial cotrol icorporatig budgetig, periodic fiacial reportig ad variace aalysis; a Risk Committee of the Board ad a Risk Maagemet Framework comprisig a risk fuctio headed by a Chief Risk Officer, a clearly stated risk appetite ad risk strategy supported by approved risk maagemet policies ad processes i the areas of uderwritig, reisurace, claims reservig, ivestmet ad treasury; a Executive Risk Committee comprisig seior maagemet whose mai role icludes reviewig ad challegig key risk iformatio ad to assist the Risk Committee, described earlier, i the discharge of its duties betwee meetigs; the risk strategy, framework ad appetite are articulated i a suite of policies coverig all risk types ad supported by detailed procedural documets. Each of these documets is subject to aual review ad approval by the Board; performace of a Ow Risk ad Solvecy Assessmet ORSA likig to risk maagemet, strategy ad capital maagemet; a Iteral Audit fuctio; a Audit Committee whose formal terms of referece iclude resposibility for assessig the sigificat risks facig the Group i the achievemet of its objectives ad the cotrols i place to mitigate those risks; a disaster recovery framework is i place ad is regularly tested; ad 36

39 a busiess cotiuity framework is i place ad is regularly tested. The Aual Budget, Half-Yearly Report ad Aual Report are reviewed ad approved by the Board. Fiacial results with comparisos agaist budget are reported to executive Directors o a mothly basis ad are reported to the Board at each Board meetig. The risk maagemet, iteral cotrol, reportig ad forecastig processes are importat to the Board i the exercise of its Goverace ad oversight role. It costatly strives to further improve their quality. FBD Holdigs plc Aual Report 2017 The Group has established a Speak Up Policy for employees the purpose of which is to reassure employees that it is safe ad appropriate to raise ay cocer that they may have about malpractice ad to eable them to raise such cocers safely ad properly. This policy is reviewed by the Audit Committee aually ad circulated thereafter to all Group employees. The Board has reviewed the effectiveess of the Group s system of iteral cotrol. This review took accout of the pricipal risks facig the Group, the cotrols i place to maage those risks ad the procedures i place to moitor them. The Board is satisfied that the systems of iteral cotrol i place were effective throughout the period covered by this report ad up to the date of its approval. 37

40 Report o Directors Remueratio Itroductory Letter from the Remueratio Committee Chair Dear Shareholder, O behalf of the Remueratio Committee ad the Board, I am pleased to set out i the sectio followig, the details of the Directors Remueratio for the year eded 31 December Payig for Performace There is a clear lik betwee the performace of the Group ad the remueratio of seior Executives. Arragemets for salaries ad Aual Performace Bouses, as described later i the Report, fully reflect the strategic priorities for the Group i 2017, our success i achievig those priorities, as well as our o-goig focus o attractig, retaiig ad rewardig strog talet. Exteral Advice As the existig Log Term Icetive Pla (LTIP) reached the ed of its te-year lifespa durig the year, the Committee udertook a assigmet with Willis Towers Watso to desig a ew LTIP. Details of this ew LTIP are explaied later i the report. Shareholder Dialogue ad Support Despite the fact that there is o obligatio to do so uder Irish law, the Board, o the recommedatio of this Committee table the Report o Directors Remueratio at the Aual Geeral Meetig each year for a advisory vote. At the 2017 AGM, this report received 91% support from shareholders. The Committee requests shareholders to cosider ad approve the aual remueratio report set out o the pages followig at the 2018 AGM. Orlagh Hut Chairperso of the Remueratio Committee 26 February

41 Role of Remueratio Committee Resposibility for determiig the levels of remueratio of the Executive Directors has bee delegated by the Board to the Remueratio Committee whose membership is set out i the Corporate Goverace Report. POLICY It is the policy of the Group to provide all members of Executive maagemet, middle maagemet ad employees of the Group with appropriate remueratio ad icetives that reward performace ad esure that they are, i a fair ad resposible maer, rewarded for specific cotributios which alig to the fiacial success of the Group. This is doe by esurig that the priciples of soud, prudet, risk maagemet are fully reflected ad that excessive risk takig is either ecouraged or rewarded. FBD Holdigs plc Aual Report 2017 It is also the policy of the Group to provide a remueratio framework that attracts, motivates ad rewards Executives of the highest calibre who brig experiece to the strategic directio ad maagemet of FBD ad who will perform i the log term iterests of the Group ad its shareholders. The followig table sets out the key elemets of remueratio policy for Executive Directors ad seior Executives, their purpose ad how they lik to strategy. Elemet ad lik to strategy Policy ad operatio Chages to policy Base Salary (fixed remueratio) To help recruit ad retai seior experieced Executives Base salaries are reviewed aually with effect from 1 April takig the followig factors ito accout: The idividual s role ad experiece Compay performace Persoal performace Market practice ad bechmarkig Although salaries are reviewed aually there is o automatic right of ay Executive to receive a salary icrease. No chage to policy Beefits (fixed remueratio) To provide market competitive beefits Pesio Provisio (fixed remueratio) To provide market competitive beefits ad reward performace over a log period, eablig Executives to save for retiremet Beefits provided take the form of a motor allowace ad a agreed percetage cotributio to health ad other isurace costs. All employees are provided with retiremet beefits uder a defied cotributio arragemet from 1 October The Groups defied beefit pesio scheme has bee closed to future accrual sice September 2015 ad to ew members sice Mr O Grady receives a taxable cash allowace i lieu of pesio beefits. No chage to policy No chage to policy 39

