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

Transcription

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

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3 CONTENTS Chairma s Statemet 2 Review of Operatios 3-5 Board of Directors ad Other Iformatio 6 Report of The Directors 7-11 Corporate Goverace Report Idepedet Auditor s Report 14 FINANCIAL STATEMENTS Profit ad Loss Accout Techical Accout 15 Profit ad Loss Accout No-Techical Accout 16 Statemet of Comprehesive Icome 17 Balace Sheet Statemet of Chages I Equity 20 Notes to the Fiacial Statemets Notice of Aual Geeral Meetig 59 FBD Isurace plc Aual Report 1

4 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 profit before taxatio of 13.8m from beefittig from a oe-time pesio gai of 4.3m but importatly also geeratig a uderwritig profit for the year. 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 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 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 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 a Chief Risk Officer & Compay Secretary. The chages esure the Compay 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. 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. Board Reorgaisatio ad Goverace Chages The ew goverace arragemets implemeted durig the year ecessitated sigificat chages i Board persoel. I wat to record my ow ad the Board s deep appreciatio to former Board members, Mr. David Marti, Mr. Vicet Sherida ad Mr. Paul D Alto for their valued iput to the Compay. I wish them cotiued success i the future. I additio Mr. Sea Dorga is aoucig his itetio ot to stad for re-electio at the AGM. I am delighted to welcome five ew o-executive Board members to FBD Isurace plc: Mr. Liam Herlihy, 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 hope to be 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. Brad We have lauched a ew FBD brad ad ad 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. 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. 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 FBD Isurace will ejoy a successful future uder the leadership of our ew Chairma, the Board ad maagemet. Michael Berkery Chairma 24 February FBD Isurace plc Aual Report

5 REVIEW OF OPERATIONS Overview Durig, FBD cotiued to stabilise ad retured to profitability durig the year. The claims eviromet stabilised somewhat durig but cotiues to be challegig, ad this has led to cotiuig re-pricig of certai risk classes across the market. Actios take by the Compay 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 Compay 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 Compay recorded a profit before tax from cotiuig operatios of 13.8m i (: loss of 84.4m). The Compay delivered a uderwritig profit of 3.2m, compared to the uderwritig loss of 125.4m i. Premium icome The Compay 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 (: 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 Compay 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 (: 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 accidet years ad was offset by modest releases from 2013 ad prior. The comparable claims icurred figure for icludes a charge of 95.8m for stregtheig prior year claims reserves ad icreasig the margi for ucertaity. The Group also icurred 7.8m (: 11.6m) relatig to its MIBI levy obligatio, which is calculated based o the Compay 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: 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 Compay 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 Compay are 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 made a umber of decisios that 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. FBD Isurace plc Aual Report 3

6 REVIEW OF OPERATIONS (cotiued) 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 Compay havig the 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 Compay s expese ratio was 26% (: 27.3%). Net expeses reduced by 5.3m to 80.2m (: 85.5m) largely drive by the reductio i staff costs arisig from the volutary redudacy programme lauched i the secod half of, ad partially offset by techology costs. The Compay s ew policy admiistratio system was rolled out at the ed of Jue. Depreciatio of the system commeced i the secod half of, ad icreased costs by 2.2m i the secod half of. Geeral The Compay s combied operatig ratio was 99.0%, leadig to a uderwritig profit of 3.2m (: loss of 125.4m). Ivestmet Retur The Compay s total ivestmet retur for was 1.9% (: 2.0%), with 0.8% (: 2.2%) recogised i the icome statemet ad 1.1% (: -0.2%) recogised i the 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 Compay s ivestmet property. Statemet of Fiacial Positio Capital positio Total shareholders fuds at 31 December amouted to 226.5m (December : 210.9m). The icrease i shareholders fuds is maily attributable to the followig: Profit after tax i the period of 12.1m; The icrease i the defied beefit pesio scheme obligatio of 6.1m 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 Compay i 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 Compay s Available for Sale ivestmets of 9.1m after tax recogised i the statemet of other comprehesive icome. Followig o from the successful ehaced trasfer value (ETV) programme for active members of the scheme i, FBD lauched a ETV programme for deferred members i. The impact of the ETV programme for deferred members for the Group was a reductio i the IAS19 liability of 27.9m of which 74.87% was icluded i the Compay ad a 4.3m icome statemet gai. This further reduces the iheret iterest rate exposure of the scheme ad its potetial volatility o the capital positio of the Compay. Ivestmet Allocatio The table below shows how the ivestmet assets of the Compay were ivested at the begiig ad ed of the fiacial year. 31 December 31 December Ivestmet assets m % m % Deposits ad cash % % Corporate bods % % Govermet bods % % Equities 23 2% 25 2% UCITs 24 2% 25 2% Ow lad & buildigs 16 2% 16 2% Ivestmet property 16 2% 15 2% Ivestmet assets 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 Compay s ecoomic capital is withi its target rage of % of SCR. 4 FBD Isurace plc Aual Report

