Deliverig results by INVESTING IN FBD Isurace plc Aual Report
Cotets 2 Chairma s Statemet 5 Board of Directors ad Other Iformatio 6 Report of The Directors 10 Corporate Goverace Report 16 Idepedet Auditor s Report Fiacial Statemets: 17 Statemet of Accoutig Policies 20 Profit ad Loss Accout/Techical Accout Geeral Busiess 21 Profit Ad Loss Accout/No-Techical Accout 22 Balace Sheet 24 Cash Flow Statemet 24 Statemet of Recociliatio of Movemet i Ordiary Shareholders Fuds 25 Notes to the Fiacial Statemets 48 Notice of Aual Geeral Meetig FBD INSURANCE plc Aual Report 1
Chairma s Statemet Overview FBD delivered aother excellet performace i, with profit before taxatio of 47.4m. Gross premiums writte were up 2%, its first icrease sice 2010. While iitial sigs of ecoomic recovery were evidet i the secod half of, idustry premium ad profitability remai challegig. The Compay agai demostrated its ability to deliver superior returs by outperformig peers. Gross premium writte icreased by 2% to 351.2m (: 344.3m) while the market declied by approximately 5%-6%. By cotiuig to develop solutios that meet the eeds of existig ad ew customers, the Compay icreased market share to approximately 13.5% (: 12.6%), its highest ever share while at the same time maitaiig uderwritig disciplie withi the Compay s risk appetite. FBD has grow market share i 12 of the last 13 years whilst also deliverig market leadig combied operatig ratios over the same period. The Compay further stregtheed its capital base ad balace sheet. The Compay had a solvecy level of 78.1% of et premium eared at the ed of (: 73.8%). Busiess Review Premium Icome The Irish property ad casualty isurace market cotracted by approximately 5%-6% i, as isurable risk ad values reduced further, while rates cotiued to declie. The market combied operatig ratio i was 106%. Pressure o market rates suggests further deterioratio i idustry profitability i. There were some early sigs of idustry rate icreases i the fial quarter of, particularly i car isurace. FBD s gross premium writte icreased by 2.0% to 351.2m (: 344.3m), icreasig FBD s market share from 12.6% to approximately 13.5%. Policy volume grew by 2.6% while average premium rates were 0.6% lower. The stabilisatio i the ecoomy i led to a margial icrease i FBD isurable values, which had declied 15% sice 2008. FBD delivered this growth by meetig the eeds of existig ad ew customers through the followig market iitiatives; A key strategic priority for FBD is to deliver o all the isurace eeds of farmig customers. I, FBD further icreased the umber of farms it isured ad the umber of policies per farmig customer. FBD ow protects more farmig customers tha at ay time i its history; The iitiative to eter ito parterships with isurace brokers to icrease peetratio of the busiess isurace market progressed positively. Busiess writte through Brokers icreased by 31% over. The icrease i broker busiess more tha offset the declie i busiess isurace writte directly, as the ecoomic challeges facig Irelad have had a sigificat impact o small, rural cosumer facig busiesses. The Compay s olie offerigs, FBD.ie ad No Nosese.ie, cotiued their maaged growth, icreasig FBD s share of urba persoal lies i. No Nosese s readymade motor isurace packages have bee particularly successful i attractig the cost-coscious cosumer while its telematics product SmartDriver, aimed at drivers uder the age of 30, also helped deliver growth. Durig, the TopDriver app was lauched to allow prospective policyholders gauge their drivig behaviours prior to takig out a telematics product with No Nosese. This has the added beefit of ecouragig positive selectio where drivers with good habits ad safe drivig styles are more likely to take out a policy. I the secod half of, the Compay lauched a car isurace product for the broker market uder the Cla Isurace brad. This iitiative provides the Compay with access to a large customer segmet that was previously out of reach, ad will eable the Compay to icrease its share of the Irish car isurace market i a cotrolled ad sustaiable maer. These iitiatives provide the Compay with a sustaiable platform for growth. The gais i premium arisig from the above were somewhat offset by a declie i the umbers of homes isured by FBD. I, market pricig for home isurace was isufficiet to geerate a acceptable retur ad, as a result, FBD maitaied its uderwritig disciplie rather tha compete with uecoomic rates i the market. Although gross premium writte icreased by 2% i, et premium eared, which is determied ot oly by the gross premium writte i but also by the lower gross premium writte i, decreased by 1.4% to 296.4m Claims Net claims icurred were 201.2m, a icrease of 4.9% o, brigig the loss ratio from 63.8% to 67.9%. While the weather was beig for most of, storm ad flood claims i the fial weeks of cost 4.5m, et of reisurace. The Compay also experieced a small umber of very large accidet ad liability claims (costig more tha 1m each) i. The combied cost of severe weather ad large claims, which will fluctuate from year to year, was 18.7% of et eared premium, sigificatly higher tha the 13.1% cost i ad two percetage poits higher tha the seve year average cost of 16.7%. Ultimately, FBD provides its customers with certaity whe such evets arise, ad therefore a elemet of variability i the loss ratio is to 2 FBD INSURANCE plc Aual Report