42 Report o Directors Remueratio (cotiued) Elemet ad lik to strategy Policy ad operatio Chages to policy Aual Performace Bouses (variable remueratio) To reward achievemet of compay targets, persoal performace ad cotributio The performace measures for aual performace bouses for the Executive Directors ad other seior Executives are based o attaimet of the Combied Operatig Ratio target for 2017, which was the measure used to reflect the compay s eed to build sustaiable profitability. The maximum bous potetial as a percetage of base salary for the Chief Executive for 2017 was 105%. More detail o the actual operatio of the Aual Performace Bous arragemets appear later i this Report. There have bee o chages to either the policy or the operatio of aual performace bouses. Loger Term Icetives the FBD Performace Share Pla ( LTIP ) (variable remueratio) To alig the fiacial iterests of Executives with those of shareholders The existig FBD Performace Share Pla ( LTIP ) was approved by shareholders i 2007 ad is at the ed of its te-year lifespa. The Remueratio Committee is proposig a ew pla to replace it. The ew pla, whilst similar i ature to the 2007 LTIP, has bee desiged to esure the pla rules are i lie with curret best practice ad to itroduce flexibility for the Committee to make awards which will be subject to post-vestig holdig periods ad malus ad clawback provisios. As has bee the case with the 2007 LTIP, the ew pla will provide for the ability to make aual awards of performace shares, which will vest subject to the achievemet of stretchig three-year performace coditios. The Committee iteds to cotiue its practice of makig aual awards to Executive Directors as well as selected key idividuals i our seior maagemet team. Subject to approval by shareholders, the first awards uder the ew pla would be made shortly after the AGM. The key features of the proposed ew pla are as follows: Life of the pla: Te years from date of shareholder approval. Overall pla limit: I aggregate with ay other employee share pla, the maximum umber of shares which may be grated will be 10% of the Compay s issued ordiary share capital over a rollig te-year period. Idividual limit: Maximum aual aggregate award level of 150% of base salary. Post-vestig holdig period: The ew pla rules allow the Committee (at its sole discretio) to make awards which may be subject to a additioal post-vestig holdig period. Awards will vest after three years oce applicable performace coditios have bee achieved ad the vested shares (et of tax) may be required to be held for a further two-year period to provide cotiued aligmet with shareholders. The Committee has decided to icrease its flexibility to award up to a idividual limit of 150% of salary (previously 100%). This aligs FBD more geerally with market practice ad provides the Committee with sufficiet flexibility over the te-year lifespa of the pla. The Committee has the discretio to apply a two year postvestig holdig period to awards made uder the ew pla. The Committee has the discretio to apply malus ad clawback provisios to awards made uder the ew Pla. 40

43 Elemet ad lik to strategy Policy ad operatio Malus ad clawback provisios: The ew pla icludes provisios that allow the Committee to withhold, reduce or require the repaymet of awards for up to two years after vestig (i.e. up to five years after grat) if there is foud to have bee (a) material misstatemet of the compay s fiacial results or (b) gross miscoduct o the part of the award holder. Chages to policy FBD Holdigs plc Aual Report 2017 The Remueratio Committee will set performace coditios each year, selectig appropriate metrics based o key strategic priorities. The period over which the performace coditios applyig to a coditioal award uder the LTIP are measured may ot be less tha three years. The extet to which a coditioal award may vest i the future will be determied by the Remueratio Committee by referece to the performace coditios set at the time of the award. These coditios are desiged to esure aligmet betwee the ecoomic iterests of the pla participats ad those of shareholders. Differet coditios, or the same coditios i differig proportios, ca be used by the Remueratio Committee i differet years uder the LTIP rules, provided that the Committee is satisfied that they are challegig targets ad that they are aliged with the iterests of the Compay s shareholders. Coditioal Awards of Shares i 2017 Durig 2017 oe Coditioal Award of Shares was made uder the 2007 LTIP. This was made i March 2017 to Executive Directors ad seior maagemet. The coditios attached to the award, which reflect the Board s strategic plas, were as follows: 50% based o the compoud aual growth rate (cagr) of Net Asset Value (NAV) per share, relative to 2016 NAV, for the three years edig 31 December NAV has bee chose because the Committee cosiders it is the cotrollable measure most closely correlated to share price ad ultimately to shareholder retur. 40% based o a weighted average Combied Operatig Ratio (COR) over the three years edig 31 December This is measured as simple average COR with equal weightig to each year ad to iclude a certai level of catastrophe weather evets ad all prior year reserve developmet. COR has bee chose as this is the most fudametal idicator of FBD s uderwritig disciplie, profitability ad sustaiable competitive advatage. 10% based o the compoud aual growth rate (cagr) of i-force policy cout, relative to 2016 s ed of year live policy cout. Policy cout has bee chose as a measure of careful sustaiable growth. A low weightig is afforded to the i-force policy cout as growth will ot be at the expese of profitability. The target rages ad thresholds for vestig are as follows: Vestig levels rage betwee a threshold level of 25% to a maximum of 100% for outperformace. The cagr target for NAV is up to early double digit % s ad for i-force policy cout is up to 5%. The COR targets rage from high 90 s for 41