7 Outlook FBD has delivered o its commitmet to simplify its strategy ad stabilise the busiess. Over the past two years the Compay has take the ecessary actio to retur the busiess to profitability. Our uderwritig ad ratig actios mea that the Compay is ow well positioed to begi to deliver sustaiable shareholder returs through growth i book value. It is the Compay 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 our 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 Compay 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 Compay a differetiated propositio from its competitors. Specifically, the ew campaig aims to target a high quality urba segmet by icreasig its relevace outside rural Irelad. The Compay will also positio itself for future chages i buyig patters by further developig its digital capabilities. Fioa Muldoo Chief Executive 24 February 2017 FBD Isurace plc Aual Report 5

8 BOARD OF DIRECTORS AND OTHER INFORMATION Board of Directors Michael Berkery (Chairma) Sea Dorga* Fioa Muldoo (Chief Executive) Walter Bogaerts* Mary Brea* (appoited 31/08/) Dermot Browe* (appoited 05/07/) Paul D Alto (resiged 31/08/) Liam Herlihy* (appoited 25/04/) Orlagh Hut* (appoited 31/08/) David Marti* (resiged 13/07/) David O Coor* (appoited 05/07/) Joh O Grady (appoited 01/07/) Vicet Sherida* (resiged 13/07/) Padraig Walshe (appoited 25/04/) *Idepedet o-executive Directors Secretary ad Registered Office Coor Gouldso (resiged 1 December ) Derek Hall (appoited 1 December ) FBD House, Bluebell, Dubli 12. Idepedet Auditors PricewaterhouseCoopers Oe Specer Dock North Wall Quay Dubli 1 6 FBD Isurace plc Aual Report

