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

Transcription

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

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3 CONTENTS 2 Fiacial Highlights 5 Chairma's Statemet 9 Review of Operatios 16 Corporate Iformatio 17 Report of the Directors 26 Corporate Goverace 39 Report o Directors Remueratio 48 Directors Resposibilities Statemet 49 Idepedet Auditor s Report FINANCIAL STATEMENTS 60 Cosolidated Icome Statemet 61 Cosolidated Statemet of Comprehesive Icome 62 Cosolidated Statemet of Fiacial Positio 64 Cosolidated Statemet of Cash Flows 65 Cosolidated Statemet of Chages i Equity 66 Compay Statemet of Fiacial Positio 67 Compay Statemet of Cash Flows 68 Compay Statemet of Chages i Equity 69 Notes to the Fiacial Statemets OTHER ITEMS (NOT FORMING PART OF THE FINANCIAL STATEMENTS) 129 Alterative performace measures 130 Letter from the Chairma i relatio to the Aual Geeral Meetig 132 Notice of Aual Geeral Meetig FBD Holdigs plc Aual Report 1

4 Fiacial Highlights Restated* 2015 Restated* 2014 Restated* 2013 Restated* 2012 Gross premium writte 361, , , , ,255 Net premium eared 308, , , , ,625 Result for the year cotiuig operatios 9,027 (74,628) (4,239) 43,278 46,037 Cet Diluted earigs/(loss) per share 26 (216) (13) Net asset value per share Ordiary divided per share Caledar Prelimiary aoucemet 27 February 2017 Aual Geeral Meetig 5 May Cet 2014 Cet 2013 Cet 2012 Cet *Restated to reflect sale of the Passage East Ferry Compay 2 FBD Holdigs plc Aual Report

5 1. FULL YEAR 362m GWP stable at 362m 99% % 1.9% Combied Operatig Ratio Capital withi target rage of Solvecy II Coverage Ratio (SCR) Ivestmet retur 2. STRONG PROGRESS IN SIMPLIFY FOCUS DE-RISK STRENGTHEN Board streamlied Reorgaised customer focus Sigle brad FBD ew brad lauch Lauch & rollout of IT system Improvig claims settlemet Chaged Fiacial Solutios busiess model Volutary redudacy programme Cost reductio Pricig ad uderwritig actios De-risk pesio scheme Follow o deferred members ETV offer Focus o direct customer relatioships Stregthe balace sheet Capital actios Maagemet ad Board appoitmets Build out maagemet team New reisurace programme FBD Holdigs plc Aual Report 3

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7 CHAIRMAN Michael Berkery I am pleased to report that saw a marked turaroud i the fortues of our compay with FBD agai retured to profitability FBD Holdigs plc Aual Report 5

8 CHAIRMAN S STATEMENT Performace I am pleased to report that saw a marked turaroud i the fortues of our compay with FBD agai retured to profitability. We achieved a group profit before taxatio of 11m from cotiuig operatios, beefittig from a oe-time pesio gai of 7m but importatly also geeratig a uderwritig profit for the year. I additio we disposed of our shareholdig i Passage East Ferries realisig a et 1.9m. This stabilisatio of our busiess ad a welcome uderwritig profit for the year, though modest, reflects the strog risk selectio ad pricig actios started i 2015 ad cotiued through this year. At this early stage i my report I wat to ackowledge the vital cotributio of FBD staff throughout our orgaisatio. Uder the guidace ad leadership of the Group Chief Executive Fioa Muldoo, we have achieved this turaroud withi a relatively short time spa, ad this advaces our retur to ormalised profitability for FBD. We look forward to future profitable growth ad FBD is ow well positioed ad committed to geeratig sustaiable returs for our shareholders. Maagemet Chages With the support of the Board, our Group Chief Executive cocetrated o stregtheig the FBD seior maagemet team throughout appoitig a umber of key idividuals who will take our busiess forward. These iclude a ew Chief Fiacial Officer, Chief Commercial Officer, Chief Claims Officer, Chief Techology & Operatios Officer ad Chief Risk Officer & Compay Secretary. The chages esure the Group is well positioed for the future through a mixture of both iteral ad exteral appoitmets. The Board looks forward to this team successfully executig our agreed strategic objectives. Board Reorgaisatio ad Goverace Chages Our streamlied busiess with its cocetrated focus o the geeral isurace subsidiary, FBD Isurace plc, ad our life, pesios ad ivestmet itermediary, FBD Fiacial Solutios is deliverig the results ad stability expected. The ew streamlied goverace structure of oe Board for FBD Holdigs plc ad FBD Isurace plc is workig very effectively. The ew goverace arragemets implemeted durig the year ecessitated sigificat chages i Board persoel which is ow complete. I additio our Seior Idepedet Director, Mr. Sea Dorga havig served ie years o the Board is aoucig his itetio ot to stad for re-electio at the AGM. I am very grateful to have had Sea s cofidece ad wise cousel over the last umber of years. He has made a sigificat cotributio to FBD ad he takes our deep respect ad best wishes with him for the future. I am delighted to welcome five ew o-executive Board members to FBD Holdigs plc: Mr. Walter Bogearts, Ms. Mary Brea, Mr. Dermot Browe, Ms. Orlagh Hut ad Mr. David O Coor, as well as executive director & Chief Fiacial Officer, Mr. Joh O Grady. The appoitmets demostrate a breadth of talet ad a strog diversity of isurace experiece both home ad abroad that I am certai will serve us well i the years ahead. The Board is well advaced i selectig the ew Chairma ad we aticipate beig i a positio to aouce this at the AGM (subject to regulatory approval). As I leave the Board, I am satisfied we have completed the ecessary persoel chages to esure cotiuity ad stability for the future of FBD. There were some employee chages i that saw may logstadig staff leave the busiess through the volutary redudacy programme. We wish all our FBD colleagues well i the ext chapter of their careers ad the Board is grateful for the hard work ad commitmet of both curret ad past employees durig the trasitio. The restructurig is almost complete ad has delivered a leaer FBD busiess for the future. 6 FBD Holdigs plc Aual Report

9 Brad We have lauched a ew FBD brad ad advertisig campaig that tells our uique story i Irelad ad i farmig. It cetres o our fudametal commitmet to protect our customers. Our ew brad shows FBD Isurace with a strap-lie, Protectio. It s i our ature. Ispired by FBD s rich heritage ad buildig o our uique positio as a idigeous Irish isurer, it is a remider that we have bee supportig local farms, busiesses ad commuities across the coutry for almost fifty years. It is a departure from our previous advertisig campaigs ad I very much hope you like it ad ca see its value. We believe both our shareholders ad customers will egage with the brad as we cotiue to also broade our appeal. We are aimig to foster relatioships with ew customers i selected markets ad thus brig them ito the FBD fold. Claims Eviromet The claims eviromet cotiues to be ucertai ad the Govermet Cost of Isurace Workig Group report sets out recommedatios to drive further chage. May of the recommedatios will help to reduce the cost of claims if implemeted well. The recogitio that we must look outside the Irish market at court award levels ad at other jurisdictios practices is importat ad bechmarkig ourselves iteratioally is the first step. The itetio to foster better co-operatio betwee the idustry ad law eforcers through improved data, fraud iitiatives ad road safety ca oly be positive. We eed to work together to get better results. Divided While has show a modest uderwritig profit, as a Board we will eed to see sustaied profitability before ay retur to payig a divided. As such, the preservatio of adequate capital levels remais a priority ad the Board has decided that there will be o divided paid i respect of the results. As the uderlyig profitability of the busiess cotiues to improve, the Board will revisit this positio. Coclusio I wat to exted my sicere thaks to the Board for their active ivolvemet ad support durig. I reiterate my thaks to all FBD staff ad maagemet for their commitmet i deliverig a solid result i i very difficult tradig circumstaces. I would also like to thak our customers for their uwaverig support. Their cotiued loyalty, trust ad cofidece have eabled the turaroud of our busiess. FBD is ready for the challeges ahead ad I am cofidet the FBD Group will ejoy a successful future uder the leadership of our ew Chairma, the Board ad maagemet. Fially, I wat to record my sicere thaks to you, our shareholders, for stayig the course with us. I believe there are better days ahead for FBD. It has bee a hoour ad a privilege to serve as Chairma of FBD for the past 21 years ad I wish my successor ad the Compay every success i the future. Thak you. Michael Berkery Chairma 24 February 2017 I summary, the iflatioary claims eviromet cotiues to affect our busiess ad our customers ad ay attempts to improve the cost of claims will assist us i retaiig our customers ad drivig sustaiable profitability for our shareholders. FBD Holdigs plc Aual Report 7