44 Report o Directors Remueratio (cotiued) threshold miimum vestig to low 90 s for maximum vestig. The actual percetages are ot disclosed due to commercial competitor sesitivity ad because to do so would also costitute forward lookig guidace. The Committee will publish details regardig targets ad vestig levels at the ed of the performace period (2020). The Committee has decided ot to iclude relative performace to market targets as there is o relevat comparator i the Irish market ad at this stage of the Compay s tur-aroud it was ot deemed a suitable metric. The maximum ad threshold for vestig for these performace coditios are as follows: Threshold Level Proportio vestig Upper Level Proportio vestig NAV cagr >3% 25% Early double digits 100% COR High 90 s 25% Low 90 s 100% Policy Cout cagr 0.5% 25% 5% 100% Outstadig Coditioal Awards ( ) The Committee cosidered the extet to which the performace coditios uderpiig this award were met i the three Fiacial Years 2014 to 2016 (the Performace Period ). The Committee cocluded that oe of the performace coditios were met ad therefore the coditioal awards grated i 2014 will ot vest. No curret Executive Director was employed at FBD i 2014 ad therefore oe had ay outstadig Coditioal Award with the potetial to vest i Compay Secretary Derek Hall was employed i 2014 ad the coditioal award grated to him will ot vest. Directors ad Compay Secretary s Coditioal LTIP Awards Details of the coditioal share awards made uder the LTIP pla to the CEO, CFO ad to the Compay Secretary are give i the table below. The umber of shares is the maximum possible umber which could vest for the idividual cocered if all of the performace coditios previously described are met at stretch target level. At 1 Jauary 2017 Executive Directors Grated durig year Vested durig year Lapsed durig year Forfeited durig year At 31 Dec 2017 Performace Period Earliest vestig date Market price o award Fioa Muldoo 54, , Mar , , Mar , , Mar Total 109,506 45, ,789 Joh O Grady - 22, , Mar Total - 22, ,138 Compay Secretary Derek Hall 2, (2,153) Mar , , Mar , , Mar , , Mar Total 20,855 11,006 - (2,153) - 29,708 42

45 The total umber of shares subject to coditioal awards outstadig uder the LTIP amouts to 511,343 beig 1.5% of the Compay s ordiary share capital (excludig treasury shares) at 31 December 2017 (2016: 478,014 shares ad 1.4% of ordiary share capital). The aggregate limit of the umber of shares over which coditioal awards are permitted uder the Scheme Rules is 10% of the Compay s issued ordiary share capital. Sice the establishmet of the Scheme i 2007, there have bee eight coditioal awards with a aggregate of 1,357,010 shares or 3.9% of the Compay s ordiary share capital (excludig treasury shares). Share Owership Policy The Group icetivises its Executive Directors ad seior Executives with equity based awards uder the Group s shareholder approved share schemes. Cetral to the philosophy uderlyig awards is the goal of aligig the ecoomic iterests of those idividuals with those of shareholders. FBD Holdigs plc Aual Report 2017 Executives are expected to maitai a sigificat log-term equity iterest i the Compay. The requiremet, which is set out i a policy documet by the Remueratio Committee, approved ad reviewed aually, is to build ad retai a valuable shareholdig relative to base salary, at a miimum, as oted hereuder. Executive Directors have ot built up to the requiremet yet due to the relatively short time i role. Util such time as this requiremet has bee met, those to whom the Policy applies are precluded from disposig of ay shares issued to them uder the Group s share schemes. Executive Group Chief Executive Other Executive Directors Other seior Executives Share owership requiremet 2 times aual salary 1.5 times aual salary 1 times aual salary No-Executive Director Remueratio The remueratio of the o-executive Directors is determied by the Board, ad reflects the time commitmet ad resposibilities of their role. I settig this level, the Board has regard to the fees payable to the o-executive Directors of the other Irish publicly listed compaies ad also to the developmets ad policy for the remueratio of the employees i the wider Group. I July 2016 the basic o-executive Director fee icreased to 50,000. There was o icrease to Director Fees i The Chairma, Mr Liam Herlihy received fees of 102,000 durig the year (2016: 47,000) iclusive of the basic o-executive Director fee. The former Chairma Mr Michael Berkery received fees of 38,000 durig the year (2016: 127,000) iclusive of the basic o- Executive Director fee. The Seior Idepedet Director, Mr Dermot Browe, received fees of 78,000 durig the year (2016: 29,000) iclusive of the basic o-executive Director fee, ad reflectig his additioal resposibilities as Chairma of the Audit Committee. No-Executive Directors are ot members of the Group s pesio schemes ad are ot eligible for participatio i the Group s log-term icetive scheme or ay share optio schemes. 43

46 Report o Directors Remueratio (cotiued) Service Cotracts The service cotract for the Group Chief Executive ad the Group Fiacial Officer provide for the followig periods of otice of termiatio of employmet: Executive From Compay From CEO/CFO Fioa Muldoo CEO 12 moths 6 moths Joh O Grady CFO 6 moths 6 moths Exteral appoitmets held by the Executive Directors I recogitio of the beefits to both the Group ad to our Executive Directors of servig as o-executive Directors of other compaies, our Executive Directors are, subject to advace agreemet i each case, permitted to take o a exteral o-executive appoitmet ad to retai ay related fees paid to them. Durig the year, Ms Muldoo served as a o-executive Director of the Goveror ad Compay of Bak of Irelad, for which she received fees of 70,875 i the period. Determiatio of Aual Performace Bous for the year eded 31 December 2017 As previously oted, the overall Aual Performace Bous arragemets, the targets ad their achievemet are approved by the Remueratio Committee each year. Specifically the Remueratio committee approve the merit pay ad bous arragemets for the Executive Directors i lie with FBDs remueratio policy. The 2017 aual performace bous scheme was desiged such that o pla Compay performace for the year 2017 would deliver 100% of the target bous. At >100% Combied Operatig Ratio, o bous is deemed payable. At <97% Combied Operatig Ratio, a 100% pay out of the target is deemed payable ad at <94% % is deemed payable. I 2017, a COR of 86% was achieved ad i lie with this excellet result which is well ahead of the target set, the Remueratio Committee has approved a maximum bous pool of 150% for all eligible employees to be split accordig to performace. I the case of Ms Muldoo ad Mr O Grady for 2017, 100% of the aual performace bous is determied by the Combied Operatig Ratio of FBD Isurace plc ad accordigly the Remueratio Committee has decided bouses of 472,500 ad 168,000 are payable. 44