9 REPORT OF THE DIRECTORS The Directors preset their aual report ad audited fiacial statemets for the fiacial year eded 31 December. Pricipal Activities The pricipal activity of the Compay is the uderwritig of motor, liability ad property isurace withi the Republic of Irelad. There has bee o sigificat chage i this activity durig the year. Busiess Review Durig the Compay geerated premium icome of 361,799,000 (: 363,263,000). The operatig profit for the year was 13,830,000 (: loss of 84,439,000). A comprehesive review of the fiacial ad o-fiacial key performace idicators of the Compay is icluded withi the Chairma s Statemet startig o page 2 ad the Review of Operatios startig o page 3. The key fiacial performace idicators iclude gross writte premium (: 361.8m, : 363.3m), ad combied operatig ratio (: 99%, : 139.9%). Future Developmets The Directors expect that the preset level of activity will be sustaied for the foreseeable future. Risks & Ucertaities Risk Maagemet ad Risk Appetite The Directors have established a risk maagemet process, the objective of which is to provide a systematic, effective ad efficiet way for maagig risk i the orgaisatio ad to esure it is cosistet with the overall busiess strategy ad the risk appetite of the Compay. Risk capacity is the amout ad type of risk that the Compay could bear over a defied period of time without breachig capital requiremets. Ultimately, the Compay s risk capacity is defied by its surplus capital. The Compay has the capacity to take a series of risks that combied (ad et of diversificatio impact) would reduce or elimiate its surplus assets. It does ot have the capacity to udertake a series of risks that combied (ad et of diversificatio impact) could exceed its surplus capital. Risk appetite is a measure of the amout ad type of risks the Compay is willig to accept or ot accept over a defied period of time i pursuit of its objectives. The Compay s risk appetite seeks to ecourage measured ad appropriate risk takig to esure that risks are aliged to busiess strategy ad objectives. The risk appetite of the Compay is drive by a overarchig desire to protect the solvecy of the Compay at all times. Through the proactive maagemet of risk, the Compay esures that it does ot curretly have or will ot take o a idividual risk or combiatio of risks that could threate the solvecy of the Compay. This esures that the Compay has ad will have i the future sufficiet capital to pay its policyholders ad all other creditors i full as these liabilities fall due. The Directors cosider that the followig are the pricipal risk factors that could materially ad adversely affect the Compay s future profits or fiacial positio. 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 Compay 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 Compay 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. Capital Maagemet Risk The Compay is committed to maagig its capital so as to maximise retur to shareholders. The risk is that iappropriate maagemet of the Compay s capital could result i losses, erosio of capital or iadequate solvecy. The Board reviews the capital structure frequetly to determie the appropriate level of capital required to pursue the Compay s growth plas. The Solvecy II directive itroduces a requiremet for udertakigs to coduct a Ow Risk ad Solvecy Assessmet ( ORSA ). The ORSA is a very importat process as it provides the Board with a comprehesive view ad uderstadig of the risks to which FBD Isurace plc is exposed or could face i the future ad how they traslate ito capital eeds or alteratively require mitigatio actios. To aid i the assessmet of the overall solvecy eeds ad busiess ad capital plaig process, a umber of stress ad scearios were tested to assess their potetial impact o capital requiremets ad solvecy cover. The stress ad scearios were chose to esure they reflect the material risks which FBD Isurace are exposed to ad are sufficietly wide ragig ad challegig, to provide a adequate basis for the assessmet of overall solvecy eeds. Each ORSA is udertake by the Risk Fuctio uder the supervisio ad cotrol of both the Board Risk Committee ad FBD Isurace Board. The output from the ORSA will assist the Board i makig strategic decisios icludig i relatio to: Capital Maagemet; Adequacy of risk appetite; Busiess plaig; ad Product developmet. FBD Isurace plc Aual Report 7