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11 CHIEF EXECUTIVE Fioa Muldoo Durig, FBD cotiued to stabilise ad retured to profitability. Actios take by the Group to improve fiacial performace are startig to show the desired effect. FBD Holdigs plc Aual Report 9

12 REVIEW OF OPERATIONS Durig, FBD cotiued to stabilise ad retured to profitability. The claims eviromet stabilised somewhat durig but remais challegig, ad this has led to cotiuig re-pricig of certai risk classes across the market. Actios take by the Group to improve fiacial performace are startig to show the desired effect. The pricig ad uderwritig actio, alog with careful cost maagemet have resulted i a welcome modest uderwritig profit for, albeit aided by beig witer weather durig the year. The icrease i the cost of isurace i Irelad has bee the subject of much public discourse. The Group welcomes the publicatio of the report from the Govermet s Cost of Isurace Workig Group, but otes that isurace premiums will oly reduce whe the cost of claims is reduced. FBD cotiues to believe that sustaied public policy actio is eeded to improve the claims eviromet i Irelad. The Group recorded a profit before tax from cotiuig operatios of 11.4m i (2015: loss of 85.9m). The Group delivered a uderwritig profit of 3.2m, compared to the uderwritig loss of 125.4m i Uderwritig Premium icome The Group cotiues to focus o its core Farm ad SME customers, alog with a sigle brad cosumer strategy. Durig it reduced its exposure to busiess writte through brokers. Overall, gross writte premium has declied by 1.5m to 361.8m (2015: 363.3m), with icreased premium from direct operatios of 14.5m (+4%) offset by a 16.0m (-44%) reductio i busiess writte through brokers. Excludig broker busiess, average rates across the book are up 9%, while policy volume has declied by 5% with a icrease i average cover of 1%. However, certai classes of isurace have see more substatial icreases year o year (eg: Motor +16%). New busiess volumes were lower tha historic levels as the Group cocetrated o improvig the profitability of the busiess. The loss of policy volume slowed durig the year with a volume reductio of 4% i the secod half of, compared to 7% i the first half for busiess writte directly. Claims Net claims icurred amouted to 217.5m (2015: 341.3m). Overall reserves are developig as expected. Adverse prior year developmet o public liability claims has largely bee offset by positive developmet i other classes. This modest adverse developmet has bee largely i 2014 ad 2015 accidet years ad was offset by modest releases from 2013 ad prior. The comparable claims icurred figure for 2015 icludes a charge of 95.8m for stregtheig prior year claims reserves ad icreasig the margi for ucertaity. The Group also icurred 7.8m (2015: 11.6m) relatig to its MIBI levy obligatio, which is calculated based o the Group s expected share of the motor market for ad the estimated levy call by the MIBI, which is lower tha i the prior year. Claims Eviromet The claims eviromet cotiues to be ucertai with claims iflatio still prevalet, albeit with some emergig evidece of moderatio i its growth. There are a umber of factors which have impacted the claims settlemet eviromet. These iclude: 10 FBD Holdigs plc Aual Report

13 The release of the updated Book of Quatum by the Ijuries Board has the potetial to lead to greater cosistecy i persoal ijury awards, but its cosistet adoptio by the judiciary is critical i this regard. There is a cocer that the icreased umber of ijury categories may lead to iflatio i award levels. It is too early yet to establish if this is the case ad the Group will cotiue to moitor court awards carefully. There is evidece of more claimats beig represeted i ijury claims at a earlier stage i their lifecycle with a reductio i the proportio of claims settled directly with the claimat; The Group is cotiuig to see a impact from the icrease i court awards followig the chage i Circuit Court jurisdictio from 38k to 60k; The protracted ad cotetious process for agreeig plaitiffs legal costs, despite the eactmet of the Legal Services Regulatio Act, is leadig to higher legal costs for all; O a more positive ote, the level of geeral damages awarded i the High Court appears to have stabilised i recet moths. The Court of Appeal reduced a umber of origial awards by close to 50% ad it issued geeral guidelies o damages. These actios are begiig to ifluece lower courts ad are removig some of the extreme volatility previously observed. The et impact of the above factors is that the claims eviromet has stabilised somewhat but cotiues to be difficult. FBD has see claim settlemet rate icreases i compared to observed slowdows i 2014 ad However those settlemets are beig made i a iflatioary eviromet. FBD welcomes the report prepared by the Cost of Isurace Workig Group ad the focus that the taskforce has brought to the complexities surroudig the risig cost of claims ad i tur isurace costs for Irish customers. I particular, we are pleased to see the plas to create a Persoal Ijuries Commissio to bechmark awards iteratioally ad the proposals to stregthe the Ijuries Board assessmet process. These are measures we have previously advocated as tagible ways to improve the claims eviromet i Irelad. It is critical that these proposals are implemeted if there is to be help for farmers, cosumers ad small Irish busiesses to maage their isurace costs. Certai key recommedatios would, if successful, lead to a reductio i the cost of claims. These iclude: Greater power give to the Persoal Ijuries Assessmet Board with regard to o-co-operatio ad o-attedace at medicals ad geerally stregtheig its powers; Bechmarkig of awards with those i other relevat jurisdictios. Should awards be brought i lie with other jurisdictios, it would have a sigificat impact o the cost of claims; Improved ability to data share betwee stakeholders to better idetify ad fight claims fraud. The effective implemetatio of automatic umber plate recogitio (ANPR) would combat the icreased levels of uisured drivers o Irish roads whose claims are ultimately paid by law-abidig motorists. Weather, Claims Frequecy ad Large Claims Weather durig was relatively beig ad there were o evets of ote. Motor ijury frequecy cotiued to declie with the uderwritig ad risk selectio actios take by the Group havig a appropriate effect. The et cost of large claims (greater tha 500k) was 2m lower tha the average over the previous three years drive by a lower icidece of such claims. Expeses The Group s expese ratio was 25.9% (2015: 27.4%). Net expeses reduced by 6.0m to 79.7m (2015: 85.7m) largely drive by the reductio i staff costs arisig from the volutary redudacy programme lauched i the secod half of 2015, ad partially offset by techology costs. The Group s ew policy admiistratio system was rolled out at the ed of Jue. Depreciatio of the system has commeced ad icreased costs by 2.2m i the secod half of. FBD Holdigs plc Aual Report 11