47 Executive ad o-executive Directors Remueratio details The followig table sets out i detail the remueratio payable by the Group i respect of ay Director who held office for ay part of the fiacial year: Fees 1 000s Salary 2 000s Other Paymets 3 000s Beefits 4 000s Pesio Cotributio 5 000s 2017 Total 000s Executive Directors: Fioa Muldoo ,051 Joh O Grady No-Executive Directors: Liam Herlihy (Chairma) Michael Berkery Sea Dorga Joe Healy Padraig Walshe Dermot Browe Orlagh Hut David O Coor Walter Bogaerts Mary Brea ,069 FBD Holdigs plc Aual Report 2017 NOTES (2017) 1 Fees are payable to the o-executive Directors oly. 2 Salaries are paid to Executive Directors. 3 Bouses of 472,500 ad 168,000 were awarded to Ms Muldoo ad Mr O Grady uder the bous scheme i The bouses for both Ms Muldoo ad Mr O Grady were calculated i accordace with the Aual Performace Arragemets described earlier ad both Ms Muldoo s ad Mr O Grady s bouses were approved by the Remueratio Committee o 22 February Beefits relate exclusively to a motor allowace ad cotributio towards health isurace costs. 5 Pesio cotributios relate to cotributios to a defied cotributio pesio scheme or a paymet i lieu. 6 Liam Herlihy was appoited as Chairma o 5 May Michael Berkery resiged as Chairma o 5 May Sea Dorga resiged as a Director o 5 May Joe Healy was appoited as a Director o 9 August

48 Report o Directors Remueratio (cotiued) The followig table sets out the detail for the previous fiacial year (2016): Fees 1 000s Salary 2 000s Other Paymets 3 000s Beefits 4 000s Pesio Cotributio 5 000s 2016 Total 000s Executive Directors: Fioa Muldoo Joh O Grady No-Executive Directors: Michael Berkery (Chairma) Emer Daly Sea Dorga Eddie Dowey Liam Herlihy Brid Hora Ruairi O Fly Padraig Walshe Dermot Browe Orlagh Hut David O Coor Walter Bogaerts Mary Brea ,620 NOTES (2016) 1 Fees are payable to the o-executive Directors oly. 2 Salaries are paid to Executive Directors oly. 3 Bouses of 315,000 ad 50,000 were awarded to Ms Muldoo ad Mr O Grady uder the bous scheme i The bous for Ms Muldoo was calculated i accordace with the Aual Performace Arragemets described earlier ad both Ms Muldoo s ad Mr O Grady bouses were approved by the Remueratio committee o 23 February Beefits relate exclusively to a motor allowace ad cotributio towards health isurace costs. 5 Pesio cotributios relate to cotributios to a defied cotributio pesio scheme or a paymet i lieu. 6 Joh O Grady was appoited Executive Director o 1 July Emer Daly resiged as Director o 29 April Eddie Dowey resiged as a Director o 29 April Liam Herlihy was appoited as a Director o 1 September Brid Hora resiged as a Director o 29 April Ruairi O Fly resiged as Director o 29 April Dermot Browe was appoited as a Director o 5 July Orlagh Hut was appoited as a Director o 31 August David O Coor was appoited as a Director o 5 July Walter Bogaerts was appoited as a Director o 26 February Mary Brea was appoited as a Director o 31 August

49 Directors Resposibilities Statemet The Directors are resposible for preparig the Aual Report ad Fiacial Statemets, i accordace with the Compaies Act 2014 ad the applicable regulatios. Irish compay law requires the Directors to prepare Fiacial Statemets for each fiacial year. Uder the law, the Directors have elected to prepare the Fiacial Statemets i accordace with Iteratioal Fiacial Reportig Stadards as adopted by the Europea Uio ( relevat fiacial reportig framework ). Uder compay law, the Directors must ot approve the Fiacial Statemets uless they are satisfied that they give a true ad fair view of the assets, liabilities ad fiacial positio of the Compay as at the fiacial year ed date ad of the profit or loss of the Compay for the fiacial year ad otherwise comply with the Compaies Act I preparig each of the Compay ad Group Fiacial Statemets, the Directors are required to: select suitable accoutig policies for the Compay ad the Group Fiacial Statemets ad the apply them cosistetly; make judgemets ad estimates that are reasoable ad prudet; state whether the Fiacial Statemets have bee prepared i accordace with the applicable accoutig stadards, idetify those stadards, ad ote the effect ad the reasos for ay material departure from those stadards; ad prepare the Fiacial Statemets o the goig cocer basis uless it is iappropriate to presume that the Compay will cotiue i busiess. The Directors are resposible for esurig that the Compay ad the Group keeps or causes to be kept adequate accoutig records which correctly explai ad record the trasactios of the Compay ad the Group, eable at ay time the assets, liabilities, fiacial positio ad profit or loss of the Compay ad the Group to be determied with reasoable accuracy, eable them to esure that the Aual Report ad Fiacial Statemets comply with the Compaies Act 2014 ad the Listig Rules of the Irish Stock Exchage ad eable the Fiacial Statemets to be audited. The Directors are also required by the Trasparecy (Directive 2004/109/EC) Regulatios 2007 (Trasparecy (Directive 2004/109/EC) (Amedmet) (No. 2) Regulatios 2015) to iclude a maagemet report cotaiig a fair review of the busiess ad a descriptio of the pricipal risks ad ucertaities facig the Group. Uder applicable law ad the requiremets of the Listig Rules issued by the Irish Stock Exchage, the Directors are also resposible for preparig a Directors Report ad reports relatig to Directors remueratio ad corporate goverace that comply with that law ad those Rules. The Directors are resposible for the maiteace ad itegrity of the corporate ad fiacial iformatio icluded o the Compay s website. Legislatio i Irelad goverig the preparatio ad dissemiatio of Fiacial Statemets may differ from legislatio i other jurisdictios. The Directors cofirm that, to the best of their kowledge ad belief: the Fiacial Statemets, prepared i accordace with IFRSs, give a true ad fair view of the assets, liabilities ad fiacial positio for the Group as at 31 December 2017 ad of the result for the fiacial year the eded; the Report of the Directors, the Chairma s Statemet ad the Review of Operatios iclude a fair review of the developmet ad performace of the Group s busiess ad the state of affairs of the Group at 31 December 2017, together with a descriptio of the pricipal risks ad ucertaities facig the Group; ad the Aual Report ad Fiacial Statemets, take as a whole, is fair, balaced ad uderstadable ad provides the iformatio ecessary for shareholders to access the performace, strategy ad busiess model of the Compay. O behalf of the Board Liam Herihy Chairma Fioa Muldoo Group Chief Executive FBD Holdigs plc Aual Report 2017 They are also resposible for safeguardig the assets of the compay ad hece for takig reasoable steps for the prevetio ad detectio of fraud ad other irregularities. 26 February