10 REPORT OF THE DIRECTORS (cotiued) 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. Market Risk The Compay has ivested i quoted debt securities, quoted ad 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 Compay s ivestmet portfolio. Liquidity Risk The Compay 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. The Compay employs actuaries to review its liabilities to esure that the carryig amout of the liability is adequate. This is subject to review by exteral actuaries. Where the liabilities, et of ay related deferred acquisitio costs, are deemed to be iadequate, the deficiecy is recogised immediately i the profit & loss accout. Iterest Rate Risk At ay time, the Compay has fixed iterest quoted debt securities ad fiacial istrumets that are exposed to fair value iterest rate risk whereby fluctuatios i iterest rates could have a adverse effect o the market value of the fiacial ivestmets. 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 Compay s curret reisurers have credit ratigs of A- or better. The Compay has assessed these credit ratigs as beig satisfactory i dimiishig the Compay s exposure to the credit risk of its reisurace receivables. Fiacial assets are graded accordig to credit ratigs issued by credit ratig agecies. Ivestmet grade fiacial assets are classified withi the rage of AAA to BBB ratigs. Fiacial assets that fall outside this rage are classified as speculative grade. All of the Compay s bak deposits are with either A- rated or higher fiacial istitutios or baks. 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 oe or more key executive officer or other employees, the adoptio of iappropriate HR policies or regulatory chages affectig the work force or the limited availability of qualified persoel may disrupt operatios or icrease the cost structure. The risk that a iterruptio or failure of iformatio systems may result i a sigificat loss of busiess, assets, or competitive positio. The impact of climate chage may result i icreased volatile weather patters ad more frequet severe weather evets. The risk that processes ad techiques to protect computer systems ad iformatio assets from uiteded or uauthorised access, chages or destructio are iadequate. The above risks are further detailed i ote 15. The Compay has cotrols embedded withi its systems ad policies icludig its ivestmet policy, uderwritig policy, capital maagemet policy, liquidity policy ad its reservig policy, to limit each of these potetial exposures. Maagemet ad the Board regularly review, reassess ad proactively limit the associated risks. RESULTS Profit/(Loss) o ordiary activities before tax 13,830 (84,439) Tax (charge)/credit for loss o ordiary activities (1,747) 11,234 Profit/(Loss) o ordiary activities after tax 12,083 (73,205) Other comprehesive icome/ (expese) after taxatio 2,999 3,220 Trasfer to reveue reserves 15,082 (69,985) Holdig Compay At 31 December ad throughout the year, FBD Holdigs plc owed 100% of FBD Isurace plc. Directorships I order to have a more efficiet corporate structure the decisio was made durig to have commo directorships for both FBD Isurace plc ad its paret FBD Holdigs plc. O 25 April, Mr. Liam Herlihy ad Mr. Padraig Walshe were appoited to the Board. O the 5 July Mr. David O Coor ad Mr. Dermot Browe were appoited to the Board. Mr. Joh O Grady was appoited as Chief Fiacial Officer ad Director o 1 July. Ms. Mary Brea ad Ms. Orlagh Hut were appoited to the Board o 31 August. Mr. Vicet Sherida ad Mr. David Marti resiged from the Board o 13 July ad Mr. Paul D Alto resiged from the Board o 31 August. I accordace with the Compay s articles of associatio, Mary Brea, Walter Bogaerts, Orlagh Hut, Liam Herlihy, David O Coor, Padraig Walshe ad Dermot Browe will retire at the Aual Geeral Meetig, ad beig eligible, offer themselves for re-electio. Mr. Sea Dorga will retire at the Aual Geeral meetig ad will ot stad for re-electio. 8 FBD Isurace plc Aual Report

11 Biographies Of Directors Michael Berkery, Chairma ad No-Executive Director Michael Berkery was elected Chairma of the Compay i 1996, a role he held util 3 March He was re-appoited Chairma o 25th February. 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 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 of the Compay. 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. Sea Dorga, Idepedet No-Executive Director Sea Dorga 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. Fioa Muldoo, Chief Executive Officer Fioa Muldoo joied FBD Holdigs plc i Jauary as Group Fiace Director Desigate ad was appoited as a executive Director ad member of its Board ad the Board of FBD Isurace plc. I October, 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 Ms. Muldoo, was appoited as a o-executive Director of the Goveror ad Compay of the Bak of Irelad. Walter Bogaerts, Idepedet No-Executive Director Walter Bogaerts 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 latest 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. Mr. Bogaerts joied the Board i Jauary Mary Brea, Idepedet No-Executive Director Ms. Mary Brea 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 No-Executive Director Mr. Dermot Browe is a Chartered Director ad 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 Eagle Star Life Assurace Compay of Irelad (ow 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 o-executive director i oe other fiacial services compay i Irelad. Liam Herlihy, Idepedet No-Executive Director Mr. Liam Herlihy was, util May of, 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 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 No-Executive Director Ms. Orlagh Hut 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. FBD Isurace plc Aual Report 9

12 REPORT OF THE DIRECTORS (cotiued) David O Coor, Idepedet No-Executive Director Mr. David O Coor is a Fellow of both the Istitute of Actuaries ad 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. Joh O Grady, Chief Fiacial Officer Joh O Grady is a Chartered Accoutat ad a experieced isurace executive. He joied FBD from Liberty Isurace Limited where he held the role of Fiace Director. Prior to his role i Liberty, Mr. O Grady worked for Aviva ad its predecessor compaies i Irelad i various roles betwee 1989 ad 2012, icludig Fiace Director, Claims Director ad Operatios Director. Padraig Walshe, No-Executive Director Padraig Walshe 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 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. Directors Ad Secretary s Iterests The directors ad secretary had o iterest i the share capital of the compay. They had the followig beeficial iterests i the 60c ordiary share capital of FBD Holdigs plc, the holdig compay: Directors: 31/12/16 Number of 60c Ordiary Shares 1/1/16 (or at date of appoitmet if later) Michael Berkery 30,000 30,000 Liam Herlihy 3,000 3,000 David O Coor 1,500 - Padraig Walshe 1,100 1,100 Derek Hall 1,755 1,755 Coditioal awards of shares uder the FBD Performace Share Pla (LTIP) 31/12/16 1/1/16 (or at date of appoitmet if later) Fioa Muldoo 109,506 54,545 Derek Hall 20,855 20, FBD Isurace plc Aual Report