14 REVIEW OF OPERATIONS (cotiued) Geeral FBD s combied operatig ratio was 99.0%, leadig to a uderwritig profit of 3.2m (2015: loss of 125.4m). Ivestmet Retur FBD s total ivestmet retur for was 1.9% (2015: 2.0%), with 0.8% (2015: 2.2%) recogised i the cosolidated icome statemet ad 1.1% (2015: -0.2%) recogised i the cosolidated statemet of other comprehesive icome. The better tha expected ivestmet retur reflects market value gais i the corporate bod portfolio as corporate bods spreads arrowed as well as a 1.9m revaluatio of the Group s ivestmet property. Fiacial Services The Group s fiacial services operatios iclude premium istalmet services ad life, pesio ad ivestmet brokig (FBD Fiacial Solutios), less holdig compay costs. This geerated a solid performace through a period of restructurig, deliverig a profit of 2.0m (before restructurig charges) (2015: 3.5m, restated). I 2015 the Group carried out a review of FBD Fiacial Solutios ad cocluded that there was further opportuity for FBD i the life ad pesios area. However, the Group idetified a eed to trasform the operatig model to geerate greater log term value. I, FBD Fiacial Solutios etered ito a preferred provider arragemet with New Irelad, oe of Irelad s largest life compaies. This arragemet eables FBD to provide a customer focussed life ad pesios advisory service to customers, reduce expeses ad icrease the profitability of the busiess. The trasformatio project is complete ad the busiess is expected to geerate a profit from 2017 owards. O 23 May FBD divested its 70% shareholdig i Passage East Ferry Compay for a total cosideratio of 2.7m, realisig a profit o disposal of 1.9m. The Passage East Ferry Compay was a o-core asset, ad the proceeds realised will be used for geeral corporate purposes. Profit/(loss) per share The diluted profit per share from cotiuig operatios was 26 cet per ordiary share, compared to a loss of 216 cet (restated) per ordiary share i Statemet of Fiacial Positio Capital positio Equity Attributable to ordiary shareholders at 31 December amouted to 225.5m (December 2015: 215.9m). The icrease i shareholders fuds is maily attributable to the followig: Profit i the period of 10.7m; The icrease i the defied beefit pesio scheme obligatio of 10.7m after tax drive maily by a 0.7% reductio i the discout rate, recogised i the statemet of other comprehesive icome. The actios take by the Group i 2015 for curret members ad i for deferred members to restructure ad de-risk its defied beefit scheme limited the impact of the decrease i the discout rate; Mark to market gais o the Group s Available for Sale ivestmets of 9.1m after tax recogised i the statemet of other comprehesive icome. Net assets per ordiary share are 651 cet, compared to 623 cet per share at December Followig o from the successful ehaced trasfer value (ETV) programme for active members of the scheme i 2015, the Group lauched a ETV programme for deferred members i. The impact of the ETV programme for deferred members was a reductio i the IAS19 liability of 27.9m ad a 7.2m icome statemet gai. This further reduces the iheret iterest rate exposure of the scheme ad its potetial volatility o the capital positio of the Group. 12 FBD Holdigs plc Aual Report

15 Ivestmet Allocatio This table shows the uderwritig ivestmet assets of the Group. 31 December 31 December 2015 m % m % Deposits ad cash % % Corporate bods % % Govermet bods % % Equities 24 2% 24 2% Uit trusts 24 2% 25 3% Ivestmet property 16 2% 15 2% 1, % % Durig, FBD further icreased its allocatio to corporate ad govermet bods, ad reduced its exposure to term deposits to move further towards its strategic asset allocatio bechmark. Solvecy Solvecy II became effective from 1 Jauary. The Group s ecoomic capital is withi its target rage of % of SCR. Outlook FBD has delivered o its commitmet to simplify its strategy ad stabilise the busiess. Over the past two years the Group has take the ecessary actio to retur the busiess to profitability. Its uderwritig ad ratig actios mea that the Group is ow well positioed to begi to deliver sustaiable shareholder returs through growth i book value. 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. FBD has begu a substatial brad campaig aimed at broadeig its customer base, while givig the Group a differetiated propositio from its competitors. Specifically, the ew campaig aims to grow a high quality urba segmet by icreasig its relevace outside rural Irelad. The Group will also positio itself for future chages i buyig patters by further developig its digital capabilities. Fioa Muldoo Group Chief Executive 24 February 2017 It is the Group s ambitio to seek careful growth i cosumer ad small commercial busiess withi its risk appetite ad i lie with Irish ecoomic growth geerally. As previously oted, the icreasig likelihood of a hard Brexit itroduces busiess ad tradig ucertaity for all idigeous Irish busiesses, icludig FBD ad its core customers i farmig ad other small busiesses. FBD Holdigs plc Aual Report 13

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17 It's i our ature to look ahead

18 CORPORATE INFORMATION Registered Office ad Head Office FBD House Bluebell Dubli 12 D12 Y0HE Irelad Idepedet Auditors for PricewaterhouseCoopers Chartered Accoutats ad Statutory Audit Firm Oe Specer Dock North Wall Quay Dubli 1 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 Lloyds TSB Bak plc Mizuho Bak Limited, Lodo Brach Permaet TSB plc Rabodirect 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 Stockbrokers Goodbody Stockbrokers Ballsbridge Park Ballsbridge Dubli 4 Irelad Shore Capital The Cor Exchage Fewick Street Liverpool L2 7RB Uited Kigdom 16 FBD Holdigs plc Aual Report

19 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 13. 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. The Group has cotiued to ivest i its IT ifrastructure durig, ad successfully rolled out its ew policy admiistratio system. Results The results for the year are show i the Cosolidated Icome Statemet o page 60. 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: Geeral Isurace 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 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 eviromet cotiues to be ucertai with claims iflatio still prevalet, albeit with some emergig evidece of moderatio i its growth. There are a umber of factors which have impacted the claims settlemet eviromet. These iclude: The release of the updated Book of Quatum by the Ijuries Board has the potetial to lead to greater cosistecy i persoal ijury awards, but its cosistet adoptio by the judiciary will be critical i this regard. There is however a cocer that the icreased umber of ijury categories could lead to iflatio i award levels. It is too early yet to establish this ad the Group will cotiue to moitor it; FBD Holdigs plc Aual Report 17

20 REPORT OF THE DIRECTORS (cotiued) There is evidece of more claimats beig represeted i ijury claims at a earlier stage i their lifecycle with a reductio i the proportio of claims settled directly with the claimat; 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 Group is cotiuig to see a impact from the icrease i court awards followig the chage i Circuit Court jurisdictio from 38k to 60k; The protracted ad cotetious process for agreeig plaitiffs legal costs, despite the eactmet of the Legal Services Regulatio Act, is leadig to higher legal costs for all; The level of geeral damages awarded i the High Court appears to have stabilised i recet moths. The Court of Appeal made a umber of decisios that reduced the origial awards by close to 50% ad it issued geeral guidelies o damages. These actios are begiig to ifluece lower courts ad are removig some of the extreme volatility previously observed. The et impact of the above factors is that the claims eviromet has stabilised somewhat but cotiues to be difficult. FBD has see claim settlemet rates icrease i compared to observed slowdows i 2014 ad 2015, albeit those settlemets are beig made i a cotiuig iflatioary eviromet. Capital Maagemet Risk The Group is committed to maagig its capital so as to maximise returs to shareholders. The capital of the Group comprises of issued capital, reserves ad retaied earigs as detailed i otes 23 to 26. 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 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 Compay is exposed or could face i the future ad how they traslate ito capital eeds or alteratively require mitigatio actios. FBD Isurace plc has a ivestmet committee, a pricig committee, a capital maagemet forum, a audit committee, a reservig committee ad a risk committee, 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. 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. 18 FBD Holdigs plc Aual Report

21 Operatioal 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 ad reputatioal criteria. Liquidity Risk The Group is exposed to daily calls o its cash resources, maily from claims. The Board sets limits o the miimum proportio of maturig fuds available to meet such calls. Market Risk The Group has ivested i quoted debt securities, quoted shares, uquoted shares ad ivestmet properties. 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 mitigated by the formulatio of, ad adherece to, strict ivestmet policies, as approved by the Board of Directors, ad the employmet of appropriately qualified ad experieced persoel to maage the Group s ivestmet portfolio. 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 credit ratigs 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. Cocetratio 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 ad with regard to the Group s quoted debt securities ad bak deposits, that these ivestmets are oly with istitutios with a acceptable credit ratig. Macro-ecoomic 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 believe 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 a key executive officer or other key employee, 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. 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. FBD Holdigs plc Aual Report 19