be expected. The Compay mitigates this variability through reisurace ad its decisios are made based o loger term treds rather tha short term variatios. The Compay s attritio loss ratio, which measures the cost of routie claims ad excludes the combied cost of severe weather ad large claims, improved agai i to 49.2% (: 50.7%), the fifth cosecutive year of improvemet for this key performace idicator. Further savigs were made i reducig those elemets of claims costs that are withi the Compay s cotrol, icludig risk selectio, ratig, claims maagemet iitiatives ad uderwritig improvemets. While the weather evets experieced i Irelad i late ad early 2014 have bee severe, the Compay s use of risk selectio tools has curtailed the impact of flood related damage. The 17% icrease i road deaths i Irelad i is disappoitig, albeit from a historic low. While a elemet of this may relate to growth i ecoomic activity, every fatality is a cause for cocer. A cocerted pla eeds to be put i place to esure that progress made i previous years does ot cotiue to reverse. Expeses Net uderwritig expeses were 78.0m compared to 77.5m i. The et expese ratio was 26.3% i compared to 25.8% i, with the icrease primarily attributable to the lower level of et premium eared i. The Compay has maitaied its competitive cost advatage while at the same time ivestig i a platform for growth. The Compay s combied operatig ratio for was 94.2% (: 89.6%) resultig i a uderwritig profit of 17.2m, compared to 31.2m achieved i. Ivestmet retur The Compay maitaied its tactical positio of a low allocatio to log-dated bods to protect shareholders ad customers from the risk of risig bod yields. Actual ivestmet retur for was 27.9m compared to 27.2m i, represetig a 3.4% retur o ivestmets. This excellet retur was delivered despite the low iterest rates prevalet i the market ad was aided by the Compay s decisio ot to ivest i log-dated bods ad the strog retur o the 8.5% (: 7.0%) of ivestmet assets ivested i equities. The loger term rate of retur was 28.7m, up from 27.8m i resultig i a operatig profit of 48.1m (: 60.8m). Profit before taxatio Actual ivestmet retur was 0.7m lower (: 0.06m) tha the loger term rate of retur. There was a property impairmet charge of 1.1m (: 1.0m) ad restructurig costs of 2.1m (: 2.1m). Profit before taxatio amouted to 47.4m (: 60.2m). After a taxatio charge of 6.2m (: 7.4m), the profit after taxatio was 41.2m (: 52.8m). Table 1 shows how the assets of the Compay were ivested at the begiig ad ed of the year. Table 1 Asset Allocatio 31 December 31 December Ivestmet assets m % m % Deposits ad cash 454 53% 499 59% Corporate bods 147 17% 152 18% Govermet bods 134 16% 111 13% Equities 72 8% 60 7% UCITs 24 3% - - Ow lad & buildigs 15 2% 16 2% Ivestmet property 11 1% 11 1% Ivestmet assets 857 100 849 100% Trade, other debtors ad DAC 102 99 Reisurers share of techical provisios 44 55 Plat ad equipmet 30 19 Total uderwritig assets 1,033 1,022 FBD INSURANCE plc Aual Report 3
CHAIRMAN S STATEMENT (cotiued) Balace Sheet The Compay s balace sheet further stregtheed i. Ordiary shareholders fuds grew to 243.0m (: 230.9m). The icrease i shareholders fuds is attributable to profit after taxatio of 41.2m, offset by the paymet of a divided of 30.1m. The Compay cotiues to be ecouraged by the improvemet i cofidece i the global ecoomy ad by policymakers actios to address the dislocatio i the iteratioal moetary system. As a result, the Compay reduced the proportio of assets ivested i cash ad bods from 90% to 86% durig. The average term of these assets remais shorter tha the Compay s techical reserves, with more term deposits ad less fixed iterest securities tha the Compay s strategic ivestmet allocatio. This tactical asset allocatio demostrates the Compay s desire to preserve capital, particularly as the reward available o loger dated assets does ot justify the additioal risk. This protects customers ad shareholders ad positios the Compay well for a risig yield eviromet. The Compay had a solvecy level of 78.1% of et premium eared at the ed of, up from 73.8% at the ed of which represets 387% (: 367%) of the miimum solvecy margi, ad a reservig ratio of 235% (: 232%). FBD had a healthy surplus over best estimate ad a 46.5m positive ru-off of prior-year claims reserves i, cotiuig the Compay s log history of recordig positive ru-offs o its claims reserves. I lie with all Europea isurers, the Compay is preparig for the itroductio of the ew Solvecy II regulatios which are to come ito effect o 1 Jauary 2016. FBD Isurace has calculated its solvecy capital requiremet o the basis that Solvecy II, as curretly proposed, was effective at 31 December. The results showed that FBD Isurace had excess capital over the expected requiremet. Outlook There are iitial sigs of a recovery i the Irish ecoomy, ad domestic demad, the best idicator of the tred i isurable risk available i the market, became positive i the secod half of ad is forecast to grow, albeit margially, i 2014. Icreased ecoomic activity will lead to icreased claims frequecy. Give the profitability challeges already