13 Directors Resposibilities Statemet The directors are resposible for preparig the directors report ad the fiacial statemets i accordace with the Compaies Act 2014 ad the applicable regulatios. Irish law requires the directors to prepare fiacial statemets for each fiacial year givig a true ad fair view of the compay s assets, liabilities ad fiacial positio at the ed of the fiacial year ad the profit or loss of the compay for the fiacial year. Uder that law the directors have prepared the fiacial statemets i accordace with Geerally Accepted Accoutig Practice i Irelad (accoutig stadards issued by the Fiacial Reportig Coucil of the UK, icludig Fiacial Reportig Stadard 102, The Fiacial Reportig Stadard applicable i the UK ad Republic of Irelad ( FRS 102 ), Fiacial Reportig Stadard 103, Isurace Cotracts ( FRS 103 ), ad promulgated by the Istitute of Chartered Accoutats i Irelad ad Irish law). Uder Irish law, the directors shall ot approve the fiacial statemets uless they are satisfied that they give a true ad fair view of the compay s assets, liabilities ad fiacial positio as at the ed of the fiacial year ad the profit or loss of the compay for the fiacial year. I preparig those fiacial statemets, the directors are required to: select suitable accoutig policies for the Compay 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 keeps or causes to be kept adequate accoutig records which correctly explai ad record the trasactios of the compay, eable at ay time the assets, liabilities, fiacial positio ad profit or loss of the compay to be determied with reasoable accuracy, eable them to esure that the fiacial statemets ad directors report comply with the Compaies Act 2014 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. 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. Idepedet Auditors The auditors, PricewaterhouseCoopers, Chartered Accoutats ad Statutory Audit Firm, have sigified their willigess to cotiue i office i accordace with Sectio 383(2) of the Compaies Act So far as the directors are aware, there is o relevat audit iformatio of which the compay s statutory auditors are uaware. The directors have take all steps that ought to have bee take i order to make themselves aware of ay relevat audit iformatio ad to establish that the compay s 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 books of accout are located at FBD House, Bluebell, Dubli 12, Irelad. Corporate Goverace The Corporate goverace report o pages 12 to 13 forms part of this report ad i this the Board has set out how it has applied the provisios of the Cetral Bak of Irelad s Corporate Goverace Code for Credit Istitutios ad Isurace Udertakigs (the Code ). Goig Cocer The Directors have a reasoable expectatio that the Compay has adequate resources to cotiue i operatioal existece for the foreseeable future. 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 Compay s budget for ad forecasts for 2018 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 Compay s corporate strategy. Subsequet Evets There were o evets subsequet to year ed requirig disclosure. 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 Chief Executive FBD Isurace plc Aual Report 11