50 Idepedet Auditors Report to the members of FBD Holdigs plc Report o the audit of the fiacial statemets OPINION I our opiio, FBD Holdigs plc s group fiacial statemets ad compay fiacial statemets (the fiacial statemets ): give a true ad fair view of the group s ad the compay s assets, liabilities ad fiacial positio as at 31 December 2017 ad of the group s profit ad the group s ad the compay s cash flows for the year the eded; have bee properly prepared i accordace with Iteratioal Fiacial Reportig Stadards ( IFRSs ) as adopted by the Europea Uio ad, as regards the compay s fiacial statemets, as applied i accordace with the provisios of the Compaies Act 2014; ad have bee properly prepared i accordace with the requiremets of the Compaies Act 2014 ad, as regards the group fiacial statemets, Article 4 of the IAS Regulatio. We have audited the fiacial statemets, icluded withi the Aual Report, which comprise: the Cosolidated ad Compay Statemets of Fiacial Positio as at 31 December 2017; the Cosolidated Icome Statemet ad Cosolidated Statemet of Comprehesive Icome for the year the eded; the Cosolidated ad Compay Statemets of Cash Flows for the year the eded; the Cosolidated ad Compay Statemets of Chages i Equity for the year the eded; ad the otes to the fiacial statemets, which iclude a descriptio of the sigificat accoutig policies. Certai required disclosures have bee preseted elsewhere i the Aual Report, rather tha i the otes to the fiacial statemets. These are cross-refereced from the fiacial statemets ad are idetified as audited. Our opiio is cosistet with our reportig to the Audit Committee. Basis for opiio We coducted our audit i accordace with Iteratioal Stadards o Auditig (Irelad) ( ISAs (Irelad) ) ad applicable law. Our resposibilities uder ISAs (Irelad) are further described i the Auditors resposibilities for the audit of the fiacial statemets sectio of our report. We believe that the audit evidece we have obtaied is sufficiet ad appropriate to provide a basis for our opiio. Idepedece We remaied idepedet of the group i accordace with the ethical requiremets that are relevat to our audit of the fiacial statemets i Irelad, which icludes IAASA s Ethical Stadard as applicable to listed public iterest etities, ad we have fulfilled our other ethical resposibilities i accordace with these requiremets. To the best of our kowledge ad belief, we declare that o-audit services prohibited by IAASA s Ethical Stadard were ot provided to the group or the compay. Other tha those disclosed i ote 9 to the fiacial statemets, we have provided o o-audit services to the group ad its subsidiaries i the period from 1 Jauary 2017 to 31 December

51 Our audit approach OVERVIEW Materiality Materiality Overall group materiality: 4.0 millio (2016: 4.0 millio). Based o 1% of reveue. Overall compay materiality: 1.1 millio (2016: 1.1 millio). Based o 1% of equity attributable to equity holders of the compay. FBD Holdigs plc Aual Report 2017 Audit scope Key audit matters Audit scope We performed a full scope audit of the complete fiacial iformatio of the group s pricipal operatig etities, FBD Isurace plc ad FBD Life & Pesios Limited. Take together, the etities where we performed our audit work accouted for 100% of group reveues ad 100% of group profit before tax. Key audit matters Valuatio of claims outstadig. Valuatio of defied beefit pesio obligatio. The scope of our audit As part of desigig our audit, we determied materiality ad assessed the risks of material misstatemet i the fiacial statemets. I particular, we looked at where the directors made subjective judgemets, for example i respect of sigificat accoutig estimates that ivolved makig assumptios ad cosiderig future evets that are iheretly ucertai. As i all of our audits we also addressed the risk of maagemet override of iteral cotrols, icludig evaluatig whether there was evidece of bias by the directors that represeted a risk of material misstatemet due to fraud. Key audit matters Key audit matters are those matters that, i the auditors professioal judgemet, were of most sigificace i the audit of the fiacial statemets of the curret period ad iclude the most sigificat assessed risks of material misstatemet (whether or ot due to fraud) idetified by the auditors, icludig those which had the greatest effect o: the overall audit strategy; the allocatio of resources i the audit; ad directig the efforts of the egagemet team. These matters, ad ay commets we make o the results of our procedures thereo, were addressed i the cotext of our audit of the fiacial statemets as a whole, ad i formig our opiio thereo, ad we do ot provide a separate opiio o these matters. This is ot a complete list of all risks idetified by our audit. 49