faced by the idustry, ad the extet of weather claims i recet moths, market rates should rise. Market size i 2014 will deped o the speed ad extet to which the market chooses to adjust rates to deliver a acceptable retur. FBD is committed to achievig profitable growth by costatly evolvig its busiess to reflect the eeds of customers. The Compay iteds to cotiue deliverig products ad services that matter to its farmig ad direct busiess customers. I 2014, FBD expects to further icrease peetratio of key urba markets, i particular Dubli, ad of the busiess isurace market, i partership with brokers. These iitiatives, alog with persoal lies busiess writte through FBD, No Nosese ad the Cla Isurace brad, provide the Compay with the ability to outperform the market agai i 2014. Durig, the combied cost of severe weather claims ad large claims were above historic orms. The Compay expects that these claims costs will revert to ormal levels i 2014 ad that the iitiatives o those aspects of claims costs that are withi the Compay s cotrol will cotiue to have a positive impact o the loss ratio. The improvig ecoomy will lead to icreased claims frequecies i 2014 for both the idustry ad FBD. Chages i rates ted to lag claims treds ad this will have a impact o profitability i 2014. The wid storm that hit Irelad i the middle of February 2014 is likely to cost the idustry 130m. The Compay budgets for catastrophic weather evets, et of reisurace ad the February wid storm will ot exceed that budget. However the persistet bad weather over the previous moth, whilst ot amoutig to a catastrophic evet, will lead to a icrease i the cost of 2014 claims. The Board is cofidet that FBD will cotiue to outperform the market. The Compay will cotiue to ivest to drive the capacity for growth, while at the same time maitaiig its competitive cost advatage. The Compay has the ambitio, capital stregth ad capability to take advatage of appropriate market opportuities that preset themselves as the ecoomic recovery takes hold. Fially, I would like to agai exted my sicere thaks to the Board, the maagemet ad the staff for their combied efforts i deliverig a excellet performace i a difficult eviromet. We will cotiue to focus o maximisig beefits for all stakeholders. Vicet Sherida Chairma 26 February 2014 4 FBD INSURANCE plc Aual Report
Board of Directors ad Other Iformatio BOARD OF DIRECTORS Vicet Sherida (Chairma) Adrew Lagford (Chief Executive) Michael Berkery Walter Bogaerts (Appoited 1 Jauary ) David Marti Eda O Brie (Appoited 25 Jue ) Cathal O Caoimh SECRETARY AND REGISTERED OFFICE Coor Gouldso, FBD House, Bluebell, Dubli 12. INDEPENDENT AUDITORS Deloitte & Touche, Chartered Accoutats & Statutory Audit Firm, Deloitte & Touche House, Earlsfort Terrace, Dubli 2. FBD INSURANCE plc Aual Report 5
Report Of The Directors The Directors preset their aual report ad audited fiacial statemets for the year eded 31 December. PRINCIPAL ACTIVITIES The pricipal activity of the Compay is the uderwritig of fire ad accidet isurace withi the Republic of Irelad. There has bee o sigificat chage i this activity durig the year. BUSINESS REVIEW Durig the Compay geerated premium icome of 351,195,000 (: 344,255,000). The operatig profit for the year was 48,131,000 (: 60,764,000). 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. The key fiacial performace idicators iclude gross writte premium (: 351.2m, : 344.3m), combied operatig ratio (: 94.22 %, : 89.6%) ad solvecy ratio (: 78.1%, : 73.8%). FUTURE DEVELOPMENTS The Directors expect that the preset level of activity will be sustaied for the foreseeable future. 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 assets. 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 assets. 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. RISKS & UNCERTAINTIES 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 outstadig 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 year ed, the pricipal assumptio uderlyig the estimates is the Compay s developmet patter from past claims. 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 competitors, particularly iappropriate pricig decisios by competitors. 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. 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 ad uquoted 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. 6 FBD INSURANCE plc Aual Report
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 uses idepedet actuaries to review its liabilities to esure that the carryig amout of the liability is adequate. 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 All of the Compay s curret reisurers have credit ratigs of A- or better, or have provided appropriate security. The Compay has assessed these credit ratigs as beig satisfactory i dimiishig the Compay s exposure to the credit risk of its reisurace receivables. 