22 REPORT OF THE DIRECTORS (cotiued) The risk that processes ad techiques to protect computer systems ad iformatio assets from uiteded or uauthorised access, chages or destructio are iadequate. All of the foregoig risks are dealt with i further detail i ote 40. 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 of 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 metrics ad escalatio processes. The risk policies icludig the Risk Maagemet Framework ad Risk Appetite are reviewed at least aually by the FBD Isurace Risk Committee ad the Board or more frequet if a system, or area cocered udergoes sigificat chage. FBD has a framework i place to idetify, assess, maage ad moitor risk ad is actively reported ad reviewed at Executive Risk Committee meetigs ad quarterly Board Risk Committee meetigs. Directors The preset Directors of the Compay, together with a biography o each, are set out o pages 26 to 29. 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 were as follows: Michael Berkery (Chairma) Walter Bogaerts Appoited 26 February Mary Brea Appoited 31 August Dermot Browe Appoited 5 July Emer Daly Resiged 29 April Sea Dorga (Seior Idepedet Director) Eddie Dowey Resiged 29 April Liam Herlihy Brid Hora Resiged 29 April Orlagh Hut Appoited 31 August Fioa Muldoo David O Coor Appoited 5 July Ruairí O Fly Resiged 29 April Joh O Grady Appoited 1 July Padraig Walshe Aual Geeral Meetig The otice of the Aual Geeral Meetig of the Compay which will be held at 11 a.m. o 5 May 2017 i the Irish Farm Cetre, Old Naas Road, Bluebell, Dubli 12, is set out o pages 132 to 134. A letter from the Chairma detailig the busiess to come before the Aual Geeral Meetig is icluded at pages 130 to 131. Subsidiaries The Compay s pricipal subsidiaries, as at 31 December, are listed i ote FBD Holdigs plc Aual Report

23 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 ad 1 Jauary (or date of appoitmet if later) were as follows: Number of ordiary shares of 0.60 each Beeficial 31 December 1 Jauary * Michael Berkery 30,000 30,000 Walter Bogaerts 0 0 Mary Brea 0 0 Dermot Browe 0 0 Sea Dorga 0 0 Liam Herlihy 3,000 3,000 Orlagh Hut 0 0 Fioa Muldoo 0 0 David O Coor 1,500 0 Joh O Grady 0 0 Padraig Walshe 1,100 1,100 Compay Secretary Derek Hall (appoited 1 December ) 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 share scheme are detailed i the Report o Directors Remueratio o pages 39 to 47. 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 20 ad 21, the Performace Share Pla i ote 38 ad the Report o Directors Remueratio o pages 39 to 47 are deemed to be icorporated i this part of the Report of the Directors. Substatial Shareholdigs As at 24 February 2017 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 2,561,622 7% Fidelity Maagemet ad Research LLC 1,969,044 6% Black Creek Iteratioal 1,776,831 5% Fidelity Ivestmets Iteratioal Limited 1,671,948 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 21

24 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 The idepedet auditors, PricewaterhouseCoopers, Chartered Accoutats ad Statutory Audit Firm, 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. 22 FBD Holdigs plc Aual Report

25 Corporate Goverace The Corporate Goverace Report o pages 26 to 38 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, ad the Irish Corporate Goverace Aex. 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 17 to 20. 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 are the fiacial positio of the Group, its cash flows, liquidity positio ad borrowig facilities. I additio, ote 40 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 2017 ad forecast for 2018 ad 2019, 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 24 February Siged o behalf of the Board Michael Berkery Chairma Fioa Muldoo Group Chief Executive 24 February 2017 FBD Holdigs plc Aual Report 23

26

27 It's i our ature to protect

28 CORPORATE GOVERNANCE 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 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. 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 Jauary 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 the Board comprised two executive Directors ad ie 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. Four Directors retired ad six were appoited durig. Seve of the o-executive Directors i office at the ed of were cosidered to meet all of the criteria idicatig idepedece set out i the Code. Years from first Date first elected electio to the Cosidered to be by share-holders 2017 AGM idepedet Mary Brea 31 Aug 0.75 Yes Dermot Browe 31 Aug 0.75 Yes Sea Dorga 29 Apr Yes Liam Herlihy 29 Apr 1.0 Yes Orlagh Hut 31 Aug 0.75 Yes David O Coor 31 Aug 0.75 Yes Walter Bogaerts 29 Apr 1.0 Yes 26 FBD Holdigs plc Aual Report

29 Neither Mr. Walshe, who is chairma of the Group s largest shareholder, Farmer Busiess Developmets plc, or the Board Chairma, Mr. Berkery, were 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, regulatory ad other compliace, fiacial accoutig ad executive reward priciples ad practice. The Board also cosiders it desirable to attract idividuals with techology ad cosumer goods ad services experiece. Directors Biographies Biographical details of the Directors i office o the date of this Report are as follows: Michael Berkery, Chairma Michael Berkery (aged 68) was elected Chairma of the Compay i He was Chief Executive Officer of the Irish Farmers Associatio for 25 years util his retiremet i March He served o the Natioal Ecoomic ad Social Coucil for over 20 years ad was a director of the Agricultural Trust (publisher of the Irish Farmers Joural). He is chairma of FBD Trust Compay Limited, ad a Director of Eable Irelad ad a umber of other compaies. I September 2015 Mr. Berkery was appoited as a member of the EU High Level Group o simplificatio of Europea Structural & Ivestmet Fuds. Mr. Berkery joied the Board i October Mr. Berkery s extesive career at leadership level i the Irish Agriculture ad Food Idustry brigs to the Board deep isights ito the Irish farmig ad agri-related commuity, which together comprise a substatial customer base for the Group s uderwritig subsidiary, FBD Isurace plc. He brigs to the Board ad to its Committees his facilitatio ad commuicatio skills, busiess ad ecoomic kowledge, idepedece of mid ad experiece of maagemet ad motivatio of people. Walter Bogaerts, Idepedet No-Executive Director Walter Bogaerts (aged 59) 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 Brea, idepedet o-executive Director Ms. Mary Brea (aged 51) 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 a umber of publicly listed compaies, icludig Ela plc ad Occidetal Petroleum Corp. She is curretly a o-executive Director of BNP Paribas Irelad where she also chairs the Audit Committee, ad is a experieced o-executive Director of a umber of life ad o-life reisurace compaies. Dermot Browe, idepedet o-executive Director Mr. Dermot Browe (aged 54) 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 he rejoied Zurich Group i a Global Strategy role based i Switzerlad. He is curretly a No-Executive Director i oe other fiacial services compay i Irelad. FBD Holdigs plc Aual Report 27

30 CORPORATE GOVERNANCE (cotiued) Sea Dorga, idepedet o-executive Director Sea Dorga (aged 65) has had extesive experiece as chairma ad o-executive director i compaies ad orgaisatios i the private ad public sectors. He has previously served as Chairma of Ulster Bak Group, Tesco Irelad, the Goverig Body of Dubli Istitute of Techology ad other boards. I his earlier career he was Secretary Geeral of the Departmets of Idustry ad Commerce ad of Tourism ad Trade, ad CEO of Chartered Accoutats Irelad ad of IDA Irelad util his retiremet from that positio i He joied the Board of FBD Holdigs ad the Audit Committee i Jauary He was appoited as Chairma of the Remueratio Committee i December 2011, ad as Chairma of the Audit Committee ad Seior Idepedet Director i April He served as Chairma of FBD Isurace plc from July 2014 util February whe the two boards were streamlied. Mr Dorga is a very experieced o-executive director ad brigs to the Board ad its Committees substatial experiece of corporate goverace, compliace, accoutig, HR ad executive reward ad geeral idustry experiece at leadership level. Liam Herlihy, idepedet o-executive Director Mr. Herlihy (aged 65) 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. Orlagh Hut, idepedet o-executive Director Ms. Orlagh Hut (aged 44) 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. Fioa Muldoo, Group Chief Executive Fioa Muldoo (aged 49) 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 Coor, idepedet o-executive Director Mr. David O Coor (aged 59) 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. Joh O Grady, Group Fiace Director Joh O Grady (aged 55) 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 28 FBD Holdigs plc Aual Report