52 Idepedet Auditors Report (cotiued) Key audit matter Valuatio of claims outstadig Refer to page 31 (Corporate Goverace Statemet), page 73 (group accoutig policies), page 80 (critical accoutig estimates ad judgemets) ad pages 107 to 109 (ote 29 (a) to (c) to the group fiacial statemets). The provisio for claims outstadig is the group s largest liability ad its valuatio ivolves cosiderable judgemet. The actuarial best estimate is determied usig complex actuarial calculatios ad requires the cosideratio of detailed methodologies, multiple assumptios ad sigificat judgemets, particularly for the loger tails classes of busiess such as motor bodily ijury ad liability. The key assumptios uderlyig the calculatios are past developmet patters, loss ratios ad assumptios regardig frequecy, severity ad duratio of claims. The valuatio is also depedet o the completeess ad accuracy of the data used i the actuarial modellig, i particular data relatig to amouts of claims paid ad icurred i prior years. The provisio icludes a margi over actuarial best estimate to provide for the risk of adverse claims developmet ad to cater for kow evets ot i the uderlyig data. As a result, the valuatio of claims outstadig was a key area of focus. How our audit addressed the key audit matter We evaluated the actuarial methodologies ad key assumptios with the assistace of our actuarial specialists. This ivolved: testig the desig ad operatig effectiveess of the cotrols over claims processig ad paymet; recociliatio of the data used i the actuarial models to the uderlyig systems; assessig the assumptios ad methodologies uderpiig maagemet s actuarial valuatio; carryig out our ow idepedet valuatios for the mai classes of busiess; ad recociliatio of the actuarial valuatio outputs to the fiacial statemets. Our work icluded a assessmet of maagemet s aalysis of the output of the calculatios from the actuarial model icludig cosideratio of the developmet of prior accidet years estimates ad aalysis of the curret accidet year estimate. I makig this assessmet we cosidered the group s historic claims experiece, developmet i the Irish claims eviromet ad our broader kowledge of developmets i the isurace idustry. We tested the calculatio of the margi over actuarial best estimate ad discussed the ratioale for the level of this elemet of the provisio with maagemet with particular focus o the cosideratio of the appropriateess of chages i the amout sice the prior year. We cocluded that the methodologies ad assumptios adopted were appropriate ad that the claims outstadig figure was calculated i accordace with these. 50

53 Key audit matter Valuatio of defied beefit pesio obligatio Refer to page 31 (Corporate Goverace Statemet), page 77 (group accoutig policies), page 81 (critical accoutig estimates ad judgemets), ad pages 111 to 115 (ote 32 to the group fiacial statemets). The group operates a defied beefit pesio scheme which is closed to future accrual ad closed to ew members. The scheme has a IAS 19 surplus of EUR9.8 millio at 31 December The surplus is the excess of the fair value of the scheme assets over the preset value of the defied beefit obligatio. We focused o the defied beefit obligatio as its valuatio is complex ad requires judgemet i choosig appropriate actuarial assumptios, especially the discout rate used ad the iflatio assumptio. These assumptios ca have a material impact o the calculatio of the defied beefit obligatio. The valuatio is also depedet o the completeess ad accuracy of the data used i the model, i particular membership data ad payroll details. How our audit addressed the key audit matter We cosidered the reasoableess of the key actuarial assumptios used to determie the defied beefit obligatio with the assistace of our pesio specialists. We challeged maagemet i relatio to the assumptios ad methodology applied icludig bechmarkig to exteral data as appropriate. Because the settig of the assumptios ad the calculatios relied to a sigificat extet o the advice of the group s exteral actuarial experts, we cosidered their idepedece, ad the reports prepared by them for maagemet. We cosidered the appropriateess of the methodologies ad assumptios uderlyig the pesio surplus valuatio with the assistace of our pesio specialists with particular focus o the discout rate used ad the iflatio assumptios. We also recociled the uderlyig membership ad payroll data used i the model to the group s records. We cocluded that the methodologies ad assumptios adopted were appropriate ad that the defied beefit obligatio was calculated i accordace with these. FBD Holdigs plc Aual Report