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 officers 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 above risks are further detailed i ote 14. The Compay has cotrols embedded withi its systems ad policies icludig its ivestmet policy, uderwritig 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 Operatig profit 48,131 60,764 Short term fluctuatios i ivestmet retur (756) (602) Profit o ordiary activities before tax 47,375 60,162 Tax charge o profit o ordiary activities (6,185) (7,393) Profit o ordiary activities after tax 41,190 52,769 Distributios paid: Divided of 144.58c (: 115.66c) per share o ordiary shares of 1.27 each (30,000) (24,000) Divided of 17.8c (: 17.8c) per share o 14% o-cumulative preferece shares of 1.27 each (89) (89) Trasfer to reveue reserves 11,101 28,680 HOLDING COMPANY At 31 December ad throughout the year, FBD Holdigs plc owed 100% of FBD Isurace plc. DIRECTORS I accordace with the Compay s articles of associatio, Michael Berkery, Vicet Sherida ad Walter Bogaerts will retire at the Aual Geeral Meetig, ad beig eligible, offer themselves for re-electio. O 25th Jue, Mr. Eda O Brie was appoited to the Board. BIOGRAPHIES OF DIRECTORS Vicet Sherida, Chairma ad Idepedet No-Executive Director Vicet Sherida was elected Chairma of the Compay o 3 March 2011. He retired as Chief Executive of Vhi Healthcare durig 2008 after seve years i that role. Prior to that he was Group Chief Executive of the Norwich Uio Isurace Group i Irelad for te years. He is a past presidet of the Istitute of Chartered Accoutats i Irelad, the Irish Isurace Federatio, the Isurace Istitute of Irelad ad the Irish Associatio of Ivestmet Maagers. He was a director of the Irish Stock Exchage for ie years to Jue 2004. He is also a former coucil member of the Iteratioal Federatio of Health Plas ad the Fiacial Reportig Coucil i the UK. He serves as a director of a umber of compaies. Mr. Sherida joied the Board of FBD Holdigs plc i August 2004 ad joied the Board of FBD Isurace plc i August 2009. FBD INSURANCE plc Aual Report 7
REPORT OF THE DIRECTORS (cotiued) Mr. Sherida brigs to the Board his extesive experiece at a leadership level i the isurace idustry, his experiece as a o-executive Director o other boards together with his kowledge of corporate goverace, compliace ad techical accoutig issues. Adrew Lagford, Chief Executive Officer Adrew Lagford joied FBD Holdigs plc as Group Fiacial Accoutat i 1996. I July 2003, he was appoited Executive Director Fiace of FBD Isurace plc. I May 2008, he was appoited Group Chief Executive. Prior to workig i FBD, he worked i Deloitte & Touche where he qualified as a Chartered Accoutat. Michael Berkery, No-Executive Director Michael Berkery was elected Chairma of the Compay i 1996, a role he held util 3 March 2011. He was Chief Executive Officer of the Irish Farmers Associatio for 25 years util his retiremet i March 2009. He also served o the Natioal Ecoomic ad Social Coucil ad the Cetral Review Committee of the Govermet Natioal Partership Programme. He is Chairma of FBD Trust Compay Limited ad is a director of a umber of other compaies. Mr. Berkery joied the Board i October 1982. 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 commuicatio ad facilitatio skills, busiess ad ecoomic kowledge, idepedece of mid ad experiece of maagemet ad motivatio of people. 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 ad sales. He was geeral maager i charge of KBC Group s Cetral-Europea isurace busiesses util appoited to his curret role i. He holds a Commercial Egieerig degree from the Ecoomic Uiversity of Brussels. Mr. Bogaerts joied the Board i Jauary. ow serves o the Board of the Irish Auditig ad Accoutig Supervisory Authority. He joied the Board i March 2011. Cathal O Caoimh, Executive Director Fiace Cathal O Caoimh joied the Compay i October 2008 ad was appoited to the Board as Executive Director Fiace. A Chartered Accoutat, he joied FBD from Horizo Techology Group plc where he was Chief Fiacial Officer sice 2001. Prior to that Mr. O Caoimh was Group Fiace Director of Hiberia Isurace Group, havig previously bee Group Fiace Director of Norwich Uio Isurace Group i Irelad. Mr. O Caoimh is a member of the Coucil of Chartered Accoutats Irelad. Eda O Brie, Executive Director ad Chief Risk Officer Eda O Brie joied FBD i 1999 ad was first appoited to the Board i 2004 ad retired from the Board i 2011. Eda was reappoited to the Board i. A Chartered Accoutat, he joied FBD from New Irelad Holdigs plc where he was a Executive Director ad was also Deputy Maagig Director of New Irelad Assurace plc. Prior to that, Mr. O Brie was a Audit Maager with Deloitte ad Touche. Mr. O Brie is also a member of the Chartered Associatio of Certified Accoutats. DIRECTORS AND SECRETARY S INTERESTS 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: 31/12/13 Number of 60c Ordiary Shares 1/1/13 (or at date of appoitmet if later) Michael Berkery 30,000 30,000 Adrew Lagford 75,000 40,000 Vicet Sherida 4,150 4,150 Cathal O Caoimh 20,179 1,179 Coor Gouldso 9,120 420 Eda O Brie 518 518 David Marti, Idepedet No-executive Director David Marti, a Chartered Maagemet Accoutat, was Fiace Director of Aryzta plc (formerly IAWS Group plc) up util his retiremet i 2004 after which he remaied o the board of that compay i a o-executive capacity util 2007. Previously he was a maagemet cosultat with KPMG workig o a rage of assigmets i Irelad ad abroad. A experieced fiace professioal, he is a o executive Director of Oe51 plc, the Sico Group ad a former Director of Dormat Accouts Board. Mr. Marti 8 FBD INSURANCE plc Aual Report