31 Irelad i various roles betwee 1989 ad 2012, icludig Fiace Director, Claims Director ad Operatios Director. Padraig Walshe, o-executive Director Padraig Walshe (aged 59) is Chairma of Farmer Busiess Developmets plc, the Compay s largest shareholder. 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. Geder Male 73% Female 27% Executive/o-executive No-executive 82% Executive 18% Experiece ad skills The percetage of the Board havig the requisite skills ad experiece were as follows: Isurace or fiacial services 82% Actuarial 9% Geeral idustry 100% Agri/farmig 27% Corporate fiace 36% Accoutig ad Auditig 45% Corporate Goverace 91% Compliace 73% Executive reward 64% 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: Teure of Director 0 2 years 73% 3 6 years 9% 7 9 years 9% Over 9 years 9% FBD Holdigs plc Aual Report 29

32 CORPORATE GOVERNANCE (cotiued) Key Roles ad Resposibilities Chairma 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. Seior Idepedet 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; Compay 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 Evaluatio 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. Six Directors joied the Board durig 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. 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. 30 FBD Holdigs plc Aual Report

33 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 with some suggestios made for further improvemet. The Board iteds to have its evaluatio exterally facilitated agai at the ed of The evaluatio process for took place i Jauary The purpose of the process was to idetify areas which the Board ca idetify for 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 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 reaffirmed that the Board is operatig effectively ad is fulfillig its role. Re-electio 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. Attedace at Board ad Board Committee Meetigs durig Board Audit Nomiatio Remueratio M Berkery 14/14-5/5 - W Bogaerts 11/12 2/2-2/2 M Brea 5/5 1/1 - - D Browe 7/7 2/2 - - E Daly 4/4 1/1-2/2 S Dorga 12/14 3/3 5/5 4/4 E Dowey 4/4-1/1 - L Herlihy 13/14-3/3 - B Hora 3/4-1/1 2/2 O Hut 5/ /1 F Muldoo 14/ D O Coor 7/ R O Fly 3/4 1/1 - - J O Grady 7/ P Walshe 11/ If a Director is uable, for ay reaso, to atted a Board or Committee meetig, he or she will receive Board 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 to the Chairma. Board Committees The Board has established three Committees to assist it i the executio of its resposibilities. These are: the Audit 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 FBD Holdigs plc Aual Report 31

34 CORPORATE GOVERNANCE (cotiued) The Compay Secretary acts as secretary to the Committees. Miutes of all of the Committees meetigs are either circulated to all of the Directors i the case of the Audit Committee or are available to ay Director o request i the case of the other two Committees. Each of these Committees has provided a report i the sectios followig. Report of the Audit Committee Membership durig the year CURRENT S Dorga Seior Idepedet o-executive Director, Committee Chairma W Bogaerts Idepedet o-executive Director, appoited 26 February D Browe Idepedet o-executive Director, appoited 5 July M Brea Idepedet o-executive Director, appoited 31 August PREVIOUS E Daly R O Fly Idepedet o-executive Director resiged 29 April Idepedet o-executive Director, stepped dow from Committee o 29 April Legth of time served o Committee 9 years.83 years.50 years.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 resposibilities delegated to the Committee reviewig the Group s fiacial results aoucemets ad Fiacial Statemets; overseeig the relatioship with the exteral auditors icludig reviewig their terms of egagemet, idepedece ad fees; 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. Meetigs The Committee met o three occasios durig. Meetigs are atteded by Committee members ad 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 durig Durig the year the followig were the mai activities udertake: assessmet of fiacial ad other risks facig the Group ad of the operatio of iteral cotrols; 32 FBD Holdigs plc Aual Report

35 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; cosideratio of issues of fiacial reportig, particularly those ivolvig substatial judgmet ad the risk of material misstatemet icludig claims estimates ad provisios; review of drafts of Aual Report ad 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 : Accoutig for the defied beefit pesio scheme. The Group had a defied beefit pesio scheme asset at 8.7m at 31 December, ad durig, udertook a Ehaced Trasfer Value (ETV) programme for deferred members. I order to satisfy itself that the balace ad the accoutig for the ETV exercise were appropriately stated, the Committee reviewed papers prepared by maagemet dealig with the accoutig treatmet of the defied beefit pesio scheme ad the impact of the ETV. The Committee cocluded carryig value of the defied beefit pesio scheme asset ad the accoutig for the ETV icluded i the fiacial statemets are appropriate. Recoverability of deferred tax asset. The Group had a deferred tax asset of 12.2m at 31 December, primarily relatig to losses forward. I order to determie whether the deferred tax asset is recoverable, the Committee reviewed the assumptios made by maagemet i determiig the recoverability of the deferred tax asset which icluded review of the strategic projectios ad uderlyig assumptios ad also cosidered the progress made to date i implemetig its turaroud strategy. The Committee cocluded carryig value of the deferred tax asset icluded i the fiacial statemets is appropriate. PricewaterhouseCoopers were appoited as Auditors of the Compay i respect of the fiacial year eded 31 December. Isurace cotract liabilities ad related reisurace assets. The Group had et claims outstadig of 676.2m ad Net UPR of 166.7m 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 report. The Audit Committee cocluded that the carryig value of claims outstadig ad UPR icluded i the fiacial statemets are appropriate. I lie with the Oe Board goverace arragemets aouced o 29 February, the Committees of FBD Holdigs plc ad FBD Isurace plc have bee streamlied. FBD Holdigs plc Aual Report 33

36 CORPORATE GOVERNANCE (cotiued) Fair, balaced ad uderstadable 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 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. Evaluatio The Committee s activities formed part of the Board s evaluatio process which foud the Committee to be operatig effectively. Sea Dorga O behalf of the Audit Committee 24 February 2017 Report of the Nomiatio Committee Membership durig the year CURRENT M Berkery S Dorga L Herlihy PREVIOUS B Hora E Dowey Committee Chairma, o-executive Director, Board chairma Seior Idepedet o executive Director Idepedet o executive director, appoited 5 July Idepedet o-executive Director, resiged 29 April Idepedet o-executive Director, resiged o 29 April Legth of time served o Committee 12 years 1 year.58 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 resposibilities 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; 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. Durig the year the Committee cosulted with a umber of exteral firms to assist it i the idetificatio of suitable idividuals for appoitmet to executive ad o executive positios ad i the draftig of employmet cotracts. 34 FBD Holdigs plc Aual Report

37 Meetigs The Committee met five times durig to cosider potetial cadidates for appoitmet to 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 successio pla. Evaluatio 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 fully met the requiremets of the Code as a majority of Committee members were Directors cosidered to be idepedet. Michael Berkery O behalf of the Nomiatio Committee 24 February 2017 Report of the Remueratio Committee Membership durig year CURRENT S Dorga Committee Chairma, ad Seior idepedet o-executive Director W Bogaerts Idepedet o-executive Director, appoited 29 April O Hut Idepedet o-executive Director, appoited 31 August PREVIOUS E Daly Idepedet o-executive Director, resiged 29 April B Hora Idepedet o-executive Director, resiged 29 April Legth of time served o Committee 5 years.66 years.33 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 resposibilities 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; FBD Holdigs plc Aual Report 35