14 CORPORATE GOVERNANCE REPORT The Board of FBD Isurace plc ( FBD or the Compay ) recogises that a effective Corporate Goverace regime is critical to the prudet maagemet of its busiess. Durig the Compay was required to comply with the provisios of the Cetral Bak of Irelad s Corporate Goverace Requiremets for Isurace Udertakigs (the Code ). The Code imposes the miimum stadards upo all udertakigs licesed or authorised by the Cetral Bak, which icludes FBD Isurace plc. It also sets out additioal requiremets o etities which are desigated as high impact istitutios to reflect the risk ad ature of those istitutios. The Compay has bee desigated as a high impact istitutio uder the Code. The Directors are satisfied that the Compay complied, i full, with the Code throughout. 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 Compay. The Board meets o a regular basis ad durig met o fourtee occasios. It has a formal schedule of matters reserved to it for cosideratio ad decisio. This schedule is reviewed ad validated at least aually. This schedule icludes the approval of the Compay s log term objectives ad commercial strategy, approval of aual report ad accouts, divideds, the appoitmet of Directors ad the Compay Secretary, approval of the aual budget icludig capital expediture ad the review of the Compay s systems of iteral cotrol. 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 Compay come before the Board for cosideratio ad decisio. The Board has delegated resposibility for the maagemet of the Compay to the Chief Executive ad, through her, to executive maagemet. The Board has also delegated some additioal resposibilities to committees of the Board established by it whose powers, obligatios ad resposibilities are set out i writte terms of referece. There is a clear divisio of resposibilities betwee the Chairma ad the Chief Executive. The Chairma leads the Board ad is resposible for esurig that it is effective as a uitary Board ad at idividual director level. He is the lik betwee the Board ad the Compay. He sets the Board ageda ad esures that Directors receive accurate ad timely iformatio to eable it to fulfil its role. He is resposible for facilitatig effective cotributios by all Directors, esurig costructive commuicatios betwee the executive ad o-executive Directors ad for esurig that members of the Board develop ad maitai a clear uderstadig of the views of the shareholder. If a Director is uable to atted a Board 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 i advace. The Chief Executive is resposible for ruig the Compay s busiess withi the authority limits set out by the Board. She is resposible for proposig ad developig the Compay s strategy ad overall commercial objectives, which she does i close cosultatio with the Chairma ad the Board, ad for implemetig the decisios of the Board ad its Committees. At the ed of, the Board comprises of two executive Directors, two o-executive Directors, icludig the Chairma ad seve idepedet o-executive directors. The Board believes that this is appropriate, beig of sufficiet size ad diversity to esure that there is healthy debate ad iput o the mai busiess to be dealt with by it. Attedace at Board ad Board Committee Meetigs durig Director Category Board Audit Remueratio Nomiatio Risk A B A B A B A B A B Michael Berkery NED, Chairma Sea Dorga INED Fioa Muldoo Executive Walter Bogaerts INED Mary Brea INED Dermot Browe INED Paul D Alto Executive Liam Herlihy INED Orlagh Hut INED David Marti INED David O Coor INED Joh O Grady Executive Vicet Sherida INED Padraig Walshe NED A idicates the umber of meetigs held durig the period the Director was a member of the Board or Committee. B idicates the umber of meetigs atteded durig the period the Director was a member of the Board or Committee. 12 FBD Isurace plc Aual Report