Number of share optios ESOS LTIP 31/12/13 1/01/13 31/12/13 1/01/13 Adrew Lagford - 120,000 58,417 35,267 Cathal O Caoimh - 75,000 42,117 27,786 Coor Gouldso - 35,000 14,162 9,343 Eda O Brie 42,500 86,500 - - DIRECTORS RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Directors are required to prepare fiacial statemets for each fiacial year which give a true ad fair view of the state of affairs of the compay at the ed of the fiacial year ad of the profit or loss of the Compay for the year. The Directors cosider that, i preparig the fiacial statemets, the Compay has used appropriate accoutig policies, cosistetly applied ad supported by reasoable ad prudet judgemets ad estimates. Applicable accoutig stadards have bee followed subject to ay material departures disclosed ad explaied i the fiacial statemets. The Directors are required to prepare the fiacial statemets o a goig cocer basis uless it is iappropriate to assume the Compay will cotiue i busiess. The Directors are resposible for keepig proper books of accout which disclose with reasoable accuracy at ay time the fiacial positio of the Compay ad to eable them to esure that the fiacial statemets are prepared i accordace with accoutig stadards geerally accepted i Irelad ad comply with Irish statute comprisig the Compaies Acts, 1963 to ad the Europea Commuities (Isurace Udertakigs: Accouts) Regulatios, 1996. The Directors have a geeral resposibility to take reasoable steps to safeguard the assets of the Compay ad to prevet ad detect fraud ad other irregularities. SUBSIDIARIES The Compay s subsidiaries are listed i ote 20. INDEPENDENT AUDITORS The idepedet auditors, Deloitte & Touche, Chartered Accoutats & Statutory Audit Firm, have expressed their willigess to cotiue i office i accordace with Sectio 160(2) of the Compaies Act, 1963. PROPER BOOKS AND RECORDS The Directors have take appropriate measures to esure compliace with Sectio 202 of the Compaies Act 1990. The specific measures take are 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. CORPORATE GOVERNANCE The Corporate Goverace report o pages 10 to 15 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 ). SOLVENCY II I lie with all Europea isurers, the Compay is preparig for the itroductio of the ew Solvecy II regulatios which are likely to come ito effect o 1 Jauary 2016. FBD Isurace has calculated its solvecy capital requiremet o the basis that Solvecy II, as curretly proposed, was fully implemeted at 31 December. The results showed that FBD Isurace had excess capital over the proposed requiremet. FBD Isurace is cofidet that it will meet all of the Solvecy II requiremets i advace of their itroductio. GOING CONCERN 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 2014 ad forecasts for 2015 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. SUBSEQUENT EVENTS There were o evets subsequet to year ed requirig disclosure. APPROVAL OF FINANCIAL STATEMENTS The fiacial statemets were approved by the board o 26 February 2014. Siged o behalf of the board: Vicet Sherida Chairma Adrew Lagford Chief Executive FBD INSURANCE plc Aual Report 9
Corporate Goverace Report The Board ackowledges the importace of good corporate goverace. The Compay has a requiremet to comply with the provisios of the Cetral Bak of Irelad s Corporate Goverace Code for Credit Istitutios ad Isurace Udertakigs (the Code ). The Code imposes the miimum core 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 major istitutios to reflect the risk ad ature of those istitutios. The Compay has bee desigated as a major istitutio. The Directors are satisfied that the compay complies with the code. 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 at least eleve times per year, ad 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 objectives ad strategy, approval of fiacial statemets, 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 comprises three executive Directors, followig the re-appoitmet of Mr. Eda O Brie i Jue, ad four o-executive Directors, icludig the Chairma. 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. No chages to the Board size or structure are aticipated i the immediate future. The Board has delegated resposibility for the maagemet of the Compay to the Group Chief Executive ad, through him, 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 ad whose activities durig the year are described more fully i this report. 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 shareholders. 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. He is resposible for proposig ad developig the Compay s strategy ad overall commercial objectives, which he does i close cosultatio with the Chairma ad the Board, ad for implemetig the decisios of the Board ad its Committees. Durig 2011, the Board completed a detailed review of its compositio ad that of its Committees to esure that i this respect it fully met the expectatios ad requiremets of the Code. This was udertake with the support of the Nomiatio Committee. This review was desiged to esure that the compositio of the Board icluded a appropriate mix of idepedece together with the specific skills ad experiece required to do its work. Board ad Board Committee Compositio as at 31 December Name Role Audit Committee Risk Committee Remueratio Committee Nomiatio Committee V. Sherida Chairma Member Chairma M. Berkery No-executive Member Member W. Bogaerts No-executive Member Chairma A. Lagford Chief Executive D. Marti No-executive Chairma Chairma Member C. O Caoimh Executive Member E. O Brie Executive 10 FBD INSURANCE plc Aual Report