38 CORPORATE GOVERNANCE (cotiued) esurig that the Group operates to recogised good goverace stadards i relatio to remueratio; makig awards of shares uder the Group s approved share scheme; ad preparatio of the detailed Report o Directors Remueratio. 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: Meetigs 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 four times durig. Activities of the Committee durig The pricipal activities udertake by the Committee durig iclude: aual review of remueratio arragemets for executive Directors ad other seior executives; review ad approval of the Report o Directors Remueratio for ; makig of a coditioal award of shares uder the FBD Performace Share Pla ad settig the coditios attached; ad Commissioed research from a exteral party aimed at improvig the Group s remueratio philosophy ad further aligig executive ad shareholder iterests. Full details of Directors Remueratio are set i the Report o Directors Remueratio o pages 39 to 47. Evaluatio The Committee s activities formed part of the Board s evaluatio process which foud the Committee to be operatig effectively. Sea Dorga O behalf of the Remueratio Committee 24 February 2017 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 2017 meetig will be held o 5 May Who atteds? All of the Directors; Seior Group executives; Shareholders; ad Compay Advisers; Members of the media are also ivited ad permitted to atted. 36 FBD Holdigs plc Aual Report

39 What busiess takes place at the meetig? 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 of FBD Isurace plc, the Group s pricipal subsidiary, 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 i FBD Isurace plc 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; 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; a busiess cotiuity framework is i place ad is regularly tested; 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; ad FBD Holdigs plc Aual Report 37

40 CORPORATE GOVERNANCE (cotiued) performace of a Ow Risk ad Solvecy Assessmet ORSA likig to risk maagemet, strategy ad capital maagemet. 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. 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. 38 FBD Holdigs plc Aual Report

41 REPORT ON DIRECTORS REMUNERATION Letter from the Remueratio Committee 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 challeges which faced the Group throughout, our success i addressig those challeges as well as the eed to attract, retai ad reward strog isurace talet. Exteral Advice Durig the year the Committee udertook a assigmet with Willis Towers Watso aimed at improvig FBD s total compesatio approach ad to esure best practice i the aligmet of Executive ad Shareholder iterests. The work will coclude durig 2017 ad a ew Log Term Icetive Pla (LTIP) is also required i the same time frame. 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 AGM, this report received 86% support from shareholders The Committee requests shareholders to cosider ad approve the aual remueratio report set out o the pages followig at the 2017 AGM. Sea Dorga Chairma of the Remueratio Committee 24 February 2017 FBD Holdigs plc Aual Report 39

42 REPORT ON DIRECTORS REMUNERATION (cotiued) 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. 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 decisios ad the 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 Base Salary (fixed remueratio) To help recruit ad retai seior experieced Executives Policy ad operatio 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 Chages to policy 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 Although salaries are reviewed aually there is o automatic right of ay Executive to receive a salary icrease. 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. 40 FBD Holdigs plc Aual Report

43 Elemet ad lik to strategy Policy ad operatio 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, which was the measure used to reflect the compay s eed to retur to profitability. For the CEO it is based 60% o Combied Operatig Ratio ad 40% based o achievemet of four specific tur-aroud goals for. The bous potetial, as a percetage of base salary for the Chief Executive for, was 70%. More detail o the actual operatio of the Aual Performace Bous arragemets appear later i this Report. Loger Term Icetives the FBD Performace Share Pla ( LTIP ) (variable remueratio) To alig the fiacial iterests of Executives with those of shareholders The FBD Performace Share Pla ( LTIP ) was approved by shareholders i This is the last year of its operatio. Uder the LTIP, the Remueratio Committee may, at its sole discretio, make coditioal awards of shares to Executives. Coditioal awards of shares uder the LTIP are limited to 10% of the Compay s issued ordiary shares of 0.60 each over a 10 year period. Chages to policy There have bee o chages to either the policy or the operatio of aual performace bouses. The market value of the shares which are the subject of a coditioal award to a idividual may ot, i ay fiacial year, ormally exceed 100% of the participat s base salary as at the date of grat. 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. No chages are permitted to the coditios attachig to a particular award oce they are set by the Remueratio Committee. FBD Holdigs plc Aual Report 41

44 REPORT ON DIRECTORS REMUNERATION (cotiued) Coditioal Awards of Shares i Durig oe Coditioal Award of Shares were made uder the LTIP. This was made i March to executive directors ad seior maagemet. The coditios attached to the award, which reflect the Board s turaroud plas, were as follows: Oe third based o total shareholder retur (TSR), expressed i terms of FBD Holdigs plc share price o 31 December 2018; Oe third based o a weighted average Combied Operatig Ratio over the three years edig 31 December 2018; ad Oe third based o a comprehesive, stretchig busiess scorecard specific to the Board s turaroud pla, the coditios for which will also be measured over the three years edig 31 December These are cosidered commercially sesitive ad are ot disclosed. The targets for the other coditios ad the thresholds for vestig are as follows: Threshold Level Proportio vestig Upper Level Proportio vestig TSR % % COR 100% 50% 95% 100% Performace betwee the threshold ad upper levels will result i the proportio vestig to icrease o a straight lie basis. Outstadig Coditioal Awards ( ) The Committee cosidered the extet to which the performace coditios uderpiig this award were met i the three Fiacial Years 2013 to 2015 (the Performace Period ). The Committee cocluded that 16.7% of the award vested by virtue of the operatio of the relative Market Share Coditio durig that period. The remaider of the 2013 coditioal award has ow lapsed. Uder the award, former Executive Directors, Adrew Lagford ad Cathal O Caoimh received 3,329 ad 2,193 shares respectively. Paymet to former Director Mr. Adrew Lagford resiged from the compay i Mr. Lagford agreed to make his services available to the compay o a cosultacy basis for a mothly fee of 16,300 per moth from the 1st February to the 31st December. Uder the terms of this arragemet Mr. Lagford udertook a strategic review of certai markets, the exact ature of which is cosidered commercially sesitive. He was paid 179,300 for his services, which have ow termiated. Directors ad Compay Secretary s Coditioal LTIP Awards Details of the coditioal share awards made uder the LTIP pla to the CEO ad to the Compay Secretaries 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. 42 FBD Holdigs plc Aual Report

45 At 1 Jauary Grated durig year Vested durig year Lapsed durig year Forfeited durig year At 31 Dec Performace Period Earliest vestig date Market price o award Executive Directors Fioa Muldoo 54, , Mar , , Mar Total 54,545 54, ,506 Compay Secretary Derek Hall 1 3, , Mar , , Mar , , Mar , , Mar Total 8,792 15, ,807-20,855 Compay Secretary Coor Gouldso 2 4, , Mar , , Mar , ,254 4, Mar , ,113 4, Mar Total 16,842 17, ,434 16,773 12,654 1 Mr. Hall was appoited Compay Secretary o 1 December ad Chief Risk Officer i Jauary Mr. Gouldso resiged as Compay Secretary effective 30 November. The total umber of shares subject to coditioal awards outstadig uder the LTIP amouts to 478,014 beig 1.4% of the Compay s ordiary share capital (excludig treasury shares) at 31 December (2015: 386,943 shares ad 1.1% 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 six coditioal awards with a aggregate of 1,118,747 shares or 3.2% 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. 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. 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. FBD Holdigs plc Aual Report 43

46 REPORT ON DIRECTORS REMUNERATION (cotiued) 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. The basic o-executive Director fee was 39,600 per aum up to 30 Jue. From 1 July the basic o- Executive Director fee icreased to 50,000. This fee had ot icreased sice These fees esure FBD attracts o-executive Directors of the highest calibre, expertise ad experiece. The Chairma, Mr. Michael Berkery received fees of 127,175 durig the year (2015: 126,225) iclusive of the basic o-executive Director fee. The Seior Idepedet Director, Mr. Sea Dorga, received fees of 100,200 (2015: 104,000) durig the year iclusive of the basic o-executive Director fee, ad reflectig his additioal resposibilities as Chairma of the Audit Committee ad as Chairma of the Remueratio 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. Service Cotracts The service cotract for the Group Chief Executive provide for the followig periods of otice of termiatio of employmet: Executive From Compay From CEO Fioa Muldoo 12 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. 44 FBD Holdigs plc Aual Report