15 Biographies of the Directors i office as at 31 December are set out i the Directors report as a brief commetary o the specific skills ad experiece which each o-executive Director brigs to the Board. The Board cofirms that durig it had available to it the skills, expertise ad experiece ecessary for the proper fuctioig of the Board ad its Committees. 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/fiacial services idustry experiece, actuarial, geeral ad farmig/agri idustry experiece, commercial/cosumer/techology, corporate fiace, corporate goverace, compliace, accoutig ad auditig ad executive reward. A exteral formal corporate goverace review, carried out by Praesta, took place at the ed of. Followig this a decisio had bee made to streamlie the Group s goverace arragemets by combiig the Boards of FBD Holdigs plc ad FBD Isurace plc ad their Committee s i lie with the Oe Board goverace ad this had bee put i place durig. A umber of Board chages have take place ad it is believed that the Board has the ecessary set of diverse skills ad experiece to support the Compay s busiess. Directors receive a formal iductio o appoitmet. All Directors are briefed regularly thereafter i writig ad orally by the Chairma ad by executive maagemet. Papers are set to each member of the Board i sufficiet time before Board meetigs. Members of the Board may take idepedet professioal advice at the Compay s expese if deemed ecessary i the furtherace of their duties. They have access to the advice ad the services of the Compay Secretary who has resposibility to esure that Board procedures are followed ad that applicable rules, regulatios ad other obligatios are complied with. Board Committees The Board has established four Committees to assist it i the executio of its resposibilities. These are: the Audit Committee; the Risk Committee; the Remueratio Committee; the Nomiatio Committee; ad Each of the Committees has writte terms of referece which were approved by the Board ad set out the Committees powers, resposibilities ad obligatios. The terms of referece are reviewed at least aually by the Board. Board. The key risk maagemet ad iteral cotrol procedures iclude: skilled ad experieced maagemet ad staff; a orgaisatioal 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 ad a risk maagemet framework comprisig a Risk fuctio headed by a Chief Risk Officer, a clearly stated risk appetite ad risk strategy supported by approved risk maagemet policies ad processes i the areas of uderwritig, reisurace, claims reservig, ivestmet ad treasury; a Executive Risk Committee comprisig seior maagemet whose mai roles are to assist the Risk Committee, described earlier, i the discharge of its duties betwee meetigs; a Iteral Audit fuctio whose broad fuctio is to help the Compay accomplish its objectives by brigig a systematic, disciplied approach to evaluate ad improve the effectiveess of risk maagemet, cotrol, ad goverace processes; a Audit Committee whose formal terms of referece iclude resposibility for assessig the regulatory, operatioal ad fiacial risks facig the Compay i the achievemet of its objectives ad the cotrols i place to mitigate those risks; a Compliace Committee whose role is to assist the Head of Compliace i carryig out his duties ad to assist with developmet, implemetatio, ad oversight of the compliace program. The Compay has a comprehesive system of fiacial reportig ivolvig budgetig, mothly reportig ad variace aalysis. The Aual Budget 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. Forecasts are updated regularly to reflect chages i circumstaces. The Board has reviewed the effectiveess of the Compay s system of iteral cotrol. This review took accout of the pricipal risks facig the Compay, the cotrols i place to maage those risks ad the procedures i place to moitor them. Siged o behalf of the board: Iteral Cotrol The Board is resposible for the Compay 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. The Board cofirms that there is a ogoig process for idetifyig, evaluatig ad maagig ay sigificat risks faced by the Compay, that it has bee i place for the year uder review ad up to the date of approval of the aual report ad accouts ad that this process is regularly reviewed by the Michael Berkery Chairma 24 February 2017 Fioa Muldoo Chief Executive FBD Isurace plc Aual Report 13

16 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF FBD INSURANCE PLC Report o the fiacial statemets Our opiio I our opiio, FBD Isurace plc s fiacial statemets (the fiacial statemets ): 14 give a true ad fair view of the compay s assets, liabilities ad fiacial positio as at 31 December ad of its profit for the year the eded; have bee properly prepared i accordace with Geerally Accepted Accoutig Practice i Irelad; ad have bee properly prepared i accordace with the requiremets of the Compaies Act What we have audited The fiacial statemets, icluded withi the Aual Report, comprise: the Balace Sheet as at 31 December ; the Profit ad Loss Accout ad Statemet of Comprehesive Icome for the year the eded; the Statemet 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 accoutig stadards issued by the Fiacial Reportig Coucil ad promulgated by the Istitute of Chartered Accoutats i Irelad (Geerally Accepted Accoutig Practice i Irelad), icludig FRS 102 The Fiacial Reportig Stadard applicable i the UK ad Republic of Irelad. I applyig the fiacial reportig framework, the directors have made a umber of subjective judgemets, for example i respect of sigificat accoutig estimates. I makig such estimates, they have made assumptios ad cosidered future evets. Matters o which we are required to report by the Compaies Act 2014 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 fiacial statemets to be readily ad properly audited. The fiacial statemets are i agreemet with the accoutig records. I our opiio the iformatio give i the Report of the Directors is cosistet with the fiacial statemets. Matter o which we are required to report by exceptio Directors remueratio ad trasactios Uder the Compaies Act 2014 we are required to report to you if, i our opiio, the disclosures of directors remueratio ad trasactios specified by sectios 305 to 312 of that Act have ot bee made. We have o exceptios to report arisig from this resposibility. 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 13, 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 Iteratioal Stadards o Auditig (UK ad 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. What a audit of fiacial statemets ivolves We coducted our audit i accordace with Iteratioal Stadards o Auditig (UK ad Irelad). 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 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 February 2017 FBD Isurace plc Aual Report