Biographies of the Directors i office as at 31 December are set out i the Directors report as is 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, geeral ad farmig/agri idustry experiece, corporate fiace, corporate goverace, regulatory ad other compliace, ad fiacial accoutig. 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; ad The mai roles ad resposibilities for the Audit Committee are detailed i its terms of referece ad are summarised as follows: I relatio to Iteral Cotrol the Committee will: 1. Review the Compay s iteral fiacial cotrols ad its iteral cotrol systems. 2. Cosider ay sigificat fraud, illegal acts, deficiecies i iteral cotrol or similar issues. I relatio to Fiacial Reportig the Committee will: 1. Moitor ad report directly to the Board of the Compay o the itegrity ad clarity of the fiacial statemets of the Compay, reviewig ay sigificat fiacial reportig judgemets cotaied i them. 2. Pay particular attetio to complex ad/or uusual trasactios. 3. Focus o sigificat judgmetal areas ad major audit adjustmets. 4. Review compliace with all legal requiremets. 5. Review the Compay s statemet o iteral cotrol systems prior to edorsemet by the Board. 6. Cosider ay ew accoutig policies ad sigificat chages to existig accoutig policies. I relatio to Iteral Audit the Committee will: 1. Review the activities, overall effectiveess ad orgaisatioal structure of the Iteral Audit fuctio. the Nomiatio Committee. 2. Review the resources of the Iteral Audit Departmet. 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 relevat Committee ad updated by the Board where ecessary. The Audit Committee Membership of the Audit Committee is set out o page 10. The Group Fiace Director ad the Head of Iteral Audit atted meetigs regularly at the request of the Committee Chairma while the exteral auditors atted as required ad have urestricted access to the Committee Chairma at all times. The Committee meets o a regular basis with the exteral auditors ad with the Head of Iteral Audit respectively without maagemet beig preset. The Compay Secretary is secretary to the Committee ad is resposible for recordig the activities of the Committee, circulatig papers i advace of its meetigs ad esurig that appropriate procedures are followed. 3. Review the idepedece, stadig ad scope of the Iteral Audit Departmet ad its relatioship with the Statutory Auditor. 4. Approve the appoitmet ad removal of the Head of Iteral Audit. 5. Esure that Maagemet respods to the fidigs ad recommedatios made by the Iteral Audit Departmet. 6. Review ad approve the Iteral Audit Departmet s strategic ad aual work pla ad receive ad cosider the reports o work performed. 7. Meet separately with the Head of Iteral Audit at least aually to discuss ay matters that the Committee or the Head of Iteral Audit cosider should be dealt with privately. 8. Review the Iteral Audit Charter periodically. FBD INSURANCE plc Aual Report 11
CORPORATE GOVERNANCE REPORT (cotiued) I relatio to Statutory Audit the Committee will: 1. Review the Statutory Auditor s terms of egagemet, proposed audit scope ad approach. 2. Review the remueratio to be paid to the Statutory Auditor i respect of audit services provided. 3. Review ad moitor the idepedece ad objectivity of the Statutory Auditor ad the effectiveess of the audit process takig ito cosideratio relevat professioal ad regulatory requiremets. 4. Develop ad implemet policy o the egagemet of the Statutory Auditor to supply o-audit services, takig ito accout relevat ethical guidace regardig the provisio of o-audit services by the Statutory Auditor ad to report to the Board, idetifyig ay matters i respect of which it cosiders that actio or improvemet is eeded ad makig recommedatios as to the steps to be take. 5. Make recommedatios to the Board regardig the appoitmet, cotiuatio i office ad removal of the Statutory Auditor. 6. Meet with the Statutory Auditor i the absece of maagemet at least aually to discuss ay matters that the Committee or the Statutory Auditor cosider should be dealt with privately. 7. Esure that sigificat fidigs ad recommedatios made by the Statutory Auditor (ormally cotaied i the Maagemet Letter) are received ad discussed by the Committee o a timely basis ad that Maagemet respods to the fidigs ad recommedatios. The Audit Committee will also: 1. Regularly update the Board of the Compay o the Committee s activities esurig that the Board is promptly made aware of ay matters that may sigificatly impact the fiacial coditio or affairs of the compay. A aual writte report is also provided by the committee to the Board outliig the committee s activities ad major recommedatios. 2. Istigate special ivestigatios as ecessary, employig idepedet legal ad other advice as appropriate. 3. Aually review ad update the Committee s Terms of Referece ad receive approval from the Board for ay chages. 