54 Idepedet Auditors Report (cotiued) How we tailored the audit scope We tailored the scope of our audit to esure that we performed eough work to be able to give a opiio o the fiacial statemets as a whole, takig ito accout the structure of the group, the accoutig processes ad cotrols, ad the idustry i which the group operates. The group has two operatig segmets, uderwritig ad fiacial services. The group fiacial statemets are a cosolidatio of idividual reportig etities withi these segmets, primarily its two pricipal subsidiaries, FBD Isurace plc (uderwritig) ad FBD Life & Pesios Limited (fiacial services). I establishig the overall approach to the group audit, we determied the type of work that eeded to be performed at each reportig etity by us. The group egagemet team performed all the required audit work i relatio to the idividual reportig etities. We performed a full scope audit of the complete fiacial iformatio of FBD Isurace plc, FBD Life & Pesios Limited ad the holdig compay. We also tested the cosolidatio process. This gave us the desired level of audit evidece o each accout balace ad for our opiio o the fiacial statemets as a whole. This gave us coverage of 100% of the group s reveue, 100% of the group s profit ad 100% of the group s total assets. Materiality The scope of our audit was iflueced by our applicatio of materiality. We set certai quatitative thresholds for materiality. These, together with qualitative cosideratios, helped us to determie the scope of our audit ad the ature, timig ad extet of our audit procedures o the idividual fiacial statemet lie items ad disclosures ad i evaluatig the effect of misstatemets, both idividually ad i aggregate o the fiacial statemets as a whole. Based o our professioal judgemet, we determied materiality for the fiacial statemets as a whole as follows: Group fiacial statemets Compay fiacial statemets Overall materiality 4.0 millio (2016: 4.0 millio) 1.1 millio (2016: 1.1 millio) How we determied it 1% of reveue 1% of equity attributable to equity holders of the compay Ratioale for bechmark applied We have applied this bechmark as the group s result has fluctuated sigificatly i recet years ad reveue is cosidered a appropriate bechmark give the circumstaces ad size of the group We have applied this bechmark as it is cosidered appropriate give the compay s activity as a holdig compay We agreed with the Audit Committee that we would report to them misstatemets idetified durig our audit above 200,000 (group audit) (2016: 200,000) ad 55,000 (compay audit) (2016: 55,000) as well as misstatemets below that amout that, i our view, warrated reportig for qualitative reasos. 52

55 Goig cocer I accordace with ISAs (Irelad) we report as follows: Reportig obligatio We are required to report if we have aythig material to add or draw attetio to i respect of the directors statemet i the fiacial statemets about whether the directors cosidered it appropriate to adopt the goig cocer basis of accoutig i preparig the fiacial statemets ad the directors idetificatio of ay material ucertaities to the group s or the compay s ability to cotiue as a goig cocer over a period of at least twelve moths from the date of approval of the fiacial statemets. We are required to report if the directors statemet relatig to goig cocer i accordace with Rule 6.8.3(3) of the Listig Rules for the Mai Securities Market of the Irish Stock Exchage is materially icosistet with our kowledge obtaied i the audit. Outcome We have othig material to add or to draw attetio to. However, because ot all future evets or coditios ca be predicted, this statemet is ot a guaratee as to the group s or the compay s ability to cotiue as a goig cocer. We have othig to report. FBD Holdigs plc Aual Report 2017 Reportig o other iformatio The other iformatio comprises all of the iformatio i the Aual Report other tha the fiacial statemets ad our auditors report thereo. The directors are resposible for the other iformatio. Our opiio o the fiacial statemets does ot cover the other iformatio ad, accordigly, we do ot express a audit opiio or, except to the extet otherwise explicitly stated i this report, ay form of assurace thereo. I coectio with our audit of the fiacial statemets, our resposibility is to read the other iformatio ad, i doig so, cosider whether the other iformatio is materially icosistet with the fiacial statemets or our kowledge obtaied i the audit, or otherwise appears to be materially misstated. If we idetify a apparet material icosistecy or material misstatemet, we are required to perform procedures to coclude whether there is a material misstatemet of the fiacial statemets or a material misstatemet of the other iformatio. If, based o the work we have performed, we coclude that there is a material misstatemet of this other iformatio, we are required to report that fact. We have othig to report based o these resposibilities. With respect to the Report of the Directors, we also cosidered whether the disclosures required by the Compaies Act 2014 have bee icluded. Based o the resposibilities described above ad our work udertake i the course of the audit, ISAs (Irelad), the Compaies Act 2014 (CA14) ad the Listig Rules applicable to the compay (Listig Rules) require us to also report certai opiios ad matters as described below (required by ISAs (Irelad) uless otherwise stated). 53

56 Idepedet Auditors Report (cotiued) REPORT OF THE DIRECTORS I our opiio, based o the work udertake i the course of the audit, the iformatio give i the Report of the Directors for the year eded 31 December 2017 is cosistet with the fiacial statemets ad has bee prepared i accordace with the applicable legal requiremets (CA14). Based o our kowledge ad uderstadig of the group ad paret compay ad their eviromet obtaied i the course of the audit, we did ot idetify ay material misstatemets i the Report of the Directors (CA14). CORPORATE GOVERNANCE STATEMENT I our opiio, based o the work udertake i the course of the audit of the fiacial statemets: the descriptio of the mai features of the iteral cotrol ad risk maagemet systems i relatio to the fiacial reportig process; ad the iformatio required by Sectio 1373(2)(d) of the Compaies Act 2014; icluded i the Corporate Goverace Statemet, is cosistet with the fiacial statemets ad has bee prepared i accordace with sectio 1373(2) of the Compaies Act 2014 (CA14). Based o our kowledge ad uderstadig of the compay ad its eviromet obtaied i the course of the audit of the fiacial statemets, we have ot idetified material misstatemets i the descriptio of the mai features of the iteral cotrol ad risk maagemet systems i relatio to the fiacial reportig process ad the iformatio required by sectio 1373(2)(d) of the Compaies Act 2014 icluded i the Corporate Goverace Statemet (CA14). I our opiio, based o the work udertake durig the course of the audit of the fiacial statemets, the iformatio required by sectio 1373(2)(a),(b),(e) ad (f) is cotaied i the Corporate Goverace Statemet (CA14). 54