47 Determiatio of Aual Performace Bous for the year eded 31 December 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 ad review those of, i lie with FBDs remueratio policy. The aual performace bous scheme was desiged such that o pla Compay performace for the year (which was plaed as a modest loss) would deliver 80% of the available target bous. At 99% Combied Operatig Ratio, a 90% pay out of the target is deemed payable ad give the better tha plaed result ad i lie with the previously agreed stretch targets, the Remueratio committee has approved this bous pool for all eligible employees to be split accordig to performace. As previously oted, i the case of Ms. Muldoo for 60% of her aual performace bous (of 70%), is determied by the Combied Operatig Ratio for FBD Isurace plc. The remaiig 40% is determied by the specific busiess objectives for as set by the Remueratio Committee. The committee has determied that she has achieved 100% of her assiged specific busiess objectives. Therefore, i accordace with the bous scheme ad i lie with the strog results achieved, a bous of 315,000 has bee awarded to Ms. Muldoo. I the case of Mr. O Grady 100% of his aual performace bous is based o the Combied Operatig Ratio for FBD Isurace plc. Mr. O Grady has bee awarded a bous of 50,000. This is also reflective of his service pro rata for. FBD Holdigs plc Aual Report 45

48 REPORT ON DIRECTORS REMUNERATION (cotiued) 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 Salary 2 Other Paymets 3 Pesio Beefits 4 Cotributio 5 Total 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 Boegarts Mary Brea ,620 Notes () 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 the 23rd 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 1st July. 7 Emer Daly resiged as Director o 29 April. 8 Eddie Dowey resiged as a Director o 29 April. 9 Liam Herlihy was appoited as a Director o 1 September Brid Hora resiged as a Director o 29 April 11 Ruairi O Fly resiged as Director o 29 April. 12 Dermot Browe was appoited as a Director o 5 July 13 Orlagh Hut was appoited as a Director o 31 August. 14 David O Coor was appoited as a Director o 5 July. 15 Walter Bogaerts was appoited as a Director o 26 February. 16 Mary Brea was appoited as a Director o 31 August. 46 FBD Holdigs plc Aual Report

49 The followig table sets out the detail for the previous fiacial year (2015): Fees 1 Salary 2 Other Paymets 3 Beefits 4 Pesio Cotributio Total Executive Directors: Fioa Muldoo Adrew Lagford Cathal O Caoimh No-Executive Directors: Michael Berkery (Chairma) Emer Daly Sea Dorga Eddie Dowey Liam Herlihy Brid Hora Dermot Mulvihill Ruairi O Fly Padraig Walshe ,772 Notes (2015 Oly) 1 Fees are payable to the o-executive Directors oly. 2 Salaries are paid to executive Directors oly. 3 Mr. Lagford, who resiged from executive office o 31 July 2015 received pay i lieu of otice uder his cotract of employmet i the amout of 269,000, represetig six moth s salary ad beefits. A bous of 37,000 was awarded to Mr. O Caoimh o the successful completio of a strategic project for which he had resposibility prior to his retiremet o 30 September 2015, i accordace with Mr. O Caoimh s short term icetive arragemets approved by the Committee earlier i Beefits relate exclusively to a motor allowace ad cotributio towards health isurace costs. 5 Pesio cotributios relate to cotributios either to a defied cotributio pesio scheme or, i the case of Mr. Lagford, paymets to the Director cocered, o a defied cotributio basis, i lieu of cotiued accrual i the Group s defied beefit pesio pla. 6 Ms. Fioa Muldoo was appoited as a Director o 19 Jauary 2015, as Iterim Group Chief Executive o 31 July 2015 ad as Group Chief Executive o 7 October Mr. Liam Herlihy was appoited as a Director o 1 September Mr. Dermot Mulvihill resiged as a Director o 14 Jauary Mr. Ruairi O Fly was appoited as a Director o 14 May FBD Holdigs plc Aual Report 47

50 DIRECTORS RESPONSIBILITIES STATEMENT 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. 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. The Directors are also required by the Trasparecy (Directive 2004/109/EC) Regulatios 2007 (as ameded by the Trasparecy (Directive 2004/109/EC) (Amedmet) Regulatios, 2012) 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 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, 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 Michael Berkery Chairma Fioa Muldoo Group Chief Executive 24 February FBD Holdigs plc Aual Report

51 INDEPENDENT AUDITORS REPORT To the members of FBD Holdigs plc Report o the fiacial statemets Our opiio 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 ad of the group s profit ad the group s ad the compay s cash flows for the year the eded; the group fiacial statemets have bee properly prepared i accordace with Iteratioal Fiacial Reportig Stadards ( IFRSs ) as adopted by the Europea Uio; the compay fiacial statemets have bee properly prepared i accordace with IFRSs as adopted by the Europea Uio as applied i accordace with the provisios of the Compaies Act 2014; ad the fiacial statemets 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. What we have audited The fiacial statemets, icluded withi the Aual Report, comprise: the Cosolidated ad Compay Statemets of Fiacial Positio as at 31 December ; 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 summary of sigificat accoutig policies ad other explaatory iformatio. The fiacial reportig framework that has bee applied i the preparatio of the fiacial statemets is Irish law ad IFRSs as adopted by the Europea Uio ad, as regards the compay fiacial statemets, as applied i accordace with the provisios of the Compaies Act FBD Holdigs plc Aual Report 49

52 INDEPENDENT AUDITORS REPORT (cotiued) Our audit approach Overview Materiality Overall group materiality: EUR4.0 millio which represets 1% of reveue. Audit scope We performed a full scope audit of the complete fiacial iformatio of FBD Isurace plc ad FBD Life & Pesios Limited, the group s pricipal operatig etities, ad the holdig compay. Take together, the etities where we performed our audit work accouted for 100% of group reveues ad 100% of group profit before tax. Areas of focus Valuatio of claims outstadig. Valuatio of defied beefit pesio obligatio. Recoverability of deferred tax assets. The scope of our audit ad our areas of focus We coducted our audit i accordace with Iteratioal Stadards o Auditig (UK ad Irelad) ( ISAs (UK & Irelad) ). We desiged our audit by determiig materiality ad assessig 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. The risks of material misstatemet that had the greatest effect o our audit, icludig the allocatio of our resources ad effort, are idetified as areas of focus i the table below. We have also set out how we tailored our audit to address these specific areas i order to provide a opiio o the fiacial statemets as a whole. This is ot a complete list of all risks idetified by our audit. 50 FBD Holdigs plc Aual Report

53 Area of focus Valuatio of claims outstadig Refer to page 33 (Corporate Goverace Statemet), page 73 (group accoutig policies), page 80 (critical accoutig estimates ad judgemets), ad pages 106 to 108 (otes 28(a) to 28(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 area of focus 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 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. FBD Holdigs plc Aual Report 51

54 INDEPENDENT AUDITORS REPORT (cotiued) Area of focus Valuatio of defied beefit pesio obligatio Refer to pages 33 (Corporate Goverace Statemet), pages 76 ad 77 (group accoutig policies), page 80 (critical accoutig estimates ad judgemets), ad pages 110 to 114 (ote 31 to the group fiacial statemets). The group operates a defied beefit pesio scheme which is bee closed to future accrual ad closed to ew members. The scheme has a IAS 19 surplus of EUR8.7 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. How our audit addressed the area of focus 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, reviewed reports prepared by them for maagemet ad discussed ad challeged their recommeded assumptios. We also recociled the uderlyig membership ad payroll data used i the model to the Group s records. The valuatio is also depedet o the completeess ad accuracy of the data used i the model, i particular membership data ad payroll details. Recoverability of deferred tax assets Refer to pages 33 (Corporate Goverace Statemet), pages 76 (group accoutig policies), page 80 (critical accoutig estimates ad judgemets), ad pages 97 ad 114 (otes 17 ad 32 to the group fiacial statemets). Deferred tax icludes a amout of EUR13.8 millio arisig from tax losses carried forward. I order for the group to recogise a asset for uutilised losses, it must have covicig evidece of future taxable profits agaist which the losses ca be utilised. This relies o maagemet s judgemets surroudig the probability, timig ad sufficiecy of future taxable profits, which i tur is based o assumptios cocerig future ecoomic coditios ad busiess performace. We focused o this area because the group s deferred tax assets primarily arise from historical operatig losses ad a key judgemet is whether there is covicig evidece of the availability of sufficiet future taxable profits agaist which those losses ca be utilised. I determiig the recoverability of tax losses carried forward, maagemet have used the profit forecasts set out i the most recet strategic pla approved by the directors. We cosidered whether the combiatio of the Group s curret profitability ad the profit forecasts provide covicig evidece that sufficiet taxable profits will be available to utilise the tax losses carried forward, particularly i the light of uderwritig losses i 2015 ad the cotiued challeges faced by the isurace sector. We evaluated the relevat macroecoomic assumptios ad growth assumptios uderlyig the profit forecasts i the light of market developmets i both premium rate icreases ad claims treds. 52 FBD Holdigs plc Aual Report