4. Evaluate the Committee s ow performace aually. 5. Review aually arragemets by which staff of the Compay may, i cofidece, raise cocers about possible improperties i matters of fiacial reportig or other matters. Durig the year the Committee udertook all of its pricipal scheduled activities through a formal programme of work. Its Chairma reported to the Board i detail at each subsequet Board meetig ad miutes of its meetigs are routiely circulated to the Board for iformatio ad otig. I additio, the Committee commissioed a idepedet exteral quality assessmet of the Iteral Audit Fuctio durig ad was pleased to ote the coclusio that the Fuctio was effective i udertakig its activities to appropriate recogised stadards. The exteral audit egagemet parter rotates every five years ad the curret parter assumed the egagemet commecig with the audit of the 2009 fiacial statemets. The curret parter will rotate off the egagemet after sigig the audit opiio for the fiacial statemets. The Committee pays particular attetio to esurig the idepedece of the exteral auditors is safeguarded. While the egagemet of the exteral auditors i the provisio of o-audit services is ot prohibited outright, such services are ot permitted to be provided where the auditors may be required to audit their ow work. The level of fees paid to the exteral auditors for the provisio of o-audit services is closely moitored so as to esure that both their idepedece ad the perceptio of their idepedece are ot dimiished. The Risk Committee Membership of the Risk Committee is set out o page 10. The role, resposibilities ad powers of the Committee are set out i writte terms of referece which are approved by the Board. The key duties of the Risk Committee are to: 1. Provide oversight ad advice to the Board i relatio to curret ad potetial future risk exposures of the Compay ad future risk strategy, icludig the determiatio by the Board of its risk appetite ad risk tolerace. 2. Promote a risk awareess culture withi the Compay. 3. Recommed a risk maagemet framework icludig strategies ad policies, risk appetite ad risk toleraces to the Board for approval. 4. Esure that the material risks facig the Compay have bee idetified ad that appropriate arragemets are i place to maage ad mitigate those risks effectively. 5. Advise the Board o the effectiveess of strategies ad policies with respect to maitaiig, o a ogoig basis, the amouts, types ad distributio of capital adequate to cover the risks of the Compay. 6. Develop a reportig structure which reports ay breaches of limits to the Committee i a timely fashio. 12 FBD INSURANCE plc Aual Report
7. Review ad challege risk iformatio received by the Chief Risk Officer from the busiess departmets to esure that the Compay is ot exceedig the risk limits set by the Board. 8. Esure that the risk maagemet fuctio has a appropriate ad achievable madate to roll-out the risk maagemet policy, risk limits ad reportig structure to all busiess fuctios. 9. Preset a profile of the Compay s key risks, risk maagemet framework, risk appetite ad tolerace ad risk policies at least aually together with a summary of the Committee s busiess to the Board. Durig the year the Committee udertook all of its pricipal scheduled activities through a formal programme of work. Its Chairma reported to the Board i detail at each subsequet Board meetig ad miutes of its meetigs are routiely circulated to the Board for iformatio ad otig. The Remueratio Committee Membership of the Remueratio Committee is set out o page 10. The role, resposibilities ad powers of the Committee are set out i writte terms of referece which are approved by the Board. The key duties of the remueratio committee are to: 1. Determie with the Board the broad policy for the remueratio of the Compay s executive directors, the compay secretary ad other seior executives (together executive maagemet ), icludig those persos i Pre-Approval Cotrolled Fuctios (as defied i the Cetral Bak of Irelad s Fitess ad Probity Requiremets), ad such other members of Compay s maagemet as it is desigated to cosider. 2. I determiig such policy, take ito accout all factors which it deems ecessary. The objective of such policy shall be to esure that members of the executive maagemet of the Compay are provided with appropriate icetives to ecourage ehaced performace ad are, i a fair ad resposible maer, rewarded for their idividual cotributios to the success of the Compay while also esurig that the priciples of soud, prudet risk maagemet are fully reflected ad that excessive risk takig is either ecouraged or rewarded. 3. Review the ogoig appropriateess ad relevace of the remueratio policy. 4. Approve the desig of, ad determie targets for, ay performace related pay schemes operated by the Compay ad approve the total aual paymets made uder such schemes. 5. Recommed to the Board the remueratio levels for the o-executive Directors. 6. Determie the policy for, ad scope of, pesio arragemets for each executive director ad other seior executives. 