57 THE DIRECTORS ASSESSMENT OF THE PROSPECTS OF THE GROUP AND OF THE PRINCIPAL RISKS THAT WOULD THREATEN THE SOLVENCY OR LIQUIDITY OF THE GROUP We have othig material to add or to draw attetio to regardig: The directors cofirmatio o page 21 of the Aual Report that they have carried out a robust assessmet of the pricipal risks facig the group, icludig those that would threate its busiess model, future performace, solvecy or liquidity. The disclosures i the Aual Report that describe those risks ad explai how they are beig maaged or mitigated. FBD Holdigs plc Aual Report 2017 The directors explaatio o page 21 of the Aual Report as to how they have assessed the prospects of the group, over what period they have doe so ad why they cosider that period to be appropriate, ad their statemet as to whether they have a reasoable expectatio that the group will be able to cotiue i operatio ad meet its liabilities as they fall due over the period of their assessmet, icludig ay related disclosures drawig attetio to ay ecessary qualificatios or assumptios. We have othig to report havig performed a review of the directors statemet that they have carried out a robust assessmet of the pricipal risks facig the group ad the directors statemet i relatio to the loger-term viability of the group. Our review was substatially less i scope tha a audit ad oly cosisted of makig iquiries ad cosiderig the directors process supportig their statemets; checkig that the statemets are i aligmet with the relevat provisios of the UK Corporate Goverace Code (the Code ); ad cosiderig whether the statemets are cosistet with the kowledge ad uderstadig of the group ad the compay ad their eviromet obtaied i the course of the audit (Listig Rules). OTHER CODE PROVISIONS We have othig to report i respect of our resposibility to report whe: The statemet give by the directors o page 31 that they cosider the Aual Report take as a whole to be fair, balaced ad uderstadable ad provides the iformatio ecessary for the members to assess the group s ad compay s positio ad performace, busiess model ad strategy is materially icosistet with our kowledge of the group ad compay obtaied i the course of performig our audit. The sectio of the Aual Report o pages 30 ad 31 describig the work of the Audit Committee does ot appropriately address matters commuicated by us to the Audit Committee. The directors statemet relatig to the compay s compliace with the Code ad the Irish Corporate Goverace Aex does ot properly disclose a departure from a relevat provisio of the Code specified, uder the Listig Rules, for review by the auditors. 55

58 Idepedet Auditors Report (cotiued) Resposibilities for the fiacial statemets ad the audit RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS As explaied more fully i the Directors Resposibilities Statemet set out o page 47, the directors are resposible for the preparatio of the fiacial statemets i accordace with the applicable framework ad for beig satisfied that they give a true ad fair view. The directors are also resposible for such iteral cotrol as they determie is ecessary to eable the preparatio of fiacial statemets that are free from material misstatemet, whether due to fraud or error. I preparig the fiacial statemets, the directors are resposible for assessig the group s ad the compay s ability to cotiue as a goig cocer, disclosig as applicable, matters related to goig cocer ad usig the goig cocer basis of accoutig uless the directors either ited to liquidate the group or the compay or to cease operatios, or have o realistic alterative but to do so. AUDITORS RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtai reasoable assurace about whether the fiacial statemets as a whole are free from material misstatemet, whether due to fraud or error, ad to issue a auditors report that icludes our opiio. Reasoable assurace is a high level of assurace, but is ot a guaratee that a audit coducted i accordace with ISAs (Irelad) will always detect a material misstatemet whe it exists. Misstatemets ca arise from fraud or error ad are cosidered material if, idividually or i the aggregate, they could reasoably be expected to ifluece the ecoomic decisios of users take o the basis of these cosolidated fiacial statemets. A further descriptio of our resposibilities for the audit of the fiacial statemets is located o the IAASA website at: 9b8f-a98202dc9c3a/Descriptio_of_auditors_ resposibilities_for_audit.pdf This descriptio forms part of our auditors report. Use of this report This report, icludig the opiios, has bee prepared for ad oly for the compay s members as a body i accordace with sectio 391 of the Compaies Act 2014 ad for o other purpose. We do ot, i givig these opiios, accept or assume resposibility for ay other purpose or to ay other perso to whom this report is show or ito whose hads it may come save where expressly agreed by our prior coset i writig. Other required reportig COMPANIES ACT 2014 OPINIONS ON OTHER MATTERS We have obtaied all the iformatio ad explaatios which we cosider ecessary for the purposes of our audit. I our opiio the accoutig records of the compay were sufficiet to permit the compay fiacial statemets to be readily ad properly audited. The Compay Statemet of Fiacial Positio is i agreemet with the accoutig records. COMPANIES ACT 2014 EXCEPTION REPORTING Directors remueratio ad trasactios Uder the Compaies Act 2014 we are required to report to you if, i our opiio, the disclosures of directors remueratio ad trasactios specified by sectios 305 to 312 of that Act have ot bee made. We have o exceptios to report arisig from this resposibility. 56

59 Appoitmet We were appoited by the directors o 10 August 2016 to audit the fiacial statemets for the year eded 31 December 2016 ad subsequet fiacial periods. The period of total uiterrupted egagemet is 2 years, coverig the years eded 31 December 2016 to 31 December Paraic Joyce for ad o behalf of PricewaterhouseCoopers Chartered Accoutats ad Statutory Audit Firm Dubli 26 February 2018 FBD Holdigs plc Aual Report 2017 The maiteace ad itegrity of the FBD Holdigs plc website is the resposibility of the directors; the work carried out by the auditors does ot ivolve cosideratio of these matters ad, accordigly, the auditors accept o resposibility for ay chages that may have occurred to the fiacial statemets sice they were iitially preseted o the website. Legislatio i the Republic of Irelad goverig the preparatio ad dissemiatio of fiacial statemets may differ from legislatio i other jurisdictios. 57

60 58

61 FBD Holdigs plc Aual Report 2017 Cotiuig to look ahead 59