55 How we tailored the audit scope We tailored the scope of our audit to esure that we performed sufficiet 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), ad the holdig compay. 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 ad 100% of the group s profit. 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 o the fiacial statemets as a whole. Based o our professioal judgemet, we determied materiality for the fiacial statemets as a whole as follows: Overall group materiality How we determied it Ratioale for bechmark applied EUR4.0 millio. 1% of reveue. We have applied this bechmark as the group s profit has fluctuated sigificatly i recet years ad reveue is cosidered a appropriate bechmark give the circumstaces ad size of the group We agreed with the Audit Committee that we would report to them misstatemets idetified durig our audit above EUR0.2 millio as well as misstatemets below that amout that, i our view, warrated reportig for qualitative reasos. FBD Holdigs plc Aual Report 53

56 INDEPENDENT AUDITORS REPORT (cotiued) Goig cocer Uder the Listig Rules we are required to review the directors statemet, set out o page 23, i relatio to goig cocer. We have othig to report havig performed our review. Uder ISAs (UK & Irelad) we are required to report to you if we have aythig material to add or to draw attetio to i relatio to the directors statemet about whether they cosidered it appropriate to adopt the goig cocer basis i preparig the fiacial statemets. We have othig material to add or to draw attetio to. As oted i the directors statemet, the directors have cocluded that it is appropriate to adopt the goig cocer basis i preparig the fiacial statemets. The goig cocer basis presumes that the group ad compay has adequate resources to remai i operatio, ad that the directors ited them to do so, for at least oe year from the date the fiacial statemets were siged. As part of our audit we have cocluded that the directors use of the goig cocer basis is appropriate. However, because ot all future evets or coditios ca be predicted, these statemets are ot a guaratee as to the group s ad compay s ability to cotiue as a goig cocer. Other required reportig Cosistecy of other iformatio Compaies Act 2014 opiio I our opiio the iformatio give i the Report of the Directors is cosistet with the fiacial statemets. ISAs (UK & Irelad) reportig Uder ISAs (UK & Irelad) we are required to report to you if, i our opiio: iformatio i the Aual Report is: We have o exceptios to report. materially icosistet with the iformatio i the audited fiacial statemets; or apparetly materially icorrect based o, or materially icosistet with, our kowledge of the group ad compay acquired i the course of performig our audit; or otherwise misleadig. the statemet give by the directors o page 34, i accordace with provisio C.1.1 of the UK Corporate Goverace Code (the Code ), that they cosider the Aual Report take as a whole to be fair, balaced ad uderstadable ad provides the iformatio ecessary for 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 acquired i the course of performig our audit. the sectio of the Aual Report o pages 32 to 34, as required by provisio C.3.8 of the Code, describig the work of the Audit Committee does ot appropriately address matters commuicated by us to the Audit Committee. We have o exceptios to report. We have o exceptios to report. 54 FBD Holdigs plc Aual Report

57 The directors assessmet of the prospects of the group ad of the pricipal risks that would threate the solvecy or liquidity of the group Uder ISAs (UK & Irelad) we are required to report to you if we have aythig material to add or to draw attetio to i relatio to: the directors cofirmatio o page 23 of the Aual Report, i accordace with provisio C.2.1 of the Code, 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. the directors explaatio o page 23 of the Aual Report, i accordace with provisio C.2.2 of the Code, 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 material to add or to draw attetio to. We have othig material to add or to draw attetio to. We have othig material to add or to draw attetio to. Uder the Listig Rules we are required to review 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 Code; ad cosiderig whether the statemets are cosistet with the kowledge acquired by us i the course of performig our audit. We have othig to report havig performed our review. Directors remueratio ad trasactios Uder the Compaies Act 2014, we are required to report to you if, i our opiio, the disclosure of directors remueratio ad trasactios specified by sectios 305 to 312 of that Act have ot bee made, ad uder the Listig Rules we are required to review the six specified elemets of disclosures i the report to shareholders by the Board o directors remueratio. We have o exceptios to report arisig from these resposibilities. FBD Holdigs plc Aual Report 55

58 INDEPENDENT AUDITORS REPORT (cotiued) Corporate goverace statemet Other matters o which we are required to report by the Compaies Act 2014 I our opiio, based o the work udertake i the course of our 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 Based o our kowledge ad uderstadig of the compay ad its eviromet obtaied i the course of our 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. I our opiio, based o the work udertake durig the course of our audit of the fiacial statemets, the iformatio required by sectio 1373(2)(a),(b),(e) ad (f) is cotaied i the Corporate Goverace Statemet. Uder the Listig Rules we are required to review the part of the Corporate Goverace Statemet relatig to the compay s compliace with te provisios of the UK Corporate Goverace Code ad the two provisios of the Irish Corporate Goverace Aex specified for our review. We have othig to report havig performed our review. 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. Resposibilities for the fiacial statemets ad the audit Our resposibilities ad those of the directors As explaied more fully i the Directors Resposibilities Statemet set out o page 48, the directors are resposible for the preparatio of the fiacial statemets ad for beig satisfied that they give a true ad fair view. Our resposibility is to audit ad express a opiio o the fiacial statemets i accordace with Irish law ad ISAs (UK & Irelad). Those stadards require us to comply with the Auditig Practices Board s Ethical Stadards for Auditors. 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. 56 FBD Holdigs plc Aual Report

59 What a audit of fiacial statemets ivolves A audit ivolves obtaiig evidece about the amouts ad disclosures i the fiacial statemets sufficiet to give reasoable assurace that the fiacial statemets are free from material misstatemet, whether caused by fraud or error. This icludes a assessmet of: whether the accoutig policies are appropriate to the group s ad the compay s circumstaces ad have bee cosistetly applied ad adequately disclosed; the reasoableess of sigificat accoutig estimates made by the directors; ad the overall presetatio of the fiacial statemets. We primarily focus our work i these areas by assessig the directors judgemets agaist available evidece, formig our ow judgemets, ad evaluatig the disclosures i the fiacial statemets. We test ad examie iformatio, usig samplig ad other auditig techiques, to the extet we cosider ecessary to provide a reasoable basis for us to draw coclusios. We obtai audit evidece through testig the effectiveess of cotrols, substative procedures or a combiatio of both. I additio, we read all the fiacial ad o-fiacial iformatio i the Aual Report to idetify material icosistecies with the audited fiacial statemets ad to idetify ay iformatio that is apparetly materially icorrect based o, or materially icosistet with, the kowledge acquired by us i the course of performig the audit. If we become aware of ay apparet material misstatemets or icosistecies we cosider the implicatios for our report. Paraic Joyce for ad o behalf of PricewaterhouseCoopers Chartered Accoutats ad Statutory Audit Firm Dubli 24 February 2017 (a) 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. (b) Legislatio i the Republic of Irelad goverig the preparatio ad dissemiatio of fiacial statemets may differ from legislatio i other jurisdictios. FBD Holdigs plc Aual Report 57

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