7. Review ay proposals from the Remueratio committee of FBD Holdigs plc for the remueratio package of each member of executive maagemet to esure that they do ot coflict with or udermie the Compay s remueratio policy ad, i particular, that they do ot icetivise the takig of excessive risk. 8. Esure that cotractual terms o termiatio, ad ay paymets made, are fair both to the idividual ad to the Compay, that failure is ot rewarded ad that the duty to mitigate loss by the idividual is fully recogised. 9. Oversee ay major chages i employee beefits structures throughout the Compay. 10. Be resposible for establishig the selectio criteria, selectig, appoitig ad settig the terms of referece for ay remueratio cosultats who advise the committee ad for obtaiig reliable, up-to-date iformatio about remueratio i other compaies. The Committee shall have full authority to commissio ay reports or surveys which it deems ecessary to help it fulfil its obligatios. The Remueratio committee cosults with the Chief Executive o the remueratio proposals for the other executive Directors ad for seior maagemet ad has access, where it deems it ecessary, to obtai exteral professioal advice from compesatio ad beefit cosultats. The Compay participates i idustry-specific ad wider remueratio ad reward surveys ad the Committee bechmarks the remueratio arragemets for the executive Directors ad seior maagemet agaist the results of these surveys. The Committee did ot deem it ecessary, followig this review process, to cosult ay exteral beefit cosultats durig the year. Durig the year the Committee udertook all of its pricipal scheduled activities through a formal programme of work. Its Chairma reported to the Board i detail at each subsequet Board meetig ad miutes of its meetigs are made available to the Board. The Nomiatio Committee Membership of the Nomiatio Committee is set out o page 10. The role, resposibilities ad powers of the Committee are set out i writte terms of referece which are approved by the Board. Amogst its resposibilities it must review Board ad Board Committee compositio, size, structure ad successio plaig ad make recommedatios to the FBD INSURANCE plc Aual Report 13
CORPORATE GOVERNANCE REPORT (cotiued) Board o these matters for its approval. I formulatig its recommedatios o Board ad Board Committee compositio, the Committee takes accout of the skills ad experiece available to the Board ad ay idetified gaps havig regard to the Compay s approved strategy ad its busiess eviromet. The duties of the omiatio committee are as follows: 1. Regularly review the structure, size ad compositio (icludig the skills, kowledge ad experiece) required of the Board compared to its curret positio ad make recommedatios to the Board with regard to ay chages. 2. Give full cosideratio to successio plaig for Directors ad other seior executives i the course of its work, takig ito accout the challeges ad opportuities facig the compay, ad what skills ad expertise are therefore eeded o the Board ad the executive maagemet team, i the future. 3. Formulate successio plas for both executive ad o-executive directors ad i particular for the key roles of Chairma ad Chief Executive. 4. Make recommedatios to the Board cocerig the requiremet of the Cetral Bak of Irelad that the reewal of the Chief Executive s cotract be reviewed at least every five years. 5. Make recommedatios to the Board cocerig the requiremet of the Cetral Bak of Irelad that the membership of the Board of directors with log service, ad i particular service beyod ie years, is formally reviewed, documeted ad commuicated to the Cetral Bak. 6. Be resposible for idetifyig ad omiatig for the approval of the Board, cadidates to fill Board vacacies as ad whe they arise. 7. Before ay appoitmet is made by the Board, evaluate the balace of skills, kowledge ad experiece o the Board, ad, i the light of this evaluatio prepare a descriptio of the role ad capabilities required for a particular appoitmet. I idetifyig suitable cadidates the Committee shall: a. cosider cadidates from a wide rage of backgrouds; ad b. cosider cadidates o merit ad agaist objective criteria, takig particular care that potetial appoitees have eough time available to devote to the positio. 8. Review aually the time required from o-executive directors. Performace evaluatio should be used to assess whether the o-executive directors are spedig eough time to fulfil their duties. 9. Esure that o appoitmet to the Board, oexecutive directors receive a formal letter of appoitmet settig out clearly what is expected of them i terms of time commitmet, committee service ad ivolvemet outside Board meetigs. Durig the year the Committee udertook all of its pricipal scheduled activities through a formal programme of work. Its Chairma reported to the Board i detail at each subsequet Board meetig ad miutes of its meetigs are made available to 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 fiacial statemets ad that this process is regularly reviewed by the 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 Solvecy II ad Risk Steerig committee comprisig seior maagemet whose mai roles are to oversee the implemetatio of the three pillars of the Solvecy II framework throughout the Compay ad 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 sigificat risks facig the Compay i the achievemet of its objectives ad the cotrols i place to mitigate those risks; 14 FBD INSURANCE plc Aual Report